Established in 1993 as a result of the merger of Bank of Muscat and Al-Ahli Bank, BankMuscat is poised to become the largest bank in Oman following the acquisition of a controlling stake in Commercial Bank of Oman (ComBank).

The merger process was precipitated by financial problems in the company that had controlled ComBank. In 1999, BM entered into a strategic alliance with Shell Oman Marketing Company. This entailed automatic teller machines (ATMs) being installed in all Shell Select convenience stores in Oman.

This alliance is being extended into other areas. At the end of the year, it had 46 domestic branches plus a branch in Bangalore and an office in Dubai. BM is considering the possibility of opening branches in other parts of India.

Other recent features included the launch of a three-year certificate of deposit issue in February 2000. In 2002, BM successfully completed its merger with Bank of Oman, acquired and began operations of its Bahrain branch, and integrated operations acquired from Al Ahli Securities.

The BoD of Bank Muscat and National Bank of Oman have approved a proposal to merge NBO with Bank Muscat. The effective date of the merger is expected to be 01-01-05 subject to receiving the regulatory approvals.

In exchange for every 100 ordinary shares of NBO held on the record date of the merger transaction, shareholder will receive: 1) For the first 85 shares of NBO; the shareholders will receive 37 and 7/9 ordinary shares of BankMuscat at an exchange ratio of 2.

25:1, which shall be identical to the existing issued ordinary shares of BankMuscat, except for cash dividend payable by BankMuscat for the end of year 2004. 2) In respect of the remaining 15 shares of NBO; BankMuscat will be issuing 15 subordinated loan bonds at an interest rate of 6.

25%/annum, payable half yearly, in arrears. Each bond will carry a nominal face value of OMR 2.750 payable at redemption of the maturity of 5 years and 1 month. The bonds will be listed and may be subsequently traded on the Muscat Securities Market (MSM).