Financial Result 2005-2006
Auditors Report
We have audited the accompanying balance sheet of Dashen Bank Share Company at 30 June 2006, the related
profit and loss account and the statement of cash flows for the year then ended. These financial statements which
have been prepared under the historical cost convention are the responsibility of the Directors of the bank. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Directors as well as evaluating the overall financial statement presentation.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud, irregularity or error. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet at 30 June 2006, the related profit and loss account and the statement of cash
flows for the year then ended read in conjunction with the notes forming part thereof, exhibit a true and fair
statement of the affairs of Dashen Banks S.C., the results of its operations and its cash flows in conformity with
generally accepted accounting principles consistently applied.
We have no comment to make on the report of your directors so far as it relates to these financial statements and
pursuant to Article 375 of the 1960 Commercial code of Ethiopia, recommend approval of the above-mentioned
financial statements.
Balance Sheet
As At 30 June 2006 Notes 2005
Assets
Cash and balances with other banks
Cash on hand 119,535,058 109,768,024
Deposits with local commercial banks 1,374,628 75,207,630
Deposits with foreign banks 546,014,884 419,626,669
Deposit with National Bank of Ethiopia 3 482,049,226 415,648,794
1,148,973,836 1,020,251,117
Investments 4 27,801,795 27,801,765
Items in course of collection from other banks 5 153,864,230 122,774,202
Loans and advances to customers 6 3,080,263,248 2,160,632,436
other assets 7 75,097,334 42,557,741
Fixed assets 60,012,535 45,791,652
Total Assets 4,546,012,978 3,419,808,716
LIABILITIES
Customers' deposits
Demand deposits 1,039,091,412 793,030,926
Saving deposits 2,343,244,480 1,897,045,435
Fixed deposits 309,267,163 142,930,754
3,691,603,055 2,833,007,115
Margin held on letters of credit 136,392,485 103,601,739
Other liabilities 9 280,367,023 213,869,232
provision for taxation 13 51,777,613 26,447,616
TOTAL LIABILITIES 4,160,140,176 3,176,925,702
SHAREHOLDERS' FUNDS
Share capital 10 156,190,000 100,000,000
Legal reserve 89,973,776 56,576,329
General reserve 64,709,026
Retained earnings 16 75,000,000 86,306,685
385,872,802 242,883,014
TOTAL LIABILITIES AND
SHAREHOLDERS' FUNDS 4,546,012,978 3,419,808,716
Income Statement
Income Notes 2005
Interest Income
Loans and advances 227,942.449 155,139.327
Surplus fund 13,950.849 6,746.819
Total interest income 241,893,298 161,886,146
Interest expense
Interest paid on deposits (66,887,818) (52,530,315)
175,005,480 109,355,831
Less: provision for doubtful loans and
(13,560,113) (11,758,000)
advances
161,445,367 97,597,831
Other income
Service income 24,221,209 13,822,754
Letters of credit opening charges 10,507,419 5,862,085
commissions 26,038,498 18,643,834
Gains on foreign exchange 54,376,042 25,750,656
Sundry income 11 8,252,709 7,542,653
Investment income from
1,334,477 1,031,074
Tana Building
124,730,354 72,653,056
EXPENSES
Salaries and benefits 39,917,551 28,998,584
Rent 12,452,314 9,763,501
General and administrative 12 32,841,576 22,346,662
Depreciation 14,775,353 10,818,338
Directors’remuneration 698.769 600,308
Audit fee and expenses 122,757 119,922
(100,808,320) (72,647,315)
PROFIT BEFORE PROVISION
FOR TAXATION 185,367,401 97,603,572
Provision for taxation 13 (51,777,613) (26,447,616)
NET PROFIT AFTER
PROVISION
FOR TAXATION 133,589,788 71,155,956
Transfer to legal reserve (25%) (33,397,447) (17,788,989)
Transfer to retained earnings (100,192,341) (53,366,967)
Earnings per share 14 956 712
Cash Flow Statement
For The Year Ended 30 June 2006 Notes 2005
Cash flows from operating activities
Operating profit before provision for taxation 185,367,401 97,603,572
Adjustments for:
Depreciation 14,775,353 10,818,339
