• Financial Statements 2004


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    • Abstract: Financial Statements 2004 DIRECTORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2004TABLE OF CONTENTS PAGECOMPANY INFORMATION 3

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Financial Statements 2004
DIRECTORS' REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2004
TABLE OF CONTENTS PAGE
COMPANY INFORMATION 3
CHAIRMAN’S STATEMENT 4
COMPANY PROFILE AND BUSINESS REVIEW 5
DIRECTORS' REPORT 7
INDEPENDENT AUDITORS' REPORT 9
CONSOLIDATED PROFIT AND LOSS ACCOUNT 11
CONSOLIDATED BALANCE SHEET 12
COMPANY BALANCE SHEET 13
NOTES TO THE FINANCIAL STATEMENTS 14
FINANCIAL HIGHLIGHTS 35
- 2 -
COMPANY INFORMATION
DIRECTORS Mr. Stephan Ziegler – Chairman
Mr. Horst Marschall – Deputy Chairman
Mr. Liam Miley – Managing Director
Mr. Tony McPoland
Mr. Hansjörg Müller-Hermann
Mr. Francis Joseph O'Riordan
Dr. Bernhard Walter
SECRETARY Mr. Tony McPoland
SENIOR MANAGEMENT Mr. Liam Miley – Managing Director
Mr. John Martin – Treasury
Mr. Tony McPoland – Finance & Operations
Mr. Stephen Dowling – Credit Investment
REGISTERED OFFICE PO Box 4566,
6 George’s Dock,
International Financial Services Centre,
Dublin 1.
SOLICITORS A. & L. Goodbody,
North Wall Quay,
International Financial Services Centre,
Dublin 1.
AUDITORS Ernst & Young
Chartered Accountants
Ernst & Young Building,
Harcourt Centre,
Harcourt Street,
Dublin 2.
- 3 -
Chairman’s Statement
This year marks the 10th anniversary of the establishment of the Bank and it is with great
pleasure that I can report another record year of performance.
The recovery in credit markets gathered pace during 2004, which resulted in significant
narrowing of credit spreads across all sectors. The reasons for this included a positive
economic environment, particularly in the US, strong credit fundamentals in corporates and
financial institutions, low levels of issuance and an unprecedented level of demand for credit
product. Spread tightening has been so significant that it places a serious question over the
risk / reward dynamic of lending as a hold to maturity investor in some credit sectors.
The Bank’s strategy in this market has been to focus on very high quality credit assets that
should be less exposed to significant spread widening when the turn in markets inevitably
occurs. There is also a focus on taking short maturity positions in sectors that may exhibit
more price volatility, such as corporates.
Against this backdrop the Bank has performed strongly. Significant balance sheet growth
was achieved with total credit assets increasing by 42% to €5.5bn. This growth was
facilitated by the investment of a further €71m of new capital in 2004 by the Bank’s parent,
BW-Bank AG, together with the leveraging of the capital injection received in late 2003.
Capitalisation levels continued to be strong with a Tier 1 ratio of 9.8% and a total capital ratio
of 10.9% at year-end. Profits after tax of €27.2m were recorded, representing an increase of
13% on 2003. A cost income ratio of 18.4% was achieved.
The outlook for 2005 is favourable. The macro-economic environment should continue to
improve and credit fundamentals are strong. Issuance, however, is expected to remain low
while demand for credit product from traditional investors and indeed new buyers, such as
hedge funds should remain robust. The Bank is focused on continued growth in its core
activities, albeit at a more modest level than in 2004. Growth potential however may be
limited by a continuation of the credit spread tightening environment which might negatively
impact the risk / reward dynamic in more credit sectors.
I sincerely thank all of the staff of the Bank for their professionalism, initiative and hard work
in delivering another record year of achievement.
I also thank my colleagues on the Board for their support and wise counsel. I record my
personal thanks and that of my colleagues in BW-Bank AG to Mr. Séamus Páircéir who
retired from the Board in November 2004. Mr. Páircéir played an invaluable role in the
development of the Bank during its first ten years.
Stephan Ziegler
Chairman
- 4 -
retail, commercial and investment banking
BW Bank Ireland plc activities.
