HSBC Bank Middle East Limited

Annual Report and Accounts HSBC Bank Middle East Limited HSBC BANK MIDDLE EAST LIMITED Annual Report and Accounts 2006 Contents 1 Presentation of Information 2 Notice of the Annual General Meeting 3 Report of the Directors 4 Statement of Directors’ Responsibilities in Relation to the Directors’ Report and the Financial Statements 5 Independent Auditors’ Report to the Member of HSBC Bank Middle East Limited 6 Consolidated Income Statement for the Year Ended 31 December 2006 7 Consolidated Balance Sheet at 31 December 2006 8 Consolidated Statement of Recognised Income and Expense for the Year Ended 31 December 2006 9 Consolidated Cash Flow Statement for the Year Ended 31 December 2006 10 Notes on the Financial Statements 78 HSBC Bank Middle East Limited and Other Group Offices in the Region Presentation of Information This document comprises the Annual Report and Accounts 2006 for HSBC Bank Middle East Limited and its subsidiary undertakings (together the ‘group’). It contains the Directors’ Report and Accounts, together with the Auditors’ report, as required by the Companies (Jersey) Law 1991. 1 HSBC BANK MIDDLE EAST LIMITED Notice of the Annual General Meeting Notice is hereby given that the One-Hundred-and-Seventeenth Annual General Meeting of HSBC Bank Middle East Limited will be held at HSBC House, Esplanade, St Helier, Jersey, Channel Islands on Wednesday 11 April 2007 at 9.00 a.m. to transact the following ordinary business: 1 to receive and consider the Annual Accounts and the Reports of the Directors and of the Auditors for the year ended 31 December 2006; 2 to appoint Auditors and to fix their remuneration. By Order of the Board M J Seguss, Secretary Jersey 28 February 2007 Notes: 1 By virtue of Article 13.6 of the Articles of Association, on a poll, votes may be given either personally, or by proxy. 2 By virtue of Article 13.8 of the Articles of Association, any instrument appointing a proxy shall be deposited at the Head Office of HSBC Bank Middle East Limited, or at such other place specified for that purpose in the notice of the meeting or an instrument of proxy issued by HSBC Bank Middle East Limited, before the time appointed for holding the meeting. 3 By virtue of Article 13.7 of the Articles of Association, any instrument appointing a proxy may be in any usual form, or as approved by the Directors. 4 By virtue of Article 14 of the Articles of Association, any corporation that is a Member of HSBC Bank Middle East Limited may, by Resolution of its Directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of HSBC Bank Middle East Limited. 2 HSBC BANK MIDDLE EAST LIMITED Report of the Directors Board of Directors D H Hodgkinson, Chairman M M Hussain N S K Booker, Deputy Chairman C J M Keirle J B Blanthorne C M Meares J E Coverdale J C Tibbo Abdel Salam El Anwar The present Directors of HSBC Bank Middle East Limited are listed above. During the year, S K Green resigned as a Director and as Chairman with effect from 24 July 2006, and D H Hodgkinson resigned as Deputy Chairman with effect from 19 May 2006 and was appointed Chairman with effect from 24 July 2006. N S K Booker was appointed as a Director and as Deputy Chairman with effect from 19 May 2006. Also during the year, E P Carton resigned as a director with effect from 08 March 2006, R F Stock resigned as a Director with effect from 24 July 2006, J B Blanthorne was appointed as a director with effect from 20 August 2006, and I A Khan resigned as a Director with effect from 14 November 2006. Principal activities The group, through its branch network and subsidiary undertakings, provides a range of banking and related financial services in the Middle East. There has been no significant change in this activity. Profit and dividends The consolidated profit for the year attributable to the shareholders of the bank was US$469,484 thousand, and has been dealt with as set out in the Consolidated Income Statement on page 8. An interim equity dividend of US$200,000 thousand was declared and paid during the year. The directors rec- ommend that no further dividend be paid. Ordinary share capital On 26 January 2006, the Directors allotted to the Bank’s sole shareholder 100,000,000 ordinary shares of US$1.00 each, fully paid and at par. Debt securities and non-equity preference share capital On 14 March 2006, the Directors allotted to the Bank’s sole shareholder 100,000 cumulative redeemable preference shares of US$1.00 each, bearing a mandatory earliest redemption date of 14 March 2016 (deferrable at the request of the ordinary shareholders of the Bank to 10-yearly intervals thereafter), but redeemable at the option of the Bank on any date after 14 March 2011, fully paid and at a premium of US$999.00 per share, and 150,000 cumulative redeemable preference shares of US$1.00 each, bearing no mandatory redemption date but redeemable at the option of the Bank on any date after 14 March 2011, fully paid and at a premium of US$999.00 per share. On 12 April 2006, the authorised non-equity preference share capital of the bank was increased from 750,000 cumulative redeemable preference shares of US$1.00 each to 1,250,000 cumulative redeemable preference shares of US$1.00 each. On 28 September 2006, the Bank’s Debt Issuance Programme, originally established in 2004 and providing for the issue of up to US$1,000,000,000 in debt securities in the form of medium-term Notes, was extended to provide for the issue of up to US$3,000,000,000 in debt securities in similar form. On 14 November 2006 the Bank issued a third tranche under the Programme, in the form of US$1,000,000,000 Floating Rate Notes due 14 November 2011. 3 HSBC BANK MIDDLE EAST LIMITED Report of the Directors (continued) Annual General Meeting The 2007 Annual General Meeting of the Bank will be held on Wednesday 11 April 2007, in accordance with the Notice on page 2. Auditors The auditors, KPMG Channel Islands Limited, offer themselves for re-appointment, at fees to be agreed, and a resolution for their re-appointment will be proposed at the forthcoming Annual General Meeting. On behalf of the Board M J Seguss, Secretary Jersey 28 February 2007 4 HSBC BANK MIDDLE EAST LIMITED Statement of Directors’ Responsibilities in Relation to the Financial Statements The following statement, which should be read in conjunction with the Auditors’ statement of their responsibilities set out in their report on page 5, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the Auditors in relation to the financial statements. The Directors are responsible for preparing the financial statements in accordance with applicable law and International Financial Reporting Standards. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss for that period. In preparing these financial statements, the Directors are required to: — select suitable accounting policies and apply them consistently; — make judgments and estimates which are reasonable and prudent; — state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and — prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991, the Banking Business (Jersey) Law 1991 and the Financial Services (Investment Business (Accounts, Audits and Reports)) (Jersey) Order 2001. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. David Hodgkinson, Chairman 5 HSBC BANK MIDDLE EAST LIMITED Independent Auditors’ Report to the Member of HSBC Bank Middle East Limited We have audited the financial statements of HSBC Bank Middle East Limited for the year ended 31 December 2006 which comprise of the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Recognised Income and Expense and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company’s members, as a body, in accordance with Article 110 of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the Statement of Directors’ Responsibilities on page 5, the company’s Directors are responsible for preparation of the financial statements in accordance with applicable law and International Financial Reporting Standards. Our responsibility is to audit the financial statements in accordance with the relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

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