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Financial Statements | 2008 Annual Report 27 08 section Directors’ Report For the year ended 31 December 2008 The directors have pleasure in presenting their annual report on the affairs of Citibank Nigeria Limited (“the Bank”), together with the financial statements and auditors’ report for the year ended 31 December 2008. Legal Form and Principal Activity The Bank is a limited liability company. The principal activity of the Bank continues to be the provision of banking services in all its ramifications to corporate and individual customers. Operating Results Highlights of the Bank’s operating results are as follows: 2008 2007 N’000 N’000 Gross earnings 20,069,477 17,344,949 Interest expense (2,810,030) (2,096,096) Net revenue 17,259,447 15,248,853 Operating expenses (6,018,732) (6,206,721) (443,279) (628,721) Profit before taxation 10,797,436 8,413,411 Taxation (2,267,953) (1,467,313) Provisions on risk assets , (net) Profit after taxation 8,529,483 6,946,098 Transfer to statutory reserve (1,279,422) (1,041,915) Transfer to general reserve (7,250,061) (5,904,183) - - Retained earnings for the year Dividend The board recommends for the approval of the shareholders the payment of a dividend of 2008 Annual Report | Financial Statements | N7,124,131,933.95 (N2.55k per share) from the outstanding balance in the general reserve 28 account as at 31 December 2008. The dividends are subject to deduction of withholding tax. Directors and their Interests The following directors of the Bank held office during the year and had interests in the shares of the Bank as noted: Number Ordinary shares of N1 2008 2007 Chief C. S. Sankey – Chairman 36,344,299 36,344,299 Mr. Emeka Emuwa – Managing Director - - Ms. Funmi Ade-Ajayi – Executive Director - - Mr. Munir S. Nanji (British) – Executive Director - - Mrs. Remi Odunlami – Executive Director - - Mr. Eddy Ogbogu – Executive Director - - Chief E. J. Amana 20,461,831 20,461,831 Mr. Ade Ayeyemi - - Alhaji M. H. Koguna 6,295,280 6,295,280 Professor I. O. Oladapo 13,523,757 13,523,757 Mr. Khalid Qurashi (British) - - Mr. Zdenek Turek (Czech Rep) – resigned 31 December, 2008 - - The directors to retire by rotation at the next Annual General Meeting are Professor I.O. Oladapo and Chief E.J. Amana who, being eligible, offer themselves for re-election. Since the last Annual General Meeting, Mr. Naveed Riaz was appointed to the Board to replace Mr. Zdenek Turek. In addition, Chief Arthur Mbanefo and Professor Yemi Osinbajo S.A.N were appointed to the board as independent directors in line with the requirements of the Central Bank of Nigeria’s code of corporate governance for banks. All these appointments are with effect from 1 January 2009. In accordance with the Companies and Allied Matters Act, Mr. Riaz, Chief Mbanefo and Professor Osinbajo, will retire and offer themselves for re-election. Subsequent to the Bank’s year end, Mrs. Remi Odunlami and Mr. Eddy Ogbogu resigned from the Board. cial position of the Bank and which ensure that the financial statements comply with the | Financial Statements | 2008 Annual Report Statement of Directors’ Responsibilities in Relation to the Financial Statements for requirements of the Companies and Allied Matters Act, 1990 and Banks and Other Financial 29 the year ended 31 December 2008 In accordance with the provisions of Sections 334 and 335 of the Companies and Allied Matters Act 1990, and Sections 24 and 28 of the Banks and Other Financial Institutions Act 1991, the Directors are responsible for the preparation of annual financial statements which give a true and fair view of the state of affairs of the Bank and the profit for the financial year. The responsibilities include ensuring that: a) Appropriate internal controls are established both to safeguard the assets of the Bank and to prevent and detect fraud and other irregularities. b) The Bank keeps accounting records which disclose with reasonable accuracy the finan- Institutions Act 1991. c) The Bank has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed. d) The financial statements are prepared on a going concern basis unless it is presumed that the Bank will not continue in business. Fixed Assets Information relating to changes in the tangible fixed assets of the Bank is given in Note (8) to the financial statements. Charitable Contributions and Other Donations In order to identify with the aspirations of the community and the environment within which we operate, a total sum of N9,600,000 (2007: N7,500,000) was given out as donations and charitable contributions during the financial year. Details of these donations and charitable contributions are as follows: 2008 Annual Report | Financial Statements | N 30 Modupe Cole Memorial Child Care 500,000 Breast Without Spot 500,000 Children Emergency Relief Fund 500,000 Bethseda Child Support Agency 500,000 Nigerian Red Cross 400,000 Sickle Cell Club, Lagos 400,000 SOS Children’s Village, Lagos 400,000 Pacelli School for the Blind 400,000 Atunda Olu School For Physically Handicapped Children 400,000 National Orthopedic Special School, Igbobi 400,000 Child Life Line, Yaba & Ikorodu, Lagos 400,000 Cheshire Home, Borokiri, Port Harcourt. 400,000 Motherless Babies Home, Borokiri, Port Harcourt 400,000 Rosalie Home for Destitutes, Eleme, Port Harcourt 400,000 The Child (For Mentally Retarded Children) Port Harcourt 400,000 Compassion Home for the Physically Handicapped Children, Port Harcourt 400,000 Wesley School 1 for Deaf Children 300,000 Wesley School 2 for Deaf Children 300,000 Arrows of God Orphanage 300,000 Right Steps Incorporated, Aba 250,000 Ngwa Road Motherless Babies Home, Aba 250,000 Seventh-Day Adventist Motherless Babies Home, Aba 250,000 Motherless Babies Home, Kuje, Abuja 250,000 Motherless Babies Home, Nyanya, Abuja 250,000 Medical Missionaries of Mary, Hospital, Lugbe 250,000 St. Anne’s Orphanage, Warri 200,000 Our Lady of Mercy Orphanage, Warri 200,000 TOTAL 9,600,000 During the year the Bank did not make any donation to other non-political organizations (2007: nil). Health and Safety at Work The Bank’s employees are adequately insured against occupational hazards. In addition, medical facilities are provided to employees and their immediate families at the Bank’s expense. Employment of Disabled Persons The Bank has a non-discriminatory policy on recruitment. Applications would always be welcomed from suitably qualified disabled persons and are reviewed strictly on qualification. The Bank’s recruitment policy is that the highest qualified persons are recruited irrespective of physical condition, sex, state of origin, ethnicity and religion. The policy is non-discriminatory and welcomes applications from qualified disabled persons. During the year under review, the Bank did not employ any disabled persons. Employee Consultation and Training The Bank places a high premium on consultation with employees on matters affecting them. Formal and informal channels of communication are employed in keeping staff abreast of various factors affecting them and the performance of the Bank. The Bank draws extensively on Citigroup’s training programs offered around the world. The programs include on the job training, classroom sessions and web-based training programs which are available to all staff. Auditors KPMG Professional Services have indicated their willingness to continue in office as auditors in accordance with Section 357(2) of the Companies and Allied Matters Act, 1990. 