Interest income received on surplus funds (13,950,849) (6,746,820)
Income from Tana building investment (1,334,477) (1,031,074)
prior year adjustment (62,303)
184,857,428 100,581,714
(Increase) in items in course of collection (31,090,028) (42,596,344)
(Increase) in other assets (32,539,820) (9,688,997)
(Increase) in loans and advances to customers (919,630,812) (533,263,202)
Increase in demand deposits 246,060,486 169,800,775
Increase in saving deposits 446,199,045 449,289,886
Increase in fixed deposits 166,336,409 36,182,392
increase in margin held on letters of credit 32,790,746 2,920,195
increase in other liabilities 66,497,791 48,080,104
159,481,245 221,306,523
Income taxes paid (26,447,616) (22,289,956)
Net cash inflow from operating activities 133,033,629 199,016,567
Cash flows from investing activities
Purchase of fixed assets (29,972,560) (22,900,829)
Disposal of fixed assets 976,324 5,487,611
Investment (2,250,000)
Disposal proceeds of treasury bills 299,039,000
Returns from:
Interest income received on surplus funds 13,950,849 6,746,820
Income from Tana building investment 1,334,477 1,031,074
Net cash (used in) received from investing
(13,710,910) 287,253,676
activities
Cash flows from financing activates
proceeds from issuance of share capital 56,190,000
Dividends paid (46,000,000) (38,000,000)
Directors bonus 16 (790,000) (360,000)
Net cash received from (used in) financing 9,400,000 (38,360,000)
activities
Net increase in cash and cash equivalents 128,722,719 447,910,243
Cash and cash equivalents, opening balance 1,020,251,117 572,340,875
Cash and cash equivalents, closing balance 1,148,973,836 1,020,251,118
Notes to the Financial Statements
ESTABLISHMENT
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
(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 exchangeand
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:
Furniture and fixtures 20%
Office and other equipment 20%
Motor vehicles 20%
Computer hardware and software 25%
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.
DEPOSIT WITH NATIONAL BANK OF ETHIOPIA
2005
Statutory reserve balance 183,078,993 138,378,993
Payment and settlement account 298,970,273 277,269,801
482,049,266 415,648,794
INVESTMENTS
Investment in Tana Building (i) 22,801,795 22,801,795
Investment in Nyala Insurance [Link].(ii) 5,000,000 5,000,000
27,801,795 27,801,795
(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:
2005
Midroc Ethiopia PLC 60% 34,202,693 34,202,693
Investment in Nyala Insurance [Link].(ii) 40% 22,801,795 22,801,795
57,004,488 57,004,488
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 5,000 shares at par value of Birr 1,000 each in Nyala Insurance Share company.
ITEMS IN COURSE OF COLLECTION FROM OTHER BANKS
Un-cleared local cheques 127,249,026 101,598,073
Outward bills purchased 5,406,320 3,322,700
Outward documentary bills purchased 21,085,353 17,784,445
MT/TT received-foreign 5,823 1,727
Foreign demand draft paid 117,708 67,257
153,864,230 122,774,202
LOANS AND ADVANCES TO CUSTOMERS
Agriculture 133,086,147 106,874,400
Manufacturing 676,584,057 521,587,701
Domestic trade and services 580,083,280 466,349,023
Export 211,898,183 147,290,224
Import 366,577,386 306,190,977
Building and construction 534,158,054 299,923,068
Transport 430,592,471 211,747,887
Advances on letters of credits 110,813,038 64,551,629
Personal 604,204 1,958,358
Loans in litigation 97,814,465 89,938,764
Loans under re-activation 7,767,994 9,914,506
Staff housing loans 20,033,870 6,501,861
Less: Provision for doubtful debts (83,877,287) (71,500,887)
&advances Suspended interest account (2,872,614) (695,075)
3,080,263,248 2,160,632,436
which is not expected to have a materially adverse effect on the financial position of the bank or the results of its
operations.
6.2 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 2006 advances against import bills and accrued interest thereon in respect of
goods stranded in Eritrean ports in 1998.
