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WEGAGEN BANK, S.C.

2009/10

Board of Directors

&

External Auditors Reports

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MANAGEMENT MEMBERS

Araya G/EgziabherPresident / CEO

Kewser ReshidV/President - Operations

Woldegebriel WedajoV/President - Support Services

Kahsay FisehaManager, Domestic Banking

Department

Eneyew TadeleManager, Finance & Treasury

Department

Demas ZewduManager, Corporate Planning

Department

Dawit TeferraManager, IS Department

Wende WodajeManager, Credit Department Gebru MesheshaManager, Marketing Department Abdella SultanManager, Administration &HRD Department

G/Giorgis HailuManager, Risk ManagementDepartment

Addis W/CherkosManager, Credit Department

Yehuwalashet ZewduManager, Control Department

Kefene GurmuManager, Legal Department

Tesfaye H/MichaelManager, Engineering Service

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Contents

Page

Vision, Mission, Principles and Values 01

Message from the Chairman of the Board 02

Message from the President / CEO 04

A. REPORT OF THE BOARD OF DIRECTORS 06

1. Performance Review 06

1.1 Domestic Banking Operations 06

1.2 International Banking Operations 07

1.3 Loans and Advances 09

2. Branch Network, Asset and Capital 11

2.1 Branch Network 11

2.2 Assets 11

2.3 Capital 11

3. ICT - driven Services 12

3.1 Payment Card Services 12

3.2 Core Banking System 12

4. Human Resource and Capacity Building 135. Risk Management 15

6. Accounting Policy 16

7. Income-ExpenseandProt/LossSummary 16

B. EXTERNAL AUDITORS REPORT 19 - 42

Wegagen Bank - Annua l Report 2009/10

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01

VISION

Wegagen Banks vision is:

Becoming the most preferred Bank in Ethiopia

MISSION STATEMENT

The Banks mission is:

To provide a wide range of quality banking services through a

dynamic workforce and up-to-date IT solutions to satisfy the

desires of all stakeholders

PRINCIPLES AND VALUES

Wegagen Bank is committed to the following main business principles.

Outstandingcustomerservice;

Businessintegrity,honestyandloyalty;

Effective,efcientandexpandingoperations;

Strongcapitalandliquidityposition;

Prudentlending;

Reasonablecostcontroldiscipline;

Fairandobjectiveemploymentpractices;

CommitmenttocomplywiththespiritandletteroftheLaw;

Playingaresponsibleroleinaligningobjectiveswiththoseofthe

local communities.


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02

Message from the Chairman of the Board

Fiscal year 2009/10 was a recovery period from the Sub-prime mortgage crisis and the

subsequentsystemicfailureofthenancialmarkets.SimilarlyforEthiopia,theyearwas

favorableforthemacroeconomy.Comparedtotheprecedingyear,thereweresignicant

improvementsininternationaltrade,internationalremittance,andforeigndirectandequity

investments.

During the year, the national target of achieving a structurally transformed, stable and

dynamic economic system was attained, thanks to the consolidated measures by the

government. The policy incentives undertaken to strengthen export oriented and import

substituting industries were also successful to enhance foreign exchange reserve of the

country.

Pursuant to the commendable performance of the economy and amidst increasing

competitionandsignicantadvancesinbankingtechnology,WegagenBankonceagain

witnessed satisfactory performance in 2009/10. I, therefore, feel honored to present the

reportoftheBankforthescalyearandannouncetheleaptheBankhasmadetowards

living up to its vision.

Duringthescalyear,theBankregisteredarecordhighprotofBirr317.5millionpriorto

taxation. Constrained, among others, by the credit ceiling set by the NBE, the volume of

outstanding loans made only a modest growth. Nevertheless, the total assets of the Bank

showedasignicantgrowth.

In order to enhance the market share of the Bank and effectively serve its purpose, the

Bankgavedueattentiontoraisingitscapitalbase,improvingassetquality,enhancing

efciencyinservicedelivery,andstrengtheningthecapacityoftheworkforce.Asaresult,

the paidup capital reached Birr 633.2 million at years end.

These operational results gain impetus if customers are served in a conducive workingenvironment.Realizingthis,theBankhasnalizedallthegroundworkfortheconstruction

of the Head Ofce building. The ongoing projects on the implementation of the core

banking, the deployment of the card payment system, and human capital development

also signal our endeavor to accomplish the twin mission of customer satisfaction and

efciency.Weshallkeeponworkingontheseandrelatedissuestoattaintheinspirational

vision of Wegagen Bank: Becoming the Most Preferred Bank in Ethiopia.


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03

Looking ahead, there are substantial uncertainties in the future economic system. On the

basis of the current trend, the world output is expected to grow by about 5% during the next

scalyear.However,therisinganxietyofnancialmarketsandtheprematureausterity

actions by many governments may crowd out the world economy. The increasinglycompetitivenancialmarketisexpectedtomakethebusinessenvironmentmoreand

more challenging.

In order to perfectly t to the environment and live up to our vision,we realize that

we need to improve our competitive performance taking advantage of our experience,

responsiveness and unreserved commitment. We, as always, renew our commitment to

continueprovidingawiderangeofqualitybankingservicesthroughadynamicworkforce

and advanced state-of-the-art technologies to satisfy the desires of all stakeholders.

I would like to take this opportunity to applaud our customers, the shareholders, the

National Bank of Ethiopia and all other stakeholders for their invaluable guidance and

contribution to the success of the Bank and call upon all for their perpetual commitment to

make our Bank most preferred in the country.

Thank you,


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04

Message from the President/CEO

I amhonored toannounce that during the reporting scal year,we, all stakeholders,

stood as one to fully exploit our competitive advantages, opportunities and overcome the

challenges. As a result, Wegagen Bank has once again registered an all time high result

duringthescalyear2009/10.Itis,therefore,mypleasuretopresenttheperformanceof

theBankforthescalyear.

Accordingly, the total income of the Bank rose by 19.7% over the previous year to Birr

565.3millionandprotbeforetaxreachedBirr317.5million,anencouraging24%growth

rate from the preceding years performance.

Inthescalyear,aggregatedepositsgrewbyBirr200millionfromBirr3.7billiontoBirr3.9 billion. The volume of outstanding loans, however, stood at close to Birr 2.5 billion

owing to the credit cap. The total assets increased from Birr 5.1 billion in 2008/09 to

Birr5.7billion.Alongside this,theconcertedeffortmadetoimprovetheassetquality

succeeded to drop the non-performing loan of the Bank to 3.47%.

In order to sustain its competitiveness and outreach, Wegagen Bank increased its branch

network to 50 at years end, out of which 23 were in Addis Ababa and the remaining 27

spreadacrossthecountryinmajortowns.TheBankalsomaintainspartnershipwitha

large number of correspondent banks and with international money transfer companies.

Thanks to our shareholders for their farsightedness and commitment to strengthen the

capital base and building the image of the Bank, the paidup capital increased to Birr

633.2 million, a 22.3% increase over the preceding year. Correspondingly, earning per

share (with value of Birr 1,000 each) was Birr 380.

UntilJune2010,WegagenBankcreatedjobopportunityforatotalof1,821employees.

Inlinewiththerequirementofcompetitivebusinessenvironmentandtobettersatisfy

customers, the Bank organized and provided various in-house, local and foreign trainingsto a large number of its staff members in their respective levels.

Our Bank is registering a visible continuous growth through ages. The performance during

2009/10conrmsthattheBankismakinghugestridestoachieveitsvisionofBecoming

the most preferred Bank in Ethiopia. In the process of evoking inspiration and living up

to the expectation of our customers, we draw upon modern technologies and update our

servicescommensuratewiththerequirementoftheday.


