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Annual Report 2008 Strong performance has combined with several new initiatives to determine exceptional growth

Opening doors to opportunity

Our Vision To be the leading financial services provider in Iraq, and to consistently meet or exceed customer expectations. Our Mission To provide leading financial service solutions that contribute to and support the long-term well being and success of all our customers, our country and our worldwide partners. Our Values guide everything we do: Trust and Integrity; Mutual Respect; Teamwork and Commitment; Excellence and Innovation.

2 I Bank of Baghdad Annual Report 2008

Bank of Baghdad is a member of the KIPCO Group

Over 27 years in the financial services industry

The KIPCO Group is one of the biggest diversified holding companies in the Middle East and North Africa, with assets worth more than US$19 billion under management or control. The Group has substantial ownership interests in a portfolio of over 50 companies operating across 21 countries. The company’s main business sectors are financial services and media. Through the subsidiaries and affiliates of its core companies, KIPCO also has interests in Real Estate, Industry, Healthcare and the Management & Advisory sector. KIPCO’s financial services interests include holdings in commercial and investment banking, asset management and insurance companies. The Group’s core operating companies in this sector include United Gulf Bank, Gulf Insurance Company and Burgan Bank.

2008 wITnEssEd A MAssIvE IMpRovEMEnT In ThE quAlITy of ThE BAnk’s BRAnCh pREsEnTATIon. nEw BRAndIng ApplICATIons, fITTIngs And sIgnAgEs wERE ApplIEd AT ouR nEw pRoToTypE REgIonAl BRAnCh In ERBIl, REAdy foR Roll ouT ACRoss ThE full BRAnCh nETwoRk.


Financial Highlights

Bank of Baghdad Annual Report 2008 I 3

Bank of Baghdad concentrated primarily on strengthening its position during 2008. The bank’s asset base increased to IQD 542.2 billion compared to IQD 363.7 billion in 2007. A steady increase in net income was reinvested to capitalise on future opportunities, resulting in a net operating profit of IQD 21.9 billion.

542.9

331.2363.7

43.7

17.7

32.3

21.9

9.6

22.493.3

59.5

76.1

19.3

3.6

16.6

Total Assets Operating Revenue

Net Operating Profit

Shareholders’ Equity

Net Income

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(Iqd

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Billi

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(Iqd

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Billi

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(Iqd

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08 07 06 08 07 06 08 07 06 08 07 06 08 07 06


Chairman’s Statement

Bank of Baghdad concentrated primarily on strengthening its position during 2008. The bank’s asset base increased to IQD 542.2 billion compared to IQD 363.7 billion in 2007. A steady increase in net income was reinvested to solidify and capitalise on future opportunities, resulting in a net operating profit of IQD 21.9 billion.

The bank’s operating revenue grew from IQD 32.3 billion in 2007 to IQD 43.7 billion in 2008, with major reinvestment to strengthen our capabilities in infrastructure and operations – boosting our resources to build for the future. Despite the global economic crisis, Iraq has continued on its journey of growth and recovery, building its infrastructure and national capabilities.

The recent drop in oil pricing as a result of the sub-prime collapse has been offset by new initiatives in economic restructuring, and I am pleased to announce that your bank has capitalised on many of these initiatives, becoming more global in its outlook and winning significant international business. As a result we have been able to focus on many new initiatives.

The bank has invested considerably in its human capital, improving skills and efficiencies through the creation of additional training courses, performance appraisals and motivational systems. Bank staff turnover in 2008 was virtually nil, proving new confidence and professionalism amongst our staff and creating a solid platform of efficiency for the future.

To support this human endeavour we have reinforced the IT operational efficiency of the bank by updating all of our core banking modules; looking for complimentary systems to our core banking practices. The result of this is proven by increased levels of customer service across every delivery channel.

Our IT infrastructure was divided into two distinct areas, reinforcing banking operations and introducing innovation. An example is our growth in the provision and linking of new ATM locations and the issuance of new debit cards.

I am pleased to announce further key achievements this year:

Bank of Baghdad has started issuing ATM debit cards that can be used worldwide through MasterCard. We have launched our new Erbil regional headquarters as a ‘Regional Branch’ to service the Northern Province with increased efficiency, forming a link to several branches and a centralisation of our northern operations. Erbil now also boasts a state-of-the-art branch experience for customers, which will be implemented right across our branch network in time.

As a result of these initiatives, your bank has become recognised internationally. The increase in our service presentation efficiencies has created increased customer satisfaction, and we have embarked on a period of significant international business acquisition, attracting major corporate businesses and forming a solid focus for the inward investment vital to the growth of Iraq.

On behalf of the Board of Directors, it is our pleasure to present the annual results of Bank of Baghdad for the year ending 2008.


Our activity during 2008 has placed Bank of Baghdad in a strong position to face future challenges. We face an ongoing need for training and advancement of employee skill levels and this need represents an ongoing focus for our management.

Bank of Baghdad operates in a country whose re-emergence is not yet complete: The country’s infrastructure – power, telecommunications and the like – continue to be reinstated and security issues over the last year have improved considerably. To that end, Bank of Baghdad is now introducing CCTV security technology, complimenting existing security systems but reducing the need for such human resource.

The biggest challenge facing business in Iraq is stability and while this is improving, there is much work to be done. The recovery of the general economy is an accelerating one. Bank of Baghdad is wholly committed to such recovery and is now looking ahead to an era of ever increasing stability and reconciliation in Iraq. The decisions that we have made this year, and those of past years, have created an infrastructure for the bank that will allow us to fully capitalise on new emerging opportunities.

We are confident of increasing the bank’s international exposure and, in line with a decision of Government to distribute a portion of trade business volume in Iraq to private banks, we are now increasing our trade finance capability accordingly.

In closing, I would like to thank my fellow Directors and our Management for their strong commitment and unwavering dedication to the long term success of our bank. I would also like to thank every member of our team – from front-line tellers to back office support staff – for supporting our endeavour, for being adaptable to change and for their commitment to continual improvement. I would also like to thank the Central Bank of Iraq for their wisdom and guidance. Above all, I thank our customers for their confidence and continued support of the Bank of Baghdad. I look forward to announcing many new initiatives and successes in 2009.

Emad Ismail ShareefChairman of the Board

Bank of Baghdad has become recognised internationally. Increased service efficiencies have created increased customer satisfaction, allowing us to embark on a period of international business acquisition, forming a solid focus for the inward investment vital to the growth of Iraq.


Annual Review

In 2008 we continued to enjoy the full commitment of our Board and employees in realising our vision of being Iraq’s best financial services provider, through delivery of the best customer service, the best products and the best technologies.

We have made massive strides in the advancement of our earlier stated four strategic priorities in raising our business performance and growth: customer relationships; branch expansion; sales culture; technology and operational excellence. The progress made in 2007 has been built upon further this year, and this is having a positive impact for all our areas of businesses.

Bank of Baghdad has focused on many areas, but of vital importance during 2008 was business development and customer service. At the root of our structure has been the implementation of a ‘sales culture’ within every branch. We have introduced sales call programmes with customer visits and regular follow-ups to ensure better response to key customer needs. Of particular focus has been the implementation of customer satisfaction surveys, which have helped create a better understanding of Iraqi market needs.

In addition, we have concentrated on improving our communication to all sectors, and in particular Small to Medium Enterprises (SMEs). In this area, we have sought to adopt a more advisory role and have established advances in salary transfer and payroll solutions services. Bank of Baghdad now offers loans to employees of corporates against salary transfers or domiciliation and this has been acclaimed as a leading service, adding value to employers’ human resource practices. Our initiatives continue to be accepted very favorably by the business community and we

continue to enter into ever more productive dialogue with key business and corporate customers.

The results of all our efforts are witnessed by a growing staff confidence within the bank and this in turn has seen ever higher customer focused results being achieved.

Marketing / Bank of Baghdad has embarked on a new wave of proactive marketing of its products and services, reaching out to the community in several key areas to promote the significant advancement of our banking offerings. We have created general awareness campaigns to coincide with the opening of our new regional branch in Erbil.

In addition, we introduced debit cards that can be used internationally, and we have promoted our superior capability in electronic banking and money transfer. The bank is also now a Western Union agent, in addition to offering its own ‘MoneyLink’ transfer service.

Our marketing channels have helped to increase business efficiency through a more direct approach to customers, with better information presentation, collateral and customer communication methods.

Our new Erbil regional headquarters was developed from the ground up to utilise best of breed ‘zoning’ and ‘customer journey’ efficiencies in its design. The branch offers self-service banking, teller counters and customer service desks together, with dedicated ‘browse’ areas and seating. All of this has created a customer experience that has already been highly lauded. The Erbil branch model will be established right across Iraq and several key branch refurbishments are planned for the forthcoming year. With

We have made massive strides in the advancement of our earlier stated priorities in raising our business performance and growth, focusing on the further development and implementation of our strategic goals.

Bank of Baghdad embarked on a programme of change for its branch network during 2008. A new suite of graphic systems were developed and implemented through identity and environment guides that address the bank’s requirements for signage systems, point of sale, merchandising and information provision. This was combined with a branch fit out programme. The bank’s premises department worked with architects and contractors to develop a complete new customer experience in our branches. The first prototype for the bank’s new branches is at Erbil.

KEY ACHIEVEMENT: New Erbil Branch


nEw TEllER CounTERs AT ERBIl wITh sECuRITy glAss fRonTs CoMBInE wITh BRIghT gRAphICs And posTER sysTEMs on ThE wAll BEhInd, CREATE A BRIghT, ModERn fEEl To ERBIl BRAnCh


Our new Erbil branch model will be established right across Iraq and several key branch refurbishments are planned for the forthcoming year. With the establishment of better environments for our customers, the bank is now able to concentrate on the provision of new products and channels such as credit cards and internet banking services.

NEw MEEtING ROOMS ANd NEw CuStOMER SEAtING AREAS AllOw GREAtER COMfORt fOR thE BANK’S CuStOMERS


the establishment of better environments for our customers, the Bank is now able to concentrate on the provision of new products and channels such as credit cards and internet banking services.

IT Operations / Bank of Baghdad has sought opportunities throughout 2008 and through analysis has developed a programme to minimise IT gaps. We have embarked on significant initiatives in IT systems training and have also started to implement Advanced Management Information Systems. These will be completed by 2009. We have also initiated data cleansing of records to increase our operational efficiency. The bank has fine-tuned its back-office infrastructure to support these new systems.

A significant part of our IT capability growth is witnessed through our linked ATM network. This area has also seen expansion with the provision of stand-alone ATMs located within major corporates with high staff numbers. These companies can now offer their employees on-the-spot money services. Our internet banking and SMS initiatives continue, and will be completed during 2009.

Human Resources / The bank has embarked on a comprehensive series of training modules with PIGIER, a French / Lebanese professional training firm. Training seminars have been, and continue to be, conducted across a full spectrum of banking requirements, from systems and procedures to customer-facing sales-oriented training. Better transparency and internal communication practice has been achieved through the establishment of regular management meetings at all levels.

