We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Customisable watchlists with full streaming quotes from leading exchanges, such as LSE, NASDAQ, NYSE, AMEX, Bovespa, BIT and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Islamic Bank | LSE:IBB | London | Ordinary Share | GB00B02KNV97 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.425 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMIBB
RNS Number : 8723O
Islamic Bank of Britain Plc
16 March 2009
+------------------------------------------------------------------+
|
Islamic Bank of Britain PLC
|
+------------------------------------------------------------------+
|
Annual Report and |
| Financial
Statements
|
+------------------------------------------------------------------+
|
Registered number 4483430
|
+------------------------------------------------------------------+
| 31
December 2008
|
+------------------------------------------------------------------+
|
|
+------------------------------------------------------------------+
Chairman's statement
Assalamu Alaikum
I am pleased to present the Annual Report for Islamic Bank of Britain PLC for
the year ended 31 December 2008. It has been a year where, despite deteriorating
market conditions, the Bank has continued to show steady growth and delivered
some notable achievements, particularly within product development and risk
management framework.
Some of the highlights of the performance in 2008 include:
*
*
*
*
*
* Wakala Treasury deposit and Notice Savings accounts launched
* IT infrastructure improvements including new Data Centre, upgraded systems and
website enhancements
* Completion of a sound risk-management and control framework covering all major
business segments and activities
Current environment and trading performance
The past twelve months have seen some of the most challenging market conditions
experienced in the financial services sector in decades. The UK is now
officially in a recession, experiencing rising unemployment and falling
commercial and residential property values.
Despite this challenging environment, the loss for the year was reduced by 15%
to GBP5.9m (2007: GBP6.9m). This was achieved through growth of Operating income
to GBP4.9m (2007: GBP4.7m), primarily due to growth in fee and commission
income. Additionally, Operating expenses declined to GBP10.8m (2007: GBP11.6m)
as a result of careful management of costs and impairment charges. It is
pleasing to note the Bank fared well during the year due to its minimum exposure
to higher risk assets, prudent credit policies and robust risk management.
Impairment charges in the unsecured consumer finance portfolio fell by 50% to
GBP0.3m (2007: GBP0.6m), and there are currently no arrears within the secured
finance portfolios.
While some growth in fee and commission income has been achieved, the Bank's
main revenue source remains the profits it earns on deposits. As notified to the
market on 5 February 2009, net margins on these deposits have been on the
decline recently as the Bank of England reduced its bench mark rates to
historical lows. This has had a significant negative effect on the income of the
Bank. The Directors believe the results for 2009 will be further impacted. It
now appears reaching break-even will extend beyond our recent plans and
expectations.
The Board continues to assess and implement actions to mitigate the impact of
the decline in revenues. In 2009 the Bank will continue to focus on growth of
secured finance assets funded by longer term deposits. Additionally, the
creation of a dedicated premier banking channel and the introduction of
distribution services of investment products are strategic initiatives with
promising positive impact on revenues and profitability.
Products
During 2008 the bank made strong additions to its product portfolio, helping to
enhance both asset and deposit growth. In September 2008, the Bank launched its
Sharia-compliant Home Purchase Plan ("HPP"). The HPP product provides IBB the
opportunity to grow its customer-finance assets in a capital efficient manner.
Progress is underway to further widen the appeal of this product during 2009.
To further support the funding of asset growth, the Wakala Treasury Deposit
Account was launched in April and the 60 Day Notice Savings Account was launched
in December. It was particularly pleasing to see the Notice Savings Account
attract significant balances in an environment where banks' savings deposits in
the UK in general were retracting.
Capital
During 2008, the Board took the decision to raise new capital, via a placing of
new shares to an existing shareholder. Proceeds of GBP7.5m were received in
January 2009. Whilst the Bank has sufficient capital for its current
requirements, the Board intends to raise additional capital at an appropriate
time to support expected growth in existing and new areas. The Board aims to
strengthen the Bank's capital base to ready it for the coming growth cycle and
support its strategic plan.
Outlook
The economic environment undoubtedly makes 2009 a challenging year. However, the
Directors believe IBB will be well positioned to benefit from the eventual
recovery particularly with a reinforced capital base. The Bank will continue to
focus on growth in lower risk secured customer finance funded by longer term
deposits. We will continue to assess new and innovative products and services to
enhance our customer offering and increase revenue.
Directors and Advisers
I would like to extend my sincere appreciation to Mr Abdulaziz Al-Khulaifi, who
resigned as a Non-Executive Director in January 2009 due to other business
demands, for his contribution to the Bank over the past 3 years. I would also
like to convey my thanks and gratitude on behalf of the Bank to our Sharia'a
Supervisory Committee scholars: Dr. Abdul Sattar Abu Ghuddah, Sheikh Nizam
Yaqoobi, and Mufti Barkatullah for their continued guidance and support.
Finally, I would like to thank Islamic Bank of Britain's customers, employees,
and shareholders for their continued support and commitment to the Bank.
+-------------------------------------+------------------------------------------+
| Mohsen Moustafa | 12 March 2009 |
| Chairman | |
+-------------------------------------+------------------------------------------+
Report of the Sharia'a Supervisory Committee
??? ???? ?????? ??????
(In the name of Allah, the Most Gracious, the Most Merciful)
To the Shareholders of the Islamic Bank of Britain PLC
For the period from 1 January 2008 to 31 December 2008
?????? ????? ????? ???? ? ??????
In compliance with the Terms of Reference of the Bank's Sharia'a Supervisory
Committee, we submit the following report:
We have reviewed the documentation relating to the products and transactions
entered into by the Islamic Bank of Britain PLC for the period from 1 January
2008 to 31 December 2008.
According to Management, the Sharia'a Compliance Officer of the Bank and
documents evidencing the facts, the Bank's funds were raised and invested during
this period on the basis of agreements approved by us.
Therefore, based on the report of our representative and representations
received from Management, in our opinion the transactions and the products
entered into by the Bank during the period from 1 January 2008 to 31 December
2008 are in compliance with the Islamic Sharia'a rules and principles and fulfil
the specific directives, rulings and guidelines issued by us.
We beg Allah the Almighty to grant us all the success and straightforwardness.
? ?????? ????? ????? ???? ? ??????
+-------------------------------------+------------------------------------------+
| Dr Abdul Sattar Abu Ghuddah | 12 March 2009 |
| Chairman of the Sharia'a | |
| Supervisory Committee | |
+-------------------------------------+------------------------------------------+
Directors' report
The directors present their report and financial statements for the year ended
31 December 2008.
Principal activities
Islamic Bank of Britain PLC (the 'Company' or the 'Bank') was incorporated with
the intention of becoming the first independent Islamic bank in the United
Kingdom established and managed on a wholly Sharia'a compliant basis providing
banking services to Muslims in the United Kingdom and other parts of Europe. The
Company received authorisation in August 2004 from the Financial Services
Authority (FSA).
The first branch was opened on Edgware Road London on 22 September 2004. A
further seven branches were subsequently opened: Small Heath Birmingham,
Leicester, Whitechapel London, Southall London, Alum Rock Birmingham, Manchester
and East Ham London.Direct telephone and postal banking channels and internet
banking are also in place to compliment the Branch network.
The Bank offers a range of Sharia'a compliant banking solutions for both
individual and business customers including current accounts, savings accounts,
high net worth treasury deposit accounts, home purchase plans, consumer and
business financing and commercial property finance.
Financial Results
The financial statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the EU.
The financial statements for the year ended 31 December 2008 are shown on
pages 9 to 37. The loss for the year amounts to GBP5,910,700 (2007:
GBP6,917,004).Details of the Company's performance and prospects are given
within the Chairman's statement on pages 1 and 2.
The directors do not recommend the payment of a dividend (2007: GBPnil).
Risks
The Company has exposure to the following risks arising from its use of
financial instruments:
* Credit risk: The Company's credit risk arises principally from its financing
products but also from other advances to customers and banks;
* Liquidity risk: Liquidity risk arises from the mismatch of the Company's
financial assets, including Commodity Murabaha and Wakala receivables, home
purchase plans, consumer finance assets, commercial property finance assets, and
deposit liabilities;
* Market risk: The principal exposure is the risk of loss arising from
fluctuations in the future cash flows or fair values of financial assets and
liabilities because of a change in achievable rates; and
* Operational risk: Operational risk is the risk of loss arising from a wide
variety of causes associated with the Company's processes, personnel, technology
and infrastructure, and from external factors other than credit, market and
liquidity risks. The principal external business risks that may affect the
Company would be a sustained downturn affecting performance through reduced
volumes and increased impairment losses, and increased competition within
Islamic finance in the UK bringing margins and pricing under pressure.
A detailed explanation of the Bank's approach to financial and operational risk
management is set out in note 4 to the financial statements.
Creditor payment policy
The Company seeks to settle trade invoices in line with their payment terms. The
amount due to the Company's trade creditors as at 31 December 2008 represented
40 days (2007: 39 days) average daily purchases of goods and services calculated
in accordance with the Companies Act 1985.
Capital
On 19 December 2008, an ordinary resolution was passed at an extraordinary
general meeting increasing the authorised share capital of the Company
from GBP5,000,000 to GBP7,250,000 by the creation of an additional 225,000,000
new Ordinary Shares. On 23 January 2009, an additional 127,470,000 shares were
allotted for consideration of GBP7,488,863 before expenses.
Directors and directors' interests
The directors who held office during the year were as follows:
+---------------------------------+----------------------------------------------+
| | |
+---------------------------------+----------------------------------------------+
| Mr. Mohsen Moustafa | |
| (Chairman) (c) | |
+---------------------------------+----------------------------------------------+
| Mr. Abdulaziz Al-Khulaifi (b) | |
+---------------------------------+----------------------------------------------+
| Mr. Shabir Randeree | Resigned as director on 6 February 2008 |
+---------------------------------+----------------------------------------------+
| Mr. Robert Owen (a) (b) (c) | |
+---------------------------------+----------------------------------------------+
| Mr. Abdul Hakim Al-Adhamy (a) | |
| (b) | |
+---------------------------------+----------------------------------------------+
| Mr. Gerry Deegan | |
+---------------------------------+----------------------------------------------+
| Mr. Sultan Choudhury | |
+---------------------------------+----------------------------------------------+
(a)Denotes member of Audit Committee
(b)Denotes member of Remuneration Committee
(c)Denotes member of Nomination Committee
In addition to the above, Mr Abdulaziz Al-Khulaifi resigned as a director of the
Company on 19 January 2009.