BW Bank Ireland plc is a wholly owned subsidiary Core Business Activities in Ireland
of Baden-Württembergische Bank AG (BW-Bank
AG), which in turn is majority owned by BW Bank Ireland plc is focused on lending in the
international credit markets, funding the credit
Landesbank Baden-Württemberg, one of the five
portfolio and proprietary trading in fixed income
largest banking groups in Germany. and derivatives markets.
The Bank commenced operations in Ireland in
Business Review 2004
January 1995 having been granted a banking
licence by the Irish Financial Services Regulatory A strong performance across all activities of the
Authority (IFSRA). Bank, together with continued attention to cost
control, resulted in significant growth in assets
It is supported by a strong capital base resulting in and profitability in 2004.
Tier 1 capital ratio of 9.8% at 31 December 2004.
A letter of comfort (Patronatserklärung) has been 35,000
issued by BW-Bank AG to IFSRA which states 30,000
that “BW-Bank AG will ensure that BW Bank 25,000
Ireland plc is able to meet its obligations”. 20,000
Profit before
15,000 Tax
BW Bank-AG 10,000
5,000
BW-Bank AG was founded in 1871 and assumed
0
its current form in 1977 through a merger of three '00 '01 '02 '03 '04
banks in the state of Baden-Württemberg. Its
Head Office is located in Stuttgart and it operates Credit Portfolio
primarily through a network of branches in Baden- The Credit Investment Division applies a rigorous
Württemberg. It is a full service bank providing a approach to analysing and monitoring all new and
comprehensive range of retail, corporate and existing credit risks with an overall focus on total
investment banking services to its clients. return. A high level of importance is placed on
capital efficiency, which is achieved through the
Outside Germany, the bank has branch offices in securitisation of asset pools and use of other
Hong Kong and Guernsey together with its structured products.
subsidiaries in Zurich and Dublin, BW Bank
Ireland plc. At the end of December 2004 total The overall quality of the portfolio continued to
assets of BW-Bank AG stood at €28bn. improve reflecting the conservative approach to
credit risk.
Landesbank Baden-Württemberg (LBBW)
Credit Quality BBB BB
Landesbank Baden-Württemberg was formed in 11.8% 2%
January 1999 through the merger of A
B
Südwestdeutsche Landesbank Girozentrale, 41.7%
0.7%
Landesgirokasse – Öffentliche Bank und
Landessparkasse and the commercial business of
Landeskreditbank Baden-Württemberg.
LBBW has among its shareholders the State of
Baden-Württemberg (39.5%), the Savings Banks AAA
Association of Baden-Württemberg (39.5%), and 25%
the City of Stuttgart (21.0%).
With total assets in excess of €400bn, about 200 AA
branches in Baden-Württemberg and offices in 18.6%
many centres of trade and commerce worldwide,
it is among the five largest German banks and
among the 50 largest credit institutions worldwide.
LBBW operates as the central banking institution
of the savings banks in Baden-Württemberg, as a
savings bank in the territory of the state capital of
Stuttgart, and as a universal bank involved in
- 5 -
Over 97% is rated investment grade, with Proprietary trading continued its profitable
over 85% rated A- or better focus on fixed income arbitrage markets.
Treasury & Trading
The markets division utilise a diversified Outlook 2005
range of counterparties and markets The Bank will continue to focus on its core
including interbank deposits, repurchase competencies and plans for growth in its
agreements, and privately placed medium credit portfolio and trading activity.
term debt issuance to fund the Bank’s
activities. Active management of interest
rate positions within clearly defined and
monitored risk limits again proved
profitable in 2004.
1%
24% 30%
Repo
Interbank
ECB Repo
Schuldschein
45%
- 6 -
DIRECTORS' REPORT
for the year ended 31 December 2004
The directors submit their report and audited financial statements for the year ended 31
December 2004.
PRINCIPAL ACTIVITIES
The Bank is focused on lending in international syndicated credit markets, funding the credit
portfolio and market trading.
