2008 fsdh inner report · 2019. 11. 30. · company. it is another successful year for the fsdh...

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Wealth Creation: Masters of The Art

Locations and Addresses

Shareholders

Directors and Advisers

The Board

Chairman’s Report

MD’s Report

The FSDH Brand

The FSDH People

Executive Management

FSDH Person of the Year

Information Technology

FSDH Subsidiaries

The Accounts

“IT REQUIRES A GREAT DEAL OF BOLDNESS AND A GREAT

DEAL OF CAUTION TO MAKE A GREAT FORTUNE, AND

WHEN YOU HAVE IT, IT REQUIRES TEN TIMES AS MUCH

SKILL TO KEEP IT.” - Ralph Waldo Emerson.

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Contents

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Over the years, we have been

proven, sustained the leading

edge, consolidated to serve you

better, remained alive to your

needs, positioned for the

future, delivered real value and

created true wealth. Now we

are the Masters of the Wealth

Creation Art!

It was the author, R.

Buckminster Fuller that said

“wealth is the product of

energy and intelligence: energy

turned into artifacts that

"advantage" human life”.

Energy, as science puts it, is the

ability to do work. We possess in

us immense capacity to execute

with precision and unmatched

initiative, our responsibilities. It is

not just about working hard, but

working smart, which is where

the intelligence comes in. Our

inspired and motivated human

capital underpins our position in

the market.

This system is all put together to

create wealth for our varied

clientele, corroborating our

vision of partnering with our

customers to create value for

them through the provision of

innovative and superior financial

products and services. Wealth;

not just financial increase, but the

O F T H E

A

W E A L T H C R E A T I O N :

RT

MASTERS

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“WEALTH IS THE PRODUCT OF ENERGY AND

INTELLIGENCE: ENERGY TURNED INTO ARTIFACTS

THAT "ADVANTAGE" HUMAN LIFE”.

- R. Buckminster Fuller

unseen aspects of wealth like

peace of mind. As a result, this

wealth can be transferred from

one period to another.

Like the martial art specialist

dedicated to his pursuit,

labouring day and night to attain

perfection, we at FSDH have

been able to hone our skills in

the creation of wealth

juxtaposing the art of discipline,

patience, anticipation and

sometimes a bit of luck. We have

mastered our trade, operating

within a culture framework of

Customer Orientation, High

Performance, Learning,

Collaboration and Image

Building.

Over the last sixteen years, we

have developed comprehensive

knowledge and skill to manage

resources and produce beneficial

results to which our numerous

clients testify. We continue to

climb the rungs of the ladder of

our business, striving always to

achieve greater heights.

The philosopher, Ayn Rand said

“Wealth is the product of man's

capacity to think”.

We think.We are FSDH.We are the Masters.Masters ofthe W ealth Creation Art!

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Head Office

UAC House (6th, 7th & 8th Floors)

1/5 Odunlami Street, PMB 12913, Lagos

01-2640160-9 (10 lines), 01-2700880-2 (3 lines)

01-2702885-6 (Investors Group)

01-2640150-9 (Bank Dealing only)

Fax: 01-2640171-4

Abuja Office

Sterling Bank Building (Formerly NAL Abuja Complex)

Plot 990, Cadastral Zone AO Central Business District,

(Behind Leventis Stores)

Abuja

09-6700535, 09-2731170

Port Harcourt Office

2nd Floor, Afribank Building (Formerly Leadbank Building),

5 Trans Amadi Road,

Port Harcourt

084-463308, 084-463174

08024081331

Fax: 084-463174

Website address: www.fsdhgroup.com

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LOCATIONS

ADDRESSES

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Afribank Nigeria Plc

AIICO Insurance Plc

Diamond Pension Fund Custodian/Trustfund Plc

Ecobank Nigeria Plc

FSDH Staff Co-operative Society

Intermarket Services Ltd

International Finance Corporation (IFC)

KMC Investments Ltd

Spring Bank Plc

Stanbic IBTC Bank Plc

UBA Asset Management Ltd

Unico CPFA Ltd

Unity Bank Plc

Williams Street Trustees Ltd

SHAREHOLDERS

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“WEALTH COMES FROM KNOWING

WHAT OTHERS DO NOT KNOW.”- Aristotle Onasis.

MASTERS OF THE

WEALTH CREATION ART

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Chairman Mr. Ibrahim Dikko

Directors: Mr. Olayiwola AdetomiwaMr. Dan AgborMrs. Hamda AmbahMr. Offong AmbahMrs. Myma Belo-OsagieMr. Junaid DikkoMr. Bashir el-RufaiMr. Vincent OmoikeMr. Atedo Peterside

Managing Director/CEO: Mr. Rilwan Belo-Osagie

Secretary: Alsec Nominees LtdSt. Nicholas House, (10th Floor)Catholic Mission StreetLagos

Auditors: KPMG Professional Services22A Gerrard RoadIkoyiLagos

Bankers: Skye Bank PlcCathedral House2/4 Odunlami StreetLagos

Stanbic IBTC Bank Plc19 Martins StreetLagos

Lawyers: Udo Udoma and Belo-OsagieSt. Nicholas House, (10th Floor)Catholic Mission StreetLagos

RC. 199528

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DIRECTORS

ADVISERS

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Ibrahim Dikkochairman

Rilwan Belo-Osagiemanaging director

Myma Belo-OsagieBashir el-Rufai

Olayiwola Adetomiwa

BOARD

THE

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Atedo Peterside Offong Ambah

Dan Agbor Vincent Omoike

Junaid Dikko Hamda Ambah

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Wealth is theaccumulation of

possibilities.- Anonymous“

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MASTERS OF THE

WEALTH CREATION ART

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Distinguished stakeholdersWe welcome you to the 16thannual general meeting of thecompany. It is another successfulyear for the FSDH group and I laybefore you the report andaccounts for the year, whichended on the 30th of June, 2008.

During the year, the companyundertook a series of initiativesto strengthen our competitiveposition in the market. This wasin recognition of the changestaking place in the operatingenvironment and the need torespond rapidly to theopportunities that are openingup. Our aim was to ensure theprovision of better services to thecustomer through increase in ourinternal capacity, streamlining ofoperational processes and workflow and the maintenance of amore conducive environment inthe work place. These initiativesinclude the review of thecorporate strategy, theacquisition of another floor, therenovation of all the offices(including the complete redesignof offices and sittingarrangements). In addition, thecompany continued theimplementation of therebranding programme thatstarted in the last financial yearand also increased our staffstrength in strategic areas of thebusiness. These initiatives haveno doubt played a major role inthe success that was achievedduring the year.

In line with the requirements ofthe CBN’s Code of CorporateGovernance for Banks andDiscount Houses, the Board of

Directors engaged the services ofPricewaterhouseCoopers toundertake the evaluation of theperformance of the Board. Theperformance evaluation exercisehas been completed and a reportpresented to the Board ofDirectors. While the result of theexercise showed that the Boardhas been doing a good job, thereis still room for improvement. TheBoard has resolved to address allareas that require improvementin the next financial year. Also, aspart of the implementation of theCode of Corporate Governance,the Board has appointed twoindependent directors namely Mr.Vincent Omoike and Mr. Bashir el-Rufai. Furthermore, an AuditCommittee has been constituted.

Operating Environment

The operating environment wasquite challenging, especially inthe money market. Interest rateswere generally on the increasethroughout the year due toinflationary pressures. Year-on-year inflation rose steadily fro m4.8% in July 2007 to 12% in June2008. The Monetary Policy Rate(MPR) was increased four timesduring the year in an attempt tocurb inflation. W e started thefinancial year in July 2007 with anMPR of 8% p.a. This wasincreased to 9% p.a. in October2007 and then to 9.5% p.a. inDecember of the same year. InApril 2008, there was an increaseby 50 basis points, moving theMPR to 10% p.a. Another 25 basispoints increase in June 2008pushed the rate to 10.25% p.a.

The steady rise in inflation andthe accompanying increase ininterest rates createduncertainties at the monthlyauctions for bonds, as the stoprates failed, in a lot of cases, tomeet market expectations. Thiswas compounded by thescheduling difficulties at the DebtManagement Office (DMO) in thesecond half of 2007, leading to acontinued increase in market risk.On more than one occasion, thetwo-way quote market shutdown completely, as franticefforts to exit positionsaccentuated the largely one-sided expectation of the entiremarket. This one-sidedexpectation has continued toerode the two-way quote marketof its vibrancy.

The capital market was one ofcontrasts. The unrestrainedoptimism in the market in thefirst two quarters of the financialyear gave way to caution duringthe 3rd quarter and to outrightpanic and despair in the lastquarter. A couple of policy

N9.54BNShareholders’ funds

N71.14BNTotal Assets

CHAIRMAN’SREPORT

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“OUR AIM IS TO ENSURE

THE PROVISION OF

BETTER SERVICES TO THE

CUSTOMER THROUGH

INCREASE IN OUR

INTERNAL CAPACITY,

STREAMLINING OF

OPERATIONAL PROCESSES

AND WORK FLOW AND

THE MAINTENANCE OF A

MORE CONDUCIVE

ENVIRONMENT IN THE

WORK PLACE”.

Ibrahim Dikko, chairman

pronouncements by theregulatory authorities and theattendant reactions by theoperators drew attention to themany shortcomings in themarket, setting off a “bearish”backlash that resulted in a 15%drop in the All-share index fromits peak of 66,371 points in earlyMarch 2008 to 55,949 points bythe end of June 2008. Thereversal of the policypronouncements did not haveany positive effect. Manyfinancial institutions, especiallystockbrokers, were caught up inthe fall and were sitting on hugeproprietary positions which they

financed with borrowed funds.I am happy to report that in linewith our sound riskmanagement practices, theFSDH group did not close thebooks with any significantshort-term proprietarypositions.

The problems in the capitalmarket have underscored themessage in the adverts that wehave been running as part ofthe rebranding campaign – thatinvestment is a serious businessthat can only be handled by afinancial services provider witha good track record. What

happened in the capital marketwas not unprecedented. It hashappened before in Nigeria ona number of occasions; it is alsohappening in other parts of theworld. The only difference thistime around is the high level ofspeculative trading financedwith borrowed funds. Thespeculative trading was notrestricted to financialinstitutions alone. Individualsand organizations wereencouraged, without soundfinancial advice, to borrow andinvest in the capital market.Many of them have suffered

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financial losses which maydiscourage them from anyfurther investment in thecapital market. Otherpotential investors may alsobe scared of investing in themarket. The implication of thisdevelopment for our stock-broking and assetmanagement businesses isenormous. We shall continueto leverage on our track recordto explain to customers thatrisk and return can beoptimized to meet thefinancial objectives ofcustomers.

During the year, the CBN cameout with a circular on themodalities for theimplementation of a commonyear end for all banks anddiscount houses. Incompliance with the circular,the Board met and changedthe company’s accountingyear end to 31st December.However, it appeared that thefallout of the policy produceda lot of unintendedconsequences in the market,forcing the CBN first tosuspend implementation andlater on to cancel the entirepolicy. Consequently theBoard has decided to retainour normal year end of 30thJune.

Performance

The group achieved a profitafter tax (PAT) of N2.344 billionfor the year ended 30th June,2008 compared with N1.584billion for the previous yearended 30th June, 2007,

representing a growth of 48%.Earnings per share also grew –from 79 kobo in 2007 to 84kobo in 2008, despite the factthat the number of shares inissue grew by 39% during theyear due to the capitalization ofthe rights issue that was donelast year. Profitability grew in allthe different companies withinthe group. FSDH, the parentcompany, recorded a growth of20%, despite the difficulties inthe money market especiallywith regard to bond trading.FSDH Asset Management andFSDH Securities grew by 85%and 122% respectively, areflection of the goodperformance of the capitalmarket for much of the financialyear. Although PensionsAlliance Limited (PAL) posted apre-tax loss of N92 millioncompared with the pre-tax lossof N331 million the previousyear, a recognition of N130million for deferred tax assets inrespect of cummulativeunrelived losses and unutilizedcapital allowances resulted anafter-tax profit of N38 million.As I estimated in my statementlast year, PAL turned the cornerin June 2008. The company isexpected to make profit in thenext financial year.