OTHER ASSETS
2005
National Trading Enterprise Outstanding
2,257,578 2,257,578
deposit for rent
Stocks of
- Stationery and supplies 2,026,993 1,005,004
- Passbooks, drafts and CPOs 190,563 1,009,018
- Cheque books 737,958 426,035
- Advertising materials 23,141 174,099
- Fixed assets 3,442,139 1,945,746
- Cleaning and sanitation 25,910 8,939
- Entertainment supplies 1,000 2,600
- Uniforms 6,522 10,978
- Sundry materials 7,022 10,931
6,461,248 4,593,350
Prepayments 7,425,513 4,778,515
Staff advances 9,566,223 4,353,734
Western Union 6,223,698 5,892,508
Suspense account (National Bank of Ethiopia) 707,400 683,387
Other non-current assets (see below 1) 15,142,912 10,064,938
Sundry debtors (see below 2) 29,570,340 12,191,082
77,354,912 44,815,092
Less: provision for doubtful
(2,257,578) (2,257,578)
receivable (National Trading Enterprise)
75,097,334 42,557,514
Other non-current assets-above 1
Construction in progress* 14,043,009 9,904,638
Cash collateral to VISA 899,923
Deposit for Multimedia Broad-band 185,980 146,300
Deposit for signboards and logo 14,000 14,000
15,142,912 10,064,938
Sundry debtors-above2 2005
Credit cards 19,149,741 4,765,154
Cash notes holding (National Bank of Ethiopia) 73,680 350,828
Stolen money and related court fees 703,430 703,430
Tana Building current account 1,303,017 2,209,328
Interest on fixed deposit 1,285,425
Travelers cheques on hand 911,990 1,347,748
Duplicate payments and overdrawn accounts 24,659 24,659
2% with holding tax 3,085 31,244
2% withholding tax (Tana) 78,651
Advance paid for construction 1,628,189
Payments by correspondent banks 761,574 333,958
Blocked balance for land lease of Head office 4,000,000
Miscellaneous 932,324 1,166,308
29,570,340 12,191,082
FIXED ASSETS
Adjustments/
Cost 30/06/05 Additions 30/06/06
Disposals
Premises 3,478,130 3,478,130
Furniture and fixtures 13,076,105 1,935,719 15,011,824
Office and other equipment 12,234,579 2,421,380 14,655,956
Computers and software 37,416,935 18,729,872 56,146,807
Motor vehicles 21,075,358 4,200,837 25,276,195
Acquired property 6,035,658 2,684,752 (976,324) 7,744,086
93,316,765 29,972,560 (976,324) 122,313,001
Accumulated depreciation
Premises 173,906 173,905 347,811
Furniture and fixtures 7,552,015 1,491,002 9,043,017
Office and other equipment 6,287,358 1,673,352 7,960,710
Computers and software 19,039,063 9,276,431 28,315,494
Motor vehicles 14,472,771 2,160,663 - 16,633,434
47,525,113 14,775,353 62,300,466
Net Book values
Premises 3,304,224 3,130,319
Furniture and fixtures 5,524,090 5,968,807
Office and other equipment 5,947,221 6,695,249
Computers and software 18,377,872 27,831,313
Motor vehicles 6,602,587 8,642,761
Acquired property 6,035,658 7,744,086
45,791,652 60,012,535
OTHER LIABILITIES
2005
Outstanding transfers 44,245,292 46,751,995
CPOs ad certified cheques issued 71,505,613 55,843,901
Exchange payable to National Bank of Ethiopia 16,553,118 10,250,678
MTs/TTs payable 18,713,571 14,519,379
Blocked current and saving accounts 14,959,314 4,276,124
Demand drafts payable 344,384 358,973
Accrued interest payable on fixed deposits 3,396,786 2,853,699
Accrued leave pay 3,267,448 2,278,795
Bonus payable 2,488,207 1,481,525
Accruals 10,450,065 6,674,821
Taxes 26,774 59,933
Unearned revenue 1,371,512
Stamp duty 1,171,456 889,776
Merchant control account 1,555
Special reserve, Article 28 of proclamation 84/1994 11,494,984 5,284,097
Tana Department store building 4,942,159 4,484,821
Other collections by correspondent banks 316,964
Special clearance 61,787,824 50,577,093
Sundries (See below) 13,646,961 6,966,658
280,367,023 213,869,232
Sundries
National Motors Corporation 126,500 126,500
Office rent payable 303,383 393,732
5% income tax on interest paid 304,689 221,044
Neon Addis 92,843 92,843
Outstanding dividends 498,000 291,000
Payable to correspondent banks 11,695,739 4,504,367
Income tax payable 304,145 236,695
Agent commission on credit cards 93,208 52,289
Payable to Midroc Ethiopia PLC 47,191
Deposit for guarantees 178,450 1,043,650
Adjustment and refund account 2,435 4,538
Franco valuta payable to National Bank of Ethiopia 378
13,646,961 6,966,658
SHARE CAPITAL
2005
Authorized capital 300,000 ordinary Shares of Birr 1,000
300,000,000 3000,000,000
each
Paid-up capital 156,190 Ordinary shares of Birr 1,000
156,190,000 100,000,000
each
The bank has collected Birr 13,810,000 after the balance sheet date out of the subscribed capital of Birr
50,000,000 approved at the 9th extraordinary shareholders’meeting on June 6,2006.