27, Kofo Abayomi Street BY ORDER OF THE BOARD Lagos 25 March 2009 Olusola Fagbure Company Secretary | Financial Statements | 2008 Annual Report Victoria Island 31 2008 Corporate Governance Report Citibank Nigeria Limited is committed to ensuring the implementation of good corporate governance principles in all its activities. Citibank Nigeria adheres to Citigroup corporate governance principles and to the provisions of the Central Bank of Nigeria Code on Corporate Governance for Banks in Nigeria – Post Consolidation (‘the Code’). The Board of Directors The Board of Directors consists of twelve members comprising the Chairman, the Managing Director, six Non-Executive Directors and four Executive Directors. In line with the requirements of the Code, two independent directors were appointed with effect from 1 January 2009. The Directors and their shareholdings are listed in the Directors’ report. The Board is responsible for the oversight of executive management, ensuring that the Bank’s operations are conducted in accordance with legal and regulatory requirements, approving and reviewing corporate strategy and performance, and for ensuring that the rights of the shareholders are protected at all times. The members of the Board possess the necessary experience and expertise to exercise their oversight functions. In accordance with the provisions of the Code, the office and responsibilities of the Chairman and the Managing Director/Chief Executive are separate. The Board meets quarterly and additional meetings are convened as required. In 2008 the Board met five times. The Board has delegated some of its responsibilities to the following standing board committees: Risk Management Committee, Audit Committee and the Credit Committee. Each of these committees reports to the board on its activities. The Chairman of the Board is not a member of any of the board committees. Board Committees a) Risk Management Committee The Risk Management Committee consists of five directors, two of whom, including the Chairman of the Committee, are Non – Executive Directors. The Committee is responsible for overseeing the Bank’s Risk Management policies and procedures in the areas of franchise, operational, credit and market risk. The Committee meets quarterly and met four 2008 Annual Report | Financial Statements | times during the year. 32 b) Credit Committee The Credit Committee consists of five directors, three of whom, including the Chairman of the committee, are Non – Executive Directors. The Committee is responsible for approving credits above such limits as may be prescribed by the Board of Directors from time to time. The Committee meets quarterly and met four times during the year. c) Audit Committee The Audit Committee consists of two shareholders and two non-executive directors. The Chairman of the Committee is a shareholder. The Committee’s responsibilities include the review of the integrity of the Bank’s financial reporting, oversight of the independence and objectivity of the external auditors, the review of the reports of external auditors and regulatory agencies and management responses thereto, and the review of the effectiveness of the Bank’s system of accounting and internal control. During the year the Committee approved the external auditors’ terms of engagement and scope of work and also reviewed the internal auditors’ audit plan. The Committee received regular internal audit reports from the Bank’s internal auditor. Members of the Committee have unrestricted access to the Bank’s external auditors. The Committee meets quarterly and met four times during the year. General Meetings The Annual General Meeting was held on 6 May, 2008. A quorum of shareholders was present at the meeting. Risk and Controls In line with Citigroup policies, the Bank maintains a strong control environment. The internal control system is designed to achieve efficiency and effectiveness of operations; reliability of financial reporting and compliance with applicable laws and regulations at all levels of the Bank as required by the Code. Robust risk management policies and mechanisms have been put in place to ensure identification of risk and effective control. The Board Risk Management Committee oversees the Bank’s risk management policies. | Financial Statements | 2008 Annual Report 33  KPMG Professional Services Telephone 234 (1) 271 8955 22a Gerrard Road, Ikoyi Fax 234 (1) 462 0704 PMB 40014, Falomo Internet www.ng.kpmg.com Lagos, Nigeria INDEPENDENT AUDITOR’S REPORT To the Members of Citibank Nigeria Limited Report on the Financial Statements We have audited the accompanying financial statements of Citibank Nigeria Limited, which comprise the balance sheet as at 31 December, 2008, and the profit and loss account, statement of cash flows and value added statement for the year then ended, and the statement of accounting policies, notes to the financial statements and the five year financial summary, as set out on pages 36 to 63. Directors’ Responsibility for the Financial Statements The directors’ are responsible for the preparation and fair presentation of these financial statements in accordance with Statements of Accounting Standards applicable in Nigeria and in the manner required by the Companies and Allied Matters Act of Nigeria, the Banks and Other Financial Institutions Act of Nigeria, and relevant Central Bank of Nigeria circulars. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of 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. Auditor’s Responsiblity Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial 2008 Annual Report | Financial Statements | statements are free from material misstatement. 34 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Citibank Nigeria Limited as at 31 December, 2008, and of its financial performance and cash flows for the year then ended in accordance with Statements of Accounting Standards applicable in Nigeria and in the manner required by the Companies and Allied Matters Act of Nigeria, Banks and Other Financial Institutions Act of Nigeria, and relevant Central Bank of Nigeria circulars. Report on Other Legal and Regulatory Requirements Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act of Nigeria In our opinion, proper books of account have been kept by the Bank, so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us. Additionally, the Bank’s balance sheet and profit and loss account are in agreement with the books of accounts and returns. Compliance with Section 27 (2) of the Banks and Other Financial Institutions Act of Nigeria and Central Bank of Nigeria circular BSD/1/2004 i. The Bank paid penalties in respect of contraventions of the Banks and Other Financial Institutions Act during the year ended 31 December 2008. Details of these contraventions and penalties paid are as disclosed in note 29 to the financial statements. ii. R  elated party transactions and balances are disclosed in note 28 of the financial statements in compliance with the Central Bank of Nigeria circular BSD/1/2004. 