The directors who held office at the end of the financial year had the following
interests in the ordinary shares of the Company according to the register of
directors' interests:
+-------------------------------+------------+--------------+---------------------+
| | | Class of | Interest at start |
| | | share | and end of year |
+-------------------------------+------------+--------------+---------------------+
| Mr. Mohsen Moustafa | | Ordinary | 100,000 |
+-------------------------------+------------+--------------+---------------------+
| Mr. Gerry Deegan | | Ordinary | 20,000 |
+-------------------------------+------------+--------------+---------------------+
| Mr. Sultan Choudhury | | Ordinary | 34,000 |
+-------------------------------+------------+--------------+---------------------+
Details of the Executive Director's options to subscribe for ordinary shares are
given below. Further information on the share options is provided in note 22.
+----------------------+-----------+-----------+-----------+-----------+-----------+
| | Interest | Interest | Earliest | Latest | Exercise |
| | at start | at end | exercise | exercise | price |
| | of year | of year | date | date | |
+----------------------+-----------+-----------+-----------+-----------+-----------+
| Mr. Gerry Deegan | 315,789 | 157,894 | 5 Nov | 4 Nov | 9.5p |
| | | | 2010 | 2017 | |
+----------------------+-----------+-----------+-----------+-----------+-----------+
| Mr. Sultan Choudhury | 315,789 | 157,894 | 5 Nov | 4 Nov | 9.5p |
| | | | 2010 | 2017 | |
+----------------------+-----------+-----------+-----------+-----------+-----------+
No options were granted or exercised during the year by directors. During the
year, 315,790 of the options granted in the prior year to directors were
cancelled due to the non-achievement of performance conditions.
None of the other directors who held office at the end of the financial year had
any disclosable interest in the shares of the Company.
Significant Shareholders
The following shareholders had interests in the ordinary shares of the
Company in excess of 3% as at 31 December 2008 (comparatives only shown if
holding as at 31 December 2007 was greater than 3%):
+-----------------------------------+----------+-----+----------+
| | 2008 | | 2007 |
| | (%) | | (%) |
| | | | |
+-----------------------------------+----------+-----+----------+
| HRH Sheikh Hamad Bin Khalifa Bin | 17.37 | | 17.37 |
| Hamad Al Thani | | | |
+-----------------------------------+----------+-----+----------+
| Qatar International Islamic Bank | 14.63 | | 14.63 |
+-----------------------------------+----------+-----+----------+
| Lynchwood Nominees Limited | 9.26 | | - |
+-----------------------------------+----------+-----+----------+
| HE Sheikh Thani Bin Abdulla Bin | 8.69 | | 8.69 |
| Thani Jasim Al Thani | | | |
+-----------------------------------+----------+-----+----------+
| Vidacos Nominees Limited | 8.67 | | 8.83 |
+-----------------------------------+----------+-----+----------+
| DCD London & Mutual PLC | 7.17 | | 7.17 |
+-----------------------------------+----------+-----+----------+
| Qatar Islamic Insurance Co. | 4.93 | | 4.93 |
+-----------------------------------+----------+-----+----------+
| HSBC Client Holdings Nominee (UK) | 4.32 | | 3.30 |
| Limited | | | |
+-----------------------------------+----------+-----+----------+
Sharia'a Supervisory Committee members
The Sharia'a Supervisory Committee members during the year were as follows:
Dr. Abdul Sattar Abu Ghuddah (Chairman)
Sheikh Nizam Yaqoobi
Mufti Abdul Kadir Barkatullah
The report of the Sharia'a Supervisory Committee is set out on page 3.
Political and charitable contributions
The Company made no political contributions during the year (2007: GBPnil).
Donations to UK charities amounted to GBP2,023 (2007: GBP9,360). Payments in
2008 include GBP2,023 (2007: GBP4,360) of fees and charges relating to late
payment on personal finance accounts that were paid to charity in accordance
with product terms as agreed with the Sharia'a Supervisory Committee. A further
payment of GBP1,247 is to be made in 2009 in respect of similar charges incurred
in 2008.
Disclosure of information to auditors
The directors who held office at the date of approval of this directors' report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's auditors are unaware; and each director has
taken all the steps that they ought to have taken as a director to make
themselves aware of any relevant audit information and to establish that the
Company's auditors are aware of that information.
Auditors
KPMG Audit Plc have indicated their willingness to continue in office and a
resolution concerning their re-appointment and authorising the directors to fix
their remuneration will be proposed at the Annual General Meeting.
By order of the board
+-------------------------------------+-------------------------------------------+
| Gerry Deegan | Islamic Bank of Britain PLC |
| Managing Director | Edgbaston House |
| | 3 Duchess Place |
| | Birmingham |
| | B16 8NH |
| | 12 March 2009 |
+-------------------------------------+-------------------------------------------+
Statement of directors' responsibilities in respect of the Annual Report and
the Financial Statements
The directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with IFRSs as adopted by the EU and applicable laws.
The financial statements are required by law to present fairly the financial
position and the performance of the Company; the Companies Act 1985 provides in
relation to such financial statements that references in the relevant part of
that Act to financial statements giving a true and fair view are references to
their achieving a fair presentation.
In preparing these financial statements, the directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgments and estimates that are reasonable and prudent;
* state whether they have been prepared in accordance with IFRSs as adopted by the
EU; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the
Companies Act 1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Independent auditors' report to the Members of Islamic Bank of Britain PLC
We have audited the financial statements of Islamic Bank of Britain PLC for the
year ended 31 December 2008 which comprise the Income Statement, the Balance
Sheet, the Cash Flow Statement, the Statement of Changes in Equity and the
related notes. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the Company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the financial statements in
accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU are set out in the Statement of Directors'
Responsibilities on page 7.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and whether the financial statements have been properly prepared
in accordance with the Companies Act 1985. We also report to you whether in our
opinion the information given in the Director's Report is consistent with the
financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do
not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
-the financial statements give a true and fair view, in accordance with IFRSs as
adopted by the EU, of the state of the Company's affairs as at 31 December 2008
and of its loss for the year then ended;
-the financial statements have been properly prepared in accordance with the
Companies Act 1985; and
-the information given in the Directors' Report is consistent with the financial
statements.
+-------------------------------------+-------------------------------------------+
| KPMG Audit Plc | 12 March 2009 |
| 8 Salisbury Square, London, EC4Y | |
| 8BB | |
| Chartered Accountants | |
| Registered Auditor | |
+-------------------------------------+-------------------------------------------+
Income statement
For the year ended 31 December 2008
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | Note | 2008 | | 2007 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | GBP | | GBP |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Income receivable from Islamic financing transactions | 6 | 8,307,297 | | 7,804,290 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Returns payable to customers and banks | 6 | (3,811,516) | | (3,208,871) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Net income from Islamic financing transactions | | 4,495,781 | | 4,595,419 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Fee and commission income | 7 | 527,212 | | 240,062 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Fee and commission expense | 7 | (94,783) | | (138,619) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Net fee and commission income | | 432,429 | | 101,443 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Operating income | | 4,928,210 | | 4,696,862 |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Net impairment loss on financial assets | 14 | (325,971) | | (644,071) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Personnel expenses | 9 | (4,831,978) | | (5,138,376) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| General and administrative expenses | | (4,017,168) | | (3,978,992) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Depreciation | 15 | (775,007) | | (746,353) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Amortisation | 16 | (888,786) | | (1,106,074) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Total operating expenses | | (10,838,910) | | (11,613,866) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Loss before income tax | | (5,910,700) | | (6,917,004) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Income tax expense | 11 | - | | - |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Loss for the year | | (5,910,700) | | (6,917,004) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Loss per ordinary share | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| Basic and Diluted (pence) | 24 | (1.4) | | (1.7) |
+------------------------------------------------------------+--------+-------------------+------+----------------+
| | | | | |
+------------------------------------------------------------+--------+-------------------+------+----------------+
The notes on pages 13 to 37 are an integral part of these financial statements.
Balance sheet
As at 31 December 2008
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | Note | 2008 | | 2007 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | GBP | | GBP |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Assets | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Cash | | | 546,953 | | 509,769 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Commodity Murabaha and Wakala receivables and | | 13 | 151,687,736 | | 141,768,471 |
| other advances to banks | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Consumer finance accounts and other advances to | | 14 | 7,878,292 | | 9,663,295 |
| customers | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Net investment in home purchase plans | | 14 | 6,980,840 | | - |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Net investment in commercial property finance | | 14 | 8,597,893 | | 6,091,882 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Property and equipment | | 15 | 3,265,745 | | 3,443,355 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Intangible assets | | 16 | 578,713 | | 1,262,231 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Other assets | | 17 | 1,263,128 | | 2,197,824 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Total assets | | | 180,799,300 | | 164,936,827 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Liabilities and equity | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Liabilities | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Deposits from banks | | 18 | 5,094,119 | | 2,498,304 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Deposits from customers | | 19 | 153,280,754 | | 134,640,612 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Other liabilities | | 20 | 3,480,891 | | 2,972,602 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Total liabilities | | | 161,855,764 | | 140,111,518 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Equity | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Called up share capital | | 22 | 4,190,000 | | 4,190,000 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Share premium | | | 48,747,255 | | 48,747,255 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Retained deficit | | | (34,046,165) | | (28,137,072) |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Profit stabilisation reserve | | | 52,446 | | 25,126 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Total equity | | | 18,943,536 | | 24,825,309 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| Total equity and liabilities | | | 180,799,300 | | 164,936,827 |
+----------------------------------------------------+----+------------+----------------+------+----------------+
| | | | | | |
+----------------------------------------------------+----+------------+----------------+------+----------------+
The notes on pages 13 to 37 are an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 12 March
2009 and were signed on its behalf by:
Gerry Deegan
Managing Director
Statement of changes in equity
For the year ended 31 December 2008
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | Share | | Share | | Profit | | Profit | | Total |
| | capital | | premium | | and loss | | Stabilisation | | |
| | | | account | | account | | reserve | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Balance at 1 January 2007 | 4,190,000 | | 48,747,255 | | (21,205,968) | | - | | 31,731,287 |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Loss for the year | - | | - | | (6,917,004) | | - | | (6,917,004) |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Credit in respect of share based | - | | - | | 11,026 | | - | | 11,026 |
| payments charge | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Transfer to profit stabilisation | | | | | (25,126) | | 25,126 | | - |
| reserve | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Balance at 31 December 2007 | 4,190,000 | | 48,747,255 | | (28,137,072) | | 25,126 | | 24,825,309 |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Balance at 1 January 2008 | 4,190,000 | | 48,747,255 | | (28,137,072) | | 25,126 | | 24,825,309 |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Loss for the year | - | | - | | (5,910,700) | | - | | (5,910,700) |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Credit in respect of share based | - | | - | | 28,927 | | - | | 28,927 |
| payments charge | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Transfer to profit stabilisation | - | | - | | (27,320) | | 27,320 | | - |
| reserve | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| Balance at 31 December 2008 | 4,190,000 | | 48,747,255 | | (34,046,165) | | 52,446 | | 18,943,536 |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
| | | | | | | | | | |
+------------------------------------+------------+--+------------+--+--------------+--+---------------+--+-------------+
The notes on pages 13 to 37 are an integral part of these financial statements.
