ECOBANK RWANDA by klg10159

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									                  ECOBANK RWANDA
(formerly Bank of Commerce Development and Industry SA (BCDI))

          REPORT AND FINANCIAL STATEMENTS

                             AT

                     31 DECEMBER 2007
                                         ECOBANK RWANDA
                (formerly Bank of Commerce Development and Industry SA (BCDI))

                           REPORT AND FINANCIAL STATEMENTS
                          FOR THE YEAR ENDED 31 DECEMBER 2007



Contents                                                                          Page


Directors, officers and administration                                            1–2


Report of the Directors                                                            3


Statement of Directors’ responsibilities                                           4


Report of the independent auditors                                                5–6


Income statement                                                                   7


Balance sheet                                                                      8


Cash flow statement                                                                9


Statement of changes in equity                                                     10


Notes to the financial statements                                                11 – 48
                             ECOBANK RWANDA
      (formerly Bank of Commerce Development and Industry SA (BCDI))

             DIRECTORS, OFFICERS AND ADMINISTRATION


DIRECTORS

Mr Ephraim Turahirwa                -   Chairman       - Re-appointed 29 June 2007
Mr Albert Essien                                       - Appointed 29 June 2007
Mr Patrick Uwizeye                                     - Re-appointed 29 June 2007
Mr Daniel Sackey                                       - Appointed 29 June 2007
Mr Emmanuel Ndahimana                                  - Resigned 29 June 2007
Mr Jean Baptiste Mutangana                             - Resigned 29 June 2007
Dr James Ndahiro                                       - Resigned 29 June 2007
Mr Leonard Habiyakare                                  - Resigned 29 June 2007

MANAGEMENT TEAM

Mr Daniel Sackey                    -   Managing Director
Mr Clement Dodoo                    -   Country Risk Manager
Mrs Peace Uwase Masozera            -   Head, Financial Control
Mr Andrew Takyi-Appiah              -   Head, Transaction Banking
Mr Rutayisire Yves                  -   Head, Wholesale Banking
Mr Patrick Masumbuko                -   Head, Corporate Affairs
Ms Kevin Ninsiima                   -   Head, Human Resource
Ms Justine Kampororo                -   Head, Information Technology
Mr Eric Rwigamba                    -   Head, Audit & Compliance
Mr Telesphore Twagiramungu          -   Head, Operational Risk
Mr Janvier Sebunuma                 -   Head, Operations Department
Ms Christelle Rugerinziza           -   Head, Treasury Department
Mr Ntambara Joseph                  -   Head, Branches & Channels

SECRETARY

Emmanuel Muragijimana
Avenue de la Paix
PO Box 3268
Kigali
Rwanda


AUDITORS

KPMG Kenya
16th Floor, Lonrho House
PO Box 40612
00100 Nairobi GPO, Nairobi, Kenya

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

Ecobank Centre
Avenue de la Paix
PO Box 3268
Kigali
Rwanda

                                                                             Page 1
                              ECOBANK RWANDA
      (formerly Bank of Commerce Development and Industry SA (BCDI))

      DIRECTORS, OFFICERS AND ADMINISTRATION (Continued)


PRINCIPAL CORRESPONDENT BANKS

Citibank New York
Citibank London
DZ Bank Frankfurt
HSBC Geneva
Standard Bank of South Africa
Standard Chartered Bank Uganda Limited

BRANCHES

ECOBANK Main Branch, ECOBANK Center, Kigali
ECOBANK City Centre, City Plaza, Kigali
ECOBANK Kacyiru, KBC Building, Kigali
ECOBANK Butare
ECOBANK Gitarama
ECOBANK Gisenyi
ECOBANK Cyangugu
ECOBANK Nyagatare
ECOBANK Ruhengeri
ECOBANK Gikongoro

SOLICITORS

Janvier Rwagatare              Buhuru Celestin               Niyomugabo Christophe
Avocat au Barreau de Kigali    Avocat au Barreau de Kigali   Avocat au Barreau de Kigali
PO Box 3583                    PO Box 10                     PO Box 769
Kigali                         Kigali                        Kigali
Rwanda                         Rwanda                        Rwanda



Trust Law Chambers
Advocates, Legal Consultants
& Procurement Specialists
Avenue de la la Justice
P.O Box 6679
Kigali
Rwanda




                                                                                 Page 2
        ECOBANK RWANDA
               (formerly Bank of Commerce Development and Industry SA (BCDI))

                               REPORT OF THE DIRECTORS
                          FOR THE YEAR ENDED 31 DECEMBER 2007

The Directors have pleasure in submitting their report together with the audited financial statements
of the Bank for the year ended 31 December 2007.

1.      Activities

        The principal activity of the Bank is the provision of wholesale, retail, treasury & transaction
        banking services.

2.      Results

        The results for the year are set out on page 7.

3.      Dividend

        The Directors do not recommend the payment of a dividend (2006 – Nil).

4.      Directors

        The Directors who served during the year and up to the date of this report are set out on page 1.

5.      Reserves

        The reserves of the Bank are set out on page 10.

6.      Auditors

        In accordance with the Law Relating to Regulations Governing Banks and Other Financial
        Institutions, KPMG Kenya, have indicated their willingness to continue in office.

7.      Approval of financial statements

        The financial statements were approved at a meeting of the Directors held on

                                    BY ORDER OF THE BOARD




                                                Secretary

Date:




                                                                                                   Page 3
                                       ECOBANK RWANDA
                (formerly Bank of Commerce Development and Industry SA (BCDI))

                      STATEMENT OF DIRECTORS’ RESPONSIBILITIES
                        FOR THE YEAR ENDED 31 DECEMBER 2007

The Directors are responsible for the preparation and presentation of the financial statements of
Ecobank Rwanda set out on pages 7 to 48 which comprise the balance sheet at 31 December 2007, and
the income statement, statement of changes in equity and cash flow statement for the year then ended,
and a summary of significant accounting policies and other explanatory notes.

The Directors responsibility includes: determining that the basis of accounting described in note 2 is an
acceptable basis for preparing and presenting the financial statements in the circumstances; designing,
implementing and maintaining internal controls relevant to the preparation and presentation of these
financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in
the circumstances.

Under the Law Governing Commercial Enterprises in Rwanda, the Directors are required to prepare
financial statements for each financial year which give a true and fair view of the state of affairs of the
Bank as at the end of the financial year and of the operating results of the Bank for that year. It also
requires the Directors to ensure the Bank keeps proper accounting records which disclose with
reasonable accuracy the financial position of the Bank.

The Directors accept responsibility for the annual financial statements, which have been prepared using
appropriate accounting policies supported by reasonable and prudent judgments and estimates, in
conformity with International Financial Reporting Standards and in the manner required by the Law
Governing Commercial Enterprises in Rwanda and the Law Relating to Regulations Governing
Banks and Other Financial Institutions. The Directors are of the opinion that the financial statements
give a true and fair view of the state of the financial affairs of the Bank and of its operating results.

The Directors further accept responsibility for the maintenance of accounting records which may be
relied upon in the preparation of financial statements, as well as adequate systems of internal financial
control.

The Directors have made an assessment of the Bank’s ability to continue as a going concern and have
no reason to believe the Bank will not be a going concern for at least the next twelve months from the
date of this statement.

Approval of the financial statements

The financial statements, as indicated above, were approved by the Board of Directors on
and were signed on its behalf by:



___________________________                                         ___________________________
Director                                                            Director



___________________________
Director




                                                                                                    Page 4
          REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
                                    ECOBANK RWANDA
              (formerly Bank of Commerce Development and Industry SA (BCDI))

We have audited the financial statements of Ecobank Rwanda set out on pages 7 to 48 which
comprise the balance sheet at 31 December 2007, the income statement, statement of changes in
equity and cash flow statement for the year then ended, and a summary of significant accounting
policies and other explanatory notes.

Directors’ responsibility for the financial statements

As stated on page 4, the directors are responsible for the preparation and fair presentation of these
financial statements in accordance with International Financial Reporting Standards. This
responsibility includes: designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatements,
whether due to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.

Auditor’s 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 relevant ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from 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 our judgement,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, we consider 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 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 opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the
bank at 31 December 2007, and its financial performance and cash flows for the year then ended in
accordance with International Financial Reporting Standards.


                                                                                              Page 5
Report on other legal and regulatory Requirements

In accordance with the Law Relating to Regulations Governing Banks and Other Financial
Institutions, we report that we have no reportable matters relating to the financial statements of the
bank.




Date:




                                                                                               Page 6
                                      ECOBANK RWANDA
               (formerly Bank of Commerce Development and Industry SA (BCDI))

                                 INCOME STATEMENT
                         FOR THE YEAR ENDED 31 DECEMBER 2007


                                                                              2007         2006
                                                   Notes                   Frw '000     Frw '000

INTEREST INCOME                                         8                 2,199,949     2,360,653

INTEREST EXPENSE                                        9                 ( 680,097)   ( 686,444)

NET INTEREST INCOME                                                       1,519,852     1,674,209

FEE AND COMMISSION INCOME                              10(a)                583,747       997,678

FOREIGN EXCHANGE TRADING INCOME                        10(b)               701,005        707,944

OTHER OPERATING INCOME                                 11                  430,657        514,451

OPERATING INCOME                                                          3,235,261     3,894,282

NET IMPAIRMENT LOSSES ON
 LOANS ADVANCES                                        16(b)           ( 913,922)      ( 728,522)

OPERATING EXPENSES                                     12              (4,957,884)     (3,462,340)

LOSS BEFORE TAXATION                                                   (2,636,545)     ( 296,580)

INCOME TAX EXPENSE                                     13             (        808)    ( 237,191)

LOSS AFTER TAXATION                                                    (2,637,353)     ( 533,771)




The notes on pages 11 to 48 form an integral part of these financial statements.




                                                                                           Page 7
                                      ECOBANK RWANDA
               (formerly Bank of Commerce Development and Industry SA (BCDI))

                         BALANCE SHEET AS AT 31 DECEMBER 2007

                                                                             2007             2006
                                                   Notes                  Frw '000         Frw '000
ASSETS

Cash and balances with National Bank of Rwanda           14             14,448,896        5,257,865
Investments in Government securities                     15              3,287,519        2,309,570
Loans and advances to customers (net)                    16(a)           8,587,541        8,719,981
Placements with other banks and financial institutions   17             10,119,909        9,960,807
Unquoted investments                                     18                      -            9,580
Tax asset                                                                  217,713          217,713
Property and equipment                                   19              4,630,368        6,309,016
Intangible assets                                        20                367,286          415,532
Deferred tax asset                                       21                554,956          585,441
Other assets                                             22              2,522,451          287,492

TOTAL ASSETS                                                            44,736,639       34,072,997

LIABILITIES

Deposits from other banks and financial institutions     23              1,292,925          890,907
Customer deposits                                        24             34,983,853       30,355,688
Amounts due to the Rwanda Revenue Authority              25              2,521,368        1,317,772
Other liabilities                                        26              1,547,599          983,879

                                                                        40,345,745       33,548,246
SHAREHOLDERS’ EQUITY (Page 10)

Share capital                                            27               3,915,000       2,500,008
Special reserves                                                                  -          91,211
Other reserves                                                            2,519,249                -
Statutory reserves                                                                -         251,371
Revenue reserves                                                         (2,373,625)     (2,317,839)
Statutory Credit Risk Reserve                                               261,023
Fair value reserves                                                          69,247                  -

                                                                         4,390,894          524,751
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY                                                    44,736,639       34,072,997


The financial statements on pages 7 to 48 were approved by the Board of Directors on
and were signed on its behalf by:



Director:___________________________                          Director:___________________________


The notes on pages 11 to 48 form an integral part of these financial statements.