25 March 2009 Lagos, Nigeria | Financial Statements | 2008 Annual Report 35 Balance Sheet As at 31 December 2008 Notes 2008 2007 N’000 N’000 ASSETS: Cash and short-term funds 1 67,136,065 45,437,112 Short-term investments 2 13,886,154 24,117,679 Loans and advances 3 58,302,699 42,386,004 Other facilities 4 330,784 560,936 Advances under finance lease 5 76,532 97,246 Other assets 6 917,167 4,033,018 Long-term investments 7 13,366,468 15,600,006 Fixed assets 8 3,511,277 3,646,988 157,527,146 135,878,989 TOTAL ASSETS LIABILITIES: Deposits and other accounts 9 97,635,454 79,134,721 Other facilities 10 334,125 566,602 Other liabilities 11 17,809,328 18,570,906 Provisions 12 292,655 331,325 Taxation payable 13 3,543,263 1,813,365 Deferred taxation 14 217,962 430,262 TOTAL LIABILITIES 119,832,787 100,847,181 NET ASSETS 37,694,359 35,031,808 CAPITAL AND RESERVES: Share capital 15 2,793,777 2,793,777 Share premium 16 11,643,995 11,643,995 Reserves 17 SHAREHOLDERS’ FUNDS 23,256,587 20,594,036 37,694,359 35,031,808 2008 Annual Report | Financial Statements | 36 Acceptances, bonds, guarantees and other obligations for the account of customers 18 95,585,572 58,856,226 SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: Chief C.S. Sankey Mr. Emeka Emuwa Chairman Managing Director Approved by the Board of Directors on 25 March 2009. The statement of accounting policies and accompanying notes form an integral part of these balance sheets. Profit and Loss Account For the year ended 31 December 2008 Notes 2008 2007 N’000 N’000 GROSS EARNINGS 20,069,477 17,344,949 20 12,988,415 11,668,408 LEASE FINANCE INCOME 10,368 12,444 (2,810,030) (2,096,096) 10,188,753 9,584,756 (443,279) (628,721) INTEREST AND DISCOUNT INCOME INTEREST EXPENSE 21 INTEREST MARGIN Provisions on risk assets (net) 3 9,745,474 8,956,035 Other income 22 7,070,694 5,664,097 16,816,168 14,620,132 (6,206,721) Operating expenses 23 (6,018,732) PROFIT BEFORE TAXATION 23 10,797,436 8,413,411 13 (2,267,953) (1,467,313) 8,529,483 6,946,098 Taxation PROFIT AFTER TAXATION APPROPRIATIONS: Transfer to statutory reserve 17 1,279,422 1,041,915 Transfer to general reserve 17 7,250,061 5,904,183 8,529,483 6,946,098 305k 249k Earnings per share 24 The board of directors recommends for the approval of the shareholders the payment of a dividend of N7,124,131,933.95 (N2.55k per share) from the outstanding balance in the general reserve account as at 31 December 2008, subject to the approval of the shareholders at the next annual general meeting. The statement of accounting policies and accompanying notes form an integral part of these profit and loss accounts. | Financial Statements | 2008 Annual Report 37 Statement of Cash Flows For the year ended 31 December 2008 Notes 2008 2007 N’000 N’000 Operating Activities: Net cash flow from operating activities before changes in operating assets 25 11,981,919 9,206,944 Changes in operating assets 26 14,794,795 14,686,176 Income tax paid 13 (750,355) (2,664,113) 26,026,359 21,229,007 Net cash flow from operating activities Investing Activities: Purchase of fixed assets 8 (629,272) (493,867) Work in-progress on head office project - (885,490) Purchase of long-term investments (356,807) (6,849,674) Proceeds from sale of long-term investments 2,422,652 - 22 11,266 33,016 Proceeds from sale of fixed assets 91,687 89,739 Net cash flow from investing activities 1,539,526 (8,106,276) Dividend income Financing Activities: Dividend paid 17 (5,866,932) (5,727,243) Net cash flow from financing activities (5,866,932) (5,727,243) Net increase in cash and short-term funds 21,698,953 7,395,488 45,437,112 38,041,624 Cash and short-term funds, beginning of year Cash and short-term funds, end of year 1 67,136,065 The statement of accounting policies and accompanying notes form an integral part of 2008 Annual Report | Financial Statements | these statements of cash flows. 38 45,437,112 Statement of Accounting Policies A summary of the principal accounting policies, applied consistently throughout the current and prior year, is set out below. (a) Basis of accounting The financial statements are prepared under the historical cost convention. (b) Cash and short-term funds Cash and short-term funds comprise cash balances on hand, cash deposited with the Central Bank of Nigeria, cash deposited with other banks (local and foreign) other than the Central Bank, placements with local and foreign banks, which are subject to insignificant risk of changes in their carrying value. (c) Investments Investments are classified as either short-term or long-term. Investments with an outstanding tenor to maturity not exceeding one year and investments held-for-trading are classified as short-term investments while the others are classified as long-term investments. Short-term investments comprise investments in bonds and treasury bills issued by the Federal Government of Nigeria and are carried at net realizable value. Gains or losses resulting from market valuation are recognised in the profit and loss account. The original cost is disclosed. Treasury bills not held for trading are presented net of unearned discount. Unearned discount is deferred and amortised as earned. Unearned discount is not recognised on treasury bills held for trading. Interest earned while holding short term securities is reported as interest income. Long-term investments comprise of investment in marketable securities and unquoted securities. Investments in marketable securities are carried at the lower of cost and net realisable value. The market value of quoted securities is disclosed. Investments in unquoted securities are carried at cost. Provisions are made for permanent diminution in the value of such investments. Income earned as dividend on equity securities held as long-term investments is reported as other income, while interest earned on bonds is reported as interest income. 90 days but less than 180 days 10 180 days but less than 360 days 50 | Financial Statements | 2008 Annual Report Any discount or premium arising on acquisition of bonds is included in the original cost 100 39 of the investment and is amortised over the period of purchase to maturity. (d) Loans and advances Loans and advances are financial assets with fixed or determinable payments. Loans and advances are stated net of provision for bad and doubtful debts. The provision is determined by a specific assessment of each customer’s account in accordance with the Central Bank of Nigeria’s (CBN) circular on Prudential Guidelines for licensed banks as follows: Number of days outstanding of principal/interest Required provision % Over 360 days A minimum of 1% general provision is made on all loans and advances, which have not been specifically provided for, in line with the Prudential Guidelines. Bad debts are written off when it is determined that they are uncollectible. (e) Advances under finance lease Advances under finance lease are stated net of unearned lease finance income. Lease finance income is recognised in a manner, which provides a constant yield on the outstanding net investment over the lease period. In accordance with the Prudential Guidelines for licensed banks, a minimum of 1% general provision is made on the aggregate net investment in finance lease. Specific provision is made on lease rentals that are doubtful of collection in line with CBN Prudential Guidelines for licensed banks and the Bank’s standard policy on loans. (f) Fixed assets • Fixed assets are stated at cost less accumulated depreciation. • Subsequent costs incurred in replacing part of an item of property or equipment are recognized in the carrying amount if it is probable that the future economic benefits embodied within the part will flow to the Bank. The costs of the day to day servicing of fixed assets are recognized in the profit and loss account as incurred. • Depreciation is provided on a straight-line basis at rates calculated to write off the cost of each asset over its estimated useful life. Land is not depreciated. Depreciation was charged at the following annual rates: Leasehold improvements Over the lease period Building Furniture and equipment Computers and computer equipment Motor vehicles • Capital work-in-progress is not depreciated. Upon completion the attributable cost of each asset is transferred to the relevant asset category. 