Enat Bank SC. Annual Report 2014/2015

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ENAT BANK

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VISION AND MISSION 1. VISION STATEMENT

To become a world-class bank mainly by leveraging women’s capabilities.

2. MISSION STATEMENT

“To remain true to our name and set a trend in the provision of best quality banking services with a special focus on the needs of women, and play a catalytic role in stimulating social, economic developments and in creating shareholders’ value.”


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ContentsMessage From the Chair of the Board of Directors

Major Non-financial Accomplishments and Success stories

Independent Auditors’ Report

Statement of finacial position

Statement of Profit or Loss

Cash Flow Statement

Message From the President

Performance Overview

Major Events and accomplishments

Financial Performance 19 Statement of Change of change in shareholder equity

20 Notes to the Financial Statment

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It is with great honor that I share with you, on behalf of my fellow Board members and myself, the achievements registered during fiscal year 2015.

Following the end of an encouraging first year of operation, Enat Bank continued operating skillfully deep inside the marketplace dominated by a well-entrenched industry peers to register yet another set of outstanding results by any measure. Subsequently, the Bank surpassed last year’s milestone to post a gross profit before provision and tax of Birr 71.2 million. Consistent with Enat’s vision of ensuring inclusive financial services to all with a particular focus to women, the number of women shareholders and depositors have reached 7,045 (66%) and 10,314, (60%), respectively.

Another important step forward for the Bank this year was the implementation of its digital banking strategy aimed at forging long-term relationships with our customers through the delivery of efficient and cost effective customer services. When the new system goes live soon, it would be front and center in the service landscape, making the Bank easy to do business with, and fast-track its catch-up process.

Cognizant of the fact that performance is increasingly hinged on capability, the Bank has launched relevant training modules, including corporate-wide initiatives, to match the management and the general staff members with competencies required to compete in the industry.

This year, the Bank has managed to raise its subscribed capital to Birr half-a-billion. However, it is worth noting that the direction given by the NBE to raise the capital requirements to Birr 2 billion demands extra effort in the years ahead.

Despite the impressive achievement made by the Bank, we are

A MESSAGE FROM THE CHAIR OF THE BOARD OF DIRECTORS

cognizant that the traditional business practice will never take the Bank to where we want to be in the long-run. To this effect, the Bank will engage skillfully and seeks to cross historical boundaries looking for untapped needs to which banking products and services have been inaccessible for so long.

The strategic choice and a solemn commitment that the Bank has embraced from the outset, which is contributing to women’s economic empowerment through provision of tailor made, effective financial services, are very much interlinked. Success in one of these areas contributes to the achievement of the other, and vice versa. This business model is very much in synergy with Ethiopia’s Growth and Transformation Plan II, African Union’s Agenda 2063 and the commitment of the global community articulated in the Sustainable Development Goal (SDGs), all of which affirm and call for inclusive development.

In line with the above, our Bank wants to do more and better in women’s financial services. This year, the Bank has strengthened its financial services department and is designing diversified strategies to reach out to women—not only in the provision of credit but also in facilitating business development training opportunities. For instance, under the non-collateral loan scheme, initially launched by First Lady Roman Tesfaye, and in collaboration with the Entrepreneurship Development Center (EDC), 10 women have received loans that changed their business immensely. Additionally, 250 women are screened and ready to receive a loan, while 3,000 are registered to access the training and expressed their interest to access loans to start a business or for further expansion. Given the potential of this program, I would like to take this opportunity to appeal to all stakeholders to support the Bank through the provision of guarantee fund and other facilities to enable Enat Bank to provide the requested financial services to these women.

Finally, on behalf of the Board of Directors and myself, I would like to extend my heartfelt gratitude to all parties, particularly to our shareholders, customers and the National Bank of Ethiopia that generously provides a non-stop guidance.

Also, as usual, special thanks are due to our dedicated Management and other staff members of the Bank, who endeavor to turn a not-so-easy dual mission into a reality, guided, of course, by the clear strategic direction offered by my committed colleagues from the Boardroom.

Together, we can make Enat Bank the most efficient financial, intermediary-role-playing brand, an outlier in the industry and beyond, and live in two time periods—today’s and tomorrow’s.

Meaza Ashenafi Chairperson Board of Directors

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የዲሬክተሮች ቦርድ ሰብሳቢ መልዕክት

በእናት ባንክ የቦርድ አባላትና በራሴ ስም የ2007 በጀት ዓመት የባንኩን ዓመታዊ የሥራ አፈጻጸም ሪፖርት ሳቀርብ በታላቅ አክብሮት ነው፡፡

በስኬት የተጠናቀቀው የዓምናው የሥራ አፈፃፀም በፈጠረልን ተነሳሽነትና በራስ መተማመን ቀላል ወደ ማይባለው ውድድር ውስጥ ገብተን የገበያ ድርሻችንን በማስፋትና ትርፋማነትን በማሳደግ አመርቂ ውጤቶች አስመዝግበናል፡፡ በዚህ ዓመት ባንካችን ከግብርና መጠባበቂያ በፊት የብር 71.2 ሚሊዮን ትርፍ በማግኘት ካምናው በእጅጉ የተሻለ የሥራ አፈጻጸም አስመዘግቧል፡፡ የእናት ባንክን ራዕይ ከማሳካትና ሁሉን አቀፍ የባንክ አገልግሎት ከመስጠት አንጻርም በሴቶች ላይ በተሠራው ሥራ የሴት ባለ አክሲዮኖች ቁጥር 7045 ወይንም ከጠቅላላው ባለአክሲዮን ውስጥ 66 በመቶ የደረሰ ሲሆን ከጠቅላላ የገንዘብ አስቀማጮች በቁጥር 10314 ወይንም 60 በመቶው የሴቶች ድርሻ መሆኑን ስገልፅ በታላቅ ደስታ ነው፡፡

ሌላው ጉዳይ በአሁኑ ወቅት ባንካችን በዘመናዊ ቴክኖሎጂ በመታገዝ ሰፊ ወደሆነው ገበያ ገብቶ በተሻለ አቋም ለመወዳደር ዝግጅቱን እያጠናቀቀ መሆኑ ነው፡፡ ዘመናዊ ቴክኖሎጂና አሠራር የሚሰጠውን ጥቅም አሟጦ መጠቀምና በሰለጠነ የሰው ኃይል መታገዝ የደንበኛን አገልግሎት ከማሳለጥ ባለፈ ውድድሩን ለማሸነፍ የሚያስችለውን መንገድ የሚጠርግ ነው፡፡ ከዚህ አኳያ የሰው ኃይልን ከማብቃት አንጻር የሠራተኛዉን የክህሎት ክፍተት በደንብ ተፈትሾና ተለይቶ ሥልጠናዎች በጥናትና በዕቅድ በመሰጠት ሂደት ላይ ናቸዉ፡፡ ወደፊትም ይኸዉ ተጠናክሮ የሚቀጥል ይሆናል፡፡

የባንካችን የተፈረመ የአክሲዮን መጠን ብር 500 ሚሊዮን የደረሰውም በዚሁ የበጀት ዓመት መሆኑ ሌላው የስኬት ምዕራፍ ነው፡፡ ይሁን እንጂ የባንኮች ዝቅተኛ የካፒታል መጠን ወደ ብር 2 ቢሊዮን እንዲያድግ በብሔራዊ ባንክ በኩል የተቀመጠዉ አቅጣጫ በዚሁ ዙሪያ ጠንክረን መስራት እንደሚጠበቅብን የሚያመለክት ነዉ፡፡

የእስከዛሬው ውጤቶች በራሳቸው እሰየው የሚያሰኙ ቢሆንም ግንዛቤ ሊወሰድበት የሚገባው ጉዳይ የእስካሁኑ የተለመደ አሰራር በዚህ የውድድር ወቅት ዘመን አሻጋሪ እና የተሻለ ዉጤት ቀያሪ ሊሆን እንደማይችል ነው፡፡ በዚህ ምክንያት የሁለትዮሽ መንገድ ማለትም በአንድ ወገን አሁን ባለው የውድድር ገበያ ውስጥ በየጊዜው እራስን እየፈተሹ በብቃት መሥራት፤ በሌላ በኩል ደግሞ በአንድ ገበያ ውስጥ ብቻ መወዳደር ላይ ሳያተኩሩ በአዲስና በተጠና ስልት የተሻለ የባንክ አገልግሎት ፈላጊ ሕብረተሰብ ጋር መድረስ የግድ ይላል፡፡

ሌላ ሳልጠቅስ የማላልፈው አንዱና ዓብይ ጉዳይ ሴቶቸን የማብቃትና የማገዝ ተልዕኮ አሁን ከተሰጠው ትኩረት የበለጠ አፅንኦት መሻቱን ነው፡፡ በእርግጥም እንደዚህ ሲሆን ብቻ ነው ሴቶቻችንን ትርጉም ያለው ለውጥ በራሳቸው ህይወትም ይሁን በሌላው ላይ ሊያመጡ የሚችሉት፡፡ የሴቶች ጉዳይና የባንክ ሥራው የተጣመሩና የባንኩ መሠረታዊ ተልዕኮዎች በመሆናቸው እርስ በርሳቸው ተመጋጋቢና የአንዱ ስኬት ለሌላው ምቹ ሁኔታ ፈጣሪ መሆኑን ነው፡፡ ከዚህም አልፎ ሁለተኛው የዕድገትና የትራንስፎርመሽን ዕቅድ፡ የ2063 አፍሪካ ሕብረት አጀንዳና የዓለም ማሕበረሰብ ቁርጠኝነቱን የገለፀበት ዘላቂ የልማት ግቦች ከባንካችን ራዕይ ጋር የተጣጣሙ መሆናቸው መታወቅ አለበት፡፡

