DIAMOND BANK PLC AUDITED FINANCIAL STATEMENTS 31 DECEMBER 2011 DIAMOND BANK PLC Table of Content Page Directors' report 1 Compliance with Code of Corporate Governance 7 Directors' responsibility and approval 25 Auditors' report 26 Statement of significant accounting policies 28 Profit and loss accounts 36 Balance sheets 37 Cash flow statements 38 Notes to the financial statements 39 Statement of value added 73 Five-year financial summary 74 Financial risk analysis 78 DIAMOND BANK PLC Directors' Report For period ended 31 December 2011 The directors present their annual report on the affairs of Diamond Bank Plc (“the Bank”) and its subsidiaries ("the Group"), together with the financial statements and auditors' report for the period ended 31 December 2011. a. Legal Form The Bank was incorporated in Nigeria under the Companies and Allied Matters Act 1990 as a private limited liability company on 20 December 1990. It was granted license on the 15 March 1991 to carry on the business of commercial banking and commenced business on 21 March 1991. The Bank converted into a Public Limited Liability Company on 28 February 2005. The Bank’s shares were listed on the 27 May 2005 on the floor of the Nigerian Stock Exchange by way of introduction. b. Principal Activity and Business Review The principal activity of the Group continues to be the provision of banking and other financial services to corporate and individual customers. Such services include granting of loans and advances, corporate finance and money market activities. At the start of the period, the Bank had seven subsidiaries ADIC Insurance Limited (96.15%), Diamond Capital and Financial Markets Limited (100%), Diamond Securities Limited (owned through Diamond Capital), Diamond Registrars Limited(owned through Diamond Capital), Diamond Mortgages Limited, Diamond Pension Fund Custodian and Diamond Bank du Benin. In line with the directives of the Central Bank of Nigeria on non-banking operations, Diamond Securities Limited, Diamond Registrars Limited and ADIC Insurance Limited were sold during the year. Diamond Capital and Financial Markets Limited and Diamond Mortgages Limited were wound up without being liquidated and their assets and liabilities transferred to the Bank. At the end of the period Bank had two operating subsidiaries including Diamond Bank du Benin S.A (97.07%) and Diamond Pension Fund Custodian Limited (100%). The Bank’s consolidated financial statements include the results of all operating subsidiaries. The indirectly wholly owned subsidiaries (via Diamond Bank du Benin) are Diamond Bank Togo, Diamond Bank Senegal and Diamond Bank Cote d’ivoire. These are consolidated with the results of Diamond Bank du Benin and the consolidated group is then consolidated with the bank. c. Operating Results Gross earnings of the Group increased by N5.3billion from N91.0 billion to 96.3billion Highlights of the Group’s operating results for the period under review are as follows: Dec.’ 2011 Dec.’ 2010 Dec.’ 2011 Dec.’ 2010 N'000 N'000 N'000 N'000 Group Group Bank Bank Gross earnings 96,307,511 91,022,288 89,311,448 85,723,090 (Loss)/ profit before taxation (16,261,015) 4,772,863 (27,297,647) 9,468,016 Taxation 5,006,914 (3,444,208) 5,109,799 (2,945,561) (Loss)/ profit after taxation (11,254,101) 1,328,655 (22,187,848) 6,522,455 Non-controlling interest 39,593 (40,241) - - (Loss)/ profit attributable to group shareholders (11,214,508) 1,288,414 (22,187,848) 6,522,455 1 The report of the directors for the period ended 31 December 2011 DIAMOND BANK PLC Directors' Report For period ended 31 December 2011 Dec.’ 2011 Dec.’ 2010 Dec.’ 2011 Dec.’ 2010 N'000 N'000 N'000 N'000 Group Group Bank Bank Transfer to statutory reserves 66,979 990,016 - 978,368 Transfer to small scale industries - 326,123 reserves - 326,123 Transfer to contingency reserve - 120,733 - - Transfer to retained earnings reserve (11,281,487) (148,458) (22,187,848) 5,217,964 (11,214,508) 1,288,414 (22,187,848) 6,522,455 d. Directors and their Interests The direct and indirect interests of directors in the issued share capital of the Bank as recorded in the register of directors shareholding and/or as notified by the directors for the purposes of sections 275 and 276 of the Companies and Allied Matters Act and the listing requirements of the Nigerian Stock Exchange is noted: Direct Shareholding Indirect Shareholding Number of Number of Number of 50k Number of 50k 50k Ordinary 50k Ordinary Ordinary Ordinary Shares Shares Held Shares Held Shares Held Held Dec 2011 Dec 2010 Dec 2011 Dec 2010 HRM Igwe Nnaemeka Alfred Achebe (Chairman) 3,547,637 