The bank revised its policies and procedures and job descriptions during the year. It has strengthened its middle management base and implemented a succession planning system. This has created better empowerment for branch level decision making, creating more responsive customer service standards. In addition, an objective-based compensation system has been introduced to provide better focus and career empowerment. The bank has also adjusted salary scales on a bank-wide basis. During the year, Bank of Baghdad determined an HR mandate to become the ‘best employer’, attracting the ‘best staff ’ who in turn provide the ‘best customer service’.

The result of these programmes has been an increase in confidence – both in our staff and in our customers.

Risk & Audit / Parallel to disclosing the results in compliance with local GAAP, Bank of Baghdad has successfully put in place processes that provide the bank’s management with results that are in compliance with IFRS. The result of this will see a far better international understanding of our structure and our financial strength, and a higher appreciation of transparency. This significant change will see Bank of Baghdad well positioned to take advantage of international business and inward investment opportunities.

The bank has also capitalised on its affiliation with the KIPCO Group and has drawn on this unique relationship to benefit from the group’s experience in corporate governance standards, risk culture and infrastructure. This continues to assist in strengthening robust standards in policies and procedures.

Annual Review

During the year, Bank of Baghdad gained authorisation to offer its customers MasterCard – leading the way to offering a full range of financial services. In addition, Bank of Baghdad became an agent of Western Union, providing its customers with an international money transfer service, besides the bank’s own ‘Moneylink’ service. This international connectivity has significantly raised the profile of Bank of Baghdad.

KEY ACHIEVEMENT: CREdIt CARdS IN IRAQ


Our internal processes have been strengthened through our advancement of IT infrastructure allowing better process control and risk mitigation.

The introduction of international audit standards to Bank of Baghdad during the year have added further transparency and provide an additional boost to our international recognition.

Network expansion / Bank of Baghdad continued its strategic vision of network expansion across Iraq, opening new branches in new areas to reach new audiences. Our ATM network has increased significantly through this branch expansion and all branches are connected through IT infrastructure allowing a streamlining of operations and information sharing across a wider network.

As part of its organisational restructuring in 2008, the bank created a regional branch approach to its network. Bank of Baghdad now has three main regional branches: Erbil, serving the Northern Region; Main Branch, serving Baghdad; and Hilla Branch, serving the Southern Region. These new branches provide the bank with more efficient management of its branch network.

Organisational structure / During 2008, Bank of Baghdad reorganised its internal structure and reporting systems into two streams – business / customer care and operations. The outcome has already been seen through increased branch efficiency; better focus on sales; better responsiveness to customer needs and higher customer

retention. We have initiated a sales culture within the organisation and have committed to customer care in significantly improved areas.

Looking ahead / Our vision for Bank of Baghdad has always been to be the leading financial service provider in Iraq, and to consistently meet or exceed customer expectations. We gave particular attention in 2008 to building stronger customer relationships, improving products and services, expanding the branch network and improving on the bank’s image in the marketplace.

The bank’s ability to deliver the strong performance we have seen over the past year would not have been possible without the dedication and commitment of our employees. The challenges of change, and of moving into a more customer driven culture are not to be under-estimated, and we recognise the tremendous amount of effort each and every one of our employees has contributed over the last year.

Annual Review

As part of the bank’s expansion, new ATM locations were established in ten locations across Iraq including Basra, Erbil, Hilla and Khadmia. The Bank also increased its branch presence with a second branch in Erbil, Dahook branch in Northern Provinces and in Dewania and Koot in Southern Provinces.

KEY ACHIEVEMENT: NEw BRANChES ANd AtMs


As part of its organisational restructuring in 2008, Bank of Baghdad now has three main regional branches: Erbil, serving the Northern Region; Main Branch, serving Baghdad; and Hilla Branch, serving the Southern Region.


fROM tRAdItIONAl EStABlIShEd ROOtS, BANK Of BAGhdAd IS OPENING NEw dOORS tO OPPORtuNItY RIGht ACROSS IRAQ wIth NEw fINANCIAl PROduCtS ANd SERVICES, NEw MOdERN BANKING BRANChES ANd NEw AtM lOCAtIONS.

Iraq has continued on its journey of growth and recovery with new initiatives in economic restructuring. Bank of Baghdad has facilitated and capitalised on many of these, becoming more global in its outlook and winning significant international business.


Independent Auditor’s Report

We examined the Balance Sheet of Bank of Baghdad (Private Joint Stock Company), Baghdad, as at 31st December, 2008, the Profit and Loss and Distributions Account for the year ended on the said date and the Bank’s Annual Report prepared according to the provisions of the Banking Law No. 94 of 2004 and the Companies Law No. 21 of 1997 and the Regulations and instructions issued in accordance therewith.

We obtained the information and clarifications, which we felt necessary for carrying out our duties in accordance with the applicable legislation and in compliance with the recognizing auditing procedures, which included the necessary tests of the Bank’s business which are part of our duties. We would like to note the following comments:

FIRsT: Paid up Capital

The paid up capital of the Bank was increased during the year from ID 52,973,256,470 (Fifty two billion nine hundred seventy three million two hundred fifty six thousand and four hundred seventy Iraqi Dinars) to ID 70,000,000,000 (Seventy billion Iraqi Dinars), that is in accordance to the Registrar of Companies letter No. 11593 dated July 15th 2008.

seCONd: Banks’ Business Activities:

The surplus of the Bank’s business activities for the year subject to the audit amount to ID 21,948,977,331 while it was ID 22,496,776,327 in the previous year, which shows that it increased by an amount of ID 547,798,996 representing a decrease of 2.43% as shown in the following details:

a) Increase in the Revenues of Current Business

During the year ended on 31st December, 2008 there was an increase in the revenues of current business in an amount of ID 11,543,088 arising as follows:

Iraqi dinar %

Decrease in Banking Operations Revenues (391,389,801) (3)

Increase in Investment Revenues 11,777,811,631 102

Increase in Service Business Revenues 156,666,209 1

11,543,088,039 100

b) Increase in Expenses of Current Business

During the year ended on 31st December, 2008 there was an increase in the expenses of current business in an amount of ID 8,234,755,215

Iraqi dinar %

Banking Operations Expenses 5,580,038,513 68

Depreciation 63,970,302 1

Administrative Expenses 2,590,746,400 31

8,234,755,215 100


c) “Miscellaneous Revenues” and “Other Transfer Expenses”

The decrease in miscellaneous revenues amounted to ID 198,184,915 while the increase in the Transfer and Other Expenses amounted to ID 3,657,946,905.

According to the above, the decrease in the Bank’s business surplus amounting to ID 547,798,996 arose from the following:

Iraqi dinars

Increase in Current Business Revenues 11,543,088,039

Less:

Increase in Expenses of Current Business 8,234,755,215

Less:

Decrease in Miscellaneous Revenues 198,184,915

Less:

Increase in Transfer and Other Expenses 3,657,946,905

(547,798,996)

THIRd: Financial Position

The asset balance increased as at 31/12/2008 compared with the balance as at 31/12/2007 by an amount of ID 179,186,854,469 as follows:

Iraqi dinar %

Current Assets:

Cash 43,766,043,480 24

Investments 132,165,667,853 74

Cash Credits (10,734,264,833) (6)

Receivables 13,155,218,260 7

178,352,664,760

Net Fixed Assets 834,189,709 1

179,186,854,469 100



sources of Finance

The aforesaid increase being ID 179,186,854,469 represents the increase arising from the sources of finance as shown hereunder:

Iraqi dinar %

Short term sources of finance 161,951,918,514 90

Long term sources of finance 17,234,935,955 10

179,186,854,469 100

short Term sources of Finance:

Current Liabilities:

Current Accounts and Deposits 148,702,824,113 92

Provisions 5,258,335,042 3

Payables 7,990,759,359 5

161,951,918,514 100

Long Term sources of Finance:

shareholders’ equity:

Paid-up Capital 17,026,743,530 99

Reserves 208,192,425 1

17,234,935,955 100

FouRth: Financial Investments

The market value of the short term financial investments / private sector (shares) according to the Price Bulletin of the Iraq Stock Exchange at the last session of the Exchange in 2008 amounted at more than the cost of the investment portfolio, hence no provision was made for the decline in the value of investments in the year subject to the audit.

FIFth: Provision for Doubtful Debts

A provision was made for doubtful debts being ID 3,520,219,042 according to the instructions of the Central Bank of Iraq received in this respect, so that the balance of the provision for doubtful debts as at 31st December 2008 amounted to ID 14,000,000,000.

SIxth: Money Laundering and terrorism Financing

Through our examination of the accounting records and our review of the nature of banking operations undertaken by the Bank during the year subject to the audit, we did not find any activities indicating that there were banking transactions related to money laundering or those that contributed to financing terrorist activities.


seveNTH: Capital Adequacy

Through our examination of the accounting records and statements prepared for the purpose of calculating the capital adequacy, we found that the capital adequacy ratio was 73.5% according to Article 16 of the Banking Law No. 94 of 2004.

In our opinion and according to the results of our examination as indicated in the Bank’s records and the information and clarifications given to us:

1) The books of accounts maintained by the Bank fully comply with the book-keeping requirements and in our opinion they contain full records of all the Bank’s assets, liabilities, expenditure and revenues of the Bank. The internal control system has consisted of the necessary procedures which ensure the accuracy of the financial statements, in a proportionate manner with the volume of the Bank’s activities.

2) The inventory of assets and the cash stock took place properly under our supervision, and the inventory results were in conformity with the available records and such assets were evaluated according to the approved principles, rules and standards followed in the previous year.

3) The annual report and its contents reflect in a comprehensive manner the Bank’s development during the year subject to the audit and do not include anything that violates the provisions of the applicable laws and statutes.

4) The final statements and accounts have been prepared in compliance with the applicable legislation and accounting standards which conform with the data shown in registers and are drawn up according to the Companies Law, regulations and instructions in accordance therewith and the Iraq Central Bank Law.

In compliance with the above that have an effect on the financial statements, the attached Balance Sheet reflects the financial position of the Bank as at 31st December, 2008 and the final accounts show the business profits for the year ended on the said date and as shown by the books and records.