ባንካችን የሴቶችን የፋይናንስ አቅም የማጎልበት ሥራውን በስፋት የመሥራት ቁርጠኝነት አለው፡፡ በመሆኑም በ2007 በጀት ዓመት ለዚሁ የተለየ አገልግሎት የተዋቀረውን ዋና ክፍል በማጠናከር በብድር አገልግሎት ብቻ ሳይሆን የሴቶችን የገንዘብ አስተዳደር ክህሎት ከፍ ለማድረግ የተለያዩ ሥልጠናዎች በመስጠት ሴቶችን ተጠቃሚ ለማድረግ ተችሏል፡፡ በሌላም በኩል በዋስትና አልባ የብድር አገልገሎት መርሐግብር፤ ቀዳማዊት እመቤት ሮማን ተስፋዬ በተገኙበትና የመጀመሪያዋ ዋስትና ሰጭ በሆኑበት፡ ከ Entrepreneurship Development Centre (EDC) ከተባለ ምግባረ ሠናይ ድርጅት ጋር በመተባበር የተካሔደ ሲሆን አሥር ሴቶችም በዚህ መርሐግብር በመጠቀም ብድር ወስደው ባገኙት ስኬት የራሳቸዉንና የቤተሰባቸውን ህይወት መለወጥ ችለዋል፡፡ በተጨማሪም 250 ሴቶች ተለይተው ብድር ለመውሰድ ብቁ እና በሂደት ላይ መሆናቸውን እና እንዲሁም 3000 ያህል ሴቶች በሥልጠና መርሐግብሩ ለመሳተፍና ወደፊትም የብድር ዕድል ተጠቃሚ በመሆን ሥራ ለመጀመርና ንግዳቸውን ለማስፋፋት ፍላጎታቸውን ገልፀዋል፡፡ ይህን ሰፊ የሴቶቻችን ጥያቄ ባንካችን ለብቻው ለማሟላት አቅም የሚያንሰው በመሆኑ ሁሉም ባለድርሻ አካላት ለዋስትና የሚሆን ሒሳብ በእናት ባንክ በመክፈት ይህን መርሐግብር እንዲያግዙ በአክብሮት እጠይቃለሁ፡፡

በመጨረሻ በቦርድና በራሴ ስም እስከዛሬ ለተመዘገበው ስኬት የራሳቸውን ድርሻ ለተወጡ ሁሉ፣ ለእናት ባንክ ባለአክሲኖች እና ደንበኞች በተለይ ደግሞ ለኢትዮጵያ ብሔራዊ ባንክ ጥልቅ ምስጋናዬን አቀርባለሁ፡፡ በተመሳሳይ መልኩ በቦርዱ ስልታዊ አመራር እየተመሩ ባንኩን የውጤት ባለቤት ላደረጉ የሥራ አመራር አባላትና ሠራተኞች የተለየ አድናቆቴን አቀርባለሁ፡፡

እናት ባንክ በባንኪንግ ኢንዱስትሪ ውስጥ ለየት ያለ እና ዛሬም ነገም ተወዳዳሪ እንዲሆን ሁላችንም እንትጋ!

መዓዛ አሸናፊ የቦርድ ሰብሳቢ


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A MESSAGE FROM THE PRESIDENTI am pleased to affirm that, despite all challenges, the fiscal year has been marked with operational success. I feel confident that you are aware Enat Bank was the last entrant to the banking industry at the time when tough regulatory environment came into picture, competition got stiff and the market turned out repelling.

Despite this, thanks to the confidence of our esteemed customers on our Bank, guidance of the Board and the team spirit of our employees we have managed to wind up the past two consecutive fiscal years with commendable operational performance that help us standout even if we are late starters. Incidentally, this year performance has been by far better than that of the last fiscal year as manifested by increases of the total asset from Birr1.4 billion to 2.2 billion, profit before tax and provision from Birr 38.5 million to Birr 71.2 million, total deposit from Birr 1.09 billion to Birr 1.7 billion and total capital from Birr 290 million to Birr 445 million.

I hope you will not take my words as if they were self congratulatory gestures that may evoke counterproductive complacence in the future. To the contrary, we have already drawn a plan that will demand us to exert more efforts to once again register an enhanced operational success in the fiscal year of 2015/16.

In addition, we will continue to roll out fresh initiatives and invest in technological advancements such as mobile banking and payment alternatives to provide our customers with a seamless, virtual and personalised offering in 2016. The kickoff of the Core Banking Solution (CBS) will materialise anytime shortly which will enable us to complement our services with e-banking channels such as ATMs, POS, Mobile and internet banking.

I believe everyone realises that customer service is what matters

most to us. Excelling in service delivery is the basic yardstick to secure reliable assurance from customers that Enat Bank is the best preferred one. To this end our employees are expected to live up to the expectation of the Bank to serve customers to their utmost.

I would like to highlight that when I say customer service I don’t only mean the modesty and humbleness employees ought to demonstrate when serving customer but a broad professional competence and skill to be learnt and developed. In this connection we have allocated quite significant resource for training and development to enhance the skill of our employees to continuously improve the service brand Enat Bank can offer to its customers in the new fiscal year.

To further boost service access to our customers in the new fiscal year, we are going to open six additional branches in different parts of the country of which 50% will be opened in Addis Ababa while the rest will be in outlying regional locations. The total number of operational branches will reach twenty after these branches become operational.

Finally, I’d like to take this opportunity to express my deepest gratitude to our Board of Directors for their visionary leadership, and also to the Bank’s management and employees for their unreserved dedication and diligence in making Enat Bank the most preferred bank for our clients.

I wish you all better accomplishment in the year■

Wondwossen TeshomePresident

Ato Wondwossen Teshome President


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በመጨረሻ ይህን አጋጣሚ በመጠቀም ለስኬቶቻችንና በደንበኞቻችን ዘንድ ተመራጭ ባንክ እንድንሆን ላገዙን ባለድርሻ አካላት ያልተቆጠበ እገዛ፤ የባንካችን የዳይሬክተሮች ቦርድ ብልህ አመራር፤ የማኔጅመነቱና የጠቅላላው ሠራተኛ ያልተቆጠበ የሥራ ትጋትና መስዋዕትነት ታላቅ የሆነ ከበሬታንና ምስጋናዬን ለማቅረብ እወዳለሁ፡፡■

ወንድወሰን ተሾመፕሬዚደንት

የፕሬዚደንቱ መልዕክት

ባንካችን የፋይናንስ ኢንዱሰትሪውን ዘግይቶ የተቀላቀለ ባንክ ከመሆኑ አንፃር የተጋረጡበት የውስጥና የውጭ ችግሮች ሂደቱን ፈታኝ አድርገውበት እንደነበር ግልፅ ነው፡፡ ብቃትና ክህሎት ያለው የሰው ኃይል ከገበያው እንደልብ ያለማግኘት፤ ቅርንጫፍ ለመክፈት በተመጣጣኝ ዋጋ የቤት ኪራይ ያለማግኘት፤ የውድድሩ መክበድና ሌሎችም ሊጠቀሱ የሚችሉ ችግሮች ናቸው፡፡

ይሁን እንጂ በሥራችን ላይ እምነት ላሳደሩ ደንበኞቻችን፣ ለቦርዳችን የተሟላ አመራርና ለሠራተኞቻችን ሁለንተናዊ ተነሳሽነት ምስጋና ይግባዉና ሥራ ከጀመረንበት ጊዜ አንስቶ የተገባደዱ ሁለት የበጀት ዓመታት የስኬት ጊዜያት ነበሩ፡፡ ምንም እንኳን ባንካችን ከዕድሜው አንጻር ገና ያልጠነከረ ጨቅላ ቢሆንም ያስመዘገባቸው ተከታታይ ውጤቶች በፋይናንስ ኢንዱስትሪው ውስጥ አንፀባራቂ ሥፍራ እንዲቀዳጅ ረድተውታል፡፡ በተለይ ባገባደድነዉ የበጀት ዓመት የባንኩን ጠቅላላ ሃብት ከብር 1.4 ቢሊዮን ወደ ብር 2.2 ቢሊዮን፤ትርፉን ከቀረጥና ለአጠራጣሪ ብድሮችና ለተሰብሳቢዎች ከተያዘው መጠባበቂያ በፊት ከብር 38.5 ሚሊዮን ወደ 71.2 ሚሊዮን ፤ ጠቅላላ ተቀማጭ ሒሳብ ከብር 1.09 ቢሊዮን ወደ ብር 1.7 ቢሊዮን እና አጠቃላይ የባንኩን ካፒታል ከብር 290 ሚሊዮን ወደ 445 ሚሊዮን ማሳደግ ተችሏል፡፡

በዚሁ በመበረታታት በተያዘው የበጀት ዓመት የተሻለ የሥራ አፈፃፀም ለማስመዘገብ የሚያስችለን ዕቅድ አውጥተን በመንቀሳቀስ ላይ መሆናችንን ስገልፅ ያቀድነውን ከግብ ለማድረስ የሁላችሁም የባለድርሻ አካላት ከጎናችን መቆም ወሳኝ ሚና እንዳለው ለመግለፅ እወዳለሁ፡፡

በሌላም በኩል ደንበኞቻችን የተቀላጠፈ አገልገሎት እንዲያገኙ በማድረግ በቴክኖሎጂ የታገዘ የባንክ ሥራ ማለትም በተንቀሳቃሽ ስልክ፤ በኢንተርኔት ወዘተ የክፍያ አማራጮችን ለደንበኞቻችን በማስተዋወቅ የተዋጣለት የባንክ አገልግሎት ለመስጠት የሚያስችለንና በተለይም ቅርንጫፎቻችንን በአውታር (network) የሚያገናኝ የኮር ባንኪንግ ቴክኖሎጂ ለመተግበር በሂደት ላይ እንገኛለን፡፡ ይህ በፕሮጀክት ደረጃ የተያዘ ሥራ ሙሉ በሙሉ ተጠናቅቆ በቅርቡ ሥራ ላይ እንደሚዉል የሥራ መርሐ ግብራችን ያመለክታል፡፡

