CENTRAL BANK OF SEYCHELLES

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1 CENTAL BANK OF SEYCHELLES FINANCIAL STATEMENTS YEA ENDED DECEMBE 31, 2006

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7 CENTAL BANK OF SEYCHELLES Income Statement For the Year ended December 31, 2006 Notes Interest income 14 87,702,989 74,811,200 Interest expense 15 (25,851,724) (34,427,378) Net interest income 61,851,265 40,383,822 Other income 16 19,270,751 6,328,814 Operating expenses 17 (18,489,410) (17,297,981) Profit Before Taxation 62,632,606 29,414,655 Taxation Net Profit for the Year 62,632,606 29,414,655 The notes on pages 94 to 103 form an integral part of these financial statements. Auditors report on pages 88 and

8 CENTAL BANK OF SEYCHELLES Statement of Changes In Equity Year ended December 31, 2006 Notes Capital General evaluation Net Profit Total eserve eserve At January 1, ,000,000 20,000,000 62,568,031-83,568,031 Exchange differences on translation of assets and liabilities ,485,754-22,485,754 Net Profit for the Year ,632,606 62,632,606 Transfer to Government Consolidated Fund (17,010,757) (62,632,606) (79,643,363) At December 31, ,000,000 20,000,000 68,043,028-89,043,028 At January 1, ,000,000 20,000,000 31,650,560-52,650,560 Exchange differences on translation of assets and liabilities ,671,503-42,671,503 Net Profit for the Year ,414,655 29,414,655 Transfer to Government Consolidated Fund (11,754,032) (29,414,655) (41,168,687) At December 31, ,000,000 20,000,000 62,568,031-83,568,031 The notes on pages 94 to 103 form an integral part of these financial statements. Auditors report on pages 88 and

9 CENTAL BANK OF SEYCHELLES Cash Flow Statement Year Ended December 31, 2006 Notes Operating activities Cash generated from operations ,701, ,844,305 Investing activities Acquisition of property, plant and equipment 13 (1,493,028) (493,129) Proceeds from disposal of property, plant and equipment 202, ,318 Proceeds from redemption of Seychelles Government Securities 229,739,984 - Investment in Seychelles Government Securities - 28,034 Net cash generated from/ (used) in investing activities 228,448,956 (343,777) Financing activities epayment of borrowings from banks (394,378,162) (99,643,353) Paid to Government Consolidated Fund (41,168,687) - Net cash used in financing activities (435,546,849) (99,643,353) Increase in cash and cash equivalents 344,603, ,857,175 Opening cash and cash equivalents 308,708, ,851,157 Closing cash and cash equivalents ,312, ,708,332 The notes on pages 94 to 103 form an integral part of these financial statements. Auditors report on pages 88 and

10 CENTAL BANK OF SEYCHELLES 1. ACCOUNTING POLICIES The principal accounting policies adopted by the Central Bank are as follows: (a) Form of presentation The financial statements have been prepared in accordance with the legislation governing the Bank s operations - the Central Bank of Seychelles Act, All section references quoted refer to the latter Act. (b) Basis of preparation The financial statements have been prepared in accordance with Generally Accepted Accounting Practices. The financial statements have been prepared under the historical cost convention modified where appropriate to include the valuation of certain assets. Where necessary, comparative figures have been amended to conform with change in presentation in the current year. (c) Foreign securities Foreign securities other than treasury bills are stated at market value. (d) Seychelles Government securities Seychelles Government securities other than treasury bills are stated on the following bases: - Treasury Bonds at nominal value - Other securities at cost (e) Treasury bills Treasury bills, both foreign and local, are stated at cost plus accrued discount. (f) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated to write off the cost of property, plant and equipment on a straight line basis over the estimated useful lives of the assets concerned. On this basis the rates of depreciation used are: Building Office Furniture and Fittings Computer and Office Equipment Motor Vehicles - 1½% p.a. - 10% p.a. - 25% p.a. - 20% p.a. 94

11 CENTAL BANK OF SEYCHELLES 1. ACCOUNTING POLICIES (CONT D) (g) Income recognition Interest income and similar income are recognised on an accruals basis. Commission on foreign exchange dealings are recognised based on the dates of transactions. (h) Foreign currencies Transactions denominated in foreign currencies are translated into rupees and recorded at the rates of exchange ruling at the date of the transaction. Balances in foreign currencies are translated into rupees at the exchange rates ruling on the balance sheet date. Net exchange differences arising on translation at the balance sheet date are dealt within the evaluation eserve Account as per section 28 of the Central Bank of Seychelles Act The exchange rate of the Seychelles rupee during the year and at year end is determined, in accordance with Section 26(1), by the Board of Directors of the Central Bank, and having due regards to the obligations that Seychelles has assumed in accordance with the provisions of any international monetary agreement to which it is a party or to which it has adhered. The following rates of exchange were applied at December 31, S.D.. 1 = US$ 1 = = J.P Yen 1 = CHF 1 = EUO 1 = ZA 1 = (i) Gratuity and statutory compensation The net present value of gratuity and statutory compensation payable is calculated and provided for. The obligations arising under this item is not funded. 2. FINANCIAL ISK MANAGEMENT The Bank s activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and operational risk. A description of the significant risk factors is given below together with the risk management policies applicable. (a) Market risk Market risk arises from open positions in the interest rate and foreign currency products, all of which are exposed to general and specific market movements. The Bank s exposure to market 95

12 CENTAL BANK OF SEYCHELLES risk is the result of both trading and asset/liability management activities. The market risk management policies of the Bank are determined by the Board of directors. Currency risk The Bank operates internationally and takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows primarily with respect to the United States dollar, Euro and Great Britain Pound. The Bank does not hedge against risk of fluctuations in exchange rates. Exchange gains and losses arising from the revaluation of assets and liabilities denominated in foreign currencies are accounted in a revaluation reserve account in accordance with Section 28 of the Central Bank of Seychelles Act (b) Credit risk The Bank is not exposed to significant credit risk which is the risk that its counterparties will be unable to fulfil their contractual obligations. The Bank is, however, exposed to a geographical concentration of interest bearing assets denominated in foreign currency in the United States and Europe. (c) (d) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Bank aims at maintaining flexibility in funding by keeping committed credit lines available. Operational risk management Operational risk is the risk of financial loss and business instability arising from failures in internal controls, operational processes or other supporting systems. It is understood that such risks cannot be entirely eliminated and the cost of controls in minimising these risks may outweigh the potential benefits. As part of the implementation of the Bank s risk strategy, independent checks on risk issues are undertaken by the internal audit unit. 3. TANSTE TO GOVENMENT CONSOLIDATED FUND Transfer to the Consolidated Fund has been carried out in accordance with section 16(3), and section 28 (4) of the CBS Act SHAE CAPITAL Authorised 10,000,000 10,000,000 Paid up 1,000,000 1,000,000 96

13 CENTAL BANK OF SEYCHELLES 5. ESEVES General reserve (Note (a)) 20,000,000 20,000,000 evaluation reserve (Note (b)) 68,043,028 62,568,031 88,043,028 82,568,031 (a) (b) General eserve The general reserve has been established and maintained in accordance with section 16(1) of the CBS Act evaluation eserve Account The revaluation reserve account has been maintained during the year in accordance with section 28 of the CBS Act Gains and losses arising from changes in the valuation of the Bank s assets and liabilities denominated in foreign currencies and other units of accounts as a result of alterations of parity of the Seychelles rupee have been credited or charged to this account in accordance with section 28 of the CBS Act CUENCY IN CICULATION Coins sold for numismatic purposes, with a face value of approximately 16,146,478 at December 31, 2006 ( ,142,952), have been excluded from currency in circulation since it is unlikely that such coins will be presented at any time for redemption Currency in circulation 417,212, ,903, DEPOSITS Government and Government related bodies 203,765,310 62,408,120 Banks 647,039, ,173,650 Pipeline Deposit Accounts (repayable on demand) 383,924, ,358,361 Special 174, ,985 Staff Welfare Fund 808, ,397 Mortgage Housing Protection Loan 325, ,000 Employee Incentive Scheme 632,653 - Gratuity and Statutory Compensation 1,639,052 2,296,826 Others 18,007,197 17,410,049 1, 256,316, ,560,388 97

14 CENTAL BANK OF SEYCHELLES PAYABLE TO CONSOLIDATED GOVENMENT FUND Transfer from Income Statement 62,632,606 29,414,655 Transfer from evaluation eserve Account 17,010,757 11,754,032 79,643,363 41,168, OTHE LIABILITIES External borrowings account (Note 9(a)) - 394,378,162 (a) External borrowings account (i) Bank of Tokyo (SEPEC Loan) - 99,141,487 (ii) Bank of Tokyo Mitsubishi Ltd Syndicated Euro Loan (2006: Nil 2005: Euro 45,329,670) - 295,236, ,378,162 (i) The above loan was fully repaid on October 12, 2006, with Bond proceeds (Euro 15,303,633). (ii) Bank of Tokyo Mitsubishi Ltd Syndicated Euro loan This loan is secured over receipts from Indian Ocean Tuna, and is repayable as follows: Tranche A: monthly instalments of Euro 559,625 in the first year monthly instalments of Euro 661,376 in the second year monthly instalments of Euro 814,000 in the third year Interest rate on Tranche A is LIBO % Tranche B: monthly instalments of Euro 339,167 in the first three years monthly instalments of Euro 1,187,085 in the fourth and fifth years Interest rate on Tranche B is LIBO + 3.5% This loan was fully repaid on October 12, 2006, with Bond proceeds. (Euro 35,600,722) 98