Farquad hasan Ahmed Al Salman Fellow of the Public Accountants Association uK ofFarqad Al Salman & Associates Company,Auditors (Partnership)

Baghdad, 1st March 2009




Financial Statements 2008


Ali Muhsin Al-Asadi Adnan Kanan Al-Chalabi Emad Ismail ShareefAccounts Manager Managing Director Chairman of The Board of Directors

Statement Accounting 31/12/2008 31/12/2007No. Manual No. Iraqi Dinars Iraqi Dinars

ASSETS

Current Assets

1 18 Cash in Hand 204,708,679,911 160,942,636,431

2 15 Investments 217,149,527,722 84,983,859,869

14 Cash Credits

3 144 Discounted Commercial Papers 1,791,021,852 5,437,493,913

4 14 except 144 Loans and Advances 45,576,096,710 52,663,889,482

47,367,118,562 58,101,383,395

16 Receivables

Debit Contra Accounts 24,167,515,298 12,423,849,659

5 Debit Balances 37,656,831,881 36,245,279,260

61,824,347,179 48,669,128,919

531,049,673,374 352,697,008,614

Fixed Assets

6 11 & 12 Existing-at book value - (after depreciation) 11,861,767,446 11,027,577,737

Total Assets 542,911,440,820 363,724,586,351

Contra Accounts

12 19 Contra Customers’ Obligations for Banking Transactions (after deducting deposits) 203,181,392,923 124,229,295,886

SOURCES OF FINANCE

Short Term Sources

7 25 Current Accounts and Deposit 404,177,095,939 255,474,271,826

11 22 Provisions 18,490,548,084 13,232,213,042

8 26 Payables 26,901,858,799 18,911,099,440

449,569,502,822 287,617,584,308

Long Term Sources

9 211 Paid-up Capital 70,000,000,000 52,973,256,470

10 22 Reserves 23,341,937,998 23,133,745,573

Shareholders’ Equity 93,341,937,998 76,107,002,043

542,911,440,820 363,724,586,351

Contra Accounts

12 29 Contra Customers’ Obligations for Banking Transactions (after deducting deposits) 203,181,392,923 124,229,295,886

Financial Statements 2008

Balance Sheet (As at 31st December 2008)Statement A


Profit and Loss Account (For the year ended on 31st December 2008)Statement B


Current Business Revenues

13 43 Service Business Revenue 178,322,422 21,656,213

14 44 Banking Operation Revenue 18,699,221,575 19,090,611,376

15 46 Investment Revenue 24,921,854,227 13,144,042,596

43,799,398,224 32,256,310,185

Less: Current Business Expenses

16 34 Banking Operations Expenses 10,045,624,082 4,465,585,569

6 37 Depreciation 419,435,950 355,465,648

17 31-33 Overheads 7,603,828,485 5,013,082,085

18,068,888,517 9,834,133,302

Current Operations Surplus 25,730,509,707 22,422,176,883

Add: Transferred and Other Revenues

18 49 Other Revenues 235,841,774 434,026,689

Less: Transferred and Other Expenses

19 38 Transferred Expenses 196,825,973 42,176,111

20 39 Other Expenses 3,820,548,177 317,251,134

4,017,374,150 359,427,245

Distributable Surplus: 21,948,977,331 22,496,776,327

Distributed as follows:

Doubtful Debts 1,097,341,924

Tax Provisions 531,776,000

Statutory Reserve according to the Iraqi Central Bank Law 1,015,992,970

Undistributed Profits (Accumulated Surplus) 19,303,866,437

21,948,977,331


Iraqi Dinars Iraqi Dinars

Surplus according to the attached Statement (B) 21,948,977,331

Cash flows from Operational Activities

Depreciation and Amortization 419,435,950

Increase in Receivables (13,155,218,260)

Increase in Current Accounts and Deposits 148,702,824,113

Increase in Payables 7,990,759,359

Net Cash Flow from Operational Activities 143,957,801,162

Cash flow from Investment Activities

Increase in Investments (132,165,667,853)

Decrease in Cash Credit 10,734,264,833

Net Decrease in Fixed Assets 1,631,334,760

Increase in Projects Under Construction (2,884,960,419)

Net Cash Flow from Investment Activities (122,685,028,679)

Cash Flow from Financing Activities

Increase in Paid-up Capital 17,026,743,530

Decrease in Reserves (20,111,666,982)

Increase in Provisions 3,629,217,118

Net Cash Flow from Financing Activities 544,293,666

Net Cash Flow 43,766,034,480

Add: Cash Balance at beginning of the year 160,942,636,431

Cash balance as of 31st December 2008 204,708,679,911

Financial Statements 2008continued

Cash Flow Statement (For the year ended on 31st December 2008)Statement C


Cash Statement (As at 31st December 2008)Statement No. 1

Accounting 31/12/2008 31/12/2007Manual No. Iraqi Dinars Iraqi Dinars

181 Cash in Hand 21,921,128,653 11,156,489,158

182 Standing Advance 5,000 -

183 Cash Funds in Local Banks 34,080,387,566 61,924,212,385

184 Statutory Deposits with Central Bank 63,189,315,000 41,105,679,000

185 Cheques and Drafts - -

186 Foreign Currency Notes 31,138,051,811 34,340,729,618

187 Cash Funds with Overseas Banks 54,379,791,881 12,415,526,270

204,708,679,911 160,942,636,431

Investment Statement (As at 31st December 2008)Statement No. 2


152 Long-term Financial Investments

1526 Long-term Financial Investments 1,812,337,920 1,582,121,422

153 Short-term Financial Investments

1531 Short-term Financial Investments/ Government Sector 203,180,000,000 70,000,000,000

1536 Short-term Investments/ Private Sector 437,189,802 36,738,447

1538 Short-term Investments/ Overseas World 11,720,000,000 13,365,000,000

215,337,189,802 83,401,738,447

217,149,527,722 84,983,859,869

Statement of Discounted and Purchased Commercial Papers (As at 31st December 2008)Statement No. 3


144 Discounted and Purchased Commercial Papers

1441 Discounted Bills of Exchange 34,000,000 2,829,050,000

1445 Purchased Local Drafts 1,757,021,852 2,608,443,913

1,791,021,852 5,437,493,913


Statement of Loans and Advances (As at 31st December 2008)Statement No. 4


142 Short Term Loans

14271 Short Term Loans/Individuals-I. Dinar 5,550,594,332 6,671,124,658

14272 Short Term Loans/Individuals-Foreign Currencies 25,087,493,110 36,883,515,001

30,638,087,442 43,554,639,659

143 Receivables Current Account

1436 Receivables Current Accounts/Private Sector/Companies 6,085,778,888 285,309,816

1437 Receivables Current Accounts/Private Sector/Individuals 6,099,622,387 7,781,939,003

12,185,401,275 8,067,248,819

1484 Advances Against Gold Jewellery Mortgage 2,746,578,581 1,024,927,471

1491 Staff Advances 6,029,412 17,073,533

45,576,096,710 52,663,889,482

Statement of Receivables (As at 31st December 2008)Statement No. 5


161 Current Business Receivables 1,879,120,603 3,869,034

165 Non-current Business Receivables 4,591,271 4,128,169

166 Miscellaneous Receivables Accounts

1661 Deposits with Third Parties 54,480,039 21,842,275

1662 Accrued earnings 5,121,601,529 2,407,595,943

1663 Prepaid Expenses 991,307,875 1,043,098,552

1664 Compensation Claims 2,408,406,641 2,009,406,104

1665 Currency Differentials - 12,071,639

1666 Legal Costs 166,987,920 105,380,400

8,742,784,004 5,599,394,913

167 Advances

1671 Advances for Business Purposes 905,303,927 285,336,741

16722 Advances for Currency Differentials (Counterfeit) 107,652,401 827,431,568

1,012,956,328 1,112,768,309

169 Miscellaneous Receivables Accounts

1691 Overdue Receivables Accounts 25,906,661,675 29,414,400,835

1693 Letter of Guarantee Debtors 110,718,000 110,718,000

26,017,379,675 29,525,118,835

37,656,831,881 36,245,279,260



Office Deferred Buildings & Plant & Vehicles & Furniture & Revenue Investment Land Facilities Equipment Transport Equipment Expenses Expenses Total

Fixed Assets

Accounting Manual No. 111 112 113 114 116 118 12

Movement During the Year Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars

Cost

Balance as at1/1/2008 838,792,450 1,930,017,833 397,096,034 142,224,200 1,181,497,399 2,584,326,769 - 7,073,954,685

Net Movement during the Year - 5,213,700 107,338,831 10,147,500 269,423,033 (2,169,261,786) - (1,777,138,722)

Balance as at31/12/2008 838,792,450 1,935,231,533 504,434,865 152,371,700 1,450,920,432 415,064,983 - 5,296,815,963

Provision of Accumulated Depreciation

Balance as at1/1/2008 - 294,660,150 193,268,020 95,089,838 845,208,372 - - 1,428,226,380

Settlementsduring the Year - 13,100,127 18,662,777 (7,167,075) (79,207,472) - - (54,611,643)

Add:Depreciation ofCurrent Year - 53,893,520 74,044,320 7,106,888 228,785,236 55,605,986 - 419,435,950

Balance as at31/12/2008 - 361,653,797 285,975,117 95,029,651 994,786,136 55,605,986 - 1,793,050,687

Book Value at31/12/2008 838,792,450 1,573,577,736 218,459,748 57,342,049 456,134,296 359,458,997 - 3,503,765,276

Projects inProgress - - - - - - 8,358,002,170 8,358,002,170

11,861,767,446

Statement of Fixed Assets and their Depreciation (As at 31st December 2008)Statement No. 6


Statement of Current Accounts & Deposits (As at 31st December 2008)Statement No. 7


251 Payable Current Accounts

2516 Payable Current Accounts/Private Sector/Companies 15,703,706,645 15,389,959,699

2517 Payable Current Accounts/Private Sector/Individuals 67,562,527,098 48,143,992,354

25191 Crossed Cheques 4,160,020,881 5,083,278,998

25192 Amounts Booked by Phone 123,281,981 259,375,730

25193 Dormant Payable Current Accounts - -

87,549,536,605 68,876,606,781

252 Savings Accounts

2521 Savings Accounts 68,147,829,515 42,749,224,335

253 Term and Demand Deposit Accounts

2531 Fixed and Call Deposits 61,584,931,745 18,030,746,878

25331 Foreign Currency Savings Accounts 24,006,232,228 21,311,579,002

25332 Foreign Currency Fixed Deposits 35,367,915,694 670,162,507

2534 Foreign Currency Current Deposits 103,607,915,854 85,474,755,420

224,566,995,521 125,487,243,807

255 Deposits Received for Banking Transactions

2551 Deposits for issued Letters of Credit 3,448,273,015 3,289,653,506

2552 Deposits for Letters of Guarantee 14,385,340,328 8,168,282,462

2555 Deposits for Leased Safe Deposit Boxes 997,300 1,017,300

17,834,610,643 11,458,953,268

256 Internal Drafts and Cheques

2562 Bills of Exchange drawn against the Bank 4,858,202,109 4,498,677,262

2563 Cheques drawn against the Bank 175,542,461 1,495,696,354

2571 Overseas Drafts drawn against the Bank 1,044,379,085 907,870,019

6,078,123,655 6,902,243,635

404,177,095,939 255,474,271,826



Payables Statement (As at 31st December 2008)Statement No. 8


261 Current Business Payables

2613 Financial Sector Payables 90,660,000 16,370,000

2617 Private Sector/Individuals Payables 747,650,101 751,091,307

838,310,101 767,461,307

262 Insurance Premium Receipts 100,420,478 65,891,777

265 Non-current Business Payables 1,103,868,808 1,866,392,263

266 Miscellaneous Payable Accounts

2661 Received Deposits 15,359,970 77,511,251

2662 Prepaid Earnings 7,914,935,731 10,060,802,721

26631 Accrued Interest 2,873,750,465 1,921,412,313

26632 Accrued Interest/US$ 1,191,960,220 618,712,397

26633 Payable Overheads 1,506,671,815 1,139,641,788

2664 Payable Salaries and Wages 21,500,440 (349,623)

26663 Financial Stamps Fees 172,122,107 140,553,527

2668 Increase in the Fund 24,748,279 3,554,229

26695 Amounts Received for Registration of Companies 6,190,174,815 669,280,000

26696 Subscription Deposits 3,571,343,764 327,430

26699 Accounts under Settlement 934,457,811 932,210,714

24,417,025,417 15,563,656,747

267 Deductions for the Account of Third Parties

2671 Staff Deductions for the Account of Third Parties 46,146,886 83,838,643

2672 Non-staff Deductions for the Account of Third Parties 64,443 42,000

46,211,329 83,880,643

268 Profit Distribution Payables 11,507,315 16,892,121

269 Other Payable Accounts

2695 Balances and Compensations of Deceased Customers 383,941,491 545,295,178

2696 Amounts Retained at Authorities’ Request 573,860 1,629,404

384,515,351 546,924,582

26,901,858,799 18,911,099,440


Statement of Capital (As at 31st December 2008)Statement No. 9

Accounting Manual No. Iraqi Dinars

211 Nominal Capital

Nominal and Authorised Capital:

Number of Shares Share Value

Paid up Capital 1.1.2008 52,973,256,470 IQD1 52,973,256,470

Increase during the year 17,026,743,530 IQD1 17,026,743,530

Paid up Capital 31/12/2008 70,000,000,000

Reserves Statement (As at 31st December 2008)Statement No. 10

Capital Reserve Reserve (According to for Replacement Accumulated SurplusType of Reserve Central Bank Law) of Fixed Assets (Undistributed Profits) Accounting 2141 2144 217 TotalManual No. Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars

Balance as at 1.1.2008 2,965,258,094 56,842,298 20,111,645,181 23,133,745,573

Additions 1,015,992,970 - 19,303,866,437 20,319,859,407

Write-offs - (21,801) (20,111,645,181) (20,111,666,982)

Balance as at 31.12.2008 3,981,251,064 56,820,497 19,303,866,437 23,341,937,998

Statement of Provisions (As at 31st December 2008)Statement No. 11

1 of 2

Balance as at Additions Depreciation Balance as atAccounting 1.1.2008 During the Year During the Year 31.12.2008 Manual No. Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars

222 Provision for

Doubtful Debts 10,117,280,958 3,882,719,042 - 14,000,000,000

224 Tax Provisions 2,743,209,200 531,776,000 - 3,274,985,200

225 Miscellaneous

Provisions

2251 Provision for Decline

in Investment Value 9,222,884 - - 9,222,884

2252 Provision for

Stolen Cash 362,500,000 843,840,000 - 1,206,340,000

13,232,213,042 5,258,335,042 - 18,490,548,084



Statement of Provisions (As at 31st December 2008)Statement No. 11

2 of 2 - Calculation of Tax Provisions

Iraqi Dinars Iraqi Dinars

21,948,977,331 Business Surplus according to the attached Profit & Loss Statement (B)

Add: Unacceptable Expenses for Tax Purposes

1,400,000 Donations to Others

1,305,737 Compensations and Fines

894,007 Special Service Costs

29,000,000 Employees’ Income Tax

2,650,000 Aid Provided to Employees

35,249,744

21,984,227,075

Less: Non-Taxable Revenues:

18,313,041,833 Treasury Bills’ Interest

126,014,800 Earnings from Property Rents

18,439,056,633

3,545,170,442 Business Surplus Subject to Tax Provisions

Tax Provisions

15% x Taxable Business Surplus

531,776,000 15% x IQD 3,545,170,442

Statement of Contra Obligations for Banking Transactions (As at 31st December 2008)Statement No. 12


192/292 Issued Letters of Guarantee

1921/2921 Letters of Guarantee (after deducting deposits) 34,496,122,910 15,478,643,084

193/293 Issued LC Accounts

1931/2931 Issued LCs (after deducting deposits) 908,428,217 3,682,098,506

196/296 Accounts of Transactions under Collection

1967/2967 Treasuries under collection at Branches 3,060,000 -

1969/2969 Cheques for Clearing 254,012,000 138,560,300

257,072,000 138,560,300

198/298 Contra Receivable Guarantee Accounts

1983/2983 Mortgages for Banking Facilities 167,519,764,662 104,929,988,007

199/299 Contra Debit Accounts at Nominal Value 5,134 5,989

203,181,392,923 124,229,295,886


Service Business Revenues Statement (For the year ended on 31st December 2008)Statement No. 13


437 Miscellaneous Service Revenues 52,307,622 11,420,713

438 Rents of Fixed Assets 126,014,800 10,235,500

178,322,422 21,656,213

Statement of Banking Operations Income (For the year ended on 31st December 2008)Statement No. 14

1 of 2Accounting 31/12/2008 31/12/2007Manual No. Iraqi Dinars Iraqi Dinars

441 Foreign Exchange Income

4413 Foreign currency selling and buying income 1,507,433,880 2,438,765,900

1,507,433,880 2,438,765,900

442 Internal Advances and Loans Income

4421 Loan interest

44211 Loan Interest/Iraqi Dinar 6,668,933,332 3,985,886,069

4422 Receivable Current Accounts Interest 2,378,434,643 2,080,960,551

44231 Discounted bills of exchange and drafts interest 400,841,993 3,062,190,126

44233 Commissions of bills for collection 764,270 2,474,647

44243 Interest of advances against securities pledge 89,708,402 100,000

44245 Interest of advances against jewellery mortgage 148,216,842 88,756,850

44246 Personal Loans interest 311,635 2,401,966

9,687,211,117 9,222,770,209

443 Drafts Commissions

4431 Commission of Sold Internal Drafts - 19,579,736

4432 Commission of Overseas Drafts 3,938,780,008 3,076,716,975

3,938,780,008 3,096,296,711

444 Income of Drafts and Letters of Credit

4441 Commission of Outgoing LCs and its drafts 2,391,195 -

4442 Interest of Outgoing LCs - 620,753

2,391,195 620,753

445 Letter of Guarantee Income

4451 Commission of Internal Letters of Guarantee/I. Dinar 972,462,812 279,495,808

Carried Forward 16,108,279,012 15,037,949,381



Statement of Banking Operations Income (For the year ended on 31st December 2008)Statement No. 14


Brought Forward 16,108,279,012 15,037,949,381

447 Miscellaneous Bank Commissions

4471 Commission for Issue of Promissory Notes and Cheques 210,369,181 118,505,930

4473 Commission for Stock and Bond Sales - 55,650,585

4479 Other Bank Commissions 2,338,693,771 3,816,540,686

2,549,062,952 3,990,697,201

448 Recovered Expenses

4482 Recovered communication expenses 22,170,816 22,440,009

4485 Sales of Banking Stationery 19,468,795 39,304,785

41,639,611 61,744,794

449 Other Banking Operations Revenues

4492 Safe Deposit Box Rents 240,000 220,000

18,699,221,575 19,090,611,376

Statement of Investment Earnings (For the year ended on 31st December 2008)Statement No. 15


462 Earnings of Domestic Financial Investments

4621 Interest of Treasury Bills 18,313,041,833 4,221,002,500

4622 Interest of Cash Deposits with Third Parties 6,569,897,532 8,914,303,883

4624 Earnings of Domestic Participations 38,914,862 8,736,213

24,921,854,227 13,144,042,596


Statement of Banking Operations Expenses (For the year ended on 31st December 2008)Statement No. 16


342 Paid Bank Interest

3421 Savings Accounts Interest 4,851,690,282 3,092,955,748

3422 Fixed Deposit Interest 5,107,544,841 1,278,739,717

3424 Overdrawn Current Account Interest - -

3425 Credit Current Account Interest 38,259,951 64,035,253

9,997,495,074 4,435,730,718

343 Paid Banking Commissions 48,129,008 29,854,851

10,045,624,082 4,465,585,569

Statement of Overheads (For the year ended on 31st December 2008)Statement No. 17


31 Salaries and Wages

312 Cash Salaries

3121 Salaries 762,141,843 665,751,099

3123 Overtime Wages 75,880,016 36,235,797

3124 Staff Bonus 14,948,000 176,928,760

3125 Professional and Technical Provisions 511,914 99,376,568

3126 Compensation Provisions 4,525 32,298,355

3129 Other Provisions 2,254,863,786 925,537,777

3,108,350,084 1,936,128,356

315 Contribution to Employees’ Social Security

3151 Bank’s Share to Social Security 168,062,003 106,239,325

Total Salaries and Wages 3,276,412,087 2,042,367,681

32 Goods and Supplies

322 Fuel and Oils 178,092,732 216,830,275

323 Standby Items 2,158,230 453,500

325 Miscellaneous Items

3251 Supplies and Requirements 31,906,103 23,564,801

3252 Stationery Items 37,958,198 24,632,244

69,864,301 48,197,045

326 Staff Facilities 717,000 135,007,743

327 Water and Electricity 29,784,978 16,266,638

Total Goods and Supplies 280,617,241 416,755,201




2 of 3


33 Service Requirements

331 Maintenance Services

3312 Buildings and Facilities Maintenance 45,274,661 41,477,662

3313 Machinery and Equipment Maintenance 30,010,690 42,443,977

3314 Transport Facilities & Vehicle Maintenance 10,980,690 10,806,500

3316 Office Furniture and Equipment Maintenance 11,982,200 64,919,077

98,248,241 159,647,216

332 Research and Consultancy Services 1,921,377,156 1,404,828,600

333 Publicity, Printing and Entertainment

3331 Publicity and Advertising 189,191,618 28,050,344

3332 Publishing and Printing 109,419,749 10,433,508

3333 Entertainment 6,687,300 4,690,025

3334 Exhibitions - -

3335 Ceremonies 30,000 125,000

3336 Conferences and Seminars 2,879,000 2,164,380

308,207,667 45,463,257

334 Transport, Trips & Communications

3341 Staff Transport 165,657,300 134,567,733

3342 Goods and Items Transport 140,149,925 41,994,510

3343 Travel and Business Trips 640,071,127 214,901,003

3344 Corporate Communications 134,624,873 120,880,473

1,080,503,225 512,343,719

335 Fixed Assets Leasing

3352 Lease of Buildings and Facilities 243,080,254 182,232,146

243,080,254 182,232,146

Carried Forward 3,651,416,543 2,304,514,938



3 of 3


Brought Forward 3,651,416,543 2,304,514,938

336 Miscellaneous Service Expenses

3361 Subscriptions 26,812,550 31,865,350

3362 Insurance Premiums 92,367,437 106,487,338

3363 Non-Staff Bonuses 8,397,570 6,257,057

3364 Taxes and Fees for Foreign Parties - 71,800

3365 Legal Services 9,267,207 4,315,450

3366 Banking Services 121,385,679 21,596,935

3367 Training and Qualification 14,824,172 17,484,500

3368 Accounting Services

336821 Audit Fees/Central Bank - -

336822 Audit Fees/Auditor 25,000,000 20,000,000

3369 Other Service Expenses 97,327,999 41,365,835

395,382,614 249,444,265

Total Service Requirements 4,046,799,157 2,553,959,203

Total Overheads 7,603,828,485 5,013,082,085

Statement of Other Revenues (For the year ended on 31st December 2008)Statement No. 18