Dividend

The directors have proposed adividend of 25 kobo per share.If approved, this will represent a33% increase over the dividendof 18.75 kobo per share paidlast year. While being mindfulof our obligation toshareholders, there is need to

retain a significant portion of theprofit for the year in order tomeet in a relatively short periodof time whatever new minimumshare capital that the regulatoryauthorities may require discounthouses to have in the near future.

Outlook

The international financial marketis currently facing seriousproblems, as it has not yetrecovered from the sub-primemortgage crisis. Some prominentfinancial institutions in the UnitedStates of America have collapsed,sending jitters through financialmarkets all over the world. Credithas dried up and governments inseveral countries are strugglingto put in place measures tostabilize the situation. Fearingsome contagion effect, theCentral Bank has recently comeup with measures aimed atincreasing liquidity in the systemas a way of boosting activities inthe financial markets.

This unfortunate developmentunderpins the importance offinancial institutions taking only

N2.34BNProfit After Tax

84KEarnings per share

“MONEY IS LIKE MANURE; IT’S NOT WORTH A THING

UNLESS IT’S SPREAD AROUND ENCOURAGING YOUNG

THINGS TO GROW”. - The Matchmaker.

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“WE AT FSDH, AS WE CONTINUE

TO BREAK INTO NEW FRONTIERS,

WILL ENSURE THAT THE

MANAGEMENT OF RISK REMAINS A

TOP PRIORITY”.

risks that are fully understood andquantifiable. Nassim Taleb said inhis recent book, The Black Swan,“The tragedy of capitalism is thatthe quality of returns is notobservable from past data, ownersof companies, namely theshareholders, can be taken for aride by the managers who showreturns and cosmetic profitability,but in fact might be taking hiddenrisks”.

We at FSDH, as we continue tobreak into new frontiers, willensure that the management ofrisk remains a top priority.

Despite all these problems,however, we believe that theoutlook for the financial servicesindustry and indeed the FSDHgroup continues to be bright. TheNigerian economy is growing andthe financial services industry ismore vibrant now than at anyother time in the history of thiscountry. At FSDH, we seeopportunities in all the marketsegments that we operate in, andwill continue to draw on ourstrong capabilities to exploit theseopportunities not only to improveperformance but also tocontribute to the growth of theeconomy in general and thefinancial services industry inparticular.

I seize this opportunity to thank allour stakeholders for theircontinued support and to assurethem that FSDH will continue tojustify the confidence they have inthe company.

Ibrahim DikkoChairman

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Wealth is largely aresult of habit.

- John Jacob Astor.“ ”

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FSDHBRANDTHE

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MANAGING

DIRECTOR’SREPORT

I am pleased to report that thefinancial year ended June 30,2008 was another year of solidgrowth. It was also a year ofconsolidation both financiallyand in strengthening ourcompetitive position in ourchosen markets. In thefinancial year ended June 30,2008, we achieved 71% growthin PBT and 48% in PAT –exceeding our projections. Thissuccess we share with ourclients and stakeholders. Theyear also marked the firstanniversary of our rebrandinginitiative and I am delighted toreport that we are makingsignificant progress with thisexercise.

The past financial year hasbeen a very exciting time for usat FSDH as we have articulatedand refined our strategy whichis a fall out of our everchanging businessenvironment. We haveachieved appreciable successin our businesses. This successapplies to both the companyand our subsidiaries.

In the 2007/2008 year, thesubsidiaries recordedsignificant achievements intheir operations and financialperformance. FSDH Securitiesachieved a growth of 88% and122% in PBT and PAT withrespect to prior yearperformance, while FSDH AssetManagement Limited (FAML)

surpassed its target with a 113%growth in PBT and an 85%growth in PAT compared with theperformance for the previousfinancial year ended June 2007.

We also launched a new logo as afall out of a rebranding project.This exercise involved extensiveresearch and consultation withcustomers and prospects in orderto get a feel of their perceptionof us at FSDH. All the informationgathered from this marketresearch was considered inlaunching the rebrandinginitiative. It is my pleasure tointroduce you to the essence andwhat the brand represents:

The logo design represents a brandthat is cosmopolitan. The graph inthe sphere shows our growth overthe years to become a globalplayer, while the royal bluerepresents our vibrancy andstrength. The cyan blue is areflection of our brilliancy inwhatever we do.

In furtherance of ourdetermination to understand theneeds of our customers we heldcustomer fora both in PortHarcourt and Abuja. Themanagement and staff of FSDHGroup were honoured to have allthose present at the fora andwish to inform them that we areimproving our processes andservice delivery so as to ensurewe create and preserve theirwealth.

Whilst we believe in theimportance of our brandingexercise, we understand that anorganization does not achievesuccess by changing its logo orcorporate colours. That can onlybe done when the organizationexceeds customers’ expectationsby the high quality of service itdelivers at a competitive cost.We have therefore ensured ourstaff receive adequate trainingwith a view to providing ourclientele with superior services.Investment in our people hasalways been a cardinal point inevery strategy we adopt in theFSDH group and has been asignificant strength of ourbusiness. As a financial servicesprovider, service excellence isimperative to our success andknowledge capital is arguablythe foundation required by anyfinancial organization. We havemade enormous progress in thisarea and significant investmentto develop our talent. Thisinvestment has yielded goodresults as feedback from ourcustomers has highlighted thepositive experience they havehad dealing with us.

As part of efforts to remaincompetitive and ensureenduring wealth creation for ourclients, we have adopted a newset of initiatives which will helpdeliver the excellent services weare known for. The mainelements of these initiatives are:

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Rilwan Belo-Osagie, MD/CEO

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Review of our informationtechnology strategy so asto enhance the growthopportunities we areadopting

Review of our enterpriserisk management systemwith the assistance ofexternal consultants

Spreading of the newbrand elements across thegroup structure in order toachieve the desiredsynergy.

Let me conclude by saying thatlooking forward at thechallenges ahead, I amconvinced that the Group is ingood shape and all ourbusinesses are on the righttrack for continuous growth. Wehave a well-diversified earningsbase, and empowered andcommitted people. All these,combined with a healthy(though challenging) operatingenvironment, should allow us tocontinue to grow and deliversuperior returns to stakeholdersin the coming years and furtherconfirm us as the masters of thewealth creation art.

Rilwan Belo-OsagieMD/CEO

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71%FSDH Group:Profit Before Tax

122%FSDH Securities:Profit After Tax

FSDHFIRST SECURITIES DISCOUNTS LIMITED

The FSDH logo design represents abrand that is cosmopolitan.

The graph in the sphereshows our growth over theyears to become a globalplayer, while the royal bluerepresents our vibrancy andstrength.

The cyan blue is a reflectionof our brilliancy in whateverwe do.

The FSDH Logo Rationale

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FSDH is the foremost discounthouse in Nigeria, and is staffedwith a group of seasonedprofessionals who are wellgrounded in the art of wealthcreation. We understand thebusiness of creating wealththrough sound investmentchoices. For over 16 years wehave played the role ofpioneers and market makers inmoney market investments.Apart from the money market,we have set up subsidiaries thatenhance our ability to provide

asset management as well asinvestment opportunities in theNigerian financial markets.

Within the group we are able totake you through the process ofdetermining your objectives andsetting up a portfolio structure.We give useful information, andassist you to make appropriateselections from the availableinvestment products, executethem and provide periodicreports on performance.

FSDH BRANDTHE

In the last year, FSDH group hasembarked on a brandinginitiative with the ultimate aim ofpublicizing the essence of ourbusiness and the value we canprovide for our customers. Thisinitiative also led to the changeof the name of one of oursubsidiaries to incorporate thename FSDH. Hence CountersTrust Securities Limited (CTSL)became FSDH Securities Limited.

What is theFSDH Brand?

What does thebrand promise?

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What does the brand promise?

Access to investmentopportunitiesValue for moneyEfficient servicesHigh quality adviceConvenienceConfidentialityIn depth informationRisk management expertise

What is the FSDH Brand?

Masters in wealthmanagement and creationCustomer focusedorganizationBig player in Nigerian financialmarketsSpecialist Financial InstitutionHigh quality (rated A+ by GCR,and Aa- by Agusto & Co)Skilled ProfessionalsIntegrity

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Our people remain our most treasured asset. The value

they bring to the table in delivering superior quality results

are unequalled. The team spirit remains vibrant, working

ever so hard to ensure there is no broken link. We are

woven together with the golden threads of Customer

Orientation High Performance, Learning, Collaboration and

Image Building.

Each member of staff is a master in his/her own right,

stroking the paint brush of initiative and efficiency on the

canvas of customer requests resulting in wealth creation.

We enjoy what we do, delighting in the satisfaction we see

in the faces of our clients when we deliver on our promises.

Our people understand that challenges can, if handled

properly, become growth opportunities. The importance of

effective communication is clearly understood, so our staff

maintain regular contact with clients, seeking to

understand their needs in order to provide tailor-made

products for them.

We acknowledge that our people continue to be

principally responsible for the success we have achieved so

far. We are FSDH; We are the Masters!

FSDHPEOPLE

THE

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MANAGEMENT

EXECUTIVE

Rilwan Belo-OsagieManaging Director

Hamda AmbahGeneral Manager

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Richard OsuagwuHead, Internal Audit

Oghogho OsulaHead Private Clients &Institutional Investors

Robert AjiamahHead, Risk Management

Funsho OlusanyaHead, Bank Dealing

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FSDHPERSONS

OF THE YEAR

“EACH MEMBER OF

STAFF IS A MASTER

IN HIS/HER OWN

RIGHT, STROKING

THE PAINT BRUSH

OF INITIATIVE

AND EFFICIENCY

ON THE CANVAS

OF CUSTOMER

REQUESTS

RESULTING IN

WEALTH

CREATION.”

Tajudeen SikiruJunior Category

Joy AtohengbeSenior Category

Our excellent service deliverywhich is acknowledged andappreciated by our customerswould be impossible withoutthe commitment of ourMasters. Our people, by theircommitment toProfessionalism, Excellence,Teamwork, CustomerOrientation, Empowermentand Personal Effectiveness,contribute greatly to thesuccess of FSDH.

It is with pleasure that werecognize and appreciatecontributions of theoutstanding members of ourteam. We are pleased toannounce that in a group ofthe best in the industry, Mrs.Joy Atohengbe and Mr.Tajudeen Sikiru have emergedas role models for the year2007/2008.

Please celebrate with us thebest from “the team of theMasters”. They are the FSDHpersons of the year.

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You are whatyou repeatedly do...

- Aristotle.“”

FSDHPEOPLE

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“

In our continuing search fortechnological tools andinnovation to improve ouroperating processes andenhance service delivery to ourclients, we undertook a coupleof initiatives during the year.

Our websites were redesignedand rebranded as part of ourrebranding project. A newwebsite (www.fsdhgroup.com)was launched for the group.The website highlights ourgroup structure and provides agateway to the websites ofother companies within thegroup. The websites of FSDHLimited (the parent company)and FSDH Securities Limitedwere redesigned and re-launched while a new websitewas developed for FSDH AssetManagement Limited. Thewebsites act as points ofcontact between ourcustomers and otherstakeholders from differentparts of the globe andourselves.