                                                                                             Page 8
                                      ECOBANK RWANDA
               (formerly Bank of Commerce Development and Industry SA (BCDI))

                                 CASH FLOW STATEMENT
                           FOR THE YEAR ENDED 31 DECEMBER 2007



                                                                            2007         2006
                                                   Notes                 Frw '000     Frw '000

Net cash flows from operating activities               28(a)            3,195,015      873,364

Cash flows from investing activities

Proceeds received on maturity of development bond                       1,442,388     1,261,125
Conversion of loan to government bond                                           -    (1,274,919)
Purchase of equipment                                                  ( 62,083)     ( 165,031)
Purchase of intangible assets - software                               (    4,655)   (    9,932)
Proceeds from disposal of equipment                                       264,614        50,169

Net cash utilised in investing activities                               1,640,265    ( 138,588)

Cash flows from financing activities

Additional share capital                                                6,434,249             -

Net cash generated from financing activities                            6,434,249             -

Net increase in cash and cash equivalents              28(b)           11,269,528      734,776




The notes on pages 11 to 48 form an integral part of these financial statements.




                                                                                         Page 9
                                                                  ECOBANK RWANDA
                                            (formerly Bank of Commerce Development and Industry SA (BCDI))

                                                        STATEMENT OF CHANGES IN EQUITY
                                                      FOR THE YEAR ENDED 31 DECEMBER 2007



                                                                                                                 Statutory
                                             Share       Fair value         Other      Statutory      Special   credit risk    Revenue
                                            capital        reserves       reserves      reserves     reserves      reserve      reserves        Total
                                          Frw '000        Frw '000       Frw '000      Frw '000     Frw '000     Frw ‘000      Frw ‘000      Frw ‘000

At 1 January 2006                        2,500,008                 -               -    251,371       91,211              -   (1,784,068)    1,058,522
Loss for the year                                -                 -               -          -            -              -   ( 533,771)    ( 533,771)

At 31 December 2006                      2,500,008                 -               -    251,371       91,211              -   (2,317,839)     524,751

Transfers on recapitalisation           (2,500,008)                -               -    (251,371)    (91,211)             -   2,842,590              -
Change in fair value of available
 for sale investments                            -           69,247             -              -            -             -            -       69,247
Recapitalisation                         3,915,000                -     2,519,249              -            -             -            -    6,434,249
Transfer to statutory
credit risk reserves                              -                -               -           -            -     261,023     ( 261,023)             -
Loss for the year                                 -                -               -           -            -           -     (2,637,353)   (2,637,353)

At 31 December 2007                      3,915,000           69,247     2,519,249              -            -     261,023     (2,373,625)   4,390,894




The notes on pages 11 to 48 form an integral part of these financial statements.




                                                                                                                                               Page 10
                                    ECOBANK RWANDA
             (formerly Bank of Commerce Development and Industry SA (BCDI))

                        NOTES TO THE FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED 31 DECEMBER 2007
1.   REPORTING ENTITY
     The Bank is incorporated as a limited company in Rwanda and is domiciled in Rwanda. The
     address of its registered office is as follows:
     Ecobank Centre
     Avenue de la Paix
     PO Box 3268
     Kigali
     Rwanda

2.   BASIS OF PREPARATION
     (i)    Statement of compliance
            The financial statements have been prepared in accordance with International Financial
            Reporting Standards (IFRSs).
     (ii)   Basis of measurement
            The financial statements set out on pages 7 to 48 have been prepared under the
            historical cost basis of accounting except for the following:
            •   financial instruments at fair value through profit or loss are measured at fair value
            •   available-for-sale financial assets are measured at fair value.
     (iii) Functional and presentation currency
            These financial statements are presented in Rwandan Francs (Frw), which is the Bank’s
            functional currency. Except as indicated, financial information presented in Rwandan
            Francs has been rounded to the nearest thousand.
            Items included in the financial statements are measured using the currency of primary
            economic environment in which the entity operates i.e. Rwandan Francs.
     (iv)   Use of estimates and judgments
            The preparation of financial statements in conformity with IFRS requires management
            to make judgments, estimates and assumptions that affect the application of policies and
            reported amounts of assets and liabilities and disclosures of contingent assets and
            liabilities at the date of the financial statements and the reported amounts of revenues
            and expenses during the reported period. The estimates and assumptions are based on
            the Directors’ best knowledge of current events, actions, historical experience and
            various other factors that are believed to be reasonable under the circumstances, the
            results of which form the basis of making the judgments about the carrying values of
            assets and liabilities that are not readily apparent from other sources. Actual results
            may differ from these estimates.
            The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
            to accounting estimates are recognised in the period which the estimate is revised if the
            revision affects only that period or in the period of the revision and future periods if the
            revision affects both current and future periods.
            In particular, information about significant areas of estimation and critical judgments in
            applying accounting policies that have the most significant effect on the amount
            recognised in the financial statements is described in Note 5.

                                                                                               Page 11
3.   SIGNIFICANT ACCOUNTING POLICIES

     The principal accounting policies adopted in the preparation of these financial statements are
     set out below:

     (a)   Translation of foreign currencies

           Transactions in foreign currencies during the year are converted into Rwandan Francs
           at the exchange rate ruling at the date of the transaction. Foreign currency monetary
           assets and liabilities are translated at the exchange rate ruling at the balance sheet date.
           The resulting exchange differences are recognised in the income statement for the year.
           Non monetary assets and liabilities denominated in foreign currency are recorded at the
           exchange rate ruling at the transaction date.

     (b)   Revenue recognition

           Revenue is derived substantially from banking business and related activities and
           comprises net interest income and non-interest income. Revenue is recognised on an
           accrual basis in the period in which it is earned.

           (i)    Net interest income

                  Interest income and expense on available-for-sale assets and financial assets or
                  liabilities held at amortised cost is recognised in the income statement using the
                  effective interest method. The effective interest method is a method of calculating
                  the amortised cost of a financial asset or a financial liability and allocating
                  interest income or interest expense over the relevant period.

           (ii)   Fees and commissions

                  Fees and commission income is recognised when the service is provided.

           (iii) Foreign exchange trading income

                  Foreign exchange trading income comprise gains less losses relating to trading
                  assets and liabilities and include all realised and unrealised exchange differences.

     (c)   Income tax expense

           Tax on the profit or loss for the year comprises the current tax and change in deferred
           tax. Current tax is provided on the results in the year as shown in the financial
           statements adjusted in accordance with tax legislation.

           Deferred tax is provided using the balance sheet liability method on all temporary
           differences between the carrying amounts for financial reporting purposes and the
           amounts used for taxation purposes, except differences relating to the initial recognition
           of assets or liabilities which affect neither accounting nor taxable profit.

           Deferred tax is calculated on the basis of the tax rates currently enacted. Deferred tax
           assets are recognised to the extent that it is probable that future taxable income will be
           available against which the unused tax losses can be utilised. Deferred tax assets and
           liabilities are not discounted.




                                                                                              Page 12
3   SIGNIFICANT ACCOUNTING POLICIES (Continued)

    (d)   Financial assets and liabilities

          (i)    Recognition

                 The Bank initially recognises loans and advances, deposits, debt securities and
                 other liabilities on the date they are originated. All other financial assets and
                 liabilities (including assets and liabilities designated at fair value through profit or
                 loss) are initially recognised on the trade date at which the bank becomes a party
                 to the contractual provisions of the instrument.

          (ii)   Derecognition

                 The Bank derecognises a financial asset when the contractual rights to the cash
                 flows from the asset expire, or it transfers the rights to receive the contractual
                 cash flows on the financial asset in a transaction in which substantially all the
                 risks and rewards of ownership of the financial asset are transferred. Any interest
                 in transferred financial assets that is created or retained by the Bank is recognised
                 as a separate asset or liability.

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

          (iii) Offsetting of financial assets and liabilities
                 Financial assets and liabilities are offset and the net amount reported on the
                 balance sheet when there is a legally enforceable right to offset the recognised
                 amounts and there is an intention to settle on a net basis, or to realise the asset
                 and settle the liability simultaneously.

          (iv)   Fair value of financial instruments
                 The determination of fair values of financial assets and financial liabilities is
                 based on quoted market prices or dealer price quotations for financial instruments
                 traded in active markets. For all other financial instruments fair value is
                 determined by using valuation techniques. Valuation techniques include net
                 present value techniques, the discounted cash flow method, comparison to similar
                 instruments for which market observable prices exist, and valuation models. The
                 Bank uses widely recognised valuation models for determining the fair value of
                 common and more simple financial instruments like options and interest rate and
                 currency swaps. For these financial instruments, inputs into models are market
                 observable.
                 For more complex instruments, the Bank uses proprietary models, which usually
                 are developed from recognised valuation models. Some or all of the inputs into
                 these models may not be market observable, and are derived from market prices
                 or rates or are estimated based on assumptions. When entering into a transaction,
                 the financial instrument is recognised initially at the transaction price, which is
                 the best indicator of fair value, although the value obtained from the valuation
                 model may differ from the transaction price.
                 This initial difference, usually an increase, in fair value indicated by valuation
                 techniques is recognised in income depending upon the individual facts and
                 circumstances of each transaction and not later than when the market data
                 becomes observable.



                                                                                                Page 13
3   SIGNIFICANT ACCOUNTING POLICIES (Continued)

    (d)   Financial assets and liabilities (continued)

                 The value produced by a model or other valuation techniques is adjusted to allow
                 for a number of factors as appropriate, because valuation techniques cannot
                 appropriately reflect all factors market participants take into account when
                 entering into a transaction. Valuation adjustments are recorded to allow for model
                 risks, bid-ask spreads, liquidity risks, as well as other factors. Management
                 believes that these valuation adjustments are necessary and appropriate to fairly
                 state financial instruments carried at fair value on the balance sheet.

          (v)    Amortised cost measurement
                 The amortised 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, plus or minus the cumulative amortisation using the effective interest
                 method of any difference between the initial amount recognised and the maturity
                 amount, minus any reduction for impairment.

          (vi)   Identification and measurement of impairment of financial assets
                 At each balance sheet date, the Bank assesses whether there is objective evidence
                 that a financial asset not carried at fair value through profit or loss is impaired.
                 Financial assets are 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 than can be estimated reliably.