491 Previous Years’ Revenues 232,555,904 433,227,644

492 Incidental Revenues 3,285,870 799,045

235,841,774 434,026,689



Statement of Transferred Expenses (For the year ended on 31st December 2008)Statement No. 19


383 Miscellaneous Transferred Expenses

3831 Donations to Third Parties 1,400,000 2,000,000

3832 Compensations and Fines 1,305,737 2,506,101

3833 Doubtful Debts 1,097,341,924 3,135,819,092

3834 Special Services Expenses 894,007 50,000

1,100,941,668 3,140,375,193

384 Taxes and Fees

3843 Financial Stamps Fees 77,071,145 (18,350)

3846 Miscellaneous Taxes and Fees 113,505,084 32,871,580

190,576,229 32,853,230

385 Aid

3851 Staff Aid 2,650,000 3,271,000

3852 Third Party Aid - 1,495,780

2,650,000 4,766,780

Total Transferred Expenses 1,294,167,897 3,177,995,203

Statement of Other Expenses (For the year ended on 31st December 2008)Statement No. 20


391 Previous Years’ Expenses 3,807,673,058 306,743,301

392 Incidental Expenses 12,875,119 10,507,833

393 Capital Losses - -

3,820,548,177 317,251,134


Statement of Added Value at the Production Elements Cost Price (For the year ended on 31st December 2008)Statement A


(1) Value of Total Production at Product’s Price

1 Commissions 7,463,461,237 7,368,964,367

2 Charged Service Fee (311,048,227) 4,785,185,597

3 Other Revenues 1,705,465,097 2,499,946,898

8,857,878,107 14,654,096,862

(2) Value of Production Requirements

4 32 Goods Requirements 279,900,241 281,747,458

5 33 Service Requirements 3,905,448,354 2,393,166,506

6 34 Banking Operations Expenses 48,129,008 29,854,851

4,233,477,603 2,704,768,815

(3) Total Added Value at Product Price (1)-(2) 4,624,400,504 11,949,328,047

384 Less: (Indirect) Fees and Taxes 190,576,229 32,853,230

Total Added Value at Production Elements Cost Price 4,433,824,275 11,916,474,817

Statement of Added Value at the Production Elements Cost Price (For the year ended on 31st December 2008)Statement B


(1) Staff Compensations

31 (a) Salaries and Wages 3,276,412,087 2,042,367,681

326 (b) Benefits in-kind – Staff Facilities 717,000 135,007,743

3,277,129,087 2,177,375,424

(2) Operations Surplus:

Net Profits 737,259,238 9,383,633,745

37 (3) Depreciation and Amortization: 419,435,950 355,465,648

4,433,824,275 11,916,474,817



Statement of Received Commissions (For the year ended on 31st December 2008)Statement No. 1


442 Revenues of Domestic Loans and Advances

4423 Revenues of Discounting and Collection of Commercial Papers

44233 Commissions of bills for Collection 764,270 2,474,647

44247 Commissions and Charges/ Miscellaneous Advances - -

443 Drafts Commissions

4431 Commission of Domestic Drafts - 19,579,736

4432 Commission of Overseas Drafts 3,938,780,008 3,076,716,975

444 Revenues of LCs and Drafts

4441 Commission of Opening of Outgoing LCs 2,391,195 -

445 Letter of Guarantee Revenues

4451 Commission of Domestic Letters of Guarantee 972,462,812 279,495,808

447 Miscellaneous Bank Commissions 2,549,062,952 3,990,697,201

Total Commissions Received 7,463,461,237 7,368,964,367

Statement of Components of Service Fees Charged (For the year ended on 31st December 2008)Statement No. 2


(1) Interest Received:

442 Revenues of Domestic Loans and Advances:

4421 Loan Interest 6,668,933,332 3,985,886,069

4422 Interest of Debit Current Accounts 2,378,434,643 2,080,960,551

4423 Interest of Discounted Bills of Exchange and Drafts 400,841,993 3,062,190,126

44243 Interest of Advances against Pledged Securities 89,708,402 100,000

44245 Interest of Advances against Mortgaged Gold Jewellery 148,216,842 88,756,850

44246 Interest of Personal Advances 311,635 2,401,966

9,686,446,847 9,220,295,562

444 Revenues of LCs and Drafts

4442 Interest of Outgoing LCs - 620,753

445 Revenues of Letters of Guarantee

4453 Interest of Letters of Guarantee - -

9,686,446,847 9,220,916,315

(2) Paid Interest:

342 Bank Interest Paid

3421 Interest of Savings Accounts 4,851,690,282 3,092,955,748

3422 Interest of Fixed Deposits 5,107,544,841 1,278,739,717

3423 Interest of Domestic Borrowing - -

3424 Interest of Overdrawn Current Accounts - -

3425 Interest of Credit Current Accounts 38,259,951 64,035,253

9,997,495,074 4,435,730,718

Service Fees Charged (1 – 2) (311,048,227) 4,785,185,597


Statement of Other Revenues (For the year ended on 31st December 2008)Statement No. 3


43 Revenues of Service Business

437 Miscellaneous Service Revenues 52,307,622 11,420,713

438 Rents of Fixed Assets 126,014,800 10,235,500

178,322,422 21,656,213

441 Foreign Exchange Revenues

4412 Revenues of Sale and Buying Foreign Currencies - -

4413 Revenues of Foreign Exchange Selling and Buying 1,507,433,880 2,438,765,900

1,507,433,880 2,438,765,900

448 Recovered Expenses

4485 Sales of Banking Stationery 19,468,795 39,304,785

449 Revenues of Other Banking Operations

4492 Rents of Safe Deposit Boxes 240,000 220,000

4493 Charges for Safekeeping of Sealed Deposits - -

240,000 220,000

1,705,465,097 2,499,946,898

Statement of Goods Requirements for National Accounts Statements (For the year ended on 31st December 2008)Statement No. 4


32 Goods Requirements 280,617,241 416,755,201

326 Less: Staff Facilities 717,000 135,007,743

279,900,241 281,747,458

Statement of Goods Requirements for National Accounts Statements (For the year ended on 31st December 2008)Statement No. 5


33 Service Requirements 4,046,799,157 2,553,959,203

3361 Less: Subscriptions 26,812,550 31,865,350

3362 Insurance Premiums 92,367,437 106,487,338

119,179,987 138,352,688

3,927,619,170 2,415,606,515

448 Less: Recovered Expenses

4482 Recovered Communications Expenses 22,170,816 22,440,009

3,905,448,354 2,393,166,506

Statement of Banking Operations Expenses for National Accounts Statements(For the year ended on 31st December 2008)Statement No. 6


343 Paid Bank Commissions 48,129,008 29,854,851


Board of Directors’ Report about the Bank’s Operations

First: Summary about the Bank’s Activities

1. The Bank was established as a Joint Stock Company with a nominal capital of Iraqi Dinars 100 million pursuant to the Certificate of Incorporation No.M.SH/4512 dated 18.2.1992 and it was the first privately owned Iraqi Bank allowed to be established pursuant to the Law Amending the Central Bank of Iraq Law No.12 of 1991.

The Bank commenced its activities on 12.9.1992 by carrying on the usual banking business. On 25.10.1997 the Bank amended the Memorandum of Association to enable it to carry on full banking business and such amendment took place according to the resolution of its General Meeting on 25.09.1998. The Bank continued to expand by increasing its capital as from 1997 when it reached Iraqi Dinars 160 million. Such increases continued until 2003 when it amounted to Iraqi Dinars 2,640 million and then to Iraqi Dinars 5280 million at the end of 2004. In 2005 the capital reached Iraqi Dinars 52,973.3 million following the entry of United Gulf Bank and Iraq Holding Company as shareholders, hence its international banking operations expanded inside and outside Iraq.

The Bank enjoyed considerable confidence and credibility in carrying on its business with its customers and corporations efficiently and at the highest levels of confidentiality and privacy.

2. Bank’s Principal Objectives:

(a) Attracting national savings and investing them in various investment areas and contributing to enhance Iraq’s economic growth according to the general policy and monetary policy approved by the Central Bank of Iraq.

(b) Last year we took a number of steps to further strengthen our abilities and to prepare for the future with the focus on bringing about further development and implementing our strategic objectives that we laid down in 2007.

Our success during the year demonstrates the value of the improvements we made and the restructuring of our activities with the intention to bring about further improvements in the future. We also enjoy the full commitment of our Board of Directors and employees to realize our vision by becoming the best financial services institution in Iraq through providing the best services, best products and best technologies for our customers.

(c) Realising the objective of effective supervision on the internal and external levels so as to enhance banking confidence and develop banking performance in the local and international levels.

3. Developments of the Paid-up Capital:

Upon its incorporation in 1992, the Bank’s capital was Iraqi Dinars 100 million and the Bank continued to expand its capital as from 1997 when it reached Iraqi Dinars 160 million. Such increases continued until 2003 when it reached Iraqi Dinars 2,640 million then Iraqi Dinars 5,280 million at the end of 2004. By the end of 2005 the capital amounted to Iraqi Dinars 52,973.3 million following the entry of United Gulf Bank and Iraq Holding Company as shareholders.

In 2008 the paid-up capital was increased to Iraqi Dinars 70 billion. The following chart shows the developments in the paid-up capital:

For the year ended on 31st December 2008

We are pleased to present to you the report of the Board of Directors of your Bank (Bank of Baghdad) with respect to the audited final accounts for the financial year ended on 31.12.2008 including the details and information about the Bank’s activities and operations, which was prepared according to the provisions of Articles 117 and 134 of the Companies Law No.21 of 1997 (amended) Instructions Concerning the Companies’ Accounting Regulation No.1 of 1998, Accounting Rule No.10 issued by the Board of Accounting and Control Standards in the Republic of Iraq and provisions of the Banking Law No.94 of 2004.

1992 200820042000 200620021998 200720031999 2005200119971995

10,000

0

20,000

30,000

40,000

50,000

60,000

70,000

(Value in thousands)

100 70,0005,2801280 52,9701990320 52,9702,640640 52,97050160100

AUTHORISED AND PAID UP CAPITAL

Board of Directors’ Report about the Bank’s Operations

Second: Financial and General Indicators for Bank of Baghdad During 2008:

1. Certain Features of the Iraqi Economy:

The Iraqi economy continued its recovery during the year following the significant improvement of security conditions. The economy witnessed some improvement through several positive factors including the increase in oil prices on the world markets and the significant growth in non-oil sectors and specifically in the construction sector in the northern provinces. The Central Bank of Iraq contributed to the increase in the growth rate through its ability to control inflation through its policies related to the exchange rates and interest rates. It also embarked upon launching a number of principal structural reforms such as the restructuring of foreign debts and development of the private sector, both of which will contribute to maintaining economic growth in future years.

As part of the Iraqi economy’s drive to develop the banking system included its technological advancement, improving its facilities and activating it, seeking to increase the banks’ capital, enhancing their financial position by pursuing modern and prudent credit policy, striving to recover debts owed to banks by their customers, setting aside sufficient provisions for outstanding credits which are all part of the efforts made by the Central Bank of Iraq in its policy with the Iraqi banks.