For those customers whomaintain accounts withdifferent companies within thegroup through their patronageof various products offered bythese companies, we haveimplemented a single sign-onsystem. The system allows theuser to group together thevarious accounts maintained

by the client in the differentcompanies under a single useridentification and password. Thesingle sign-on facility allows thecustomer to group all theseaccounts under one user ID andpassword such that when theclient logs into any of the group’swebsites, access is gained to allthe accounts without necessarilygoing to the websites of thecompanies where the individualaccounts are maintained.

To enhance the process of orderplacement for the clients of FSDHSecurities, an online orderingfacility was introduced into thecompany’s website. This facilityenables clients in far awaylocations to place orders(purchase, sales, payment) viaour websites in the comfort oftheir homes or offices. Orderplacement via the websitecomplements other transactionoptions currently availableincluding e-mail and telephone.

Another facility that becameavailable during the period wasan online payment solution viaInterswitch. With this facilitycustomers of FSDH Securities canpay for stock purchases throughonline transfer of funds fromtheir bank to their stockbrokingaccount with FSDH. This facility isalso available for FAMLcustomers who can now invest inany of our mutual funds using

their ATM debit card issued byany member bank of theInterswitch payment network.

To further improve on the speedand quality of service delivery,we commenced the process ofdelivering contract notes tocustomers of FSDH Securitiesonline by means of electronicmail. This process, to the delightof our customers replaced theold slow and cumbersomemethod of hard copy delivery.

TECHNOLOGY

INFORMATION

For the clientsof FSDHSecurities, anonline orderingfacility wasintroduced intothe company’swebsite... toenhance theprocess of orderplacements.

”

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FSDH Asset ManagementLimited “FAML” is a whollyowned subsidiary of FSDH andone of Nigeria’s leadinginvestment management andfinancial advisory firms. Ourscope of work involves bothdirect investment contractsand collective investmentschemes e.g. mutual funds.

FAML was established toprovide investment advisoryand wholesale portfoliomanagement services toclients whose investmenthorizon is essentially long term.This initiative evolved out ofthe need to complement ourtraditional business in the shortend of the market. With ourteam of experienced fundmanagers, we are able toprovide tailored wealthmanagement solutions toinstitutional investors as well ashigh networth individualswhich typically have varyinginvestment objectives.

Our Philosophy

FAML’s business philosophy is totake a personal, sophisticatedand vigilant approach to fundsmanagement. This is premisedon providing investmentadvisory services, tailored tomeet the needs of investors, whohave a long-term horizon. In thisway, FAML seeks to addsignificant value by enablingthese investors to achieve theirspecific return objectives.

In seeking to achieve long-termpartnerships, FAML isunequivocally performancedriven and result-oriented.However, the presence of riskand uncertainty in financialmarkets is well known to FAMLand as a result, the managementof risk is firmly embedded in itsinvestment and financialadvisory services.

Unit Trust Schemes

Coral Growth Fund

The Coral Growth Fund “CGF” isan actively managed, openended equities-based unit trustscheme, which was establishedin February 2001. The Fund’sstructure permits a maximuminvestment of 65% in quotedequities, while the balance isinvested in high-quality, fixedincome securities. The primaryobjective of the CGF is to enableinvestors’ to achieve capitalgrowth over the long term. Inparticular, the CGF will enableinvestors to satisfy a broadvariety of financial needs andcan be used as a End-of-ServiceScheme, Supplementary StaffWelfare Scheme, GratuityScheme and Investment Plan.

Between February 1, 2001 andJune 30, 2008, the CGF achieveda cumulative return of 555.30%,hence an average annual returnof 28.33% p.a. in Naira and28.90% in US$ terms (both netof charges)

The Trustees to the CGF protectthe interests of the unit holdersby ensuring that the Manager’sactivities adhere to theprovisions of the Trust Deed. Inaddition, the administration ofthe CGF is carried out in

ASSET MANAGEMENT

FSDH

LIMITED

Between February 1, 2001 andJune 30, 2008, the CGFachieved a cumulative returnof 555.30%“”

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accordance with the global bestpractices as its assets aresegregated from the Managerand held under full custody byan independent Custodian, thefirst Fund in Nigeria to do so.

Coral Income Fund

The Coral Income Fund “CIF” isan open ended, income-basedunit trust scheme, which wasestablished in May 2006. TheFund’s structure permits amaximum investment of 30% inquoted equities, while thebalance is invested in high-quality, fixed income securities.The primary objective of the CIFis to enable investors topreserve capital and achievestable and consistent incomeflows. It is suitable forconservative investors whotypically seek capitalpreservation above capitalgrowth. It was established toprovide investors with aninvestment outlet that providesstable but competitive returns.

Between September 14, 2006and June 30, 2008, the CIFachieved a cumulative return of23.69%, hence an averagereturn of 7.62% p.a. in Naira and4.64% in US$ terms (both net ofcharges)

Coral Ethical Fund

The Coral Ethical Fund “CEF”which was established in May2006 is an open-ended unittrust scheme that investsexclusively in equities quotedon The Nigerian StockExchange, which have beenscreened to exclude companieswhose principal business isderiving interest income or areengaged in the production ofalcoholic beverages andtobacco related products. TheFund does not invest in interestbearing securities. The primaryobjective of the Fund is toenable investors to achievecapital growth over the long-term while avoiding portfolioexposure to companies that areengaged in activities whichcontradict their ethical andsocial values.

Between September 14, 2006and June 30, 2008, the CEFachieved a cumulative returnof 20.49%, hence an averagereturn of 8.03% p.a. in Nairaand 5.06% in US$ terms (bothnet of charges)

Coral Dynamic Portfolio

The Coral Dynamic Portfolio“CDP” is the latest in thebouquet of mutualinvestments offered by FSDHAsset Management Limited.The CDP is a unique unittrust targeted at investorswith the sole aim ofachieving capital growththrough a special purposetrading technique. It is anopen ended unit trustscheme with a diversifiedportfolio of investments, upto 90% of which are in theequities of viable companiesquoted on the floor of TheNigerian Stock Exchange. Theportfolio has a medium tolong term horizon.

The main objective of theCDP is to provide investorswho are so inclined with theopportunity to achieveaggressive capital growth.

“IT REQUIRES A GREAT DEAL OF BOLDNESS AND A GREAT

DEAL OF CAUTION TO MAKE A GREAT FORTUNE, AND

WHEN YOU HAVE IT, IT REQUIRES TEN TIMES AS MUCH

SKILL TO KEEP IT.” - Ralph Waldo Emerson.

32

“WEALTH IS THE PRODUCT OF

MAN’S CAPACITY TO THINK.”- Ayn Rand.

33

“

FSDH Securities Limited (FSDHSec) formerly Counters TrustSecurities Limited (CTSL) is aDealing Member of TheNigerian Stock Exchange and isregistered with the Securities &Exchange Commission as aBroker/Dealer, Issuing House,Portfolio Manager, andInvestment Adviser.

FSDH Securities hasestablished a reputation forproviding capital marketservices of a very high standardin terms of service delivery,professionalism and integrityto institutional investors in theprivate and public sectors aswell as high net worthindividuals.

FSDH Securities has over thepast years evolved into aleading stockbrokeragecompany and has in a modestway contributed to the range,depth, expertise and quality ofservice available in theNigerian capital market.

At FSDH Securities we haveimbibed the FSDH culture andvalues, which lay emphasis onhigh performance, integrity,collaboration, customerorientation, image building andlearning.

Our customers can viewtheir Portfolio Reports,Account and CSCSStatements, ShareCertificates VerificationStatus and view theirPortfolio Valuations on ourwebsitewww.fsdhsecurities.comfrom the comfort of theiroffices or homes.

Our clients are able to veryquickly obtain margin facilitywhich is a product for whichwe were one of the pioneersin Nigeria.

Our research publicationshave become a referencepoint for professionalinvestors, investmentanalysts, global fundmanagers, financialjournalists and the investingpublic at large. Over 17,000

SECURITIES

FSDH

LIMITED

recipients receive our FSDHSecurities daily updates andperiodic money and capitalmarket reports as well asour other researchpublications.

We also enjoy a very cordialrelationship borne out ofmutual respect withinstitutional and individualinvestors, the Securities &Exchange Commission andThe Nigerian StockExchange.

Over 17,000recipients receiveour FSDHSecurities dailyupdates andperiodic moneyand capitalmarket reports aswell as our otherresearchpublications.

”

34

Pensions Alliance Limited (PAL)was incorporated on the 14thApril 2005, to manage andadminister retirement savingscontributions of Nigerianworkers as a result of the Pensionreform Act of 2004. PAL is a jointventure between First SecuritiesDiscount House Limited (FSDH)and African Alliance InsuranceCompany Limited (AfricanAlliance).

Vision“To be the foremost ininnovation within the NigerianPensions Industry, offeringoutstanding service andcompetitive returns”

Mission“To give Nigerians theconfidence of a financially securefuture”

ALLIANCE

PENSIONS

LIMITED

Core Values“Integrity, Innovation,Professionalism, Respect,Openness, Transparency andWarmth”

Investment PhilosophyTo provide Nigerian workerswith secure and adequate fundspost-retirement to enable themto enjoy a decent standard ofliving. We will ensure this bypreserving and growing theirpension assets to achieve realrate of return in the medium tolong-term.

PAL has registered Contributorsfrom:

Federal GovernmentMinistries/Parastatals andAgencies

State Governments

Private Sector Companies

...your PAL for life.

Addresses & Contact Telephone Numbers

Head OfficeBull Plaza (7th Floor)38/39 Marina,Lagos, NigeriaTel: 234-1-2667110, 234-1-4622201-2Fax: 234-1-2662002E-mail:[email protected]

Abuja OfficePlot 990 Cadastral ZoneAO Central Business DistrictBehind Leventis StoresAbujaTel: 09-6712379

Port-Harcourt OfficeAfribank Building (2nd Floor)5, Trans Amadi RoadPort-HarcourtTel: 084 -463744

Enugu Office2A O’Connor StreetAsata -EnuguTel: 042 319381

w w w . p e n s i o n s a l l i a n c e . c o m

Jos Office42 Tafawa Balewa Street(1st Floor), JosTel: 08065634334

Over

N380 million paidto Retirees

Presence

in all Statesof the Federation

Over

N26 billionAssets under management

Over

200,000 clients

Returns

Competitive

...your PAL for life.

E-mail:[email protected] [email protected]

35

T H E 2 0 0 8 A C C O U N T S

>>

Report of the Directors

Report of the Audit Committee

Independent Auditor’s Report

Statement of Accounting Policies

Balance Sheet

Profit and Loss Accounts

Statements of Cashflows

Notes to the Financial Statements

Statement of Value Added

Five Year Financial Summary

37

40

41

42

46

47

48

49

64

66

36

“NOT EVERYTHING THAT CAN BE

COUNTED COUNTS AND NOT EVERYTHING

THAT COUNTS CAN BE COUNTED.”- Albert Einstein.

37

REPORT OF THE DIRECTORS

The Directors present their annual report on the affairs of First Securities Discount House Limited (“the Company”) and itssubsidiaries (“the Group”), together with the group financial statements and auditor’s report for the year ended 30 June2008.

Principal activityThe principal activity of the Company continues to be the provision of discount house services to its customers. Suchservices principally involve trading in and holding money market securities such as treasury bills, government bonds,commercial bills and other eligible instruments.

The Company holds a 99.7% interest in an asset management company - FSDH Asset Management Limited. FSDH AssetManagement Limited holds a 99.9% interest in FSDH Securities Limited (FSL), a company involved in stock broking andissuing house operations.

In addition, the Company has a 51% interest in Pensions Alliance Limited, which is involved in pension fund administration.

