ANN201UAL REPORT5 - Centenary Bank · 2015 5 FINANCIAL DEFINITIONS Core capital Permanent equity in...

Annual Report & Financial Statements l 2015

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ANNUAL REPORT

2015

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TABLE OF CONTENTS

LIST OF ACRONYMS 4

FINANCIAL DEFINITIONS 5

BANK CONTACT INFORMATION 6

CHAIRMAN BOARD OF DIRECTORS’ STATEMENT 11

MANAGING DIRECTOR’S STATEMENT 14

STATEMENT OF CORPORATE GOVERNANCE AND RISK MANAGEMENT 18

SUSTAINABILITY REPORTING STATEMENT 33

FINANCIAL REVIEW 47

AUDITED FINANCIAL STATEMENTS

Directors’ Report 54

Directors’ Responsibility for Financial Reporting 56

Report of Independent Auditors 57

Statement of Comprehensive income 59

Statement of Financial Position 60

Statement of changes in equity 61

Statement of Cash flow 62

Notes to the Financial Statements 63

BANK AND ATM NETWORK 117

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LIST OF ACRONYMS

aBi Agriculture Business Initiative Finance Limited

aBi Trust Agriculture Business Initiative Trust

ACF Agricultural Credit Facility

ALCO Asset and Liability Committee

ATM Automated Teller Machines

BCP Business Continuity Plan

BCM Business Continuity Management

BCMT Business Continuity Management Team

BOD Board of Directors

BOU Bank of Uganda

CBS Core Banking System

EaR Earnings at Risk

EIB EAC MF Loan European Investment Bank East African Community Microfinance Loan

EIB PEFF European Investment Bank Private Enterprise Finance Facility

ERM Enterprise Risk Management

FAMOS Female and Male Operated Small enterprises

HR Human Resource

HRD Human Resource Division

IAS International Accounting Standards

ICT Information and Communication Technology

IFRS International Financial Reporting Standards

ILO Intenational Labour Organisation

KCCA Kampala Capital City Authority

MOGLSD Ministry of Gender, Labour and Social Development

N.S.S.F National Social Security Fund

NPAT Net Profit After Tax

OSH Occupational Safety and Health

P.A.Y.E Pay As You Earn

QMM Quarterly Management Meeting

ROA Return on Assets

ROE Return on Equity

RSA Interest Rate Sensitive Assets

RSL Interest Rate Sensitive Liabilities

SIDI Solidarite’ Internationale pour le Development et l’ investissement

SOCI Statement of Comprehensive Income

SOFP Statement of Financial Position

UECCC Uganda Energy Credit Capitalization Company

WENRECO West Nile Rural Electrification Company


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FINANCIAL DEFINITIONS

Core capital Permanent equity in the form of issued and fully paid-up shares plus all disclosed reserves less goodwill or any intangible assets

Cost-to-income ratio (%) Total operating expenses as a percentage of total income

Credit impairment charge (Shs) The amount by which the period profits are reduced to cater for the effect of non-performing loans for the period

Credit loss impairment [Statement of Financial Position (SOFP)] (Shs)

The amount by which gross loans in the SOFP are written down to cater for non-performing loans

Credit loss ratio (%) Provision for credit losses per the Statement of Comprehensive Income as a percentage of average net loans

Dividend cover (times) Earnings Per Share divided by ordinary dividend per share

Dividend per share ( Shs) Total ordinary dividends declared per share with respect to the year

Earnings per share (cents) Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares

Effective tax rate (%) The income tax charge as a percentage of income before tax excluding income from associates

Lending Ratio Net loans and advances divided by total deposits

Net interest margin (%) Net interest income as a percentage of average earning assets

Non-performing loans [NPL] (Shs) Loans whose servicing is due but the borrower has no money on the account from which to recover the installment(s)

Percentage change in credit loss ratio (%) Ratio of change in the rate of credit loss impairment between time periods

Percentage change in the impairment charge (%)

Ratio of change in the rate of impairment charge between time periods

Profit for the year (Shs) Annual profit attributable to ordinary shareholders and preference shareholders

Return on Assets (%) Earnings as a percentage of average total assets

Return on Equity (%) Earnings as a percentage of average equity

SOFP credit impairment as a % of gross loans and advances (%)

Ratio of SOFP credit impairment to gross loans and advances

Supplementary capital General provisions which are held against future and current unidentified losses that are freely available to meet losses which subsequently materialize, and re-valuation reserves on banking premises, and any other form of capital as may be determined from time to time.

Total capital The sum of core capital and supplementary capital

Total capital adequacy Total capital divided by the sum of total risk weighted assets and total risk weighted contingent claims

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1. Principal place of business and registered office Mapeera House Plot 44-46, Kampala Road P. O. Box 1892, Kampala. Tel: +256 414-251276/7 Toll-free line: 0800 200 555 Fax: +256 414-251273/4 E-mail: [email protected] Website: http://www.centenarybank.co.ug

2. Company Secretary Peninnah Tibagwa Kasule Mapeera House Plot 44-46, Kampala Road P. O. Box 1892, Kampala. 3. Correspondent Banks • Citibank NA New York - US • Deutsche Bank AG - Germany • Deutsche Bank Trust Company – USA• Co-operative Bank of Kenya • Bank of China - South Africa • Citibank N.A – Kenya • Ivory Bank - South Sudan • Sparkase Aachen Bank - US• Sparkase Aachen Bank - Germany 4. Auditors Ernst & Young Certified Public Accountants Ernst & Young House Plot 18, Clement Hill Road Shimoni Office Village P. O. Box 7215, Kampala. Uganda.

BANK CONTACT INFORMATION


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The Bank will continue to deliver sustainable performance and to contribute to the country’s economic development through provision of inclusive customer-focused financial

products and services.

Professor John Ddumba-Ssentamu, Board Chairman.

VISION MISSION AND OWNERSHIP

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“To be the best provider of Financial Services, especially Microfinance.”

“To provide appropriate financial services especially microfinance to all people, particularly in rural areas, in a sustainable manner and in accordance with the law.”

SUPERIOR CUSTOMER SERVICE

LEADERSHIP EXCELLENCE COMPETENCE

INTEGRITY TEAMWORK PROFESSIONALISM

OUR VISION

OUR MISSION STATEMENT

OUR VALUES


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SHAREHOLDERS

The Registered Trustees of Various Catholic Dioceses in Uganda 38.5%

The Registered Trustees of the Uganda Episcopal Conference 31.3%

SIDI 11.6%

Stichting Hivos-Triodos Fonds 18.3%

Individuals 0.3%

Total 100%

OWNERSHIP

• The Catholic Dioceses, which are all independent legal personalities incorporated as Registered Trusteeships, are: Arua, Fort Portal, Gulu, Hoima, Jinja, Kabale, Kasana-Luwero,

Lugazi, Kampala, Kasese, Kotido, Lira, Masaka, Mbarara, Mityana, Moroto, Nebbi, Soroti, and Tororo.

• Registered Trustees of the Uganda Episcopal Conference.

• SIDI - Solidarite’ Internationale pour le Development et l’Investissement (International Solidarity for Development and Investment) based in France, invests in developing countries

through institutions to foster financial inclusion, social and economic development.

• STICHTING HIVOS-TRIODOS FONDS. An investment fund, specializing in investing in mi-crofinance and trade finance, managed by Triodos Investment Management in the Netherlands.

• Individual shareholders (4 individuals).

Solidarite’ Internationale pour le Development et I’Investissement (International Solidarity for Development and Investment)

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Annual Report & Financial Statements l 2015Annual Report & Financial Statements l 2015Annual Report & Financial Statements l 2015

Chairman Board of Directors

Professor John Ddumba-Ssentamu


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On behalf of the Board and myself, it gives me pleasure to present the Bank’s annual report for the year ended 31st December 2015. Centenary Bank registered growth and excellent performance despite the changing trends in banking, increasing cost of doing business, competition and unfavourable macro-economic conditions. We are set to keep the momentum while maintaining financial inclusion at the helm of all we do.

CHAIRMAN’S STATEMENT

The Operating Environment

The key macro economic factors that affected the Bank in 2015 were inflation, rising interest rates and the exchange rates. The re-based annual headline inflation went up to 8.4% from 1.8% in 2014, where the main driver was the volatility in the exchange rate. This had an effect on the industry and in a bid to expand with minimal structural costs, the number of players joining electronic banking increased. Some closed a number of their traditional brick and mortar branches while others merged them. On the contrary, Centenary Bank continued to reach the unbanked through the traditional platforms, as well as the electronic.