RESULTS FOR THE YEAR AND STATE OF AFFAIRS AS AT 31 DECEMBER 2004
The consolidated profit and loss account and the consolidated balance sheet for the year
ended 31 December 2004 are set out on pages 11 and 12. The profit before taxation
amounted to €30,517,571.
DIVIDENDS AND RETENTION
The directors recommend the following dividend for the year ended 31 December 2004:
Ordinary shares € 23,000,000
=============
The balance available for transfer to Reserves after dividend is €4,162,436.
REVIEW OF THE DEVELOPMENT OF THE BUSINESS AND FUTURE ACTIVITIES
Profit after taxation increased by 12.7% to €27.2m in 2004, and the proposed dividends
increased by 15% to €23m. The improvement in profitability was due to an increase in
lending, profitable trading and lower loan loss provisions. The company foresees continuing
growth and development of its core business activities in 2005.
HEALTH AND SAFETY AT WORK
The welfare of employees is safeguarded through adherence to health and safety standards
as laid down in the Safety, Health and Welfare at Work Act, 1989.
DIRECTORS AND SECRETARY
The directors and the company secretary at the date of this report are listed on page 3.
Mr. Séamus Páircéir retired from the Board on 25th November 2004.
DIRECTORS' AND SECRETARY'S INTERESTS IN SHARES
The directors and the secretary did not hold any beneficial interest in the share capital of the
company or any other body corporate in the same group at the beginning or end of the
financial year. The interests of the directors in the ordinary shares of € 2.55 each in the
immediate holding company, Baden-Württembergische Bank AG, Stuttgart, were as follows:
Interests at 31 December 2004 at 31 December 2003
Directors
Mr. Horst Marschall 150 150
- 7 -
DIRECTORS' REPORT
for the year ended 31 December 2004 (Continued)
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF
THE CONSOLIDATED FINANCIAL STATEMENTS
Company law requires the directors to prepare financial statements for each financial period
which give a true and fair view of the state of affairs of the company and of the group and of
the profit or loss of the group for that period. In preparing those financial statements, the
directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the company and of the group and
which enable them to ensure that the financial statements comply with the Companies Acts,
1963 to 2003 and the European Communities (Credit Institutions: Accounts) Regulations,
1992. They are also responsible for safeguarding the assets of the company and of the
group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
BOOKS OF ACCOUNT
In addition the directors are responsible for ensuring that proper books and accounting
records, as outlined in Section 202 of the Companies Act 1990, are kept by the company. To
achieve this, the directors have appointed professionally qualified accountants who report to
the Board and Audit Committee to ensure compliance with the requirements of Section 202 of
the Companies Act, 1990. Those books and accounting records are maintained at the
company’s registered office at 6 George’s Dock, IFSC, Dublin 1.
AUDITORS
The auditors, Ernst & Young, Chartered Accountants, will continue in office in accordance
with Section 160(2) of the Companies Act, 1963.
On behalf of the Directors
STEPHAN ZIEGLER
LIAM MILEY
BERNHARD WALTER
Directors
TONY Mc POLAND
Secretary
28 January 2005
- 8 -
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BW BANK IRELAND PLC
We have audited the group's financial statements for the year ended 31 December 2004,
which comprise the Consolidated Profit and Loss Account, Consolidated Balance Sheet,
Company Balance Sheet and the related notes 1 to 34. These financial statements have
been prepared on the basis of the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with Section
193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state
to the company's members those matters we are required to state to them in an auditors'
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and 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 auditors
The directors are responsible for preparing the Annual Report, including the financial
statements which are required to be prepared in accordance with applicable Irish law and
accounting standards as set out in the Statement of Directors' Responsibilities in relation to
the financial statements.
Our responsibility is to audit the financial statements in accordance with relevant legal and
regulatory requirements and Auditing Standards issued by the Auditing Practices Board for
use in Ireland and the United Kingdom.
We report to you our opinion as to whether the financial statements give a true and fair view
and are properly prepared in accordance with the Companies Acts. We also report to you
our opinion as to: whether proper books of account have been kept by the company; whether
at the balance sheet date there exists a financial situation which may require the convening
of an extraordinary general meeting of the company; and whether the information given in the
directors’ report is consistent with the financial statements. In addition, we state whether we
have obtained all the information and explanations necessary for the purposes of our audit
and whether the company’s balance sheet is in agreement with the books of account.
