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Ama - Hai Chartered Certified Accountants & Auditors
Partners Amanuel Bahta, FCCA (U.K.)

Haileselassie G/kidan, FCCA

(U.K._________________________________________________________________________________

INDEPENDENT AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF
LION INTERNATIONAL BANK S. C.

We have audited the accompanying financial statements of Lion International

Bank S. C. which comprise the Statement of Financial Position as of 30 June
2016, the Statement of Financial Performance and Statement of Cash Flows for
the year then ended, and a summary of significant accounting policies and
other explanatory notes.

Director’s Responsibility for the Financial Statements

The Company’s Directors are responsible for the preparation and fair
presentation of these financial statements in accordance with Applicable laws
and Accounting Policies of the Bank. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and
fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based

on our audit. We conducted our audit in accordance with International
Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall
presentation of financial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Unqualified opinion

In our opinion the financial statements present fairly, in all material respects,
the financial position of Lion International Bank S. C. as of 30 June 2016,
and of its financial performances and its cash flows for the year then ended
and are prepared in accordance with Applicable laws and Accounting Policies
of the Bank.

We have no comments to make on the report of the Board of Directors of the

Bank in so far as it relates to these financial statements and pursuant to
Article 375 of the Commercial Code of Ethiopia 1960 we recommend approval
of these financial statements.

Addis Ababa Ama - Hai

September 23, 2016 Chartered Certified Accountants
2
LION INTERNATIONAL BANK S. C.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
CURRENCY: BIRR

ASSETS Notes 2015

Cash & balance with banks 2h, 3 1,096,762,700 814,461,602

Reserve with National Bank of Ethiopia 318,000,000 217,000,000
National Bank of Ethiopia bills 4 1,679,129,000 1,236,900,000
Foreign bank deposits 5 219,049,244 503,976,412
Domestic bank time deposit 6 200,000,000 -
Loan & advances 2d, 7 4,303,387,848 2,830,566,767
Stock of supplies 8 7,605,338 3,697,300
Other assets 9 173,872,868 160,339,715
Deferred charges 2i, 10 3,798,708 1,608,512
Investment 11 25,732,624 25,399,574
Plant, property & Equipment 2e, 12 91,893,314 65,412,358

Total assets 8,119,231,644 5,859,362,240

LIABILITIES, CAPITAL AND RESERVES

LIABILITIES

Deposits from customers 13 6,333,564,240 4,457,396,806

Other liabilities 14 431,042,472 240,913,005
Margin held on letters of credit 196,638,844 264,100,040
Provision for taxation 26 88,126,516 74,830,716

Total liabilities 7,049,372,072 5,037,240,567

CAPITAL AND RESERVES

Paid up capital 15 642,489,634 509,919,263

Legal reserve 16 207,222,251 141,836,919
Special reserve 17 7,092,821 2,895,579
Retained earning 18 213,054,866 167,469,912

Total capital and reserves 1,069,859,572 822,121,673

Total liabilities, capital and reserves 8,119,231,644 5,859,362,240

_____________________________ _____________________
Tassew W/hana (Phd) Getachew Solomon (Ato)
Chairman, Board of Directors President

3
LION INTERNATIONAL BANK S. C.
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

INCOME Notes 2015

Interest income 19 527,201,904 326,861,807

Less: Interest Expenses 20 (169,608,626) (106,597,782)
357,593,278
Net Interest Income 220,264,025

Commission, fees and charges 21 117,828,141 117,412,016

Net gain from dealing in foreign
currencies 2g, 22 110,572,324 74,949,356
Other income 23 139,198,029 119,718,016
367,598,494 312,079,388
Net operating income 725,191,772 532,343,413

Provision for doubtful loans and

advances (38,565,616) (27,086,761)

Provision for doubtful debts other than

loans & advances - (3,295,487)
Net interest and other income after
provisions for doubtful accounts 686,626,156 501,961,165

OPERATING EXPENSES

Salaries and benefits 200,231,613 122,879,853

General & administration 24 135,379,078 102,520,455
Directors fee 25 1,048,667 820,000
Audit fee & expenses 298,954 148,754

Total operating expenses (336,958,312) (226,369,062)