2008 Annual Report | Financial Statements | • Gains or losses on the disposal of fixed assets are included in the profit and loss ac- 40 count. (g) Deposit liabilities Deposit liabilities are the Bank’s sources of debt funding. Deposit liabilities are carried at cost. (h) Provisions A provision is recognized if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. (i) Taxation • Income tax payable is provided on taxable profits at the current tax rate. • Income tax expense comprises current and deferred tax and is recognized in the profit 2% 20% 33 1/3% 25% and loss account. (j) Deferred taxation Deferred taxation, which arises from temporary timing differences in the recognition of items for accounting and tax purposes, is calculated using the liability method. Deferred tax is provided on timing differences, which are expected to reverse in the foreseeable future at the rates of tax likely to be in force at the time of reversal. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the associated unutilized tax losses and deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (k) Off balance sheet transactions Transactions to which there are no direct balance sheet risks to the Bank are reported and accounted for as off balance sheet transactions and comprise: Acceptance/direct credit substitutes: Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be settled simultaneously with the reimbursement from customers. Acceptances, which meet the conditions, set out in Central Bank of Nigeria (CBN) Guidelines on the treatment of Bankers Acceptances and Commercial Papers are accounted for and disclosed as contingent liabilities. The income and expense relating to these acceptances are reported net in the financial statements. Guarantees and performance bonds: The Bank provides financial guarantees and bonds to third parties on the request of customers in form of bid and performance bonds or advance payment guarantees. These agreements have fixed limits and generally do not extend beyond the period stated in each contract. The amounts reflected in the financial statements for bonds and guarantees represent the maximum accounting loss that would be recognized at the balance sheet dates if coun- Transaction-related contingencies: Transaction related contingencies comprise letters of credit and commitments to deliver on sales and/or purchase of foreign exchange in the future. (i) Letters of credit The Bank provides letters of credit to guarantee the performance of customers to third parties. Confirmed letters of credit for which the customer has not provided cash cover are reported off balance sheet. (ii) Commitments to deliver on sales or purchase of foreign exchange in the future: Commitments to deliver on sales and/or purchases of foreign exchange transactions in future at contracted rates are recognized as contingent liabilities. Foreign exchange commitments are converted at contracted rates at the balance sheet date. | Financial Statements | 2008 Annual Report terparties failed completely to perform as contracted. 41 (l) Income recognition Income in the profit and loss account is recognized as follows: • Interest is accrued monthly on all interest-bearing assets. Risk assets are classified as non-performing when they are overdue for more than 90 days. Interest income arising therefrom is recognised only to the extent that cash is received. The income and expense relating to acceptances disclosed as contingent liabilities are reported net in the financial statements. • Credit-related fee income is systematically spread over the life of the credit facility. • Commissions and fees charged to customers for services rendered are recognised at the time the service or transaction is affected, except for commissions earned on letters of credit transactions, which are amortised over the life of the letters of credit. Commissions and fees charged to customers for services rendered in respect of bonds and guarantees are recognized over the life of such bonds and guarantees. • Dividend income is recognized in profit and loss when the Bank becomes entitled to the dividend. • Recoveries of previously written-off loans and advances are written back to profit and loss account on a cash basis. (m) Foreign currency items Transactions in foreign currencies are converted into Naira at the rates of exchange ruling at the date of each transaction (or where appropriate the rate of the related forward contracts). Monetary assets and liabilities denominated in foreign currencies are reported at the rates of exchange prevailing at the balance sheet date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in the profit and loss account. (n) Pension scheme The Bank operates a defined contributory pension scheme. The scheme is fully funded and is managed by licensed Pension Fund Administrators. Membership of the scheme is automatic upon commencement of duties at the Bank. The employee and the Bank contribute 7.5% 2008 Annual Report | Financial Statements | each of the employee’s annual basic salary as well as housing and transport allowances to 42 the scheme. The Bank’s contributions to this scheme are charged to profit and loss account in the period to which they relate. (o) Earnings per share Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the year. (q) Segment reporting The Bank defines a segment as a distinct or distinguishable unit of the Bank that is engaged in providing financial products or services subject to risks and rewards that are different from those of other segments. The Bank’s primary format for segment reporting is based on business segments. The Bank currently operates in one geographical segment, which is Nigeria and, as such, does not have a secondary segment reporting format. Notes to the Financial Statements For the year ended 31 December 2008 1. Cash and short-term funds (a) Cash and short-term funds comprise: 2008 Cash and foreign monies 2007 N’000 N’000 1,441,312 1,851,340 Balances held with Central Bank of Nigeria: – Current accounts – Restricted balance (see (b) below) – Cash reserve (see (c) below) 13,015,939 7,492,029 784,725 784,725 1,220,324 2,091,498 Balances held with other banks and cheques in course of collection: In Nigeria: – Current accounts – Secured placements (see (d) below) – Unsecured placements 659,529 819,732 2,000,000 14,000,000 10,000,000 1,750,000 Outside Nigeria: – Current accounts – Placements held on account of customers’ obligations (see (e) below) 29,738,899 9,085,232 8,275,337 7,562,556 67,136,065 45,437,112 (b) This represents restricted funds held by the Central Bank of Nigeria in respect of investment in SMEEIS not yet undertaken by the Bank. (c) In line with the current CBN policy on cash reserve, this represents 2% of two weeks average daily balances of deposit liabilities (2007: 3%). (d) This represents placements that have been secured with FGN bonds. to cover letter of credit transactions. The corresponding liability for this amount is included in other liabilities (see Note 11). 