ለደንበኛ አገልግሎት ልዩ ትኩረት እንሰጣለን፡፡ የወደፊቱ የአሸናፊነታችን ሚስጥር ያለው ለደንበኞቻችን በምንሰጠው የተቀላጠፈ አገልገሎት ውስጥ ነው፡፡ ደንበኞቻችን ባንካችንን ሊመርጡና በአገልገሎታችንን እንደሚጠቀሙ ዋስትና የሚሰጡን በምንሰጣቸው አገልግሎት ሲረኩ ብቻ ነው፡፡ ከዚህ አኳያ ሠራተኞቻችን በደንበኞች ፍላጎት ልክ ራሳቸውን በማዘጋጀት ተገቢውን አገልግሎት መስጠት መቻል አለባቸው፡፡

ይህን ስል ሠራተኞቻችን ለደንበኞች ከሚያሳዩት የትህትናና የአገልጋይነት መንፈስ በተጨማሪ በዕውቀትና በክህሎት መታነፅ አለባቸው ማለቴ ነው፡፡ በመሆኑም በአዲሱ የበጀት ዓመት ለሥልጠናና ለሰው ኃይል ልማት ልዩ ትኩረት በመስጠትና የሠራተኛውን ክህሎት ከፍ ለማድረግ ከፍተኛ በጀት መመደቡን በዚህ አጋጣሚ ለመግለፅ እወዳለሁ፡፡

ከሁሉም በላይ ደንበኞቻችንን በቅርበት ለማገልገል በአዲሱ የበጀት ዓመት ስድስት ተጨማሪ ቅርንጫፎችን በአዲስ አበባና ከአዲስ አበባ ውጭ ባሉ የክልል ከተሞች እንከፍታለን፡፡ይህም የጠቅላላ የደንበኛ አገልግሎት መስጫ ማዕከሎቻችንን ብዛት ወደ ሃያ ከፍ ያደርጋል፡፡

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1 0 | A N N U A L R E P O R T

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1 PERFORMANCE OVERIEW(in millions of Birr)

1,417

2,209

1,086

1,698Total Assets Total Deposit

Paid-up Capital Total Loans and Advances

Total Income Total Expense

262

384

512

1,145

94

198

FY 2013/14 FY 2014/15 FY 2013/14 FY 2014/15

FY 2013/14 FY 2014/15 FY 2013/14 FY 2014/15

FY 2013/14 FY 2014/15 FY 2013/14 FY 2014/15

60

133

33

64

FY 2013/14 FY 2014/15 FY 2013/14 FY 2014/15

103

195

Net Profit before Tax Staff Strength (in Number)

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2 MAJOR EVENTS AND ACCOMPLISHMENTSThe Bank has introduced Enat Collateral Saving Account service (product) at a ceremony held at Hilton Addis on June 21st 2014 which gained massive support from the public at large. The scheme was meant to call up on individuals and entities to open a deposit account that serves as a security for clean loan Enat Bank grants to economically active but underserved women. In view of the foregoing, Her Excellency Woizero Roman Tesfaye, the First Lady, has become the first person to open a loan guarantee account with Birr 100,000.00. Following the initiative taken by her Excellency, the first lady, other supporters of this good cause have pledged to deposit about Birr 5.6 million at the launching ceremony. Speaking on the occasion, Woizero Meaza Ashenafi, Chairperson of the Bank’s Board, noted that the service was a great opportunity for women entrepreneurs whom lack of collateral has impeded their access to credit facilities.

Subsequently Enat Bank and UNDP Entrepreneurship Development Centre-Ethiopia have forged partnership and agreed to work together in training staff, develop entrepreneurship skill of targeted women and link the Bank’s products and services to the Special Collateral Risk Fund Scheme. The main objective of the partnership was to enhance the entrepreneurial ability of those women who have potentially eligible to borrow money and eventually payback their debt without fail.

The first two loans were ceremonially disbursed to two elected women beneficiaries of the scheme on the 2nd of December 2014 at Enat Bank’s Headquarter. On the occasion, presents were, the first lady Woizero Roman Tesfaye and the CEO of National Oil Company (NOC) Ato Tadesse Tilahun who are the first contributors to the scheme, the Bank’s Promoters, Board Chairperson, Executive Management Members and Journalists. In subsequent, the Bank has made successive loan disbursements to the tune of Birr 1.3 million to various women who have been eligible to benefit from the scheme in the fiscal year.

As a precursor to introducing e-banking channels, the Bank has procured Core Banking Solution software (CBS) that is trade-named as Oracle FlexCube Universal Banking

solutions. The kickoff of the implementation project took place on June 23, 2015 at the presence of members of the Senior Management, IT professionals of the Bank and vendors. The system will be fully implemented before the mid-term of the new fiscal year after completion of customisation and configuration.

In addition to the existing international money transfer companies, the Bank has established business relationship with Ria, International Money transfer in the year 2014/15. This will definitely enhance the Bank’s foreign currency generation capacity.

Enat Bank held its first ordinary general shareholders meeting at the Millennium Hall on December 06, 2014. Speaking at the ordinary annual shareholders meeting, the Chairperson of the Bank’s Board of Directors has underscored that the first-year had been successful as important milestones have been achieved. Further, the chairperson has cited the performance as a promising and inspiring start. Meanwhile, the assembly has nominated eleven board members for the final approval of the National Bank of Ethiopia. It is also at this juncture that the shareholders have decided to set aside 5% of the net earning to serves as collateral fund for those women who need most.

A consultative partnership formulation meeting was held at Enat Bank’s Headquarter on February 5, 2015 with the Union of Ethiopian Women Charitable Association, a local NGO working on women, which has been successfully organised at the presence of union members, Bank’s Board Chairperson and the Bank’s management. This has resulted in mobilisation of savings from members of the association and created easy access to target women for financial education and to set up mutually beneficial relationships.

It is in the past fiscal year that a meeting was held at Hilton Hotel on 4th of April 2015 to establish Enat Bank Ambassadors. Important female public figures and role models recognised as Temsalet, Artists, Journalists, NGO Directors and Women from different sectors have attended the meeting. The meeting was facilitated by Dr Eleni Gebremedhin, Ato Eyesuswork Zafu and Woizero Meaza Ashenafi.

Starting from April 1, 2015, a financial literacy enhancement programme was designed to improve financial literacy of women in the period under review in partnership with Enterprise Partners (EP) a programme sponsored by DFID (Department for International Development) and Eminence Social Entrepreneurs. As part of this initiation a pilot test


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program has been conducted in two branches and 336 women were trained the basics of financial literacy at the end of June 30, 2015.

3 FINANCIAL PERFORMANCE

3.1. Deposit MobilisationThe total deposit of the Bank stood at Birr 1.7 billion at the end of June 30, 2015. It grew by more than six hundred million or 56 percent compared with that of total deposit at the end of June 30, 2014. The increase in deposits is mainly ascribed to the growth in saving and time deposit implying the rise of public trust in the Bank from time to time.

From the total deposit; saving account, current, time deposits and margin held for Letter of Credit constitute 40%, 18%, 34% and 8% respectively. The net interest margin remained stable in the period, as strategic considerations were put in place to reduce and neutralise the adverse effects of high cost deposits.

The total number of deposit account holders stood at 17,314 as of June 30, 2015 of which 10,317 or 60 percent are women. In comparison to that of the last fiscal year, the total number of account holders have gone up by 9,971 or 136% while the number of women has increased by 5,981 or 138%.

Chart 1: Total deposit Growth (in Millions of Birr)

Chart 2: Percentage Composition of Deposit Types

3.2. Loans and AdvancesThe outstanding loans and advances reached Birr 1.15 billion at the end of June 30, 2015. The increase is by more than Birr 634 million or 124 percent from the end balance of the preceding fiscal year. The growth in the loans and advances is attributed to an increase in loan disbursement which is about one billion. Sector-wise construction, import, export and domestic trade service loans constitute 26%, 25%, 20% and 17% of total loans

advances respectively. The loan to deposit ratio has been 67% at the end of the year. However, considering the Bank’s NBE bills purchase, the ratio of the loans and the bills to deposit has reached 88% at the end of June 2015.

Chart 3: Outstanding Loans and Advances (in Millions of Birr)

3.3. Share capitalThe total paid up capital stood at the peak of Birr 384 million as at June 30, 2015 whereas the total subscribed capital hit the highest tip of Birr 473 million. Since commencement, the Bank has managed to mobilise Birr 260 million share capital from new sales and unpaid subscriptions.

Viewing shareholders’ composition from the perspective of gender mix, the number of women represents 66 percent of the total shareholders while in terms of contribution women’s share still constitute 62% which is the majority in comparison to the total paid up capital at the end of June 2015.

Chart 4: Paid up Capital

3.4. IncomeTotal income earned at the end of the fiscal year was Birr 198 million depicting a total increase of Birr 104 million or 111 percent from that of the previous year. The major component of the total revenue is the interest income earned on loans and advances exhibiting about 201 percent growth compared with that of the last fiscal year; while commission and gain on foreign currency fluctuation has shown 134 percent and 115 percent growth, respectively.

Chart 4: Income Growth (in Millions of Birr)

Deposit for L/Cs 8%

Demand 18%

Savings 40%

Time 34%

Women’s contribution

Others

Other contribution

Number of women

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3.5. ExpensesAt the end of June 2015, the total operating expenses was about Birr 133 million. The figure has shown an increase of Birr 73 million compared with that of the FY 2013/14. The increase in the total interest expense was Birr 47 million while salaries and benefits and general administrations increased by Birr 14 million and Birr 11 million, respectively. With respect to contribution of each expense category to the total expense, interest expense contributed 48 percent, salary and benefit constitutes 20 percent and general expense constitutes 32 percent.

Chart 5: Growth in Total Expenditure (in Millions of Birr)

3.6. ProfitThe Bank maintained its growth momentum in the reporting period by securing Birr 64 million profit before tax at the end of June 30, 2015. The strategy of cost optimization, process excellence and service quality are amongst the contributors to achieve such a growth in the operational profit.