Operating results:The following is a summary of the Group and Company’s operating results and transfers to reserves:

Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000

Profit before taxation 2,737,993 1,599,490 2,054,405 1,532,245Taxation (377,278) (163,105) (301,104) (69,586)

Profit after taxation before non-controlling interest 2,360,715 1,436,385 1,753,301 1,462,659Non-controlling Interest (16,589) 147,989 - -

Profit attributable to the group 2,344,126 1,584,374 1,753,301 1,462,659Transfer to statutory reserve (267,832) (219,399) (262,995) (219,399)

Retained earnings for the year 2,076,294 1,364,975 1,490,306 1,243,260Retained earnings, beginning of year 2,270,909 1,283,278 2,001,201 1,135,285Dividend declared (524,024) (377,344) (524,024) (377,344)

Retained earnings, end of year 3,823,179 2,270,909 2,967,483 2,001,201

DividendThe board of directors has recommended, for the approval of the shareholders, the payment of a dividend of N698.69million (2007: N524.02 million). The dividends are subject to deduction of withholding tax.

Directors and their interestsThe following directors of the Company held office during the year. At present, the only Executive Director is the ManagingDirector. All of the non-executive directors are representatives of companies who have interests in the share capital of theCompany, as follows:

Mr. Ibrahim Dikko Chairman

38

Mr. Rilwan Belo-Osagie Managing DirectorMr. Olayiwola A. Adetomiwa Representing UNICO CPFA LimitedMr. Daniel O. Agbor Representing KMC Investments LimitedMrs. Hamda Ambah Representing FSDH Staff Co-operative SocietyMr. Offong Ambah Representing Ecobank Nigeria PlcMrs. Myma Belo-Osagie Representing KMC Investments LimitedMr. Junaid Dikko Representing KMC Investments LimitedMr. Bashir el-Rufai Independent DirectorMr. Vincent Omoike Independent DirectorMr. Atedo Peterside Representing Stanbic IBTC Bank Plc

In accordance with Section 277 of the Companies and Allied Matters Act of Nigeria, none of the directors has notified theCompany of any declarable interests in contracts with the Company.

Statement of directors’ responsibilities in relation to the financial statements for the year ended 30 June 2008

This statement, which should be read in conjunction with the Auditor’s report, is made with a view to setting out forshareholders, the responsibilities of the directors of the Company with respect to the financial statements.

In accordance with the provisions of Sections 334 and 335 of the Companies and Allied Matters Act of Nigeria, theDirectors are responsible for the preparation of annual financial statements which give a true and fair view of the state ofaffairs of the Company and the Group and of the profit or loss for the financial year.

The responsibilities include ensuring that:

a. appropriate internal controls are established both to safeguard the assets of the Group and to prevent and detect fraudand other irregularities;

b. the Group keeps accounting records which disclose with reasonable accuracy the financial position of the Group andwhich ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act ofNigeria;

c. the Group has used suitable accounting policies, consistently applied and supported by reasonable and prudentjudgments and estimates, and that all applicable accounting standards have been followed; and

d. it is appropriate for the financial statements to be prepared on a going concern basis unless it is presumed that theCompany and its subsidiaries will not continue in business.

Fixed assetsInformation relating to changes in the fixed assets of the Group is disclosed in Note 14 to the financial statements.

Employee consultation and training:The Group places considerable value on the involvement of its employees and has continued its previous practice ofkeeping them informed on matters affecting them as employees and the various factors affecting the performance of theGroup. This is achieved through regular and informal meetings between management and staff.

The Group places a high premium on training and development of its manpower and sponsors employees for varioustraining courses as appropriate.

Health, safety and welfare at workThe Group's employees are adequately insured against occupational hazards. In addition, medical facilities are provided toemployees and their immediate families at the Group’s expense.


39

DonationsThe following donations were made during the year (2007: N3,725,000)

NNigeria Society for the Blind 1,500,000Dominican Sisters College 1,000,000Children Development Centre 937,500Bethtorrey Home and School 875,000Naija Go-Getters 250,000Titilayo Ogunlesi-Ayeni Memorial Trust Fund 250,000St. Saviour School 125,000Corona Schools Trust Council 100,000Breast Cancer Association of Nigeria 100,000American Women’s Club 100,000Tolulope Sangosanya’s Project LOTS 50,000Lagos State Cricket Association 50,000

5,337,500

In compliance with Section 38(2) of the Companies and Allied Matters Act of Nigeria, the Group did not make any donationor gift to any political party, political association or for any political purpose during the year under review.

Employment of disabled personsThe Group has a non-discriminatory policy on recruitment. Applications would always be welcomed from suitably qualifieddisabled persons and are reviewed strictly on qualification. The Group's policy is that the highest qualified and mostexperienced persons are recruited for appropriate job levels irrespective of an applicant’s state of origin, ethnicity, religionor physical condition.

AuditorIn accordance with Section 357 (2) of the Companies and Allied Matters Act of Nigeria, KPMG Professional Services haveindicated their willingness to continue in office as auditors.

1-5 Odunlami Street, BY ORDER OF THE BOARD,uac House, 6th floorLagos, Nigeria

28 August 2008 Alsec Nominees LimitedCompany Secretary


40

To the Members of First Securities Discount House Limited

In accordance with the provisions of Section 359 (6) of the Companies and Allied Matters Act 1990, the members of theAudit Committee of First Securities Discount House Limited hereby report as follows:

• We have exercised our statutory functions under Section 359 (6) of the Companies and Allied Matters Act, 1990 andacknowledge the co-operation of management and staff in the conduct of these responsibilities.

• We are of the opinion that the accounting and reporting policies of the Company and Group are in accordance withlegal requirements and agreed ethical practices and that the scope and planning of both the external and internalaudits for the year ended 30 June, 2008 were satisfactory and reinforce the Group’s internal control systems.

• We have deliberated with the external auditors, who have confirmed that necessary cooperation was received frommanagement in the course of their statutory audit and we are satisfied with management’s responses thereon andwith the effectiveness of the Company’s system of accounting and internal control.

Yomi OniwindeChairman, Audit Committee

28 August, 2008

Members of the Audit Committee are:

Yomi Oniwinde - ChairmanJunaid DikkoVincent OmoikeAtedo Peterside

REPORT OF THE AUDIT COMMITTEEFor the year ended 30 June, 2008

41

INDEPENDENT AUDITOR’S REPORT

To the Members of First Securities Discount HouseLimited

Report on the Financial Statements

We have audited the group and separate financialstatements of First Securities Discount House Limited (“theCompany”), which comprise the balance sheets as at 30June 2008, the profit and loss accounts, statements of cashflows, value added statements for the year then ended, thestatement of accounting policies, notes to the financialstatements and the five year financial summaries, set outon pages 42 to 67.

Directors' Responsibility for the financial statements

The directors’ are responsible for the preparation and fairpresentation of these financial statements in accordancewith Statements of Accounting Standards applicable inNigeria and in the manner required by the Companies andAllied Matters Act of Nigeria, the Banks and Other FinancialInstitutions Act of Nigeria and relevant Central Bank ofNigeria circulars. This responsibility includes: designing,implementing and maintaining internal control relevant tothe preparation and fair presentation of financial statementsthat are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that arereasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonableassurance whether the financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain auditevidence about the amounts and disclosures in the financialstatements. The procedures selected depend on theauditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity'spreparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity's internalcontrol. An audit also includes evaluating theappropriateness of accounting policies used and thereasonableness of accounting estimates made by thedirectors, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our auditopinion.

Opinion

In our opinion, the Group and separate financial statementsgive a true and fair view of the financial position of theGroup and Company as at 30 June 2008 and its finanicalperformance and cash flows for the year then ended inaccordance with Statements of Accounting Standardsapplicable in Nigeria and in the manner required by theCompanies and Allied Matters Act of Nigeria, the Banksand Other Financial Institutions Act of Nigeria and relevantCentral Bank of Nigeria circulars.

Report on Other Legal and Regulatory Requirements

Compliance with the requirements of Schedule 6 of theCompanies and Allied Matters Act of Nigeria

In our opinion, proper books of account have been kept bythe Company and its subsidiary companies (“the Group”),so far as appears from our examination of those books andadditionally, the Group’s balance sheet and profit and lossaccount are in agreement with the books of accounts.

Compliance with section 27(2) of the Banks and OtherFinancial Institutions Act of Nigeria.

Based on our audit and representations received, to thebest of our knowledge and belief, the Company did notcontravene any of the rules and regulations of the Banksand Other Financial Institutions Act of Nigeria.

28 August 2008Lagos, Nigeria

42

A summary of the principal accounting policies, applied consistently throughout the current and preceding years is set outbelow:

(a) Basis of accountingThe financial statements are prepared under the historical cost convention, except as otherwise indicated in the notesto the financial statements.

(b) Basis of consolidation

i) Subsidiary companies:The Group financial statements comprise the financial statements of First Securities Discount House Limited andits subsidiary companies made up to 30 June each year.

Subsidiary companies are those enterprises controlled by the Company. Control exists when the Company hasthe power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtainbenefits from its activities. The financial statements of the subsidiaries are included in the financial statementsfrom the date that control commences until the date that control ceases.

ii) Transactions eliminated on consolidation:Intra-group balances and transactions and any unrealised gains or losses arising from intra-group transactions areeliminated in preparing the group financial statements.

iii) Investments in subsidiary companies are stated at cost in the Company’s books. Provision is made for any permanentdiminution in the value of the investment in the subsidiary companies.

(c) Income recognitionInterest on bonds and commercial bills, discount on placements, brokerage commission and other fixed incomesecurities is accounted for on an accrual basis. Other fee income on services rendered is recognised at the time theservice or transaction is effected.Securities trading income relates to gains or losses arising from the purchase and sale of securities.Dividened income is reecognised when the right to receive payment is established.

(d) Discount expenseDiscount expense is accounted for on an accrual basis on all discount-bearing liabilities.

(e) Trading securitiesTrading securities comprise FGN trading bonds acquired for trading purposes. FGN trading bonds are carried at marketvalue. Any gain or loss arising from movements in market values of the portfolio is transferred to a revaluation reserveaccount unless a net cumulative loss has been incurred, in which case the net loss is charged to the profit and lossaccount in the period it first arises. Any subsequent net gain is credited to the profit and loss account to the extent oflosses previously charged. Transactions in marketable securities are recorded on a settlement date basis.

(f) Marketable SecuritiesMarketable securities comprise treasury bills and commercial bills and are stated at face value net of unearnedincome. Unearned income is deferred and amortised as earned.Dealing securities held by subsidiary companies are carried at lower of cost and market value.

(g) Fixed AssetsFixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis at ratescalculated to write-off the cost less estimated residual value of each asset over its estimated useful life at thefollowing annual rates:

STATEMENT OF ACCOUNTING POLICIES

43

Leasehold improvements 25% or over the lease periodFurniture and fittings 12.5%Office equipment 20%Computer equipment 33.33%Motor vehicles 25%Work-in-progress 0%

Gains or losses arising from the disposal of fixed assets are included in the profit and loss account.

(h) TaxationIncome tax expenses/credits are recognized in the profit and loss account. Current income tax is the expected taxpayable on the taxable income for the year, using statutory tax rates at the balance sheet date, and any adjustment tothe tax payable in respect of previous years.

(i) Deferred taxationDeferred taxation, which arises from timing differences in the recognition of items for accounting and tax purposes,is calculated using the liability method. Deferred taxation is provided, on all timing differences, which are expectedto reverse, at a rate of tax likely to be in force at the time of reversal.A deferred tax asset is recognised only to the extent that it is probable that future taxable income will be availableagainst which the associated tax losses and deductible temporary differences can be utilised. Deferred tax assets arereduced to the extent that it is no longer probable that the related tax benefit will be realised.

(j) Retirement benefits

i) Pension costsIn line with the Pension Reform Act 2004, the Group operates a defined contribution pension scheme; employeesare entitled to join the scheme on confirmation of their employment. The employee and each Company contribute5% and 10% of the employee’s basic, transport and rent allowances respectively.

Benefits under this scheme are payable in line with the provision of the Act. Employees’ contribution under theschemes is funded through payroll deductions, while the Company’s contribution is charged to the profit and lossaccount.

ii) GratuityGratuity is paid to staff that have worked for a minimum continuous period of 5 years with the Company. Thegratuity payment comprises a percentage of the employee's basic salary, transport allowance and rent allowancedependent on the number of years of service. Any increase in the gratuity payable is charged to profit and lossaccount.

(k) Provision for risk assetsCommercial bills are stated at cost net of provision for amounts doubtful of recovery. The provision is determined bya specific assessment of each issuer’s account in accordance with the Central Bank of Nigeria’s (CBN) circular onPrudential Guidelines as stated below:

Period Principal/Interest Classification % Provision Requiredhave been outstanding90 days but less than 180 days Substandard 10180 days but less than 360 days Doubtful 50Over 360 days Lost 100

A provision of at least 1% is made for all commercial bills classified as performing to recognize potential inherentlosses in line with the Prudential Guidelines.


44

Bad debts are written-off when the extent of the loss has been determined.

(l) Margin trading accountsMargin trading accounts are stated at cost net of allowances for bad and doubtful accounts. A specific allowance forloan losses is established to provide for management’s estimate of credit losses as soon as the recovery of an exposureis identified as doubtful. This allowance is made for each account that is not performing in accordance with the termsof the related facility. Provision is made in the manner stated below:

(i) Where lending is related to a specific transaction, and there is evidence that the transaction will not be successful,provision is made immediately in full against interest and principal outstanding, net of collateral realised or inpossession and in the process of realization.

(ii) Where lending is not related to a specific transaction or evidence on the status of the transaction is not readilyavailable, and success of the transaction is doubtful, specific allowances are made as follows:

a. Interest overdue by more than 30 days is suspended and recognized on cash basis.b. Principal repayments which are overdue by more than 90 days are fully provided for and recoveries recognised

on a cash basis.c. When individual principal repayments have been overdue for more than 180 days, full provision is made against

the outstanding principal repayments not yet due.

When a loan is deemed not collectible, it is written off against the related allowance and subsequent recoveriesare credited to the profit and loss account.

A general provision of 0.5% is made on all margin accounts, which have not been specifically provided for.

(m) InvestmentsShort-term investments comprise held to maturity debt securities maturing within one year of the balance sheet date.Short term investments are stated at the lower of cost and market value.Long-term investments comprise held to maturity debt and equity securities maturing after one year of the balancesheet date. Long term investments are stated at cost. Provisions are made for permanent diminution in the value ofsuch investments as appropriate.

(n) Assets under repurchase agreementThis represents the value of treasury bills and commercial bills sold to counter parties where the Company has acommitment to buy back the bills at a later date. Assets under repurchase are carried at cost. A provision of at least 1%is made for all commercial bills classified as performing to recognize potential inherent losses in line with thePrudential Guidelines.

(o) Liabilities against repurchase agreementThis represents consideration received for treasury bills and commercial bills sold to counter parties where theCompany has a commitment to buy back the bills at an agreed future date.

(p) Cash and bank balancesCash and bank balances comprise cash in hand and the Group’s current account balances with banks in Nigeria.

(q) Funds under managementFunds under management represent clients’ funds invested in equities and money market investments. Funds undermanagement are recognized at market value and are disclosed by way of notes to the financial statements.

(r) DividendDividends comprise dividends declared and/or paid. Dividend proposed is not recognized in the financial statements


45

until it is declared. Dividend declared is recognized in the financial statements in the period when it is declared.

(s) ProvisionsA provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that canbe estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.

(t) Foreign currency transactionTransactions in foreign currency are converted to Naira at the rates of exchange ruling on the dates of the transactions.Assets and liabilities in foreign currency are translated into Naira at the rates of exchange ruling at the balance sheetdate. Differences arising on conversion are included in the profit and loss account.

(u) Segment reportingThe Group defines a segment as a distinct or distinguishable unit of the Group that is engaged in providing financialproducts or services subject to risks and rewards that are different from those of other segments. The Group’s primaryformat for segment reporting is based on business segments. The Group currently operates in one geographicalsegment, which is Nigeria and, as such, does not have a secondary segment reporting format.

(v) Debtors and prepaymentsDebtors are stated at cost after the deduction of allowance for amounts considered bad or doubtful of recovery. Anallowance for doubtful receivables is established when there is objective evidence that the Company will not be ableto collect all the amounts due according to the original terms of the receivables. The charge for the year is recognisedimmediately in the profit and loss account.Prepayment are carried at cost less amortised amounts.

(w) Operating expensesOperating expenses are recognised on an accrual basis.


46

Group Group Company CompanyNotes 2008 2007 2008 2007

N’000 N’000 N’000 N’000ASSETS:

Cash and bank balances 4 1,299,767 290,647 522,339 200,504Assets on repurchase agreements 5 12,668,789 31,099,865 12,778,761 31,099,865Marketable securities 6 40,249,485 19,220,234 39,425,253 18,772,447Trading securities 7 1,702,068 8,585,725 1,702,068 8,585,725Short-term investments 8 4,003,300 1,750,000 4,003,300 1,750,000Margin accounts 9 1,550,730 1,490,197 - -Other assets 10 858,651 1,334,649 543,856 958,010Deferred taxation 11 201,643 56,896 38,298 23,998Investment in subsidiary companies 12 - - 564,000 564,000Long-term investments 13 8,314,043 4,629,009 8,200,666 4,514,371Fixed assets 14 293,293 278,746 185,571 138,381

TOTAL ASSETS 71,141,769 68,735,968 67,964,112 66,607,301

LIABILITIES:

Placements 15 45,440,000 27,050,000 45,440,000 27,050,000Liabilities on repurchase agreements 5 12,791,016 30,575,919 12,900,988 31,203,662Short term borrowings 16 1,454,896 908,491 - -Other liabilities 17 1,115,007 2,075,253 471,911 724,327Dividend payable 18 - - - -Taxation payable 20 551,274 210,938 328,231 76,419Provisions for gratuity 19 139,612 110,240 135,339 104,608

TOTAL LIABILITIES 61,491,805 60,930,841 59,276,469 59,159,016

CAPITAL AND RESERVES:

Called-up share capital 21 2,794,794 2,012,500 2,794,794 2,012,500Deposit for shares 22 - 2,321,881 - 2,321,881Share premium 23 1,539,587 - 1,539,587 -Statutory reserve 24 1,380,535 1,112,703 1,375,698 1,112,703Retained earnings 25 3,823,179 2,270,909 2,967,483 2,001,201Revaluation reserve 26 10,081 - 10,081 -

SHAREHOLDERS’ FUNDS 9,548,176 7,717,993 8,687,643 7,448,285

Non-controlling Interest 27 101,788 87,134 - -

TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 71,141,769 68,735,968 67,964,112 66,607,301

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

…………………………………… Ibrahim Y. Dikko - Chairman

…………………………………… Rilwan Belo-Osagie - Managing Director

Approved by the Board of Directors on 28 August 2008The accompanying accounting policies and notes form an integral part of these balance sheets.

BALANCE SHEETAS AT 30 JUNE 2008

47


N’000 N’000 N’000 N’000

Gross earnings 13,161,533 6,243,103 11,574,738 5,766,462

Securities income 1 11,490,882 5,597,980 11,490,882 5,723,610Securities discount expenses (8,608,939) (3,595,451) (8,608,939) (3,595,451)

2,881,943 2,002,529 2,881,943 2,128,159Other income 2 1,670,651 645,123 83,856 42,852

Net earnings 4,552,594 2,647,652 2,965,799 2,171,011(Provisions) on risk assets 6e (37,604) (3,178) (29,811) (3,178)Operating expenses 3 (1,776,997) (1,044,984) (881,583) (635,588)

Profit before taxation 2,737,993 1,599,490 2,054,405 1,532,245Taxation 20 (377,278) (163,105) (301,104) (69,586)

Profit after taxation before non-controlling interest 2,360,715 1,436,385 1,753,301 1,462,659

Non-controlling interest 27 (16,589) 147,989 - -

Profit attributable to the Group 2,344,126 1,584,374 1,753,301 1,462,659

Transfer to statutory reserve 24 (267,832) (219,399) (262,995) (219,399)

Retained earnings for the year 2,076,294 1,364,975 1,490,306 1,243,260

Retained earnings, beginning of year 25 2,270,909 1,283,278 2,001,201 1,135,285

Dividend declared 18, 25 (524,024) (377,344) (524,024) (377,344)

Retained earnings, end of year 3,823,179 2,270,909 2,967,483 2,001,201

Earnings per share- basic 29 84k 79k 63k 73k

The accompanying accounting policies and notes form an integral part of these profit and loss accounts.

PROFIT AND LOSS ACCOUNTSFOR THE YEAR ENDED 30 JUNE 2008

48


N’000 N’000 N’000 N’000

Net cash flow from trading activities 30 2,938,263 1,755,364 2,183,867 1,619,736Changes in operating assets 31 4,709,018 (2,630,074) 4,781,289 (2,512,494)

Income tax paid 20 (181,689) (235,902) (63,592) (187,279)Gratuity paid 19 (11,541) (8,454) (8,662) (8,308)

Net cash flow from operating activities 7,454,051 (1,119,065) 6,892,902 (1,088,345)

Investments activities:Proceeds from disposal of fixed assets 5,056 5,855 4,951 5,855Purchase of fixed assets 14 (140,094) (105,418) (112,399) (78,566)Purchase of investments (5,939,595) (531,580) (5,939,595) (596,705)

Net cash flow from investing activities (6,074,633) (631,143) (6,047,043) (669,416)

Financing activities:Cash received from non-controlling interest 153,725 44,500 - -Dividend paid 18 (524,024) (377,344) (524,024) (377,344)Deposit for shares - 2,321,881 - 2,321,881

Net cash flow from financing activities (370,299) 1,989,037 (524,024) 1,944,537

Net increase in cash and short-term funds 1,009,120 238,829 321,835 186,776

Cash and bank balances, beginning of year 290,647 51,819 200,504 13,728

Cash and bank balances, end of year 4 1,299,767 290,647 522,339 200,504

The accompanying accounting policies and notes form an integral part of these profit and loss accounts.

STATEMENTS OF CASHFLOWSFOR THE YEAR ENDED 30 JUNE 2008

49

1 Securities incomeSecurities income comprise income from: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Government bond - trading gain - 464,117 - 464,117Government bond - interest Income 1,128,856 1,327,822 1,128,856 1,327,822Commission on bonds trading - 82,377 - 82,377Treasury bills 1,570,495 1,202,431 1,570,495 1,202,431Commercial bills 8,791,531 2,521,233 8,791,531 2,646,863

11,490,882 5,597,980 11,490,882 5,723,610

2 Other incomeOther income comprise income from: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Management fees 640,935 276,701 - -Brokerage commissions 251,609 237,973 - -Interest on margin account 391,704 62,781 - -Securities trading income 232,085 11,856 - -Financial advisory fees 84,116 5,000 - -Administrative fees 58,751 12,874 - -Technical services fee - - 78,536 35,400Others 11,451 37,938 5,320 7,452

1,670,651 645,123 83,856 42,852

3 Operating expensesOperating expenses comprise the following: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Directors’ fees and allowances 19,351 20,523 17,930 20,250Staff and related costs (see note (28)(a)) 663,863 575,539 357,004 317,528Depreciation 123,292 115,311 63,030 51,771Auditors’ fees 19,840 17,025 12,000 8,750Other operating expenses 950,651 316,586 431,619 237,289

1,776,997 1,044,984 881,583 635,588

4 Cash and bank balancesThese comprise: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Cash in hand 44 124 6 9Balances held with other banks: - Current account 1,299,723 290,523 522,333 200,495

1,299,767 290,647 522,339 200,504

NOTES TO THE FINANCIAL STATEMENTS - 30 JUNE 2008

50

5 Assets / liabilities on repurchase agreements:

(a) Assets under repurchase agreements comprise: Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000 Treasury bills * Banks 195,000 20,824,000 195,000 20,824,000

195,000 20,824,000 195,000Unearned discount (4,384) - (4,384) -

190,616 20,824,000 190,616 20,824,000

Commercial bills * Banks - 3,663,247 - 3,663,247 * Energy 2,969,000 654,799 2,969,000 654,799 * Corporate 8,363,715 5,372,262 8,473,687 5,372,262 * Others 1,263,301 689,354 1,263,301 689,354

12,596,016 10,379,662 12,705,988 10,379,662Discount receivable 128,607 - 128,607 -Unearned discount (119,297) - (119,297) -

12,605,326 10,379,662 12,715,298 10,379,662General allowance for commercial bills (see note (b)) (127,153) (103,797) (127,153) (103,797)

12,478,173 10,275,865 12,588,145 10,275,865

Total - Assets on repurchase agreements 12,668,789 31,099,865 12,778,761 31,099,865

b) The movement on the general provision account during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of the year 103,797 98,689 103,797 98,689Provision during the year (see Note 6e) 23,356 5,108 23,356 5,108

Balance, end of year 127,153 103,797 127,153 103,797

(c) The gross value of assets under repurchase agreements comprise:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Treasury bills 195,000 20,824,000 195,000 20,824,000 Commercial bills 12,596,016 10,379,662 12,705,988 10,379,662

Total assets on repurchase agreement 12,791,016 31,203,662 12,900,988 31,203,662

d) The classification of commercial bills by performance is as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Performing 12,596,016 10,379,662 12,705,988 10,379,662


51


(d) Liabilities on repurchase agreements comprise: (Product/Sectoral breakdown) Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Treasury bills * Banks 195,000 20,824,000 195,000 20,824,000

195,000 20,824,000 195,000 20,824,000

Commercial bills * Banks 1,503,411 3,090 1,503,411 3,090 * Non-bank financial institutions 4,271,247 4,196,034 4,381,219 4,196,034 * Public sector 1,771,093 40,000 1,771,093 40,000 * FSDH Private clients 2,623,045 3,288,291 2,623,045 3,916,034 * Others 2,427,220 2,224,504 2,427,220 2,224,504

12,596,016 9,751,919 12,705,988 10,379,662

Total liabilities against repurchase agreement 12,791,016 30,575,919 12,900,988 31,203,662

6 Marketable securities (Product/ Sectoral Breakdown):Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

a) Marketable securities comprise: Treasury bills (see (b) below) 35,690,177 17,651,000 35,690,177 17,651,000 Commercial bills (see (c) below) 3,735,076 1,215,688 3,735,076 1,121,447 Dealing securities 824,232 353,546 - -

40,249,485 19,220,234 39,425,253 18,772,447

b) The analysis of treasury bills as at year end is as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Treasury bills - Face value 35,816,621 17,651,000 35,816,621 17,651,000 Interest receivable 28,609 - 28,609 - Unearned discount (155,054) - (155,054) -

Balance, end of year 35,690,177 17,651,000 35,690,177 17,651,000

c) The analysis of commercial bills as at year end is as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Commercial bills - Face value* Banks 19,897 356,649 19,897 356,649* Energy 362,640 561 362,640 561* Corporate 2,881,538 804,458 2,881,538 804,458* Others 559,479 132,889 559,479 38,648

3,823,554 1,294,557 3,823,554 1,200,316Discount receivable 38,700 - 38,700 -Unearned discount (35,900) - (35,900) -

3,826,354 1,294,557 3,826,354 1,200,316

Provision for risk assetsSpecific (see note (d)(i) below) (52,712) (66,585) (52,712) (66,585)General (see note (d)(ii) below) (38,566) (12,284) (38,566) (12,284)

(91,278) (78,869) (91,278) (78,869)


52


d) The movement on the provisions for commercial bills account during the year was as follows:


N’000 N’000 N’000 N’000i) Specific provision Balance, beginning of the year 66,585 72,076 66,585 72,076 Write-backs during the year (13,873) (5,491) (13,873) (5,491)


ii) General provision Balance, beginning of the year 12,284 14,677 12,284 14,677 Provision during the year 26,282 (2,393) 26,282 (2,393)


e) Provisions/(write-backs) for risk assets comprises Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000 Commercial bills: - Specific write-backs during the year (see (d)(i)) 13,873 5,491 13,873 5,491 - General provision during the year (see (d)(ii)) (26,282) 2,393 (26,282) 2,393

Assets on repurchase agreements: - General provision during the year (see Note 5(b)) (23,356) (5,108) (23,356) (5,108)

Provisions on doubtful accounts: - Write back during the year (seeNote 10(b)) 5,954 (5,954) 5,954 (5,954)

Provisions on margin accounts: - General provision during the year (see Note 9(e)) (7,793) - - -

(37,604) (3,178) (29,811) (3,178)

f ) The classification of commercial bills by performance is as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Non-performing - Lost 52,712 66,585 52,712 66,585Performing 3,770,842 1,227,972 3,770,842 1,133,731

3,823,554 1,294,557 3,823,554 1,200,316

7 Trading securities:Trading securities comprise: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

FGN Bond Cost 1,650,721 8,585,725 1,650,721 8,585,725 Revaluation reserve 10,081 - 10,081 - Interest receivable 41,266 - 41,266 -

1,702,068 8,585,725 1,702,068 8,585,725

53


8 Short-term investments:Short-term investments comprises: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

8.25% 2nd FGN Bond 2007 Series - 1,250,000 - 1,250,00015% 2nd FGN Bond 2007 Series - 500,000 500,0008.5% 2nd FGN Bond 2008 Series 100,000 - 100,000 -8.99% 4th FGN Bond 2008 Series 300,000 - 300,000 -11.5% 2nd FGN Bond 2008 Series 500,000 - 500,000 -9.45% 5th FGN Bond 2008 Series 100,000 - 100,000 -10.75% 4th FGN Bond 2008 Series 500,000 - 500,000 -12.5% 3rd FGN Bond 2008 Series 100,000 - 100,000 -10.7% 5th FGN Bond 2008 Series 200,000 - 200,000 -9.2% 4th FGN Bond 2008 Series 200,000 - 200,000 -12.5% 2nd FGN Bond 2008 Series 1,000,000 - 1,000,000 -17% 2nd FGN Bond 2008 Series 1,000,000 - 1,000,000 -15% 3rd FGN Bond 2009 Series 3,300 - 3,300 -

Federal Government of Nigeria Bonds 4,003,300 1,750,000 4,003,300 1,750,000

9 Margin accounts:(a) Margin accounts comprise: Group Group Company Company

2008 2007 2008 2007N’ 000 N’ 000 N’ 000 N’ 000

Share-backed facilities (see Note (b) below) 1,525,828 1,445,294 - - Interest receivable on share-backed facilities 32,695 44,903 - -

1,558,523 1,490,197 - - General loan loss provision (see e below) (7,793) - - -

Balance, end of year 1,550,730 1,490,197 - -

(b) Share-backed facilities represent the value of credit facilities availed to customers which are backed by shares of companies listed on the Nigerian Stock Exchange.

(c ) The gross value of margin accounts by maturity profile is as follows:Group Group Company Company

2008 2007 2008 2007N’ 000 N’ 000 N’ 000 N’ 000

Under 1 month 401,948 914,760 - - 1-3 months 1,153,677 575,437 - - 3 - 6 months 2,898 - - -

1,558,523 1,490,197 - -

(e) The movement on the general loan loss provision account during the year was as follows:


N’ 000 N’ 000 N’ 000 N’ 000

Balance, beginning of year - - - - Provision during the year 7,793 - - -

Balance, end of year 7,793 - - -

54

10 Other assets:(a) Other assets comprise: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Prepayments 90,658 61,079 44,027 45,701Accrued discount receivable 151,810 387,884 151,810 387,884Unamortised upfront discount 36,078 20,539 36,078 20,539Staff advances 91,077 126,141 82,965 94,668Receivable from non-controlling interest (see note 27) - 153,725 - -Others 489,028 591,235 228,976 415,172

858,651 1,340,603 543,856 963,964Provisions for doubtful accounts (see note (b)) - (5,954) - (5,954)

858,651 1,334,649 543,856 958,010

b) The movement on the provisions for other assets account during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of the year (5,954) - (5,954) - Provisions during the year - (5,954) - (5,954) Write-backs during the year 5,954 - 5,954 -

Balance, end of year - (5,954) - (5,954)

11 Deferred taxation:

(i) The movement in the deferred taxation asset account during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of year 56,896 25,506 23,998 17,392Deferred tax credit (see note 20(b)) 144,747 31,390 14,300 6,606


(ii) The analysis of deferred taxation account during the year was as follows:

Fixed assets 23,038 13,927 (28,534) (18,971)General provision on commercial bills 49,467 34,824 49,467 34,824Unrelieved losses 111,773 - - -Provision for gratuity 17,365 8,145 17,365 8,145


12 Investment in subsidiary companies comprises:

FSDH Asset Management Limited (See (a) below) - - 200,000 200,000Pensions Alliance Limited (See (b) below) - - 364,000 364,000

- - 564,000 564,000

a) This represents the Company’s 99.7% shareholding in 200,000,000 Ordinary shares of N1 each in FSDH Asset Management Limited.

b) This represents the Company’s 51% shareholding in 364,000,000 Ordinary shares of N1 each in Pensions Alliance Limited.


55


13 Long-term investments:Long-term investments comprise: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Quoted equity investments 119,388 119,388 - -Provision for dimunition in investments (6,011) (4,750) - -

113,377 114,638 - -

b) The movement on the provisions for long term investments account during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of the year 4,750 (2,225) - - Provisions during the year 1,261 4,750 - - Write-backs during the year - 2,225 - -

Balance, end of year 6,011 4,750 - -

Quoted bonds9% 4th FGN Bond 2010 Series - 1,000,000 - 1,000,00014.5% 3rd FGN Bond 2011 Series - 1,000,000 - 1,000,00013.5% Special Bonds for Local Contractors - 513,705 - 513,70512.5% 2nd FGN Bond 2008 Series - 1,000,000 - 1,000,00017% 2nd FGN Bond 2008 Series - 1,000,000 - 1,000,0009% 4th FGN Bond 2010 Series 700,000 - 700,000 -7.95% 4th FGN Bond 2010 Series 700,000 - 700,000 -7% 4th FGN Bond 2010 Series 100,000 - 100,000 -8.99% 4th FGN Bond 2010 Series 5,000,000 - 5,000,000 -14.5% 3rd FGN Bond 2011 Series 1,000,000 - 1,000,000 -9.5% 4th FGN Bond 2012 Series 200,000 - 200,000 -9.23% 4th FGN Bond 2012 Series 400,000 - 400,000 -9.25% 4th FGN Bond 2014 Series 100,000 - 100,000 -

8,200,000 4,513,705 8,200,000 4,513,705Unquoted InvestmentsNigeria Inter Bank Settlement Systems 666 666 666 666

8,314,043 4,629,009 8,200,666 4,514,371

The directors are of the opinion that adequate provision has been made for dimunition in the value of long-terminvestments as at the balance sheet date.