We also report to you if, in our opinion, any information specified by law regarding directors'
remuneration and transactions with the group is not given and, where practicable, include
such information in our report.
We read the Directors' Report and consider the implications for our report if we become
aware of any apparent misstatements within it.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.
- 9 -
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BW BANK IRELAND PLC
(Continued)
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the
company and of the group as at 31 December 2004 and of the profit of the group for the year
then ended and have been properly prepared in accordance with the provisions of the
Companies Acts, 1963 to 2003 and the European Communities (Credit Institutions: Accounts)
Regulations, 1992.
We have obtained all the information and explanations we consider necessary for the
purposes of our audit. In our opinion proper books of account have been kept by the
company. The company’s balance sheet is in agreement with the books of account.
In our opinion the information given in the directors’ report is consistent with the financial
statements.
In our opinion the company balance sheet does not disclose a financial situation, which under
Section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an
extraordinary general meeting of the company.
Ernst & Young
Registered Auditors
Dublin
28 January 2005
- 10 -
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2004
2004 2003
Note €000 €000
Interest receivable & similar income 2 240,102 176,365
Interest payable & similar charges 3 (204,585) (142,468)
Fees and commissions receivable 3,617 1,389
Dealing profits 1,940 2,126
________ ________
Total operating income 41,074 37,412
Administrative expenses 4 7,084 6,465
Depreciation 473 435
Provisions for bad and doubtful debts 5 3,000 3,700
________ ________
Profit on ordinary activities before taxation 6 30,517 26,812
Tax on profit on ordinary activities 7 (3,355) (2,709)
________ ________
Profit on ordinary activities after taxation 8 27,162 24,103
Dividends Proposed 9 (23,000) (20,000)
________ ________
Profit Retained 4,162 4,103
Transfer to Other Reserves 22 (4,000) (4,512)
________ ________
Increase/(Decrease) in the year 22 162 (409)
Profit brought forward at beginning of year 1,101 1,510
________ ________
Profit carried forward at end of year 1,263 1,101
============= =============
There are no recognised gains or losses in either year other than the profit attributable to
shareholders of the group.
Approved by the Board on 28 January 2005
STEPHAN ZIEGLER
LIAM MILEY
BERNHARD WALTER
Directors
TONY Mc POLAND
Secretary
- 11 -
CONSOLIDATED BALANCE SHEET
as at 31 December 2004
2004 2003
Note €000 €000
ASSETS
Cash and balances at central banks 14,148 12,425
Loans and advances to banks 10 419,796 92,407
Loans and advances to customers 11 570,553 232,674
Debt securities and other fixed income securities 12 5,064,980 3,528,083
Tangible fixed assets 13 1,733 1,953
Prepayments and accrued income 105,765 65,156
________ ________
TOTAL ASSETS 6,176,975 3,932,698
============= =============
LIABILITIES
Deposits by banks 15 5,439,913 3,628,017
Customer accounts 16 321,421 0
Other liabilities 17 96,993 64,202
Dividend proposed 23,000 20,000
Provisions for liabilities and charges 18 210 236
________ ________
5,881,537 3,712,455
________ ________
CAPITAL RESOURCES
Regulatory capital liabilities 58,733 -
Subordinated liabilities 25,000 25,000
________ ________
19 83,733 25,000
________ ________
SHARE CAPITAL & RESERVES
Called up share capital 20 6,688 6,688
Capital contribution 21 190,129 177,829
Reserves 22 13,625 9,625
Profit and loss account 22 1,263 1,101
________ ________
Shareholders' funds (including non-equity
interests) 22 211,705 195,243
________ ________
TOTAL CAPITAL RESOURCES 295,438 220,243
________ ________
TOTAL LIABILITIES AND CAPITAL RESOURCES 6,176,975 3,932,698
============= =============
MEMORANDUM ITEMS
Commitments 23 46,990 74,797
============= =============
Approved by the Board on 28 January 2005
STEPHAN ZIEGLER
LIAM MILEY
BERNHARD WALTER
Directors
TONY Mc POLAND
Secretary
- 12 -
COMPANY BALANCE SHEET
as at 31 December 2004
