confidence - Investing In Africa

Management Discussions & AnalysisFinancial Review (cont’d)Income TaxesTax expense increased from Rs235.3M for 2004 to Rs304.9M for 2005,representing an increase of 29.54%. Profit before taxation excluding exemptincome of Rs196.2M amounted to Rs1,305.1M for 2005 whereas for 2004 profitbefore taxation net of exempt income of Rs332.5M amounted to Rs1,033.0M.Moreover, investment allowance which is a one-time tax relief of 25% of qualifyingcapital expenditure in respect of the year in which the capital expenditure isincurred amounted to Rs56.4M for 2004 compared to Rs19.0M in 2005. In viewof the above and one time expenses of Rs88M in 2004 the effective tax rateincreased from 17.23% for 2004 to 20.31% for 2005.AssetsTotal assets excluding contingent assets grew by 15.03% from Rs42,257.7M atJune 30, 2004 to Rs48,607.0M at June 30, 2005. The growth was drivenmostly from the domestic market, namely increase in placements withforeign banks by Rs4.6Bn, increase in advances by Rs1.7Bn and net increasearising from the valuation of properties and equity investment by Rs1.2Bn. Onthe other hand, investment in gilt-edged securities, which witnessed asubstantial drop in yields, decreased by Rs2.0Bn. Assets of our overseasoperations increased by Rs671M from Rs3,345M at June 30, 2004 toRs4,016M at June 30, 2005 and accounted for 7.92% and 8.26% of totalassets at June 30, 2004 and June 30, 2005 respectively. The assets of ourMadagascar subsidiary increased by 37.90% from 2004 to 2005 due to higheradvances. Focus on treasury activities and low risk advances at IndianOperations led to an increase in assets of 14.27% .Chart 8 - Average Assets MixAverage Assets Mix 2005Average Assets Mix 20041037% Other Assets5% Other Assets16% Cash &Interbank balance12% Cash &Interbank balance52% Loans25% Securities54% Loans29% SecuritiesChart 8 shows average assets mix for the group. Eliminating the effect of thevaluation of properties, the proportion of advances and gilt edged securities as apercentage of average assets improved to 53% and 26% respectively for 2005.