SUNDRY INCOME
Telecommunications 6,614,296 5,504,031
Postage 306,894 235,963
Estimation fees 299,393 269,248
Correspondent bank charges 3,500
Legal fees 2,798 7,202
Miscellaneous 1,025,828 1,526,209
8,252,709 7,542,653
GENERAL AND ADMINISTRATIVE EXPENSES
Stationery and printing 2,880,178 2,672,284
Telecommunications 8,068,751 7,000,092
Postage 276,685 217,560
Advertisements 4,015,652 1,684,529
Correspondent and bank charges 211,469 1,303,017
Entertainment 235,436 235,583
Insurance 871,120 741,676
Fuel and lubricants 778,549 679,896
Perdiems 641,699 463,849
Representation allowance 788,971 736,481
Transport 722,768 407,905
Water and light 513,560 425,246
Special reserve, Article 28 of proclamation 84/19994 6,244,068 1,000,000
Maintenance and repairs 2,614,142 1,228,551
Donations and contributions 15,300 60,000
Professional fees 1,109,306 309,256
SWIFT charges 682,633 350,462
Computer supplies 545,986 532,282
Sundries 1,625,303 2,297,993
32,841,576 22,346,662
PROVISION FOR TAXATION
2005
Profit before prevision for taxation 185,367,401 97,603,572
Add: Representation allowance in excess
of 10% of salary 136,376 268,327
Donations and contributions 300
Entertainment 235,436 235,583
372,112 503,910
185,739,513 98,107,482
Less: Interest on treasury bills 15,000 685,430
Interest on local deposit 933,082 1,432,808
Interest on foreign deposit 12,121,645 4,004,257
Dividend earned on shares 881,121 624,324
Bad debts written off against
Provision held before June 2002 1,216,894 3,869,319
(15,167,742) (10,616,138)
Taxable profit 170,571,771 87,491,344
Taxation
(a) @30%(170,571,771) 51,171,531 26,247,403
(b) @ 5% (12,121,645)* 606,082 200,213
51,777,613 26,447,616
Profit tax is computed at the rate of 5% on interest earned on deposit with foreign banks as per Income Tax
proclamation no 286/2002, Article 36 sub Article1.
EARNINGS PER SHARE
Earnings per share for the year are calculated on the basis of the average number of shares outstanding during the
year.
GENERAL RESERVE
Transfer from retained earnings 39,936,685
2005 24,772,341
2006 64,709,026
RETAINED EARNINGS
2005
Balance,1 July 2005 86,306,685 33,362,021
Add: Transfer from profit and loss Account 100,192,341 53,366,967
186,499,026 86,728,988
Less: Prior year adjustment (62,303)
Dividend paid (2005) (46,000,000)
Directors’bonus paid (2005) (370,000) (360,000)
Directors’Bonus (2006) (420,000)
(790,000) (360,000)
General Reserve (2005) (39,936,685)
General Reserve (2006) (24,772,341)
(64,709,026)
75,150,131 86,306,685
MEMORANDUM ITEMS
a) Contingent liabilities Guarantees issued to
178,150,131 116,866,573
customers
b) contingent assets
There was interest in memorandum accounts accumulated on loans and advances under litigation amounting to
Birr 32,537,017,37,(2005, Birr 26,195,178)
c) Commitments
Letters of credit 471,373,725 323,760,256
Margin held on L/C (136,392,485) (103,601,739)
334,981,240 220,158,517
Outward bills for collection 25,879,359 4,045,131
Inward bills for collection 33,477,131 20,734,317
394,337,730 244,937,965
d) The un-utilized balances of overdraft facilities granted to customers at 30 June 2006 amounted to Birr
259,868,000. It was Birr 219,594,000 in 2005.
EMPLOYEE'S BENEFITS SCHEMES
Regarding the provident fund scheme, the Bank contributes 12% of basic salary while employees contribute 6%.
These contributions are held for each individual in saving accounts of the Bank. All other employee benefits are
in accordance with the labor proclamation No.377/2003. Eligible staff also benefit from Housing Loans.