56

14 Fixed assets:a) The movement in these accounts during the year was as follows:

Group Leasehold Furniture & Office Motor Work In TotalImprovements Fittings Equipment Vehicles Progress

N’000 N’000 N’000 N’000 N’000 N’000Cost:Balance, beginning of year 64,598 51,402 341,187 186,902 8,717 652,806Additions 13,120 54,942 44,971 27,061 - 140,094Transfer 8,717 - - - (8,717) -Disposal - - (250) (17,514) - (17,764)

Balance, end of year 86,435 106,344 385,908 196,449 - 775,136

Accumulated Depreciation:Balance, beginning of year 49,489 25,018 214,401 85,152 - 374,060Charge for the year 7,176 9,658 60,211 46,247 123,292Disposal - - (174) (15,335) - (15,509)


Net Book Value:


Balance, beginning of year 15,109 26,384 126,786 101,750 8,717 278,746

b) The movement in these accounts during the year was as follows:Company Leasehold Furniture & Office Motor Work In Total

Improvements Fittings Equipment Vehicles ProgressN’000 N’000 N’000 N’000 N’000 N’000

Cost:Balance, beginning of year 43,937 37,332 208,990 118,533 8,717 417,509Additions 13,101 51,367 26,209 21,721 - 112,399Transfer 8,717 - - - (8,717) -Disposal - - - (17,514) - (17,514)


Accumulated Depreciation:Balance, beginning of year 32,815 19,967 164,453 61,893 - 279,128Charge for the year 3,921 5,703 24,361 29,044 - 63,030Disposal - - - (15,335) - (15,335)


Net Book Value:


Balance, beginning of year 11,122 17,365 44,537 56,640 8,717 138,381

c) No leased assets are included in the above fixed asset

d) There were no authorised or contracted capital commitments as at the balance sheet date ( 2007: Nil)


57


15 PlacementsPlacements comprise : Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Unsecured:Call 24,440,000 27,050,000 24,440,000 27,050,000Term 21,000,000 - 21,000,000 -

45,440,000 27,050,000 45,440,000 27,050,000

16 Short term borrowings:(a) Short term borrowings comprise: Group Group Company Company

2008 2007 2008 2007N’ 000 N’ 000 N’ 000 N’ 000

Commercial papers 1,424,896 908,491 - - Promissory note 30,000 - - -

1,454,896 908,491 - -

(b) Short term borrowings represent commercial papers and promissory notes issued to institutional investors and bears interest at rates ranging from 14% to 18% per annum, with maturities ranging from 30 days to 60 days.

17 Other liabilities:a) These comprise: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Unrealised interest and discount income - 517,192 - 517,192Accrued expenses and discount payable 553,947 1,383,864 471,911 206,329Due to customers 561,060 173,391 - -Due to banks in Nigeria - 806 - 806

1,115,007 2,075,253 471,911 724,327

18 Dividend payable:


N’000 N’000 N’000 N’000

Balance, beginning of year - - - -Dividend declared in the year 524,024 377,344 524,024 377,344Payments during the year (524,024) (377,344) (524,024) (377,344)

Balance, end of year - - - -

The dividend was paid to the Company’s shareholders net of applicable withholding tax in accordance with theprevailing legislation. The tax withheld was paid to the relevant tax authorities.

19 Provisions for gratuity : i) The movement in provisions for gratuity during the year was as follows:


N’000 N’000 N’000 N’000

Balance, beginning of year 110,239 80,916 104,608 77,456 Payments in the year (11,541) (8,454) (8,662) (8,308) Charge for year 40,914 37,778 39,393 35,460


58


20 Taxation payablea) The movement on this account during the year was as follows:


N’000 N’000 N’000 N’000

Balance, beginning of year 210,938 252,345 76,419 187,506Current year tax (see note(b) below) 522,025 194,495 315,404 76,192

732,963 446,840 391,823 263,698Payment during the year (181,689) (235,902) (63,592) (187,279)


b) The charge for the year comprises:

Company income tax 487,757 190,672 294,050 70,292Education tax 34,268 13,925 21,354 5,900Prior year under / (over) provision - (10,102) - -

522,025 194,495 315,404 76,192Deferred tax credit (note (11) above) (144,747) (31,390) (14,300) (6,606)

Tax charge 377,278 163,105 301,104 69,586

The current tax charge has been computed at the applicable rate of 30% (2007: 30%) plus education levy of 2% (2007: 2%) on theprofit for the year after adjusting for certain items of expenditure and income which are not deductible or chargeable for taxpurposes.

21 Share capital Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000

a) Authorised:3,100,000,000 Ordinary share of N1 each 3,100,000 3,100,000 3,100,000 3,100,000(2007: 2,100,000,000 Ordinary share of N1 each)

Called-up and fully paid2,794,794,000 Ordinary share of N1 each 2,794,794 2,012,500 2,794,794 2,012,500(2007: 2,012,500,000 Ordinary share of N1 each)

b) The movement on the share capital account during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of year 2,012,500 2,012,500 2,012,500 2,012,500 Transfer from share disposal account (see note 22) 782,294 - 782,294 -


59


22 Deposit for shares

The Company made right issues of 1,006,250,004 Ordinary shares of N1 each at N3 per share. A total of 782,293,722 ordinaryshares were taken up and proceeds of N2,321,881,000 net of share issue expenses of N25,000,166 from the offer has beenalloted during the year after obtaining CBN approval. The nominal value of the shares was transferred to the share capitalaccount while the balance was transferred to the share premium account.

Movement in the deposit for shares account was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of year 2,321,881 - - - Proceeds from rights issue 2,321,881 2,321,881 Transfer to share capital (782,294) - (782,294) - Transfer to share premium (1,539,587) - (1,539,587) -

Balance, end of year - 2,321,881 - 2,321,881

23 Share premium Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000

Balance, beginning of year - - - -Premium from rights issue 1,539,587 - 1,539,587 -

Balance, end of year 1,539,587 - 1,539,587 -

24 Statutory reserve Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000

Balance, beginning of year 1,112,703 893,304 1,112,703 893,304Transfer from profit and loss account 267,832 219,399 262,995 219,399


In accordance with existing legislation, 15% of profit after taxation (2007: 15%) has been transferred to statutory reserve.In addition, Pension Alliance Limited, a subsidiary company in the group, has transferred 12.5% of profit after taxation tostatutory reserve account which is required to be done on an annual basis.

25 Retained earnings

The movement on retained earnings during the year was as follows:Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Balance, beginning of year 2,270,909 1,283,278 2,001,201 1,135,285Dividend paid (524,024) (377,344) (524,024) (377,344)Transfer from profit and loss account 2,076,294 1,364,975 1,490,306 1,243,260


26 Revaluation reserve represents unrealised gain from the recognition of trading bonds at market value.

60

27 Non-controlling InterestThe movement on non-controlling interest during the year was as follows:


N’000 N’000 N’000 N’000

Balance, beginning of year 87,134 36,898 - -Called up share capital (see Note 10) - 153,725Paid up share capital - 44,500 - -Shortfall in share of loss from prior year (1,935) - - -Share of profit/(loss) 16,589 (147,989) - -

Balance, end of year 101,788 87,134 - -

28 Staff and directors’ costa) Employee costs, excluding executive directors, during the year amounted to:


N’000 N’000 N’000 N’000

Staff and related costs 605,010 524,831 302,935 270,706Pension costs 17,939 12,930 14,676 11,362Gratuity costs 40,914 37,778 39,393 35,460

663,863 575,539 357,004 317,528

b) The average number of persons employed by the Group and Company during the year was as follows:Group Group Company Company

2008 2007 2008 2007Number Number Number Number

Management staff 25 19 14 9 Senior staff 98 55 24 24 Other staff 51 58 35 32

174 132 73 65

c) Higher paid employees of the Group and Company, other than directors, whose duties were wholly or mainly dis-charged in Nigeria received emoluments (excluding pension contributions and other benefits) in the following ranges:


Number Number Number Number

N 25,001 - N50,000 4 0 2 0N 50,001 - N60,000 12 4 2 0N 60,001 - N70,000 13 3 0 1N 70,001 - N80,000 3 5 1 3N 80,001 - N90,000 1 16 1 9N 90,001 - N100,000 12 6 1 6N 100,000 - N110,000 12 7 1 1N 110,001 - N120,000 1 1 0 1N 120,001 - N130,000 5 0 5 0N 130,001 - N140,000 8 1 4 1N 140,001 - N150,000 7 2 2 0N 150,001 - N160,000 3 1 1 1N 160,001 - N170,000 3 1 3 1N 170,001 - N180,000 3 8 1 5N 180,001 - N190,000 3 4 2 1N 200,001 - N210,000 6 3 0 3N 210,001 - N220,000 5 2 0 2N 230,001 - N240,000 3 8 4 2


61


N 240,001 - N260,000 2 3 2 1N 260,001 - N270,000 3 6 0 5N 280,001 - N290,000 1 2 4 2N 290,001 - N340,000 5 6 1 3N 340,001 - N350,000 0 1 0 1N 350,001 - N360,000 0 2 0 0N 360,001 - N370,000 2 2 0 0N 370,001 - N380,001 0 3N 380,001 - N390,000 2 3 2 0N 390,001 - N400,000 9 4 5 1N 420,001 - N440,000 3 3 2 3N 440,001 - N450,000 2 0 1 0N 450,001 - N490,000 8 6 1 2N 500,001 - N510,001 0 2N 510,001 - N520,000 1 0 0 0N 520,001 - N530,000 1 4 1 1N 590,001 - N600,000 3 3 0 2N 600,001 - N700,000 6 5 6 4N 750,001 - N800,000 7 5 1 1N 810,001 - N900,000 2 0 2 0N 1,000,001 - N1,010,000 2 1 0 1N 1,010,001 - N1,090,000 0 0 0 0N 1,100,001 - N1,170,000 1 1 0 1N 1,250,001 - N1,290,000 2 0 1 0N 1,320,001 - N1,490,000 2 1 2 1N 1,620,001 - N1,790,001 0 3N 1,840,001 - N1,850,000 2 0 0 1N 1,890,001 - N1,970,000 1 2 1 0N 2,200,001 - N2,410,000 2 0 2 0N 2,500,001 - N3,500,000 1 0 1 0N 4,000,001 - N5,000,000 0 0 0 0

174 132 73 67

d) Directors’ remuneration was paid in respect of directors of the Company as follows:2008 2007

N’000 N’000

Fees as directors 7,730 10,050 Other emoluments 10,200 10,200

17,930 20,250

Company Companye) The directors’ remuneration shown above 2008 2007 (excluding pension and other benefits) N’000 N’000 includes:

Chairman 1,404 1,404 Highest paid director 2,742 2,742

f ) Other directors, whose duties were wholly or mainly performed in Nigeria, received emoluments (excluding pension andpension contributions) in the following ranges:

Company Company2008 2007

Number NumberN 1, 000,000 - N 1,500,000 5 6N 1, 500,001 - N 2,000,000 4 5

9 11

62

29 Earnings per shareEarnings per share has been calculated on profit after taxation for the year based on 2,794,794,000 Ordinary share in issueas at 30 June 2008 (2007: 2,012,500,008).