Statement of cash flows
For the year ended 31 December 2008
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | Note | 2008 | | 2007 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | GBP | | GBP |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Cash flows from operating activities | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Loss for the year | | | (5,910,700) | | (6,917,004) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Adjustments for: | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Depreciation | | 15 | 775,007 | | 746,353 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Amortisation | | 16 | 888,786 | | 1,106,074 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Impairment on financial assets | | 14 | 325,971 | | 644,071 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Share based payments credit | | 22 | 28,927 | | 11,026 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in Commodity Murabaha and Wakala receivables | | | (12,784,885) | | (38,075,665) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in consumer finance accounts and other advances to | | | 1,459,032 | | (2,215,040) |
| customers | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in net investment in commercial property finance | | | (2,506,011) | | (3,753,481) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in net investment in home purchase plans | | | (6,980,840) | | - |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in other assets | | | 934,696 | | (1,214,554) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in deposits from banks | | | 2,601,729 | | 2,258,140 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in deposits from customers | | | 18,634,228 | | 50,787,229 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Change in other liabilities | | | 508,289 | | 785,341 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Net cash generated from operating activities | | | (2,025,771) | | 4,162,490 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Cash flows from investing activities | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Purchase of property and equipment | | 15 | (597,397) | | (224,338) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Purchase of intangible assets | | 16 | (205,268) | | (474,033) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Net cash used in investing activities | | | (802,665) | | (698,371) |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Net change in cash and cash equivalents | | | (2,828,436) | | 3,464,119 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Foreign exchange (gains)/losses | | | (221,586) | | 9,805 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Cash and cash equivalents at 1 January | | | 5,664,506 | | 2,190,582 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| Cash and cash equivalents at 31 December | | 12 | 2,614,484 | | 5,664,506 |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
| | | | | | |
+-----------------------------------------------------------+---+-------+---------------+-------+----------------+
The notes on pages 13 to 37 are an integral part of these financial statements.
Notes to the financial statements
1 Reporting entity
Islamic Bank of Britain PLC (the 'Company' or the 'Bank') is a company domiciled
in the UK. The address of the Company's registered office is Edgbaston House, 3
Duchess Place, Hagley Road, Birmingham B16 8NH. The financial statements of the
Company are presented as at and for the year ended 31 December 2008. The
Company is a retail bank offering Sharia'a compliant banking products and
services.
2Basis of preparation
(a)Statement of compliance
These financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the EU and approved by the
directors.
The financial statements were approved by the Board of Directors on 12 March
2009.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these financial statements.
(b) Basis of measurement
The directors are satisfied that the Company has adequate resources to continue
in business for the foreseeable future. For this reason, the financial
statements continue to be prepared on a going concern basis.
The financial statements have been prepared on the historical cost basis.
(c)Functional and presentation currency
The financial statements are presented in Sterling, which is the Company's
functional currency.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies that have the most
significant effect on the amount recognised in the financial statements are
described in note 5.
3Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements.
(a)Property and equipment
(i) Recognition and measurement
Items of property and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.Cost includes expenditure that is
directly attributable to the acquisition of the asset.
(ii) Subsequent costs
The cost of replacing part of an item of property or equipment is recognised in
the carrying amount of the item if it is probable that the future economic
benefits embodied within the part will flow to the Company and its cost can be
measured reliably. The costs of the day-to-day servicing of property and
equipment are recognised in the income statement as incurred.
(iii) Depreciation
Depreciation is recognised in the income statement on a straight line basis over
the estimated useful lives of each part of an item of property and equipment as
follows:
+---------------------------------+----+-------------------------------------------+
| Computer equipment | 3 | Years |
+---------------------------------+----+-------------------------------------------+
| Fixtures, fittings and office | 5 | Years |
| equipment | | |
+---------------------------------+----+-------------------------------------------+
| Leasehold improvements | 10 | years or over the life of the lease |
| | | whichever is shorter |
+---------------------------------+----+-------------------------------------------+
Depreciation methods, useful lives and residual values are reassessed at each
reporting date.
(b) Intangible assets
Software and computer licences acquired by the Company are stated at cost less
accumulated amortisation and accumulated impairment losses.
Expenditure on internally developed software is recognised as an asset when the
Company is able to complete the development and use the software in a manner
that will generate future economic benefits, and can reliably measure the costs
to complete the development. The capitalised costs of internally developed
software include all costs directly attributable to developing the software, and
are amortised over its estimated useful life. Internally developed software is
stated at capitalised cost less accumulated amortisation and impairment.
Subsequent expenditure on software assets and computer licences is capitalised
only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure on software or computer
licenses is expensed as incurred.
Amortisation is recognised in the income statement on a straight line basis over
the estimated useful life of the software or the licence term, from the date
that it becomes available for use. The estimated useful life of software is
three years.
(c) Commodity Murabaha and Wakala receivables and other advances to banks
Commodity Murabaha is an Islamic financing transaction, which represents an
agreement whereby the Company buys a commodity and sells it to a counterparty
based on a promise received from that counterparty to buy the commodity
according to specific terms and conditions. The selling price comprises of the
cost of the commodity and a pre-agree profit margin.
Wakala is an Islamic financing transaction, which represents an agreement
whereby the Company provides a certain sum of money to an agent, who invests it
according to specific conditions in order to achieve a certain specified return.
The agent is obliged to return the invested amount in case of default,
negligence or violation of any of the terms and conditions of the Wakala.
Commodity Murabaha receivables are recognised upon the sale of the commodity to
the counterparty. Wakala receivables are recognised upon placement of funds with
other institutions.
Income on both Commodity Murabaha and Wakala receivables is recognised on an
effective yield basis. The effective yield rate is the rate that exactly
discounts the estimated future cash payments and receipts through the agreed
payment term of the contract to the carrying amount of the receivable. The
effective yield is established on initial recognition of the asset and is not
revised subsequently.
The calculation of the effective yield rate includes all fees paid or received,
transaction costs, and discounts or premiums that are an integral part of the
effective yield rate. Transaction costs are incremental costs that are directly
attributable to the acquisition, issue or disposal of a financial asset or
liability.
Commodity Murabaha and Wakala receivables are initially recorded at fair value
and are subsequently measured at amortised cost using the effective yield
method, less impairment losses. The accrued income receivable is classified
under other assets.
Other advances to banks are stated at cost and are non-return bearing.
(d) Consumer finance accounts
Islamic consumer financing transactions represent an agreement whereby the
Company buys a commodity or goods and then sells it to the customer with an
agreed profit mark-up with settlement of the sale price being deferred for an
agreed period. The customer may subsequently sell the commodity purchased to
generate cash.
Consumer finance assets will be recognised on the date that the commodity or
good is sold by the Company. Consumer finance account balances are initially
recorded at fair value and are subsequently measured at amortised cost. The
amortised cost is the amount at which the asset is measured at initial
recognition, minus repayments received relating to the initial recognised
amount, plus the cumulative amortisation using an effective yield method of any
difference between the initial amount recognised and the agreed sales price to
the customer, minus any reduction for impairment.
Income is recognised on an effective yield basis over the period of the
contract. The effective yield rate is the rate that exactly discounts the
estimated future cash payments and receipts through the agreed payment term of
the contract to the carrying amount of the receivable. The effective yield is
established on initial recognition of the asset and is not revised subsequently.
The calculation of the effective yield rate includes all fees paid or received,
transaction costs, and discounts or premiums that are an integral part of the
effective yield rate. Transaction costs are incremental costs that are directly
attributable to the acquisition, issue or disposal of a financial asset or
liability.
The accrued income receivable from the customer is classified under other
assets.
(e) Commercial property finance and Home Purchase Plans
Commercial property finance and Home Purchase Plans are provided using the
Diminishing Musharaka (reducing partnership) principle of Islamic financing. The
Company will enter into an agreement to jointly purchase a property with another
party and rental income will be received by the Company relating to that
proportion of the property owned by the Company at any point in time. The other
party to the agreement will make separate payments to purchase additional
proportions of the property from the Company, thereby reducing the Company's
effective share.
The transaction is recognised as a financial asset upon legal completion of the
property purchase and the amount receivable is recognised at an amount equal to
the net investment in the transaction. Where initial direct costs are incurred
by the Company such as commissions, legal fees and internal costs that are
incremental and directly attributable to negotiating and arranging the
transaction, these costs are included in the initial measurement of the
receivable and the amount of income over the term will be reduced. Rental income
is recognised to provide a constant periodic rate of return on the Company's net
investment.
(f)Deposits from customers
Profit sharing accounts are based on the principle of Mudaraba whereby the
Company and the customer share an agreed percentage of any profit earned on the
customers deposit. The customer's share of profit is paid in accordance with the
terms and conditions of the account. The profit calculation is undertaken at the
end of each calendar month.
Customer Murabaha deposits consist of an Islamic financing transaction involving
the Company arranging the purchase of an asset on behalf of the customer and the
purchase thereof from the same customer by the Company at cost plus an agreed
profit mark-up with settlement on a deferred payment basis. Customer Murabaha
deposit balances are included in the balance sheet under deposits from customers
and the accrued returns payable to the customer are classified under other
liabilities. Returns payable on customer Murabaha deposits are recognised on an
effective yield basis over the period of the contract.
Customer Wakala deposits consist of an Islamic financing transaction, which
represents an agreement whereby the customer appoints the Company as agent to
invest a certain sum of money, according to specific conditions in order to
achieve a certain specified return. The Company, as agent, is obliged to return
the invested amount in case of default, negligence or violation of any of the
terms and conditions of the Wakala.
(g)Profit stabilisation reserve
The profit stabilisation reserve is used to maintain returns payable to
customers on Mudaraba based savings accounts. Returns payable on these profit
sharing accounts are credited to customers in accordance with the terms and
conditions of the account. Any surplus returns arising from the investment of
funds are then credited to this reserve. In the case of inadequate returns
generated by these funds, the Company will maintain the return to depositors by
utilising this reserve.
(h) Derecognition of financial assets and liabilities
The Company derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards or ownership of the financial asset are
transferred. Any remaining interest in transferred financial assets that is
created or retained by the Company is recognised as a separate asset or
liability.
The Company derecognises a financial liability when its contractual obligations
are discharged or cancelled or have expired.