NET PROFIT BEFORE TAXATION 349,667,844 275,592,103

PROVISION FOR TAXATION 26 (88,126,516) (74,830,716)

261,541,328 200,761,387

LEGAL RESERVE 16 (65,385,332) (50,190,347)

NET PROFIT AFTER TAXATION &

LEGAL RESERVE 196,155,996 150,571,040

EARNING PER SHARE OF BIRR 25 27 11.97 10.63

4
LION INTERNATIONAL BANK S. C.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR
OPERATING ACTIVITIES 2015
Net profit before taxation 349,667,844 275,592,103
Amortization of deferred charges 230,603 2,754,840
Depreciation 13,897,795 9,455,695
Prior year adjustment 7,355 (6,044)
Return on investment (divided income) (933,305) (1,116,000)
Gain on disposal at fixed asset - (3,669)
Operating (loss) before working capital changes 362,870,292 286,676,925
Decrease (Increase) in stock of supplies (3,908,038) (1,081,232)
Increase in other assets (11,787,143) (1,918,613)
Increase in loans and advances (1,511,386,698) (1,316,287,670)
Doubtful debts other than loans written back (1,746,010) -
Provision for doubtful loans and advances 38,565,616 30,382,248
Doubtful accounts written off - (199,088)
Increase in deposits from customers 1,876,167,434 1,770,412,460
Increase in other liabilities 190,129,467 28,705,108
(Decrease) Increase in margin held on letter of credit (67,461,198) 208,379,016
Profit tax & withholding tax paid (74,830,716) (30,605,876)
Dividend paid (63,774,682) (69,539,610)

Net cash generated from operating activities 369,968,032 618,246,743

INVESTING ACTIVITIES
Acquisition of fixed assets (40,378,750) (26,384,960)
Increase on differed charges (2,420,799) (363,081)
Acquisition of NBE bills (442,229,000) (520,512,000)
Proceeds from disposal at fixed assets - 6,626
Investment in share (333,050) (16,340,000)
Return on investment (Dividend received) 933,305 1,116,000
Net cash used in investing activities (484,428,294) (562,477,415)

FINANCING ACTIVITIES
Payments for subscribed shares & capitalization 49,963,900 63,085,976
Net cash generated from financing activities 49,963,900 63,085,976

Net (Decrease)/Increase In Cash And Cash Equivalents 298,373,930 405,532,229

Cash and cash equivalents at beginning of the year 1,535,438,014 1,129,905,785
Cash and cash equivalents at end of the year 1,833,811,944 1,535,438,014

CASH AND CASH EQUIVALENTS

Cash on hand 660,958,643 796,281,860

Cash and balances with National Bank of Ethiopia 753,804,057 235,179,742
Cash and balances with foreign banks 219,049,244 503,976,412
Cash and balances with domestic banks 200,000,000 -
1,833,811,944 1,535,438,014

5
LION INTERNATIONAL BANK S. C.
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

Paid up Legal Special Retained

Capital Reserve Reserve Earnings Total

Balance as at 30 June 2014 446,833,287 91,646,572 - 89,340,105 627,819,964

Dividend paid - - - (69,539,610) (69,539,610)

Special reserve - - 2,895,579 (2,895,579) -

Contribution to subscribed
capital 63,085,976 - - - 63,085,976

Net profit for the year - - - 150,571,040 150,571,040

Prior year adjustment - - - (6,044) (6,044)

Transfer to legal reserve - 50,190,347 - - 50,190,347

Balance as at 30 June 2015 509,919,263 141,836,919 2,895,579 167,469,912 822,121,673

Dividend paid - - (146,387,828) (146,387,828)

Special reserve - - 4,183,212 (4,183,212) -

Contribution to subscribed
capital 132,577,046 - - - 132,577,046

Net profit for the year - - - 196,155,994 196,155,994

Prior year adjustment (6,675) - 14,030 - 7,355

Transfer to legal reserve - 65,385,332 - - 65,385,332

Balance as at 30 June 2016 642,489,634 207,222,251 7,092,821 213,054,866 1,069,859,572

6
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

1. BACKGROUND

Lion International Bank (S.C) was formed in Ethiopia in 02 October 2006 and
is registered as a public shareholding company in accordance with Licensing
and Supervision of Banking Business Proclamation No. 84/1994 and
Commercial Code of Ethiopia 1960.