2. Short term investments: (a) These comprise: 2008 2007 N’000 N’000 Treasury bills – trading 1,489,521 3,415,277 FGN bonds – trading 1,142,989 1,836,074 6,889,282 16,199,781 Treasury bills – others (see (b) below) FGN bonds – others 4,364,362 2,666,547 13,886,154 24,117,679 | Financial Statements | 2008 Annual Report (e) This represents the Naira value of foreign currencies held on behalf of customers 43 (b) Treasury bills – others are stated as follows: 2008 2007 N’000 N’000 Face value (see (c) below) 6,971,333 16,963,556 Unearned income (149,534) (737,714) 67,483 (26,061) 6,889,282 16,199,781 Revaluation gain/(loss) Net investments (c) Included in the treasury bills – others is N1,250,000,000 (2007:N1,855,556,000) pledged as collateral. (d) The original cost of treasury bills and bonds is N8,094,937,730 (2007: N19,554,779,000) and N5,371,460,673 (2007: N4,441,256,000) respectively. 3. Loans and advances (a) The classification of loans and advances is as follows: Otherwise secured Unsecured 2008 2007 N’000 N’000 2,628,589 2,611,513 58,507,998 42,372,629 61,136,587 44,984,142 Loan loss provision (see (b) below) – Specific – General Interest in suspense (see (c) below) (981,554) (1,199,983) (1,038,676) (374,434) (2,020,230) (1,574,417) (813,658) (1,023,721) (2,833,888) (2,598,138) 58,302,699 42,386,004 2008 Annual Report | Financial Statements | No loan was secured against real estate (2007: Nil). 44 (b) The movement on the general loan loss provision account during the year was as follows: Balance, beginning of year Provisions/(write-backs) during the year Balance, end of year 2008 2007 N’000 N’000 374,434 434,078 664,242 1,038,676 (59,644) 374,434  (c) The movement on the specific loan loss provision account during the year was as follows: Balance, beginning of year Write-backs on specific provisions Provisions during the year 2008 2007 N’000 N’000 1,199,983 827,708 (826,946) (83,234) 608,517 775,362 - (319,853) 981,554 1,199,983 Provisions on loans written-off Balance, end of year (d) The movement on the interest in suspense account during the year was as follows: Balance, beginning of year 2008 2007 N’000 N’000 1,023,721 1,438,307 Interest suspended during the year 136,132 151,793 Interest recovered (1,435) (85,243) Interest written-off Balance, end of year (344,760) (481,136) 813,658 1,023,721 2008 2007 N’000 N’000 (e) Write-backs on risk assets comprise: Write-backs on recoveries Provisions on loans and advances Write-backs on other facilities (see Note 4 (b)) Write-backs on advances under finance lease (see Note 5(c)) 826,946 142,878 (1,272,759) (775,362) 2,325 3,278 209 485 (443,279) (628,721) 2008 2007 (d) The maturity profile of loans and advances is as follows: N’000 4,921,478 1 – 3 months 25,790,732 2,938,204 3 – 6 months 4,662,087 6,016,723 6 – 12 months 16,453,850 26,794,518 Over 12 months 10,370,976 4,313,219 61,136,587 44,984,142 | Financial Statements | 2008 Annual Report N’000 3,858,942 Under 1 month 45 (f) The analysis of loans and advances by performance is as follows: 2008 Performing 2007 N’000 N’000 57,591,521 36,199,129 Non-performing – Principal 2,731,408 – Interest in suspense 7,761,292 813,658 1,023,721 61,136,587 44,984,142 (g) The analysis of non-performing loans and advances and related provisions is as follows: Number of 2008 2007 days past due N’000 N’000 90-180 180-360 Over 360 Balance Provision 1,554,204 702,141 1,288,721 3,545,066 % Balance 155,420 10 7,178,509 717,850 10 351,071 50 201,300 100,650 50 1,288,721 100 1,405,204 1,405,204 100 8,785,013 2,223,704 1,795,212 Provision % (h) The analysis of loan loss provision and interest in suspense on performing and nonperforming loans and advances is as follows: 2008 Performing Non-performing 2007 N’000 N’000 1,038,676 374,434 1,795,212 2,223,704 2,833,888 2,598,138 4. Other facilities 2008 Annual Report | Financial Statements | (a) The Bank acts as an intermediary for FMO Netherlands in respect of loans and ad- 46 vances (see Note 10). The classification of the outstanding balance as at year-end is as follows: Unsecured General provision 2008 2007 N’000 N’000 334,125 566,602 (3,341) (5,666) 330,784 560,936  (b) The movement on the loan loss provision for other facilities during the year was as follows: Balance, beginning of year Write-backs during the year (see Note 3(d)) Balance, end of year 2008 2007 N’000 N’000 5,666 8,944 (2,325) (3,278) 3,341 5,666 2008 2007 (c) The maturity profile of other facilities is as follows: N’000 N’000 3-6 months 164,430 134,950 6-12 months 169,695 139,437 Over 12 months - 292,215 334,125 566,602 2008 2007 N’000 N’000 77,305 98,228 (773) (982) 76,532 97,246 2008 2007 N’000 N’000 Gross investment 88,387 111,320 Unearned income (11,082) (13,092) Net investment 77,305 98,228 (d) The only outstanding facility was performing as at year end. 5. Advances under finance lease (a) The classification of advances under finance lease is as follows: Otherwise secured General provision (see (c) below) (b) Advances under finance lease are stated as follows: follows: Balance, beginning of year Write-back during the year (see Note3 (d)) Balance, end of year 2008 2007 N’000 N’000 982 1,467 (209) (485) 773 982 | Financial Statements | 2008 Annual Report (c) The movement on provision for advances under finance lease during the year was as 47 (d) The maturity profile of advances under finance lease is as follows: 2008 2007 N’000 N’000 Under 1 month - 90 1-3 months - 122 3-6 months 6 – 12 months Over 12 months 1,719 2,306 5,602 1,918 69,984 93,792 77,305 98,228 (e) All advances under finance lease were performing as at year end. 6. Other assets: (a) Other assets comprise: 2008 2007 N’000 N’000 - 3,000,000 24,002 558,978 304,690 203,156 Treasury bills sold under open buy-back transactions Interest receivable on placements Prepayments Sundry receivables 51,646 114,259 Fees and commissions receivable 186,063 128,011 Purchased coupon on FGN bonds 277,415 34,615 71,214 - Receivable from NIB Nominees Limited (see note (28e)) Transfer from work-in-progress (see note (c) & (8a)) Provisions on sundry receivables (b) 8,138 4,039,019 (6,001) (6,001) 917,167 4,033,018 (i) There was no movement on the provision on other assets during the year. 2008 Annual Report | Financial Statements | (ii) Adequate provisions have been made for diminution in the value of other as- 48 sets at the balance sheet date. (c) This represents amount of advance payments in work-in-progress transferred to other assets. - 923,168 7. Long-term investments (a) Long-term investments comprise: 2008 2007 N’000 N’000 Investments in equity securities: Nigeria International Debt Fund (NIDF) Notes (see Note (c) below) 298,700 SME Companies (See Note (d) below) 298,700 598,223 279,151 Nigeria Interbank Settlement System (NIBSS) (see Note (e) below) 47,548 47,548 Valucard Nigeria Plc (See Note (f) below) 23,019 23,019 Central Securities Clearing System Limited (See Note (g) below) 6,000 6,000 23,752 11,251 997,242 665,669 Vectis Nigeria GP (See Note (h) below) Provision for impaired investments (see (b) & (i) below) (59,037) (23,019) 938,205 642,650 Investments in Federal Government bonds ( see (j) below) 12,428,263 14,957,356 13,366,468 15,600,006 (b) The movement on the provision for impaired investments during the year was as follows: 2008 2007 N’000 N’000 Balance, beginning of year 23,019 23,019 Provisions during the year 36,018 - 59,037 23,019 Balance, end of year (c) The market and net asset values of the investment in NIDF notes at the balance sheet date were N199,245,900 and N609,224,632 respectively. Accion Microfinance (N400.449 million) and indirect equity investment in Falcongaz Limited, Alvac Company Limited, Freezone Plant Fabrication International, Nigerian Starch Mills Limited, S&B Ince Limited, Orbital Track & Fleet Management and Weltek Limited through SME II Partnership. Additional net investments of N319.072 million were made during the year. (e) This represents the Bank’s 3.62% equity participation in Nigerian Interbank Settlement System Plc. (f) This represents the Bank’s 3.27 % equity investment in Valucard Nigeria Plc. (g) This represents the Bank’s 1% equity investment in Central Securities Clearing System Limited. | Financial Statements | 2008 Annual Report (d) This represents the Bank’s direct equity investment and convertible loan stock in 49  (h) This represents the Bank’s 8.80% equity investment in Vectis Nigeria GP, additional investment of N12.5 million was made during the year. (i) Additional provisions of N36,018,000 was made with respect to investment in SME Companies. (j) This represents market value of investments in Federal Government of Nigeria bonds with outstanding tenor to maturity exceeding one year and not held for trading. The original cost of the bonds is N12,212,077,216 (2007: N15,139,546,000). (k) The Bank has an unpaid commitment of N999,999 to NIB Nominees Limited as at balance sheet date representing value of 99.99% holding in the company. NIB Nominees Limited, which commenced business in August 2008 was incorporated on 3 March 2008 to hold in its name securities purchased for the Bank’s custody business. The net liability of NIB Nominee Limited at balance sheet date was N71,214,000. Due to the immateriality of the financial performance, financial position and cash flows of NIB Nominees as at report date, the Bank has not consolidated its financial statements. (l) The directors are of the opinion that there has been adequate provision made for the diminution in the value of long-term investments at the balance sheet date. 8. Fixed assets (a) The movement on these accounts during the year was as follows: Leasehold Computer in-Progress Improvements Work Equipment N’000 Motor Vehicles Total Land & Furniture & Buildings N’000 Equipment: N’000 N’000 N’000 COST 2008 Annual Report | Financial Statements | Balance, beginning of year 50 8,138 1,622,878 3,021,732 596,399 5,249,147 Additions – 98,850 232,519 297,903 629,272 Transfers (8,138) (110,546) 110,546 - (8,138) Disposals – - (260,780) (192,075) (452,855) Balance, end of year – 1,611,182 3,104,017 702,227 5,417,426 ACCUMULATED DEPRECIATION Balance, beginning of year - 61,019 1,228,143 312,997 1,602,159 Charge for the year - 34,252 487,722 145,437 667,411 Disposals - - (223,520) (139,901) (363,421) Transfers - (184) 184 - - Balance, end of year - 95,087 1,492,529 318,533 1,906,149 NET BOOK VALUE End of year Beginning of year - 1,516,095 1,611,488 383,694 3,511,277 8,138 1,561,859 1,793,589 283,402 3,646,988  (b) As at 31 December 2008, there were no authorized and committed contracts (2007: N2.916 billion and N0.18 billion respectively). (c) The land is held under a statutory right of occupancy. (d) No leased movable assets are included in the above fixed asset accounts. 9. Deposits and other accounts (a) Deposits and other accounts comprise: 2008 2007 N’000 N’000 89,923,529 62,003,061 7,618,233 10,939,891 93,692 240,101 Interbank - 3,000,000 Due to other Citigroup branches - 2,951,668 97,635,454 79,134,721 2008 2007 N’000 N’000 96,923,218 73,693,596 668,795 266,239 43,441 621,656 - 4,553,230 97,635,454 79,134,721 2008 2007 N’000 N’000 Demand Term Savings (b) The maturity profile of deposits and other accounts is as follows: Under 1 month 1 – 3 months 3 – 6 months 6 – 12 months 10. Other facilities (a) Other facilities comprise: 334,125 566,602 334,125 566,602 (b) Other facilities from FMO Netherlands bears interest rate of 2.4% above LIBOR rates and is repayable semi-annually expiring in December 2009. | Financial Statements | 2008 Annual Report Due to FMO Netherlands 51  (c) The maturity profile of amounts received from FMO Netherlands for on-lending (Note 4) is as follows: 2008 2007 N’000 N’000 3 – 6 months 164,430 134,950 6-12 months 169,695 139,437 Over 12 months - 292,215 334,125 566,602 2008 2007 N’000 N’000 8,275,337 7,562,556 Deposits for foreign exchange 2,240,287 4,032,668 Managers’ cheques 4,738,399 4,610,777 Accrued expenses 872,767 1,059,987 Unearned income 660,933 408,973 51,771 146,971 Collections 231,285 50,245 Foreign currency drafts payable 80,906 35,012 657,643 663,717 17,809,328 18,570,906 2008 2007 11. Other liabilities Other liabilities comprise: Placements held on account of customers’ obligations (see Note 1(d)) Interest payable Others 12. Provisions (a) Provisions comprise: Gratuity provision (see Note (b) below) 2008 Annual Report | Financial Statements | Others 52 N’000 N’000 212,258 255,244 80,397 76,081 292,655 331,325 (b) The movement on gratuity provision account during the year was as follows: 2008 2007 N’000 N’000 Balance, beginning of year 255,244 308,492 Payments during the year (53,205) (59,872) 10,219 6,624 212,258 255,244 Interest earned on investment Balance, end of year  (c) Gratuity provision Prior to 1 July 2005, the Bank operated a gratuity scheme under which employees were entitled to certain benefits based on the terms of the scheme. Effective from 1 July 2005, the gratuity scheme was terminated and replaced by a pension plan.  Under the terms of the termination, amounts payable to employees will be paid when such employees leave the service of the Bank and the amount payable is calculated on a pro-rata basis. 13. Taxation payable (a) The movement in taxation payable during the year was as follows: 2008 2007 N’000 N’000 1,813,365 3,376,721 Payments during the year (750,355) (2,664,113) Current year charge (see Note (b) below) 2,480,253 1,100,757 3,543,263 1,813,365 2008 2007 N’000 N’000 Balance, beginning of year Balance, end of year (b) The tax charge for the year comprises: Current tax charge Prior year over provision Deferred taxation (note 14) 2,911,821 1,100,757 (431,568) - 2,480,253 1,100,757 (212,300) 366,556 2,267,953 1,467,313 The current tax charge has been computed at the rate of 30% on the profit for the year after adjusting for certain items of income and expenditure, which are not deductible or 14. Deferred taxation (a) Movement on deferred tax account during the year was as follows: 2008 Balance, beginning of year (Reversal)/charge during the year (note 13) Balance, end of year 2007 N’000 N’000 430,262 63,706 (212,300) 366,556 217,962 430,262 | Financial Statements | 2008 Annual Report chargeable for tax purposes, plus 2% Education Levy for the year. 53  (b) The Bank’s exposure to deferred tax has been fully provided for in the financial statements. The directors are of the opinion that these timing differences are likely to reverse in the foreseeable future. 