(i) Impairment of financial assets
At each balance sheet date the Company assesses whether there is objective
evidence that financial assets are impaired. Financial assets are impaired when
objective evidence demonstrates that a loss event has occurred after the initial
recognition of the asset, and that the loss event has an impact on the future
cash flows of the asset that can be estimated reliably.
The Company considers evidence of impairment at both a specific asset and
collective level. All individually significant financial assets are assessed for
specific impairment. All significant assets found not to be specifically
impaired are then collectively assessed for any impairment that has been
incurred but not yet identified. Assets that are not individually significant
are then collectively assessed for impairment by grouping together financial
assets (carried at amortised cost) with similar risk characteristics.
Objective evidence that financial assets are impaired include default or
delinquency by the counterparty, extending or changing repayment terms,
indications that a counterparty may go into bankruptcy, or other observable data
relating to the group of assets such as adverse changes in the payment status of
counterparties, or economic conditions that correlate with defaults in the
group.
In assessing collective impairment the Company uses analysis of historical
trends to identify the probability of default, timing of recoveries and the
amount of loss incurred, adjusted for management's judgement as to whether
current economic conditions are such that actual losses are likely to be greater
or less than suggested by historical analysis. Default rates, loss rates and the
expected timing of future recoveries are regularly benchmarked against actual
outcomes to ensure that they remain appropriate.
Impairment losses on assets carried at amortised cost are measured as the
difference between the carrying amount of the financial asset and the present
value of the estimated cash flows discounted at the assets' original effective
yield rate. Losses are recognised in the income statement and reflected against
the assets carrying value.
When a subsequent event causes the amount of expected impairment losses to
decrease, the impairment loss is reversed through the income statement.
(j) Impairment of non-financial assets
The carrying amounts of the Company's non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If
any such indication exists then the asset's recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. A cash-generating unit is
the smallest identifiable asset group that generates cash flows that largely are
independent from other assets and groups. Impairment losses are recognised in
the income statement.
The recoverable amount of an asset is the greater of its value in use and its
fair value less costs to resell. In assessing value in use, the estimated future
cash flows are discounted to their present value. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
(k) Provisions
A provision is recognised if, as a result of a past event, the Company has a
present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of cost of
funds and, where appropriate, the risks specific to the liability.
(l) Fees and commissions
Fees and commission income that relate mainly to transaction and service fees
are recognised as the related services are performed. Fees and commission
expenses that relate mainly to transaction and service fees are expensed as
incurred.
Arrangement fees for commercial property finance deals and home purchase
plans are amortised over the expected life of the transaction.
(m) Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in the income statement except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on laws that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
(n) Lease payments made
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised as an integral part of the total lease expense, over the term of the
lease.
(o) Employee benefits
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement when they are due.
Short-term employee benefits, such as salaries, paid absences, and other
benefits, are accounted for on an accruals basis over the period for which
employees have provided services. Bonuses are recognised to the extent that the
Company has a present obligation to its employees that can be measured reliably.
(p) Cash and cash equivalents
Cash and cash equivalents include notes and coins in hand, unrestricted balances
held with central banks and highly liquid financial assets with original
maturities of less than three months, which are subject to insignificant risk of
changes in their fair value, and are used by the Company in the management of
its short-term commitments.
Commodity Murabaha and Wakala transactions, used by the Company for investment
purposes, are not included within cash and cash equivalents. Cash and cash
equivalents are carried at amortised cost in the balance sheet.
(q) Other receivables
Trade and other receivables are stated at their nominal amount (discounted if
material) less impairment losses.
(r) Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares.
(s) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency at
exchange rates ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate ruling at that
date. The foreign currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the beginning of the period
and the amortised cost in foreign currency translated at the exchange rate
ruling at the end of the period. Foreign currency differences arising on
retranslation are recognised in the income statement.
(t) Share based payments
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date on which they are granted. The fair value is
determined by an external valuer using an option pricing model, taking into
account the terms and conditions upon which the options were granted.
The cost of equity-settled transactions is expensed on a straight-line basis,
together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which
the relevant employees become fully entitled to the award ('the vesting date').
The cumulative expense recognised for equity settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Company's best estimate of the number of equity
instruments that will ultimately vest. The income statement charge or credit for
a period represents the movement in cumulative expense recognised as at the
beginning and end of that period.
Any dilutive effect of outstanding options is reflected as additional share
dilution in the computation of earnings per share.
(u) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations relevant
to the Company have been issued, but are not yet effective within the EU and
have not been applied in preparing these financial statements.
* IAS 1* Presentation of financial statements (Amendment). This becomes effective
for accounting periods beginning on or after 1st January 2009. The adoption of
this standard will result in changes in the presentation of the financial
statements and is not expected to have any impact on the financial position of
the Company.
* IAS 23 Borrowing costs (Amendment). The amendment to this standard deals with
the accounting treatment of borrowing costs for certain qualifying assets. The
amendment is effective for accounting periods beginning on or after 1 January
2009 and will have no impact on the Company.
* IAS 27* Investment in subsidiaries (Amendment). This becomes effective for
accounting periods beginning on or after 1st July 2009. The adoption of this
standard will result in no material changes in the presentation of the financial
statements and is not expected to have any impact on the financial position of
the Company.
* IFRS 2 Share based payments (Amendment). In October 2007 the International
Accounting Standards Board proposed an amendment to IFRS 2, dealing with the
recognition of certain cash settled share based payments. This amendment becomes
effective for accounting periods beginning on or after 1 January 2009. The
adoption of this amendment will not have any impact on the Company.
* IFRS 3 Business Combinations (Amendment). In January 2008 the International
Accounting Standards Board proposed an amendment to IFRS, dealing with the
treatment of transactions resulting in a loss of control, the disposal of equity
interests and revising the definition of a business combination. This amendment
became effective for accounting periods beginning on or after 1 July 2009. The
adoption of this amendment will not have any impact on the Company.
* IFRS 8 Operating segments. IFRS 8 becomes effective for accounting periods
beginning on or after 1st January 2009. This standard replaces IAS 14 - Segment
Reporting and prescribes disclosure requirements in relation to the Company's
operating segments, products, services and geographical areas in which it
operates.
* These standards have not yet been endorsed by the EU.
4 Financial risk management
The Company has exposure to the following risks arising from its use of
financial instruments:
* Credit risk
* Liquidity risk
* Market risk
* Operational risk
The Company is not exposed to any material foreign currency risk.
This note presents information about the Company's exposure to each of the above
risks, its objectives, policies and processes for measuring and managing these
risks, and its management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and
oversight of the Company's risk management framework. The Company has
established the Asset and Liability (ALCO), Credit and Risk Committees, which
are responsible for developing and monitoring risk management policies in their
specific areas.
The Company's risk management policies are established to identify and analyse
the risks faced by the Company, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions, products and
services offered. The Company, through its training and management standards
and procedures, aims to develop a disciplined and constructive control
environment, in which all employees understand their roles and obligations.
Risk management controls and procedures are reviewed by Internal Audit, both as
part of the regular audit review programme and through ad-hoc reviews. The
results of these reviews are reported to the Audit Committee.
(a)Credit risk
Credit risk is the risk of financial loss to the Company if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Company's credit risk arises principally from its financing
products but also from other advances to customers and banks.
(i) Management of credit risk
The Board of Directors has delegated responsibility for the management of credit
risk to the Credit Committee. A separate Credit department, reporting to the
Credit Committee is responsible for oversight of the Company's credit risk,
including:
* Formulating credit policies in consultation with other business units, covering
credit assessments, collateral requirements, risk reporting, legal requirements
and compliance with regulatory and statutory requirements.
* Establishing authorisation limits and structures for the approval and renewal of
credit exposure limits.
* Reviewing and assessing credit risk prior to agreements being entered into with
customers.
* Limiting concentrations of exposure to counterparties, countries or sectors and
reviewing these limits.
* Ongoing assessment of exposure and implementation of procedures to reduce this
exposure.
* Providing advice, guidance and specialist skills to all business areas to
promote best practice throughout the Company in the management of credit risk.
Adherence to country and counterparty limits, for amounts due to other banks, is
monitored on an ongoing basis by the Company's Treasury department, with a
detailed review of all limits at least annually. Senior management receives
regular reports on the utilisation of these limits.
(ii) Exposure to credit risk
+------------+--------+-------------+------------+------------+------------+-------------+
| | Note | Commodity | Consumer | Net | Net | Total |
| | | Murabaha | finance | investment | investment | |
| | | and | accounts | in | in home | |
| | | Wakala | and | commercial | purchase | |
| | | receivables | other | property | plan | |
| | | and other | advances | finance | finance | |
| | | advances to | to | | | |
| | | banks | customers | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| 2008 | | GBP | GBP | GBP | GBP | GBP |
+------------+--------+-------------+------------+------------+------------+-------------+
| Investment | 13 | 151,687,736 | - | - | - | 151,687,736 |
| grade | | | | | | |
| financial | | | | | | |
| assets | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Unrated | 14 | - | 8,963,907 | 8,597,893 | 6,980,840 | 24,542,640 |
| financial | | | | | | |
| assets | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Specific | 14 | - | (145,707) | - | - | (145,707) |
| allowances | | | | | | |
| for | | | | | | |
| impairment | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Collective | 14 | - | (939,908) | - | - | (939,908) |
| allowances | | | | | | |
| for | | | | | | |
| impairment | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Carrying | | 151,687,736 | 7,878,292 | 8,597,893 | 6,980,840 | 175,144,761 |
| amount | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| 2007 | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Investment | 13 | 141,768,471 | - | - | - | 141,768,471 |
| grade | | | | | | |
| financial | | | | | | |
| assets | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Unrated | 14 | - | 10,676,312 | 6,091,882 | - | 16,768,194 |
| financial | | | | | | |
| assets | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Specific | 14 | - | (194,309) | - | - | (194,309) |
| allowances | | | | | | |
| for | | | | | | |
| impairment | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Collective | 14 | - | (818,708) | - | - | (818,708) |
| allowances | | | | | | |
| for | | | | | | |
| impairment | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
| Carrying | | 141,768,471 | 9,663,295 | 6,091,882 | - | 157,523,648 |
| amount | | | | | | |
+------------+--------+-------------+------------+------------+------------+-------------+
Investment grade financial assets have a minimum rating of BBB. As at 31
December 2008, the amount of unimpaired balances stood at GBP174,587,812 (2007:
GBP156,933,093). The maximum exposure to credit risk is the carrying amount of
the financial asset receivable balances as at 31 December 2008 and 31 December
2007.
(iii) Write-off policy
The Company writes off a balance (and any related allowances for impairment)
when the Credit department determines that the balance is uncollectible. This
determination is reached after considering information such as the occurrence of
significant changes in the counterparty's financial position such that the
counterparty can no longer pay the obligation, or that proceeds from collateral
will not be sufficient to pay back the entire exposure.