                 The Bank considers evidence of impairment at both a specific asset and collective
                 level. All individually significant financial assets are assessed for specific
                 impairment. All significant assets found not to be specifically impaired are then
                 collectively assessed for any impairment that has been incurred but not yet
                 identified. Assets that are not individually significant are then collectively
                 assessed for impairment by banking together financial assets (carried at amortised
                 cost) with similar risk characteristics.
                 Objective evidence that financial assets (including equity securities) are impaired
                 can include default or delinquency by a borrower, restructuring of a loan or
                 advance by the Bank on terms that the Bank would otherwise consider,
                 indications that a borrower or issuer will enter bankruptcy, the disappearance of
                 an active market for a security, or other observable data relating to a bank of
                 assets such as adverse changes in the payment status of borrowers or issuers in
                 the bank, or economic conditions that correlate with defaults in the bank.
                 In assessing collective impairment, the Bank uses statistical modelling of
                 historical trends of the probability of default, timing of recoveries and the amount
                 of loss incurred, adjusted for management’s judgment as to whether current
                 economic and credit conditions are such that the actual losses are likely to be
                 greater or less than suggested by historical modelling. Default rate, loss rates and
                 the expected timing of future recoveries are regularly benchmarked against actual
                 outcomes to ensure that they remain appropriate.
                 Impairment losses on assets carried at amortised cost are measured as the
                 difference between the carrying amount of the financial assets and the present
                 value of estimated cash flows discounted at the assets’ original effective interest
                 rate. Losses are recognised in the income statement and reflected in an allowance
                 account against loans and advances. Interest on the impaired asset continues to be
                 recognised through the unwinding of the discount.

                                                                                              Page 14
3   SIGNIFICANT ACCOUNTING POLICIES (Continued)

    (d)   Financial assets and liabilities (continued)

                When a subsequent event causes the amount of impairment loss to decrease, the
                impairment loss is reversed through the income statement.
                Impairment losses on available-for-sale investment securities are recognised by
                transferring the difference between the amortised acquisition cost and current fair
                value out of equity to the income statement. When a subsequent event causes the
                amount of impairment loss on an available-for-sale debt security to decrease, the
                impairment loss is reversed through the income statement.

                However, any subsequent recovery in the fair value of an impaired available-for-
                sale equity security is recognised directly in equity. Changes in impairment
                provisions attributable to time value are reflected as a component of interest
                income.

    (e)   Cash and cash equivalents

          For purposes of cash flow statement, cash and cash equivalents comprise balances with
          maturities of less than 90 days from the date of acquisition and include cash and
          balances with the National Bank of Rwanda, treasury bills, balances with banks and
          other financial institutions and deposits from banks and other financial institutions.

    (f)   Trading assets and liabilities

          Trading assets and liabilities are those that the Bank principally holds for the purpose of
          selling or repurchasing in the near term, or holds as part of a portfolio that is managed
          together for short-term profit or position taking.
          Trading assets and liabilities are initially recognised and subsequently measured at fair
          value in the balance sheet with transaction costs taken directly to the income statement.
          All changes in fair value are recognised as part of net trading income in the income
          statement. Trading assets and liabilities are not reclassified subsequent to their initial
          recognition.
          The determination of fair values of financial assets and financial liabilities is based on
          quoted market prices or dealer price quotations for financial instruments traded in
          active markets. For all other financial instruments fair value is determined by using
          valuation techniques such as the net present value techniques and the discounted cash
          flow method.

    (g)   Loans and receivables

          Loans and receivables are non-derivative financial assets with fixed or determinable
          payments and fixed maturities that are not quoted in an active market and that the Bank
          does not intend to sell immediately or in the near term. They arise when the Bank
          provides money directly to borrowers, other than those created with the intention of
          short-term profit taking. They are recognised at the date they are transferred to the
          Bank.
          Subsequent to initial recognition, these are carried at amortised cost, which is the
          present value of the expected future cash flows, discounted at the instrument’s original
          effective interest rate. Loan origination fees together with related direct costs are treated
          as part of the cost of the transaction.
          Amortised cost is calculated using the effective interest rate method.

                                                                                              Page 15
3   SIGNIFICANT ACCOUNTING POLICIES (Continued)

    (h)   Investment securities

          Investment securities are initially measured at fair value plus incremental direct
          transaction costs and subsequently accounted for depending on their classification
          either as held-to-maturity or available-for-sale.

          (i) Held-to-maturity

              These are financial assets with fixed or determinable payments and fixed maturities
              that the Bank’s management has the positive intention and ability to hold to
              maturity. The sale of a significant amount of held-to-maturity assets not close to
              their maturity would taint the entire category leading to reclassification as
              available-for-sale and prevent the Bank from reclassifying investment securities as
              held-to-maturity for the current and the following two financial years.

              Held-to-maturity investments are carried at amortised cost using, the effective
              interest method.

          (ii) Available-for-sale

              Other financial assets held by the Bank are classified as available-for-sale and are
              initially recognised at cost, including transaction costs.

              Subsequent to initial recognition, available-for-sale financial assets are stated at fair
              value based on quoted bid prices. Gains and losses arising from changes in the fair
              value of available-for-sale financial assets are recognised directly in equity in the
              fair value reserve, net of deferred tax. When these investments are derecognised,
              the cumulative gain or loss previously directly recognised in equity is recognised in
              the income statement.

    (i)   Property and equipment

          Items of property and equipment are stated at historical cost less accumulated
          depreciation and impairment losses. Historical cost includes expenditure that is directly
          attributable to the acquisition of the items. Subsequent costs are included in the asset’s
          carrying amount only when it is probable that future economic benefits associated with
          the item will flow to the Bank and the cost of the item can be measured reliably. All
          other repairs and maintenance are charged to the income statement during the financial
          period in which they are incurred.

          Land is not depreciated. Buildings and motor vehicles are depreciated on a straight
          lines basis. Depreciation on other fixed assets is calculated on the reducing balance
          basis, at annual rates estimated to write down carrying values of the assets over their
          expected useful lives.

          The annual depreciation rates in use are:

          Buildings                                                     5% - 15%
          Furniture, fittings and equipment                             30 - 50%
          Motor vehicles                                                25%
          Computer equipment                                            50%




                                                                                              Page 16
3.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (i)   Property and equipment (continued)

           The assets residual values and useful lives are reviewed, and adjusted if appropriate, at
           each balance sheet date.

           Gains and losses on disposal of assets are determined by comparing proceeds with their
           carrying amounts and are recognised in the income statement in the year in which they
           arise.

     (j)   Intangible assets – computer software

           Intangible assets comprise of acquired computer software licenses and are capitalised
           on the basis of the costs incurred to acquire and bring to use the specific software.

           The assets are stated at cost, less accumulated amortisation. Amortisation is calculated
           on straight line basis at an annual rate of 20%. This rate is estimated to write off the
           carrying values of the assets over their expected useful lives.

     (k)   Unquoted investments

           Unquoted equity investments are stated at cost net of impairment losses.

     (l)   Impairment of non financial assets

           The carrying amounts of the Bank’s non financial assets are reviewed at each reporting
           date to determine whether there is any indication of impairment. If any such indication
           exists then the assets’ recoverable amount is estimated.

           An impairment loss is recognised if the carrying amount of an asset or its cash-
           generating unit exceeds its recoverable amount. A cash-generating unit is the smallest
           identifiable asset Bank that generates cash flows that largely are independent from
           other assets and Banks. Impairment losses are recognised in the income statement.
           Impairment losses recognised in respect of cash-generating units are allocated first to
           reduce the carrying amount of any goodwill allocated to the units and then to reduce
           the carrying amount of the other assets in the unit (Bank of units) on a pro-rata basis.

           The recoverable amount of an asset or cash-generating unit is the greater of its value in
           use and its fair value less costs to sell. In assessing value in use, the estimated future
           cash flows are discounted to their present value using a pre-tax discount rate that
           reflects current market assessments of the time value of money and the risks specific to
           the asset.

     (m) Employee benefits

           (i)   Retirement benefit costs

                 The Bank contributes to a statutory defined contribution scheme, the Caisse
                 Social Du Rwanda. Contributions are determined by local statute and are
                 currently limited to 5% of the total of employees’ basic salary and house
                 allowance.

                 The Bank’s contributions to the above scheme are charged to the income
                 statement in the year in which they relate.

                                                                                             Page 17
3.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (m)     Employee benefits (continued)

           (ii)   Short term employee benefits

                  These include items such as wages and salaries, short term compensated absences
                  such as paid annual, accrued leave and sick leave and non-monetary benefits
                  such as medical care, housing and cars. All these benefits are expensed when
                  incurred.

     (n)   Operating leases

           Leases where a significant portion of the risks and rewards of ownership are retained
           by the lessor, are classified as operating leases. Payments made under operating leases
           arrangements (whether pre-paid or post paid) are charged to the income statement on a
           straight-line basis over the period of the lease.

     (o)   Contingent liabilities

           Letters of credit and guarantees are accounted for as off balance sheet transactions and
           are disclosed as contingent liabilities. Estimate of the outcome and the financial effects
           of contingent liabilities is made by management based on the information available
           upto the date the financial statements are approved for issue by directors. Any expected
           loss is charged to the income statement.

     (p)   Provisions

           Provisions are recognised when the company has a present legal or constructive
           obligation as a result of past events and it is probable that an outflow of resources
           embodying economic benefits will be required to settle the obligation and a reliable
           estimate of the amount of the obligation can be made

     (q)   Related parties

           In the normal course of business, transactions have been entered with certain related
           parties. These transactions were made on terms equivalent to those that prevail in arm's
           length transactions.

     (r)   Segment reporting

           A segment is a distinguishable component of the Bank that is engaged either in
           providing products or services (business segment), or in providing products or services
           within a particular economic environment (geographic segment), which is subject to
           risks and rewards that are different from those other segments. The Bank’s primary
           format for segment reporting is based on business segments. The format is also based
           on the Bank’s management and internal reporting structure.

     (s)   Comparatives

           Where necessary, comparative figures have been restated to conform with changes in
           presentation in the current year.




                                                                                             Page 18
3.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (t)   New standards and interpretations not yet adopted

           A number of new standards, amendments to standards and interpretations are not yet
           effective for the year ended 31 December 2007, and have not been applied in preparing
           these consolidated financial statements as follows:

            (i) Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs
                and requires that an entity capitalise borrowing costs directly attributable to the
                acquisition, construction or production of a qualifying asset as part of the cost of
                that asset. The revised IAS 23 will become mandatory for the Bank’s 2009
                financial statements and will constitute a change in accounting policy for the
                Bank. In accordance with the transitional provisions the Bank will apply the
                revised IAS 23 to qualifying assets for which capitalisation of borrowing costs
                commences on or after the effective date.

            (ii) IFRIC 11 IFRS 2 – Bank and Treasury Share Transactions requires a share-based
                 payment arrangement in which an entity receives goods or services as
                 consideration for its own equity instruments to be accounted for as an equity-
                 settled share-based payment transaction, regardless of how the equity instruments
                 are obtained. IFRIC 11 which becomes mandatory for the Bank’s 2008 financial
                 statements, is not expected to have any effect on the consolidated financial
                 statements because the company has not entered into share-based payment
                 arrangement.

