STATUS

The Bank is a privately owned company established in 1995 in accordance with the “Licensing and Supervision of Banking business proclamation No.84/1994” of Ethiopia to undertake commercial banking activities.

The bank obtained its license from the National Bank of Ethiopia on 20 September 1995 and started normal business activities on the first of January 1996. it operates through its head office in Addis Ababa and thirty seven area banks established within and outside Addis Ababa and four forex bureaus.

ACCOUNTING POLICIES

The significant accounting policies adopted by the bank are summarized hereunder:

(a) Accounting convention

These financial statements are prepared under the historical cost convention.

(b) Interest income and expenses

Interest income and interest expenses are accounted for on the accrual basis. However, no interest is accounted for unpaid past due loans and advances.

(c) Other income

All other income is accounted for at the time of completion of related banking transaction

(d) Conversion of foreign currencies

(i)  Foreign currencies denominated transactions are converted into Birr at the prevailing rates of exchange and realized foreign exchange gains or losses are reflected in the profit and loss account.

(ii)  Year-end balances of foreign currencies on hand and with correspondent banks are converted into Birr at the mean of the buying and selling rates ruling at the balance sheet date.

(e) Provision for doubtful debts

The provision is maintained at a level adequate to cover possible losses. Management determines the adequacy of the provision based upon reviews of individual credits and other related factors, and pursuant to the Directives of the National Bank of Ethiopia.

(f)  Fixed assets

Fixed assets are stated at cost, net of depreciation calculated on the following basis at their respective rates per annum.

(i) Building is depreciated based on the straight-line method at a rate of 5% per annum.

(ii) The following categories of business assets are depreciated based on the declining balance method:

The depreciation base is the book value as recorded in the opening balance sheet of the tax period including assets acquired during the tax period and excluding sales price of assets.  

INVESTMENTS

(i) The Bank and Midroc Ethiopia PLC following their agreements on 5 October 2001 acquired jointly the Tana Department Store Building in Addis Ababa, as a result of a tender procedure instituted by the commercial Bank of Ethiopia.

According to the terms of the agreement between the two joint venture parties:

a) The contributions for the acquisition are:

b) Dashen Bank S.C is appointed to manage and administer the affairs of the building.

c) The results of operations are to be shared pro-rata to the respective contributions.

(ii) The bank owns 2,750 shares at par value of Birr 1,000 each in Nyala Insurance Share company.

LOANS AND ADVANCES TO CUSTOMERS

5 The Bank is a party to various legal proceedings in relation to loans and advances, the ultimate resolution of which is not expected to have a materially adverse effect on the financial position of the bank or the results of its operations.

6 The Bank is able to report that under the guarantee issued by the Federal Government of Ethiopia it has recovered in the year to 30 June 2005 advances against import bills and accrued interest thereon in respect of goods stranded in Eritrean ports in 1998.

OTHER DEBIT BALANCES

FIXED ASSETS

ESTABLISHMENT EXPENSE

OTHER CREDIT BALANCES

PROPOSED DIVIDENDS

SHARE CAPITAL

MEMORANDUM ACCOUNTS

SUNDRY INCOME

GENERAL EXPENSES

EARNINGS PER SHARE

The Earnings per share for the year were calculated on the basis of the average number of shares during the year weighted on a monthly basis. Accordingly, the capital increases having taken place  on June 27,2002, the calculations were based on the paid up capital as of that date i.e. 50,000 shares.

CASH FLOW STATEMENTS

Reconciliation of operating income before tax to net cash inflow from operating activities: