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FBN Bank (UK) Limited

Report and Financial Statement31 March 2008

Report and Financial Statement

3

Our Mission To provide world class

international banking and trade services in support

of commercial relations between Africa and the

European Union

Our Vision To be the first choice UK

and European Bank for Africa

Contents

Profile 04

Officers and professional advisers 05

Chairman’s statement 06

Managing Director/Chief Executive’s Review 08

Directors' report 13

Statement of directors’ responsibilities 15

Independent auditors' report 16

Profit and loss account 17

Balance sheet 18

Statement of changes in equity 19

Cash flow statement 20

Notes to the accounts 21

Report and Financial StatementFBN Bank (UK) Limited

54

FBN Bank (UK) Ltd commenced trading on the 1st November2002 following receipt of the relevant authorisation from theFinancial Services Authority and the approval of the courtsunder the Financial Services and Markets Act 2000. The assetsand liabilities of the former London branch of First Bank ofNigeria PLC were absorbed by FBN Bank (UK) Ltd.

It is a wholly owned subsidiary of First Bank of Nigeria Plcand the office is based in the heart of the city of London,at 28 Finsbury Circus, EC2M 7DT.

First Bank of Nigeria Plc for over a century has distinguisheditself as a leading banking institution and a major contributorto the economic advancement and development of Nigeria.

Founded in 1894 by a shipping magnate from Liverpool,Sir Alfred Jones, the Bank commenced as a small operationin the office of Elder Dempster & Company in Lagos.

It was incorporated as a Limited Liability Company onMarch 31, 1894, with the Head Office in Liverpool. It startedbusiness under the corporate name of the Bank for BritishWest Africa (BBWA) with a paid – up capital of £12,000, afterabsorbing its predecessor, the African Banking Corporation,which was established earlier in 1892. This signalled thepre-eminent position which the Bank was to establish in thebanking industry in West Africa. In the early years ofoperations, the Bank recorded impressive growth and workedclosely with the Colonial Government in performing thetraditional functions of a Central Bank.

To justify its West Africa coverage, a branch was openedin Accra, Gold Coast (now Ghana) in 1896 and another inFreetown, Sierra Leone in 1898. These marked the creationof the Bank’s international banking operations. The secondbranch of the Bank in Nigeria was in the old Calabar in1900 and two years later, services were extended toNorthern Nigeria.

Currently with 453 branches spread throughout Nigeria,the Bank maintains the largest branch network in the industry.

To satisfy the needs of its customers, the First Bank Group hasdiversified into a wide range of banking activities andservices. These include Corporate and Retail Banking,Registrarship, Pension Fund Custodianship, Trusteeshipand Insurance Brokerage.

Over the years, the Bank has experienced phenomenal growth.With a share Capital of N55.6 million in 1980, the Group’sCapital grew to N353 billion as at March 2008. The Group’stotal asset base was N1,527 billion while its deposit basestood at N700 billion as at March 2008.

Market capitalization stood at N895 billion ie N45/share as at 31st March 2008.

To reposition and to take advantage of opportunities inthe changing environment, the Bank embarked on severalrestructuring initiatives. In 1957, it changed its name fromBank of British West Africa to Bank of West Africa. In 1969,the Bank was incorporated locally as the Standard Bank ofNigeria Limited in line with the Companies’ Decree of 1968.

Changes in the name of the Bank also occurred in 1979and 1991, to First Bank of Nigeria Limited and First Bankof Nigeria Plc, respectively. In 1985, the Bank introduceda decentralized structure with five regional administrations.This was reconfigured in 1992 to enhance the Bank’soperational efficiency. In 1996, the Bank introduced theFBN Century – II project to revolutionise its operationsin line with the dynamics of the environment.

FBN obtained a listing on the Nigerian Stock Exchange (NSE)in March 1971 and has won the NSE President’s merit awardnine times for the best financial report in the banking sector.

The Bank has continued to be a leader in financing long-termdevelopment of the economy, which was demonstrated in1947 when the first long-term loan was advanced to the thencolonial government. To demonstrate its commitment to itscustomers and the development of the Nigerian economy,the Bank has since broadened its loan and credit portfoliosto various sectors of the economy.

The Bank has developed tremendously judging from a numberof parameters including number of branches, growth in depositbase, asset size and size of loans and advances. Furthermore,its track record of profitability and reliability in sound bankinghas continually placed the Bank in its leadership position.

In line with its mission statement “remain true to our nameby providing the best financial services possible” the Bank willconsistently transform itself as it forges ahead in its secondcentury of qualitative banking to the nation.

Directors

Ayoola Oba Otudeko, OFR Chairman

Peter Stuart Hinson Managing Director/Chief Executive

John Oche Aboh

Jacobs Moyo Ajekigbe

Michael John Bamber Executive Director, Operations

Christiana Etukudo Fashogbon Executive Director, Business Development

Peter Arnhem Grafham

Abdullahi Sarki Mahmoud

Anthony Robert Paget Williams

Company Secretary

Venetia Carpenter, FCIS

Registered office

28 Finsbury CircusLondonEC2M 7DT

Bankers

HSBC Bank plc, London

Standard Chartered Bank PLC, New York

WestLB AG, Dusseldorf

The Bank of Tokyo – Mitsubishi UFJ, Ltd, Tokyo

Credit Suisse, Zurich

Solicitors

DLA Piper UK LLP, London

Auditors

Deloitte & Touche LLPChartered Accountants and Registered AuditorsLondon

Profile Report and Financial StatementsOfficers and professional advisers


76

Fellow shareholders, invited guests, distinguishedladies and gentlemen,

On behalf of the Directors, Management and staff, I welcomeyou all to the 6th Annual General Meeting of FBN Bank (UK)Limited. I am pleased to inform you that during the 2007/2008 financial year, the Bank recorded steady growth anddevelopment despite turbulent financial markets. Combinedwith the provision of high quality service to our customers,the bank also successfully adhered to the risk and regulatorychanges that have been implemented within the business.

On the back of good business performance, we have upheldour corporate governance responsibilities with accountabilityand transparency at all levels, eagerly working alongsideour regulator, the Financial Services Authority (FSA), to ensurethat with expansion, the risks and challenges facing ourorganisational operations are controlled and kept withinacceptable guidelines. The constant challenge however is tomaintain a healthy balance between financial performance,risk awareness, and management.

Looking ahead to our 7th year of operations, it is usefulto scrutinize the global environment by assessing the forcesshaping the world economy during 2008.

The subprime mortgage crisis that began in the US hasshown no signs of abating, after inducing a knock-on effectthat has resulted in a credit crunch for major financial marketsof the world, particularly in the Americas, Asia and Europe.The US Dollar has fallen to record lows against the Euro andother major world currencies, the US property market is facinga serious downturn, whilst most economies face the spectreof high inflation not witnessed for a generation. These factorshave resulted in increased volatility of commodity prices withan unprecedented surge in the prices of oil and gold, as wellas basic food items. The US is therefore braced for lowereconomic growth during 2008, with global growth expectationsduring the year shored up mainly by the emerging marketsof Brazil, Russia, India and China (BRIC). Despite the ongoingglobal turmoil, these economies continue to record year-on-year development and outstanding performances.

In Nigeria, prolonged disturbances in the oil-rich Niger DeltaRegion have contributed to global crude oil price increases.Undoubtedly, abductions of foreign workers, random violenceand unresolved disputes have caused a reduction in productionlevels and major disruption of crude oil exports. The newadministration of President Umar Musa Yar’Adua has graduallysettled into office, with a 7-point economic reform agendaprioritised on improving infrastructure, in particular theinhibiting power sector. Overall, the economic indicators arepositive with the country recording historically low levels ofdebt, while the Naira continues to appreciate against theUS Dollar.

In our host country, the problems that began with the USsubprime mortgages have rippled into the UK economicfundamentals. The financial markets have experienced toughtimes leading to the first run on a major British bank in overa century, with Northern Rock being effectively nationalised.With the Pound falling to record lows against the Euro,rising inflation, and falling house prices, close monitoring andintervention by the Monetary Policy Committee and otherfinancial authorities have become necessary, in order to curbthe detrimental effects of these factors on economic growth.

1. Operating EnvironmentOur operating environment has remained relatively stableduring the year, as continued economic development andincreased financial transparency have improved internationalbusiness flow between Nigeria and the UK.

The major reform by the Central Bank of Nigeria (CBN) in 2005,which raised the minimum capital base of banks operatingin Nigeria to N25 billion (US $188m), continues to engenderpositive dividends with further consolidation negotiationsbeing reported. Substantial equity injections have thus beenrealised, through public offers which remain in high demandand due to growing confidence within the market. This hasenabled Nigerian Banks to further improve their operations byincreasing their ability to compete with mega-banks in otherparts of the world, invariably leading to increased competition,which indeed we welcome.

Nigeria also continues to enjoy increased earnings from oilexports due to higher oil prices, and the Naira has remainedrelatively stable against other major currencies.

2. Financial ResultsIt is indeed gratifying to inform you that our business continuesto grow from strength to strength as the Bank’s resultsdemonstrate substantial increases in our financial performance.During 2007/2008, the Bank recorded an 84% increase inpre-tax profits to £14.68m. Operating income was up 69%to £22.26m from the previous year, while operating expensesincreased by 48% to £7.62m. In addition, our called-up sharecapital was increased by £60m during the year to £82mreflecting the confidence of the shareholders in ourbusiness model.

With such commendable results, our aim is to uphold ourtrading fundamentals, and ensure that during these difficulttimes, we maintain service and value for our customers,while diversifying our strategies to reflect a changing market,and increased competition. To this end, we continue toinvest innovatively in human resources, as well as newproducts and services.

3. OutlookAs the West African market continues to grow, we believe thaton the back of the growing strength of the First Bank Group,we will expand on our ongoing initiatives, and consolidateour position as the premier UK Bank for the region.

The questions that have lingered about the UK economyhowever remain, and to these risks we have to stay cautious,as tough times seem to lie ahead. With the housing marketcooling and increases in inflation and interest rates aslooming concerns, it is vital that the government and theBank of England remain vigilant to these problems.

Despite uncertainties in the global economy, our goal is toensure that we maintain our momentum, and by doingso capitalise on new opportunities that arise in the market.Hence, we have made substantial investments in a newRepresentative Office in Lagos, Nigeria, and established a fullbranch in Paris, France. We have also strengthened ourmanagement team to reflect our growing business, the newregulatory changes, and for effective risk management.

4. AppreciationLastly, on behalf of the Board, I would like to sincerely thankour customers for their continued patronage and supportfor our business. I wish also to thank the Board of Directors,Management and staff of FBN Bank (UK) Limited for theirimmense contributions and unrelenting commitment to ourshared vision and the achievements we have made thus far.I believe there is a bright future for this institution and,despite numerous challenges, our focus is unhindered tomeet your high expectations.

Thank you for your attention and God bless.

Dr. Oba Otudeko (OFR)Chairman

Chairman’s statement

...our goal is to ensure thatwe maintain our momentum,and by doing so capitaliseon new opportunities thatarise in the market.

Dr Oba Otudeko (OFR)Chairman


98

Distinguished shareholders, invited guests,distinguished ladies and gentlemen.

I am delighted to present my report to the sixth AnnualGeneral Meeting of FBN Bank (UK) Ltd.

The IndustryThe stable environment seen at the start of the year rapidlydisappeared as a result of the debt crisis in the US which hada significant negative global impact on the industry. The failureof major industry names and the massive Bank of Englandsupport operation for one of the UK’s largest mortgage lendershas left the industry in a state of shock. This has led to severalmajor banks raising significant amounts of new capital to boostTier 1 ratios with mixed reactions. In its wake, the industry iscurrently suffering from a lack of confidence which will takeconsiderable time to mend before normal operatingconditions return.

Drastic reductions in US rates to assist a flagging economyhave helped reduce the impact of the crisis in the US. In theUK, the Bank of England face a dichotomy as demands forlower rates to boost the economy compete against equaldemands to hold rates to stem inflationary pressures.

Whilst we are now seeing a few new shoots of optimism,the only certainty is that the future for the industry is unclear.

BASEL II has arrived, somewhat overshadowed by theaforementioned industry events. It is too early to see anybenefits from this new regime except that its introductionappears to have been without any significant issues.

The Foreign Bankers Association, The British BankersAssociation and The International Chamber of Commerce,of which we are members, continue to work actively tohelp guide the industry on major issues.

Regulatory FrameworkThe Regulatory Framework in the UK under the auspicesof the Financial Services Authority (‘FSA’) continues to beconsidered as a leader of global regulatory standards eventhough there has been a level of criticism over the past year.The fact remains that the industry is well regulated andconsumers have not lost money.

We keep the FSA closely informed of our future directionand strategy to ensure this aligns with good market practice.With their increased focus on ‘Treating Customers Fairly’,we are well placed to demonstrate our adherence to thislatest initiative.

Our BusinessIn the past year we have opened a Branch in Paris to pursuethe francophone West Africa market and a RepresentativeOffice in Lagos to allow us to offer daily face to face contactin our most important market.

Our Banking Division continues to serve four main markets:Correspondent Banking, Government and ParastatalBanking, Commercial and Corporate Banking (Trade Finance),and Private Banking.

Correspondent Banking – working closely with internationalbanks, we provide a professional service to most of the upperquartile Banks and their customers in West Africa, largelythrough the facilitation of Trade Finance, Foreign Exchangeand Payment transactions.

Government and Parastatal Banking – The banking needsof Government and parastatal or state industries are immenseand, whilst the main Nigerian Government relationships aremanaged through our parent bank, we provide the essentialinternational leg of the services.

Commercial and Corporate Banking, (Trade Finance) –according to available statistics Nigeria is the world’s leadingissuer of Letters of Credit and we have seen significant growthin this business for the fourth consecutive year. Our standingin international trade services allows us to capitalise on thisstrength and pursue opportunities in West Africa.

Private Banking – London has traditionally been a place for‘High Net Worth’ visitors from West Africa and this continues.We provide a highly professional and personal service to thisniche market sector.

Business DevelopmentWith business development teams now operating out ofLondon, Paris and Nigeria, we are offering customers a uniqueface to face service across West Africa and capitalising on themany opportunities presented by the vibrant economicgrowth, particularly in Nigeria.

We continue to strive to offer superior levels of customer servicewhich, when added to the ability for customers to access theirbank accounts from anywhere in the world through our internetbanking module, it is a unique offering.

Our core business remains that of Trade Finance and our highlyexperienced team has gained an excellent reputation in themarket. Quality of service and timely delivery are the bedrockwhich continues to attract good new business.

The past year has also seen the very successful launch of ourFirstSave brand which offers UK residents the opportunityof achieving high interest rates on savings through our internetportal. The growth has met our expectations and we areexploring how this can be extended to non residents.

Managing Director/Chief Executive’s Review

Whilst the future for theoverall industry is a littleuncertain in the short term,we remain confident thatthe successful executionof our chosen strategy willdeliver the returns ourshareholder expects

Peter S HinsonManaging Director & Chief Executive

We have also further developed our Private Banking businesswhich primarily provides mortgages for ‘buy to let’ propertyinvestment in the UK. A friendly efficient service and face to facemeetings either in London or Nigeria is seen by customersas attractive.

Financial PerformanceFor the sixth consecutive year the Bank performed very well.Overall it was an excellent year that reflected good growth inevery sector of our business against an increasingly competitivebackground. Profit before tax grew by some 84% to £14 millionwhich translates to a return on average capital employed of30%, which we believe to be one of the highest for a bankin London.

All income lines evidenced substantial growth matched bya sensible control on expenses. We continue to reap the benefitsof the earlier investment in technology in our fierce challengeon the ever rising costs of operating a business in London.

With the desire to maintain strong capital ratios post theintroduction of Basel II and the exceptionally strong businessgrowth, we completed negotiations with our parent bankfor £60m Tier 1 capital injection by the issue of new ordinaryshares. This has left us well placed against our peer group.

Our CustomersI have again had the pleasure of meeting many of ourcustomers, both in the UK and West Africa – the mostimportant asset a bank can have. The continuing supportreceived is immense and we are very grateful for theirbusiness. It has also been exciting to listen to our customers’plans for the future, plans in which we will assist to ensuretheir visions translate into reality.

Corporate GovernanceThe Board of Directors is composed of 9 members,6 Non Executives and 3 Executives.

The Board, in summary, agrees the strategic direction,business plan and annual budget which are then implementedby the Executive. The Board is currently supported by thefollowing Committees which meet at least quarterly.

Board Nomination & Remuneration CommitteeChairman A O Otudeko OFR Non Executive ChairmanMembers P S Hinson Managing Director

J M Ajekigbe Non Executive DirectorA R P Williams Non Executive Director

Board Audit CommitteeChairman P A Grafham Non Executive DirectorMembers J O Aboh Non Executive Director

A S Mahmoud Non Executive DirectorA R P Williams Non Executive Director


11

Corporate ResponsibilityWorking with our parent bank we have undertaken to bea good corporate citizen by supporting worthy causes in variousways. Donations are approved by the Executive ManagementCommittee and take into account the benefit to society andthe support of our staff who may be either directly orindirectly involved in the good cause.

We are proud to have specifically supported the followingduring the year:-

The Nigeria High Commission Nigeria Day celebrations

The London Business School

The Anthony Nolan Trust

The London Nigerian Rugby Football Club

International Banker’s Charitable Trust

Youth Enterprise Initiatives

Brain Injury Rehabilitation & Development

The FutureWhilst the future for the overall industry is a little uncertainin the short term, we remain confident that the successfulexecution of our chosen strategy will deliver the returns ourshareholder expects. New product delivery and a continuingemphasis on the provision of a high quality service allied tomeeting the regulatory requirement of ‘Treating CustomersFairly’ will pay dividends.

Our development into a bank that provides services fromLondon and Paris to customers across West Africa, will maintainour position as the leading bank in this sector.

ConclusionI am grateful for the continuing support of the Group’s Lagosbased Executives and the way in which they have helpedwith our establishment and growth as well as the guidancefrom the learned Non-Executive Directors. We have a soundbusiness model and will take advantage of it to deliverexcellent growth.

In closing I would especially thank our customers, our employeesand our Board alike.

Peter S HinsonManaging Director/Chief Executive


10

Board Credit CommitteeChairman J M Ajekigbe Non Executive DirectorMembers P S Hinson Managing Director

C E Fashogbon Executive DirectorBusiness Development

A S Mahmoud Non Executive DirectorA R P Williams Non Executive Director

Board Establishment CommitteeChairman J O Aboh Non Executive DirectorMembers P S Hinson Managing Director

P A Grafham Non Executive DirectorA R P Williams Non Executive Director

Board Strategy Review CommitteeChairman A R P Williams Non Executive DirectorMembers P S Hinson Managing Director

J O Aboh Non Executive DirectorM J Bamber Executive Director,

OperationsC E Fashogbon Executive Director,

Business DevelopmentP A Grafham Non Executive DirectorA S Mahmoud Non Executive Director

Executive CommitteesThe Executive operate through the following Committeesto implement the business plan.

Executive Management CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director,


Business DevelopmentS O Aiyere Head of FinanceM J Barrett Head of RiskM C Connell Head of Compliance

Executive Credit CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director,



& MLRO

Anti Money Laundering CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director,



& MLROR Harris Compliance Manager

& Assistant MLROT Fall Head of Customer Services

& Assistant Deputy MLRO

Asset & Liability CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director,



& MLROM J Newcomb Treasurer

Risk Management CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director,



& MLROM J Newcomb Treasurer

Report and Financial Statements Report and Financial Statements


1312

The directors have pleasure in presenting their annualreport and the audited financial statements for the yearended 31 March 2008.

Principal activitiesFBN Bank (UK) Ltd is an authorised banking institution regulatedby the Financial Services Authority and provides a range ofdomestic and international banking and financial services.

The principal activities are the provision of CorrespondentBanking, Corporate Banking, Private Banking and Treasuryservices to our clients.

The Bank concentrates on the provision of services to existingand new customers with business interests spanning Europeand Africa. We work very closely with our colleagues in FirstBank of Nigeria Plc and the FBN Bank (UK) Ltd RepresentativeOffice in Nigeria, to provide structured trade finance productsand target a large volume of corporate lending facilities.We also focus on banks in Africa for their correspondentbanking needs; by providing trade links to Europe and therest of the world.

Private Banking has a client base largely resident in the WestAfrica region and the United Kingdom respectively. We arecurrently focused on a deposit driven customer propositionwhich is at present outsourced in the United Kingdom.

Treasury acts as the funding and liquidity management hubfor FBN Bank (UK) Ltd. Its focus is primarily on foreignexchange and money market activities.

We intend to improve our products and services in the comingyear with more focus on provision of structured customer-ledbusiness through a more active involvement in customerrelationship management. To achieve this objective we haverecently set up a branch in Paris and an enlarged NigeriaRepresentative Office. The Paris branch is expected to providethe bank with access to wider African businesses.

International Financial Reporting StandardsFBN Bank (UK) Ltd has prepared these financial statementsusing International Financial Reporting Standards (IFRS) asadopted in the EU. The notes to the financial statements setout changes to accounting policies and adjustments made tocomparative information for 2007, as those financial statementswere originally prepared using UK Generally AcceptedPrinciples (UK GAAP).

Business reviewThe company is an authorised banking institution andprovides a range of banking and financial services. There havenot been any significant changes in the company’s principalactivities in the year under review. The directors are notaware, at the date of this report, of any likely changes in thecompany’s activities in the forthcoming year.

The company continues to invest in human capital andtechnology which has resulted in improved productivity.The directors regard such investment as necessary for thecontinued success in the medium to long term futureof the business.

As shown in the company’s income statement, the netinterest income and fee income increased by 64% and 91%respectively over the prior year (2007: 36.8% and 35%).The income growth can be directly attributable to increasedbusiness volume.

One of the company’s key measurements of effectiveness ofits operations is calculating operating margin after direct costs.The company achieved an operating margin after directcosts of 65.9% which is an improvement over the prior yearoperating margin of 60.6%.

The balance sheet shows that the company’s financial positionat the year end has significantly improved, in net assets terms,over the prior year. The company’s asset level increased by98.2%, from £499m as at March 2007 to £989m as at March2008. The growth is due to a general increase in thecustomer base and business conducted.

DirectorsThe directors, who all served throughout the year, are as listedin this report.

Results and dividendThe profit for the year after taxation amounted to £10,212,250(2007 – £5,534,217).

Future prospectsThe Bank’s capacity to identify, generate and deliver newbusiness remains strong despite increased market competition.The focus is principally on profitable business and sustainablebalance sheet growth with a well diversified risk asset portfolio.

FBN Bank (UK) Limited looks forward with optimism to a futureof continued business growth and outstanding financialperformance for the benefit of its customers and shareholders.

FBN Bank (UK) Limited Report and Financial StatementsDirectors’ Report

Executive Directors

Non Executive Directors

Peter Stuart HinsonManaging Director/

Chief Executive

Michael John BamberExecutive Director,

Operations

Christi Etukudo FashogbonExecutive Director,

Business Development

Ayoola Oba Otudeko, OFRChairman

Jacobs Moyo Ajekigbe

John Oche Aboh

Peter ArnhemGrafham

Abdullahi SarkiMahmoud

Anthony RobertPaget Williams

Report and Financial Statements

Senior staff

Samuel AiyereHead of Finance

Michael BarrettHead of Risk

Christopher BrownHead of Administration

Michael ConnellHead of Compliance

Chris GormanCountry Manager,

FBN (UK) Nigeria Ltd

Trevor FallHead of Customer Services

Martin NewcombTreasurer

Frederic Le BourgeoisGeneral Manager, FBN

Bank (UK) Ltd, Paris Branch

Graham ThorpeHead of Trade Finance


15

The directors are responsible for preparing the Annual Reportand the financial statements in accordance with applicable lawand regulations.

Company law requires the directors to prepare financialstatements for each financial year. Under that law the directorshave elected to prepare the financial statements in accordancewith International Financial Reporting Standards (IFRSs) asadopted by the European Union. The financial statements arerequired by law to be properly prepared in accordance withIFRSs as adopted by the European Union and the CompaniesAct 1985.

International Accounting Standard 1 requires that financialstatements present fairly for each financial year the company’sfinancial position, financial performance and cash flows.This requires the faithful representation of the effects oftransactions, other events and conditions in accordance withthe definitions and recognition criteria for assets, liabilities,income and expenses set out in the International AccountingStandards Board's ‘‘Framework for the preparation andpresentation of financial statements’’. In virtually all circumstances,a fair presentation will be achieved by compliance with allapplicable IFRSs. However, directors are also required to:

• properly select and apply accounting policies;

• present information, including accounting policies, in a mannerthat provides relevant, reliable, comparable andunderstandable information;

• provide additional disclosures when compliance with thespecific requirements in IFRSs are insufficient to enable usersto understand the impact of particular transactions, otherevents and conditions on the entity’s financial positionand financial performance; and

• make an assessment of the company's ability to continueas a going concern.

The directors are responsible for keeping proper accountingrecords that disclose with reasonable accuracy at any time thefinancial position of the company and enable them to ensurethat the financial statements comply with the Companies Act1985. They are also responsible for safeguarding the assets ofthe company and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrityof the corporate and financial information included on thecompany’s website. Legislation in the United Kingdom governingthe preparation and dissemination of financial statements maydiffer from legislation in other jurisdictions.

Report and Financial StatementsStatement of directors’ responsibilities


14

Charitable contributionsDuring the year the Bank made charitable contributionstotalling £25,675 (2007 – £20,800).

Financial Risk Management Objectives and PoliciesThe principal risks associated with the business of FBN Bank(UK) Ltd are credit risk, market risk, liquidity risk andoperational risk.

FBN Bank (UK) Ltd has an established and comprehensive riskmanagement framework to manage these risks as we seek tocomply with Basel II requirements. Hence the risk managementframework is constantly evolving as business activities changeand expand in response to credit, market, product andother developments.

The risk management framework is guided by a number ofcompeting principles as outlined in Basel II including the formaldefinition of risk management governance, an evaluationof risk appetite expressed in terms of formal risk limits, riskoversight independent of business units, disciplined riskassessment and measurement including portfolio stress testingand various risk monitoring and mitigation techniques.

The Board of Directors sets FBN Bank (UK) Ltd overall riskparameters, gives risk tolerances and sets the significant riskmanagement policies.

The FBN Bank (UK) Ltd Executive Credit Committee, chairedby the Managing Director, has the primary responsibility forsanctioning risk taking activities and risk management policieswithin the overall risk parameters and tolerances defined bythe Board of Directors.

The risk management control process is based on a detailedstructure of policies, procedures and limits and comprehensiverisk measurement and management information systems forthe control, monitoring and reporting of risks.

Periodic reviews by both the Internal Auditor and regulatoryauthorities subject the risk management processes toadditional scrutiny which help to further strengthen the riskmanagement environment.

The financial risk management and objectives are disclosedin note 25.

Capital structureFBN Bank (UK) Ltd has two key components to its capitalstructure, being £82m share capital and subordinated debtamounting to £11.5m. Whilst the subordinated debt iscorrectly shown as a liability it counts as upper tier 2 capitalfor the regulated capital base.

60,000,000 new ordinary shares of £1 each were issuedduring the year for cash at par.

AuditorsIn the case of each of the persons who are directors of thecompany at the date when this report is approved:

• so far as each of the directors is aware, there is no relevantaudit information (as defined in the Companies Act 1985)of which the company’s auditors are unaware; and

• each of the directors has taken all the steps that they oughtto have taken as a director to make themselves aware ofany relevant audit information (as defined) and to establishthat the company’s auditors are aware of that information.

The confirmation is given and should be interpreted inaccordance with the provisions of section 234ZA of theCompanies Act 1985.

Deloitte & Touche LLP have expressed their willingness tocontinue in office as auditors and a resolution to reappointthem will be proposed at the forthcoming Annual GeneralMeeting.

Approved by the Board of Directorsand signed on behalf of the Board

Venetia Carpenter, FCISCompany Secretary26 June 2008

Report and Financial StatementsDirectors’ Report continued

Report and Financial Statements


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Report and Financial Statements Report and Financial StatementsReport and Financial StatementsProfit and loss account – Year ended 31 March 2008Independent auditors’ report to the members of FBN Bank (UK) Limited

We have audited the financial statements of FBN Bank (UK)Limited for the year ended 31 March 2008, which comprise theIncome Statement, the Balance Sheet, the Cash Flow Statement,the Statement of Changes in Equity and the related notes 1to 30. These financial statements have been prepared underthe accounting policies set out therein.

This report is made solely to the company’s members, as a body,in accordance with section 235 of the Companies Act 1985.Our audit work has been undertaken so that we might stateto the company’s members those matters we are required tostate to them in an auditors’ report and for no other purpose.To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the companyand the company’s members as a body, for our audit work,for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors' responsibilities for preparing the Annual Reportand the financial statements in accordance with applicablelaw and International Financial Reporting Standards (IFRSs)as adopted by the European Union are set out in theStatement of Directors' Responsibilities.

Our responsibility is to audit the financial statements inaccordance with relevant legal and regulatory requirementsand International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financialstatements give a true and fair view and are properly preparedin accordance with the Companies Act 1985. We also reportto you whether in our opinion the information given in theDirectors' Report is consistent with the financial statements.The information given in the Directors' Report includes thatspecific information presented in the Operating and FinancialReview that is cross referred from the Business Review sectionof the Directors' Report.

In addition we report to you if, in our opinion, the companyhas not kept proper accounting records, if we have notreceived all the information and explanations we require forour audit, or if information specified by law regardingdirectors' remuneration and other transactions is not disclosed.

We read the other information contained in the Annual Reportas described in the contents section and consider whether itis consistent with the audited financial statements. This otherinformation comprises only the Directors’ Report and theChairman’s Statement. We consider the implications for ourreport if we become aware of any apparent misstatementsor material inconsistencies with the financial statements.Our responsibilities do not extend to any further informationoutside the Annual Report.

Basis of audit opinionWe conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) issued by the AuditingPractices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures inthe financial statements. It also includes an assessment of thesignificant estimates and judgments made by the directors inthe preparation of the financial statements, and of whetherthe accounting policies are appropriate to the company’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessaryin order to provide us with sufficient evidence to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud orother irregularity or error. In forming our opinion we alsoevaluated the overall adequacy of the presentation ofinformation in the financial statements.

OpinionIn our opinion:

• the financial statements give a true and fair view,in accordance with IFRSs as adopted by the European Union,of the state of the company's affairs as at 31 March 2008and of its profit for the year then ended;

• the financial statements have been properly preparedin accordance with the Companies Act 1985; and

• the information given in the Directors’ Report is consistentwith the financial statements.

Approved by the Board of Directorsand signed on behalf of the Board

Deloitte & Touche LLPChartered Accountants and Registered AuditorsLondon, United Kingdom

26 June 2008

Continuing activities

Interest receivable 4 48,172,645 28,536,001

Interest payable 4 (31,843,992) (18,593,369)

Net interest income 16,328,653 9,942,632

Fees and commissions income 5 3,604,315 1,885,162

Dealing and exchange profits 2,056,592 1,141,546

Other operating income 278,614 175,549

Operating income 22,268,174 13,144,889

Administrative expenses 6 (7,626,788) (5,137,654)

Impairment charge 22 (1,560) (46,192)

Loan recovery 22 45,677 -

Profit on ordinary activities before taxation 8 14,685,503 7,961,043

Tax on profit on ordinary activities 9 (4,473,253) (2,426,826)

Profit on ordinary activities after taxation 10,212,250 5,534,217

Note

2008

£ 2007

£

Note

2008

£ 2007

£ Sharecapital

£ Retained

Earning

£ Total Equ

ity

£


19

Balance as at 1 April 2006 22,000,000 5,505,385 27,505,385

Profit for the year - 5,534,217 5,534,217

Dividends paid - (3,900,000) (3,900,000)

Balance attributable to equity

shareholders as at 31 March 2007 22,000,000 7,139,602 29,139,602

Profit for the year - 10,212,250 10,212,250

New capital 60,000,000 - 60,000,000

Dividend paid - (4,900,000) (4,900,000)

Balance attributable to equity

shareholders as at 31 March 2008 82,000,000 12,451,852 94,451,852

Report and Financial StatementsStatement of changes in equity – Year ended 31 March 2008


18

Report and Financial StatementsBalance sheet – Year ended 31 March 2008

Assets

Cash at bank and in hand 11 17,231,738 2,480,320

Loans and advances to banks 12 875,202,404 470,335,868

Loans and advances to customers 13 94,102,442 24,139,804

Property and equipment 14 303,447 349,798

Intangible assets 15 615,617 409,845

Other assets 16 1,008,926 879,429

Deferred tax asset 10 38,464 20,177

Financial assets – derivatives 297,767 43,141

Total assets 988,800,805 498,658,382

Current liabilities

Deposits by banks 17 576,596,711 338,012,756

Customer accounts 18 165,505,746 48,170,115

Other liabilities 19 139,626,128 71,722,322

Financial liabilities – derivatives 1,120,368 113,587

882,848,953 458,018,780

Non-current liabilities

Subordinated liabilities 20 11,500,000 11,500,000

Total liabilities 894,348,953 469,518,780

Called up share capital 21 82,000,000 22,000,000

Retained earnings 12,451,852 7,139,602

Equity shareholders’ funds 94,451,852 29,139,602

Total liabilities and shareholders’ funds 988,800,805 498,658,382

These financial statements were approved by the Board of Directors and authorised for issue on 26 June 2008.Signed on behalf of the Board of Directors

Ayoola Oba Otudeko, OFR Peter Stuart HinsonChairman Managing Director/Chief Executive

Note

2008

£ 2007

£


21

1. Accounting policies

General InformationFBN Bank (UK) Ltd (‘’the Bank’’) is a company incorporatedin the United Kingdom under the Companies Act 1985.The address of the registered office is given on page 1.The nature of the Bank’s operations and its principal activitiesare set out in the Directors’ report and in the notes.

Basis of PreparationThe financial statements of FBN Bank (UK) Ltd (“the Bank”)have been prepared in accordance with International FinancialReporting Standards (IFRS). The financial statements havealso been prepared in accordance with IFRSs adopted by theEuropean Union.

The financial statements are expressed in Pounds Sterling (£),which is the functional currency of the bank.

Accounting conventionFBN Bank (UK) Limited is incorporated in the United Kingdomand registered in England. The financial statements havebeen prepared on the historical cost basis, except for therevaluation of certain financial instruments. The principalaccounting policies adopted are described below:

Income recognition

a) Interest income and expenseInterest income on financial assets that are classified asloans and receivables and interest expense on financialliabilities is recognised in ‘Interest income’ and ‘Interestexpense’ in the income statement using the “effectiveinterest rate’’ method.

The effective interest rate is the rate that exactly discountsthe expected future cash payments or receipts throughthe expected life of the financial instrument, or whenappropriate, a shorter period, to the net carrying amountof the financial instrument. The effective interest rateincorporates fees receivable that are an integral part ofthe “effective interest rate’’ of a financial instrument.

All income derives from banking business carried outin the United Kingdom.

b) Non-interest income

Fees and commissionsFees and commissions are accounted for depending onthe services to which the income relates to as follows:

• fees earned on the execution of a significant actare recognised in ‘fee income’ when the actis completed;

• fees earned in respect of services are recognised in‘fee income’ as the services are provided; and

• fees which form an integral part of the “effectiveinterest rate’’ of a financial instrument are recognisedas an adjustment to the effective interest rate andrecorded in ‘interest income’

Foreign currencyTransactions in foreign currencies are recorded using the rateof exchange ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies aretranslated into sterling using the rate of exchange as at thebalance sheet date and resulting gains and losses on translationare included in the profit and loss account.

Exchange profits on foreign exchange transactions withcustomers are recognised as income during the period.

Financial instrumentsFinancial assets and liabilities are recognised in the bank’sbalance sheet when the bank becomes a party to thecontractual provisions of the instrument.

The bank classifies its financial assets into the followingcategories:

• Financial assets at fair value through profit or loss; and

• Loans and receivables

Management determines the classification of financial assetsat the time of initial recognition.

Financial assets at fair value through profit and lossFinancial assets at fair value through profit or loss comprisefinancial assets that are held for trading, and those designatedby management as being at fair value through profit or losson initial recognition.

Financial assets may be designated at fair value through profitor loss only if such a designation (a) eliminates or significantlyreduces a measurement or recognition inconsistency; (b) appliesto a group of financial assets, financial liabilities, or both thatthe company manages and evaluates on a fair value basis;or (c) relates to an instrument that contains an embeddedderivative which is not closely related to the host contract.

Financial assets at fair value through profit or loss are recognisedinitially at fair value, with transaction costs recognised in theincome statement. Subsequently, gains and losses arising fromchanges in fair value are recognised as they arise.

Loans and receivablesLoans and receivables are non-derivative financial assets withfixed or determinable payments that are not quoted in an activemarket and which are not classified upon initial recognitionas available for sale or at fair value through profit and loss.

Loans and receivables are initially recognised at fair value,including directly attributable transaction costs and aresubsequently measured at amortised cost, using the effectiveinterest rate method, less any impairment losses.

Impairment of financial assetsThe Bank assesses at each balance sheet date whether there isobjective evidence that a financial asset or a group of financialassets not carried at fair value through profit or loss is impaired.

Report and Financial StatementsNotes to the Accounts – Year ended 31 March 2008


20

Cash flow from operating activities

Profit before tax 14,685,503 7,961,043

Adjustment to reconcile net profit to cash flowfrom operating activities:

Depreciation of property and equipment 108,430 135,174

Amortisation of intangible assets 245,689 173,834

15,039,622 8,270,051

Net (increase)/decrease in assetsrelating to operating activities

Loans and advances to Banks (404,866,536) (49,405,335)

Loans and advances to customers (69,962,638) (16,602,003)

Other assets (402,411) (579,398)

(460,191,963) (58,316,685)

Net increase/(decrease) in liabilitiesrelating to operating activities

Due to Banks 238,583,955 11,951,716

Due to customers 117,335,631 6,336,125

Other liabilities 67,560,892 41,735,571

423,480,478 60,023,412

Income tax paid (3,123,557) (2,042,129)

Net cash flow from operating activities (39,835,042) (335,402)

Cash flow from investing activities

Acquisition of fixed assets (513,540) (287,698)

Net (increase)/decrease in investing activities

Net cash from investing activities (513,540) (287,698)

Cash flow from financing activities

Dividend paid (4,900,000) (3,900,000)

Issue of shares 21 60,000,000 -

55,100,000 (3,900,000)

Net increase/(decrease) in cash and cash equivalents 14,751,418 (4,523,100)

Cash and cash equivalents at 1 April 2007 11 2,480,320 7,003,420

Cash and cash equivalents at 31 March 2008 11 17,231,738 2,480,320

Report and Financial StatementsCash flow statement – Year ended 31 March 2008


23

1.Accounting policies (continued)

Derivative financial instrumentsDerivatives are classified as assets when their fair value ispositive or as liabilities when their fair value is negative.Derivative assets and liabilities arising from different transactionsare only offset where there is a legal right of offset of therecognised amounts and the parties intend to settle thecash flows on a net basis, or realise the asset and settle theliability simultaneously.

Property and equipmentProperty and equipment “PE’’ are stated at cost less accumulateddepreciation and any accumulated impairment losses.

Depreciation is provided on a straight-line basis at thefollowing rates to write off the cost of the fixed assets overtheir estimated useful life as follows:

Leasehold improvement 10 years (lease period)

Office equipment/furniture 5 years

Intangible assets –Computer software 5 years

Computer hardware 3 years

Motor vehicles 4 years

At each balance sheet date, property and equipment,are assessed for indications of impairment. If indications arepresent, these assets are subject to an impairment review.The impairment review comprises a comparison of the carryingamount of the asset with its recoverable amount: the higherof the asset’s net selling price and its value in use. Net sellingprice is calculated by reference to the amount at which theasset could be disposed of in a binding sale agreement in anarms-length transaction evidenced by an active market orrecent transactions for similar assets. Value in use is calculatedby discounting the expected future cash flows obtainable asa result of the assets continued use, including those resultingfrom its ultimate disposal, at a market based discount rateon a pre-tax basis.

The carrying values of fixed assets are written down by theamount of any impairment and this loss is recognised in theincome statement in the period in which it occurs. A previouslyrecognised impairment loss relating to a PE may be reversedin part or in full when a change in circumstances leads to achange in the estimates used to determine the fixed asset’srecoverable amount. The carrying amount of the fixed assetwill only be increased up to the amount that it would havebeen had the original impairment not been recognised.

LeasesA lease is classified as a finance lease when the risks andrewards of ownership are substantially transferred to the lessee.All other leases are classified as operating leases (operatinglease rentals payable are recognised as an expense in theincome statement on a straight-line basis over the lease term).

ProvisionsProvisions are recognised when it is probable that an outflowof economic benefits will be required to settle a current legal orconstructive obligation as a result of past events and a reliableestimate can be made of the amount of the obligation.

TaxationThe tax expense represents the sum of the tax currentlypayable and deferred tax.

The tax currently payable is based on taxable profit for theyear. Taxable profit differs from net profit as reported in theincome statement because it excludes items of income orexpense that are taxable or deductible in other years and itfurther excludes items that are never taxable or deductible.The bank liability for current tax is calculated using tax ratesthat have been enacted or substantively enacted by thebalance sheet date.

Deferred tax is the tax expected to be payable or recoverableon differences between the carrying amounts of the assets andliabilities in the financial statements and the corresponding taxbases used in the computation of taxable profit and is accountedfor using the balance sheet liability method. Deferred taxliabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extentthat it is probable that taxable profits will be available againstwhich deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at eachbalance sheet date and reduced to the extent that it is nolonger probable that sufficient taxable profits will be availableto allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected toapply in the period when the liability is settled or the asset isrealised. Deferred tax is charged or credited in the incomestatement, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also dealtwith in equity.

Pension costsThe Bank operates a defined contribution pension schemeand the amount charged to the income statement in respectof pension costs and other post-retirement benefits is thecontributions payable in the year. Differences betweencontributions payable in the year and contributions actuallypaid are shown as either accruals or prepayments in thebalance sheet.

Cash and cash equivalentsCash and cash equivalents comprises cash and demand depositswith banks together with short-term highly liquid investmentsthat are readily convertible to known amounts of cash andsubject to insignificant risk of change in value.



22


A financial asset or portfolio of financial assets is impaired andimpairment losses are incurred if, and only if, there is objectiveevidence of impairment as a result of one or more eventssince initial recognition of the assets that have adversely affectedthe amount or timing of future cash flows from the assets.

Impairment losses are assessed individually for financial assetsthat are individually significant, and individually or collectivelyfor assets that are not individually significant.

In making collective assessment of impairment, financial assetsare grouped on the basis of similar credit risk characteristics,taking into account asset type, industry, geographical location,collateral type, past-due status, historical loss status and otherrelevant factors. These characteristics are relevant to theestimation of future cash flows for groups of such assets bybeing indicative of the counterparty’s ability to pay allamounts due according to the contractual terms of the assetsbeing evaluated.

Losses expected from future events, no matter how likely,are not recognised.

Financial assets held at amortised costIf there is objective evidence that an impairment loss ona financial asset or group of financial assets classified as heldto maturity or loans and receivables has been incurred,the amount of impairment loss is measured as the differencebetween the asset or group of assets carrying amount andthe present value of estimated future cash flows from theasset or group of assets discounted at the effective interestrate determined on initial recognition.

Impairment losses are recognised in the income statementand the carrying amount of the financial assets or group offinancial assets are reduced by establishing an allowancefor impairment losses.

If, in a subsequent period, the amount of the impairmentloss reduces and the reduction can be related objectively toan event occurring after the impairment was recognised,the previously recognised impairment loss is reversed byadjusting the allowance account. The amount of the reversalis recognised in the income statement.

Financial liabilities and equityThe bank classifies its financial liabilities in the followingcategories:

• financial liabilities designated at fair value throughprofit or loss; and

• other financial liabilities.

Management determines the classification of financialliabilities at initial recognition.

Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss comprisefinancial liabilities that are held for trading, and thosedesignated by management as being at fair value throughprofit or loss on initial recognition.

Financial liabilities are classified as held for trading if they areacquired principally for the purposes of generating a profitfrom short-term fluctuations in price or dealers margin, or formpart of a portfolio of similar liabilities for which there isevidence of a recent actual pattern of short-term profit-taking, or are derivatives (not designated into a qualifyinghedge relationship).

Financial liabilities may be designated at fair value throughprofit or loss only if such a designation (a) eliminates orsignificantly reduces a measurement or recognition inconsistency;(b) applies to a group of financial assets, financial liabilities,or both that the company manages and evaluates on a fairvalue basis; or (c) relates to an instrument that contains anembedded derivative which is not evidently closely related tothe host contract.

Financial liabilities at fair value through profit or loss arerecognised initially at fair value, with transaction costsrecognised in the income statement. Subsequently, gains andlosses arising from changes in fair value are recognised asthey arise.

Other financial liabilitiesOther financial liabilities are initially recognised at fair valueincluding directly attributable transaction costs and aresubsequently measured at amortised cost, using the effectiveinterest rate method.

Determining fair valueAll financial instruments are recognised initially at fair value.The fair value of a financial instrument on initial recognitionis normally the transaction price.

Subsequently, the fair value of financial instruments that arequoted in an active market are based on bid price (for assets)and offer price (for liabilities). Where there is no quotedmarket price in an active market, fair values are determinedusing valuation techniques including discounting future cashflows, option pricing models and other methods used bymarket participants.

Where the fair value cannot be reliably determined for aninvestment in an equity instrument, the instrument ismeasured at cost.


Adjustm

ents

£ IFRS

Adjusted

1April2006

£UKGAAP

1April2006

£ Reclassification

s

£


25


Effects of first time adoption of IFRS on 31 March 2007 (continued)

i) Balance Sheet as at 1 April 2006

(i) Reclassification due to reclassifying accrued interest to underlying assets and liabilitiesheld at amortised cost.

(ii) Reversal of general provision previously recognised under UK GAAP

(iii) Clean line fee income included in the effective interest rate under IFRS, previouslyrecognised on maturity of the underlying instruments

(iv) Facility fees included in the effective interest rate under IFRS previouslyrecognised upfront.

(v) Reclassification of subordinated liabilities to non-current liabilities

(vi) Consequential tax adjustment

Assets

Cash at bank and in hand 7,003,420 7,003,420

Loans and advances to banks 419,244,834 1,489,431 (i) 196,268 (ii, iii, iv) 420,930,533

Loans and advances to customers 7,410,315 14,986 (i) 112,500 (ii) 7,537,801

Property, plant and equipment 780,954 - - 780,954

Other assets 1,894,295 (1,504,417) (i) - 389,878

Deferred tax asset 17,721 - 25,233 (vi) 42,954

Total assets 436,351,539 - 334,001 436,685,540

Current liabilities

Deposits by banks 324,609,478 1,451,562 (i) - 326,061,040

Customer accounts 41,780,941 53,049 (i) - 41,833,990

Other liabilities 31,289,736 (1,504,611) (i) - 29,785,125

Non current liabilities

Subordinated liabilities - 11,500,000 (v) - 11,500,000

397,680,155 11,500,000 - 409,180,155

Subordinated liabilities 11,500,000 (11,500,000) (v) - -

Called up share capital 22,000,000 - - 22,000,000

Retained earnings 5,171,384 - 334,001 5,505,385

Equity shareholders’ funds 27,171,384 - 334,001 27,505,385

Total liabilities and shareholders’ funds 436,351,539 - 334,001 436,685,540



24


Use of estimatesThe preparation of financial statements in accordance withIFRS requires the use of certain critical accounting estimates.It also requires management to exercise judgement in theprocess of applying the accounting policies. The notes to thefinancial statements set out areas involving a higher degreeof judgement or complexity, or areas where assumptions aresignificant to the financial statements such as fair value offinancial instruments and loan loss impairment.

Capital instrumentsThe Bank classifies a financial instrument that it issues asa financial asset, financial liability or an equity instrument inaccordance with the substance of the contractual arrangement.An instrument is classified as a liability if it is a contractualobligation to deliver cash or another financial asset, or toexchange financial assets or financial liabilities on potentiallyunfavourable terms. An instrument is classified as equity if itevidences a residual interest in the assets of the bank afterthe deduction of liabilities. The components of a compoundfinancial instrument issued by the bank are classified andaccounted for separately as financial assets, financial liabilitiesor equity as appropriate.

Adoption of new and revised standardsAt the date of authorisation of these financial statements,the following Standards and Interpretations which have notbeen applied in these financial statements were in issue butnot yet effective:

• IFRS 8 Operating segments

• IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

• IFRIC 12 Service Concession Arrangements

• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset,Minimum Funding Requirements andtheir Interaction.

The directors anticipate that the adoption of these Standardsand Interpretations in future periods will have no materialimpact on the financial statements of the Bank except foradditional segment disclosures when IFRS 8 comes into effectfor period commencing on or after 1 January 2009.

Critical accounting judgements and key sourcesof estimation uncertaintyIn the application of the Bank’s accounting policies, the directorsare required to make judgements, estimates and assumptionsabout the carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates andassociated assumptions are based on historical experience andother factors that are considered to be relevant. Actual resultsmay differ from these estimates.

The estimates and underlying assumptions are reviewed on anongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised if the revision affectsonly that period or in the period of the revision and futureperiods if the revision affects both current and future periods.

Fair value of derivatives and other financial instrumentsAs described in note 25, the directors use their judgement inselecting an appropriate valuation technique for financialinstruments not quoted in an active market. Valuation techniquescommonly used by market practitioners are applied. For derivativefinancial instruments, assumptions are made based on quotedmarket rates adjusted for specific features of the instrument.

Effects of first time adoption of IFRS on 31 March 2007The bank adopted IFRS on 1st of April 2007, with a date oftransition to IFRS of 1st April 2006

The last financial statements under UKGAAP were for theyear ended 31 March 2007

The impact of adopting IFRSs is shown in thereconciliations below:


Adjustm

ents

£ IFRS

31March

2007

£UKGAAP

31March

2007

Reclassification

s

£


27



26

1. Accounting policies (continued)

ii) Balance Sheet as at 31 March 2007

(i) Reclassification of accrued interest to underlying assets and liabilities held atamortised cost.

(ii) Reversal of general provision previously allowed under UK GAAP.

(iii) Clean line fee income included in the effective interest rate under IFRS,previously recognised on maturity of the underlying instruments.

(iv) Facility fees included in the effective interest rate under IFRS previouslyrecognised upfront.

(v) Deferred tax raised on IFRS adjustments.

(vi) Recognition of derivative assets and liabilities on balance sheet at fair value.

(vii) Reclassification of subordinated liabilities to non-current liabilities.

(viii) Capitalisation of maintenance fees under IFRS.

Assets

Cash at bank and in hand 2,480,320 2,480,320

Loans and advances to banks 468,151,273 1,952,625 (i) 231,970 (ii,iii,iv) 470,335,868

Loans and advances to customers 23,664,189 229,435 (i) 246,180 (ii) 24,139,804

Property, plant and equipment 759,643 - - 759,643

Other assets 2,913,989 (2,182,060) (i) 147,500 (viii) 879,429

Deferred tax asset 26,874 - (6,697) (v) 20,177

Financial assets – derivatives - - 43,141 (vi) 43,141

Total assets 497,996,288 - 662,094 498,658,382

Current liabilities 497,996,288 - 662,094 498,658,382

Deposits by banks 336,440,503 1,572,253 (i) - 338,012,756

Customer accounts 48,050,741 119,374 (i) - 48,170,115

Other liabilities 73,413,948 (1,691,627) (i) - 71,722,322

Financial liabilities – derivatives - - 113,587 (vi) 113,587

Non current liabilities - 11,500,000 (vii) - 11,500,000

457,905,192 11,500,000 113,587 469,518,780

Subordinated liabilities 11,500,000 (11,500,000) (vii) - -

Called up share capital 22,000,000 - - 22,000,000

Retained earnings 6,591,096 - 548,507 7,139,602

Equity shareholders’ funds 28,591,096 (11,500,000) 548,507 29,139,602

Total liabilities and shareholders’ funds 497,996,288 - 548,507 498,658,382

Adjustm

ents

£ IFRS

31March

2007

£UKGAAP

31March

2007

£ Reclassification

s

£

1. Accounting policies (continued)

iii) Income Statement for the year ended 31 March 2007

(i) Reclassification of clean line fee income and facility fees to interest receivable.These amounts were previously recorded as fee income under UK GAAP.

(ii) Reversal of general provision previously allowed under UK GAAP (pre FRS 26).

(iii) Deferred tax raised on IFRS adjustments.

(iv) Fair value movements for the period on derivatives and the capitalisation ofmaintenance fees under IFRS.

(v) Clean line fee income included in the effective interest rate, previously recognisedon maturity of the underlying instruments.

(vi) Facility fees included in the effective interest rate under IFRS, previously recognisedupfront.

Interest receivable 26,122,667 2,383,952 (i) 29,382 (v,vi) 28,536,001

Interest payable (18,470,202) (123,167) (i) (18,593,369)

Net interest income 7,652,465 2,260,785 29,382 9,942,632

Fees and commissions receivable 4,269,114 (2,383,952) (i) - 1,885,162

Dealing and exchange profits 1,141,546 - - 1,141,546

Other operating income 175,549 - - 175,549

Operating income 13,238,674 (123,167) 29,382 13,144,889

Administrative expenses (5,337,875) 123,167 (i) 77,054 (iv) (5,137,654)

Provision for bad and doubtful debts (186,192) 186,192 - -

Impairment gain/(losses) on loans & advances (186,192) 140,000 (ii) (46,192)

Operating profit onordinary activities before taxation 7,714,607 - 246,436 (iii) 7,961,043

Tax on profit on ordinary activities (2,394,895) - (31,931) (2,426,826)

Operating profit onordinary activities after taxation 5,319,712 - 214,505 5,534,217


2008

£ 2007

£

2008

£ 2007

£

2008

£ 2007

£

2008

Num

ber

2007

Num

ber


29



28

5. Fees and commissions income

Loans 119,086 260,106

Letters of credit 3,178,240 1,364,553

Funds transfer 304,193 224,267

Others 2,796 36,236

3,604,315 1,885,162

6. Administrative expenses

Average number of employees

(including three (2007 – three) executive directors)

Banking Division 19 17

Operations 19 20

Administration 5 3

43 40

Wages and salaries (including directors) 3,476,154 2,370,325

Social security costs 224,176 213,609

Other pension costs 104,378 96,706

Total staff costs 3,804,708 2,680,640

Other administrative expenses 3,822,080 2,457,014

7,626,788 5,137,654


2008

£ 2007

£

2 Dealing and exchange profits

Dealing and exchange profits relate to foreign exchange income

derived from customer foreign exchange transactions and the

revaluation of foreign currency assets and liabilities.

3. Segmental information

The Bank has one main activity, commercial banking, which is

carried out in the United Kingdom.

4. Net Interest income

Interest and similar income

Due from banks 44,749,968 27,724,022

Loans and advances to customers 3,422,677 811,979

48,172,645 28,536,001

Interest expense and similar charges

Due to banks 28,489,916 16,693,000

Due to customers 2,606,134 1,302,025

Borrowed funds 747,942 598,344

31,843,992 18,593,3690

2008

£ 2007

£

2008

£ 2007

£


31



30

9. Taxation

Tax on profit on ordinary activities charged in the income statement

(i) Analysis of tax charge on ordinary activities

United Kingdom corporation tax based on the profit for the year 4,447,529 2,407,000

Prior year current tax adjustment 44,012 (2,952)

Total current tax 4,491,541 2,404,048

Deferred tax:

Timing differences, origination and reversal 26,062 18,163

Effect of tax rate change 2,747 -

Prior year deferred tax Adjustment (47,097) 4,615

Tax expense on profit on ordinary activities 4,473,253 2,426,826

(ii) Reconciliation of the total tax charge

The tax assessed for the period is higher than that resulting from applying

the standard rate of corporation tax in the UK. The differences are explained below:

Profit on ordinary activities before tax 14,685,503 7,961,043

Tax at 30% thereon 4,405,651 2,388,313

Effects of:

Expenses not deductible for tax purposes 67,940 36,850

Effect of tax rate change 2,747 -

Prior year adjustment (3,085) 1,663

Tax expense 4,473,253 2,426,826


2008

£ 2007

£

2008

£ 2007

£

7. Directors’ emoluments

Directors’ fees 310,077 284,954

Other emoluments 774,990 446,769

Contribution to a money purchase pension scheme 23,160 30,479

1,108,227 762,202

The highest paid director received emoluments, excluding pension contributions, totalling £337,968 (2007 – £264,964)

and pension contributions of £14,560 (2007 – £20,479).

Mortgages were approved and advanced on a commercial arm’s length basis, to three group directors during the year (Note 24).

8. Profit on ordinary activities before taxation

Operating profit is stated after charging:

Depreciation 354,119 309,008

Auditors’ remuneration – audit work 90,500 84,000

– tax services 1,210 -

– consultancy 46,440 -

Rental of premises held under operating leases 369,910 370,777

Performing

Loan

s2008

£ Impa

ired

Loan

s2008

£ Total

Loan

s2008

£ Performing

Loan

s2007

£ Impa

ired

Loan

s2007

£ Total

Loan

s2007

£


33



32

12. Loans and advances to banks

Repayable on demand or at short notice 21,474,684 121,626 21,596,310 104,205,744 123,798 104,329,542

Remaining maturity:

– 3 months or less excluding

on demand or at short notice 690,423,092 - 690,423,092 289,332,799 - 289,332,799

– 1 years or less but over 3 months 158,392,673 - 158,392,673 76,283,953 - 76,283,953

– 5 years or less but over 1 year 4,911,955 - 4,911,955 513,372 - 513,372

Less:

Allowances for impairment (note 22) - (121,626) (121,626) - (123,798) (123,798)

875,202,404 - 875,202,404 470,335,868 - 470,335,868

Total loans advanced to First Bank of Nigeria Plc at 31 March 2008 were £37,375,234 (2007 – £52,330,057).

Loans and advances to banks are categorised as loans and receivables in accordance with IAS 39.

The Bank does not hold collateral in respect of loans and advances to banks (2007 – nil).


2008

£ 2007

£

Accelerated

tax

depreciation

£ IFRS

tran

sition

al

adjustmen

t£ Total

£

10. Deferred tax

The following are the major deferred tax liabilities and assets

recognised by the company and movements thereon during

the current and prior reporting period:

At 1 April 2006 17,721 25,233 42,954

Credit/(charge) to income 9,153 (31,930) (22,777)

At 1 April 2007 26,874 (6,697) 20,177

Credit to income 14,337 6,697 21,034

Effect of change in tax rate – income statement (2,747) - (2,747)

At 31 March 2008 38,464 - 38,464

11. Cash and cash equivalents

Cash 97,250 100,341

Short-term placements with other banks 17,134,488 2,379,979

17,231,738 2,480,320

Cash and cash equivalents are categorised as loans and receivables

in accordance with IAS 39.

Compu

ter

Software

£

Compu

ter

Hardw

are

£ Leaseh

old

Improvem

ents

£ Furniture&

Equipm

ent

£ Motor

Vehicles

£ Total

£


35



34


14. Property and equipment

Cost

At 31 March 2007 287,205 395,080 200,856 9,454 892,595

Additions 29,163 9,217 23,699 - 62,079

At 31 March 2008 316,368 404,297 224,555 9,454 954,674

Accumulated depreciation

At 31 March 2007 182,067 186,957 172,591 1,182 542,797

Charge for the year 54,015 43,083 8,969 2,363 108,430

At 31 March 2008 236,082 230,040 181,560 3,545 651,227

Net book value

At 31 March 2008 80,286 174,257 42,995 5,909 303,447

At 31 March 2007 105,138 208,123 28,265 8,272 349,798

15. Intangible assets

Cost

At 31 March 2007 945,322

Additions 451,461

At 31 March 2008 1,396,783

Accumulated depreciation

At 31 March 2007 535,477

Charge for the year 245,689

At 31 March 2008 781,166

Net book value

At 31 March 2008 615,617

At 31 March 2007 409,845

Performing

Loan

s2008

£ Impa

ired

Loan

s2008

£ Total 2008

£ Performing

Loan

s2007

£ Impa

ired

Loan

s2007

£ Total 2007

£

13. Loans and advances to customers

Repayable on demand or at short notice 4,022,874 1,560 4,024,434 1,233,694 46,192 1,279,886

Remaining maturity:

– 3 months or less excluding

on demand or at short notice 444,744 444,744 1,088,858 - 1,088,858

– 1 years or less but over 3 months 10,098,596 10,098,596 2,936,394 - 2,936,394

– 5 years or less but over 1 year 65,908,385 65,908,385 13,084,985 - 13,084,985

– Over 5 years 13,627,843 13,627,843 5,795,873 - 5,795,873

Less:

Allowances for impairment (note 22) (1,560) (1,560) (46,192) (46,192)

94,102,442 - 94,102,442 24,139,804 - 24,139,804

As at 31 March 2008, the Bank had advanced £4,024,434 overdrafts (2007 – £1,279,886) and £90,079,568 fixed term

loans (2007 – £22,906,110) to customers. £105,866 was granted as staff loans (2007 – £9,025).

Loans and advances to customers are categorised as loans and receivables in accordance with IAS 39.

The Bank held no collateral in respect of the impaired loans (2007: nil)

2008

£ 2007

£

2008

£ 2007

£


37



36


18. Customer accounts

Repayable on demand 81,678,616 22,496,444

With agreed maturity dates or periods of notice by remaining maturity:

More than one year but less than five years 15,125,096

One year or less but over three months 6,549,064 71,794

Three months or less but not repayable on demand 62,152,970 25,601,877

165,505,746 48,170,115

Deposits by customers are categorised as other liabilities in accordance with IAS 39.

19. Other liabilities

Taxation and social security 2,571,585 1,221,889

Trade creditors 132,972,009 67,699,862

Customers unclaimed balances 895,664 916,369

Other payables 3,186,870 1,884,202

139,626,128 71,722,322

2008

£ 2007

£

2008

£ 2007

£

16. Other assets

Prepayments 1,008,926 879,429

1,008,926 879,429

17. Deposits by banks

Repayable on demand 39,284,519 120,471,780

With agreed maturity dates

or periods of notice by remaining maturity:

One year or less, but over three months 108,927,817 21,614,320

Three months or less 428,384,375 195,926,656

576,596,711 338,012,756

Total deposits due to First Bank of Nigeria Plc at 31 March 2008 were £75,999,775 (2007 – £129,103,104).

Deposits by banks are categorised as other liabilities in accordance with IAS 39.

2008

£ 2007

£


39



38


22. Allowances for impairment

Opening balance 169,990 164,809

Charge to profit and loss account 1,560 46,192

Loan recovery (45,677) -

Exchange difference (2,687) (17,650)

Amount written off - (23,361)

Closing balance 123,186 169,990

Loans and advances to banks (Note 12) 121,626 123,798

Loans and advances to customers (Note 13) 1,560 46,192

123,186 169,990

2007

No.

ofShares

2007

Amou

nt£2008

No.

ofShares

2008

Amou

nt£

2008

£ 2007

£

20. Subordinated liabilities

Subordinated debt 11,500,000 11,500,000

11,500,000 11,500,000

Subordinated liabilities represent a subordinated loan

of £11,500,000 granted by the parent company, First Bank

of Nigeria Plc, on 6th December 2005 and repayable on

7th December 2015. The interest rate payable on the

subordinated loan is at a 0.25% margin over LIBOR for the

respective interest period. First Bank of Nigeria Plc has the

right to determine the interest period at each reprice date.

21. Called up share capital

Authorised

Ordinary shares of £1 each 82,000,000 82,000,000 22,000,000 22,000,000

Issued, allotted and fully paid

Ordinary shares of £1 each 82,000,000 82,000,000 22,000,000 22,000,000

Ordinary Shares:First Bank of Nigeria Plc holds 82,000,000 (2007 – 22,000,000)

or 100% (2007 –100%) of the ordinary shares. 60,000,000 new

shares of £1 each were authorised and subsequently issued

during the current year for cash at par.

2008

£ 2007

£


41



40


24. Related party transactions

A number of banking transactions were entered into with related parties

in the normal course of business. These include loans and deposits and

foreign currency transactions. Outstanding balances at the end of the year,

and related income and expense for the year are as follows:

Assets

Amounts due from parent bank 37,375,234 52,330,057

37,375,234 52,330,057

Liabilities

Amounts due to parent bank 75,999,775 129,103,104

Amount due to fellow subsidiaries 1,269,805 -

77,269,580 129,103,104

Letters of guarantee

Parent bank 45,013,330 2,664,687

Income

From parent bank 1,839,398 1,664,954

Expenses

To parent bank 3,962,465 6,270,212

To fellow subsidiaries 88,455 -

4,050,920 6,270,212

Mortgages were approved and advanced on a commercial arm’s

length basis, to three (2007 – three) group directors during the year.

As at 31 March 2008, a total mortgage amount of £812,426

(2007 – £794,984) was outstanding in respect of these directors.

Also, loans totalling £40,000 (2007 – nil) were advanced to key

management personnel of the Bank and were outstanding as

at 31 March 2008.

£11.5m subordinated loan granted by First Bank of Nigeria Plc

in December 2005 was outstanding as at 31 March 2008 (note 20).

There were no other related party transactions or balances

requiring disclosure.

2008

£ 2007

£

2008

£ 2007

£

23. Contingent liabilities and commitments

a) Legal issuesAt 31 March 2008, there are no pending legal cases

or issues in progress which may have a material impact

on the financial statements of the Bank (2007 – nil).

Within one year 440,000 360,000

Between one and five years 1,760,000 1,440,000

More than five years 880,000 1,080,000

3,080,000 2,880,000

c) Off-balance sheet liabilities

Letters of credit 208,451,726 124,198,997

Guarantees given to third parties 53,938,508 26,011,395

Undrawn irrevocable loan commitments 9,831,155 22,961,183

272,221,389 173,171,575

b) Operating lease commitmentsAt 31 March 2008 the Bank was committed to making

the following future payments in respect of operating

leases for land and buildings. The lease is expected to

expire in June 2016.

Not

morethan

threemon

ths

£’000

Morethan

three

mon

ths b

utno

t more

than

sixmon

ths

£’000

Morethan

six

mon

ths b

utno

t more

than

oneyear

£’000

Morethan

oneyear

but n

otmorethan

fiveyears

£’000

Morethan

fiveyears

£’000

Not

expo

sedto

creditrisk

£’000

Total

£’000

Not

morethan

threemon

ths

£’000

Morethan

three

mon

ths b

utno

t more

than

sixmon

ths

£’000

Morethan

six

mon

ths b

utno

t more

than

oneyear

£’000

Morethan

oneyear

but n

otmorethan

fiveyears

£’000

Morethan

fiveyears

£’000

Not

expo

sedto

creditrisk

£’000

Total

£’000


43



42


25 Financial Risk Management (continued)

Maturity Analysis based on earlierof the periods to the next interest ratepricing date or the maturity dates.

As at 31 March 2008

Assets

Cash at bank and in hand 17,232 - - - - - 17,232

Loans and advances to banks 712,493 84,390 73,426 4,894 - - 875,203

Loans and advances to customers 4,913 1 10,048 65,580 13,560 - 94,102

Tangible fixed assets - - - - - 616 616

Intangible fixed assets - - - - - 303 303

Other assets - - - - - 1,009 1,009

Deferred tax - - - - - 38 38

Financial assets-derivatives 298 - - - - - 298

Total assets 734,936 84,391 83,474 70,474 13,560 1,966 988,801

As at 31 March 2007

Assets

Cash at bank and in hand 2,480 - - - - - 2,480

Loans and advances to banks 392,008 37,084 40,734 510 - - 470,336

Loans and advances to customers 2,491 166 2,791 12,954 5,738 - 24,140

Tangible fixed assets- - - - - - 350 350

Intangible fixed assets - - - - - 410 410

Other assets - - - - - 879 879

Deferred tax - - - - - 20 20

Financial assets-derivatives 43 - - - - - 43

Total assets 396,979 37,250 43,525 13,464 5,738 1,703 498,658

25 Financial Risk Management

25.1) Derivatives and other financial instrumentsThe bank’s financial instruments, other than derivatives,principally comprise loans and deposits that arise fromits operations as a lending and deposit-taking institution.

The bank also enters into a small number of derivativetransactions (principally forward foreign currency contracts).The purpose of the transactions is to manage the currencyrisks arising from the bank’s operations.

The Bank holds and issues financial instruments for threemain purposes:

• to earn an interest margin or a fee;

• to finance its operations; and

• to manage the interest rate and currency risks arising fromits operations and from its sources of finance.

The Bank does not have a trading book. The Bank finances itsoperations by a mixture of shareholders’ funds and customerand bank deposits. The deposits raised may be in a rangeof currencies at variable or fixed rates of interest. The Bank’slending is in USD, GBP, EUR, JPY and CHF. The Bank dealsin spot and forward foreign exchange transactions.

The main risks arising from the Bank’s financial instruments arecredit risk, market risk and liquidity risk. Market risk includesinterest rate, foreign currency risk and other price risk. Themanagement reviews and agrees policies for managing eachof these risks and they are summarised below. These policieswere reviewed within the period being reported.

Credit riskCredit risk is the risk that financial loss arises from the failureof a customer or counterparty to meet its obligation undera contract. It arises principally from lending, trade finance andtreasury activities. Internal controls are in place within thebank’s credit function which are designed to ensure that loansare made in accordance with the Bank’s credit policy and thatonce made such facilities are monitored on a regular basis bythe appropriate level of management.

Moreover, significant changes in the economy, or state ofa particular industry could result in risks that are differentfrom those provided for at the balance sheet date. To managethese risks, management has established limits in relation toindividual borrowers or group of borrowers.

Credit risk and asset/liability concentrationThe Bank’s Credit Committee is responsible for approvingcredit recommendations and making other credit decisionsas per its delegated authority within the Bank’s LendingAuthority Policy. This includes decisions on individual credits,reviewing and recommending credits, large exposures and/orconcentration limits to the Board of Directors for theirapproval. The Credit Committee is also responsible formonitoring the credit approval delegated to the Credit RiskManagement Department by the Board of Directors.

The limits established are constantly monitored and are subjectto a regular review by an approval body (based on the amountof the limit). Limits relating to specific sectors and countriesare examined and approved by the Board of Directors.

The Bank’s credit policy documents include details on lendingauthorities, large exposures, concentration risk, transactionswith parent and affiliates, country risk exposure, industrylending, use of external credit assessments, credit riskcollateral and provisioning.

The exposure to credit risk is managed by an analysis of theability of the borrowers to meet their obligations using internalcredit rating systems and methodologies.

In the instances of borrowers who have obtained facilitiesin other group companies, the total exposure on a groupbasis is taken into account in determining credit risk.

As a result the credit limits are adjusted if considerednecessary. In addition the above analysis takes into accountthe interest rate spread and collaterals held.

The bank’s exposure to credit risk is determined by thecounterparties with whom the bank conducts business, as wellas the markets and countries in which those counterpartiesconduct their business. Counterparty and country limits are inplace and the bank performs credit appraisal procedures priorto the advancing of any facilities. The bank also has policieson the levels of collateral that are required to secure facilities.

The tables below show the maturity of the Banks’ financialassets and the bank’s exposure to credit risk based on theage, markets and countries in which the bank’s customersconduct their business.


45



44



The above sector and geographical analyses only include cashat bank and in hand and loans and advances to banks andto customers.

The bank extends credit facilities to quality rated and unratedcounterparties. All rated counterparties must have a Fitch (orequivalent) rating of no less than B. A large percentage (90%)(2007 - 95%) of the Bank’s total financial assets was to highquality financial institutions, the majority of which had ratingsof between A and AAA.

As at 31 March 2008, the Bank’s maximum exposure to creditwas £1,072m (200 – £577m), none of which was deemed tobe impaired or doubtful. These amounts include all financialassets and undrawn irrevocable loan and trade commitments.

Total trade related exposure was £262m (2007 – £150m)against which the Bank held cash collateral of £133m (2007 –£68m). In addition, the Bank had collateral of £49m (2007 –£17m) in respect of other credit exposures.

25.2 Market risk

Market risk is the risk that the fair value or future cash flowsof a financial instrument will fluctuate because of changes inmarket prices. Market risk comprises three types of risk: foreigncurrency risk, interest rate risk and the price risk. The objective

of market risk management is to maintain market riskexposures within acceptable parameters, whilst optimisingthe return on risk.

25.2.1 Interest rate risk

Interest rate risk originating from banking activities arisesdue to the Bank holding a combination of fixed and variablerate assets and liabilities that arise during the normal courseof business. The tables summarise the variable rate assetsand liabilities as at 31 March 2008 as a basis of disclosingthe Bank’s interest rate sensitivity analysis.

Interest rate sensitivity analysisThe bank holds a combination of fixed and variable rateassets and liabilities. As a consequence of holding variablerate financial instruments, the Bank is exposed to cash flowinterest rate risk.

Interest rate sensitivity analysis has been performed on thenet cash flow interest rate risk exposures as at the reportingdates. A range of possible upward/downward movementsin Libor/Euribor of 100 – 150bps has been assumed for thedifferent currencies.

If all other variables are held constant, the tables belowpresent the likely impact on the banks profit or loss.

2008

£ 2007

£

2008

£ 2007

£

2008

GrossAmou

nt

£ 2008

Collateral

£ 2008

Net

Amou

nt£ 2007

Net

Amou

nt£ 2007

Collateral

£ 2007

Net

Amou

nt£


Age Analysis of past due but notimpaired assets

The table below shows the age analysis

of past due but not impaired assets.

The bank holds collateral in the form

of property against these assets.

Within three months 1,058,079 2,064,000 - 1,326,233 2,306,000 -

Between three to six months 126,228 185,000 - 474,100 550,000 -

Over six months but less than one year - - - - - -

Over one year - - - - - -

1,184,307 2,249,000 - 1,800,332 2,856,000 -

Credit exposure by sector

Sovereign - 2,716

Banks 892,434 473,250

Corporate 78,840 15,021

Individuals 15,262 6,173

986,536 497,160

Credit exposure by location

Europe 481,956 228,162

Eastern European 163,846 84,036

Africa 296,131 148,355

Others 44,603 36,607

986,536 497,160

GBP

£’000

USD

£’000

EUR

£’000

Other

CCY

£’000

Total

£’000


47



46



As at 31 March 2007

Total financial assets 80,544 395,417 18,652 2,547 497,160

Less: Fixed rate assets - (9,323) - - (9,323)

Total variable rate assets 80,544 386,094 18,652 2,547 487,837

Total financial liabilities 54,472 406,400 7,778 958 469,608

Less: Fixed rate liabilities - - - - -

Total variable rate liabilities 54,472 406,400 7,778 958 469,608

Net Cash Flow Interest Rate Risk exposure 26,072 (20,306) 10,874 1,589 18,229

Possible movement in Libor /Euribor (bps) 100 150 100 100

Possible Impact of increase in Libor/Euribor

on profit/loss 261 (305) 109 16 81

Impact of decrease in Libor/Euribor on profit/loss (261) 305 (109) (16) (81)

GBP

£’000

USD

£’000

EUR

£’000

Other

CCY

£’000

Total

£’000


As at 31 March 2008

Total financial assets 284,561 660,062 32,621 9,292 986,536

Less: Fixed rate assets - (4,832) (4,024) - (8,856)

Total variable rate assets 284,561 655,230 28,597 9,292 977,680

Total financial liabilities 241,381 627,628 20,775 3,428 893,212

Less: Fixed rate liabilities (20,940) - - - (20,940)

Total variable rate liabilities 220,441 627,628 20,775 3,428 872,272

Net Cash Flow Interest Rate Risk exposure 64,120 27,602 7,822 5,864 105,408

Possible movement in Libor/Euribor (bps) 100 150 100 100

Possible impact of increase

in Libor/Euribor on profit/loss 641 414 78 59 1,192

Possible impact of decrease

in Libor/Euribor on profit/loss (641) (414) (78) (59) (1,192)

Not

morethan

threemon

ths

£’000

Morethan

three

months b

utnot m

ore

than

sixmon

ths

£’000

Morethan

six

months b

utnot m

ore

than

oneyear

£’000

Morethan

one

year

butno

tmore

than

five

years

£’000

Morethan

fiveyears

£’000

Total

£’000


49



48


As at 31 March 2008

Liabilities

Deposits by banks 467,826 108,771 - - - 576,597

Customer accounts 143,986 10 6,539 14,971 - 165,506

Other financial liabilities 62,656 71,212 - - - 133,868

Financial liabilities -derivatives 1,120 - - - - 1,120

Subordinated liabilities - - - - 11,500 11,500

Off B/S items:

undrawn loan commitments 9,831 - - - - 9,831

Total liabilities 685,419 179,993 6,539 14,971 11,500 898,422

As at 31 March 2007

Liabilities

Deposits by banks 316,398 - 21,614 - - 338,216

Customer accounts 48,098 72 - - - 48,170

Other financial liabilities 18,616 50,000 - - - 68,616

Financial liabilities -derivatives 114 - - - - 114

Subordinated liabilities - - - 11,500 11,500

Off B/S items:

undrawn loan commitments 11,900 11,061 - - - 22,961

Total liabilities 395,126 61,133 21,614 - 11,500 489,373

26 Liquidity risk

The Bank is regulated in the United Kingdom by the

Financial Services Authority (FSA) who set the required

liquidity mismatch parameters. The Bank manages the

liquidity structure of its assets, liabilities and commitments

so that cash flows are appropriately balanced to ensure

USdo

llar

£’000

EUR

£’000

Other

Curren

cies

£’000

As at 31 March 2008

Net foreign currency exposures (2,037) 14,666 5,864

Impact of 5% increase in FC: GBP rate (102) 733 293

Impact of 5% decrease in FC: GBP rate 102 (733) (293)

As at 31 March 2007

Net foreign currency exposures 313 (120) 46

Impact of 5% increase in FC: GBP rate 16 (6) 2

Impact of 5% decrease in FC: GBP rate (16) 6 (2)


25.2.2 Foreign Currency riskForeign exchange exposure arises from normal banking activities,particularly from the receipt of deposits and the placementof funds denominated in foreign currencies. It is the policy ofthe Bank to match the currencies and its assets and liabilitiesas far as practicable. It is also the policy of the Bank to adhereto the limits laid down by the Board in respect of the “overallnet open position”. The tables below give details of thecompany’s net foreign currency exposures as at 31 March2008 as a basis of disclosing the Bank’s foreign currencysensitivity analysis.

Foreign Currency SensitivityForeign currency sensitivity analysis has been performed onthe foreign currency exposures inherent in the Bank’s financialassets and financial liabilities at the reporting dates presented,net of FX derivatives. The sensitivity analysis provides anindication of the impact on the Bank’s profit or loss of reasonablypossible changes in the currency exposures embedded withinthe functional currency environment that the Bank operatesin. Reasonably possible changes are based on an analysis ofhistoric currency volatility, together with any relevantassumptions regarding near-term future volatility.

The Bank believes that for each foreign currency net exposureit is reasonable to assume a 5% appreciation/depreciationagainst the Bank’s functional currency. If all other variables areheld constant, the tables below present the impacts on theBank’s profit or loss if these currency movements had occurred.

that all funding obligations are met when due and the

required mismatch parameters by the FSA are not breached.

The policy of the Bank is to match the maturities and

currencies as far as practicable for all (and particularly large)

exposures or placements.


50


27. Fair values of financial instruments

Set out below is a year-end comparison of current and bookvalues of all the company’s financial instruments by category.Market values are used to determine fair values. In theabsence of readily ascertainable market values, directors’estimation is used to determine fair values.

2007

No.

ofShares

2007

Amou

nt£2008

No.

ofShares

2008

Amou

nt£

Assets

Cash at bank and in hand 17,232 2,480 17,232 2,480

Loans and advances to banks 875,203 470,336 875,203 470,336

Loans and advances to customers 94,102 24,140 94,102 24,140

Financial assets – derivatives 298 43 298 43

986,834 496,999 986,834 496,999

Liabilities

Deposits by banks 576,597 338,013 576,597 338,013

Customer accounts 165,506 48,170 165,506 48,170

Financial liabilities – derivatives 1,120 114 1,120 114

Subordinated liabilities 11,500 11,500 11,500 11,500

754,723 397,797 754,723 397,797

28. Pension costs

The Bank operates a defined contribution pension scheme forstaff and contributions were made during the year totalling£104,378 (2007 – £96,706). This amount forms part of totalstaff costs recorded under administrative expenses.

There were no outstanding or prepaid contributions at thebalance sheet date.

29. Ultimate parent company and controlling party

The ultimate parent company and controlling party is FirstBank of Nigeria Plc “FBN”, a company incorporated in Nigeriaand which prepares group accounts including all companieswithin the FBN group. The parent of the smallest and largestgroup for which group accounts are prepared and of which thecompany is a member is First Bank of Nigeria Plc. Copies ofsuch accounts may be obtained from the Company Secretary,First Bank of Nigeria Plc, Lagos, Nigeria.

30. Dividend paid

A dividend payment of £4,900,000 was made in respectof the year ended 31 March 2008 (2007 – £3,900,000).

Company Registration No. 4459383

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