(iv)Collateral
The Company holds collateral against secured advances made to businesses and
individuals in the form of charges over properties, other registered securities
over assets, and guarantees. Estimates of fair value are based on the value of
collateral assessed at the time of financing and are updated on a periodic
basis. The estimated fair value of collateral held against financial assets as
at 31 December 2008 is GBP27.4m (2007: GBP10.1m). None of this amount was held
against impaired assets.
(v) Concentration of credit risk
The Company monitors concentrations of credit risk by sector and geographical
location. An analysis of concentrations of credit risk at the reporting date is
shown below.
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| | Commodity | Consumer | Net investment | Net investment |
| | Murabaha and | finance | in commercial | in home |
| | Wakala | accounts and | property | purchase plan |
| | receivables and | other advances | finance | finance |
| | other advances | to customers | | |
| | to banks | | | |
+---------------+---------------------------+-----------------------+-----------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Concentration | | | | | | | | |
| by sector: | | | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Individuals | - | - | 7,777,873 | 9,522,801 | 3,530,190 | 1,931,552 | 6,980,840 | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Corporate | - | - | 100,419 | 140,494 | 5,067,703 | 4,160,330 | - | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Bank | 151,687,736 | 141,768,471 | - | - | - | - | - | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| | 151,687,736 | 141,768,471 | 7,878,292 | 9,663,295 | 8,597,893 | 6,091,882 | 6,980,840 | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Concentration | | | | | | | | |
| by location: | | | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| United | 8,758,617 | 36,050,280 | 7,878,292 | 9,663,295 | 8,597,893 | 6,091,882 | 6,980,840 | - |
| Kingdom | | | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Europe | 65,248,731 | 64,712,978 | - | - | - | - | - | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| Middle | 77,680,388 | 35,105,213 | - | - | - | - | - | - |
| East | | | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| South | - | 5,900,000 | - | - | - | - | - | - |
| East | | | | | | | | |
| Asia | | | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
| | 151,687,736 | 141,768,471 | 7,878,292 | 9,663,295 | 8,597,893 | 6,091,882 | 6,980,840 | - |
+---------------+-------------+-------------+-----------+-----------+-----------+-----------+-----------+--------+
The asset quality underlying the commercial property finance and home purchase
plan portfolios is high, with financing decisions based on clear affordability
assessments and prudent finance to value (FTV) ratios. As at 31 December 2008
none of the facilities within these secured finance portfolios were in arrears.
(b) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting
obligations arising from its financial liabilities. The Company's approach to
managing liquidity is to ensure that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Company's
reputation.
The Treasury department is responsible for monitoring the liquidity profile of
financial assets and liabilities and preparing details of projected cash flows
arising from projected future business. The Treasury department maintains a
portfolio of short-term liquid assets, made up of cash on demand and short term
Commodity Murabaha and Wakala transactions to ensure that sufficient liquidity
is maintained. All liquidity policies and procedures are subject to review and
approval by ALCO.
The key measure used by the Company for managing liquidity risk is the
comparison of liquid assets and maturity of assets against customer deposits.
This analysis is completed on a daily basis and reports are submitted for review
to ALCO. A similar calculation of mismatches is submitted to the Financial
Services Authority (the 'FSA') as part of the Company's quarterly regulatory
reporting.
Residual contractual maturities of financial liabilities
The table below shows the undiscounted cash flows on the Company's financial
liabilities on the basis of their earliest possible contractual maturity.
However, based on behavioural experience demand deposits from customers are
expected to maintain an increasing balance.
(b) Liquidity risk (continued)
+-----------+--------+-------------+-------------+-------------+------------+------------+
| 31 | Note | Carrying | Gross | Less | 1 - 3 | 3 |
| December | | amount | maturity | than 1 | months | months |
| 2008 | | GBP | outflow | month | GBP | - |
| | | | GBP | GBP | | 1 year |
| | | | | | | GBP |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| Deposits | 18 | 5,094,119 | 5,096,561 | 5,096,561 | - | - |
| from | | | | | | |
| banks | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| Deposits | 19 | 153,280,754 | 154,167,388 | 94,232,980 | 45,899,805 | 14,034,603 |
| from | | | | | | |
| customers | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| | | 158,374,873 | 159,263,949 | 99,329,541 | 45,899,805 | 14,034,603 |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| 31 | | | | | | |
| December | | | | | | |
| 2007 | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| Deposits | 18 | 2,498,304 | 2,542,208 | 14,820 | 2,278,432 | 248,956 |
| from | | | | | | |
| banks | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| Deposits | 19 | 134,640,612 | 135,586,802 | 111,124,101 | 14,687,992 | 9,774,710 |
| from | | | | | | |
| customers | | | | | | |
+-----------+--------+-------------+-------------+-------------+------------+------------+
| | | 137,138,916 | 138,129,010 | 111,138,921 | 16,966,424 | 10,023,666 |
+-----------+--------+-------------+-------------+-------------+------------+------------+
A breakdown of the Company's Commodity Murabaha and Wakala receivables by
maturity date is shown in note 13.
(c) Market risk
Market risk is the risk that changes in market prices will affect the Company's
income. The objective of market risk management is to manage and control
exposures within acceptable parameters, whilst optimising returns. Given the
Company's current profile of financial instruments, the principle exposure is
the risk of loss arising from fluctuations in the future cash flows or fair
values of these financial instruments because of a change in achievable
rates.This is managed principally through monitoring gaps between effective
profit and rental rates and reviewing approved rates and bands at regular
re-pricing meetings:
* Profit rates for Commodity Murabaha and Wakala receivables are agreed with the
counterparty bank at the time of each transaction and the profit mark-up and
effective yield rate is consequently fixed for the duration of the contract.
Risk exposure is managed by reviewing the maturity profiles of transactions
entered into.
* Effective rates applied to new consumer finance transactions are agreed on a
monthly basis by ALCO and the profit mark-up will then be fixed for each
individual transaction for the agreed deferred payment term.
* Rentals for longer term commercial property financing and home purchase plans
are benchmarked against a market measure, in agreement with the Company's
Sharia'a Supervisory Committee, and assessed every six months, subject to
minimum rent levels.
* Profit rates payable on Mudaraba customer deposit accounts are calculated at
each month-end in line with the profit allocation model and the customer terms
and conditions. Profit rates payable on Murabaha and Wakala deposits are agreed
with the customer at the time of each transaction and the profit mark-up and
effective yield rate is consequently fixed for the duration of the contract.
Risk exposure is managed by reviewing the maturity profiles of transactions
entered into.
All rates and re-pricings are reviewed and agreed at ALCO, which is principally
responsible for monitoring market risk. ALCO will also review sensitivities of
the Company's assets and liabilities to standard and non-standard changes in
achievable effective rates. Standard scenarios that are considered on a monthly
basis include a 1.00% or 0.50% rise or fall in effective average rates. An
analysis of the Company's income statement sensitivity to an increase or
decrease in effective rates (assuming no asymmetrical movement and a constant
balance sheet position) is as follows:
+------------------------------+------------+------------+------------+------------+
| | 1.00% | 1.00% | 0.50% | 0.50% |
| | parallel | parallel | parallel | parallel |
| | increase | decrease | increase | decrease |
+------------------------------+------------+------------+------------+------------+
| | | | | |
+------------------------------+------------+------------+------------+------------+
| 31 December 2008 | 756,715 | (756,715) | 378,358 | (378,358) |
+------------------------------+------------+------------+------------+------------+
| | | | | |
+------------------------------+------------+------------+------------+------------+
| 31 December 2007 | 702,587 | (702,587) | 351,294 | (351,294) |
+------------------------------+------------+------------+------------+------------+
(d)Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide
variety of causes associated with the Company's processes, personnel, technology
and infrastructure, and from external factors other than credit, liquidity and
market risks.
The Company's objective in managing operational risk is to implement an
integrated internal control structure that supports process efficiency and
customer needs, whilst effectively reducing the risk of error and financial loss
in a cost effective manner. The overall operational risk framework is set by the
Board of Directors. Primary responsibility for the development and
implementation of internal controls is assigned to senior management within each
business department, with the assistance of the Risk department. Adherence to
operational risk policies and procedures is monitored regularly by the Risk
Committee, through the use of key risk indicators, control related metrics and
reports from the Risk department.
(e) Capital management
The Company's capital requirements are set by the FSA and monitored by the
Board. Regulatory capital is analysed into two tiers:
* Tier 1 capital, which includes ordinary share capital, share premium and
retained earnings, less intangible assets.
* Tier 2 capital, which includes collective impairment allowances, restricted to a
maximum amount.
The level of total capital is matched against risk-weighted assets which are
determined according to specified requirements that seek to reflect the varying
levels of risk attached to assets. The Company has put in place processes to
monitor and manage capital adequacy.
The Company's regulatory capital position as at 31 December was as follows:
+-----------------------------------------------+---------+------------+----+-------------+
| | Note | 2008 | | 2007 |
| | | GBP | | GBP |
+-----------------------------------------------+---------+------------+----+-------------+
| Tier 1 capital | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| Total equity | | 18,943,536 | | 24,825,309 |
+-----------------------------------------------+---------+------------+----+-------------+
| Less intangible assets | | (578,713) | | (1,262,231) |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| | | 18,364,823 | | 23,563,078 |
+-----------------------------------------------+---------+------------+----+-------------+
| Tier 2 capital | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| Collective allowances for impairment | | 744,027 | | 632,109 |
| (restricted to a maximum amount) | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| Total regulatory capital | (a) | 19,108,850 | | 24,195,187 |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| Risk weighted assets | (b) | 59,522,138 | | 50,568,758 |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| Total regulatory capital expressed as a | (a)/(b) | 32.10% | | 47.85% |
| percentage of risk weighted assets | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
| | | | | |
+-----------------------------------------------+---------+------------+----+-------------+
The Company adopted the EU Capital Requirements Directive, implementing the
Basel II framework for calculating minimum capital requirements, on 1 January
2008. There was no significant impact on the Company's capital ratios from
adopting the Basel II capital requirements.
5Critical accounting policies
Management discussed with the Audit Committee the development, selection and
disclosure of the Company's critical accounting policies and estimates, and the
application of these policies and estimates. The critical accounting policies
are set out below.
Allowance for credit losses
Assets accounted for at amortised cost are evaluated for impairment on the basis
described in accounting policy (i).
The specific counterparty component of the total allowances for impairment
applies to claims evaluated individually for impairment and is based upon
management's best estimate of the present value of the cash flows that are
expected to be received. In estimating these cash flows, management makes
judgements about each counterparty's financial situation and the realisable
value of any underlying collateral. Each impaired asset is assessed on its
merits, and the estimates of cash flows considered recoverable are approved by
the Credit Risk function.