Inflation and foreign exchange volatility further led to an increase in the central bank rate from 11% in December 2014 to 17% as at 31st December 2015. The consequent effect in the industry was an increase in lending rates by most players there by impacting private sector borrowing. Centenary Bank also increased its prime-lending rate from 22 to 23%. While some players registered high non-performing rates (NPR) as a result, our Bank’s NPR improved due to enhanced risk management.

During the year, the Uganda shilling also weakened from USD/UGX 2,275 as at 31st December 2014 to USD/UGX 3,375 as at end of 31st December 2015. Although the Bank’s balance sheet is predominantly denominated in Uganda shillings and most expenses are paid in local currency, the weakening shilling led to an increase in dollar denominated operating costs especially Information Technology related. The depreciation of the shilling also led to an increase in the Bank’s capital expenditure due to foreign currency denominated obligations.

Regarding money markets, the interest rates increased in 2015 particularly on short tenors. The 91 day treasury bill average yield for December 2015 closed at 19.9% from 11.3% in December 2014, 182 day treasury bill average yield for December 2015 was 22.8% from 13.5% for December 2014, while the 364 day rate closed at 22.3% in December 2015 compared to 13.8% for December 2014. This increased the Bank’s return on investment in short-term government paper, but also increased the cost of deposits.

For the year under review

THE NUMBERS

91 DAY TREASURY BILL AVERAGE YIELD

19.9%


22.8%


22.3%


CHAIRMAN’S STATEMENT

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I am glad to report that the Bank’s basic earnings per ordinary share increased to Ushs 4,059 from Ushs 2,952 the previous year. The Bank achieved a return on equity (ROE) of 28.3% up from 25.9% the previous year and this is above the Industry ROE of 16.0%. The Bank was adequately capitalised and its total capital adequacy ratio stood at 25.1%, which is above the statutory capital requirement and above the industry average of 21.0%.

The Bank’s good performance and growth momentum demonstrates our ability to deliver substantial and sustained value for our shareholders and other stakeholders.

Corporate Social Investment

Centenary Bank’s policy on sustainability remains unchanged. We continue to invest 1% of the previous year’s net profit to Corporate Social Investment (CSI). The Bank reached millions of people countrywide in four main areas which are; health, education, environment and the social mission of the Church. The youth, small and medium enterprises and women acquired financial literacy skills while numerous environment initiatives at community level were supported. The breast, cervical and prostate cancer awareness drive reached more people through printing and distributing brochures countrywide, holding screening camps and the cancer run. We maintained our partnership with the church and supported many of their activities. Our plan is to do more in 2016.

Corporate Governance

The Board recognises that high standards of corporate governance are important for the effective functioning of the Bank. We remain committed to improvement of our duties as per the Bank’s corporate governance charter which is pivotal in sustenance of strong corporate governance. Two board members Mr. Rene Ehrmann and Mr. Jacco Minnaar left the board in June and September 2015 respectively and the process of replacing them is underway.

Environmental Outlook

The board remains confident about 2016. The economy is expected to grow at about 5.1%, and Centenary Bank is well positioned to leverage on its strength and seize opportunities in the business environment. The Bank will continue to deliver sustainable performance and to contribute to the country’s economic development through provision of inclusive customer-focused financial products and services.

Appreciation

Together with my colleagues on the Board, allow me to register our sincere appreciation and gratitude to all internal and external stakeholders who contributed to Centenary Bank’s performance in 2015. I pay special thanks to our Shareholders, Board Members, Management and the entire staff Centenary Bank family who continue to work tirelessly. I am confident that with your continued support, we shall be able to achieve more.

Professor John Ddumba-SsentamuChairman of the Board

CHAIRMAN’S STATEMENT (continued...)


THE NUMBERS

EARNINGS PER ORDINARY SHARE

Shs 4,059

RETURN ON EQUITY

28.3%



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Managing Director

Fabian Kasi


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I am happy to report that during financial year 2015 we sustained and further improved our performance, despite an environment marked by elevated interest rates, low growth and significant market volatility. Given the developments in the environment, we adopted a balanced approach to growth, profitability and risk management.