2. Bank of Baghdad’s Financial Position:

The Bank’s financial position (Total balance sheet footings without contra accounts) as at 31.12.2008 totalled Iraqi Dinars 542.9 billion an increase of 49.3% while it was Iraqi Dinars 363.73 billion in 2007.

The asset items which include the cash items contributed an increase of 27% and the investments contributed 155%. The receivables contributed 3.9% and the fixed assets contributed 8% while the cash credit item declined by 18%.

Bank of Baghdad’s financial position as at the end of 2008 and 2007:

31.12.2008 31.12.2007 Annual Account’s Name ID (Millions) % ID (Millions) % Rate of Change

ASSETS

Cash in Hand 204.6 37.7 160.9 44.2 27%

Investments 217.1 40.0 85 23.4 155%

Cash Credits 47.4 8.7 58.1 16 -18%

Receivables 37.7 6.9 36.3 10.0 3.9%

Mutual Receivables Accounts 24.2 4.5 12.4 3.4

Fixed Assets 11.9 2.2 11 3 8%

Total 542.9 100 363.7 100 49.3%

LIABILITIES

Current Accounts and Deposits 404.2 74.4 255.5 70.3 58%

Provisions 18.5 3.4 13.2 3.6 40%

Payables 26.9 5.0 18.9 5.2 42%

Paid-up Capital 70.0 12.9 53 14.6 32.1%

Reserves 23.3 4.3 23.1 6.3 1%

Total 542.9 100 363.7 100 49.3%

2.2%4.5%6.9%

8.7%

37.7%

40% Fixed Assets

Mutual Receivables Accounts

Receivables

Cash Credit

Cash

Investments

BANK’S ASSETS IN 2008

3.4%4.3%5%

12.9%

74.4%

Provisions

Reserves

Payables

Paid-up Capital

Current Account & Deposits

BANK’S LIABILITIES IN 2008

For the year ended on 31st December 2008


Development of the Bank’s Financial Position as at the end of the Five Years 2004-2008:

Year 2004 2005 2006 2007 2008

ID billion 61.878 318.090 331.210 363.725 542.9

Banking Business

a) Current Accounts and Deposits

The amount held (current accounts and deposits) with the Bank totaled Iraqi Dinars 404.2 billion at the end of 2008 including Iraqi Dinars 240.2 billion held in local currency and representing 59.4% while the amounts deposited in foreign currencies with their equivalent in the Iraqi Dinars were Iraqi Dinars 164.0 billion representing 40.6%.

The current accounts and deposits constituted 74.4% of the total liabilities which confirmed the ability of the Bank to attract deposits with it during the period ended on 31.12.2008 especially the low cost deposits (Credit Current Accounts + Other Accounts) which represented 53% of the total deposits. This is a positive indicator reflecting the customers’ preference to do business with the Bank and their satisfaction with its services. In addition, the increase in the balances of savings accounts and fixed deposits is evidence that the savers and investors do trust and prefer our Bank.

Breakdown of the Bank’s deposits as at the end of 2008 and 2007:

31.12.2008 31.12.2007 Account’s Name ID (Millions) % ID (Millions) % Rate of Change

Credit Current Accounts 191,157 47.3 154,351 60.4 23.8%

Savings Accounts 92,154 22.8 64,061 25.1 43.9%

Fixed Deposit Accounts 96,953 24.0 18,701 7.3 418%

Other Accounts 23,913 5.9 18,361 7.2 30.2%

Total 404,177 100 255,474 100 58%

100

0

200

300

400

500

600

5-YEAR DEVELOPMENT OF THE BANK’SFINANCIAL POSITION (2004-2008)

(ID Billion)

61.878 318.09 331.21 363.725 542.9

2004 2005 2006 2007 2008

5.9%

22.8%

24%

Other Accounts

Savings Accounts

Fixed Deposit Account

Current Accounts Payable

BREAKDOWN OF THE BANK’S DEPOSITS IN 2008

47.3%

0.3%1.2%

4.4%

22.8%Drawn Overseas Drafts

Internal Drafts and Bonds

Received Deposits

Savings Accounts

Fixed Deposit Account

Current Accounts Payable

CURRENT ACCOUNTS & DEPOSITS OF ALL TYPES AS AT 31.12.2008

47.3%24%


Current Accounts and Deposits of All Types as at 31.12.2008:

Foreign Currency In Iraqi Currency its equivalent Total Type of Deposits ID (Millions) % to ID (Millions) % ID (Millions) %

Credit Current Accounts 87,549.5 36.5 103,607.9 63.2 191,157.4 47.3

Savings Accounts 68,147.8 28.4 24,006.2 14.6 92,154.0 22.8

Fixed Deposit Accounts 61,584.9 25.6 35,367.9 21.6 96,952.8 24.0

Received Deposits 17,834.6 7.4 17,834.6 4.4

Internal Drafts and Bonds 5,033.7 2.1 5,033.7 1.2

Drawn Overseas Drafts 1,044.4 0.6 1,044.4 0.3

Total 240,150.5 100 164,026.4 100 404,176.9 100

Percentage 59.4% 40.6% 100%

Development of Deposit Volumes at the end of the Five Years 2004-2008:

Year 2004 2005 2006 2007 2008

ID billion 49.006 246.127 242.317 255.474 404.2

b) Banking Facilities:

1. Cash Credits:

The amounts of cash credits used by the Bank’s customers as loans, advances and other credits at the end of 2008 totalled Iraqi Dinars 47.36 billion against Iraqi Dinars 58.1 billion as at the end of 2007 with a fall of 18.5%. This decline is due to the measures taken by the Bank’s management for collection of the accrued debts. The loans given constituted 64.7% of the total credit amounts while the receivables represented 25.7% of the total facilities. The banking facilities extended against gold accounted for 5.8% followed by discounted or sold commercial papers with 3.8%. It should be noted that credit facilities extended against gold registered an increase of 168% since they were free of risks.

Breakdown of the Cash Credits used as at the end of 2008 and 2007:

31.12.2008 31.12.2007 Annual Account’s Name ID (Millions) % ID (Millions) % Rate of Change

Overdraft Accounts 12,185 25.7 8,067.3 13.9 51

Loans Extended 30,638 64.7 43,554.6 75 -69.7

Discounted and Sold Commercial Papers 1,791 3.8 5,437.5 9.4 -95.6

Advances against Mortgage of Gold Jewellery 2,747 5.8 10,24.9 1.7 168

Staff Advances 6 17.1

Total 47,367 100 58,101.4 100 18.5

Development of Cash Credit used at the end of the Years from 2004-2008:

Year 2004 2005 2006 2007 2008

ID billion 17.337 68.642 48.517 58.81 47.36

2. Contracting Credits:

The contracting credits registered a total sum of Iraqi Dinars 202.181 billion in 2008 against a sum of Iraqi Dinars 124.2 billion or a growth rate of 85% reflecting the customers’ confidence and their preference to do business with our Bank. Following are the components of this type of credit:

31.12.2008 31.12.2007 Sector Breakdown ID (Millions) % ID (Millions) %

Issued Letters of Credit 908 1 3,682.1 3.0

Issued Letters of Guarantee 34,496 17 15,478.6 12.5

Transactions Under Collection 257 138.6

Contra Guarantees Accounts 167,520 82 104,929.9 84.5

Total Contracting Credits (after deducting deposits) 203,181 100 124,229.2 100

Board of Directors’ Report about the Bank’s OperationsFor the year ended on 31st December 2008


3. Doubtful Debt Provision:

In spite of the decline in the total balances of cash credit accounts used as at the end of 2008 compared with the total as at the end of the previous year owing to the collection of the accrued and outstanding debts, yet the Bank set aside provisions for doubtful debts in the sum of Iraqi Dinars 3,520 million from the revenues of this year according to the guidelines of the Central Bank of Iraq. Thus, the total balance of the doubtful debt provision was Iraqi Dinars 14,000 million as at the end of 2008.

c) Cash Liquidity:

The cash in hand and at banks account represents the Bank’s cash liquidity in local and foreign currencies. The management of cash liquidity held by commercial banks has become an activity only undertaken by highly experienced and qualified bankers. The cash money account (in hand and at banks) as at 31.12.2008 reached a sum of Iraqi Dinars 204.6 billion compared with Iraqi Dinars 160.9 billion as at 31.12.207 an increase of 27%.

The cash liquidity ratio (cash in hand/current accounts and deposits) constitutes a percentage of 38.5%.

Breakdown of the Cash Account as at the end of 2008 and 2007:

31.12.2008 31.12.2007 Account’s Name ID (Millions) % ID (Millions) % %

Cash in hand 21,921 10.7 11,157 6.9 96.5

Cash at local banks 34,080 16.6 61,924 38.5 -94

Statutory deposits held in the Central Bank of Iraq 63,189 30.9 41,106 25.5 53.7

Cash held in overseas banks 54,380 26.6 12,415 7.7 33.8

Foreign currency notes 31,138 15.2 34,341 21.4 -9.3

Total 204,708 100 160,943 100 27

Development of Cash Account at the end of Five Years from 2004-2008:

Year 2004 2005 2006 2007 2008

ID billion 16.360 163.195 187.525 160.943 204.7

d) Investment Activities:

Our Bank’s investment activities increased to Iraqi Dinars 217.1 billion in 2008 after registering Iraqi Dinars 85.0 billion in 2007 an increase of 155%. This increase was due to the drive to invest in treasury bills and weekly and monthly investments with the Central Bank of Iraq. It should be noted that the Bank was able to generate revenues that totalled Iraqi Dinars 24,922 million representing interest on such deposits. The following table shows the details of such investments:

2008 Investments 2007 Investments Change No. Types of Investments ID (Millions) ID (Millions) %

1. Local Investments 205,430 71,618.8 187

a) Long-term financial investment 1,813 1,582.1 14

b) Short-Term Financial Investments/Government

b-1) Treasury Bills 98,180 70,000 40

b-2) Weekly investments 105,000

c) Short Term Financial Investments/ Private Sector 437 36.7 1090

2. Short Term Overseas Investments in Deposits: 11,720 13,365.0 -12

Total 217,150 84,983.8 155

10.7%

15.2%

16.6%

26.6%

30.9%

Cash in Hand

Foreign Currency Notes

Cash at Local Banks

Cash held in Overseas Banks

Statutory Deposits held in theCentral Bank of Iraq

BREAKDOWN OF THE CASH ACCOUNT AS AT THE END OF 2008


Third: Total Revenues, Expenses, Profits and Losses:

1. Revenues:

The Bank’s revenues for the financial year ended on 31.12.2008 rose to Iraqi DInars 44.035 billion against Iraqi Dinars 32.690 billion in 2007 an increase of 35%. Earnings from investment revenues were on top position amounting to Iraqi Dinars 24.922 billion or 57% of the total revenues. Revenues from banking transactions represented 42% following by foreign exchange and other revenues representing 1% as shown in the following table.

It should be noted that these revenues amounting to Iraqi Dinars 44.035 billion represented 62.9% of the paid-up capital as at the end of 2008 which reflects the effectiveness of banking business in generating such revenues as a result of the increase of capital and expansion of deposits of various kinds.