The Bank’s principal activity is commercial banking.

The registered address of the bank is Yeka sub city, Kebele 12, House No.
New, Lex Plaza Building, Addis Ababa.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Bank are stated below:-

a) Statement of compliance

The financial statements have been prepared in accordance with

Applicable laws and Accounting Policies of the Bank.

The financial statements are presented in Ethiopian Birr.

b) Basis of preparation

The financial statements are prepared on historical cost basis. Financial

assets and liabilities and non-financial assets and liabilities are stated at
amortized cost or historical cost, except for foreign currencies which are
stated at closing date selling exchange rate.

7
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

c) Financial instruments

(i) Classification

A financial instrument is any contract that rises to a financial asset

for the bank and a financial liability or equity instrument of another
party. All assets and liabilities in the balance sheet are financial
instruments except fixed assets, deferred charges and shareholders
equity.

The major financial instrument of the Bank is originated loans and

advances.

Originated loans and advances are loans and receivables created by

the Bank providing money to a debtor. Originated loans and
receivables comprise deposits and other balances due from banks
and loans and advances to customers.

(ii) Recognition of financial instruments

The Bank initially recognizes financial assets and liabilities on its

balance sheet on the date it becomes a party to the contractual
provision of the instrument. Any gains and losses arising from
changes in value of the asset are recognized from this date. When
the Bank becomes a party to the contractual terms comprising a
loan and as a consequence has the legal right to receive principal
and interest payments on the loan, it controls the economic benefits
associated with the loan. Normally, a bank becomes a party to the
contractual provisions that comprise a loan (i.e., acquires legal
ownership of the loan) on the date of the advance of funds or
payment to third party. As a result, a commitment to lend funds is
not recognized as an asset on the balance sheet.

8
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

(iii) De-recognition of financial instruments

All financial assets are derecognized when the Bank loses control
over the contractual rights that comprise the assets. This occurs
when the rights are realized, expired or are surrendered. A financial
liability is derecognized when it is extinguished.

(iv) Measurement of financial instruments

The Bank measures all financial instruments initially at cost,

including transaction costs.

d) Loans and advances

Loans and advances are financial instruments originated by the Bank by

providing money to the debtors. The loans and advances are stated at
cost less impairment losses.

Impairment losses comprise specific provisions against debts identified

as bad and doubtful and general provision against losses which are likely
to be present in any loans and advances portfolio. The Bank follows the
National Bank of Ethiopia Supervision of Banking Business Directive
number SBB 43/2008 in determining the extent of provision for
impairment losses. The Directive classifies loans and advances into the
following:

(i) Pass loans

Loans and advances in this category are fully protected by the

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

9
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

(ii) Special mention

Any loan or advance past due 30 days or more, but less than 90
days is classified under this category.

(iii) Substandard

Non-performing loans or advances past due 90 days or more but

less than 180 days is classified under this category.

(iv) Doubtful

Non-performing loans or advances past due 180 days or more but

less than 360 days is classified as doubtful.

(v) Loss

Non-performing loans or advances past due 360 days is classified as

loss.

As per this directive, the provision for impairment losses is

determined as follows:

Loan Category Extent of Provision Required

1. Pass loans 1% of outstanding loan balances

2. Special mention loans 3% of the outstanding loan balances
3. Substandard loans 20% of the net loan balance (Note)
4. Doubtful loans 50 % of the net loan balance
5. Loss loans 100% of the net loan balance

Note

Net loan balance is outstanding loan balance less net Recoverable

Value of collaterals.

10
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

e) Fixed assets

Fixed assets are stated at cost less accumulated deprecation.

Depreciation is charged on straight line bases at the following rate.

Building 5
Vehicles 20
Furniture, fittings & equipment 10
IT equipment 10

f) Revenue recognition

Interest income and expense in the income statement are recognized on

accrual basis.

Fees and commission income arise on financial services provided by the

bank and are recognized when the services are provided to customers.

g) Foreign currencies

Foreign currency transactions are recorded at rates of exchange ruling at

the value date of the transactions.