4 MAJOR NON-FINANCIAL ACCOMPLISHMENTS AND SUCCESS STORIES

4.1. Branch ExpansionThe Bank has managed to open seven additional new branches in the metropolitan and outlying regional location that has incidentally raised the total number of functional branches to eleven as at June 30, 2015. As usual branches opened in the metropolitan have been named after distinguished women personalities. Accordingly, our branch in Mercato is named after W/ro Sindu Gebru the first women parliamentarian, a branch at Meskel flower is named after Dr Catherine Hamlin, a woman foreigner who pioneered Fistula Hospital, our branch at Sengatera is named after Sylvia Pankhurst an anti-fascist woman who extensively wrote on the Ethiopian art & culture and later on received the title of honorary Ethiopian upon her death in 1960 GC from King Haileselassie. Besides, branches were opened in selected outlying regional towns of Mekelle, Bahir Dar, Hawassa and Dire Dawa City Administration .

4.2. Human ResourceThe total number of staff of the Bank stood at 195 as at June 30, 2015, of which 118 or 61 percent are females. In the year under review, 93 new recruits were employed and eleven have resigned due to various reasons. Besides, capacity building trainings were given to 142 staffs on different topics to complement the Bank’s effort to develop the competencies of its employees and cope up with the ever-changing business environment in providing efficient banking services.

4.3. Core banking

The Bank is devotedly working on the implementation of Core Banking Solution with the aim of networking its branches to give Any Branch Banking services. In subsequent ATM, POS, Mobile Banking, Internet Banking and Agent Banking alternatives will be implemented sooner after completion of the CBS project at mid-year of the new fiscal year.

4.4. Risk and Compliance

As a major task, the Bank has strengthened its Risk and Compliance wing at department level to enhance its capacity to take calculated business risks and consciously ward off before they become real.

4.5. Women Financial ServiceAs beneficiaries of the saving collateral scheme, nine women have been granted loan amounting to Birr1.3 million to finance the business they are engaged in.

Addis Ababa October 01, 2015


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We have audited the accompanying financial statements of ENAT BANK SHARE COMPANY which comprise the statement of financial position as of 30 June 2015, the statement of comprehensive income, the statement of changes in shareholders equity and statement of cash flows for the year then ended and summary of significant accounting policies and other explanatory information.

Management’s Responsibility for Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the International Financial Reporting Standards and for such internal controls as management determination is necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error.

Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risk of material misstatements in the financial statements whether due to fraud or error. In making those risk assessments the auditor considers internal control relevant to the entity’s preparation and

fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of ENAT BANK SHARE COMPANY as of 30 June 2015 and of its financial performance, changes in shareholders equity and cash flows for the year then ended in accordance with the International Financial Reporting Standards.

We have no comment to make on the Board of Directors Report relating to financial matters and pursuant to Article 375(2) of the Commercial Code of Ethiopia 1960; we recommend the approval of these financial statements.

Degefa Lemessa Authorized Auditors

Limited Partnership, Chartered Certified Accountants

Addis AbabaOctober 09,2015

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ENAT BANK SHARE COMPANY

ደገፋ ለሜሣ የኦዲት አገልግሎትሁለት ዓይነት ኃላፊነት ያለበትየሽርክና ማህበርየተፈቀደላቸው ኦዲተሮችTel:+251-011-466 11 57 Mobile +251-091-122 32 10Fax: +251-011-466 15 36 Mobile +251-091-198 35 72

Degefa Lemessa Authorized AuditorsLimited PartnershipChartered Certified

Accountants P.O.Box: 8118

E-mail: [email protected] Ababa Ethiopia

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LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIESDEPOSITSDemand deposits 12 311,359,013 314,644,282

Savings deposits 12 671,097,119 278,588,585

Fixed time deposits 12 582,768,193 336,208,433

1,565,224,325 929,441,300

Margins held on letters of credit and IBC payable 132,998,187 156,453,548

Other liabilities 13 54,241,550 36,916,104

Profit tax payable 14.1 10,648,438 3,705,323

197,888,175 197,074,975

Deferred tax liability 14.5 1,657,339 936,716

Total liabilities 1,764,769,839 1,127,452,991

SHAREHOLDERS' EQUITY

Paid up capital 15 383,869,626 261,671,660

Legal reserve 16 20,472,152 7,193,676

Special reserve 1,051,551 -

Retained earnings 39,285,427 21,031,028

444,678,756 289,896,365

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,209,448,595 1,417,349,356

ENAT BANK SHARE COMPANYSTATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2015

2014

NOTES Birr Birr Birr

ASSETS

Cash in hand 5 71,371,719 29,864,829

Deposits with other banks 287,282,788 296,120,306

Correspondent bank 41,716,678 3,462,919

Reserve account with National Bank of Ethiopia (NBE) 73,000,000 38,000,000

Other account with National Bank of Ethiopia 28,819,538 62,092,423

Items in course of collection from other banks 6 33,020,588 164,303,695

Investment In Fixed time deposit 30,000,000 110,000,000

Investment In NBE Bills 342,151,000 130,793,000

Equity investment-Ethswitch 5,030,000 -

Deposit and prepayments 7 51,194,535 19,041,476

Loans and advances to customers 8 1,133,607,386 506,737,276

Other asset 9 52,655,807 31,527,455

Property, plant and equipment 10 42,138,275 20,506,354

Deferred expenditures 11 17,460,280 4,899,623

TOTAL ASSETS 2,209,448,595 1,417,349,356

MEAZA ASHENAFI BOARD CHAIRPERSON

WONDWOSSEN TESHOME PRESIDENT

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LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIESDEPOSITSDemand deposits 12 311,359,013 314,644,282

Savings deposits 12 671,097,119 278,588,585

Fixed time deposits 12 582,768,193 336,208,433

1,565,224,325 929,441,300

Margins held on letters of credit and IBC payable 132,998,187 156,453,548

Other liabilities 13 54,241,550 36,916,104

Profit tax payable 14.1 10,648,438 3,705,323

197,888,175 197,074,975

Deferred tax liability 14.5 1,657,339 936,716

Total liabilities 1,764,769,839 1,127,452,991

SHAREHOLDERS' EQUITY

Paid up capital 15 383,869,626 261,671,660

Legal reserve 16 20,472,152 7,193,676

Special reserve 1,051,551 -

Retained earnings 39,285,427 21,031,028

444,678,756 289,896,365

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,209,448,595 1,417,349,356 ....................................................................................................................................................................................................

ENAT BANK SHARE COMPANYSTATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2015

NOTES 2014

INCOME Birr Birr

Interest income 18 125,751,577 41,847,284

Less: interest expense 22 (63,295,897) (15,874,234)

Net interest income 62,455,680 25,973,050

Net gain on fluctuation of exchange rates 19 15,154,585 7,063,379

Service charges 16,664,273 23,137,534

Commission earned 20 39,072,305 16,708,369

Other income 21 907,603 4,883,019

134,254,447 77,765,350

EXPENSES

Salaries and benefits 23 27,001,258 13,495,733

General and administration 24 35,759,805 25,346,816

Board of Directors' fees 246,000 330,000

Audit fee 51,750 57,500

Provision for doubtful loans and advances 6,707,766 5,118,558

(69,766,579) (44,348,607)

Profit before tax 64,487,868 33,416,744

Tax expense 14.3 (11,373,966) (4,642,039)

Profit after tax 53,113,902 28,774,705

Transfer to legal reserve (13,278,476) (7,193,676)

39,835,427 21,581,028

Less: Directors' shares on Profit 25 (550,000) (550,000)

Current year distributable profit 39,285,427 21,031,028

Retained earning brought forward 21,031,028 -

Transfer to special reserve (1,051,551)

Dividend paid to founding members of the Bank (998,974)

Dividend paid (18,980,503) -

- -

Total Distributable profit 39,285,427 21,031,028

EARNINGS PER SHARE 26 16.43% 13.47%

MEAZA ASHNAFI BOARD CHAIRPERSON


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CASH FLOW FROM FINANCING ACTIVITIES:

Issues of ordinary shares 122,197,965 137,993,570

Dividends paid (17,662,650) -

Directors profit share paid (550,000) -

Net cash inflow/(outflow) from financing activities 103,985,316 137,993,570

Effects of exchange rate changes 15,154,585 7,063,379

Net increase in cash for the year 72,650,247 375,637,878

Cash balance at the beginning of the year 429,540,477 53,902,599

Cash balance at the end of the year 502,190,723 429,540,477

ENAT BANK SHARE COMPANYCASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2015

2014

Birr Birr Birr

CASH FLOW FROM OPERATING ACTIVITY

Net profit before tax 64,487,868 33,416,744

Depreciation and amortization 6,721,936 4,627,441

Depreciation adjustment credited to income (36,424)

Provision for doubtful loans and advances 6,707,766 5,118,558

Net Gain on foreign currency transactions and translations (15,154,585) (7,063,379)

Operating profit before changes in operating assets

and liabilities 62,726,561 36,099,364

(Increase)/ decrease in items in the course of collection 131,283,106 (164,303,695)

(Increase)/decrease in other deposits and prepayments (32,153,060) 1,219,390

(Increase)/decrease in loans and advances to customers (633,577,875) (511,855,834)

(increase) / decrease in other assets net of change in provision and fixed asset transferred to stock (20,852,933) (23,817,168)

Increase in deposits by customers 635,783,024 929,441,300

Increase in other liabilities excluding dividend payable & directors share on profit of previous year 15,008,619 30,019,440

Increase/(decrease) in margins on L/Cs (23,455,361) 156,453,548

Net cash (outflow) / inflow from operating activities 72,035,521 417,156,982

134,762,082 453,256,346

TAXATION

Profit tax paid (3,705,323)

Withholding tax paid (4,904) -

(3,710,227) -

131,051,855 453,256,345

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (27,399,868) (18,130,238)

Investment in certificate of deposit 80,000,000 (70,000,000)

Investment in IT project (13,753,641) (525,350)

Equity investment (5,030,000)

Deferred expenditures - (3,226,829)

Purchase of NBE Bills (211,358,000) (130,793,000)

Net cash (outflow)/ inflow from investing activities (177,541,509) (222,675,417)

MEAZA ASHENAFI BOARD CHAIRPERSON


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ENAT BANK SHARE COMPANY STATEMENT OF CHANGE IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 30 JUNE 2015

Paidup Legal Resrve Special Retained

capital reseve earning Total

Birr Birr Birr Birr Birr

Balance as at 5 March 2013 123,678,090 - - - 123,678,090

Collection from subscribed and new shares 137,993,570 - - - 137,993,570

Net profit for the year - - - 28,774,705 28,774,705

Transfer to legal reserve - 7,193,676 - (7,193,676) -

Directors' share on profit - - - (550,000) (550,000)

Balance as at 30 June 2014 261,671,660 7,193,676 - 21,031,029 289,896,365

Transfer to special reserve - - 1,051,551 (1,051,551) -

Dividend paid - - (19,979,477) (19,979,477)

Collection from subscribed and new shares 122,197,965 - - - 122,197,965

Net profit for the year - - - 53,113,902 53,113,902

Transfer to legal reserve - 13,278,476 - (13,278,476) -

Directors' share on profit - - - (550,000) (550,000)

Balance as at 30 June 2015 383,869,626 20,472,152 1,051,551 39,285,427 444,678,756 ................................................................................................................................................................................................