15. Share capital (a) Share capital comprises: 2008 2007 N’000 N’000 Authorised: 3.0 billion Ordinary shares of N1.00 each 3,000,000 3,000,000 Issued and fully paid: 2.794 billion Ordinary shares of N1.00 each 2,793,777 2,793,777 (b) There was no movement in share capital account during the year. 16. Share premium There was no movement in share premium account during the year. 17. Reserves (a) Reserves comprise: Statutory reserve General reserve (see Note (b)) 2008 2007 N’000 N’000 7,953,776 6,674,354 11,962,928 10,543,781 Small and medium enterprises equity 2008 Annual Report | Financial Statements | investment scheme (SMEEIS) reserve 54 3,339,883 3,375,901 23,256,587 20,594,036 (b) The movements on these accounts during the year were as follows: Balance, beginning of year Transfer from profit and loss account Paid out as dividend during the year Statutory General SMEEIS Reserve Reserve Reserve Total N’000 N’000 N’000 N’000 6,674,354 10,543,781 3,375,901 20,594,036 1,279,422 7,250,061 - 8,529,483 - (5,866,932) - (5,866,932) Provision for impaired Investment transferred (see note (7h)) Balance, end of year - 36,018 (36,018) - 7,953,776 11,962,928 3,339,883 23,256,587 In accordance with existing legislation, 15% (2007:15%) of profit after taxation of the Bank has been transferred to statutory reserve. In accordance with the Banker’s Committee and Central Bank of Nigeria’s revised position on provision for SMEEIS, additional appropriation was not made for small scale industries reserve in 2008 (2007:nil). 18. Acceptances, bonds, guarantees and other obligations for the account of customers (a) These comprise: Acceptances/direct credit substitutes 2008 2007 N’000 N’000 432,716 666,236 Foreign exchange commitments 14,842,553 11,230,995 Letter of credit 39,778,004 22,239,482 Bonds and guarantees 40,532,299 24,719,513 95,585,572 58,856,226 (b) Included in bonds and guarantees is a standby letter of credit granted by the Bank to AES Nigeria Barge Limited on behalf of Power Holding Company of Nigeria (PHCN) comprehensive guarantee of the Federal Government of Nigeria, is renewable annually, though the underlying contract will expire in the year 2014. 50% of the sum has been guaranteed by another Nigerian Bank. Also included in the bonds and guarantees are cash collateralized and secured guarantees with a total sum of N6,961,944,908 (2007: N4,418,181,239). (c) Included in letter of credit are cash collateralized letters of credits for which the value at balance sheet date was N8,275,337,201 (2007: N7,998,488,731). | Financial Statements | 2008 Annual Report for the sum of $25,795,581 (2007: $60,000,000). The facility, which is secured by a 55 19. Litigations and claims There are litigations and claims against the Bank as at 31 December 2008 amounting to N1,272,146,092 (2007: N1,400,512,340). These litigations and claims arose in the normal course of business and are being contested by the Bank. The directors, having sought professional legal counsel are of the opinion that no significant liability will crystallize from these litigations; therefore no provisions are deemed necessary. 20. Interest and discount income Interest and discount income comprises: 2008 2007 N’000 N’000 Source: Lending to financial institutions 2,154,210 1,918,639 Lending to non-bank customers 7,733,314 5,862,049 Interest/discount income on securities 3,100,891 12,988,415 3,887,720 11,668,408 2008 2007 N’000 N’000 Geographical location: Earned in Nigeria Earned outside Nigeria 12,306,577 10,492,315 681,838 1,176,093 12,988,415 11,668,408 2008 2007 N’000 N’000 21. Interest expense Interest expense comprises: Source: 2008 Annual Report | Financial Statements | Borrowing from banks 56 Other customers 976,818 130,871 1,833,212 1,965,225 2,810,030 2,096,096 Paid in Nigeria Paid outside Nigeria 2008 2007 N’000 N’000 2,513,934 1,622,097 296,096 473,999 2,810,030 2,096,096 22. Other income Other income comprises: 2008 2007 N’000 N’000 Commissions 2,248,491 2,562,635 Income from foreign exchange transactions 2,163,363 1,299,831 Fees 2,050,611 885,917 Gain on sale of securities 646,004 752,685 80,381 121,642 Revaluation loss on long-term investments (116,826) - Loss on sale of SME investment (14,849) - Dividend income 11,266 33,016 Gain on sale of fixed assets 2,253 8,371 7,070,694 5,664,097 Revaluation gain on short-term investments 23. Profit before taxation (a) General Profit before taxation for the year is stated after charging the following operating expenses: Staff costs (see note (b)) Deposit insurance premium Depreciation 2008 2007 N’000 N’000 2,801,690 2,494,233 518,735 553,880 327,841 359,328 317,917 Communications 152,027 162,875 Transport and travel 101,658 104,153 Rentals 64,955 93,808 Auditor’s remuneration 35,000 25,000 36,018 - 1,281,910 2,127,014 6,018,732 6,206,721 Dimunition in value on long-term investment Other administrative expenses (b) Staff and directors’ costs i. Cost of employees, including executive directors, during the year amounted to: 2008 Wages and salaries Pension costs Other indirect employee costs 2007 N’000 N’000 2,041,353 2,214,102 102,135 99,654 2,143,488 2,313,756 658,202 180,477 2,801,690 2,494,233 | Financial Statements | 2008 Annual Report 667,411 Outsourced services 57  ii. The average number of persons employed during the year was: 2008 2007 Number Number 248 282 iii. Employees, other than directors, earning more than N60,000 per annum, whose duties were wholly or mainly discharged in Nigeria, received emoluments (excluding pension contributions and certain benefits) in the following ranges: 2008 2007 Number Number N1,000,001 – N2,000,000 - 36 N2000,001 – N3,000,000 58 38 N3000,001 – N4,000,000 29 39 N4,000,001 – N5,000,000 26 32 135 137 2008 2007 N’000 N’000 Above N5,000,000 (c) Directors’ remuneration Directors’ remuneration was provided as follows: Fees as directors Other emoluments 16,700 16,700 116,303 116,303 133,003 133,003 The directors’ remuneration shown above (excluding pension contributions and certain 2008 Annual Report | Financial Statements | benefits) includes: 58 Chairman Highest paid director 2008 2007 N’000 N’000 6,350 6,350 37,800 37,800 The emoluments of all other directors fell within the following ranges: 2008 2007 Number Number Nil (Foreign non-executive directors) 2 2 Nil (Local non – executive director) 1 1 Above N2, 000,000 7 7 24. Earnings per share Earnings per share are based on the profit after taxation for the year and the Ordinary shares of 2,793,777,229 in issue during the year. 25. Net cash flow from operating activities before changes in operating assets This comprises: Profit after taxation Add back: taxation charge Profit before taxation 2008 2007 N’000 N’000 8,529,483 6,946,098 2,267,953 1,467,313 10,797,436 8,413,411 Adjustments to reconcile