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05

The commencement of the payment card services to respond appropriately to

increasingly sophisticated and diverse customer requirements and the devise of

a comprehensive human resource management system underscores our founding

philosophyof promotingexcellence through quality service strongly and continuouslyin order to thrive at a steady pace toward our vision.

In closing, I would like to extend my special recognition to our esteemed customers

for their condence and distinguished partners for working with our Bank. My

appreciation also goes to the Board of Directors for their commitment and able guidance

throughout the year. Thanks should go to National Bank of Ethiopia for its unreserved

assistance and productive guidance. I am truly honored to work with the Banks

management and staff that continuously demonstrated their diligence, expertise and

professionalisminmeetingourBanksobjectives.

As usual, on the idea of initiative, I call upon all the stakeholders of the Bank to unite

behindtheobjectivesoftheBank.

Thank you.


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06

A. REPORT OF THE BOARD OF DIRECTORS

1. PERFORMANCE REVIEW 1.1 Domestic Banking Operations

Total deposits as at June 30, 2010 were Birr 3.9 billion, showing an increase

ofoverBirr194.4millionor5.2%whencomparedwiththeprecedingscal

yearsgureofBirr3.7billion.Therelativetotalnumberofdepositaccounts

increased from 180,430 in FY 2008/09 to 201,691 in FY 2009/10, showing

an 11.8% growth.

SavingsdepositsmadethemajorshareoftotaldepositsrepresentingBirr2

billion (50%) while demand/checking/ and time deposits contributed Birr 1.8

billion (45%) and Birr 192 million (5%), respectively. The chart below shows

structure of deposits by category for the three most recent consecutive

scalyears.

Checking

Savings

Time

Total Deposits

Deposit Accounts by Category

(Million Birr)


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07

1.2 International Banking Operations

During the reported period, Birr 266.4 million or 46.8% of the Banks overall revenue

was generated from international banking operations.

Wegagen Bank works with various international money remittance partners, to

which our Bank is an agent.

The Bank has also established correspondent banking relationships with 127

internationally known banks to facilitate its international banking service needs.

Out of them, there is account relationship with 22 banks for the use of standard

settlement instruction. The list of Wegagens correspondent banks with which

account relationships are established for standard settlement instruction is shownin the following page.


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08

N0

NameofBank

Currrency

Town

Swift/BIC

A

ccountNO.

Type

1

CitibankNA

USD

NewYor

k

CITIUS33

3

6128583

C/A

2

CitibankNA

EUR

London

CITIGB2L

1

0585831

C/A

3

CitibankNA

GBP

London

CITIGB2L

1

1070657

C/A

4

CitibankNA

JPY

London

CITIGB2L

1

2008939

C/A

5

CommerzbankAG

EUR

Frankfurtamm

ain

COBADEFF

4

00870030401EUR

C/A

6

CommerzbankAG

USD

Frankfurtamm

ain

COBADEFF

4

00870030400USD

C/A

7

CommerzbankAG

SEK

Frankfurtamm

ain

COBADEFF

4

00870030400SEK

C/A

8

HSBCBankplc

USD

Johanne

sburg

HSBCZAJJ

1

21-000608-150

C/A

9

HSBCBankplc

EUR

Johanne

sburg

HSBCZAJJ

1

21-000608-151

C/A

10

HSBCBankplc

JPY

Johanne

sburg

HSBCZAJJ

1

21-000608-153

C/A

11

StandardCharteredBank

USD

London

SCBLGB2L

0

17068107-50

C/A

12

StandardCharteredBank

GBP

London

SCBLGB2L

0

17068107-01

C/A

13

UnicreditoItalianoSPA

EUR

Millan

UNCRITMM

0

9958850600

C/A

14

UnicreditoItalianoSPA

USD

Millan

UNCRITMM

0

9951832500

C/A

15

INGBelgiumS

A/NV(formerlyBBL)

EUR

Brussels

BBRUBEBB

3

01-0105758-12-EUR

C/A

16

INGBelgiumS

A/NV(formerlyBBL)

USD

Brussels

BBRUBEBB

3

01-0105758-12-011

C/A

17

NatexisBanquesPopulaires

EUR

Paris

CCBPFRPP

F

R7630007999990607920000019EU

R

C/A

18

NatexisBanquesPopulaires

USD

Paris

CCBPFRPP

F

R7630007999990607920000019USD

C/A

19

TheNationalCommercialBank

USD

Jeddah

NCBKSAJE

5

5513524010105

C/A

20

CreditAgricole-BanqueIndosuez

MerRouge

USD

Djibouti

MRINDJJD

1

00820596580002

C/A

21

BanquepourLeCommerceETInd

ustrie

MerRouge

USD

Djibouti

BCIMDJJ

0

9590015547001USD

C/A

22

NordeaBank,

Denmarka/s

DKK

Copenha

gen

NDEADKKK

5

000013858

C/A

Correspon

dentBanksforSta

ndardSettlementInstruction(SSI)


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09

1.3 Loans and Advances

Total outstanding loans as at June 30, 2010 were about Birr 2.5 billion showing a

Birr361.5million(17.1%)increasecomparedwiththeprecedingscalyear(Birr2.1billion).

Explained below are loans and advances by type and amount with the help of a

chart. Accordingly, the share of import was Birr 571 million (23.1%), export: Birr

551.6 million (22.3%), manufacturing: Birr 341.1 million (13.8%), transport service &

vehicle: Birr 258.8 million (10.5%), wholesale & retail trade: Birr 215.4 million (8.7%),

and building construction and bridge: Birr 203.3 million (8.2%). The remaining balance

went in aggregate to miscellaneous DTS, agriculture, and other small demonstration

items.

600

500

400

300

200

100

-

Impo

rt

Expo

rt

Manuf

acturin

g

Tran

sportS

ervic

e&Ve

hicles

Who

lesale

&Reta

ilTrade

Build

ingCon

struc

tion&

Brid

ge

Miscell

aneo

usDTS

Agric

ulture

Loans & Advances by Type and Amount

(Million Birr)


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10

Exports

Imports

Manufacturing

Construction

Transportation


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11

2. BRANCH NETWORK, ASSET AND CAPITAL

2.1 Branch Network

Atthecloseofscalyear2009/10,thebankhadanetworkof50branches,23ofwhichwerelocatedinAddisAbaba.Thereisacoordinationofcefor

international money transfer partners that are operating under the Banks

agency in Ethiopia, and a forex bureau at Bole International Airport.

2.2 Assets

Assets includecashand bank depositbalances,xedassets, suspense

accounts, deferred charges, etc. Over the years, the assets of WegagenBank have been growing continuously and as at June 30, 2010, they were

Birr 5.7 billion. That was an increase by Birr 624 million or 12.2% when

comparedwiththeprecedingscalyear(Birr5.1billion).

2.3 Capital

The total capital of the Bank which is comprised of paid-up capital, legalreserve, retained earnings and premium on share capital, Birr 1.05 billion,

showed an increase of Birr 215.3 million or 25.7% over the balance recordedduring the preceding year (Birr 836.4 billion). The shareholder base also

increased from 1,222 to 1,541.

Shareholders 17th Regular & 10th Extraordinary Meetings

Future Headquarters Design


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3. ICT - DRIVEN SERVICES

3.1 Payment Card Services

Wegagen Bank has launched Payment Card services as part of ensuring

service excellence, keep abreast with the developing global banking

technology and satisfy the increasing needs and wants of world class

banking products. As a result, our Bank has started issuance ofAgar Visa

Electron, Visas leading debit product line, which is accepted at the Banks

ATM network across the country. It also helps effecting purchase payments

at our Point of Sale (PoS) terminals, which are to be placed at merchant

sites.

With Agar Visa card, one could do a host of various banking activities 24

hours a day, seven days a week. Thus, the product abolishes the customary

time-bound banking culture. With our Agar card, one would discover

exclusive privileges that give the freedom to live the way he/she wants. It

is un-matching solutions to need for cash, shopping, dining or entertaining

andmanymorefabulousbenets.Theonlyrequirementtogetaccessto

this service is to open an account at any one of our branches.

So far, the Bank has availed 28 ATMs in total where 21 have been installedat own city branches and some crucial off-branch sites while seven are

placedatmajorcitiesofMekelle,B/Dar,Hawassa,Adama,DireDawaand

Axum. ATM network expansion will continue on need basis. Moreover, our

ATM and PoS network accepts all Visa International cards.

3.2 Core Banking System

Wegagen Bank is pioneer to implement state-of-the-art banking technology

in the year 2000. This solution has enabled clients to access their accountsfrom any one of the Banks branches. Moreover, it made possible for its

clients to be served in one window, making the services swift and reliable.


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Takingintoaccountgrowingcustomerservicerequirementstandards,the

Bank has decided to migrate into a new generation, versatile and powerful

Core banking solution, for which the implementation is being speeded-

up. The new system supports implementing new service delivery channelsforInternet Banking, SMS Banking, Credit Management System and Anti-

money Laundering packages, which will be availed to customers when the

core banking solution is implemented.

4. HUMAN RESOURCE AND CAPACITY BUILDING

The Banks human resource development strategy aims at hiring experiencedand qualied staff, enhancing competence by improving the skills of new and

existing staff, and developing a working environment that would create a sense of

commitment and belongingness.

Competition for acquiring highly qualied bankers has intensied due to the

increase in the number of branches of the different banks. Wegagen Bank has been

attemptingtoattractqualiedemployeesandretaintheexistingonesbyoffering

good opportunities for career & skills development. Employment of fresh graduates

and training them to work as bankers has continued as a strategy to produce own

people and strengthen belongingness.

As at June 30, 2010, the number of employees of Wegagen Bank stood at 1,821

showing an increase of 5.4% over the preceding year (1,727). Wegagen Bank

continuedtocreatesignicantemploymentopportunitiesforanumberofqualied

people during the reference year.

Out of the total number of employees, 956 (52%) were semi-skilled and skilled

professionals with compatible educational background such as degree graduates or

with college diploma, while the number of general service staff was 865 (48%) with

different levels of education.


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Investment has been made as a continuous process in the training of the Banks

staff to improve their skills. During the scal year, training opportunities were

provided to 943 employees. The trainings involved managerial, skilled and semi-

skilled professionals, trainee and all-round bankers. Foreign (abroad) trainings were

also offered to few. The Bank will intensify training rigorously to upgrade staff skills,

develop career and enhance capacity.

Composition of Permanent Staff

Category Male Female Total % Total

Semi - Skilled and Skilled Professionals 651 305 956 52

Unskilled 586 279 865 48

Total 1,237 584 1,821 100

% Total 68 32 100

Training on Risk Management


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Management Meeting

5. RISK MANAGEMENT

In banking business, placement of appropriate institutional capabilities to manageinherent business and other non-business risks has become a fundamental rule of

engagement. The recent global economic crisis, perpetrated by gross failures in

almostallmajorinternationalbanks,primarilyblamedinadequaciesinproactiveand

rigorousmanagementofrisksbybankinginstitutions.Intheaftermath,majorcentral

banks in the US and Euro Zone moved to craft a new accord, Basel III, to embark

international banks on safer and sound management of risk taking.

Blending the international experience, the internal need and the push from the

regulatory organ (NBE), the Bank has strengthened its risk management process

primarily by expanding activities of the Risk Management Department which is

responsible for measurement and monitoring of credit, liquidity, market, and

operational risks and producing periodic reports. Furthermore, the Bank has also put

in place ALCO - the organ responsible for management of the Banks balance sheet

structure to ensure the Banks risk management endeavor proceed in an integrated

manner.

Relevant studies have been conducted and supplementary pertinent frameworks

established to help create sound risk management framework for the Bank. As

partofthiscontinuingendeavorandinlinewithNBEsrequirements,theBankhas

prepared Risk Management Program (RMP), which is set to further augment the

current risk management framework. With implementation of the RMP, the Bank


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shall move up steps on the prevailing integration between departments and branches,

resulting in more proactive and effective risk management system through Board

andManagementoversight,accurateriskquantication,adequateMISandstrong

internal control environment.

6. ACCOUNTING POLICY

The Banks accounting policy envisages the following:

TheBanksassets,liabilities,capital,incomeandexpenseaccountsarebased

on double entry booking system.

TheBankusestheaccrualsystemofaccounting.Thismethodrecognizes

transactions as they occur regardless of whether cash is paid or received.

However, interests accruing on loans and advances referred to Legal

as substandard, doubtful and loss loan categories are maintained under

memorandum account and are recognized as income when collected.

Depreciationratesareadheredtoaccordingtotheexistingtaxationlaw.

TheBanksnancialyearstartsontherstofJulyandendsonJune30thofeach calendar year

7. INCOME, EXPENSE AND PROFIT AND LOSS

SUMMARY

Income of the Bank grew from Birr 472.2 million in FY 2008/09 to Birr 565.3million in FY 2009/10, an increase of Birr 93.1 million (19.7%). The following chartcompares the income categories of the three most recent years.


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Trends & Composition of Income

(Million Birr)

Trends & Composition of Expenses

(Million Birr)

TheBanksnetprotbeforetaxasatJune30,2010wasBirr317.5,reectinga

growth rate of 24% over the preceding year (Birr 256.1 million).


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Operating expenses increased during the scal year under consideration

(Birr 247.8million) against that of the preceding scal year (Birr 216.1million)

by Birr 31.7 million (14.7%). The chart above makes expense comparison of

themostrecentthreeconsecutivescalyears:2007/08,2008/09and2009/10.


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B. EXTERNAL AUDITORS REPORT

Getachew Kassaye & Co., Chartered

Certied Accountants

and

Authorised Auditors

P.O. Box 1432

Addis Ababa, Ethiopia

Tel: +(251) 11 551 37 11, 551 17 08

Fax: +(251) 11 551 02 20

E-mail: [email protected]

Addis Ababa, Ethiopia

INDEPENDENT AUDITORS REPORT

TO THE SHAREHOLDERS OF WEGAGEN BANK SHARE COMPANY

1. WehaveauditedtheaccompanyingnancialstatementsofWegagenBankShare

Company (hereinafter referred to as the Bank) for the year ended June 30, 2010, set

out on pages 3 to 23, which have been prepared under the accounting policies set

out on page 7.

Directors Responsibility for the nancial Statements

2. The directors of the Bank are responsible for the preparation and fair presentation

ofthesenancialstatementsinaccordancewithInternationalFinancialReporting

Standards. This responsibility includes: designing, implementing and maintaining

internalcontrolrelevanttothepreparationandfairpresentationofnancialstatements

thatarefreefrommaterialmisstatement,whetherduetofraudorerror;selecting

andapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthat

are reasonable in the circumstances.

Auditors Responsibility

3. Ourresponsibilityistoexpressanopiniononthesenancialstatementsbasedon

our audit. We conducted our audit in accordance with International Standards on

Auditing.Thosestandardsrequirethatwecomplywithethicalrequirementsand

planandperformtheaudittoobtainreasonableassurancewhetherthenancial

statements are free from material misstatement.


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4. An audit involves performing procedures to obtain audit evidence about the amounts

and disclosures inthe nancialstatements.The procedures selected depend on

our judgment, including the assessment of the risks of material misstatement

of the nancial statements,whether due to fraudorerror. Inmaking those risk

assessments, we considered internal control relevant to the preparation and fair

presentationofthenancialstatementsinordertodesignauditproceduresthat

are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Banks internal control. The audit also includes

evaluating the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall

presentationofnancialstatements.Webelievethattheauditevidencewehave

obtainedissufcientandappropriatetoprovideabasisforouropinion.

OPINION

5. Inouropinion,thefnanceialstatementsrepresentfairlythenanceialpositionofthe

BanksasatJune30,2010,anditsprotandcashinowsfortheyearthenended

and are prepared in accordance with International Financial Reporting Standards.

6. We hae no comments to make on the report of the Board of Directors relating to the

nancialmattersandpursanttoarticle375(2)oftheCommercialCodeofethiopiaof

1960;werecommendthattheabovementionednancialstatementsbeapproved

GETACHEW KASSAYE & Co.,

CHARTERED CERTIFIED ACCOUNTANTS

Addis Ababa

October 11, 2010


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WEGAGEN BANK SHARE COMPANY

BALANCE SHEET

AS AT JUNE 30, 2010Currency: Ethiopian Birr

2009

Notes BIRR BIRR

ASSETS

Cash and bank balances with local banks 3, 2h 1,130,263,762 1,953,689,386

Reserve with National Bank of Ethiopia 598,388,527 528,388,527

Deposits with foreign banks 4, 2g 1,107,079,525 433,470,784

Treasury bills-NBE 5 199,990,000 -

Loans and advances 6, 2d 2,375,625,606 1,983,747,131

Stocks of supplies 7 29,083,956 10,334,237

Other assets 8 202,190,283 134,754,442

Deferred charges 9,2i 16,546,518 16,289,148

Leaseholdland 2j 15,835,026 15,835,026

Property,plantandequipment 10,2e 66,933,372 41,802,778

TOTAL ASSETS 5,741,936,575 5,118,311,459

LIABILITIES

Deposits from customers 11 3,815,751,230 3,550,855,857

Depositsfromnancialinstitutions 12 107,047,487 177,526,300

Other liabilities 13 329,984,826 251,652,599

Margin held on letters of credits 332,174,840 214,384,740

Provision for taxation 14 94,187,072 75,499,105

Leasehold land payable 11,065,089 11,978,274

TOTAL LIABILITIES 4,690,210,544 4,281,896,875

CAPITAL AND RESERVES

Paid up capital 15 633,170,000 517,618,000

Share Premium 16 21,415,250 14,243,500

Legal Reserve 17 209,317,331 153,482,102

Special Reserve 18 20,317,764 15,619,220

Retained Earnings 19 167,505,686 135,451,762

1,051,726,031 836,414,584

TOTAL CAPITAL, RESERVES AND LIABILITIES 5,741,936,575 5,118,311,459

Sebhat Nega

Chairman of The Board of Directors

Addis Ababa

October 11, 2010


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INCOME STATEMENT

FOR THE YEAR ENDED JUNE 30, 2010Currency: Ethiopian Birr

2009

Notes BIRR BIRR

INCOME

Interest income 20, 2f 247,251,582 233,543,954

Less :Interest expense 21 75,742,832 83,458,171

Net interest income 171,508,750 150,085,783

Fees and commission income 22, 2f 139,233,614 90,186,237

Net gains from dealing in foreign currencies 2g 145,125,297 139,694,032

Other income 23 33,731,683 8,815,418

Net operating income 489,599,344 388,781,470

Provision for doubtful loans and advances 2d -

Provision for doubtful debts other than loans

and advances (8,525,334) (2,901,000)

Net interest and other income afterprovision for doubtful debts 481,074,010 385,880,470

LESS: - EXPENSES

Salariesandbenets 90,846,238 74,344,643

General and administrative 24 65,630,338 49,701,732

Directors fee 25 6,976,359 5,652,543

Audit fee 93,088 80,098

163,546,023 129,779,016

PROFIT BEFORE TAXATION 317,527,987 256,101,454

LESS: PROVISION FOR TAXATION 14 94,187,072 75,499,105

NET PROFIT AFTER TAXATION 223,340,915 180,602,349

TRANSFER TO LEGAL RESERVE 55,835,229 45,150,587

NET PROFIT AFTER TAX AND LEGAL RESERVE 167,505,686 135,451,762

EARNING PER SHARE OF BIRR 1,000 30 380 389


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STATEMENT CHANGES IN SHAREHOLDERS EQUITY


Paid up Share Legal Special Retained

Capital Premium Reserve Reserve Earnings Total

Birr Birr Birr Birr Birr Birr

Balance as at July 1, 2008 370,825,000 9,679,450 108,331,515 12,484,693 104,128,130 605,448,788

Dividend paid - - - - (39,743,117) (39,743,117)

Premium collected - 4,564,050 - - (37,060) 4,526,990

Dividend capitalized

2007/2008 57,831,003 - - (12,484,693) (45,346,310) -

Dividend capitalized

2006/2007 951,461 - - - - 951,461

New shares issued 90,581,536 - - - - 90,581,536

Netprotfortheyear - - - - 180,602,349 180,602,349

Transfer to Special Reserve - - - 15,619,220 (15,619,220) -

Transfer to dividend payable - - - - (3,382,423) (3,382,423)

Transfer to Legal Reserve - - 45,150,587 - (45,150,587) -

Repayment of capital (2,571,000) - - - - (2,571,000)

- - - - - -

Balance as at June 30, 2009 517,618,000 14,243,500 153,482,102 15,619,220 135, 451,762 836,414,584

Dividend paid - - - - (58,135,628) (58,135,628)

Premium collected 7,171,750 - (163,703) 7,008,047

Dividend capitalized 68,609,378 - (15,619,220) (52,990,158) -

New shares issued 46,942,622 - - - 46,942,622Netprotfortheyear - - - 223,340,915 223,340,915

Transfer to Special Reserve - - 20,317,764 (20,317,764) -

Transfer to dividend payable - - - (3,844,509) (3,844,509)

Transfer to Legal Reserve - - 55,835,229 - (55,835,229) -

Balance as at June 30, 2010 633,170,000 21,415,250 209,317,331 20,317,764 167,505,686 1,051,726,031


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CASH FLOW STATEMENT


2009BIRR BIRR BIRR

Cash In Flow from Operating ActivitiesProtbeforetaxation 317,527,987 256,101,454Depreciation 10,358,957 8,936,864Amortization 1,448,763 -Adjustmentonxedassets - 21,281

Operatingprotbeforechangeinworkingcapital 329,335,707 265,059,599

(Increase)/decrease in stocks of supplies (16,786,745) 36,550

Increase in other assets (67,435,841) (88,765,210)(Increase)/decrease in loans and advances (391,878,475) 224,180,999Increase in deposits from customers 264,895,373 982,979,471Decreaseindepositsfromnancialinstitution (70,478,813) (220,927,471)Increase/(decrease) in margin held on letter of credits 117,790,100 (45,775,177)Increase in other liabilities 78,332,227 22,773,620Dividend transferred to liability (462,086) 2,213,163Decrease in leasehold payable (913,185) (942,330)

242,398,262 1,140,833,214

Net Cash In Flow from Operating Activities 242,398,262 1,140,833,214

INVESTING ACTIVITIESAcquisitionofxedassets 25,746,671 10,204,682Purchase of treasury bills 199,990,000Deferred expenditures paid 13,935,669 15,473,347

(239,672,340) (25,678,029)TAXATIONProttaxpaid (75,499,105) (51,153,448)

FINANCING ACTIVITIESNew shares issued 46,942,622 90,581,536Capital Repayment - (2,571,000)Premium collected 7,008,047 4,526,990

Equitydividendpaid (60,994,369) (44,387,242)(7,043,700) 48,150,284

Net (Decrease)/ Increase in Cash andCashEquivalents (79,816,883) 1,112,152,021

Cash Balances Increase in Cash balances

30/06/09 Cash 30/06/10Birr Birr Birr

Cash and bank balances with local banks 1,953,689,386 (823,425,624) 1,130,263,762Reserve with National Bank of Ethiopia 528,388,527 70,000,000 598,388,527Cash with foreign bank 433,470,784 673,608,741 1,107,079,525

2,915,548,697 (79,816,883) 2,835,731,814


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NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2010

1. BACKGROUND

Wegagen Bank S. Co. was formed in Ethiopia in 1997 and is registered as a public share holding

Company in accordance with the provision of the licensing and supervision of Banking Business

Proclamation No. 84/94 and the Commercial Code of Ethiopia 1960. The Bank had a network

of50branchesthroughoutthecountryandofceforinternationalmoneytransfercompanies

operating under the Banks agency in Ethiopia.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Bank, which are consistent with those applied

in the preceding year, are stated below:-

a) Statement of Compliance

ThenancialstatementshavebeenpreparedinaccordancewithInternationalFinancial

Reporting Standards (IFRS) promulgated by the International accounting standards

board.

b) Basis of Accounting

The nancial statements are prepared on historical cost basis. Financial assets and

liabilitiesandnon-nancialassetsandliabilitiesarestatedatamortizedcostorhistorical

cost, except for foreign currencies, which are stated at closing exchange rate.

The Bank has consistently applied the accounting policies used in the previous years.

c) Financial Instruments

i)Classication

Anancial instrument is anycontractthatgivesrisetoanancialasset forthe bank

andanancialliabilityorequityinstrumentofanotherparty.Allassetsandliabilitiesin

thebalancesheetarenancialinstrumentsexceptxedassets,deferredchargesand

shareholdersequity.

ThemajornancialinstrumentsofthebankareloansandadvancescreatedbytheBank


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providing money to debtors. Loans and advances comprise deposits and other balances

due from banks and loans and advances to customers.

ii) Recognition of Financial Instruments

Thebankinitiallyrecognizesnancialassetsandliabilitiesonitsbalancesheetonthedateit

becomes a party to the contractual provisions of the instrument. Any gains and losses arising

from changes in value of the asset are recognized from this date. When the Bank becomes a

partytothecontractualtermscomprisingaloanandasaconsequencehasthelegalrightto

receiveprincipalandinterestpaymentsontheloan,itcontrolstheeconomicbenetsassociated

with the loan. Normally, a bank becomes a party to the contractual provisions that comprise a

loan(i.e.,acquireslegalownershipoftheloan)onthedateoftheadvanceoffundsorpayment

to third party. As a result, a commitment to lend funds is not recognized as an asset on the

balance sheet.

iii) De-recognizing of Financial Instruments

Allnancialassetsarede-recognizedwhentheBanklosescontroloverthecontractualrights

that comprise the assets. This occurs when the rights are realized, expired or are surrendered.

Anancialliabilityisde-recognizedwhenitisextinguished.

iv) Measurement of Financial Instruments

TheBankmeasuresallnancialinstrumentsinitiallyatcost,includingtransactioncosts.

d) Loans and advances

LoansandadvancesarenancialinstrumentsoriginatedbytheBankbyprovidingmoneytothe

debtors. The loans and advances are stated at cost less impairment losses. Impairment lossescomprisespecicprovisionsagainstdebtsidentiedasbadanddoubtfulandgeneralprovisions

against losses which are likely to be present in any loans and advances portfolio. The Bank

follows the National Bank of Ethiopia Supervision of Banking Business Directive SBB/43/2008 in

determining the extent of provisions for impairment losses.

TheDirectiveclassiesloansandadvancesintothefollowing:-


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i) Pass Loans

Loansandadvancesinthis category arefully protectedbythe currentnancialandpaying

capacityoftheborrowerandarenotsubjecttocriticism.Ingeneral,loansandadvances,which

arefullysecured,bothastoprincipalandinterest,bycashorcashsubstitutes,areclassied

under this category regardless of past due status or other adverse credit factors.

ii) Special Mention

Anyloanoradvancepastdue30daysormore,butlessthan90daysisclassiedunderthis

category.

iii) Substandard

Non-performingloansoradvancespastdue90daysormorebutlessthan180daysisclassied

under this category.

iv) Doubtful

Non-performingloansoradvancespastdue180daysormorebutlessthan360daysisclassied

as doubtful.

v) Loss

Non-performingloansoradvancespastdue360daysisclassiedasloss.Asperthisdirective,

the provision for impairment losses is determined as follows:

Loan Category Extent of Provision required

1 Pass loans 1% of outstanding loan balances

2 Special mention loans 3% of the outstanding loan balances

3 Substandard loans 20% of the net loan balance

4 Doubtful loans 50% of the net loan balance

5 Loss loans 100% of the net loan balance

Note:-

Net loan balance is outstanding loan balance less net recovery value of collaterals.


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e) Fixed Assets

Fixed assets are stated at cost less accumulated depreciation. Depreciation is charged on the

straight-line basis at the following rates per annum.

%

Vehicle 20

Furniture,ttingsandequipment 10

Computers 10

Building 5

Acquiredproperty 5

For prot tax purpose, necessary adjustments are made to comply with the income tax

proclamation 286/2002. (Note 14)

f) Revenue Recognition

Interest income and expense in the income statement are recognized on accrual basis. However,interest accruing on loans and advances referred to legal counsel including substandard, doubtful

and loss loan categories are maintained under memorandum account and are recognized as

income when collected.

Feeandcommissionincomearisesonnancialservicesprovidedbythebankandarerecognized

as income when the services are provided to customers.

g) Foreign currencies

Foreign currency transactions are recorded at rates of exchange ruling at the date of the

transactions. Monetary assets denominated in foreign currencies, which are stated at historical

cost, are translated at the exchange rates ruling at June 30, 2010. Foreign exchange differences

arising on translation are recognized in the income statement.

h) Cash and Cash Equivalents

Cash andcashequivalents consistof cash on hand andbalancewith thenationalBankof

Ethiopia, domestic and foreign banks payable on demand.


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i) Deferred Charges

Deferred charges represent expenses incurred for the establishment of Card Payment System

Project&Core Banking&DataMigration Project.Deferred chargesare amortized overve

years.

j) Leasehold Land

Thebankhasacquired2,254sq.mleaseholdlandfromAddisAbabaCityAdministrationforthe

period of 90 years.

k) Assets Awaiting for Resale

Collateralsseizedorforeclosedbythebankareclassiedasassetawaitingforresaleiftheir

carrying amount will be received principally through a sale transaction rather then continuing

use. This condition is regarded as met only when the sale is highly probable and the asset is

available for immediate sale in its present condition. Management is committed to the sale,

whichshouldbeexpectedtoqualifyforrecognitionasacompletedsalewithinoneyearfrom

thedateofclassication.

3. CASH AND BANK BALANCES2009

BIRR BIRR

Cash in hand 430,728,939 318,461,235

Deposits with domestic banks 422,692,959 270,900,271

NBE payment and settlement account 276,841,864 1,364,327,880

1,130,263,762 1,953,689,386

4. DEPOSIT WITH FOREIGN BANKSCorrespondent accounts 565,795,525 139,735,784

Fixed deposits 541,284,000 293,735,000

1,107,079,525 433,470,784

5. TREASURY BILLS

Purchase of 28 days treasury bills from Ethiopian Government is matured on July 13, 2010.