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1. BACKGROUNDEnat Bank is a privately owned commercial bank established in 2011 in accordance with the “licensing and supervision of banking business proclamation No. 592/2008” of Ethiopia to undertake commercial banking activities.

The Bank obtained its license from the National Bank of Ethiopia (NBE) on 14 November 2012 and started its business activities on 05 March 2013.

2. BASIS OF PREPARATIONA. Statement of complianceThe financial statements of ENAT BANK S.C have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Additionally, the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor body were applied. There was no early adoption of any standard not yet effective.

Local regulatory requirements as issued by the National Bank of Ethiopia and the commercial code of Ethiopia of 1960 have also been considered in the preparation of the Financial Statements.

The financial statements are presented in Ethiopian Birr rounded to the nearest decimal.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank’s accounting policies.

Standards, amendments and interpretations effective and adopted by the Bank in 2015

IAS 32 (amended). In December 2011 the IASB published amendments to IAS 32 Financial Instruments: Presentation. The amendments to IAS 32 clarify the IASB’s requirements for offsetting financial instruments. The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32. The pronouncement clarifies:

The meaning of “currently has a legally enforceable right of set off the recognized amounts”; and

That some gross settlement systems may be considered equivalent to net settlement.The Bank adopted the amended

standard as of 1 January 2014. The amended standard did not have material impact on the disclosures in the Bank’s financial statements.

IAS 36 (amended). In May 2013 the IASB published Recoverable Amount Disclosures for Non-Financial Assets, amendments to IAS 36 Impairment of Assets. The amendments address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. When developing IFRS 13 Fair Value Measurement, the IASB decided to amend IAS 36 to require disclosures about the recoverable amount of impaired assets. The amendments clarify the IASB’s original intention: that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal. The Bank adopted the amended standard as of 1 January 2014. The amended standard did not have any impact on the Bank’s financial statements.

IFRIC 21 In May 2013 the IASB issued IFRIC Interpretation 21: Levies, an Interpretation on the accounting for levies imposed by governments. IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The new interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The Bank adopted the interpretation as of 1 January 2014. The interpretation did not have any impact on the Bank’s financial statements as the Bank’s interpretation of the standard was identical to the IFRIC applied in 2014.

IFRS 10, IFRS 12, IAS 27 (amended). In October 2013 the IASB published “Investment Entities” (Amendments to IFRS 10, IFRS 12 and IAS 27). As the Company does not have investment entities, the amendments did not have any impact on the Bank’s financial statements.

B. Basis of measurementThe financial statements have been prepared on the historical cost convention.

C. Functional and presentation currencyThese financial statements are presented in Ethiopian Birr (ETB), which is the Bank’s functional currency. Except as indicated, financial information, presented in ETB has been rounded to the nearest digit.

ENAT BANK SHARE COMPANYNOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2015


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D. Use of estimates and judgmentsThe preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgments, estimates and assumptions in the process of applying the Bank’s accounting policies, that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these financial statements.

A. Foreign currency transactionsTransactions in foreign currencies are translated into ETB at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into ETB at the mid exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in ETB at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the spot mid exchange rate at the end of the period. The foreign currencies the Bank deals with are predominantly United States Dollars (USD) and Euro (EUR). The exchange rates used for translation at 30 June 2015 were as follows:

Currency Buying Selling Mid rate

1 USD Birr 20.5659 Birr 20.9772 Birr 20.7716 1 EUR Birr 22.8528 Birr 23.3099 Birr 23.0814

B. Interest income and expenseInterest income and expense are recognized in the profit or loss, on an accrued basis excepting interest income on non-performing loans and advance on import bills which is recognized on cash basis.

C. Fees and commission income and expenseFees and commission income, including financial services provided by the Bank in respect of foreign currency settlements, guarantees, letters of credit, domestic and foreign payment operations and other services, are recognized as the related services are performed. Other fees and commission expense relates mainly to transaction and service fees, which

are expensed as the services are received.

D. DividendsDividend income is recognized when the right to receive income is established.

E. Income tax (current and deferred)The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Current income taxThe company pays 30% tax on profit it made after adjusting for non taxable income and unallowable expenses.

Deferred income taxDeferred in tax is computed on the difference between the carrying value of depreciable assets and deferred charges and their future tax base at the rate the Bank pays income tax, i.e., 30%. The total tax expense charged to the Banks profit and loss account is the sum or difference of current year tax expense and the deferred tax as appropriate.

F. Financial assets and liabilities

i. Recognition and initial measurementThe Bank initially recognizes loans and advances, deposits and borrowed funds on the date at which they are originated. All other financial assets and liabilities are initially recognized on the date at which the Bank becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is initially measured at cost.

ii. De-recognitionThe Bank derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and consideration received (including any new asset obtained less any new liability assumed) is recognized in profit or loss. In transactions in which the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Bank continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

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The Bank derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.

iii. OffsettingAssets and liabilities, and income and expenses, are not offset unless required or permitted by an IFRS. Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and losses arising from a group of similar transactions such as in the Bank’s trading activity.

iv. Amortized cost measurementThe amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, minus any reduction for impairment.

v. Identification and measurement of impairmentAt each reporting date the Bank assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. A financial asset is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Bank on terms that the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data such as adverse changes in the payment status of borrowers or issuers, or economic conditions. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

All individually significant loans and advances and investment securities are assessed for specific impairment. Impairment losses on assets carried at amortized cost are measured as the difference between the carrying amount of the financial asset and the estimated recoverable value. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

I. Cash and cash equivalentsCash and cash equivalents include cash balance on hand,

demand deposits with banks, cash deposited with the National Bank of Ethiopia (“NBE”) and highly liquid financial assets with original maturities of less than three months, which are subject to insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-term commitments. Cash and cash equivalents are carried at amortized cost in the statement of financial position.

II. Loans and advancesLoans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Bank does not intend to sell immediately or in the near term. Loans and advances to banks are classified as loans and receivables. Loans and advances are initially measured at cost and subsequently measured at their amortized cost less any impairment loss.

III. Investment securitiesSubsequent to initial recognition investment securities are accounted for depending on their classification as either held to maturity, fair value through profit or loss, or available-for-sale.

IV. Held-to-maturityHeld-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity, and which are not designated as at fair value through profit or loss or as available for sale. Held-to-maturity investments are carried at amortized cost using the effective interest method. A sale or reclassification of a more than insignificant amount of Held-to-maturity investments would result in the reclassification of all Held-to-maturity investments as available for sale, and would prevent the Bank from classifying investment securities as held to maturity for the current and the following two financial years. However, sales and reclassifications in any of the following circumstances would not trigger a reclassification:

• sales or reclassifications that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value;

• sales or reclassifications after the Bank has collected substantially all of the asset’s original principal;

• sales or reclassifications attributable to non-recurring isolated events beyond the Bank’s control that could not have been reasonably anticipated.

(g) Properties and equipment

(i) Recognition and measurementItems of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other


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costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalized borrowing costs.

When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and are recognized within other income or other expenses in profit or loss.

(ii) Subsequent costsThe cost of replacing part of an item of property or equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Bank and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

(iii) DepreciationDepreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Depreciation rates, based on the estimated useful lives for the current and comparative periods are as follows: % Buildings 5 Motor Vehicles 20 Furniture and equipment 10 Computers 10

(h) Intangible assets

(i) Recognition and measurementIntangible assets acquired by the Bank are stated at cost less accumulated amortization & accumulated impairment losses.

(ii) Subsequent expenditureSubsequent expenditure on intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure isexpensed as incurred.

(iii) AmortizationAmortization is recognized in profit or loss on a straight-line basis over the estimated useful life of the intangible assets, from the date that it is available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The amortization rates based

on the estimated useful lives for the current and comparative periods are as follows:

%Software 20Deferred expenditures 20

(i) Deposits and borrowed fundsDeposits and borrowed funds are the Bank’s sources of debt funding. Deposits and borrowed funds are initially measured at cost, and subsequently measured at their amortized cost.

(j) ProvisionsA provision is recognized if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(k) Employee benefits

(i) Defined contribution plansThe Bank contributes to its employees’ post retirement plans as prescribed by the national legislation and will have no legal or constructive obligation to pay further amounts. Contributions, based on salaries, are made to the national organizations responsible for the payment of pensions. There is no additional liability in respect of these plans. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss when they are due.

(l) Share capital and reserves

I. Ordinary sharesOrdinary shares are classified as equity.

II. Legal ReserveThe bank transfer not less 25% of its profit after tax as required by the National Bank of Ethiopia until such reserve equals the bank’s paid up capital.