            (iii) IFRIC 12 Service Concession Arrangements provides guidance on certain
                  recognition and measurement issues that arise in accounting for public-to-private
                  service concession arrangements. IFRIC 12, which becomes mandatory for the
                  Bank’s 2008 financial statements, is not expected to have any effect on the
                  consolidated financial statements because the company has not entered into any
                  public-to-private service concession.

            (iv) IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities
                 that operate, or otherwise participate in, customer loyalty programmes for their
                 customers. It relates to customer loyalty programmes under which the customer
                 can redeem credits for awards such as free or discounted goods or services.
                 IFRIC 13, which becomes mandatory for the Bank’s 2009 financial statements, is
                 not expected to have any impact on the bank’s financial statements because the
                 company does not have any customer loyalty programmes.

            (v) IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
                Requirements and their Interaction clarifies when refunds or reductions in future
                contributions in relation to defined benefit assets should be regarded as available
                and provides guidance on the impact of minimum funding requirements (MFR)
                on such assets. It also addresses when a MFR might give rise to a liability. IFRIC
                14, is not expected to have any effect on the bank’s financial statements because
                the company does not have a defined benefit arrangement.




                                                                                           Page 19
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES

     This section provides details of the Bank’s exposure to risk and describes the methods used
     by management to control risk in respect of financial instruments. The most important types
     of financial risk to which the Bank is exposed to are liquidity risk, credit risk, market risk and
     operational risk. Market risk includes interest rate risk and currency risk.

     The Board of Directors has overall responsibility for the establishment and oversight of the
     Bank’s risk management framework.

     Through its risk management structure, the Bank seeks to manage efficiently the core risks;
     credit, liquidity and market risk, which arise directly through the Bank’s commercial
     activities. Compliance and regulatory risk, operational risk and reputational risk are normal
     consequences of any business undertaking.

     The Bank’s risk management policies are established to identify and analyse 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
     market conditions, products and services offered. The Bank, through its training and
     management standards and procedures, aims to develop a disciplined and constructive control
     environment, in which all employees understand their roles and obligations.

     Details of how the various risks are managed are outlined below:

     (a)   Credit risk

           The Bank takes on exposure to credit risk, which is the risk that a counter party will be
           unable to pay amounts in full when due. Impairment provisions are provided for losses
           that have been incurred at the balance sheet date. Significant changes in the economy or
           in the health of a particular industry segment that represents a concentration in the
           Bank’s portfolio could result in losses that are different from those provided for at the
           balance sheet date. Management therefore carefully manages its exposure to credit risk.

           The Bank structures the levels of credit risk it undertakes by placing limits on the
           amount or risk accepted in relation to one borrower or Banks of borrowers and to
           geographic and industry segments. Such risks are monitored on a revolving basis and
           subject to an annual or more frequent review. The exposure to any one borrower is
           further restricted by sub-limits covering on and off balance sheet exposures. Actual
           exposures are monitored daily.

           Exposure to credit risk is managed through regular analysis of the ability of the
           borrowers and potential borrowers to meet interest and capital repayment obligations
           and by changing these lending limits where appropriate. Exposure to credit risk is also
           managed in part by obtaining collateral and corporate and personal guarantees, but a
           significant proportion is personal lending where no such facilities can be obtained.
           Guarantees and standby letters of credit are collateralized by the underlying shipments
           of goods to which they relate and therefore carry less risk than a direct borrowing.

           Commitments to extend credit represent unused portions of authorizations to extend
           credit in the form of loans, guarantees or letters of credit. With respect to credit risk on
           commitments to extend credit, the Bank is potentially exposed to loss in an amount
           equal to the total unused commitments. However the likely amount of loss is less than
           the total unused commitments, as most commitments to extend credit are contingent
           upon customers maintaining specific credit standards. The Bank monitors the term to
           maturity of credit commitments because longer-term commitments generally have a
           greater degree to credit risk than shorter-term commitments.

                                                                                              Page 20
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (a)   Credit risk (continued)

           For risk management purposes, credit risk arising on trading securities is managed
           independently, but reported as a component of market risk exposure.

           The Board of Directors has delegated responsibility for the management of credit risk to
           its Bank Credit Committee. The Credit department, reporting to the Bank Credit
           Committee, is responsible for oversight of the Bank’s credit risk, including:

           •   Formulating credit policies in consultation with business units, covering collateral
               requirements, credit assessment, risk grading and reporting, documentary and legal
               procedures, and compliance with regulatory and statutory requirements.
           •   Establishing the authorisation structure for the approval and renewal of credit
               facilities. Authorisation limits are allocated to business unit Credit Officers. Larger
               facilities require approval by Bank Credit Committee, Regional Credit Committee
               or the Board of Directors as appropriate.
           •   Reviewing and assessing credit risk - Bank Credit assesses all credit exposures in
               excess of designated limits, prior to facilities being committed to customers by the
               business unit concerned. Renewals and reviews of facilities are subject to the same
               review process.
           •   Limiting concentrations of exposure to counterparties, geographies and industries
               (for loans and advances), and by issuer, credit rating band, market liquidity and
               country (for investment securities).
           •   Developing and maintaining the Bank’s risk gradings in order to categorise
               exposures according to the degree of risk of financial loss faced and to focus
               management on the attendant risks. The risk grading system is used in determining
               where impairment provisions may be required against specific credit exposures.
               The current risk grading framework (in line with Central Bank guidelines) consists
               of five grades reflecting varying degrees of risk of default and the availability of
               collateral or other credit risk mitigation. The responsibility for setting risk grades
               lies with the final approving executive/committee as appropriate. Risk grades are
               subject to regular reviews by Country Risk.
           •   Reviewing compliance of business units with agreed exposure limits, including
               those for selected industries, country risk and product types. Regular reports are
               provided to Bank Credit on the credit quality of local portfolios and appropriate
               corrective action is taken.
           •   Providing advice, guidance and specialist skills to business units to promote best
               practice throughout the Bank in the management of credit risk.

           Each business unit is required to implement Bank credit policies and procedures, with
           credit approval authorities delegated from the Bank Credit Committee. The Bank has a
           Country Risk officer who reports on all credit related matters to local management and
           the Bank Credit Committee. The Bank is responsible for the quality and performance of
           its credit portfolio and for monitoring and controlling all credit risks in its portfolios,
           including those subject to central approval.

           Regular audits of business units and Bank Credit processes are undertaken by Internal
           Audit.




                                                                                             Page 21
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (a)   Credit risk (continued)

           The bank’s exposure to credit risk is analysed as follows:
           Exposure to credit risk
                                                            Loans & advances to customers    Loans & advances to Banks    Investment securities
                                                                    2007             2006            2007         2006      2007         2006
                                                                Frw '000         Frw '000        Frw '000     Frw '000   Frw '000     Frw '000
           Individually impaired:
           Class 3 – Impaired                                      270,710        334,973                -           -           -            -
           Class 4 – Impaired                                       55,240        163,491                -           -           -            -
           Class 5 – Impaired                                    5,266,297      4,481,388                -           -           -            -
           Allowance for impairment                            (4,308,662 )   (3,714,939 )               -           -           -            -
           Carrying amount                                       1,283,585      1,264,913                -           -           -            -
           Collectively impaired:
           Class 3 – Impaired                                        53,145       196,366                -           -           -            -
           Class 4 – Impaired                                        20,604       109,678                -           -           -            -
           Class 5 – Impaired                                       972,076       686,476                -           -           -            -
           Allowance for impairment                               (942,601)     (794,955)                -           -           -            -
           Carrying amount                                         103,224        197,565                -           -           -            -
           Past due but not impaired:
           Class 2                                               1,768,847      2,468,479                -           -           -            -
           Carrying amount                                       1,748,805      2,468,479                -           -           -            -
           Neither past due nor impaired
           Class 1                                               5,624,632      4,789,024       10,119,909   9,960,807   3,287,519    2,309,570
           Carrying amount                                       5,451,927      4,789,024       10,119,909   9,960,807   3,287,519    2,309,570
           Includes accounts with renegotiated terms               260,629               -               -           -           -            -
           Total carrying amount                                 8,587,541      8,719,981       10,119,909   9,960,807   3,287,519    2,309,570



                                                                                                                                       Page 22
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (a)   Credit risk (continued)

           Loans and advances have been categorised as follows:

           (i)    Impaired loans and securities

                  Impaired loans and securities are loans and securities for which the Bank
                  determines that it is probable that it will be unable to collect all principal and
                  interest due according to the contractual terms of the loan / securities
                  agreement(s). These loans are graded 3 to 5 in the Bank’s internal credit risk
                  grading system.

           (ii)   Past due but not impaired loans

                  Loans and securities 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.

           (iii) Loans with renegotiated terms

                  Loans with renegotiated terms are loans that have been restructured due to
                  deterioration in the borrower’s financial position and where the Bank has made
                  concessions that it would not otherwise consider. Once the loan is restructured it
                  remains in this category independent of satisfactory performance after
                  restructuring.

           Allowances for impairment

           The Bank establishes an allowance for impairment losses that represents its estimate of
           incurred losses in its loan portfolio. The main components of this allowance are a
           specific loss component that relates to individually significant exposures, and a
           collective loan loss allowance established for Bank homogeneous assets in respect of
           losses that have been incurred but have not been identified on loans subject to
           individual assessment for impairment.

           Write-off policy

           The Bank writes off a loan / security balance (and any related allowances for
           impairment losses) when Bank Credit determines that the loans / securities are
           uncollectible. This determination is reached after considering information such as the
           occurrence of significant changes in the borrower / issuer’s financial position such that
           the borrower / issuer can no longer pay the obligation, or that proceeds from collateral
           will not be sufficient to pay back the entire exposure. For smaller balance standardised
           loans, charge off decisions generally are based on a product specific past due status.

           The Bank holds collateral against loans and advances to customers in the form of
           mortgage interests over property, other registered securities over assets, and guarantees.
           Estimates of fair value are based on the value of collateral assessed at the time of
           borrowing, and generally are not updated except when a loan is individually assessed as
           impaired. Collateral generally is not held over loans and advances to banks, except
           when securities are held as part of reverse repurchase and securities borrowing activity.
           Collateral usually is not held against investment securities, and no such collateral was
           held at 31 December 2007 or 2006.