Monetary assets denominated in foreign currencies, which are stated at

historical cost, are translated at the selling exchange rates ruling at 30
June 2016. Foreign exchange differences arising on translations are
recognized in the income statement.

h) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand balances and

balances with the National Bank of Ethiopia, due from domestic and
foreign banks on demand.

11
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
i) Deferred charges

These are the cost of new banking software (Delta Software) and will be
amortized on straight line bases over five years.

CURRENCY: BIRR

3. CASH AND BALANCE WITH BANKS 2015

Cash on hand (Local & Foreign currency) 660,958,643 796,281,860

NBE-Payment and settlement and issue account 435,804,057 18,179,742
1,096,762,700 814,461,602

4. NATIONAL BANK OF ETHIOPIA BILLS

This represents cost of Bills acquired from the National Bank of Ethiopia in
accordance to the directives on the Establishment and operation of National Bank
of Ethiopia Bills market No MFA/NBEBILLS/002/2011. Maturity period of the bills
is five years.

Balance at 30 June 2015 1,236,900,000

Add: Additional bills acquired 607,172,000
1,844,072,000
Less: Bill matured & repaid back (164,943,000)
1,679,129,000

5. DEPOSIT WITH FOREIGN BANK

Bank of Africa – Djibouti 7,957,483 14,094,151

Bank of Beirut 6,209,031 9,826,212
CommerZ Bank AG - Frankfurt 172,408,577 480,056,049
Bank of China – Beijing 32,474,153 -
219,049,244 503,976,412

6. DESPOT WITH DOMESTIC BANK

Abay Bank S.C. 50,000,000

Enat Bank S.C. 100,000,000
Bunna International Bank S.C. 50,000,000
200,000,000

12
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

CURRENCY: BIRR

7. LOANS AND ADVANCES

Analysis by period of maturity

Maturities are expressed in terms of the original loan period to the repayment
date:
2015
Loans and advances due:
Within one year 1,767,266,440 1,200,156,319
After but within five years 2,291,782,536 1,476,521,724
After five years 330,653,329 201,637,565
4,389,702,305 2,878,315,608
Less: Provision for doubtful debts (86,314,457) (47,748,841)
4,303,387,848 2,830,566,767

Analysis by sector

Transportation & communication 290,597,660 72,588,278

Export loans 828,902,954 574,443,493
Import loans 994,480,487 714,419,273
Manufacturing & production 249,405,588 157,735,186
Building construction 837,330,815 491,360,128
Domestic trade 869,370,301 652,386,259
Staff emergency & morgage loan 141,919,912 61,081,081
Agricultural loan 59,542,211 49,748,581
Hotel & tourism 118,152,377 104,553,328
4,389,702,305 2,878,315,607
Less: Provision for doubtful debts (86,314,457) (47,748,840)

Loans and advances, net 4,303,387,848 2,830,566,767

8. STOCK OF SUPPLIES

Negotiable instrument 566,796 1,041,137

General supplies 2,494,911 1,314,938
Stock, non supplies 9,165 8,582
Others - 507
Fixed asset in store 4,534,466 1,332,136
7,605,338 3,697,300

13
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

9. OTHER ASSETS 2015

Prepayments 94,894,994 60,761,396

Sundry 11,439,912 5,668,908
Accrued income 27,528,919 15,079,441
Other receivables 40,746,124 76,059,808
Acquired property (Note below) 1,239,822 6,493,075
175,849,771 164,062,628
Less: Provision for doubtful debts (1,976,903) (3,722,913)
173,872,868 160,339,715

Note

Acquired properties represent properties that have been held as loan collateral, and
acquired by the bank in accordance to a proclamation No. 97/1998.