III. Share issue costsCosts directly attributable to the issue of equity instruments are recognized as a expense in the profit or loss when incurred.

IV. DividendsDividends are recognized as a liability in the period in which they are declared.

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(m) Earnings per shareThe Bank presents basic earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period.

4. FINANCIAL RISK MANAGEMENT

(a) Introduction and overviewThe Bank has exposure to the following risks from its use of financial instruments:

• credit risk

• liquidity risk

• market risks

• Operational risk

This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and processes for measuring and managing risk, and the Bank’s management of capital.

Risk management frameworkThe Board of Directors (“the Board”) has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has established the Credit Review sub-Committee and Risk sub-Committee, which are responsible for developing and monitoring Bank’s risk management policies.

The Bank’s risk management policies are established to identify and analyze the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in the regulation, market conditions, products and services offered. The Bank, through its training and procedures and policies for management, aims to develop a constructive control environment, in which all employees understand their roles and obligations.

The Bank’s Board of Directors is responsible for monitoring compliance with the Bank’s risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. The Bank’s Board of Directors is assisted in these functions by the Risk Management Department. The Risk Management Department undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Risk Management Committee.

(b) Credit riskCredit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans and advances to customers and other banks and investment securities. For risk management reporting purposes, the Bank

considers and consolidates all elements of credit risk exposure (such as individual obligor default risk and sector risk).

Management of credit riskThe Board of Directors follows up the implementation of : credit policies, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutoryrequirements.

• Reviewing and assessing credit risk. Assess all credit exposures in excess of designated limits, prior to facilities being committed to customers.

• Limiting concentrations of exposure to geographies, industries, individual or and group exposures and maturity exposures (for loans and advances).

Impaired loans and advancesImpaired loans and advances are loans and advances for which the Bank determines that it is probable that it will be unable to collect part or all of the principal and interest due according to the contractual terms of the loan agreement(s). These loans are graded as Non performing Loans (NPL).

Past due but not impaired loansLoans and advances where contractual interest or principal payments are past due but the Bank believes that impairment is not appropriate on the basis of the level of security / collateral available and / or the stage of collection of amounts owed to the Bank.

Allowances for impairmentThe Bank at each balance sheet date has established a process for determining an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. A financial asset is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset.The main components of this allowance are a specific loss component that relates to individually significant exposures. Loans are evaluated individually for impairment based on factors such as payment history, borrower financial condition, collateral and current economic conditions. For collateral dependent loans their value is taken into account but discounted based on date of their last received appraisal and market conditions. For calculation of the value of the collaterals, following collaterals are taken into account; cash deposits, vehicles, real estate, equipment and other movable property. From these evaluations of expected cash flows and collateral values, specific allowances are determined. The amount of the loss is measured as the difference between the asset’s carrying amount and the lower of recoverable value of the loan or the estimated value of the collaterals. Recoverable value is the multiple of recovery rate of the Bank and the principal balance of the loan. Recovery rate


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is determined in accordance the National Bank of Ethiopia provisions.

The National Bank of Ethiopia, Supervision of Banking Business SBB 43/2008 directive classifies loans and advances into the following categories:

Pass LoansLoans and advances in this category are fully protected by the current financial and paying capacity of the borrower and are not subject to criticism. In general, loans and advances, which are fully secured, both as to principal and interest, by cash or cash substitute, are classified under this category regardless of past due status or other adverse credit factors.

ii Special MentionAny loan or advance past due 30 days or more but less than 90 days is classified under this category.

iii SubstandardNon-performing loans or advances past due 90 days or more but less than 180 days is classified under this category.

iv DoubtfulNon-performing loans or advances past due 180 days or more but less than 360 days is classified as doubtful.

v LossesNon-performing loans or advances past due 360 days is classified as loss. As per the Directive the provision for impairment losses are determined as follows:-

No. Loan Category Provision required 1 Pass loans 1% of the outstanding loan balance2 Special mention loans 3% of the outstanding loan balance3 Substandard loans 20% of the net loan balance4 Doubtful loans 50% of the net loan balance5 Loss loans 100% of the net loan balance Note: Net loan balance is outstanding loan balance less the recovery value of the loan.

(c) Liquidity riskLiquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Management of liquidity riskThe Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation.

Exposure to liquidity riskThe finance department receive information from other departments regarding the liquidity profile of their financial assets and liabilities and details of other projected cash flows arising from projected future business. The finance department then maintain a portfolio of short-term liquid assets, largely made up of short-term liquid investment securities, loans andadvances to banks and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank.

The daily liquidity position and market conditions are regularly monitored. All liquidity policies and procedures are subject to review and approval by ALCO. Daily reports cover the liquidity position of the Bank. Liquidity reports are submitted weekly to the NBE.

The Bank has access to a diverse funding base. Funds are raised using a broad range of instruments including deposits, borrowed funds and share capital. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. The Bank strives to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities. The Bank continually assesses liquidity risk by identifying and monitoring changes in funding required meeting business goals and targets set in terms of the overall Bank strategy. In order for the liquidity risk to be kept at acceptable level the bank has set internal limits on liquidity risk exposure which are regularly followed and reported. Also as part of the overall liquidity risk management in order to address future emergencies, as a liquidity crisis management tool the bank has established liquidity contingency plan with clearly defined roles and responsibilities of the parties involved in the processes itself. The Liquidity Contingency Plan is specifying developments, so that immediate actions will be taken in order to prevent escalation of such events. In regular course of the activities of the Bank liquidity risk is managed according to the Policy and Procedure on liquidity risk management. As key indicators, that will be used to recognize liquidity problems, the Bank, as minimum, is defining the following:

• substantial increase in the assets financed by short term deposits;

• significant and sudden decrease in the core deposits or loss of the regular depositors of the Bank;

• considerable decrease in the assets quality, particularly the credit portfolio;

• extensive withdrawal of deposits before their maturity date;

• regulatory liquidity indicators; internal liquidity indicators;

As a part of the crisis management actions, within the Liquidity Contingency Plan, following are considered as immediate:

• borrow on inter-bank money market;

• sell short term securities (domestic and foreign);

• borrowing from the National Bank

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Market risksMarket risk is the risk that changes in market prices, such as interest rate, foreign exchange rates and credit spreads (not relating to changes in the obligor’s / issuer’s credit standing) will affect the Bank’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.

Management of market risksThe Bank manages changes in interest rate risk by applying fixed term interest rates while the foreign exchange risk is managed by matching of liabilities and assets and holding of assets appreciating currencies especially the USD to which the Birr is pegged to. Assets and liabilities committee (ALCO) analyzes the Bank’s market risk on a monthly basis and reports to the Risk Committee. ALCO performs analyses and makes decisions with regard to balance sheet structure, liquidity risk, and currency risk and also is analyzing the risk of the Bank’s treasury unit.

Exposure to interest rate risk The Bank’s operations are subject to the risk of interest rate fluctuations to the extent that interest earning assets and interest-bearing liabilities mature or reprising at different times or/and in differing amounts. Asset-liability risk management activities are conducted in the context of the Bank’s sensitivity to interest rate changes. In general, the Bank is asset sensitive because of majority of its assets and liabilities are interest bearing. The Bank has contractual right to change the interest rate on its loans. However the actual effect will depend on various factors, including stability of the economy, environment and level of the inflation.

Operational riskOperational risk is risk of loss due to inappropriate or weak internal processes, inappropriate persons and inappropriate or weak systems in the Bank as well as external events. The Bank defined its framework for managing with the operational risk by adopting the Policy and Procedure on operational risk management. Policy and Procedure for Operational Risk Management was adopted by the Supervisory Board of the Bank. In the Policy the basic aims are defined such as operational risk management (system and processes for managing operational risk, organizational structure, reporting system, internal control and etc), as well as measuring and monitoring the operational risk. Implementation of the operational risk management framework is meant to be delivered by performing RCSA (Risk and control self-assessment) which is continuous process, and by using the operational loss event database. Within the strategy for Risk Management, the Bank has defined the acceptable level of exposure to operational risk.


2 0 1 4 / 1 5

5 CASH ON HAND 2014Birr Birr

Local Currency 70,445,913 29,306,919 Foreign Currency 925,806 557,910

71,371,719 29,864,829

6 ITEMS IN THE COURSE OF COLLECTION

These are assets the recognition of which has not been finalized as the recording documents are in transit between branches

and head office. Most of these assets in transit are stocks issued from head office to branches, cash issued to branches and/or

cash being transferred from branches to head office, other prepayments clamed by head office from branches and some small

expenses claimed by branches/head office from head office/branches.

2014

Birr Birr

Head office account with Branches 389,247,370 397,101,725

Branches account with Head office (407,584,061) (401,091,387)

Un-cleared effect foreign 4,384,552 14,733,328

Un-cleared effect Local 46,972,727 153,560,028

33,020,588 164,303,695

7 DEPOSITS AND PREPAYMNETS2014

BIRR BIRR

Prepaid office rent 50,949,894 18,715,232

Prepaid insurance 109,611 326,244

Others 135,030 -

51,194,535 19,041,476

The prepaid office rent significant because the Bank doesn't have own building and the prepayments

are effected up to five years future rents.