                                                                                             Page 23
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (a)   Credit risk (continued)

                 An estimate of the fair value of collateral and other security enhancements held
                 against financial assets is shown below:
                 Loans and advances to customers                           2007                 2006
                                                                        Frw '000             Frw '000
                 Against individually impaired:
                 Property                                              1,822,264             2,271,123
                 Other                                                         -                50,713
                 Against collectively impaired:
                 Property                                                455,759                48,708
                 Against past due but not impaired:
                 Property                                                626,592             1,645,058
                 Against neither past due nor impaired:
                 Property                                              1,375,168             1,402,071
                 Total                                                 4,279,783             5,417,673

     (b)   Liquidity risk

           The Bank is exposed to daily calls on its available cash resources from overnight
           deposits, current accounts, maturing deposits, loan draw-downs and guarantees. The
           Bank does not maintain cash resources to meet all of these needs, as experience shows
           that a minimum level of re-investment of maturing funds can be predicted with a high
           level of certainty.
           The matching and controlled mismatching of the maturities and interest rates of assets
           and liabilities is fundamental to the management of the Bank. It is unusual for Banks to
           be completely matched, as transacted business is often of uncertain term and of
           different types. An unmatched position potentially enhances profitability, but also
           increases the risk of losses.
           The maturities of assets and liabilities and the ability to replace, at an acceptable cost,
           interest-bearing liabilities as they mature are important factors in assessing the liquidity
           of the Bank and its exposure to changes in interest rates and exchange rates.
           Liquidity requirements to support calls under guarantees and standby letters of credit
           are considerably less than the amount of the commitment because the Bank does not
           generally expect third party to draw funds under the agreement. The total outstanding
           contractual amount of commitments to extend credit does not necessarily represent
           future cash requirements, as many of these commitments will expire or terminate
           without being funded.
           A key measure of liquidity risk is the ratio of net liquid assets to deposit liabilities. The
           National Bank of Rwanda requires the bank to maintain a statutory minimum ratio of
           100% of liquid assets to all its deposit liabilities.
           The liquidity ratio at the reporting date and during the reporting period were as follows:

                                                                            2007                  2006
           At 31 December                                                     149%               116%
           Average for the period                                             135%                99%
           Highest for the period                                             165%               116%
           Lowest for the period                                               97%                81%

                                                                                               Page 24
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (b)   Liquidity risk (continued)

           The table below summarises financial liabilities into relevant maturity Bankings based
           on the remaining period to the contractual maturity date:

                                             Up to     Less than                       Over
                                          1 month        1 years     1-5 years       5 years          Total
                                         Frw ‘000      Frw ‘000      Frw ‘000      Frw ‘000        Frw ‘000
           31 December 2007:
           Customer deposits            28,352,050      6,631,803             -             -    34,983,853
           Other liabilities               107,766        602,583             -             -       710,349
           Amounts due to Rwanda
           Revenue Authority             2,521,368               -            -             -     2,521,368
           Deposits of other
           financial institutions         792,925         500,000             -             -     1,292,925
           Total financial
           liabilities                  31,774,109      7,734,386             -             -    39,508,495

           31 December 2006:
           Customer deposits            23,432,630      6,923,058             -             -     30,355,688
           Other liabilities               465,513        173,421             -             -        638,934
           Amounts due to Rwanda
           Revenue Authority             1,317,772               -            -             -      1,317,772
           Deposits of other
           financial institutions         390,907         500,000             -             -          890,907

           Total financial
           liabilities                  25,606,822      7,596,479             -             -    33,203,301

     (c)   Market risk

           Market risk is the risk that changes in market prices, such as interest rate and foreign
           exchange rates 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 optimising the return on risk.

           The Bank is exposed to the effects of fluctuations in the prevailing levels of market
           interest rates on both its fair value and cash flow risks. Interest rate risk is managed
           principally through monitoring interest rate gaps and by having pre-approved limits for
           repricing bands.

           The Bank is also exposed to the effects of fluctuations in the prevailing foreign
           currency exchange rates on its financial position and cash flows. Currency risk is
           managed principally through limits set on the level of exposure by currency and in total
           for both overnight and intra-day positions which are monitored daily.

           (i)   Interest rate risk

                 The Bank is exposed to various risks associated with the effects of fluctuations in
                 the prevailing levels of market interest rates on its financial position and cash
                 flows. The table below summarises the exposure to interest rate risks. Included in
                 the table are the Bank’s assets and liabilities at carrying amounts, categorised by
                 the earlier of contractual repricing or maturity dates.

                                                                                            Page 25
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (c)   Market risk (continued)

           (i)   Interest rate risk – continued
                                                           Interest       Up to       Between      Between       Over     Non-interest
                 31 December 2007:                            Rate     1 month     1-3 months 3-12 months       1 year        bearing       Total
                                                                       Frw’000        Frw’000      Frw’000    Frw’000        Frw’000      Frw’000
                 ASSETS
                 Cash and balances with National Bank of
                 Rwanda                                        5%      9,000,000            -            -            -     5,448,896    14,448,896
                 Placements with other banks                   3%              -    5,974,951            -            -     4,144,958    10,119,909
                 Loans and advances to customers (net)        15%      2,521,709    1,670,096    1,144,026    2,318,671       933,039     8,587,541
                 Investments in Government securities         10%      1,712,960      619,641      954,918            -             -     3,287,519
                 Other assets                                    -             -            -            -            -     2,522,452     2,522,452
                 Intangible assets                               -             -            -            -            -       367,286       367,286
                 Property and equipment                          -             -            -            -            -     4,630,368     4,630,368
                 Deferred tax asset                              -             -            -            -            -       554,956       554,956
                 Tax asset                                       -             -            -            -            -       217,713       217,713
                 TOTAL ASSETS                                         13,234,669    8,264,688    2,098,945    2,318,671    18,819,667    44,736,639
                 LIABILITIES AND EQUITY
                 Customer deposits                             7%              -            -    6,631,803            -    28,352,050    34,983,853
                 Other liabilities                               -             -            -            -            -     1,547,598     1,547,599
                 Amounts due to Rwanda Revenue
                 Authority                                        -            -            -             -           -      2,521,368    2,521,368
                 Deposits from other banks and financial
                 institutions                                  7%       500,000             -             -           -       792,925     1,292,925
                 Shareholders’ equity                            -            -             -             -           -     4,390,894     4,390,894
                 LIABILITIES AND EQUITY                                 500,000             -    6,631,803            -    37,604,835    44,736,639
                 INTEREST SENSITIVITY GAP                             12,734,669    8,264,688   (4,532,860)   2,318,671   (18,792,873)            -




                                                                                                                                           Page 26
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (c)   Market risk (continued)

           (i)   Interest rate risk – continued
                                                           Interest      Up to       Between      Between      Over     Non-interest
                 31 December 2006:                          Rate      1 month     1-3 months 3-12 months      1 year        bearing       Total
                                                                      Frw’000        Frw’000      Frw’000   Frw’000        Frw’000      Frw’000
                 ASSETS
                 Cash and balances with National Bank of
                 Rwanda                                       -               -            -            -           -     5,257,865     5,257,865
                 Placements with other banks                3.5%      5,829,359            -    2,750,316           -     1,381,132     9,960,807
                 Loans and advances to customers (net)      14%         497,600      135,072      130,629   7,287,993       493,674     8,719,981
                 Unquoted investments                         -               -            -            -           -         9,580         9,580
                 Investments in Government securities       14%               -            -    2,309,570           -             -     2,309,570
                 Other assets                                 -               -            -            -           -       287,492       287,492
                 Intangible assets                            -               -            -            -           -       415,532       415,532
                 Property and equipment                       -               -            -            -           -     6,309,016     6,309,016
                 Deferred tax asset                           -               -            -            -           -       585,441       585,441
                 Tax asset                                    -               -            -            -           -       217,713       217,713
                 TOTAL ASSETS                                         6,326,959      135,072    5,190,515   7,287,993    14,957,445    34,072,997

                 LIABILITIES AND EQUITY
                 Customer deposits                           9%       1,555,695    3,990,890    2,737,291           -    22,071,812    30,355,688
                 Other liabilities                            -               -            -            -           -       983,879       983,879
                 Amounts due to Rwanda Revenue
                 Authority                                    -               -             -           -           -      1,317,772    1,317,772
                 Deposits from other banks and financial
                 institutions                               10%               -      500,000            -           -       390,907      890,907
                 Shareholders’ equity                        -                -            -            -           -       524,751      524,751
                 LIABILITIES AND EQUITY                               1,555,695    4,490,890    2,737,291           -    25,289,121    34,072,997
                 INTEREST SENSITIVITY GAP                             4,771,264   (4,355,818)   2,453,224   7,287,993   (10,331,676)            -




                                                                                                                                         Page 27
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (c)   Market risk (continued)

           (ii)   Currency risk

                  The Bank operates wholly within Rwanda and its assets and liabilities are stated in the local currency. The various foreign currencies to which the
                  Bank was exposed at 31 December 2007 are summarised in the table below:

                  31 December 2007:
                                                                                           US$         EURO             GBP          Others              Total
                  Equivalent in                                                        Frw ‘000      Frw ‘000        Frw ‘000      Frw ‘000           Frw ‘000

                  ASSETS

                  Cash on hand                                                        1,662,877         97,019           9,980         3,951          1,773,827
                  Balances with the National Bank of Rwanda (BNR)                     1,056,738              -               -             -          1,056,738
                  Placements and balances with other banking institutions             8,747,615      1,227,183               -        38,590         10,013,388
                  Loans and advances to customers (net)                                  43,809              -               -             -             43,809

                  TOTAL ASSETS                                                       11,511,039      1,324,202           9,980        42,541         12,887,762

                  LIABILITIES

                  Customer deposits                                                  10,898,844      525,6612           70,212              -        11,494,718
                  Deposits from other banks and financial institutions                   28,774       177,270                -              -           206,044

                  TOTAL LIABILITIES                                                  10,927,618       702,932           70,212              -        11,700,762

                  Net balance sheet position – 31 December 2007                         583,421       621,270         (60,232)        42,541          1,187,000




                                                                                                                                                             Page 28
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (c)   Market risk (continued)

           (ii)   Currency risk - continued

                  31 December 2006:
                                                                                 US$       EURO        GBP       Others       Total
                  Equivalent in                                              Frw ‘000    Frw ‘000   Frw ‘000   Frw ‘000    Frw ‘000
                  ASSETS
                  Cash on hand                                                 780,238     79,241     18,389      1,218      879,086
                  Balances with the National Bank of Rwanda (BNR)              900,003          -          -          -      900,003
                  Placements and balances with other banking institutions    9,209,602    312,170          -     48,900    9,570,672
                  Other assets                                                  35,229          -          -          -       35,229

                  TOTAL ASSETS                                              10,925,072    391,411     18,389     50,118   11,384,990

                  LIABILITIES
                  Customer deposits                                         11,370,272    427,831     73,156          -   11,871,259
                  Other liabilities                                             31,450      2,940      1,077          -       35,467

                  TOTAL LIABILITIES                                         11,401,722    430,771     74,233          -   11,906,726

                  Net Balance Sheet Position – 31 December 2006              (476,650)   (39,360)   (55,844)     50,118    (521,736)




                                                                                                                                Page 29
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (c)   Market risk (continued)

           Sensitivity analysis

           Sensitivity analysis interest rate risk

           At 31 December 2007, if interest rates at that date had been 100 basis points lower with
           all other variables held constant, the pre-tax loss for the year would have been Frw 123
           million (2006 – Frw 120 million) higher arising, mainly as a result of lower interest
           income on placements and other components of equity would have been Frw 2.3 million
           lower (2006 – Frw 446 million higher) arising mainly as a result of a decrease in the fair
           value of fixed rate government bonds classified as available for sale.