10. DEFERRED CHARGES

Balance at 30 June 2015 16,930,146 16,567,065

Add: Additions during the year 2,420,799 363,081
19,350,945 16,930,146
Less: Amortization
Balance at 30 June 2015 15,321,634 12,566,795
Current year amortization 230,603 2,754,839
(15,552,237) (15,321,634)
3,798,708 1,608,512

11. INVESTMENT

EthSwitch S.C. 11,370,000 11,370,000

Lion Insurance Co. S.C. 4,333,050 4,000,000
SWIFT 29,574 29,574
Goda Bottle & Glass S.C. 10,000,000 10,000,000
25,732,624 25,399,574

The bank had subscribed and paid 173,322 shares of Birr 25 per share, in Lion
Insurance Co. The bank had also purchased one share of Birr 29,574 (2,540 Euro) from
Society of Worldwide Interbank Financial Telecommunication (SWIFT) and subscribed
and paid 11,370 shares of Birr 1000 per share, in Ethswitch S.C. In addition, the
Company had purchased a new 200,000 shares of Birr 50 per share in Goda Bottle &
Glass S.C.

14
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

12. PLANT, PROPERTY & EQUIPMENT

BALANCE AT BALANCE AT
COST
30 JUNE 2015 ADDITIONS 30 JUNE 2016
Motor vehicles 24,099,704 13,849,123 37,948,827
Furniture and fittings 23,388,367 8,784,637 32,173,004
Office & other equipment 23,256,161 9,930,365 33,186,526
IT equipments 24,583,892 7,814,626 32,398,518
Building & premises 4,500,033 - 4,500,033
99,828,157 40,378,751 140,206,908

DEPRECATION
Motor vehicles 12,957,247 4,475,650 17,432,897
Furniture and fittings 5,808,627 2,715,059 8,523,686
Office & other equipment 5,762,250 2,708,194 8,470,444
IT equipments 8,920,071 3,773,891 12,693,962
Building & premises 967,604 225,001 1,192,605
34,415,799 13,897,795 48,313,594

NET BOOK VALUE 65,412,358 91,893,314

13. DEPOSITS FROM CUSTOMERS 2015
Payable on demand
Private sector 1,658,931,693 1,308,826,183
Public enterprises 33,445,231 43,492,941
Non bank financial 49,286,773 12,076,825
Co-operatives & association 3,935,912 8,556,998
Central government 1,087,589 1,222,831
1,746,687,198 1,374,175,778
Saving deposits
Private sector 4,029,859,595 2,575,794,640
Public enterprise 752,395 1,842,365
Non-Bank financial institution 2,166,780 8,112,966
Co-operatives & association 20,645,862 16,457,740
4,053,424,632 2,602,207,711
Foreign currency deposits 10,425,104 14,321,443
10,425,104 14,321,443
Time deposits
Private sector 502,527,306 422,254,118
Non-Bank financial institution 12,500,000 36,937,756
Diaspora deposit 7,000,000 6,500,000
Public enterprise 1,000,000 1,000,000
523,027,306 466,691,874

Total deposits from customers 6,333,564,240 4,457,396,806

15
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

14. OTHER LIABILITIES 2015

Cash payment orders 169,701,244 110,422,518

Blocked accounts 56,657,271 8,285,123
Provision for annual leave 10,964,687 7,418,549
Local transfers payable 4,889,673 12,202,632
Exchange commission 14,252,189 20,183,489
Taxes and stamp duty charges 5,111,502 3,176,137
Miscellaneous payable 45,046,214 862,114
Retention payable 15,474 -
Retention on foreign currency 11,907,823 5,860,465-
Accruals 57,887,745 45,102,459
Others 1,449,448 1,736,082
Unearned LG Commission 31,840,198 -
Provident & pension fund 669,829 402,792
Foreign transaction payable 4,074,439 7,104,837
Temporary customer account 8,041,568 5,633,015
Advance on import bill 8,533,172 12,522,793
431,042,476 240,913,005

15. PAID UP CAPITAL

Subscribed capital of the bank has been increased to Birr 1,000,000,000 (One Billion
Birr) as per the 4th extraordinary meeting of the shareholders.

Balance at 30 June 2015 509,919,263 446,833,287

Add: Shares paid during the year 49,963,900 63,085,976
Dividend capitalized 82,613,146 -
Less: Adjustment (6,675) -
642,489,634 509,919,263

16. LEGAL RESERVE

Article 13(4) of the licensing and supervision of banking proclamation No. 84/1994
provides that 25% of the net profit after taxation shall be transferred to legal reserve
account until the balance reaches the paid-up capital.