8 LOANS& ADVANCES TO CUSTOMERS2014

Birr Birr

Agriculture 28,776,770 6,288,808

Construction 299,999,546 81,174,804

Consumers Loan 9,384,521 3,429,260

Domestic trade and services 195,928,374 75,629,812

Export 225,333,237 118,027,179

Import 289,748,723 189,168,239

Industry 50,072,457 14,394,691

Merchandise - 19,228,883

Transport 46,190,083 4,514,159

1,145,433,710 511,855,834

Less: Provision for doubtful loans and

advances ( Note 17) (11,826,324) (5,118,558)

1,133,607,386 506,737,276

2 0 1 4 / 1 5


LOANS & ADVANCES BY MATURITIES

Total< 3

months

3-6

months

6-12

months1-3 years >3 years

Birr Birr Birr Birr Birr Birr

Agriculture 28,776,770 68,773 871,164 2,373,242 13,564,866 11,898,725

Construction 299,999,546 716,958 9,081,935 24,741,185 141,414,543 124,044,924

Consumers Loan 9,384,521 22,428 284,099 773,948 4,423,699 3,880,347

Domestic trade and services 195,928,374 468,242 5,931,371 16,158,358 92,357,211 81,013,190

Export 225,333,237 538,516 6,821,550 18,583,399 106,218,150 93,171,622

Import 289,748,723 692,460 8,771,610 23,895,792 136,582,484 119,806,376

Industry 50,072,457 119,666 1,515,852 4,129,513 23,603,281 20,704,145

Transport 46,190,083 110,388 1,398,320 3,809,330 21,773,198 19,098,847

1,145,433,710 2,737,432 34,675,900 94,464,768 539,937,433 473,618,177

9 OTHER ASSETS 2014

Birr BirrStationery and other stocks 2,737,309 2,227,204

Suspense receivable 2,748,627 2,976,684

Stock of fixed asset items 2,454,859 3,553,137

Assets transferred to branches under establishment 10,018,777 12,943,375

Accrued interest Income Receivable 12,366,092 8,492,734

Miscellaneous accounts receivable 22,330,144 1,334,322

52,655,807 31,527,455

Assets transferred to branches under establishment represents: prepaid branches office rent, deferred expenditures of the branches

office being opened up, fixed assets stocks transferred to the branch.

10 PROPERTY, PLANT AND EQUIPMENT

Balance Balance

30-Jun-14 Additions Adjustment 30-Jun-15

Birr Birr Birr Birr

COST

Motor vehicles 10,415,631 13,023,341 23,438,972

Office and other equipment 8,006,100 4,605,750 12,611,850

Furniture and fittings 2,856,715 7,905,356 (275,419) 10,486,652

Computer accessories 2,264,704 1,865,421 4,130,125

23,543,150 27,399,868 (275,419) 50,667,599

DEPRECIATION

Motor vehicles 1,689,062 3,435,536 5,124,598

Office and other equipment 281,395 778,941 1,060,336

Furniture and fittings 866,879 988,997 (36,424) 1,819,452

Computer accessories 199,460 325,479 524,938

3,036,796 5,528,953 (36,424) 8,529,324

NET BOOK VALUE 20,506,354 42,138,275


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12 DEPOSITS BY CUSTOMERS

2014

Demand Savings Fixed time Total

Birr Birr Birr Birr Birr

Private sector & staffs 288,209,135 670,587,311 146,773,343 1,105,569,789 632,252,005

Co-operatives & associations 1,007,092 210,287 25,444,125 26,661,504 10,007,200

Domestic banks 490,317 299,521 410,550,725 411,340,562 264,274,868

NR-transferable Birr accounts 13,997,017 - - 13,997,017 -

Public agencies & enterprises - - - - 87,090

NR- foreign currency accounts - - - - 17,571,583

Residents 7,655,452 - - 7,655,452 5,248,555

311,359,013 671,097,119 582,768,193 1,565,224,325 929,441,300

11 DEFERRED EXPENDITURESBalance Balance

30-Jun-14 Additions 30-Jun-15

Birr Birr Birr

COST

Establishment and pre-operating cost 5,964,918 - 5,964,918

IT Project cost 525,350 13,753,641 14,278,991

6,490,268 13,753,641 20,243,909

AMORTIZATION

Establishment and pre-operating cost 1,590,645 1,192,984 2,783,629

1,590,645 1,192,984 2,783,629

NET BOOK VALUE 4,899,623 17,460,280

The IT project cost represents payments effected to a software supplying company, cost of hardware bought for the project.

The project is core banking project which is aimed to integrate the accounting and operation of the bank.

2 0 1 4 / 1 5


13 OTHER LIABILITIES

2014

Birr Birr

Cashiers' payment orders 22,373,490 14,533,373

Board of Directors' fees 550,000 550,000

Accrued interest on fixed deposits 18,225,839 7,658,258

Payable to withdrawing shareholders 3,744,342 5,226,623

Exchange and auction payable 2,393,816 6,000,510

Dividends payable 2,316,827 -

Blocked account and blocking inwards 1,113,488 -

Stamp duty charges 1,040,710 152,061

Income tax payable 848,362 236,232

Sales tax on interest paid 568,326 73,187

Withholding tax payable - 112,143 Old draft & outstanding payments-local/

foreign173,652 504

Deposit for guarantee issued 144,165 -

Audit fee 51,750 57,500

MTs and TTs payable, local and foreign 13,500 -

Miscellaneous accounts payable 683,283 2,315,714

54,241,550 36,916,104

14 PROVISION FOR TAXATION

14.1 Profit tax payable 2014

Birr Birr Birr

The movements in this account are:

Beginning balance 3,705,323 -

Less; Settlement (3,705,323) -

Add: Current year provision 10,653,342 3,705,323

Withholding tax paid (4,904) -

10,648,438 3,705,323

14.2 Provision for the year

Profit before tax 64,487,868 33,416,744

Less: Depreciation per Tax proclamation No.286/2002 9,612,942 7,224,476

Interest income taxed at source 19,254,253 17,302,607

Depreciation adjustment credited to income 36,424

Tax free interest income from NBE Bills 7,422,251 1,565,156

(36,325,870) (26,092,239)

Add: Deferred Expense 75,738 75,738

Depreciation per accounting policy 6,721,936 4,627,441

Donations 20,000 12,000


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Entertainment 531,469 311,394

7,349,143 5,026,573

Taxable profit for the year 35,511,141 12,351,078

Provision for profit tax @ 30% 10,653,342 3,705,323

14.3 TAX EXPENSE

2014

Birr Birr

Tax expense payable on current year profit (14.2) 10,653,342 3,705,323

Deferred tax expense(14.5) 720,623 936,716

11,373,966 4,642,039

14.4 Depreciation and Amortization for tax purpose

14.4.1 DEPRECIATION FOR TAX PURPOSE

COMPUTER AND ACCESSORIESBirr Birr

Depreciation base brought forward 1,509,803

Addition 1,865,421

Current Depreciation Base 3,375,224

Depreciation @ 25% (843,806) 843,806

Depreciation Base carried forward 2,531,418

Other business assets

Depreciation base brought forward 15,604,194

Add; Addition 25,534,447

Adjustment (275,419)

Current Depreciation Base 40,863,222

Depreciation @ 20% (8,172,644) 8,172,644

Depreciation Base carried forward 32,690,578

14.4.2 AMORTIZATION FOR TAX PURPOSE

Balance on Balance on

30/06/2014 Addition 30/06/2015

Birr Birr Birr

Cost 5,964,918 - 5,964,918

Depreciation 795,322 596,492 1,391,814

Net book value 5,169,596 4,573,104

Total Depreciation and amortization for tax purpose 9,612,942

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14.5 DEFERRED TAX

BirrNet Book Value of tangible and intangible assets as

Per Accounting Policy45,319,564

Tax base 39,795,100

Temporary difference 5,524,464

Deferred Tax Liability @ 30% 1,657,339

Less: Deferred tax liability brought forward (936,716)

Deferred tax expense of current year 720,623

15 SHARE CAPITAL

Number of 30-Jun-15 30-Jun-14

Description shares Par value Amount Amount

Subscribed Capital 472,703 1000 472,703,000 354,708,000

Paid up capital 383,870 1000 383,869,626 261,671,660

16 LEGAL RESERVE

2014

Birr Birr

Balance at the beginning of the year 7,193,676 -

Transfer for the year ( 53,113,902 @ 25%) 13,278,476 7,193,676

20,472,152 7,193,676

17 PROVISION FOR DOUBTFUL LOANS AND ADVANCES

2014

Birr BirrThe movements in this account were as

follows:Beginning balance 5,118,558 -

Add: Additional provision 6,707,766 5,118,558

11,826,324 5,118,558

18 INTEREST INCOME

2014

Birr Birr

Interest on: Term loans 85,114,608 19,592,797

Overdrafts 12,633,791 2,888,093

Import and export facilities 1,326,674 498,632

99,075,073 22,979,521

INTEREST ON INVESTMENT

NBE Bills 7,422,251 1,565,156

Deposits with domestic banks 19,254,253 17,302,607

26,676,504 18,867,763

125,751,577 41,847,284


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19 NET GAIN ON FLUCTUATION OF EXCHANGE RATES

2014

Birr Birr

Gain on fluctuation of exchange rates 34,870,157 14,224,034

Less; Loss on fluctuation of exchange rates (19,715,572) (7,160,655)

Net Gain on fluctuation of exchange rates 15,154,585 7,063,379

20 COMMISSION EARNED

2014

Birr Birr

L/C and other import/export facilities 6,439,176 16,199,887

Letters of guarantee 32,451,532 425,354

Cashiers' payment order 167,027 82,230

Others 14,570 897

39,072,305 16,708,369

21 OTHER INCOME

2014

Birr Birr

Telephone, telegram, telex and fax 3,711 753,414

Sundries 823,542 90,677

Estimation and Inspection Fees 80,350 57,380

Service charge on share selling's - 3,981,548

907,603 4,883,019

22 INTEREST EXPENSE

2014

%Birr Birr

Savings deposits 31% 19,567,346 4,422,758

Fixed time deposits 69% 43,728,551 11,451,476

63,295,897 15,874,234

Saving deposits 54% 671,097,119

Fixed time deposits 46% 582,768,193

1,253,865,312

2 0 1 4 / 1 5


The Bank is incurring and paying 69% its interest expense on fixed time deposits whereas the fixed time deposit as at 30 June 2015

constitute only 46%. This is because the interest rate on fixed time deposit is close to twice that it pays on saving deposits and some

times even higher than that. Whereas the average cost of funds excluding shareholders' fund is 5.21% which nearly equal to the

interest the Bank is paying on ordinary saving accounts.