2004 2003
Note €000 €000
ASSETS
Cash and balances at central banks 14,148 12,425
Loans and advances to banks 10 419,696 92,307
Loans and advances to customers 11 570,553 232,674
Debt securities and other fixed income securities 12 5,064,980 3,528,083
Tangible fixed assets 13 1,733 1,953
Shares and investments in group undertakings 14 100 100
Prepayments and accrued income 105,765 65,156
________ ________
TOTAL ASSETS 6,176,975 3,932,698
============ ============
LIABILITIES
Deposits by banks 15 5,439,913 3,628,017
Customer accounts 16 321,421 0
Other liabilities 17 96,993 64,202
Dividend proposed 23,000 20,000
Provisions for liabilities and charges 18 210 236
________ ________
5,906,537 3,737,455
________ ________
CAPITAL RESOURCES
Regulatory capital liabilities 58,733
Subordinated liabilities 25,000 25,000
________ ________
19 83,733 25,000
________ ________
SHARE CAPITAL & RESERVES
Called up share capital 20 6,688 6,688
Capital contribution 21 190,129 177,829
Other reserves 22 13,625 9,625
Profit and loss account 22 1,263 1,101
________ ________
Shareholders' funds (including non-equity
interests) 22 211,705 195,243
________ ________
TOTAL CAPITAL RESOURCES 295,438 220,243
________ ________
TOTAL LIABILITIES AND CAPITAL RESOURCES 6,176,975 3,932,698
============ ============
MEMORANDUM ITEMS
Commitments 23 46,990 74,797
============ ============
Approved by the Board on 28 January 2005
STEPHAN ZIEGLER
LIAM MILEY
BERNHARD WALTER
Directors
TONY Mc POLAND
Secretary
- 13 -
NOTES TO THE FINANCIAL STATEMENTS
31 December 2004
1. ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements have been drawn up in accordance with the provisions of
the Companies Acts 1963 to 2003 and the European Communities (Credit
Institutions: Accounts) Regulations 1992, and with accounting standards generally
acceptable in Ireland relating to banking companies. The Bank has adopted the
applicable Statements of Recommended Practice except as noted in note 1 (l).
(b) Accounting convention
The financial statements are prepared under the historical cost convention.
(c) Depreciation of tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation
is calculated to reduce the assets to their estimated residual values at the end of their
useful lives as follows:
Motor vehicles 5 years
Equipment and furniture 3- 5 years
Computers and software 3- 5 years
Banking System 8 years
Leasehold Premises 13 years
(d) Operating Leases
Rentals on operating leases are charged to the profit and loss account in equal
instalments over the lease term.
(e) Income Recognition
Income on advances and investments in debt securities is accounted for on an
accruals basis. Interest is not taken to profit where recovery is doubtful.
(f) Fees and commissions
Fees and commissions are recognised over the appropriate period in accordance
with the terms of the relevant contract.
(g) Foreign currencies
The financial statements are expressed in Euros (€) and displayed in €000.
Transactions in foreign currencies are recorded at the rate of exchange ruling at the
date of the transaction. Assets and liabilities denominated in foreign currencies are
translated into Euros at the rate of exchange ruling at the balance sheet date. Profit
and losses arising are dealt with in the profit and loss account.
(h) Pension costs
The company operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the company in an independently
administered fund. The annual cost is charged to the profit and loss account in the
year in which it is incurred.
(i) Provisions for bad and doubtful debts
Specific provisions are made on a case by case basis for loans or debt securities
which are recognised to be bad or doubtful as a result of the continuous appraisal of
the asset portfolio. A general provision is also made against assets to cover latent
loan losses which are known from experience to be present in any portfolio of loans
or debt securities, but have yet to be specifically identified. This is based on a
methodology that reflects statistical default rates and loss severity, determined by
experience and relevant research. The bad debt provisions are deducted from loan
balances or debt securities, as appropriate, in the Balance Sheet.