Collectively assessed impairment allowances cover credit losses inherent in
portfolios of claims with similar economic characteristics when there is
objective evidence to suggest that they contain impaired claims, but the
individual impaired items cannot yet be identified. In assessing the need for
collective loss allowances, management considers factors such as credit quality,
portfolio size, concentrations, and economic factors. In order to estimate the
required allowance, assumptions are made to define the way inherent losses are
modelled and to determine the required input parameters, based on historical
experience and current economic conditions.
Financial Services Compensation Scheme
Based on its share of protected deposits, the Bank, in common with all regulated
UK deposit takers, pays levies to the Financial Services Compensation Scheme
(FSCS) to enable the FSCS to meet claims against it. The FSCS levy consists of
two parts - a management expenses levy and a compensation levy. The management
expenses levy covers the costs of running the scheme and the compensation levy
covers the amount of compensation the scheme pays, net of any recoveries it
makes using the rights that have been assigned to it. During 2008, claims were
triggered against the FSCS arising from defaults by the following deposit
takers:
* Bradford and Bingley plc (September 2008);
* Kaupthing Singer and Friedlander's internet deposit business ('Kaupthing Edge')
(October 2008);
* Heritable Bank's deposit business, a subsidiary of Landsbanki Islands hf
(October 2008);
* Icesave, the UK branch of Landsbanki Islands hf (October 2008); and
* London Scottish Bank plc (December 2008).
The FSCS has met the claims by way of loans received from the Bank of England
and HM Treasury. The FSCS has, in turn, acquired the rights to the realisation
of the assets of these banks. The FSCS is liable to pay interest on the loans
from the Bank of England. The FSCS may have a further liability if there
are insufficient funds available from the realisation of the assets of the banks
to fully repay the respective Bank of England loans.
As a result of notifications it has received from the Financial Services
Authority, the Bank has recognised in this year's results a provision (within
Other liabilities) for a levy of GBP224,000 for the scheme years 2008/09 and
2009/10, which is calculated with reference to the Protected Deposits held at 31
December 2007 and 31 December 2008 respectively. This represents the Bank's
current best estimate of the amount that will be payable. At the date of signing
these accounts there remains uncertainty over the amount provided given that the
scheme years run to 31 March 2009 and 31 March 2010 respectively and additional
levies for these scheme years may be raised up to those dates. The amount
provided does not take account of any compensation levies which may arise from
any ultimate payout on claims.
6 Net income from Islamic financing transactions
+----------------------------------------+---+---------+-------------+-----+----------+---+
| | | | 2008 | | 2007 |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Income received | | | GBP | | GBP |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Commodity Murabaha and Wakala | | | 6,860,642 | | 6,658,628 |
| transactions | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Consumer finance accounts | | | 800,600 | | 793,861 |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Commercial property finance | | | 597,107 | | 351,801 |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Home purchase plan finance | | | 48,948 | | - |
+----------------------------------------+---+---------+-------------+-----+--------------+
| | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Total income received from Islamic | | | 8,307,297 | | 7,804,290 |
| financing transactions | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Returns payable | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Deposits from banks | | | (202,987) | | (225,851) |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Deposits from customers | | | (3,608,529) | | (2,983,020) |
+----------------------------------------+---+---------+-------------+-----+--------------+
| | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Total returns payable to banks and | | | (3,811,516) | | (3,208,871) |
| customers | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| Net income from Islamic financing | | | 4,495,781 | | 4,595,419 |
| transactions | | | | | |
+----------------------------------------+---+---------+-------------+-----+--------------+
| | | | | | |
+----------------------------------------+---+---------+-------------+-----+----------+---+
7 Net fee and commission income
+---------------------------------------+---+----------+----------+-----+-----------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+----------+----------+-----+-----------+
| Fee and commission income | | | GBP | | GBP |
| | | | | | |
+---------------------------------------+---+----------+----------+-----+-----------+
| Retail customer banking fees | | | 446,779 | | 164,854 |
+---------------------------------------+---+----------+----------+-----+-----------+
| Home finance introduction fees | | | 4,696 | | 28,324 |
+---------------------------------------+---+----------+----------+-----+-----------+
| Arrangement fees | | | 18,711 | | 7,300 |
+---------------------------------------+---+----------+----------+-----+-----------+
| ATM commission | | | 31,037 | | 31,910 |
+---------------------------------------+---+----------+----------+-----+-----------+
| Other | | | 25,989 | | 7,674 |
+---------------------------------------+---+----------+----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+----------+----------+-----+-----------+
| Total fee and commission income | | | 527,212 | | 240,062 |
+---------------------------------------+---+----------+----------+-----+-----------+
| Fee and commission expense | | | | | |
+---------------------------------------+---+----------+----------+-----+-----------+
| Electronic transaction fees | | | (17,343) | | (19,005) |
+---------------------------------------+---+----------+----------+-----+-----------+
| ATM interchange fees | | | (77,440) | | (119,614) |
+---------------------------------------+---+----------+----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+----------+----------+-----+-----------+
| Total fee and commission expense | | | (94,783) | | (138,619) |
+---------------------------------------+---+----------+----------+-----+-----------+
| Net fee and commission income | | | 432,429 | | 101,443 |
+---------------------------------------+---+----------+----------+-----+-----------+
8 Auditors' remuneration
Included within operating losses are the following amounts payable to the
auditors:
+----------------------------------------+---+---------+----------+-----+----------+
| | | | 2008 | | 2007 |
+----------------------------------------+---+---------+----------+-----+----------+
| | | | GBP | | GBP |
+----------------------------------------+---+---------+----------+-----+----------+
| Amounts receivable by the auditors and their | | | |
| associates in respect of: | | | |
+------------------------------------------------------+----------+-----+----------+
| | | | |
+------------------------------------------------------+----------+-----+----------+
| Audit of financial statements pursuant to | 74,000 | | 98,538 |
| legislation | | | |
+------------------------------------------------------+----------+-----+----------+
| Other services relating to taxation | 74,258 | | 239,492 |
+------------------------------------------------------+----------+-----+----------+
| All other services | 21,656 | | 8,966 |
+------------------------------------------------------+----------+-----+----------+
| | | | |
+------------------------------------------------------+----------+-----+----------+
| Total | 169,914 | | 346,996 |
+----------------------------------------+---+---------+----------+-----+----------+
9 Personnel expenses
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | GBP | | GBP |
| | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Wages and salaries | | | 4,323,265 | | 4,344,913 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Social security costs | | | 384,267 | | 713,840 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Contributions to defined contribution | | | 83,003 | | 50,308 |
| pension plans | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Share based payments charge | | | 28,927 | | 11,026 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Other staff costs | | | 12,516 | | 18,289 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Total | | | 4,831,978 | | 5,138,376 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| The average number of persons | | | 147 | | 175 |
| employed by the Company during the | | | | | |
| year was: | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
10 Directors' emoluments
+---------------------------------------+---+-----------+----------+-----+----------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+-----------+----------+-----+----------+
| | | | GBP | | GBP |
+---------------------------------------+---+-----------+----------+-----+----------+
| | | | | | |
+---------------------------------------+---+-----------+----------+-----+----------+
| Directors' emoluments | | | 531,893 | | 482,979 |
+---------------------------------------+---+-----------+----------+-----+----------+
| Company contributions to pension | | | 24,500 | | 24,225 |
| plans | | | | | |
+---------------------------------------+---+-----------+----------+-----+----------+
| | | | | | |
+---------------------------------------+---+-----------+----------+-----+----------+
| Total | | | 556,393 | | 507,204 |
+---------------------------------------+---+-----------+----------+-----+----------+
| | | | | | |
+---------------------------------------+---+-----------+----------+-----+----------+
The Company made contributions to money purchase pension plans in respect of 2
directors (2007: 2).
The aggregate of emoluments during 2008 of the highest paid director was
GBP225,000 (2007: GBP167,456) and Company pension contributions of GBP15,000
(2007: GBP14,900) were made on his behalf.
11Income tax expense
There were no taxable profits or recoverable losses for the year ended 31
December 2008 (2007: GBPnil) and accordingly the Company has not provided for a
tax charge or a tax debtor.
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| | | | 2008 | | 2007 |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| | | | GBP | | GBP |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Reconciliation of effective tax rate | | | | | |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Loss before tax | | | (5,910,700) | | (6,917,004) |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Income tax at UK corporation tax rate 28.5% (2007: | | | (1,684,550) | | (2,075,101) |
| 30%) | | | | | |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Non deductible expenses | | | 21,485 | | 15,099 |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Depreciation in excess of capital allowances on | | | 261,170 | | 389,646 |
| which deferred tax not recognised | | | | | |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| Unutilised tax losses | | | 1,401,895 | | 1,670,356 |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| | | | - | | - |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+--------------+--------------+------+--------------+
Deferred tax assets have not been recognised in respect of the following items:
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Capital allowances | | | 1,437,613 | | 1,147,840 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Tax losses | | | 7,555,394 | | 6,156,185 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | 8,993,007 | | 7,304,025 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
In respect of the recognition of deferred tax assets, for the purposes of
applying the requirements of IAS 12 ('Income Taxes'), it has been considered
that the Company is not currently at a sufficiently advanced stage in its
development to confidently assert future offsetting tax liabilities. Capital
allowances to be claimed are being finalised and therefore the level of the
asset shown above may change.
The corporation tax rate used to calculate potential deferred tax assets was 28%
(2007: 28%).
12 Cash and cash equivalents
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | GBP | | GBP |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Cash | | | 546,953 | | 509,769 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Other advances to banks | | | 2,067,531 | | 5,154,737 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Total cash and cash equivalents | | | 2,614,484 | | 5,664,506 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
13Commodity Murabaha and Wakala receivables and other advances to banks
+---------------------------------------+---+-----------+-------------+-----+-------------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| | | | GBP | | GBP |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Repayable on demand | | | 2,067,531 | | 5,154,737 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| 3 months or less but not repayable on | | | 143,756,349 | | 136,114,234 |
| demand | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| 1 year or less but over 3 months | | | 5,863,856 | | 499,500 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Total Commodity Murabaha and Wakala | | | 151,687,736 | | 141,768,471 |
| receivables and other advances to | | | | | |
| banks | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
A breakdown of Commodity Murabaha and Wakala receivables and other advances to
bank by geographic regions is shown in note 4. Balances maturing in 1 year or
less but over 3 months include a balance of GBP691,085 (2007: GBP499,500)
representing a repayable security deposit held by a bank that has issued a
guarantee to cover the Company's future customer card transactions with
MasterCard. The deposit does not earn a return.