23 Salaries and Related benefits

2014

Birr Birr

Contractual staff salaries 616,443 13,323

Clerical staff salaries 17,209,403 9,056,363

Non clerical staff salaries 2,463,056 1,681,518

Cash indemnity allowances 338,919 165,574

House allowance 94,786 55,871

Living allowance 347,984 -

Maternity pay 400 400

Fuel Allowances 498,080 445,282

Medical 368,909 226,956

Overtime clerical staff - 7,282

Overtime non-clerical staff 24,987 1,637

Provident fund 2,148,571 1,166,568

Staff insurance 389,246 137,227

Training and education 282,994 133,585

Leave pay 119,500 108,765

Uniform 295,039 169,025

Acting allowance 3,571 34,407

Staff allowance 174,350 91,950

Bonus 1,625,020 -

27,001,258 13,495,733

24 GENERAL AND ADMINISTRATION EXPENSES

2014

Birr Birr

Office rent 14,803,590 13,529,330

Depreciation 5,528,953 3,036,796

Postage, telephone, telegram, telex/fax 1,303,773 842,030

Stationery and printing 1,499,983 908,118

Transportation 1,694,437 731,724

Advertisements 3,278,105 1,746,484

Car and representation allowance 617,737 351,210

Repair and maintenance 365,900 182,595


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Fuel and lubricants 744,186 396,934

Insurance 513,467 228,016

Travel and Perdiem 742,551 109,656

Correspondent charges 15,907 33,467

SWIFT services 181,370 198,202

Utilities 128,285 110,771

Revenue stamp 33,353 -

Amortization 1,192,984 1,590,645

Donations and contributions 20,000 12,000

Annual reception 389,863 -

Bank charges 193,189 36,447

Membership and subscriptions 357,163 18,984

Entertainment 531,469 311,394

Inauguration of branches 562,536 25,254

Legal 4,990 32,000

License and Registration 11,000 13,500

Cleaning Supplies 145,533 24,525

Wages 83,384 66,735

Transportation of currency 1,127 -

Miscellaneous expenses 814,973 809,999

35,759,805 25,346,816

25 DIRECTORS' SHARES ON PROFIT

Current year Board of Directors Remuneration is calculated in compliance with Directive No.SBB/49/2011

which has been issued by National Bank Of Ethiopia, effective from January 15,2011, which limits the

maximum compensation of Birr 50,000 for each Board member. The balance has been shown

in the profit and loss account.

26 EARNINGS PER SHARE

The rate of earnings per share is the return per share computed on the basis of the net profit after tax divided by the weighted

average number of shares held during the year.

27 CONTINGENT LIABILITY AND COMMITMENTS

2014

Birr Birr

Letter of Guarantee 411,199,968 15,583,689

Letter of Credit 97,530,313 166,003,385

Loans approved but not disbursed 42,597,166 -

Unutilized facilities 58,353,403 -

609,680,851 181,587,074

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28 MEMORANDUM OF ACCOUNTS

2014

Birr Birr

OBC-Own branches and other banks' city

clearance

2,324,246

7,889,502 2,324,246 7,889,502

29 RESIDUAL CONTRACTUAL MATURITIES OF LIABILITIESMaturity

Carrying value Gross nominal

in/out flow < 3 months 3-6 months 6-12 months 1-3 years >3 years

Birr Birr Birr Birr Birr Birr Birr

Financial assets

Cash and bank balances 502,190,723 502,190,723 502,190,723 -

Items in course of collec-tion from other banks 33,020,588 33,020,588 33,020,588 -

Investment In Fixed time deposit 30,000,000 30,000,000 30,000,000

Investment In NBE Bills 342,151,000 342,151,000 - 342,151,000

Equity investment 5,030,000 5,030,000 - 5,030,000

Loans and advances to customers 1,145,433,709 1,145,433,709 2,737,432 34,675,900 94,465,768 539,937,433 473,617,176

Accrued interest receivable 12,366,092 12,366,092 - 12,366,092 - - -

2,070,192,113 2,070,192,113 537,948,743 77,041,993 94,465,768 539,937,433 820,798,176

Liabilities

Deposits:

Current 311,359,013 (311,359,013) (202,383,358) (108,975,654) - -

Savings 671,097,119 (671,097,119) (335,548,559) (335,548,559) - - -

Fixed time deposit 582,768,193 (582,768,193) (155,754,000) (110,950,000) (316,064,193) - -

Other liabilities 54,241,550 (54,241,550) (54,241,550) - - - -

Margin on letter of credit 132,998,187 (132,998,187) (132,998,187) - - - -

Current year tax 10,648,438 (10,648,438) - (10,648,438) - - -

Total liabilities 1,763,112,500 (1,763,112,500) (880,925,654) (566,122,652) (316,064,193) - -

Commitments 609,680,851 (609,680,851) (609,680,851) - - - -

Total liabilities &commitment 2,372,793,351 (2,372,793,351) (1,490,606,505) (566,122,652) (316,064,193) - -

Liquidity gap (302,601,237) (302,601,237) (952,657,762) (489,080,660) (221,598,425) 539,937,433 820,798,176


2 0 1 4 / 1 5

29 RESIDUAL CONTRACTUAL MATURITIES OF LIABILITIESMaturity

Carrying value Gross nominal

in/out flow < 3 months 3-6 months 6-12 months 1-3 years >3 years

Birr Birr Birr Birr Birr Birr Birr

Financial assets

Cash and bank balances 502,190,723 502,190,723 502,190,723 -

Items in course of collec-tion from other banks 33,020,588 33,020,588 33,020,588 -

Investment In Fixed time deposit 30,000,000 30,000,000 30,000,000

Investment In NBE Bills 342,151,000 342,151,000 - 342,151,000

Equity investment 5,030,000 5,030,000 - 5,030,000

Loans and advances to customers 1,145,433,709 1,145,433,709 2,737,432 34,675,900 94,465,768 539,937,433 473,617,176

Accrued interest receivable 12,366,092 12,366,092 - 12,366,092 - - -

2,070,192,113 2,070,192,113 537,948,743 77,041,993 94,465,768 539,937,433 820,798,176

Liabilities

Deposits:

Current 311,359,013 (311,359,013) (202,383,358) (108,975,654) - -

Savings 671,097,119 (671,097,119) (335,548,559) (335,548,559) - - -

Fixed time deposit 582,768,193 (582,768,193) (155,754,000) (110,950,000) (316,064,193) - -

Other liabilities 54,241,550 (54,241,550) (54,241,550) - - - -

Margin on letter of credit 132,998,187 (132,998,187) (132,998,187) - - - -

Current year tax 10,648,438 (10,648,438) - (10,648,438) - - -

Total liabilities 1,763,112,500 (1,763,112,500) (880,925,654) (566,122,652) (316,064,193) - -

Commitments 609,680,851 (609,680,851) (609,680,851) - - - -

Total liabilities &commitment 2,372,793,351 (2,372,793,351) (1,490,606,505) (566,122,652) (316,064,193) - -

Liquidity gap (302,601,237) (302,601,237) (952,657,762) (489,080,660) (221,598,425) 539,937,433 820,798,176

30 RESIDUAL CONTRACTUAL MATURITIES OF LIABILITIES IN FOREIGN CURRENCIES

1-3 months Birr Birr

AssestCash and Bank balances 42,642,484 42,642,484 Outward documentary bills purchased 4,384,552 4,384,552 Contingent Assets 205,263,939 205,263,939

252,290,975 252,290,975 LiabilitiesMargin held and other liabilities 95,129,509 95,129,509 Commitments 97,530,313 97,530,313

192,659,822 192,659,822

Liquidity gap 59,631,153 59,631,153

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No Branch Name Office phone

1 Etege Tayitu-Main branch 0115-50 06 83

2 Nigiste Saba-Bole Medhanealem 0116-18 04 61

3 Abebech Gobena -Megenagna 0116-67 40 01

4 Derartu Tulu-Mexico 0115-57 25 36

5 Sindu Gebru-Merkato 0112-73 23 01

6 Hawassa 0462-12 30 86

7 Catherine Hamlin-Meskel Flower 0114-47 00 33

8 Mekele 0342-41 51 72

9 Bahir Dar 0582-20 94 32

10 Sylvia Pankhurst-Senga Tera 0115-57 68 03

11 Dire Dawa 0252-11 02 96

12 Adama 0222-12 01 76

13 Shwareged Gedile-Kality 0114-71 74 62

14 Yekake Wordwet-Gojam Berenda 0112-73 26 91

BRANCH ADDRESS


2 0 1 4 / 1 5

ENAT ROCKS!

ማን እንደ እናት!

No Branch Name Office phone

1 Etege Tayitu-Main branch 0115-50 06 83

2 Nigiste Saba-Bole Medhanealem 0116-18 04 61

3 Abebech Gobena -Megenagna 0116-67 40 01

4 Derartu Tulu-Mexico 0115-57 25 36

5 Sindu Gebru-Merkato 0112-73 23 01

6 Hawassa 0462-12 30 86

7 Catherine Hamlin-Meskel Flower 0114-47 00 33

8 Mekele 0342-41 51 72

9 Bahir Dar 0582-20 94 32

10 Sylvia Pankhurst-Senga Tera 0115-57 68 03

11 Dire Dawa 0252-11 02 96

12 Adama 0222-12 01 76

13 Shwareged Gedile-Kality 0114-71 74 62

14 Yekake Wordwet-Gojam Berenda 0112-73 26 91

Published by Eminence Social Entrepreneurs Plc. 0911507833, 0118678187

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ANNUAL REPORT,2014/2015

Phone: - +251-115-158278/ 507074 Fax: - +251-115-151338/504948 P.O.Box: 18401,Addis Ababa,[email protected] Code: ENATETAAAddress: - Kirkos sub city, wereda 8 in front of Yordanos Hotel at Enat Tower.

Enat Bank SC. Annual Report 2014/2015

Documents

Transcript of Enat Bank SC. Annual Report 2014/2015