Currency: Ethiopian Birr


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6. LOANS AND ADVANCESa) The loans and advances are due as follows:-

2009

BIRR BIRR

Within 12 months 1,155,956,792 1,054,138,267

After 12 months but within 24 months 576,196,294 405,811,102

After 24 months 687,141,493 595,822,630

2,419,294,579 2,055,771,999

Add:-Loans under litigation 54,577,915 56,609,077

2,473,872,494 2,112,381,076Less:-Provision for doubtful loans and advances 98,246,888 128,633,945

2,375,625,606 1,983,747,131

b) The composition of loans and advances by sector is as follows: -

Agriculture 23,171,545 34,522,811

Building construction 91,854,471 69,545,926

Manufacturing 341,039,958 261,623,755

Hotel and tourism 40,358,055 21,159,147

Wholesale and retail 207,351,341 171,791,876Health services 2,507,668 3,484,173

Transport vehicles 223,805,373 196,283,699

Miscellaneous domestic trade 82,880,533 81,093,748

Advance against export bills - 14,398,969

Advance against import bills 20,286,224 10,769,982

Staff loans 9,566,954 7,712,819

Consumers loans 96,772 313,853

Automobile loans 16,449,643 15,832,119

Export 325,422,750 187,024,069

Import 540,511,413 414,690,038Construction bridge loans 145,201,073 148,368,326

Mortgage loans 85,999,859 54,847,928

Transport loans 17,780,626 11,942,070

Personal loans 8,855,121 7,654,003

Revolving export credit 209,453,076 321,325,691

Loans under litigation 54,577,915 56,609,077

Special staff loans 26,702,124 21,386,997

2,473,872,494 2,112,381,076

Less: -Provision for doubtful loans and advances 98,246,888 128,633,9452,375,625,606 1,983,747,131



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7. STOCKS OF SUPPLIES2009

BIRR BIRR

Negotiable instruments 1,023,547 1,427,489

Check books 1,069,541 1,378,625

Stationary 2,539,016 812,757

Bank forms 1,102,899 536,754

Travelerscheque 4,600,016 679,299

Memorial coins 974,200 1,148,200Fixed assets in store 13,098,686 4,093,513

EMV Visa cards 3,530,766 -

Pin mailers 434,402 -

Private label cards 49,794 -

Others 661,089 257,600

29,083,956 10,334,237

8. OTHER ASSETS

Payment and deposits 46,432,890 43,737,110

Receivable from NBE 109,433,303 22,645,676

Staff receivables 281,923 16,980

Accrued income receivables - 235,281

Receivable from African Insurance 946,243 746,991

Assets awaiting for resale 7,650,012 12,850,170

Receivable from Dehabshil MTC 38,870,184 54,227,945

Receivable from Amal Express 2,141,411 2,304,690

Receivable from branches under formation 1,775,713 4,774,044Receivable from Kah Express Ltd 9,143,352 -

Visa settlement receivable 634,918 -

Inter-branch balances 108,611 -

Others 104,971 23,467

217,523,531 141,562,354

Less: - Provision for bad debts 15,333,248 6,807,912

202,190,283 134,754,442



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9. DEFERRED CHARGES

2009

BIRR BIRR

Card Payment System-ATM 7,243,816 16,265,906

Less: amortization 1,448,763 -

5,795,053 16,265,906

Core Banking & Data Migration 10,751,465 23,242

16,546,518 16,289,148

10. PROPERTY, PLANT AND EQUIPMENT

Balance Balance 01/07/09 Additions Adjustments 30/06/10

COST Birr Birr Birr Birr

Premises 1,038,825 3,000,100 4,038,925

Motor vehicle 32,234,985 10,716,584 42,951,569

Computer and accessories 18,190,196 15,713,989 33,904,185

Ofceandotherequipment 14,304,608 4,012,294 18,316,902 Ofcefurnitureandttings 16,331,603 2,720,543 19,052,146

Acquiredproperty 621,766 621,766

Construction in progress:

Mekelle 1,523,547 (1,523,547) -

Headofce 923,649 849,588 - 1,773,237

85,169,179 37,013,098 (1,523,547) 120,658,730

DEPRECIATION

Premises 355,422 89,443 444,865

Motor vehicle 21,726,297 5,354,998 27,081,295

Computer and accessories 8,034,513 1,968,224 10,002,737

Ofceandotherequipment 5,091,682 1,555,927 6,647,609

Ofcefurnitureandttings 8,153,538 1,359,277 9,512,815

Acquiredproperty 4,949 31,088 36,037

43,366,401 10,358,957 53,725,358

NET BOOK VALUE 41,802,778 66,933,372


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11. DEPOSITS FROM CUSTOMERS2009

BIRR BIRR

Payable on Demand

Private sector 1,586,908,336 1,662,535,101

Public agencies and enterprises 365,994 872,939

Regional governments 680,028 3,955

Cooperatives and associates 7,957,000 5,721,223

Non-resident accounts 41,454,193 21,001,775Resident foreign currency account 64,387,266 12,534,160

Zero balance account 227 1,969,504

Special demand deposit 33,540,700 139,434,443

ECX paying and settlement account 25,282,088 5,432,043

1,760,575,832 1,849,505,143

Saving deposit

Private sector 1,864,687,623 1,415,775,659

Cooperatives and associates 65,405,120 72,901,394Now accounts 14,673,797 17,417,553

Children trust fund 1,542,539 914,515

Special savings 5,345,042 2,425

Public agencies and enterprises 2,519 5,146,046

1,951,656,640 1,512,157,592

Term Deposits

Private sector 22,426,576 6,303,902

Public agencies and enterprises 81,092,182 182,889,220

103,518,758 189,193,122

3,815,751,230 3,550,855,857

12. DEPOSIT FROM FINANCIAL INISTUTIONS

Payable on demand 9,761,580 20,697,756

Saving deposit 8,797,126 5,824,476

Fixed time deposit 88,488,781 151,004,068

107,047,487 177,526,300



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13. OTHER LIABILITIES

2009

BIRR BIRR

Cashier payment order 202,503,605 146,863,644

Blocked current account 6,403,754 2,584,556

Unearned revenue 2,952,352 8,119,224

Accrued interest on savings and deposits 4,838,401 12,687,952

Provision for annual leave 8,933,524 5,976,860

Local transfer payable 24,635,230 20,281,155

Provision for bonus 9,355,774 6,934,335

Exchange commission 32,305,582 25,250,898

Deposit for guarantees issued 5,724,359 2,208,800

Taxes and stamp duty charges 38,064 47,428

Miscellaneous payable 17,361,977 8,206,069

Dividend payable 3,844,509 3,382,423

Saving account-block - 464,000

Foreign transfer payable 1,071,483 1,228,844

Inter-branch balances - 118,264

Guarantee fee payable 634,303 1,819,070Staff payable 201,089 534

Court case 2,388,461 -

Directors fee payable 6,792,359 5,478,543

329,984,826 251,652,599

14. PROVISION FOR TAXATION

Balance as at July 1, 2009 75,499,105Less: -Payments 75,499,105

- Protbeforetax 317,527,987

Add: -Non allowable expenses

Depreciation in accordance with accounting policy 10,358,957

Provision made during the year other than loan & advances 1,125,618

Entertainment 157,959

Less: - Allowable expenses

Depreciation in accordance with tax regulation 286/2002 14,303,070

Interest on deposit with foreign banks 881,546

Interest on treasury bills 29,000

TaxableProt 313,956,905 Provisionforprottax@30% 94,187,072


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15. PAID UP CAPITAL

BIRRBalance as at July 1, 2009 517,618,000

Add: -New shares issued 46,942,622

Capitalized dividend 68,609,378

633,170,000

16. SHARE PREMIUM

Balance as at July 1, 2009 14,243,500

Add: -Premium on New shares issued 7,008,047

Premium on Capitalized dividend 163,703

21,415,250

17. LEGAL RESERVE

a) The detail is as follows

Balance as at July 1, 2009 153,482,102Add:-Transfer from Retained Earnings 55,835,229

209,317,331

b) 25%ofthenetprotaftertaxationistransferredtolegalreserveaccountuntilthebalance

reaches the paid up capital in accordance with Proclamation No. 592/2008 Article 19(1)

of the Licensing and Supervision of Banking

18. SPECIAL RESERVE

a) The detail is as follows

Balance as at July 1, 2009 15,619,220

Less:-Capitalized dividend 15,619,220

Add: -Transfer from Retained Earnings 20,317,764

20,317,764

b) Thebalancerepresents15%ofretainedearningsofthepreviousscalyearsetasidein

accordance with the decision of the shareholders.