- 14 -
NOTES TO THE FINANCIAL STATEMENTS
31 December 2004 (Continued)
1. ACCOUNTING POLICIES (Continued)
(j) Basis of Consolidation
The consolidated accounts include the results of all subsidiary companies up to 31
December 2004.
(k) Derivatives
Derivative instruments used for trading purposes include swaps, futures, forwards,
forward rate agreements and options contracts in the interest rate and foreign
exchange markets. These derivatives are measured at fair value and the resultant
profits and losses are included in dealing profits. Unrealised gains and losses are
reported on the balance sheet in Prepayments and accrued income or Other liabilities
on a gross basis.
Derivatives used for hedging purposes are accounted for on an accruals basis, and
are taken to the profit and loss account in accordance with the accounting treatment
of the underlying transaction. Accrued income is reported in Prepayments and
accrued income and accrued expense is reported in Other liabilities on a gross basis.
Profits and losses related to qualifying hedges of firm commitments and anticipated
transactions are deferred and taken to the profit and loss account when the hedged
transactions occur.
The criteria required for a derivative instrument to be classified as a designated
hedge are:
(i) Adequate evidence of the intention to hedge must be established at the
outset of the transaction.
(ii) The transaction must match or eliminate a proportion of the risk inherent in
the assets, liabilities, positions or cash flows being hedged and which results
from potential movements in interest rates, exchange rates or market prices.
Changes in the derivative’s fair value must be highly correlated with changes
in the fair value of the underlying hedged item for the entire life of the
contract
Where these criteria are not met, transactions are measured at fair value.
Hedge transactions which are superseded, cease to be effective or lapse early, are
measured at fair value. Any profit or loss arising is deferred and reported in balance
sheet assets or liabilities as appropriate. This profit or loss is amortised over the
remaining life of the asset, liability, position or cash flow previously being hedged.
When the underlying asset, liability or position is concluded, or an anticipated
transaction is no longer likely to occur, the hedging transaction is measured at fair
value and any profit or loss arising is recognised in full in dealing profits. The
unrealised profit or loss is reported in balance sheet assets or liabilities as
appropriate.
(l) Debt securities and fixed income securities
Debt securities intended for use on a continuing basis in the activities of the bank are
classified as investment securities. Investment securities are stated at cost (adjusted
for the amortisation of premiums or discounts on a straight-line basis over the period
to maturity), less provision for any impairment value. The amortisation of premiums
or discounts is included in interest income. When sold before maturity the difference
between the proceeds and the cost (adjusted for amortisation or premiums and
discounts) is taken to the profit and loss account in the year of realisation.
- 15 -
NOTES TO THE FINANCIAL STATEMENTS
31 December 2004 (Continued)
1. ACCOUNTING POLICIES (Continued)
(l) Debt securities and fixed income securities (continued)
The company does not disclose the market value of debt securities as recommended
by the Statements of Recommended Practice for Banking Institutions as in the
opinion of the Directors the level of unquoted securities would make the disclosure
misleading.
Debt securities held for short term trading purposes and associated off balance sheet
financial instruments are marked to market with the resulting unrealised profit or loss
taken to the profit and loss account. Profits and losses on disposal of securities are
recognised in fees and commissions receivable in the profit and loss account in the
year of sale.
(m) Deferred taxation
Deferred tax is recognised in respect of all material timing differences that have
originated but not reversed at the balance sheet date where transactions or events
have occurred at that date that will result in an obligation to pay more or right to pay
less tax. Deferred tax is measured on an undiscounted basis using the tax rates that
have been enacted or substantively enacted at the balance sheet date as an
approximation of the rates expected to apply in the periods in which the timing
differences reverse.
Deferred tax assets are recognised only to the extent that the directors consider that
it is more likely than not that there will be suitable taxable profits from which the
future reversal of the underlying timing difference can be deducted.
(n) Sale and repurchase transactions
Securities which have been sold with an agreement to repurchase continue to be
shown on the balance sheet and the sale proceeds recorded as a deposit. Securities
acquired in reverse sale and repurchase transactions are not recognised in the
balance sheet and the purchase price is treated as a loan. The difference between
the sale price and repurchase price is accrued evenly over the


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