Balance at 30 June 2015 141,836,919 91,646,572

Add: Current year reserve 65,385,332 50,190,347
207,222,251 141,836,919

16
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

CURRENCY: BIRR

17. SPECIAL RESERVE

According to the resolution of the 10th & 11th shareholders’ general assembly, the
assembly has passed a resolution to retain a special reserve from the profit of the
year ended 30 June 2015 & 2016. This reserve is not subject to distribution to the
shareholders.

18. RETAINED EARNINGS 2015

Balance at 30 June 2015 167,469,912 89,340,105

Prior year adjustment 14,030 (6,044)
Dividend declared (146,387,828) (69,539,610)
Transferred special reserve (4,197,242) (2,895,579)
Add: Net profit for the year 196,155,994 150,571,040
213,054,866 167,469,912

19. INTEREST INCOME

Interest on loans and advances 478,627,897 298,231,786

Interest on time deposit 4,187,351 -
Interest on treasury & NBE bills 44,386,656 28,630,021
527,201,904 326,861,807

20. INTEREST EXPENSES

Fixed deposits 50,006,597 32,130,264

NBE-borrowing 899,235 -
Saving and demand deposits 118,702,794 74,467,518
169,608,626 106,597,782

21. COMMISSION, FEES AND CHARGES

On letter of credit 55,443,713 52,291,796

On letter of guarantee 56,255,100 57,614,740
On local transfers and transactions 6,129,328 7,505,480
117,828,141 117,412,016

22. NET GAIN FROM DEALING IN FOREIGN CURRENCIES

Gain on foreign exchange 139,073,081 99,592,021

Loss on foreign exchange (28,500,757) (24,642,665)
110,572,324 74,949,356
17
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

23. OTHER INCOME 2015

Provision for doubtful debts other than
loans & advance written back 1,743,095 -
Gain on disposal of fixed assets - 3,669
Telephone, telegraph and postage charge 2,095,855 2,716,321
Service charge on foreign and local transaction 133,495,724 112,738,053
Others 930,050 3,143,973
Dividend 933,305 1,116,000
139,198,029 119,718,016

24. GENERAL & ADMINISTRATION EXPENSES

Deprecation 13,897,796 9,455,695
Inspection & circulation fee 45,896 33,312
Amortization 230,603 2,754,839
Office rent 45,818,679 32,992,387
Stationery and printing 4,975,732 4,507,810
Communication 6,778,406 4,953,139
Correspondent charges 637,409 121,290
Advertisement and promotion 11,326,193 7,855,152
Insurance 3,099,278 2,963,832
Repair and maintenance 3,214,223 2,336,976
Fuel and lubricants 588,492 676,850
Traveling & perdiem 3,320,236 1,497,262
Electricity and water 557,816 535,725
Subscription and membership fees 446,941 198,431
Wages 23,709,610 12,524,298
Postage expenses 274,307 251,599
License fee 480,125 181,523
Transportation 677,236 675,487
Legal expense 1,743,095 -
Entertainment 1,014,225 1,177,732
Inauguration 2,273 2,880
Cleaning supplies 314,844 236,720
Office supplies 900,348 563,124
Maintenance, support & consultancy fee 4,861,210 3,135,338
Transportation of currencies 4,889,624 9,805,954
Legal fees 321,597 7,495
Stamp duty tax 19,943 16,665
Miscellaneous 1,012,941 1,058,940
Donation 150,000 2,000,000
Penalty 70,000 -
135,379,078 102,520,455

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LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

25. DIRECTORS FEE 2015

Monthly allowance 272,000 270,000

Annual directors fee 596,667 550,000
Nomination committee allowance 180,000 -
1,048,667 820,000

The annual directors fee represents the maximum limit allowed by the National Bank of Ethiopia on
its directive No. SBB/49/2011. However, this fee is subject to approval by the shareholders general
assembly.

