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How we conduct our business

The financial statements are prepared on a going concern basis utilising the historical cost concept, modified for the revaluation of certain fixed assets, in conformity with International Accounting Standards and incorporate the following principal accounting policies which have been applied on a basis consistent with prior years

Change in accounting policies

Previously any benefits to staff in respect of accumulated leave were charged directly against income only when availed of by employees. All liabilities arising in respect of accumulated leave benefits are now recognised.

Basis of consolidation

The Group financial statements incorporate the financial results of the bank and its subsidiary and associated companies. Subsidiary companies are those in which the Group, directly or indirectly, has a long-term interest and over whose operations it has the power to exercise control. Subsidiaries are consolidated from the date on which effective control is transferred to the Group. All inter-company transactions and balances between Group companies have been eliminated.

Associated companies

Associated companies are those in which the Group holds a long-term equity interest and over which it exercises a significant influence. These include companies in which the Group has a 20 to 50 percent interest.

The post acquisition results of the associated companies have been accounted for in the Group financial statements using the equity method of accounting.

Account has been taken of the most recently audited financial statements of the associated companies. The equity accounted earnings, less dividends received, are taken to a non-distributable reserve.

No adjustment is made to the carrying value of the investments in respect of goodwill or any excess of net assets over cost which arose at the date of acquisition.

Investments

Securities are held for either trading or investment purposes. Securities held for trading purposes are stated at market value. Securities held for investment purposes are stated at book value and profits or losses are recognised on realisation.

In determining the book value of investments, securities with a fixed redemption date are stated at cost plus accrued interest. Where cost contains premiums or discounts on purchase, such amounts are amortised on a straight line basis over the period to redemption.

Securities are transferred between trading and investment portfolios at market value.

Where an investment security is held in lieu of an advance, such an investment is reflected as an advance and the dividend income derived is shown as interest received.

Other investments are stated at cost less any provision which, in the opinion of the directors, is necessary to recognise a permanent impairment to the value of those investments.

Loans and other advances to customer

Loans and other advances are stated after deduction of amounts which, in the opinion of the directors, are required as specific and general provisions.

Specific provisions are made against doubtful advances and contingencies. A general provision is maintained to cover potential losses which, although not specifically identified, may be present in any bank's portfolio of advances. The aggregate provisions which are made during the period, less amounts released and recoveries of advances previously written-off, are charged to the income statement.

Accrual of interest on an advance is suspended when specifc provision is made. Irrecoverable advances are written off when the extent of the loss incurred has been confirmed

Taxation

The tax charge is calculated on net income adjusted for permanent differences between tax and accounting income. The tax effects of timing differences, arising from items being brought to account in different periods for income tax and accounting purposes, are carried in the balance sheet as deferred tax credits or debits.

The liability method is used to provide deferred tax on a comprehensive basis. Account is taken of deferred taxation assets arising from taxation losses where, in the opinion of the directors, recovery of such losses is assured beyond reasonable doubt.

Instalment credit agreements

Instalment credit agreements are regarded as financing transactions and the principal balances are included in advances. Finance charges are credited to revenue in proportion to the capital balances outstanding in the balance sheet.

Property and equipment depreciation

Property and equipment are stated in the balance sheet at cost or valuation. Valuations of freehold and leasehold properties are carried out by qualified property valuers every fve years. Property and equipment are depreciated on a straight line basis over their expected useful lives as follows:

Freehold land and buildings:	50 years
Leasehold land and buildings:	The lesser of the unexpired period of lease or 50 years
Motor vehicles:	4 years
Computer and offce equipment:	7 years
Furniture and fttings:	10 years

Foreign currency transactions

Assets and liabilities denominated in foreign currencies are translated into Botswana Pula at rates of exchange ruling at the balance sheet date or, where covered by forward exchange contracts, at the relevant contract rates.

Foreign exchange trading positions, including spot and forward exchange contracts, are valued at current market rates and the resultant profts or losses are accounted for in the income statement.

Retirement funding

The bank provides for retirement benefts by making payments to a pension fund which is independent of the bank. The fund is a defned contribution fund and the laws of the Republic of Botswana govern its administration. The pension fund is managed by Trustees who have appointed Alexander Forbes Financial Services to undertake the administration and Botswana Insurance Fund Management as asset managers.