           If interest rates had been 100 basis points higher, with all other variables held constant,
           the pre-tax loss would have been Frw 115 million lower (2006 – Frw 515 million
           higher), arising mainly as a result of higher interest income on placements and other
           components of equity would have been Frw 2 million higher, arising mainly as a result
           of an increase in the fair value of fixed rate government bonds classified as available for
           sale.

           Profit is more sensitive to interest rate decreases than increase because of borrowing
           with capped interest rates.

     (d)   Operational risk

           Operational risk may crystallise if there is failure to control properly every aspect of the
           documentation, processing, settlement and accounting for a transaction. The Bank is
           exposed to operational risk mainly because of the high volume of transactions and the
           complexity of aspects of the business. The complexity arises both from the intrinsic
           nature of certain banking products and from the intricacy of the documentary, legal and
           other regulatory requirements that surround banking transactions. Generally the Bank
           looks to the insurance market for protection against the financial consequences of
           potentially large losses arising from fire, theft, fraud, professional negligence,
           environmental catastrophe and so on. At the same time where the potential loss is
           deemed to be low, the Bank bears it out of its annual profits.

     (e)   Compliance and regulatory risk

           Compliance and regulatory risk includes the risk of non-compliance with regulatory
           requirements. The Compliance function is responsible for establishing and maintaining
           an appropriate framework of bank compliance policies and procedures. Compliance
           with such policies and procedures is the responsibility of all managers.

     (f)   Legal risk

           Legal risk is the risk of unexpected loss, including reputational loss, arising from
           defective transactions or contracts, claims being made or some other event resulting in a
           liability or other loss for the bank, failure to protect the title to and ability to control the
           rights to assets of the bank (including intellectual property rights), changes in the law,
           or jurisdictional risk. The bank manages legal risk through the legal function, Legal
           Risk policies and procedures and effective use of its internal and external lawyers.




                                                                                                  Page 30
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

     (g)   Reputational risk

           Reputational risk is the risk of failing to meet the standards of performance or
           behaviour required or expected by stakeholders in commercial activities or the way in
           which business is conducted. Reputational risks arise as a result of poor management of
           problems occurring in one or more of the primary banking risk areas (Credit, Market,
           Operational risk areas) and/or from social, ethical or environmental risk issues. All
           members of staff have a responsibility for maintaining the bank’s reputation.

     (h)   Independent monitoring

           Internal Audit is an independent function that reports to the Board Audit Committee
           and provides an independent check that bank and business standards, policies and
           procedures are being complied with. Where necessary, corrective action is
           recommended.

     (i)   Capital management

           (i)   Regulatory capital

                 The Bank’s regulator National Bank of Rwanda (BNR) sets and monitors capital
                 requirements for the Bank as a whole. The parent company and individual
                 banking operations are directly supervised by their local regulators.

                 In implementing current capital requirements, BNR, requires the Bank to
                 maintain a prescribed ratio of total capital to total risk-weighted assets.

                 The Bank’s regulatory capital consists only of Tier 1 capital, which includes
                 ordinary share capital, retained earnings, revaluation reserves and statutory
                 reserves

                 The Bank’s policy is to maintain a strong capital base so as to maintain investor,
                 creditor and market confidence and to sustain future development of the business.
                 The impact of the level of capital on shareholders’ return is also recognised and
                 the Bank recognises the need to maintain a balance between the higher returns
                 that might be possible with greater gearing and the advantages and security
                 afforded by a sound capital position.

                 The Bank has complied with all externally imposed capital requirements
                 throughout the period.




                                                                                           Page 31
4.   FINANCIAL RISK MANAGEMENT DISCLOSURES (Continued)

                During the year, the Bank’s capital changed from Frw 525 million to Frw 4.4
                billion as shown in the Statement of Changes in Equity on page 10.

                                                                         2007                 2006
                                                                      Frw '000             Frw '000

                Ordinary share capital                               3,915,000            2,500,008
                Other reserves                                       2,519,249                   -
                Retained earnings                                   (2,112,602)          (2,317,839)
                Revaluation reserve                                     69,247                   -
                Statutory reserves                                           -              251,371
                Special reserves                                             -               91,211

                Total                                                4,390,894               524,751

                Risk-weighted assets                                25,651,266           20,804,363

                Capital ratios
                Total tier 1 capital expressed as a percentage
                 of risk-weighted assets                                   17%                   3%

         (ii)   Capital allocation

                The allocation of capital between specific operations and activities is, to a large
                extent, driven by optimisation of the return achieved on the capital allocated. The
                amount of capital allocated to each operation or activity is based primarily upon
                the regulatory capital, but in some cases the regulatory requirements do not
                reflect fully the varying degree of risk associated with different activities. In such
                cases the capital requirements may be flexed to reflect differing risk profiles,
                subject to the overall level of capital to support a particular operation or activity
                not falling below the minimum required for regulatory purposes. The process of
                allocating capital to specific operations and activities is undertaken independently
                of those responsible for the operation, by Bank Risk and Bank Credit, and is
                subject to review by the Credit Committee or ALCO as appropriate.

                Although maximisation of the return on risk-adjusted capital is the principal basis
                used in determining how capital is allocated within the Bank to particular
                operations or activities, it is not the sole basis used for decision making. Account
                also is taken of synergies with other operations and activities, the availability of
                management and other resources, and the fit of the activity with the Bank’s
                longer term strategic objectives. The Bank’s policies in respect of capital
                management and allocation are reviewed regularly by the Board of Directors.




                                                                                             Page 32
5.   USE OF ESTIMATES AND JUDGEMENTS

     Impairment of loans and receivables

     The Bank’s loan loss provisions are established to recognise incurred impairment losses either
     on specific loan assets or within a portfolio of loans and receivables.

     Impairment losses for specific loan assets are assessed either on an individual or on a
     portfolio basis. Individual impairment losses are determined as the difference between the
     carrying value and the present value of estimated future cash flows, discounted at the loans’
     original effective interest rate. Impairment losses determined on a portfolio basis are assessed
     based on the probability of default inherent within the portfolio of impaired loans or
     receivables.

     Estimating the amount and timing of future recoveries involves significant judgement, and
     considers the level of arrears as well as the assessment of matters such as future economic
     conditions and the value of collateral, for which there may not be a readily accessible market.

     Loan losses that have been incurred but have not been separately identified at the balance
     sheet date are determined on a portfolio basis, which takes into account past loss experience
     and defaults based on portfolio trends. Actual losses identified could differ significantly from
     the impairment provisions reported as a result of uncertainties arising from the economic
     environment.




                                                                                            Page 33
6.   SEGMENT REPORTING

     Geographical segments

     The bank’s operations are all within Rwanda. Geographical analysis is therefore not relevant.

     Business segments

     The Bank is organised into two main business segments: Consumer Banking and Wholesale
     Banking. Wholesale Banking comprises Financial Markets (formerly Global Markets) and
     Origination and Client Coverage (formerly Client Relationships).

     The segment results were as follows:

     (a)     Income statement

                                               Retail     Wholesale
                                             Banking       Banking         Treasury            Total
                                             Frw ‘000      Frw ‘000        Frw ‘000         Frw ‘000
             31 December 2007
             Net interest income              377,734         83,530      1,058,588         1,519,852
             Non funded income                741,705        272,699        701,005         1,715,409

             Operating income               1,119,439        356,229      1,759,593         3,235,261

             Operating expenses                      -              -               -   (4,957,884)
             Net impairment losses on
             loans and advances              (457,990)     (305,327)                -   ( 913,922)

             Loss before taxation                    -              -               -   (2,636,545)

             Income tax expense                                                         (       808)

             Loss after tax                                                             (2,637,353)

             31 December 2006

             Net interest income              516,310        344,207        813,692         1,674,209
             Non funded income                985,240        526,889        707,944         2,220,073

             Operating income               1,501,550        871,096      1,521,636         3,894,282

             Operating expenses                      -              -               -   (3,462,340)
             Net impairment losses on
             loans and advances              (437,113)      (291,409)               -   ( 728,522)

             Loss before taxation                    -              -               -   ( 296,580)

             Income tax expense                                                         ( 237,191)

             Loss for the period                                                        ( 533,771)




                                                                                             Page 34
6.   SEGMENT REPORTING (Continued)

     (b)     Balance sheet
                                               Wholesale
                                     Retail     Banking      Treasury Unallocated          Total
                                   Frw ‘000     Frw ‘000     Frw ‘000   Frw ‘000        Frw ‘000
           31 December 2007:

           Segment assets          5,152,524    3,435,016   27,856,324           -     36,443,864
           Unallocated assets              -            -            -   8,292,775      8,292,775

           Total assets            5,152,524    3,435,016   27,856,324   8,292,775     44,736,639

           Segment liabilities    15,742,734   17,491,927    5,563,486           -     38,798,147
           Unallocated
           liabilities                     -            -            -   1,547,598      1,547,598

           Total liabilities      15,742,734   17,491,927    5,563,486   1,547,598     40,345,745

           Impairment losses on
           financial assets         548,353      365,569             -           -       913,922
           Depreciation and
           amortization                    -            -            -    621,458        621,458
           Restructuring costs             -            -            -    181,794        181,794
           Capital expenditure             -            -            -     66,738         66,738


           31 December 2006:

           Segment assets          5,231,989    3,487,992   17,528,242           -     26,248,223
           Unallocated assets              -            -            -   7,824,774      7,824,774

           Total assets            5,231,989    3,487,992   17,528,242   7,824,774     34,072,997

           Segment liabilities    13,660,060   15,177,844    3,726,463           -     32,564,367
           Unallocated
           liabilities                     -            -            -    983,879         983,879

           Total liabilities      13,660,060   15,177,844    3,726,463    983,879      33,548,246

           Impairment losses on
           financial assets         437,113      291,409             -           -       728,522
           Depreciation and
           amortization                    -            -            -    735,163        735,163
           Capital expenditure             -            -            -    174,963        174,963




                                                                                     Page 35
7.   FINANCIAL ASSETS AND LIABILITIES

     Accounting classifications and fair values

     The table below sets out the Bank’s classification of each class of financial assets and liabilities, and their fair values:


                                                                                                                                       Other       Total
                                                       Held for      Designated       Held to      Loans and Available-             amortised   carrying
                                                       Trading      at fair value    maturity     receivables  for-sale                  cost    amount      Fair value
                                                       Frw‘000          Frw‘000      Frw‘000         Frw‘000  Frw‘000                Frw‘000    Frw‘000       Frw‘000
      31 December 2007:

      Financial assets
      Cash and balances with Central Bank of
        Rwanda                                                  -               -             -             -              -    14,448,896 14,448,896        14,448,896
      Deposits and advances to banks                            -               -             -             -              -    10,119,909 10,119,909        10,119,909
      Loans and advances to customers                           -               -             -     8,587,541              -             - 8,587,541          8,326,518
      Investment securities                                     -               -             -             -      3,287,519             - 3,287,519          3,287,519