26. PROVISION FOR TAXATION

Net profit before taxation for the year 349,667,844 275,592,103

Add: Non-allowable expense
Deprecation in accordance with bank’s policy
13,897,795 9,455,695
Entertainment 1,014,225 1,177,732
Penalty 70,000 360,000
Donation 150,000 1,000,000
Amortization of deferred charge as per bank
policy 230,603 2,754,840
Provision for doubtful accounts other than
loans & advances - 3,295,487
15,362,623 18,043,754
Less: Allowable expense & deposit income
Deprecation in accordance with tax
proclamation No. 286/2002 18,736,927 12,993,612
Interest income on deposits as per tax
proclamation No 286/2002 Article 36,
sub Article 3 (Note 19) 48,574,007 28,630,021
Dividend income taxed at source 933,305 1,116,000
Amortization of deferred charge as per tax law
1,285,165 1,456,834
Gain on disposal of IT equipment - 3,669
Written back of doubtful debts other than
loans & advance 1,746,010 -
(71,275,414) (44,200,136)
Taxable profit 293,755,053 249,435,721
Provision for taxation (30%) 88,126,516 74,830,716
Less: Withholding tax - -
88,126,516 74,830,716

27. EARNING PER SHARE

Earning per share is calculated by dividing net profit after tax but before legal reserve divided by
average number of outstanding shares as at 30 June 2016. The weighted average number of
outstanding shares as at 30 June 2016 is 21,854,216 (18,888,752 share as at 30 June 2015) shares
of Birr 25 par value. 19
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016

CURRENCY: BIRR

28. CONTINGENT LIABILITIES & COMMITMENTS

Contingent liabilities represent credit-related commitments to extend letter

of credit, guarantees and acceptance and forward foreign exchange
contracts which are designed to meet the requirements of the Bank’s
customers to ward third parties. Commitments represent the Bank’s
commitments approved unutilized facilities and other commitments of the
Bank.
2015
Contingent liabilities
Letters of credit (Note (a)) 474,803,920 826,910,560
Guarantees issued (Note (b)) 1,271,181,671 1,107,373,344
1,745,985,591 1,934,283,904

Contingent liabilities
Loans and advances approved but
not drawn 279,961,523 258,462,749

Note (a)
The Bank has a lien on the goods imported through letter of credit as the
suppliers are required to send shipping documents directly to the bank.

Note (b)
The risk exposure involved in connection with the performance guarantees
issued is managed in the following manner.

- The bank has held collaterals and letters of undertaking in respect of

most guarantees issued to its customers;
- Concerning guarantees issued on clean basis, upon issuance of
guarantees customers are obliged to deposit advance payments and
subsequent collections from their clients into a current account
maintained with Bank itself under joint control of the Bank and the
customer, whereby payments from such a joint account are made
with the consent of the Bank and only in respect of related
guaranteed contracts.

20
LION INTERNATIONAL BANK S. C.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CURRENCY: BIRR

29. MEMORANDUM ACCOUNTS 2015

Inward bills for collection-acceptance and sight 32,354,939 54,332,209

Outward bills for collection local and foreign 8,461,498 5,633,015
Interest on Non performing loans 6,264,694 4,504,269

30. RISK MANAGEMENT

This note provides details of the Bank’s exposure of risk and describes the
methods used by management to manage such risk. The most important types of
financial risks to which the Bank is exposed are credit risk, liquidity risk and
foreign exchange risk.

Credit risk

Credit risk, both on and off balance sheet, is managed and monitored in
accordance with defined credit policies and procedures. The credit worthiness of
each counterpart is evaluated and appropriate credit limits are established. To
reduce individual counter party credit risk the Bank ensures, whenever necessary,
that all loans are secured by acceptable forms of collateral. Although the bank has
not yet established credit limits across industries and products, it needs to review
its credit exposure. The bank loans are diversified against various sectors as
shown in Note 6 to the financial statements.

Liquidity risk

Liquidity risk arises in the general funding activities of the Bank and the
management of positions. It includes the risk of being unable to fund assets at
appropriate maturities and rates and the risk of being unable to liquidate an asset
at a reasonable price and in appropriate time frame. The bank has a reasonable
funding base. Funds are raised mainly from customers’ deposits.

Foreign exchange risk

Foreign exchange risks are controlled by maintaining major currencies whose

exchange rate against the reporting currency has always been appreciating. The
Bank settles foreign exchange transactions of customers at the exchange rate
ruling on the date of the transactions. Hence, the customers bear the cost of the
increase in exchange rates.

21