profit before taxation to net cash flow from operations: – depreciation – gain on disposal of fixed assets – Provision on risk assets – dividend income – revaluation (gain) on short-term investments – revaluation loss on long-term investments 667,411 327,841 (2,253) (8,371) 443,279 628,721 (11,266) (33,016) (80,381) (121,642) 116,826 - – Diminution in value of long-term investments 36,018 - – Loss on sale of investments, (net) 14,849 - 11,981,919 9,206,944 2008 2007 N’000 N’000 Net cash flow from operating activities 26. Changes in operating assets This comprises: (Increase)/decrease in operating assets: – Short-term investments – Loans and advances – Other assets – Advances under finance lease 371,048 (16,362,508) (7,528,733) 232,477 327,757 3,123,989 (3,008,061) 20,923 48,466 Increase/(decrease) in operating liabilities: – Deposits and other accounts 18,500,733 18,072,747 – Other facilities (232,477) (327,757) – Other liabilities (761,578) 6,778,223 – Provisions (38,670) (47,514) 14,794,795 14,686,176 | Financial Statements | 2008 Annual Report – Other facilities 10,311,906 59 27. Business segment reporting The segment information is presented in respect of the Bank’s business segments. The Bank operates the following main business segments: Corporate Banking Includes loans, deposits and other transactions and balances with corporate customers. Commercial Banking Includes loans, deposits and other transactions and balances with medium sized customers. Financial Institutions Includes transactions in investment and trading securities, interbank placements and takings, loans, deposits and other transactions and balances majorly with other financial institutions. The Bank’s business reporting information comprises: Corporate banking N’000 2008 Commercial banking Financial institutions Total N’000 N’000 N’000 N’000 N’000 N’000 N’000 2007 2008 2007 2008 2007 2008 2007 Revenue Interest income 4,968,667 3,771,186 1,421,356 2,792,864 6,608,760 5,116,802 12,998,783 11,680,852 98,521 1,455,261 3,124,052 4,861,944 2,441,524 7,070,694 5,664,097 3,869,707 2,876,617 5,916,916 11,470,704 7,558,326 20,069,477 17,344,949 (433,994) (873,050) (1,212,350) (976,818) (449,752) (2,810,030) (2,096,096) Other income 753,489 Total revenue 5,722,156 Interest expense (960,162) Loan loss recoveries/(expense) (367,277) (738,600) (76,002) 69,606 – 40,273 (443,279) (628,721) 4,394,717 2,697,113 1,927,565 4,774,172 10,493,886 7,148,847 16,816,168 14,620,132 EXPENSES Depreciation 2008 Annual Report | Financial Statements | 192,723 60 76,162 300,557 117,374 174,131 134,305 667,411 327,841 Other operating expenses 1,544,133 1,589,967 762,972 2,272,330 3,044,216 2,016,583 5,351,321 5,878,880 1,736,856 1,666,129 1,063,529 2,389,704 3,218,347 2,150,888 6,018,732 6,206,721 Profit on ordinary activities before taxation 2,657,861 1,030,984 864,036 2,384,468 7,275,539 4,997,959 10,797,436 8,413,411 ASSETS AND LIABILITIES Total assets 43,193,808 51,302,303 6,881,805 5,655,194 107,451,533 78,921,492 157,527,146 135,878,989 28,420,865 86,049,065 65,712,400 4,046,621 6,713,916 119,832,787 100,847,181 22,881,438 (79,167,260) (60,057,206) 103,404,912 72,207,576 37,694,359 35,031,808 Total liabilities 29,737,101 Net assets 13,456,707 28. Related party transactions (a) 81.9% of the Bank’s share capital is held by Citibank Overseas Investment Corporation. (b) In the normal course of the Bank’s business, the Bank enters into business transactions with other Citigroup branches at commercial rates. (c) Certain of the Bank’s directors are also directors of other companies with whom the Bank does business. All such transactions are conducted at arm’s length. (d) At the end of the year, the Bank had an outstanding credit facility of N198,661,309 (2007: N226,283,377) with a company in which a director of the Bank is also a director. The credit facility which was granted at terms comparable to other credit facilities in the Bank’s credit portfolio was performing. (e) As at year end, a net amount of N71.21 million was receivable from NIB Nominees Limited (see Note 6(a)). The amount was mainly in respect of staff and other overhead costs incurred and paid on behalf of NIB Nominees Limited. 29. Contraventions The Bank contravened one applicable banking law and guideline relating to the provisions of a 1997 CBN circular with respect to treatment of CPs/BAs in the financial year ended 31 December 2008 (2007: nil). The imposed penalty of N2 million has been paid. 30. Prior-year comparatives Certain prior year balances have been reclassified in line with current year classifications. | Financial Statements | 2008 Annual Report 61 Statement of Value Added 2008 Gross earnings 2007 % N’000 20,069,477 17,344,949 N’000 % Interest expense – Foreign – Local Loan loss provisions, (net) (296,096) (473,999) (2,513,934) (1,622,097) 17,259,447 15,248,853 (443,279) (628,721) Bought-in materials and services – Local (2,549,631) 14,266,537 100 (3,384,647) 11,235,485 100 Applied to pay: Employee costs 2,801,690 20 2,494,233 22 Government as taxes 2,267,953 16 1,467,313 13 Retained in the business: – Depreciation – Proposed dividend 2008 Annual Report | Financial Statements | – To augment reserves 62 667,411 4 327,841 3 7,124,132 50 5,866,932 52 1,405,351 10 1,079,166 10 14,266,537 100 11,235,485 100 Five-Year Financial Summary 2008 2007 2006 2005 2004 N’000 N’000 N’000 N’000 N’000 Cash and short-term funds 67,136,065 45,437,112 38,041,624 22,745,877 28,615,709 Short-term investments 13,886,154 24,117,679 24,367,085 27,235,876 18,238,200 58,302,699 42,386,004 35,489,755 27,588,166 15,940,416 330,784 560,936 885,415 1,158,838 1,326,993 Advances under finance lease 76,532 97,246 145,227 138,411 226,203 Other assets 917,167 4,033,018 1,024,957 520,173 537,724 13,366,468 15,600,006 8,750,332 5,514,135 322,700 3,511,277 3,646,988 2,676,840 2,077,505 1,039,419 157,527,146 135,878,989 111,381,235 86,978,981 66,247,364 44,969,271 42,066,574 Loans and advances Other facilities Long-term investments Fixed assets Deposits and other accounts 97,635,454 79,134,721 61,061,974 Other facilities 334,125 566,602 894,359 1,170,543 1,398,922 Other liabilities 17,809,328 18,570,906 11,792,683 10,204,810 8,496,691 292,655 331,325 378,839 876,917 - 3,543,263 1,813,365 3,376,721 1,439,335 1,734,957 217,962 430,262 63,706 197,924 177,083 Provisions Taxation payable Deferred tax Share capital Share premium Reserves 2,793,777 2,793,777 2,793,777 2,762,733 1,500,000 11,643,995 11,643,995 11,643,995 11,364,593 - 23,256,587 20,594,036 19,375,181 13,992,855 10,873,137 157,527,146 135,878,989 111,381,235 86,978,981 66,247,364 Other commitments and Contingencies 58,856,226 29,924,882 46,697,950 23,068,094 20,069,477 17,344,949 16,522,399 10,032,697 9,881,104 Profit before taxation 10,797,436 8,413,411 10,555,485 4,365,658 5,351,342 Taxation (2,267,953) (1,467,313) (2,833,371) (1,245,940) (1,772,985) 8,529,483 6,946,098 7,722,114 3,119,718 3,578,357 Earnings per share 305k 249k 276k 187k 239k Declared dividend per share* 210k 205k 140k - 153k 2,794 2,794 2,763 1,500 Gross earnings Profit after taxation Number of Ordinary shares of N1.00 (million) 2,794 *Declared dividend represents the dividend proposed for the preceding year but declared during the year. | Financial Statements | 2008 Annual Report 95,585,572 63