Total Revenues in 2008:

2008 Amount 2007 Amount No. Types of Revenues ID (Millions) % ID (Millions) %

1. Investment revenues (a+b) 24,922 57 13,144 40.2

a) Local investments 24,922 57 13,144 40.2

b) Overseas investments - - - -

2. Banking Operations Revenues 18,699 42 19,090.6 58.4

3. Service Business Revenues 178 - 21.7 0.1

4. Transferred Revenues and Other Revenues 236 1 434 1.3

Total 44,035 100 32,690.3 100

2. Expenses:

Expenses in 2008 totalled Iraqi Dinars 22,086 million compared with Iraqi Dinars 10,193.6 million in 2007. The total expenses represented 31.5% of the paid-up capital and such increase in expenses has been the result of the growth in sources of finance and revenues of the Bank. Expenses for banking operations in 2008 totalled Iraqi Dinars 10,045.6 million representing 45% of the total expenses followed by overheads at Iraqi Dinars 7,604 million representing 34% followed by depreciation representing 1.8% and then the transferred expenses at a sum of Iraqi Dinars 197 million or 1%. Other expenses totalled a sum of Iraqi Dinars 3,821 million representing 17% as shown in the following table:

Types of Expenses in 2008:

2008 Amount 2007 Amount No. Types of Revenues ID (Millions) % ID (Millions) %

1. Banking Operations Expenses 10,046 46 4,465.6 43.8

2. Depreciation 419 2 355.5 3.5

3. Overheads including Salaries 7,604 34 5013 49.2

4. Transferred Expenses except for Doubtful Debt Provision 197 1 42.2 0.4

5. Other Expenses 3,820 17 317.3 3.1

Total 22,086 100 10,193.6 100

Overheads may be shown in detail in the following table:

2008 Amount 2007 Amount No. Overheads ID (Millions) % ID (Millions) %

1. Wages and Salaries including Social Security Contributions 3,276.4 43.1 2,042.4 40.7

2. Supplied goods 280.6 3.7 416.8 8.3

3. Supplied services 4,046.0 53.2 2,553.9 51

Total 7,603.8 100 5,013.1 100



3. Net Profit:

The Bank made a net profit of Iraqi Dinars 21.9 billion which was divided by setting aside a sum of Iraqi Dinars 1.097 billion as provision for doubtful debts according to the Guidelines and a sum of Iraqi Dinars 532 million was set aside as tax provisions and the remaining balance being Iraqi Dinars 20.3 billion was used for deducting a sum of Iraqi Dinars 1.016 billion as statutory reserve according to the Companies Law. Thus, the distributable surplus amounted to Iraqi Dinars 19.3 billion representing 28% of the paid-up capital, which can be recommended for distribution to the shareholders or its capitalization.

3.1 Shareholders’ Equity, Reserves and Provisions:

Following is a summary of the shareholders’ equity, reserves and provisions as at 31.12.2008 shown in the Bank’s balance sheet for boosting its financial position and ensuring compliance with the applicable laws and instructions:

3.1.1 Shareholders’ Equity:

At the end of 2008 the shareholders’ equity rose to Iraqi Dinars 93.3 billion against Iraqi Dinars 76.1 billion at the end of 2007, which is an increase of 23%. The following table shows the development of the capital and reserves:

2008 2007 Account’s Name ID (Millions) ID (Millions) %

Paid-up Capital 70,000 52,973.2 32

Capital Reserve 3,981 2,965.3 26

Reserve for Replacement of Fixed Assets 56.8 56.8

Undistributed Profits 19,303 20,111.6 -4

Total 93,341 76,107 23

3.1.2 Reserves:

As at 31.12.2008 the reserve balances totalled a sum of Iraqi Dinars 23.3 billion divided as follows:

Amount Account’s Name ID (Millions) %

Capital Reserve Balance (according to the Companies Law) 3,981.2 17

Reserve for Replacement of Fixed Assets 56.8

Balance of Accumulated Surplus (Undistributed profits) 19,303.9 83

Total 23,341.9 100

With regard to the value of reserves for the year 2008, they amounted to Iraqi Dinars 23.3 billion while reserves for previous years amounted to Iraqi Dinars 23.1 billion. Such reserves constituted 33% of the paid-up capital which would enhance the Bank’s financial position in countering risks especially liquidity risk as shown by Statement No.10 of the final accounts for the year ended on 31.12.2008.

3.1.3 Provisions Balances:

The provisions balances as at 31.12.2008 totalled Iraqi Dinars 18.5 billion representing 26.4% of the paid-up capital as shown in the following table:

Amount Account’s Name ID (Millions) %

Provision for Doubtful Debts 14,000 76

Tax Provisions 3,275 18

Provision for Decline in the Investment Value 9

Provision for Stolen Cash 1,206 6

Total 18,490 100

It should be noted that such provisions have been determined according to the applicable laws and regulations and as shown in Statement No.11 of the Final Accounts for the Year ended on 31.12.2008.


Fourth: Detailed and Analytical Statements:

1. Board of Directors and Managing Director and their Equity in the Capital:

a) During 2008 the number of Board meetings totalled six and the Directors did not receive any remuneration in cash or in kind during 2008.

Following are the names of the Board Chairman and Members and the Shares owned by each as at the end of 2008:

Shares Owned Name Title by Each

1. Emad Ismail Sharif, Representative of Al Amin Financial Investment Co. Chairman 1,420,275,379

2. Dr. Younes Mohammed Brouche , Representative of United Gulf Bank Executive Vice Chairman 13,214

3. Adel Mohammed Al Hassoon, Representative of Al Sawari Contracting Company Director 2,642,842

4. Mohamed Ali Jaber, Representative of Al Amin Insurance Company Director 132,142

5. Abdul Aziz Kamel Sharif, Representative of Al Manal Agricultural Company Director 1,295,283,802

6. Adnan Kanaan Al Chalabi, Managing Director Director 3,092,126

7. Saad Jaboori Hamza, Representative of Al Hamra Hotels Company Director 6,991,846

Total 2,728,431,351

b) Amounts Received by the Directors:

In pursuance of the resolution of the Bank’s Annual General Meeting held on 15.6.2008, fees were paid to the Chairman and Board members for the year 2007 in the sum of Iraqi Dinars 10 million for the Chairman, Iraqi DInars eight million for the Directors members of the Audit Committee and Iraqi Dinars five million for each of the other Board member. Payments totalling Iraqi Dinars 14,052,000 were made to Mr. Mohammed Ali Jaber (Board member) for providing consultancy services.

(c) Amounts Received by the Managing Director:

The salaries and benefits paid to the Managing Director during the year totalled Iraqi Dinars 40,200,000 (Iraqi Dinars forty million and two hundred thousand).

2. Indicators of Banking Performance and Financial Analysis:

Pre-determined No. Banking Performance Indicators 2008 2007 %

1. Liquidity Ratio: Cash Account/Total Deposits & Current Accounts

Funds Investment Policies (Operating Ratios): 51% 63%

a) Investments/Total Deposits & Current Accounts 54% 33.3% 20%

b) Cash credits/ Total Deposits & Current Accounts 8.3% 22.7% 70%

c) Investments Cash credits/Total Deposits & Current Accounts 62% 56%

d) Capital Adequacy Ratio 73.5% 59% 15%

e) Cash Credit/Capital & Reserves Ratio 35.5% 76.3% 400%

2. Leverage Ratio:

a) Total Deposits & Current Accounts/Capital and Reserves 4.3% 3.4%

b) Capital & Reserves/Total Liabilities 17.8% 20.9%

3. Business Costs Ratio:

a) Total Expenses of Banking Operations/Total Deposits 2.5% 1.8%

b) Total Expenses/Total Revenues 52.7% 31.2%

4. Profitability Ratio:

a) Total Profits/Paid-up Capital 29.7% 42.5%

b) Total Profits/Shareholders Equity 22% 29.5%

c) Net Profits after distribution/Paid-up capital 24% 29.8%

5. Doubtful Debt Provision/Cash Credit 42% 18%

Doubtful Debt Provision/Loans 44% 19.9%



3. Salaries, Wages & Manpower:

a. The cash salaries, wages and remuneration paid to our Bank’s employees from 1.1.2008 to 31.12.2008 totalled Iraqi Dinars 3.108 billion.

b. Our Bank’s staff members enjoy transport facilities free of change provided to them by the Bank’s management and also health insurance and security staff uniforms.

c. As at the end of 2008 the employees of our Bank and all its branches totalled 531 people, who include 55 cashiers representing 10% and 117 security guards representing 22% of the total employees.

d. The number of employees covered by social security totalled 411 employees.

e. Names and titled of the five Bank employees who receive the highest annual income:

Name Position 1. Laila Adnan Yehia Regional Manager 2. Saher Hameed Mahmood Regional Manager 3. Abdul Baqi Redha Advisor 4. Mohamed Shukr Khalifa Executive Manager 5. Abdul Majeed Yehia Abdulla Compliance Officer

4. Management and Service Activities:

4.1 Development of Human Resources:

Our employees’ loyalty and sincerity in carrying out their duties were the key factors behind the Bank’s success and the highest performance level in implementing our strategy. During the year, we carried out a number of initiatives. We appointed an international consulting firm specialized in training to help us with our internal training programmes for the employees. We employed a number of managers in the executive management to fill the key and responsible jobs. We also drew up new policies and procedures for the Bank that the Board of Directors had approved earlier. We also prepared new job descriptions for the executive management of the Bank and these positions were filled during the year.

Following is a summary of the courses held by the Bank and the number of participants during 2008:

1. Number of training courses held outside Iraq (3) courses with 7 participants.

2. Number of training courses held inside Iraq (33) courses with 221 participants.

4.2 Breakdown of the Bank’s Staff Members According to Qualifications and Jobs:

As at the end of 2008 the total number of employees in the Bank and its branches was 531 employees who included 150 people in the Bank’s management and 381 employees in the branches.

Following are the job titles and academic qualifications of the Bank’s employees:

Below Inter- Inter- High Details mediate mediate Diploma Bachelor Diploma Masters Total %

Employees 38 7 49 221 3 1 319 60

Cashiers 1 27 11 16 - - 55 10

Guards 80 33 3 1 - - 117 22

Workers 28 12 - - - - 40 8

Total 147 79 63 238 3 1 531 100


5. Total Amounts Spent on Publicity, Travel, Entertainment and Donations:

2008 Amount 2007 Amount No. Account’s Name ID Million % ID Million %

1. Advertising and Publicity 189 22.6 28.1 10.9

2. Travel and Assignments (including conferences & seminars) 640 76.3 217.1 84.6

3. Entertainment 6.7 0.8 4.7 1.8

4. Donations and Gifts (assistance) for Employees 3.7 0.3 6.8 2.7

Total 838.4 100 256.7 100

6. Equity in other Companies:

The Bank is a shareholder in the following companies and is represented on their boards:

Current Capital Number of Company’s Name ID (Millions) Bank’s Shares

1. Al Amin Insurance Company 1,000,000,000 100,000,000

2. Al Amin Real Estate Investment Company 6,960,000,000 200,230,897

3. Al Amin Financial Investment Company 750,000,000 37,500,000

7. Investment Portfolio:

Following is a table of the Bank’s investments in the shares of Iraqi joint stock companies worth Iraqi Dinars 2,249,527,722. Since their market value according to the most recent bulletin in the Iraq Stock Exchange trading session amounted to Iraqi Dinars 2,467,374,928, which is higher than the cost of the investment portfolio, no provision has been set aside for the decline in the investment’s value.