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19. RETAINED EARNINGS

BIRRBalance as at July 1, 2009 135,451,762

Less: -Transfer to Special Reserve 20,317,764

Capitalized dividend 52,990,158

Capitalized Premium on dividend 163,703

Dividend paid on cash 58,135,628

Dividend transferred to liability 3,844,509

Add:-Netprotfortheyear 167,505,686167,505,686

20. INTEREST INCOME

2009

BIRR BIRR

Interest on loans and advances 246,341,036 226,076,100

Interest on deposits with foreign banks 910,546 7,467,854

247,251,582 233,543,954

21. INTEREST EXPENSE

Savings deposits 59,995,345 44,740,380

Fixed time deposits 15,037,392 33,149,391

Special demand deposit 710,095 5,568,400

75,742,832 83,458,171

22. COMMISSION, FEES AND CHARGES

Letter of credit 95,946,058 46,452,724

Letter of guarantees issued 21,497,216 25,583,351

Local transfer and others 21,790,340 18,150,162

139,233,614 90,186,237


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23. OTHER INCOME2009

BIRR BIRR

Rebet 466,888 385,617

Swift charge 844,868 940,369

Rent 51,325 53,910

Provision for doubtful loans, advances 30,387,057 4,111,787

Gainondisposalofacquiredassets 595,179 2,130,717

Cash surplus 93,660 75,371

Estimation fee 235,244 206,130

Correspondent charges 6,126 180

Income from card payment 2,911 -

Sundries 1,048,425 911,337

33,731,683 8,815,418

24. GENERAL AND ADMINISTRATIVE EXPENSES

Ofcerent 20,104,440 15,810,205

Stationery and printing 5,073,101 3,140,195

Communication 5,964,409 5,508,251Fuel and lubricants 2,409,745 1,728,791

IT support charges 763,833 597,343

Advertising and publicity 2,163,863 2,138,499

Repair and maintenance 1,998,354 1,632,585

Insurance 2,765,853 2,149,628

Electricity and water 668,157 585,933

Membership subscription 453,226 324,836

Entertainment 157,959 214,085

Wages 148,947 119,649

Inauguration 46,077 58,321Depreciation 10,358,957 8,936,865

Amortization 1,448,763 -

Cleaning supplies 362,790 233,755

Transportation 1,319,724 1,234,337

Guest house expense 10,442 12,706

License and inspection fee 6,350 10,050

Perdiem 534,100 526,865

Leased line for computerization 1,438,005 1,463,477

Renovation 45,982 -

Sundries 7,387,261 3,275,35665,630,338 49,701,732



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25. DIRECTORS FEEa) The detail is as follows

2009

BIRR BIRR

Board meeting allowance 184,000 174,000

Protsharing-5% 6,792,359 5,478,543

6,976,359 5,652,543

b) Directors feesapplicable to theyearunderreviewwascomputedat5%ofprotafter

tax, legal reserves and special deductions amounting to 5% of the paid up capital that

isreportedasanappropriationofretainedearnings.Thedirectorsfeesaresubjectto

approval of the shareholders for disbursement.

26. CONTINGENT LIABILITIES AND COMMITMENTS

a) Contingent liabilities represent credit-related commitments to extend letter of credit,

guarantees and of outward bill collections sight contracts which are designed to meet the

requirementsoftheBankscustomerstowardthirdparties.Commitmentsrepresentthe

Banks approved but unutilized facilities and other commitments of the Bank.

Contingent Liabilities

Letter of credit (Note (c)) 845,046,199 452,830,212

Bank guarantee (Note (c) 545,324,855 801,130,502

1,390,371,054 1,253,960,714

Commitments (Note (d)

Undrawn loans and advances approved but

not disbursed 145,135,397 100,529,469

Unutilized merchandise revolving facility and

unutilized advance against export bills 84,695,240 103,800,583

Unutilized overdraft facility 140,245,067 180,624,691

c) The bank has a lien on the goods imported through letter of credit as the suppliers are

requiredtosendshippingdocumentsdirectlytotheBank.

d) The risk exposure involved in connection with the performance guarantees issued is

managed in the following manner. The bank has held collaterals and letters of undertaking

inrespectofmostguaranteesissuedtoitscustomers;


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27. MATURITIES OF ASSETS AND LIABILITIES

a) The detail is as follows: - From 6 Total Less than 6 months Overmonths to one year one year

BIRR BIRR BIRR BIRR

ASSETS

Cash and bank balances 2,835,731,814 2,835,731,814 - -

Treasury bills 199,990,000 199,990,000Loans and advances 2,375,625,606 - 1,155,956,792 1,219,668,814

Other assets and stock supplies 231,274,239 - 231,274,239 -

Deferred charges 16,546,518 - - 16,546,518

Leasehold land 15,835,026 - - 15,835,026

Fixed assets 66,933,372 - . - . 66,933,372

Total Assets 5,741,936,575 3,035,721,814 1,387,231,031 1,318,983,730

LIABILITIES AND SHAREHOLDERS FUND

Customers deposits 3,815,751,230 3,815,751,230 - -

Depositinnancialinstitutions 107,047,487 - 107,047,487 -

Other liabilities 329,984,826 329,984,826 - -

Margin held 332,174,840 332,174,840 - -

Leasehold and payable 11,065,089 - 913,186 10,151,903

Prottaxpayable 94,187,072 94,187,072 - -

Shareholders funds 1,051,726,031 - - 1,051,726,031

Total liabilities andshareholders funds 5,741,936,575 4,572,097,968 107,960,673 1,061,877,934

b) Theanalysisreectsthecontractualmaturitiesofassetsandliabilities,whichhavebeendetermined

on the basis of the remaining period at the balance sheet date to the contractual maturity date. In

the case of assets and liabilities that do not have a contractual maturity date, the period in which

these are assumed to mature is taken as the expected date of maturity.


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28. RELATED PARTY TRANSACTIONS a)Thesignicantbalancesandtransactionsincludedinthenancialstatementsareindicated

as:-

2009

BIRR BIRR

Loans and advances at June 30, 2010 88,651,514 84,869,349

Customers deposits at June 30, 2010 247,365,834 169,841,649

Guarantees issued/contingent liabilities 100,000 -

Interest income for the year 6,830,138 23,766,269

Interest expense for the year 1,666,943 322,577

b) These represent transactions with certain related partieswith major shareholders of

the bank or directors who have control over decision of the bank. The terms of these

transactions were approved by the banks management on agreed terms.