                                                                -               -             -     8,587,541     3,287,519     24,568,805 36,443,865        36,182,842

      Financial liabilities
      Deposits from banks                                       -               -             -               -             -    1,292,925 1,292,925          1,292,925
      Deposits from customers                                   -               -             -               -             -   34,983,853 34,983,853        34,983,853
      Other liabilities                                         -               -             -               -             -    2,521,368 2,521,368          2,521,368

      `                                                         -               -             -               -             -   38,798,146 38,798,146        38,798,146




                                                                                                                                                           Page 36
7.   FINANCIAL ASSETS AND LIABILITIES (Continued)

                                                                                                               Other        Total
                                              Held for    Designated      Held to    Loans and Available-   amortised    carrying
                                              Trading    at fair value   maturity   receivables  for-sale        cost     amount       Fair value
                                              Frw‘000        Frw‘000     Frw‘000       Frw‘000  Frw‘000      Frw‘000     Frw‘000        Frw‘000
     31 December 2006:

     Financial assets
     Cash and balances with Central Bank of
       Rwanda                                        -               -          -            -          -    5,257,865   5,257,865      5,257,865
     Deposits and advances to banks                  -               -          -            -          -    9,960,807   9,960,807      9,960,807
     Loans and advances to customers                 -               -          -    8,719,981          -            -   8,719,981      8,719,981
     Investment securities                           -               -          -            -          -    2,309,570   2,309,570      2,309,570

                                                     -               -          -    8,719,981          -   17,528,242 26,248,223      26,248,223

     Financial liabilities
     Deposits from banks                             -               -          -            -          -      890,907    890,907         890,907
     Deposits from customers                         -               -          -            -          -   30,355,688 30,355,688      30,355,688
     Other liabilities                               -               -          -            -          -    1,317,772 1,317,772        1,317,772

                                                     -               -          -            -          -   32,564,367 32,564,367      32,564,367




                                                                                                                                     Page 37
                                                                     2007               2006
                                                                  Frw ‘000           Frw ‘000
8.    INTEREST INCOME

      Arising from:
      Loans and advances to customers                            1,204,340           1,469,384
      Placements with other banks and financial institutions       740,712             455,380
      Government securities                                        254,897             435,889

                                                                 2,199,949           2,360,653

9.    INTEREST EXPENSE

      Arising from:
      Deposits from other banks                                     87,625             77,577
      Interest on customers' fixed deposits                        481,320            520,192
      Interest on customers' current and savings accounts          111,152             88,675

                                                                   680,097            686,444

10.
      (a) FEE AND COMMISSION INCOME

      Service fees                                                 583,747            997,678

      (b) FOREIGN EXCHANGE TRADING INCOME

      Trading Gains                                                678,922            756,042
      Translation Gains                                             22,083            (48,098)

                                                                   701,055            707,944
11.   OTHER OPERATING INCOME

      Gain on disposal of fixed assets                             172,441             23,919
      Other operating income                                       258,216            490,532

                                                                   430,657            514,451

12.   OPERATING EXPENSES

      Staff costs                                                1,108,601           1,034,718
      Depreciation & amortization                                  621,458             735,163
      Taxes & penalties                                            302,959                  -
      Other penalties                                               85,060                  -
      Management fees                                              160,065                  -
      Pre incorporation expenses                                    43,399                  -
      Technical fees                                                40,624                  -
      Restructuring costs                                          181,794
      Provision for losses on Rwanda Flora facility                      -             175,013
      Impairment of head office building                         1,080,000                   -
      Other operating expenses                                   1,333,924           1,517,446

                                                                 4,957,884           3,462,340

      The average number of employees engaged during the year, were 181 (2006 – 207). Included
      in salaries and employee benefits are contributions to the defined contribution plan for
      employees. During the year the Bank expensed Frw 30 million (2006 – Frw 32 million).
                                                                                        Page 38
                                                                        2007                 2006
                                                                     Frw '000             Frw '000
13.   INCOME TAX (CREDIT)/EXPENSE

      The tax (credit)/charge for the period comprises:

      Corporation tax at 30% (2006: 30%)
      Current tax                                                            -                  -
      Deferred tax credit                                             (329,420)           ( 50,177)

      Over provision in respect of prior years
      Deferred tax                                                     330,228             287,368
      Corporation tax                                                        -                   -

      Tax charge                                                           808             237,191

      The tax on the company’s profit differs from the theoretical amount using the basic tax rate as
      follows:
                                                                         2007                 2006
                                                                     Frw '000            Frw '000

      Accounting loss before tax                                    (2,636,545)           (296,580)

      Tax at applicable corporation tax rate of 30% (2006:30%)      ( 790,963)            ( 88,974)
      Prior year overprovision                                        330,228              287,368
      Tax effect of non deductible costs and non taxable income       459,927               38,797

                                                                           808             237,191

14.   CASH AND BALANCES WITH NATIONAL BANK OF RWANDA


      Cash on hand                                                   2,820,022           1,276,568
      Balances with National Bank of Rwanda                         11,628,874           3,981,297

                                                                    14,448,896           5,257,865

15.   INVESTMENT IN GOVERNMENT SECURITIES

      Treasury bills                                                 2,332,602                  -
      Development bond (SONEX)                                         954,917           1,628,322
      Rwandair Express Bond                                                  -             681,248

                                                                     3,287,519           2,309,570

      The development bond refers to two foreign denominated advances to SONEX that were
      consolidated and converted to a government bond in the 2000. The bond, which matures in
      September 2008, attracts interest at an annual rate of 14%. The repayment of principal and
      interest is fixed at Frw 955 million per annum and is due on 30 September of every year.

      The Bank’s investments in treasury bills and the development bond are classified as Available
      for Sale financial instruments and are carried at fair value.




                                                                                            Page 39
15.   INVESTMENT IN GOVERNMENT SECURITIES (Continued)

      Maturity analysis:                                           2007                2006
                                                                Frw '000            Frw '000

      Treasury bills - Available for sale
      Maturing within 30 days                                    605,896                    -
      Maturing within 60 days                                  1,726,706                    -

                                                               2,332,602                    -
      Development Bond - Available for sale
      Maturing within one year                                   954,917           1,471,711
      Maturing after one year                                          -             837,859

                                                                 954,917           2,309,570

                                                               3,287,519           2,309,570

16.   LOANS AND ADVANCES TO CUSTOMERS

      (a)   Maturity analysis of gross loans and advances
                                                                   2007                2006
                                                                Frw '000            Frw '000

            Repayable on demand                                4,347,040           2,521,709
            Less than two years                                3,340,193           3,348,301
            From two to five years                             2,318,901           3,830,722
            Over five years                                    4,025,187           3,563,083

            Total loans and advances                          14,031,321          13,263,815

            Less: Impairment losses on loans and advances    ( 5,443,780)         ( 4,543,834)

                                                               8,587,541           8,719,981

      (b)   Impairment losses on loans and advances

                                             Specific  Portfolio
            Provisions for non performing impairment impairment          2007          2006
            loans and advances                  losses     losses        Total         Total
                                            Frw '000   Frw '000       Frw '000      Frw '000

            At 1 January                        4,543,834         - 4,543,834 4,145,828
            Made during the year                2,863,625    92,035 2,955,660 1,581,912
            Written back in the year           (2,042,421)        - (2,042,421) (1,177,511)
            Reclassified from other provisions    175,022         -    175,022           -
            Written off during the year        ( 188,315)         - ( 188,315) (     6,395)

            At 31 December                     5,351,745     92,035   5,443,780    4,543,834




                                                                                      Page 40
16.   LOANS AND ADVANCES TO CUSTOMERS (Continued)
                                                                     2007               2,006
                                                                  Frw '000           Frw '000

           Provisions made during the year                        2,955,660          1,581,912
           Written off during the year                                  683            324,121
           Provisions written back in the year                   (2,042,421)        (1,177,511)

           Net charge to income statement                          913,922             728,522

17.   PLACEMENTS WITH OTHER BANKS

      Current accounts                                           4,144,958           7,210,491
      Fixed deposits                                             5,974,951           2,750,316

                                                                10,119,909           9,960,807

18.   UNQUOTED INVESTMENTS

      Cost
      Investment in SIMTEL                                          50,000              50,000

      Impairment losses
      At 1 January                                                  40,420                   -
      Made during the year                                           9,580              40,420

                                                                    50,000              40,420

      Balance at 31 December                                              -              9,580

      The investment in SIMTEL relates to the Bank’s equity contribution in an inter bank
      monetary company formed by local banks in Rwanda. The investment is unquoted and is
      stated at cost less impairment losses. The impairment loss represents the Bank’s share of
      SIMTEL’s net assets as at 31 December 2007.




                                                                                       Page 41
19.   PROPERTY AND EQUIPMENT

      2007:                 Freehold land Furniture        Motor Computer Work in
                            and buildings & Fittings      Vehicles equipment progress            Total
                                Frw ‘000   Frw ‘000      Frw ‘000   Frw ‘000 Frw ‘000         Frw ‘000
      Cost
      At 1 January 2007         6,447,699    1,222,550    325,118     1,238,327     2,008     9,235,702
      Additions                    13,110       28,977          -        19,996         -        62,083
      Impairment               (1,080,000)           -          -             -         -    (1,080,000)
      Disposals                ( 160,733)            -   ( 32,210)            -         -    ( 192,943)
      Transfer from work
       in progress                 2,008             -           -            -    (2,008)            -

      At 31 December 2007       5,222,084    1,251,527    292,908     1,258,323         -    8,024,842

      Depreciation
      At 1 January 2007          934,223      795,756     259,886      936,821          -    2,926,686
      Charge for the year        300,408      105,458      38,529      124,163          -      568,558
      Disposals                ( 70,685)            -    ( 30,085)           -          -    ( 100,770)

      At 31 December 2007       1,163,946     901,214     268,330     1,060,984         -    3,394,474

      Net book value
      At 31 December 2007       4,058,138     350,313      24,578      197,339          -    4,630,368

      2006:

      Cost
      At 1 January 2006        6,433,059     1,189,533    387,999     1,102,967   397,193     9,510,751
      Additions                   14,640        33,017      18,559       90,830     7,985       165,031
      Disposals                        -             -    ( 81,440)           -         -    ( 81,440)
      Transfer to computer
      equipment and intangible
      assets                           -             -           -      44,530 (403,170) ( 358,640)

      At 31 December 2006       6,447,699    1,222,550    325,118     1,238,327     2,008    9,235,702

      Depreciation
      At 1 January 2006          609,531      670,493     247,242      774,853          -     2,302,119
      Charge for the year        324,692      125,263      67,834      161,968          -       679,757
      Disposal                         -            -    ( 55,190)           -          -    ( 55,190)

      At 31 December 2006        934,223      795,756     259,886      936,821          -    2,926,686

      Net book values
      At 31 December 2006       5,513,476     426,794      65,232      301,506      2,008    6,309,016

      Freehold land and building were revalued by several professional valuers prior to the
      acquisition of the Bank - KS Construction, Knight Frank (Kenya) and Société d’Etudes et
      d’Exécution des Projets (SEPRO s.a.r.l). The book values were adjusted to revaluation based
      on the average valuation of the three professional valuers and the resulting deficit was
      recognised in the income statement.