14 Advances to customers
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| | Gross | Impairment | Carrying | Gross | Impairment | Carrying |
| | amount | allowance | | amount | allowance | |
| | | | amount | | | amount |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Retail customers: | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Consumer finance accounts | 8,863,488 | (1,085,615) | 7,777,873 | 10,535,818 | (1,013,017) | 9,522,801 |
| and other advances to | | | | | | |
| customers | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Corporate customers: | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Consumer finance accounts | 100,419 | - | 100,419 | 140,494 | - | 140,494 |
| and other advances to | | | | | | |
| customers | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Total consumer finance | 8,963,907 | (1,085,615) | 7,878,292 | 10,676,312 | (1,013,017) | 9,663,295 |
| accounts and other | | | | | | |
| advances to customers | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Net investment in | 8,597,893 | - | 8,597,893 | 6,091,882 | - | 6,091,882 |
| commercial property | | | | | | |
| finance | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
| Net investment in home | 6,980,840 | - | 6,980,840 | - | - | - |
| purchase plans | | | | | | |
+---------------------------+-----------+-------------+-----------+------------+-------------+-----------+
+----------------------------------------+---+---------+-----------+-----+-----------+
| | | | 2008 | | 2007 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Specific allowances for impairment | | | GBP | | GBP |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 1 January | | | 194,309 | | 357,081 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Transfer to collective allowances | | | - | | (302,938) |
| for impairment | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Charge for the year | | | 64,223 | | 140,166 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Amounts written off during the year | | | (112,825) | | - |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 31 December | | | 145,707 | | 194,309 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Collective allowances for impairment | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 1 January | | | 818,708 | | 140,076 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Transfer from specific allowances | | | - | | 302,938 |
| for impairment | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Charge for the year | | | 261,748 | | 503,905 |
| Amounts written off during the year | | | (140,548) | | (128,211) |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 31 December | | | 939,908 | | 818,708 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Total allowances for impairment | | | | | |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 1 January | | | 1,013,017 | | 497,157 |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Charge for the year | | | 325,971 | | 644,071 |
| Amounts written off during the year | | | (253,373) | | (128,211) |
+----------------------------------------+---+---------+-----------+-----+-----------+
| Balance at 31 December | | | 1,085,615 | | 1,013,017 |
+----------------------------------------+---+---------+-----------+-----+-----------+
This impairment allowance relates to consumer finance accounts, home purchase
plan finance accounts and other advances to retail customers. Following a review
of the impairment calculation in the previous year, a transfer was made from the
specific allowance to the collective allowance, as shown in the table above.
The gross investment in commercial property finance comprises:
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Less than one year | | | 848,175 | | 592,391 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Between one and five years | | | 3,317,679 | | 2,397,607 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| More than five years | | | 12,778,920 | | 9,516,134 |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Total gross investment in commercial | | | 16,944,774 | | 12,506,132 |
| property finance | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Unearned future rental on commercial | | | (8,346,881) | | (6,414,250) |
| property finance | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
| Net investment in commercial property | | | 8,597,893 | | 6,091,882 |
| finance | | | | | |
+---------------------------------------+---+-----------+-------------+-----+-------------+
The net investment in commercial property finance comprises:
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Less than one year | | | 207,846 | | 112,867 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Between one and five years | | | 935,654 | | 616,859 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| More than five years | | | 7,454,393 | | 5,362,156 |
+---------------------------------------+---+-----------+-----------+-----+-----------+
| Net investment in commercial property | | | 8,597,893 | | 6,091,882 |
| finance | | | | | |
+---------------------------------------+---+-----------+-----------+-----+-----------+
The gross investment in home purchase plan finance comprises:
+----------------------------------------+---+----------+-------------+-----+----------+
| | | | 2008 | | 2007 |
+----------------------------------------+---+----------+-------------+-----+----------+
| | | | GBP | | GBP |
+----------------------------------------+---+----------+-------------+-----+----------+
| Less than one year | | | 552,619 | | - |
+----------------------------------------+---+----------+-------------+-----+----------+
| Between one and five years | | | 2,210,475 | | - |
+----------------------------------------+---+----------+-------------+-----+----------+
| More than five years | | | 9,894,842 | | - |
+----------------------------------------+---+----------+-------------+-----+----------+
| Total gross investment in home | | | 12,657,936 | | - |
| purchase plan finance | | | | | |
+----------------------------------------+---+----------+-------------+-----+----------+
| Unearned future rental in home | | | (5,677,096) | | - |
| purchase plan finance | | | | | |
+----------------------------------------+---+----------+-------------+-----+----------+
| Net investment in home purchase plan | | | 6,980,840 | | - |
| finance | | | | | |
+----------------------------------------+---+----------+-------------+-----+----------+
The net investment in home purchase plan finance comprises:
+---------------------------------------+---+-----------+-----------+-----+----------+
| Less than one year | | | 159,486 | | - |
+---------------------------------------+---+-----------+-----------+-----+----------+
| Between one and five years | | | 736,042 | | - |
+---------------------------------------+---+-----------+-----------+-----+----------+
| More than five years | | | 6,085,312 | | - |
+---------------------------------------+---+-----------+-----------+-----+----------+
| Net investment in home purchase plan | | | 6,980,840 | | - |
| finance | | | | | |
+---------------------------------------+---+-----------+-----------+-----+----------+
As at 31 December 2008 there is no material difference between the carrying
value and the fair value of any financial assets or liabilities (2007: GBPnil).
15Property and equipment
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | Computer | | Office | | Leasehold | | Fixtures & | | Total |
| | Equipment | | equipment | | Improvements | | fittings | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Cost | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 1 January 2008 | 1,357,725 | | 97,967 | | 4,079,098 | | 321,747 | | 5,856,537 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Additions | 396,866 | | 25,910 | | 165,972 | | 8,649 | | 597,397 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 31 December 2008 | 1,754,591 | | 123,877 | | 4,245,070 | | 330,396 | | 6,453,934 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Depreciation | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 1 January 2008 | 1,126,128 | | 52,127 | | 1,073,164 | | 161,763 | | 2,413,182 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Depreciation charge for the | 212,032 | | 22,256 | | 475,092 | | 65,627 | | 775,007 |
| year | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 31 December 2008 | 1,338,160 | | 74,383 | | 1,548,256 | | 227,390 | | 3,188,189 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Net book value | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| At 31 December 2008 | 416,431 | | 49,494 | | 2,696,814 | | 103,006 | | 3,265,745 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Cost | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 1 January 2007 | 1,251,615 | | 87,617 | | 4,035,562 | | 257,405 | | 5,632,199 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Additions | 106,110 | | 10,350 | | 43,536 | | 64,342 | | 224,338 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 31 December 2007 | 1,357,725 | | 97,967 | | 4,079,098 | | 321,747 | | 5,856,537 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Depreciation | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 1 January 2007 | 814,872 | | 34,578 | | 724,760 | | 92,619 | | 1,666,829 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Depreciation charge for the | 311,256 | | 17,549 | | 348,404 | | 69,144 | | 746,353 |
| year | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Balance at 31 December 2007 | 1,126,128 | | 52,127 | | 1,073,164 | | 161,763 | | 2,413,182 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| Net book value | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| At 31 December 2007 | 231,597 | | 45,840 | | 3,005,934 | | 159,984 | | 3,443,355 |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
| | | | | | | | | | |
+---------------------------------+-------------+--+-------------+--+--------------+--+-------------+--+-------------+
The Company leases its branch and office premises under operating leases. The
leases typically run for 10 years, with options to renew the lease after that
date. Lease payments are reviewed after periods stipulated in the agreements to
reflect market rentals.
16Intangible assets
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | Computer | | Purchased | | Total |
| | licences | | & developed | | |
| | | | software | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | GBP | | GBP | | GBP |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Cost | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 1 January 2008 | 684,037 | | 3,940,942 | | 4,624,979 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Additions | 34,483 | | 170,785 | | 205,268 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 31 December 2008 | 718,520 | | 4,111,727 | | 4,830,247 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Amortisation | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 1 January 2008 | 504,489 | | 2,858,259 | | 3,362,748 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Amortisation charge for the year | 150,597 | | 738,189 | | 888,786 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 31 December 2008 | 655,086 | | 3,596,448 | | 4,251,534 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Net book value | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| At 31 December 2008 | 63,434 | | 515,279 | | 578,713 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Cost | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 1 January 2007 | 681,808 | | 3,469,138 | | 4,150,946 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Additions | 2,229 | | 471,804 | | 474,033 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 31 December 2007 | 684,037 | | 3,940,942 | | 4,624,979 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Amortisation | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 1 January 2007 | 359,698 | | 1,896,976 | | 2,256,674 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Amortisation charge for the year | 144,791 | | 961,283 | | 1,106,074 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| Balance at 31 December 2007 | 504,489 | | 2,858,259 | | 3,362,748 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
| Net book value | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| At 31 December 2007 | 179,548 | | 1,082,683 | | 1,262,231 |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
| | | | | | |
+--------------------------------------------------------------+--------------+--+-------------+--+-------------+
17Other assets
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| | | | 2008 | | 2007 |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| | | | GBP | | GBP |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| | | | | | |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| VAT recoverable | | | 190,089 | | 1,502,964 |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| Accrued income | | | 238,284 | | 281,490 |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| Prepayments | | | 834,755 | | 413,370 |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| Total | | | 1,263,128 | | 2,197,824 |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
| | | | | | |
+-----------------------------------------------------+----+------------+--------------+------+--------------+
There are no receivables within other assets that are expected to be recovered
in more than 12 months (2007: GBPnil).