Bank of Baghdad Investment Portfolio in the Shares of Iraqi Joint Stock Companies as at 31.12.2008:

Number of No. Company’s Name Shares

First: Long Term Investments Total 1,809,251,252

1. Al Amin Insurance Company 100,000,00

2. Al Amin Financial Investment Company 37,500,000

3. Al Amin Real Estate Investment Company 200,230,897

4. Al Rafidain Grains Company 766,420,355

5. Industrial Union Generation Manufacture Co. 75,000,000

6. Iraq Banking Securities Company 400,000,000

7. Al Amwal Banking Services Company 30,100,000

8. Baghdad Brokerage Company 200,000,000

Second: Short Term Investments Total 375,712,621

1. Northern Gas Company 3,650,877

2. Al Rasafa Games Company 37,651

3. Sindbad Tourism Company 1,663,777

4. Dar Al Salam Insurance Company 50

5. Ahlia Insurance Company 403,262

6. Baghdad Al Salam Food Industries Co. 2,125,977

7. National Food Industries Company 24,261

8. Al Ta’amim Construction Company 3,477

9. Readymade Garments Industry Company 443,230

10. Modern Building Materials Manufacture Co. 3,329,411

11. Iraq Seed Production Company 1,232,142

12. Carton Manufacture Company 29,899

13. Al Hilal Industrial Company 197,301

14. Gulf Commercial Bank 362,571,306

Gross Total 2,684,963,873



8. Information about the Bank’s Owned and Leased Branch Premises:

a) Number of Branches: 24 Branches throughout Baghdad and a number of Iraqi Governorates:

No. Branch’s Name Address Date of Opening

1. Al Siba’a Branch Baghdad, Beirut Square 20.2.1992

2. Al Mansoor Branch Baghdad, Al Mansoor District Square 20.3.1992

3. Main Branch Baghdad, Karrada Kharij M903, Street 17, Building 150/65 12.9.1992

4. Al Hilla Branch Al Hilla, Imam Ali Street 29.12.1992

5. Al Zahra Street Branch, Baghdad, Al Kadhemeya, Al Qattala Area, M 419, Z 79, Building 25 20.1.1996 Kadhemeya

6. Al Rabie’e (Mosul) Mosul, Khalid Ibn Al Walid Street, Shaikh Abulala’a, Property 4/17 1.9.1996

7. Babil Mall (Property) Baghdad, Babel Mall, Al Rasheed District, 155 Property M 104, Z 41, Building 16 8.10.1997

8. Al Jadereya Al Jadereya, District 913, Z 10 Building 33 Al Hamra Hotel 23.6.1999

9. Karbla’a Karbla’a, Qiblat Al Husain Road 1.12.1999

10. Karkuk Karkuk, Al Jomohoureya Steet, Shukr Al Najar Building, Near Central Markets 7.12.1999

11. Al Hamra Baghdad, Police Tunnel 1.4.2000

12. Jamila Baghdad, Al Rasafa Jamila, M 514, Z 26 Building 26 2.9.2000

13. Basra Basra, Mookam Ali, Main Road corner of Kuwait Street, 25.4.2001

14. Baaqooba Dialli Governorate, Al Tikiya near Al Farouk Mosque 6.5.2001

15. Falooja Al Jubail Al Kharab, Al Jadid Street, Z 51, M 202 Al Risala District 19.6.2001

16. Palestine Baghdad, Beirut Square 17.11.2001

17. Al Mahmoodeya Al Mahmoodeya City 20.8.2002

18. Najaf Najaf City 2.1.2003

19. Al Baya’a Baghdad, Al Baya’a 1.12.2004

20 Al Sulaymaneya Al Sulaymaneya City 1.9.2005

21. Erbil Erbil City End of 2008

22. Dahook Dahook City Early 2009

23. Al Koot Al Koot City Early 2009

24. Al Diwaneya Al Diwaneya City Early 2009


b) Table of the Bank of Baghdad Freehold Properties:

Area Cost in Estimated value No. Branch Name Location Branch Serial No. in Sq. Metres Iraqi Dinars Land & Buildings

1. Al Baya’a Al Baya’a 19/3748M/Al Khur 261.61 225,757,453 376,680,000

2. Jamila Al Thawra 1/2979M/4/Al Wazireya 600 458,058,267 1,771,700,000

3. New Baghdad Al Rasafa 7/7390M/14/Al Wazireya 480 102,033,750 384,000,000 Plot of land

4. Main Branch Al Rasafa 150/76/Al Batawin 915.8 41,648,474 3,539,050,000

5. Al Zahra Al kadhemia 1108/33/Qutana 265.8 52,477,475 1,000,000,000

6 Al Mansoor Al Karkh 7/4517M/20/Al Dawood 967.6 777,861,231 2,290,600,000

7. Al Saba’a Al Rasafa 180/175 251.75 453,513,836 514,750,000

8. Al Mahmoodia Baghdad 426/36 203.79 100,396.487 314,845,000 Al Mahmood

9. Karbala Karbala 1664/41 158 175,223,675 1,665,000,000

10. Falooja Falooja 9/1816 258.75 64,464,990 74,950,000

11 Ba’aqooba Dialli 371/76 Tikiya 264 121,777,401 250,000,000

12. Basra Basra 668/47 122.87 233,433,755 737,310,000

13. Mosul Mosul 4/17 Shiha Bu’ali 165.54 64,247,239 656,080,000

14. Mosul Mosul 6/14/M/41 3,330 84,067,941 245,250,000

15. Erbil Erbil 17/51 M46 Warish 724.54 3,962,418,750 3,962,418,750

16. Dahuk Dahuk 1/6M/81 Dahuk North 301 1,215,000,000 1,215,000,000

Total in Iraqi Dinars 8,132,320,724 19,024,633,750

c) Table of the Branch Premises Leased by the Bank:

No. Branch’s Name Annual Rent Lease Term Landlord’s Name

1. Al Jadreya Office, ID1,000,000 One year to be renewed automatically Al Hamra Hotels Baghdad

2. Palestine Branch, 77 weights of 10 years from 22.2.2001 to 22.2.2011 Heirs of Ahmed Abdul Baghdad 24 carat gold Wadhi Kamal

3. Al Hamra Branch, 198,863 grams of 10 years from 15.9.1999 to 16.9.2009 Ali Al Aameri Baghdad 24 carat gold

4. Al Hilla Branch ID6,250,000 3 years from 1.1.2003 to 3.12.2005 Al Hilla Chamber of Commerce. to be renewed

5. Kirkuk Branch ID5,500,000 10 years from 1.8.1999 to 1.8.2009 Mohamed & Ahmed Sons of Shukr Al Najar

6. Najaf Branch $5747 10 years from 1.10.2002 to 30.9.2012. Husain Mehdi Zayed

7. Al Sulaimaneya Branch $20,400 4 years Waali Othman Juma Najm $20,000 8 Years

8. Sinak Branch, Baghdad ID3,500,000 One year to be automatically renewed Caledonian Community

9. Regional Administration ID37,000,000 10 years from 22.9.2008 Mona Mohammed Abdulredha of Southern Province/ Hilla

10. Nishtiman, Erbil $100,000 2 years and 3 months Middle East Construction & Investment Co.

11. Al Koot Branch ID42,000,000 10 years from 22.9.2008 Zahra Mohsin Jassim Al Azzawi

12. Al Diwaneya Branch ID24,000,000 10 years from 22.9.2008 Haider Noor Ali, Amir Kadhem Ali, Abdulla Mutlaq Henaish



9. Capital Adequacy:

As at the end of 2008 the Bank’s capital adequacy ratio according to the risk exposure in the Balance Sheet amounted to 73.5%. It should be noted that the minimum ratio required by the instructions of the Central Bank of Iraq is 15% and according to the Banking Law No.94 of 2004 is 12% and according to the decisions of the Basel Conference is 8%.

10. Bank’s Overseas Operations:

The Bank continued its total banking business which included the issue of overseas letters of guarantee, issuing letters of credit, receiving foreign currency drafts, issue of drafts for overseas remittances according to the guidelines of the Central Bank and the anti-money laundering instructions. Thus, it was able to establish the rules of international banking, keep abreast of modern developments and approving rates of overseas transactions without allowing any scope for smuggling activities but mainly to establish the rules of competition and profitability on the international level.

11. Research, Development and Expansion Policy:

The Bank continued during the year its development and expansion policy. In addition to the progress and expansion achieved by the Bank in total banking business during 2008, it embarked upon the expansion of its banking services. During the year, the Bank opened Erbil provincial branch and Hilla provincial branch. Operations of Al Koot, Dahuk and Al Diwaneya branches will be launched in the first month of 2009.

In addition, the Bank’s investments grew by contributing to the incorporation of the Iraq Bank Guarantees Company And Amwal Banking Services Company.

12. Accounting Policy:

The Bank adopted the recognized accounting policies and principles that are applied in the banking sector according to the requirements of the applicable Companies Law, Banking Law No.94 of 2004 and instructions of the Central Bank of Iraq in addition to applying the consolidated accounting standard for banks and insurance companies in maintaining accounts and preparation of financial statements. Since its inception, our Bank has recognized the historical cost convention in its accounting policy except for the outstanding debts and suspension of interest until actual repayment. The Bank sets aside a doubtful provision according to the rates prescribed in the guidelines issued by the Central Bank of Iraq.

As for the depreciation of the fixed assets, the Bank follows the straight line method and provides for depreciation 20% annually of all the fixed assets except buildings for which depreciation are computed at the rate of 3% per annum. Moreover, our Bank implements the Central Bank’s instruction that calculates the US dollar rate according to the auction rate on the last day of December, 2008, when it was ID1,172 per US dollar.

13. Material Changes and Events Since the date of the Balance Sheet:

The Central Bank of Iraq embarked upon reducing the Policy Rate more than once by as much as 14% at present with effect from 1.2.2009 and the most recent reduction was 11% as from 1.3.2009. So this decision will be one of the fundamental reasons that will certainly affect the Bank’s revenues. However, efforts will be doubled to activate other banking operations and to attract more new customers to make up for the decline and to increase our revenues.


14. Finally, the Bank’s Board of Directors would like to express on your behalf sincere thanks and appreciation to the management of the Central Bank of Iraq for its good management of the monetary and credit policy and boosting investment activities at home and abroad.

We would also like to congratulate the shareholders for the excellent results of the Bank of Baghdad and all its branches which were the results of the efforts, sincerity and loyalty of the Bank’s employees and the outstanding role they played in providing excellent banking services. We would like to express our thanks and appreciation to the Bank’s customers for doing business with us. All the credit goes to the employees of our Bank as without their efforts the management could not have achieved such good results that contributed to enhancing the financial position of our Bank. It is imperative upon us to express our thanks and gratitude to the Companies Registrar Department and to the Auditors.

Emad Ismail ShareefBoard Chairman



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