30 Net cash flow from trading activitiesThis comprises: Group Group Company Company

2008 2007 2008 2007N’000 N’000 N’000 N’000

Profit after taxation 2,360,715 1,436,385 1,753,301 1,462,659Taxation 377,278 163,105 301,104 69,586

Adjustments to reconcile profit aftertaxation to net cash flow from trading activities- depreciation 123,292 115,311 63,030 51,771- provisions on risk assets 37,604 3,178 29,811 3,178- reversal of provisions no longer required - (2,225) - -- provision for long-term investment 1,261 4,750 - -- gratuity charge 40,914 37,778 39,393 35,460- profit on disposal of fixed assets (2,801) (2,918) (2,772) (2,918)

2,938,263 1,755,364 2,183,867 1,619,736

31 Changes in operating assets: Group Group Company Company2008 2007 2008 2007

N’000 N’000 N’000 N’000(increase)/decrease in operating assets:- Marketable securities (21,041,660) 10,255,096 (20,665,215) 10,315,395- Trading securities 6,893,736 (8,938,041) 6,893,738 (8,585,725)- Assets on repurchase agreements 18,407,720 (3,175,381) 18,297,748 (3,142,870)- Margin accounts (68,326) (1,490,197) - -- Other assets 326,292 (50,791) 420,107 (376,034)

increase/(decrease ) in operating liabilities:

- Placements 18,390,000 (4,043,547) 18,390,000 (4,043,547)- Short term borrowings 546,405 908,491- Liabilities on repurchase agreements (17,784,903) 2,639,298 (18,302,674) 3,142,870- Other liabilities (960,246) 1,264,998 (252,416) 177,417

4,709,018 (2,630,074) 4,781,289 (2,512,494)

32 Related party transactionsDuring the year, the Company conducted business transactions with the following institutions whose directors are also directorsof FSDH Limited: FSDH Staff Cooperative, Stanbic IBTC Bank Plc, Ecobank Plc, Spring Bank Plc, Afribank Nigeria Plc, Unity Bank Plc,Nigeria Social Insurance Trust Fund, AIICO Insurance Plc, Unico Pension Trust Fund, KMC Investment Ltd, UBA Asset ManagementLimited. The transactions with these institutions were carried out at arm’s length.

33 Contingent liabilities, litigation and claimsThe Company has litigation and claims which arose in the normal course of business and they are being contested by theCompany. The directors, having sought professional legal counsel, are of the opinion that no significant liability willcrystallise from these litigation and therefore no provision is deemed necessary for these legal claims. There were no othercontingent liabilities requiring disclosure in these financial statements.

34 Subsidiary undertakingThe Company has a 99.7% shareholding interest in FSDH Asset Management Limited ( FAML ) which in turn has a 99.9%shareholding interest in FSDH Securities Limited (FSL). FSDH also has 51% shareholding interest in Pensions AllianceLimited.

There is a technical management agreement between the Company and FSDH Asset Management Limited and FSDHSecurities Limited. The agreement provides for the provision of technical management assistance to FAML and FSL, for afee of 10% of profit before tax. Amount charged during the year amounted to N78.5 million (2007: N35.4 million)

All other transactions between the Company and its controlled entities were carried out at arms length during the year.


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35 Assets/funds under management:The Group through its subsidiaries FSDH Asset Management Limited (FAML) and Pensions Alliance Limited (PAL) engage ininvestment management activities. The aggregate amounts of funds under management which are not included in thebalance sheet are as follows

2008 2007N’000 N’000

FAML’s Assets Under Management 10,924,196 9,070,665PAL’s Assets Under Management 24,634,478 14,848,981

35,558,674 23,919,646

36 Prior year comparative figuresCertain prior year comparatives have been reclassified to conform with current year presentation format.

37 Business segment reportingThe segment information is presented in respect of the group’s business segments.

The group operates the following main business segments:

Asset management - includes portfolio management and advisory servicesPension funds management - includes management of pension fundsFixed income securities - includes trading in money market securitiesStockbroking - includes stock trading with proprietary portfolio and customers’ portfolio.

The group’s business reporting information comprises:

Asset management Stock Fixed Pension funds Totalbroking income management

securities

N’000 N’000 N’000 N’000 N’000

REVENUE:Gross earnings - external 452,892 961,930 11,496,202 330,171 13,241,195Intersegment revenue/(expense) (31,933) (46,603) 78,536 - -

Total segment revenue 420,959 915,327 11,574,738 330,171 13,241,195

EXPENSESDepreciation - - (63,030) (60,262) (123,292)

Segment result 348,099 507,852 1,975,869 (93,827) 2,737,993

ASSETS AND LIABILITIES

Total assets 1,026,758 2,485,261 67,207,579 422,171 71,141,769Total liabilities (429,141) (1,769,123) (59,083,938) (209,603) (61,491,805)Non-controlling Interest (101,788)

Net Assets 597,617 716,138 8,123,641 212,568 9,548,176


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STATEMENT OF VALUE ADDEDFOR THE YEAR ENDED 30 JUNE, 2008

GROUPGroup Group

2008 2007N’000 % N’000 %

Gross earnings 13,161,533 6,243,103Securities trading expenses (8,608,939) (3,595,451)

4,552,594 2,647,652(Provisions) on risk assets (37,604) (3,178)Bought-in materials and services- local (989,842) (354,134)

Value added 3,525,148 100 2,290,340 100

Applied to pay:

Employees as staffand related costs 663,863 19 575,539 24Government as taxes 377,278 11 163,105 7

Retained in the Business:

Depreciation 123,292 3 115,311 5Non-controlling Interest 16,589 0 (147,989) (6)Statutory reserve 267,832 8 219,399 10Retained earnings 2,076,294 59 1,364,975 60

3,525,148 100 2,290,340 100

These statements show the distribution of the wealth created by the Group during the year.

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STATEMENT OF VALUE ADDEDFOR THE YEAR ENDED 30 JUNE, 2008

COMPANYCompany Company

2008 2007N’000 % N’000 %

Gross earnings 11,574,738 5,766,462Securities trading expenses (8,608,939) (3,595,451)

2,965,799 2,171,011(Provisions) on risk assets (29,811) (3,178)Bought-in materials and services- local (461,550) (266,289)

Value added 2,474,438 100 1,901,544 100

Applied to pay:

Employees as staff

and related costs 357,003 14 317,528 17Government as taxes 301,104 12 69,586 4

Retained in the Business:

Depreciation 63,030 2 51,771 3Statutory reserve 262,995 11 219,399 11Retained earnings 1,490,306 60 1,243,260 65

2,474,438 100 1,901,544 100

These statements show the distribution of the wealth created by the Company during the year.

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FIVE YEAR FINANCIAL SUMMARY - GROUP

2008 2007 2006 2005 2004N’000 N’000 N’000 N’000 N’000

Gross earnings 13,161,533 6,243,103 4,605,010 5,978,301 5,065,165Securities trading expenses (8,608,939) (3,595,451) (2,921,315) (4,050,128) (3,661,535)

Net earnings 4,552,594 2,647,652 1,683,695 1,928,173 1,403,630Profit before taxation 2,737,993 1,599,490 1,094,287 1,587,072 1,120,845Taxation (377,278) (163,105) (220,125) (460,683) (340,891)Non-controlling Interest (16,589) 147,989 114,602 - -Profit attributable to the group 2,344,126 1,584,374 988,764 1,126,389 779,954

Earnings per share- adjusted 84k 79k 49k 56k 39k

ASSETS:Cash and bank balances 1,299,767 290,647 51,819 64,711 119,154Assets on repurchase agreements 12,668,789 31,099,865 27,929,592 35,648,397 37,534,590Marketable securities 40,249,485 18,866,688 29,113,900 1,910 7,528Trading securities 1,702,068 8,939,271 1,230 21,877,234 15,448,425Short-term investments 4,003,300 1,750,000 2,077,000 - -Margin accounts 1,550,730 1,490,197Other assets 858,651 1,334,649 1,136,087 490,972 395,199Deferred taxation 201,643 56,896 25,506 18,037 22,514Long-term investments 8,314,043 4,629,009 3,772,954 1,172,853 772,753Fixed assets 293,293 278,746 291,576 103,347 53,696

71,141,769 68,735,968 64,399,664 59,377,461 54,353,859

LIABILITIESPlacements 45,440,000 27,050,000 31,093,547 18,592,818 12,996,000Liabilities on repurchase agreements 12,791,016 30,575,919 27,936,621 35,814,479 37,642,318Short term borrowings 1,454,896 908,491Other liabilities 1,115,007 2,075,253 810,255 844,486 549,009Taxation payable 551,274 210,938 252,345 478,568 340,915Provisions 139,612 110,240 80,916 69,448 22,156

61,491,805 60,930,841 60,173,684 55,799,799 51,550,398

NET ASSETS 9,649,964 7,805,127 4,225,980 3,577,662 2,803,461

SHAREHOLDERS’ FUNDS:Called-up share capital 2,794,794 2,012,500 2,012,500 1,509,375 503,125Share premium 1,539,587 - -Bonus issue reserve - - - 503,125 1,006,250Deposit for shares - 2,321,881 - - -Statutory reserve 1,380,535 1,112,703 893,304 743,197 588,508Retained earnings 3,823,179 2,270,909 1,283,278 821,965 705,578Revaluation reserve 10,081

9,548,176 7,717,993 4,189,082 3,577,662 2,803,461

Non-controlling Interest 101,788 87,134 36,898 - -

SHAREHOLDERS’ FUNDS 9,649,964 7,805,127 4,225,980 3,577,662 2,803,461

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FIVE YEAR FINANCIAL SUMMARY - COMPANY

2008 2007 2006 2005 2004N’000 N’000 N’000 N’000 N’000

Gross earnings 11,574,738 5,723,610 4,642,555 6,080,633 5,125,386Securities trading expenses (8,608,939) (3,595,451) (2,941,599) (4,060,208) (3,661,535)

Net earnings 2,965,799 2,128,159 1,700,956 2,020,425 1,463,851

Profit before taxation 2,054,405 1,532,245 1,149,521 1,438,904 1,046,825Taxation (301,104) (69,586) (148,810) (407,646) (331,680)Profit after taxation 1,753,301 1,462,659 1,000,711 1,031,258 715,145

Earnings per share- basic 63k 73k 50k 51k 36k

ASSETS:Cash and bank balances 522,339 200,504 13,728 140 73,193Assets on repurchase agreements 12,778,761 31,099,865 27,962,103 35,856,470 37,649,601Trading securities 39,425,253 18,772,447 29,079,958 - -Marketable securities 1,702,068 8,585,725 - 21,682,460 15,333,414Short-term investments 4,003,300 1,750,000 2,077,000 - -Other assets 543,856 958,010 587,930 323,374 246,979Deferred taxation 38,298 23,998 17,392 18,037 22,514Investment in subsidiary companies 564,000 564,000 564,000 200,000 200,000Long-term investments 8,200,666 4,514,371 3,590,666 1,075,566 705,510Fixed assets 185,571 138,381 114,523 103,347 53,696

67,964,112 66,607,301 64,007,300 59,259,394 54,284,907

LIABILITIESPlacements 45,440,000 27,050,000 31,093,547 18,684,341 12,996,000Liabilities on repurchase agreements 12,900,988 31,203,662 28,060,792 35,953,809 37,757,329Other liabilities 471,911 724,327 546,910 714,271 439,066Taxation payable 328,231 76,419 187,506 425,628 331,704Provisions 135,339 104,608 77,456 63,623 22,156

59,276,469 59,159,016 59,966,211 55,841,672 51,546,255

NET ASSETS 8,687,643 7,448,285 4,041,089 3,417,722 2,738,652

SHAREHOLDERS’ FUNDS:Called-up share capital 2,794,794 2,012,500 2,012,500 1,509,375 503,125Share premium 1,539,587 - - - -Bonus issue reserve - - - 503,125 1,006,250Deposit for shares - 2,321,881 - - -Statutory reserve 1,375,698 1,112,703 893,304 743,197 588,508Retained earnings 2,967,483 2,001,201 1,135,285 662,025 640,769Revaluation reserve 10,081

8,687,643 7,448,285 4,041,089 3,417,722 2,738,652

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NOTES

2008 fsdh inner report · 2019. 11. 30. · company. it is another successful year for the fsdh...

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