18 Deposits from banks
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | 2008 | | 2007 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | GBP | | GBP |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Repayable on demand | | | 94,119 | | 14,820 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| 3 months or less but not repayable on demand | | | 5,000,000 | | 2,247,752 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| 1 year or less but over 3 months | | | - | | 235,732 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Total deposits from banks | | | 5,094,119 | | 2,498,304 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Comprising: | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Non profit sharing accounts | | | 94,119 | | 6,000 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Profit sharing / paying accounts | | | 5,000,000 | | 2,492,304 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Total deposits from banks | | | 5,094,119 | | 2,498,304 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
19 Deposits from customers
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| | | | 2008 | | 2007 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| | | | GBP | | GBP |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Repayable on demand | | | 94,232,981 | | 77,626,003 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| 3 months or less but not repayable on demand | | | 45,392,618 | | 47,586,495 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| 1 year or less but over 3 months | | | 13,655,155 | | 9,428,114 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Total deposits from customers | | | 153,280,754 | | 134,640,612 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Comprising: | | | | | |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Non profit sharing | | | 24,755,496 | | 27,094,505 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Profit sharing / paying accounts | | | 128,525,258 | | 107,546,107 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
| Total deposits from customers | | | 153,280,754 | | 134,640,612 |
+----------------------------------------------------+----+---------------+--------------+-----+---------------+
20Other liabilities
+---------------------------------------+---+-----------+-----------+----+------------+
| | | | 2008 | | 2007 |
+---------------------------------------+---+-----------+-----------+----+------------+
| | | | GBP | | GBP |
+---------------------------------------+---+-----------+-----------+----+------------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+----+------------+
| Returns payable to customers | | | 419,565 | | 374,032 |
+---------------------------------------+---+-----------+-----------+----+------------+
| Trade payables | | | 646,183 | | 534,118 |
+---------------------------------------+---+-----------+-----------+----+------------+
| Social security and income tax | | | 423,530 | | 114,926 |
+---------------------------------------+---+-----------+-----------+----+------------+
| Accruals | | | 975,033 | | 1,157,599 |
+---------------------------------------+---+-----------+-----------+----+------------+
| Other creditors | | | 1,016,580 | | 791,927 |
+---------------------------------------+---+-----------+-----------+----+------------+
| Total | | | 3,480,891 | | 2,972,602 |
+---------------------------------------+---+-----------+-----------+----+------------+
| | | | | | |
+---------------------------------------+---+-----------+-----------+----+------------+
Included within accruals is a balance of GBP40,000 payable over the remaining
lease term of 6 years relating to refurbishment of a branch property
(2007: GBP56,000). This is paid in equal annual instalments with GBP32,000
payable in more than 12 months.
21 Operating leases
Non-cancellable operating lease rentals are payable as follows:
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | 2008 | | 2007 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | GBP | | GBP |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Less than one year | | | 441,805 | | 439,305 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Between one and five years | | | 2,221,523 | | 2,219,023 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| More than five years | | | 1,401,071 | | 1,845,376 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
| Total | | | 4,064,399 | | 4,503,704 |
+----------------------------------------------------+----+---------------+--------------+------+--------------+
During the year GBP476,532 was recognised as an expense in the income statement
in respect of operating leases (2007: GBP506,470).
22 Called up share capital
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| | | | 2008 | | 2007 |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| | | | GBP | | GBP |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| Authorised | | | | | |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| Equity: 725,000,000 (2007: 500,000,000) ordinary shares of | | | 7,250,000 | | 5,000,000 |
| GBP0.01 each | | | | | |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| Allotted, called up and fully paid | | | | | |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| Issued ordinary share capital | | | 4,190,000 | | 4,190,000 |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
| | | | | | |
+----------------------------------------------------------------+--+-----+--------------+------+--------------+
On 19 December 2008, an ordinary resolution was passed at an extraordinary
general meeting increasing the authorised share capital of the Company
from GBP5,000,000 to GBP7,250,000 by the creation of an additional 225,000,000
new Ordinary Shares. On 23 January 2009, an additional 127,470,000 shares were
allotted for consideration of GBP7,488,863 before expenses.
Company Share Option Plan
In the prior year, the Company established an HMRC approved Company Share Option
Plan ('CSOP') under which options to subscribe for the Company's ordinary shares
of 1p each were awarded to certain employees ('Optionholders').
All options have a vesting period of 3 years, and are subject to the achievement
of specific performance criteria.
Options are forfeited if they remain unexercised after a period of more than 10
years from the date of grant. Options are also forfeited if the Optionholder
ceases to hold office with the Company before the options vest, with certain
exceptions ("good leaver" provisions). All options are non-transferable and
there are no cash settlement alternatives.
The following options were granted during the prior year under the CSOP scheme:
+--------------+----------+----------+-----------+-----------+-----------+---------------+
| Number of | Exercise | Date | Date of | Date of | Cancelled | Number of |
| options | price | of grant | first | last | during | options |
| outstanding | | | exercise | exercise | year | outstanding |
| at | | | | | | at |
| 1 January | | | | | | 31 December |
| 2008 | | | | | | 2008 |
+--------------+----------+----------+-----------+-----------+-----------+---------------+
| | | | | | | |
+--------------+----------+----------+-----------+-----------+-----------+---------------+
| 2,982,053 | 9.5p | 5 Nov | 5 Nov | 4 Nov | 1,491,028 | 1,491,020 |
| | | 2007 | 2010 | 2017 | | |
+--------------+----------+----------+-----------+-----------+-----------+---------------+
| 218,421 | 9.5p | 11 Dec | 11 Dec | 10 Dec | 109,211 | 109,210 |
| | | 2007 | 2010 | 2017 | | |
+--------------+----------+----------+-----------+-----------+-----------+---------------+
| | | | | | | |
+--------------+----------+----------+-----------+-----------+-----------+---------------+
During the year, 1,600,239 of the options granted in the prior year were
cancelled due to the non-achievement of performance conditions. No options were
granted during the year and no options were exercised during the current or
prior years.
The fair value of the equity-settled share options granted under the CSOP are
estimated at the date of grant using a Black-Scholes model, taking into account
the terms and conditions upon which the options were granted. There are no
market conditions which need to be taken into account in measuring the fair
value of the share options.
The assumptions used in the model are as follows:
+-----------------------+--------------------------------------------------------+
| Input | Assumption |
| | |
+-----------------------+--------------------------------------------------------+
| Share price | Price at date of grant |
+-----------------------+--------------------------------------------------------+
| Expected share price | 70% (Expected volatility is based on the Company's |
| volatility | historic share price volatility over the previous 260 |
| | days) |
+-----------------------+--------------------------------------------------------+
| Option life | Per scheme rules |
+-----------------------+--------------------------------------------------------+
| Expected dividends | Nil |
+-----------------------+--------------------------------------------------------+
| Risk free rate | 4.9% |
+-----------------------+--------------------------------------------------------+
| | |
+-----------------------+--------------------------------------------------------+
The expense recognised in the income statement for share based payments and the
corresponding movement within reserves during the year was GBP28,927 (2007:
GBP11,026).
23Related parties
Transactions with directors
Mr Shabir Randeree resigned as a director of the Company on 6 February 2008.
During the current and comparative years, Mr Shabir Randeree was a director of
the following companies that held bank accounts with Islamic Bank of Britain Plc
under normal customer terms and conditions:
* As at 6 February 2008, Pelham Incorporated Limited deposit balances amounted to
GBP86,341 (31 December 2007: GBP622,949) and the highest balance during the
period to 6 February 2008 was GBP625,602 (31 December 2007: GBP1,749,887).
Returns paid on these deposits during the period to 6 February 2008 totalled
GBP2,654 (31 December 2007: GBP13,121). As at 31 December 2008, the deposit
balances amounted to GBP561,981.
* As at 6 February 2008, DCD Properties Limited deposit balances amounted to
GBP2,048 (31 December 2007: GBP86,543) and the highest balance during the period
to 6 February 2008 was GBP87,173 (31 December 2007: GBP86,453). Returns paid on
these deposits during the period to 6 February 2008 totalled GBP391 (31 December
2007: GBP2,143). As at 31 December 2008, the deposit balances amounted to
GBP2,033.
* As at 6 February 2008, European Islamic Investment Bank PLC deposit balances
amounted to GBP244,552 (31 December 2007: GBP244,552) and the highest balance
during the period to 6 February 2008 was GBP244,567 (31 December 2007:
GBP244,552). Returns paid on these deposits during the period to 6 February 2008
totalled GBP15 (31 December 2007: GBP4,460). As at 31 December 2008, the deposit
balances amounted to GBPnil.
* During the comparative period, the Company paid DCD London & Mutual PLC GBP48 in
respect of meeting room hire costs. There were no other transactions or amounts
outstanding between the Company and DCD London & Mutual PLC at the end of the
current or comparative periods.
At 31 December 2008, directors of the Company and their immediate relatives
controlled 0.04% of the voting shares of the Company (2007: 7.21%).
Transactions with key management personnel
Key management of the Company are the Board of Directors and senior management.
The compensation of key management personnel including the directors is as
follows:
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| | | | 2008 | | 2007 |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| | | | GBP | | GBP |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| | | | | | |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| Key management emoluments including social | | | 1,376,291 | | 1,064,355 |
| security costs | | | | | |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| Company contributions to pension plans | | | 49,251 | | 38,980 |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| | | | | | |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| Total | | | 1,425,542 | | 1,103,335 |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
| | | | | | |
+--------------------------------------------------+----+----------------+--------------+------+--------------+
In addition to the above compensation, key management personnel held share
options as set out in note 22. During the year, 1,600,239 of the options granted
in the prior year were cancelled due to the non-achievement of performance
conditions. No options were granted during the year and no options were
exercised during the current or prior years.
Deposit balances, operated under standard customer terms and conditions, held by
key management personnel, including directors, totalled GBP242,923 as at 31
December 2008 (2007: GBP116,664). The highest balance during the year was
GBP322,988 (2007: GBP143,305). Total returns paid on these accounts during the
year totalled GBP2,895 (2007: GBP944).
Outstanding consumer finance account balances relating to key management
personnel totalled GBP54,302 as at 31 December 2008 (2007: GBP51,994). Returns
recognised during the year for these accounts were GBP3,553 (2007: GBP2,404).
All consumer finance account facilities taken by key management personnel and
staff were offered in line with standard customer terms and conditions.
24 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated by dividing the
loss for the financial period attributable to equity holders by the weighted
average number of ordinary shares in issue for the year ended 31 December 2008
of 419,000,000 (31 December 2007: 419,000,000).
The Company has established a HMRC approved Company Share Option Plan, "CSOP",
under which options to subscribe for the Company's ordinary shares of 1p each
have been awarded to certain employees. At 31 December 2008, 1,600,230 options
remain outstanding (31 December 2007: 3,200,474). Diluted loss per share is the
same as basic loss per share since the outstanding share options have not been
taken into account due to their anti-dilutive effect. This arises since the
Company is loss making.
25 Capital commitments
There were no capital commitments outstanding as at 31 December 2008 or 31
December 2007.
26 Segmental reporting
The Company has one class of business and all other services provided are
ancillary to this. All business is conducted from the United Kingdom.
27 Assets and liabilities denominated in foreign currency
As at 31 December 2008, assets equivalent to GBP1,131,054 were denominated in US
Dollars and are included within Commodity Murabaha and Wakala receivables and
other advances to banks (2007: GBP3,714,866). At 31 December 2008 assets
equivalent to GBP186,586 were denominated in Euro and are included within
Commodity Murabaha and Wakala receivables and other advances to banks (2007:
GBP1,878).
Customer liabilities of GBP339,796 were denominated in US Dollars (2007:
GBP3,143,377) and GBP184,042 were denominated in Euro (2007: GBP201).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFLFADSUSEED
1 Year Islamic Bank Of Britain Chart |
1 Month Islamic Bank Of Britain Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