15 CENTAL BANK OF SEYCHELLES 10. CASH AND CASH EQUIVALENT Balances held abroad 653,244, ,640,850 Holdings of Special Drawing ights 14,624 6,587 Notes and Coins in Hand 53,574 60, ,312, ,708, SEYCHELLES GOVENMENT SECUITIES Year estructuring Bond 1,111,060,016 1,340,800, ADVANCES AND OTHE ACCOUNTS Advances to Government - - Other accounts 61,601,544 28,745,031 61,601,544 28,745,031 99

16 CENTAL BANK OF SEYCHELLES 13. POPETY, PLANT AND EQUIPMENT COST Building Office Furniture & Fittings Computer & Office Equipment Motor Vehicles Total At January 1, ,969,679 2,522,650 4,234, ,320 32,304,232 Additions 544, , , ,155 1,493,028 Disposals - - (12,506) (240,805) (253,311) At December 31, ,514,274 2,645,715 4,907, ,670 33,543,949 DEPECIATION At January 1, ,890,916 1,958,427 3,763, ,537 12,758,372 Charge for the year 382, , ,853 84,647 1,097,097 Disposal adjustments - - (12,506) (110,539) (123,045) At December 31, ,273,630 2,128,310 4,210, ,645 13,732,424 NET BOOK VALUES At December 31, ,240, , , ,025 19,811,525 At December 31, ,078, , , ,783 19,545,

17 CENTAL BANK OF SEYCHELLES INTEEST INCOME Interest on foreign deposits with other banks 19,145,551 6,109,742 Interest on loans and advances to Government 20,873 2,436,604 Interest on local securities 62,515,991 59,246,848 Others 6,020,574 7,018,006 87,702,989 74,811, INTEEST EXPENSE Interest on deposits 9,014,096 8,154,912 Interest on loans 16,837,628 26,272,466 25,851,724 34,427, OTHE INCOME Profit arising from dealing in foreign currencies 11,513,146 4,901,392 Gain/(Loss) on exchange 5,989,986 (1,719,107) Other miscellaneous income 1,767,619 3,146,529 19,270,751 6,328, OPEATING EXPENSES Depreciation charge 1,097,097 1,025,925 Other operating expenses 17,392,313 16,272,056 18,489,410 17,297, TAXATION The Central Bank of Seychelles is exempted from taxation under Section 49 of the CBS Act

18 CENTAL BANK OF SEYCHELLES NOTES TO THE CASH FLOW STATEMENTS Cash generated from operations Net profit for the year 62,632,606 29,414,655 Adjustments for: Depreciation on property, plant and equipment 1,097,097 1,025,925 Gratuity and Statutory Compensation (657,774) (212,167) Profit on disposal of property, plant and equipment (71,735) (75,737) Operating profit before working capital changes 63,000,194 30,152,676 Increase in currency in circulation 72,309,000 30,342,991 Increase in deposits (Exclude Gratuity & Statutory Compensation) 426,414,166 64,794,583 Increase/(decrease) in deposit for allocation of Special Drawing ights 349,239 (239,504) (Increase)/decrease in advances and other accounts (32,856,513) 53,122,056 Exchange differences on revaluation of assets and liabilities 22,485,754 42,671,503 Net cash generated from operating activities 551,701, ,844, CAPITAL COMMITMENTS Capital expenditure approved by the Board and contracted for at year end but not yet incurred is as follows: Property, plant and equipment 11,101,800 4,522, FOEIGN CUENCY SITUATION As at December 31, 2006, the Central Bank had a net assets amounting to 653,258,705. (Net liability in 2005: 85,730,726; 2004: 306,229,758) made up as follows: External assets 653,258, ,647, ,791,757 External liabilities - (394,378,162) (494,021,515) 653,258,705 ( 85,730,726) (306,229,758) 102

19 CENTAL BANK OF SEYCHELLES 22. CONTINGENCIES At December 31, 2006, no guarantee was given by the Bank, to third parties. (2005: 44,000,000 (USD 8.0 million)). 23. EGISTEED ADDESS The registered address is Independence Avenue, Victoria, Mahé, Seychelles. 103

CENTRAL BANK OF SEYCHELLES

CENTRAL BANK OF SEYCHELLES FINANCIAL STATEMENTS YEA ENDED DECEMBE 31, 2005 Profit and Loss Account For the Year ended December 31, 2005 Notes 2005 2004 Interest income 13 74,811,200 88,215,182 Interest expense 14 (34,427,378) (33,686,813)