                                                                                               Page 42
20.   INTANGIBLE ASSETS
                                                                          2007              2006
                                                                       Frw '000          Frw '000
      Cost
      At 1 January 2007                                                 548,626            180,054
      Additions                                                           4,655              9,932
      Transfer from work in progress                                          -            358,640

      At 31 December 2007                                               553,281            548,626

      Amortisation
      At 1 January 2007                                                 133,094             77,688
      Charge for the year                                                52,901             55,406

      At 31 December 2007                                               185,995            133,094

      Net book value
      At 31 December 2007                                               367,286            415,532

21.   DEFERRED TAX ASSET

      The net deferred tax assets at 31 December 2007 and 2006 are attributed to the following:

                                                      Recognised
      2007:                            Balance at        through       Recognised        Balance at
                                         01.10.07       Reserves        in income          31.12.07
                                        Frw '000        Frw '000         Frw '000         Frw '000

      Property and equipment            ( 62,707)               -        ( 42,695)         (105,402)
      Tax losses carried forward         630,248                -         122,361           752,609
      Impairment of SIMTEL                12,126                -        ( 12,126)                -
      Impairment losses on loans             -                  -        ( 78,307)         ( 78,307)
      Accrued leave provision              5,774                -           9,959            15,733
      Fair value reserve                       -          (29,677)              -         ( 29,677)

                                         585,441          (29,677)          ( 808)         554,956

                                             Balance as at           Recognised        Balance at
      2006:                                       1.1.2006            in income        31.12.2006
                                                 Frw ‘000              Frw ‘000         Frw ‘000

      Property and equipment                              -            ( 62,707)          ( 62,707)
      Tax losses carried forward                    433,270             196,978            630,248
      General provisions                            375,972            (375,972)                  -
      Impairment of SIMTEL                                -              12,126             12,126
      Accrued leave provision                        13,390            ( 7,616)              5,774

                                                    822,632            (237,191)           585,441




                                                                                           Page 43
                                                                       2007                2006
                                                                    Frw '000            Frw '000
22.   OTHER ASSETS

      Prepayments                                                      55,246             33,686
      Stocks                                                           41,173             70,571
      Sundry debtors                                                  316,980             81,506
      Cheques in clearing                                           2,109,052            101,729

                                                                    2,522,451            287,492

23.   DEPOSITS AND BALANCES FROM OTHER
      BANKS AND FINANCIAL INSTITUTIONS

      Demand deposits                                                792,925             390,907
      Term deposits                                                  500,000             500,000

                                                                    1,292,925            890,907

24.   CUSTOMER DEPOSITS

      Demand deposits                                             27,290,966          21,865,842
      Term deposits                                                6,631,530           6,592,384
      Other customer liabilities                                   1,061,357           1,897,462

                                                                  34,983,853          30,355,688

25.   AMOUNTS DUE TO THE RWANDA REVENUE AUTHORITY

      Amounts due to Rwanda Revenue Authority                       2,521,368           1,317,772

      These amounts relate to income taxes and value added taxes collected by the Bank on behalf of
      Rwanda Revenue Authority pursuant to the agreement entered into between the two parties.
      The taxes collected are repayable to Rwanda Revenue Authority two days after collection.

26.   OTHER LIABILITIES
                                                                       2007                2006
                                                                    Frw '000            Frw '000

      Accruals                                                       441,811              93,799
      Inter branch balances                                          381,246             173,421
      Inter affiliate balances                                       221,337                   -
      Provision for taxes & penalties                                302,957                   -
      Provision for losses on Rwanda Flora facility                        -             175,013
      Cheques in clearing                                            107,766             465,513
      Other liabilities                                               92,482              76,133

                                                                    1,547,599            983,879




                                                                                          Page 44
27.   SHARE CAPITAL AND RESERVE

      (a)   Share capital                                                 2007                  2006
                                                                       Frw '000              Frw '000
            Authorised, issued and fully paid share capital:

            39,150 (2006: 108,696) ordinary shares
             of Frw 100,000 each (2006: Frw 23,000)                    3,915,000            2,500,008

            In June 2007, the bank was acquired by Ecobank Transnational Incorporated, who took
            up 90% of the paid up share capital with the balance going to minority shareholders.
            The directors approved off set of the existing share capital at 30 June 2007 against the
            accumulated losses with a view to enhancing the capital structure of the bank. The
            capital injected by Ecobank Transnational Incorporated was allotted to all shareholders
            based on existing shareholding.

      (b)   Statutory reserves

            According to article 220 of the Law Governing Commercial Enterprises in Rwanda
            companies are required to transfer 5% of their profit after tax to a statutory reserve. The
            obligation ceases when the enterprise’s reserves are equivalent to 10% of its share
            capital. No transfers were made during the year as the Bank made a net loss after tax.

      (c)   Special reserves

            Previously, companies were required to transfer 20% of their profit after tax to a special
            reserve (taxation reserve), according to Article 65 of Law 9/97 on the code of fiscal
            procedures. The obligation would cease when the reserves were equivalent to 10% of
            the Bank’s depreciable assets.

            However, the Law 9/97 on the code of fiscal procedures was repealed following the
            adoption of Law No. 25/2005 of 4 December 2005 on tax procedures that came into
            force on 1 January 2006. Following the repeal of Law 9/97 on the code of fiscal
            procedures in 2006 no transfers were made out of special reserves to revenue reserves
            during the year.

      (d)   Fair value reserves

            Fair value reserves relates to gains and losses arising from changes in fair value of
            available for sale financial assets net of deferred tax.

      (e)   Other reserves

            At the time of the take over of BCDI by Ecobank, the agreed share capital of the Bank
            was Frw 3.19 billion. However, Ecobank injected Frw 6.4 billion with the view of
            recapitalising the Bank and covering the accumulated losses. The Frw 2.5 billion in
            excess of the share capital was set aside as other reserves.

      (f)   Statutory credit risk reserves

            Where impairment losses required by legislator or regulations exceed those computed
            under International Financial Reporting Standards (IFRSs), the excess is recognised as
            a statutory credit risk reserve and accounted for as an appropriation of retained
            earnings. These reserves are not distributable.


                                                                                               Page 45
28.   NOTES TO THE CASH FLOW STATEMENT

      (a)   Reconciliation of loss before tax
            to cash flows from operating activities
                                                                           2007             2006
                                                                        Frw '000         Frw '000
            Cashflows from operating activities
            Loss before taxation                                       (2,636,545)       ( 296,580)
            Adjustments for:
            Depreciation                                                  568,558      679,757
            Amortisation of intangible assets                              52,901       55,406
            Impairment losses on SIMTEL                                     9,580       40,420
            Impairment losses on property and equipment                 1,080,000            -
            Gain on disposal of fixed assets                           ( 172,441)    ( 23,919)

            Operating profit before changes in
            operating assets and liabilities                           (1,097,947)        455,084

            Changes in operating assets and liabilities
            Loans and advances to customers                               132,440     4,025,230
            Other assets                                               (2,234,959)      580,903
            Amounts due to Rwanda Revenue Authority                     1,203,596    ( 647,598)
            Customer deposits                                           4,628,165    ( (785,135)
            Other liabilities                                             563,720    (2,728,060)

            Cash generated from operations                              3,195,015         900,424

            Tax utilised in the year                                            -           45,511
            Income tax paid                                                     -    (      72,571)

            Net cash generated from operating activities                3,195,015         873,364

      (b)   Analysis of the balance of cash and cash equivalents
                                                                                         Change
                                                     2007                  2006      in the year
                                                  Frw '000              Frw '000       Frw '000

            Cash and Central bank balances      14,448,896              5,257,865        9,191,031
            Placements with other banks
             and financial institutions         10,119,909              9,960,807          159,102
            Treasury bills                       2,321,413                      -        2,321,413
            Deposits from other banks
             and other financial institutions   ( 1,292,925)       (     890,907)    (    402,018)

                                                25,597,293             14,327,765    11,269,528




                                                                                           Page 46
29.   CONTINGENT LIABILITIES

      (a)   Letters of credit, guarantees and acceptances

            In the ordinary course of business, the Bank conducts business involving guarantees,
            acceptances and letters of credit. These facilities are offset by corresponding obligations
            of third parties. At year end, the contingencies were as follows:

                                                                          2007                 2006
                                                                       Frw '000             Frw '000

            Letters of credit                                          2,847,135              474,545
            Guarantees                                                 2,449,264              599,150

                                                                       5,296,399            1,073,695

            Letters of credit commit the Bank to make payments to third parties, on production of
            documents, which are subsequently reimbursed by customers.

            Guarantees are generally written by the Bank to support performance by a customer to
            third parties. The bank will only be required to meet these obligations in the event of
            the customer’s default.

            Due to the inherent nature of the transactions entered into with customers, it is not
            practicable to estimate with reasonable certainty the amounts that will crystallize, if
            any, in foreseeable future.

      (b)   Legal proceedings

            The Bank is a defendant in a number of litigations and claims for which the Directors
            believe based on the information currently available, that the claims can be successfully
            defended and therefore no provision has been made in the financial statements.

30.   COMMITMENTS
                                                                          2007                 2006
                                                                       Frw '000             Frw '000

      Authorised and contracted for                                            -                    -
      Loans committed but not disbursed at year end                       30,459              381,561

                                                                          30,459              381,561




                                                                                              Page 47
31.   RELATED PARTY TRANSACTIONS

      In the ordinary course of business, transactions are entered into with Ecobank Transnational
      Incorporated, the ultimate holding company and other affiliates related to Ecobank Rwanda
      S.A through common shareholding. These transactions are at arm's length.

      The parent company also provides technical support and consultancy services which are
      charged at market rates.

      Included in loans and advances to customers are the following amounts:

      (a)   Loans to related parties

            The balances of gross loans and advances to shareholders, their associated companies,
            directors and employees include:

                                                                       2007                2006
                                                                    Frw ‘000            Frw ‘000

            Shareholders, directors and associates                  2,631,051          1,901,295
            Employees                                                 366,459            406,688

                                                                    2,997,510          2,307,983

      (b)   Deposits from related parties

            Shareholders, directors and associates                  1,947,557          3,727,108

      (c)   Directors remuneration

            The members of the Board of Directors are listed on page 2 of the Directors’ Report.
            The total remuneration of the Directors during the year amounted to Frw 34 million
            (2006 - Frw 52 million).

      (d)   Inter-company balances

            As at 31 December 2007, intercompany balances were as follows:

                                                                       2007                2006
                                                                    Frw ‘000            Frw ‘000

            Ecobank Transnational Incorporated                       136,432                    -
            Eprocess                                                  56,458                    -
            Ecobank Ivory Coast                                       17,518                    -
            Ecobank Ghana                                              6,969                    -
            Ecobank Chad                                               3,529                    -
            Ecobank Senegal                                              431                    -

                                                                     221,337                    -




                                                                                          Page 48

								
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