3,547,637 - - Dr. Alex Otti (Managing Director) 10,000,000 10,000,000 - - Mr. Uzoma Dozie (Executive) 20,630,610 20,630,610 807,477,710 769,220,403 Mr. Oladele Akinyemi (Executive) 8,503,293 8,503,293 - - Mr. Abdulrahman Yinusa (Executive/CFO) 4,000,000 - - - Mr. Victor Ezenwoko (Executive) 7,044,157 12,044,157 - - Mrs. Caroline Anyanwu (Executive) 1,650,000 1,650,000 - - Mazi Clement Owunna MFR 33,000 33,000 264,901,398 260,917,398 Mr. Chris Ogbechie 10,845,000 10,295,959 - - Lt. General Jeremiah Timbut Useni (Rtd) 6,672,306 6,672,306 184,835,555 184,690,219 Dr. Olubola Adekunle Hassan 6,101,500 6,101,500 - - Mr. Simon Harford - - 2,141,349,189 2,141,349,189 Ms. Ngozi Edozien - - - - Chief John D. Edozien 5,842,400 4,842,400 - - Mr. lan Greenstreet - - - - Mr. Thomas Barry (Appointed with effect from September 15, 2011) - - - - Mrs. Omobola Johnson (Resigned with effect from July 14, 2011) 7,493 - - - In line with the provisions of the Articles of Association the directors to retire by rotation are Dr Olubola Hassan, Lt. Gen. Jeremiah Useni (Rtd) and Ms. Ngozi Edozien who being eligible for re-election offer themselves for re-election. Also HRM Igwe Nnaemeka Alfred Ugochukwu Achebe who is 70 years of age will be proposed as Director for re-election pursuant to Section 256 of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria, 2004. e. Directors interests in contracts For the purpose of section 277d of the Companies and Allied Matters Act 1990, none of the directors had direct or indirect interest in contracts or proposed contracts with the company during the year. 2 The report of the directors for the period ended 31 December 2011 DIAMOND BANK PLC Directors' Report For period ended 31 December 2011 f. Property, Plant and Equipment Information relating to changes in property, plant and equipment is given in Note 26 to the financial statements. g. (i) Shareholding Analysis The shareholding pattern of the Bank as at 31 December 2011 is as stated below: Share Range No. Of Percentage (%) Of No. Of Holdings Percentage Holdings Shareholders Shareholders 1 - 10,000 93,169 77.87 202,789,183 1.40 10,001 - 50,000 17,607 14.72 342,363,657 2.37 50,001 - 100,000 4,888 4.09 309,181,990 2.14 100,001 - 500,000 3,157 2.64 577,170,749 3.99 500,001 - 1,000,000 307 0.26 210,168,949 1.45 1,000,001- 5,000,000 329 0.27 657,881,733 4.54 5,000,001 - 10,000,000 68 0.06 482,016,047 3.33 10,000,001 - 50,000,000 82 0.07 1,944,728,776 13.43 50,000,001 - 100,000,000 14 0.01 957,656,400 6.62 100,000,001 – 500,000,000 16 0.01 2,840,314,897 19.62 500,000,001 - 1,000,000,000 3 0.00 1,867,289,895 12.9 1000,000,001 - 10,000,000,000 2 0.00 4,083,680,829 28.21 TOTAL 119,642 100 14,475,243,105 100 (ii) Share Capital History YEAR INCREASE CUMULATIVE INCREASE CUMULATIVE CONSIDERATION 1991 25,000,000 25,000,000 25,000,000 25,000,000 Cash 1992 25,000,000 50,000,000 25,000,000 50,000,000 Cash 1993 50,000,000 100,000,000 50,000,000 1994 100,000,000 200,000,000 45,000,000 95,000,000 Bonus issue of N20m and Cash deposit of N25m for share 1995 200,000,000 19,000,000 114,000,000 Bonus issue of N19,000,000 1996 200,000,000 38,000,000 152,000,000 Bonus issue of N38,000,000 1997 800,000,000 1,000,000,000 412,300,000 564,300,000 Bonus issue of N412,300,000 1998 1,000,000,000 156,750,000 721,050,000 Rights issue of N156,750,000 1999 1,000,000,000 721,050,000 2000 1,000,000,000 721,050,000 2001 1,000,000,000 721,050,000 2002 1,000,000,000 2,000,000,000 360,525,000 1,081,575,000 Bonus issue of N360,525,000 2003 2,000,000,000 1,081,575,000 2004 2,000,000,000 458,230,033 1,539,805,033 Rights issue of N458,230,033 3 The report of the directors for the period ended 31 December 2011 DIAMOND BANK PLC Directors' Report For period ended 31 December 2011 YEAR INCREASE CUMULATIVE INCREASE CUMULATIVE CONSIDERATION 2004 1,500,000,000 3,500,000,000 513,268,327 2,053,073,360 Bonus issue of N513,268,327 2004 3,500,000,000 3,159,809 2,056,233,169 Rights issue of N3,159,809 2005 3,500,000,000 981,373,342 3,037,606,511 Private placement proceed of N12,365,304,109 2005 1,500,000,000 5,000,000,000 420,000,000 3,457,606,511 Share exchange btw DB & LB 2005 5,000,000,000 344,197,564 3,801,804,075 IPO proceed of N4,681,086,875 2006 2,000,000,000 7,000,000,000 898,152,632 4,699,956,707 Private placement proceed of N17,064,900,000 (Actis Holding Limited) 2007 7,000,000,000 1,879,699,250 6,579,655,957 GDR proceeds of N59,050,000,000.00 2008 3,000,000,000 10,000,000,000 657,965,596 7,237,621,553 Bonus issue of N657,965,596 2009 10,000,000,000 7,237,621,553 2010 10,000,000,000 7,237,621,553 2011 10,000,000,000 7,237,621,553 h.