29. RISK MANAGEMENT

This note provides details of the Banks exposure to risk and describes the methods used by

managementtomanagesuchrisk.ThemostimportanttypesofnancialriskstowhichtheBankisexposedarecreditrisk,liquidityrisk,foreignexchangerisk,interestrateriskandoperational

risk.

Credit Risk

Creditrisk,bothonandoffbalancesheet,ismanagedandmonitoredinaccordancewithdened

credit policies and procedures. The credit worthiness of each counterpart is evaluated and

appropriate credit limits are established. To reduce individual counter party credit risk the Bank

ensures, whenever necessary, that all loans are secured by acceptable forms of collateral. Thebank has also established credit limits across industries and products, it regularly reviews its

creditexposure.ThebankloansarediversiedagainstvarioussectorsasshowninNote6to

thenancialstatements.

Liquidity Risk

LiquidityriskarisesinthegeneralfundingactivitiesoftheBankandthemanagementofpositions.

It includes the risk of being unable to fund assets at appropriate maturities and rates and the


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riskofbeingunableto liquidateanassetatareasonablepriceandinappropriatetimeframe.The Bank has a reasonable funding base. Funds are raised mainly from customers deposits.

Thematurityproleismonitoredbymanagementtoensureadequateliquidityismaintained.

Note27tothenancialstatementsanalysesthecontractualmaturitiesofassetsandliabilities.

These have been determined on the basis of the remaining period to maturity as at the balance

sheet date but do not take account of the effective maturities as indicated by the Banks deposit

retentionhistoryandtheavailabilityofliquidfunds.

Foreign Exchange Risk

Foreignexchangerisksarecontrolledbymaintainingmajorcurrencieswhoseexchangerate

against the reporting currency has always been appreciating. The bank settles foreign exchange

transactions of customers at the exchange rate ruling on the date of the transactions. Hence,

the customers bear the cost of the increase in the exchange rates.

Interest Rate Risk

Interestrateriskistheriskthatfairvalueorfuturecashowswilluctuatebecausechangesin

the market interest rate. The bank often revises its lending rate across segments of the creditportfoliobasedonchangesinthecostoffund,reserverequirementandtheperceivedriskin

eachcreditportfoliosegmenttokeeptheoverallprotability.Thisriskismanagedbyincluding

a variable interest rate clause in the loans and advances contracts with customers.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processand

systems), fraud, malpractices or external events. The bank manages its operational risk through

implementation sound policies, procedures and staff training on proper implementation ofoperational manuals by the operational units. Additionally the bank has strong oversight and

supervision and internal control function. Besides, IT system and management audit have been

started to strengthen operational risk management framework.

30. EARNINGS PER SHARE

Earningspershare is calculated by dividing thenet protafter taxbut before legalreserve

amounting to Birr 223,340,915 (2009: Birr 180,602,349) by the weighted average number of

shares outstanding during the year of 588,519 (2009: 464,089)


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31. MEMORANDUM ACCOUNTS2009

BIRR BIRR

Loans and advances written off, kept in

memorandum account 48,823,791 48,830,986

Interest on non performing loans 18,883,294 16,086,553

IBC-acceptance and sight 13,532,741 35,516,207

OBC-own branches and other banks city clearance 7,845,668 32,031,131

Outward document bills for collection-sight 4,269,368 3,166,698

OBC-foreign 1,393,820 684,554

Stockofpartsandtravelerscheque 495,312 444,093

Money bags 9,410 9,593

Uncollected penalty charges on bounced checks 242,146 115,718

b) These represent transactions with certain related partieswith major shareholders of

the bank or directors who have control over decision of the bank. The terms of these

transactions were approved by the banks management on agreed terms.

32. COMPARATIVE FIGURES

Some of the previous year comparative gures have been rearranged in order to facilitate

comparison.


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Location Map of Branch Ofces


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Addresses of City Branch & Other Ofces

No Branch Fixed Line Fax P.O.Box

1 Abakoran 0112-781177/76 0112-781146 51177

2 Abinet 0112-780571/44 0112-780551 1018

3 Africa Avenue 0116-624772 0116-624770 1018

4 Africa Union 0115-547061/63 0115-547062 43186

5 Arada 0111-111074/61 0111-111676 1018

6 Beklobet 0114-663580/81 0114-663608 101841

7 Bole 0115-523524/539568 0115-524455 10621110

8 Bole Medhanialem 0116-616135/33 0116-638968 713/1250

9 CMC Area 0116-479047/43 0116-479048 1018

10 Gerji 0116-29814114 0116-298118 737/1110

11 Goffa 0114-655816/17 0114-654879 56810

12 H/Giorgis 0111-112972/70 0111-578499 24215

13 ILRI 0116-459752/53 0116-459755 1018

14 Kality 0114-394285/86 0114-394284 180

15 Kazanchis 0115-545666/71 0115-545665 1018

16 Merkato 0112-752867/752119 0112-752799 1080

17 Mesalemia 0112-768611/765154 0112-765142 26661

18 MeskelSquare 0115-516652/512728 0115-516834 27571/1000

19 Sebara Babur 0111-570186/570329 0111-570040 20493

20 T/Haymanot 0111-563813/12 0111-563811 56734

21 Wellosefer 0114-66800693 0114-668098 1018

22 Weyra Bethel 0113-492184/495308 0113-495536 1018

23 Wuhalimat 0116-631518/17 0116-625150 170201

24 Militarytera (under opening) 1018

25 International Money

TransferCoordinatingOfce 0116-632274/631617 0116-631618 1018

26 Airport Forex Bureau 0116-650476 0116-298118 1018

27 HeadOfce 0115-523800 0115-523520/21 1018


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Addresses of Outlying Branch Ofces

No Branch Fixed Line Fax P.O.Box

1 Adama 0221-119055/86 0221-126070 1900

2 Adigrat 0344-452866/452790 0344-452745 237

3 Adwa 0347-714046/43 0347-714047 105

4 Agaro 0472-211031/51 0472-211499 404

5 Axum 0347-753631/95 0347-753440 277

6 Bahir Dar 0582-202038/39 0582-202037 1125

7 Bishoftu 0114-371062/25 0114-371010 1721

8 Dessie 0331-113788/89 0331-113790 12779 Dire Dawa 0251-124668/69 0251-110841 107

10 Edaga Mekele 0344-413666/22 0344-413748 1090

11 Gendawuha 0583-310009/370010 0583-310010 19

12 Gondar 0581-114816/15 0581-114620 02

13 Harar 0256-664622/663623 0256-669819 1434

14 Hawassa 0462-202629/204172 0462-205480 723

15 Humera 0344-480005/07 0344-480006 38

16 Jijiga 0257-757628/752057 0257-752058 491

17 Jimma 0471-116393/05 0471-116301 1358

18 Kezira 0251-110285/130371/72 0251-130412 107

19 Kombolcha 0335-510753/54 0335-510576 332

20 Mekelle 0344-408933/34 0344-403269 930

21 Metema Yohannes 0582-311138/39 0583-310278 19

22 Shashemene 0461-103468/66 0461-103469 623

23 Shire 0344-442165/442424 0344-442229 116

24 TogWajaale 0258-820033/32 0258-820034 1301

25 Tulu Bollo 0113-420064/57 0113-420065 15

26 Weliso 0113-41984/411617 0113-410187 415

27 Yirgachefe 0463-320553/320410 0463-320552 118

28 Ruztera Area 0251-124674 0251-124675 107


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HeadOfce

P.O. Box 1018, Addis Ababa, Ethiopia

Tel.: +251 11 5523800

Fax: +251 11 5523520

E-mail: [email protected]

Website: www.wegagenbank.com.et

S ift WEGAETAA

01 wegagen bank ar 2009-10

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