During the year, we reviewed our position in the market place with continued improvements in our market share, a large and expanding distribution network and a healthy capital position; thereby creating a platform for robust growth. In the year under review, we are pleased with the bank’s performance which aligns well with our vision and our proven track record of sustained growth. In this context, I would like to share with you some of our key performance highlights for the year:

2015 Performance review

The bank continued its growth momentum in all fronts especially profitability and total assets. This growth has been maintained due to continued focus on strategy execution.

The bank posted a 37.6% growth in profit after tax to close at Shs 101.6 billion compared to Shs 73.8 billion the previous year and representing a market share of 18.8% an increase from 15.2% for the year before. Total operating income went up by 23.5% to reach Shs 354.8 billion up from Shs 287.2 billion the previous year, mainly driven by growth in loans and advances to customers and increase in transaction volumes. Notably, the loans portfolio maintained good quality with NPR of 2.6% compared to industry rate of about 4%. Net interest income rose by 27.2% to Shs 267.7 billion from Shs 210.5 billion the previous year. Total expenses increased by 12.5% to Shs 257.4 billion from Shs 228.8 billion mainly attributed to the bank’s expansion and improvements in staff welfare.

During the year, the balance sheet grew impressively with total assets reaching Shs 1,974.4 billion from Shs 1,635.1 billion the previous year, representing a 20.8% increase and far above the total assets industry growth of 10.9%. This impressive growth was reflected in the net loan book that grew to Shs 1,020.2 billion up from Shs 830.9 billion the previous year, representing a growth of 22.8% which is above the industry growth of 14.6%. Despite this growth, the bank maintained a high quality asset portfolio with an average non-performing loan book of 2.6%, which is below last year’s figure of 2.8% and the bank’s set target of 3%.

Customer deposits grew from Shs 1,175.1 billion to Shs 1,380.2 billion, a growth of 17.5% which is above the industry growth of 12.1%. The bank continued to attract new customers and closed the year with 1,473,958 deposit accounts compared to 1,307,757 the previous year, thereby maintaining the lead position in the industry in terms of customer base. In addition to customer deposits, the other funding sources of the bank are represented by equity which increased by 26.2% to Shs 400.6 billion, up from Shs 317.5 billion the previous year.

MARKET SHARE

18.8%

PROFIT AFTER TAX

37.6%


THE NUMBERS

NET INTEREST INCOME

27.2%

MANAGING DIRECTOR’S STATEMENT



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63 branches

115 locations

157ATMS

DEPOSIT ACCOUNTS

1,473,958

CUSTOMER DEPOSITS

Shs1,380.2 billion

TOTAL ASSETS

Shs1,974.4 billion

NET LOAN BOOK

Shs1,020.2 billion

Business development and innovation

With regard to business development and innovation, the bank closed 2015 with 63 branches and 157 ATMs at 115 locations. Over the past years, the bank has been expanding its footprint in terms of delivery channels. In 2012, we expanded by 2 branches and 11 ATMs. In 2013, we opened 4 Branches and 4 offsite ATMs. In order to consolidate our position, we decided to open one branch in 2015 and 5 offsite ATMs. Due to delays in idenifying suitable locations, the bank was only able to open one branch instead of the planned 4 and 4 offsite ATMs instead of the planned 5. In the view of the growing customer base, the bank will continue to open additional branches, offsite ATMs in addition to other e-banking channels for service delivery. In the year under review, the bank rolled out and launched its Mobile Wallet platform through partnerships with MTN and Airtel.

Partnerships and collaborations

The Bank continues to respond to some of the challenges that Private Enterprises and the youth face in accessing credit facilities. The bank went into partnership with European Investment Bank, aBi-Trust, Kampala Capital City Authority and Government of Uganda and the main focus was on financing the agro industry, micro credit projects and supporting expansion of business ventures owned by the youth residents in the country.

Strategy 2016

Despite the difficult prevailing market conditions, the bank will remain committed to its long-term strategy which will enable it to capture emerging growth opportunities in Uganda. We expect that the growth momentum will be continued through maintaining efficient operations, prudent lending and risk management. The bank will continue to implement an engaging strategy that focuses on delighting customers, enhancing productivity and efficiency, and innovation and growth. The bank will pursue its growth focusing on new delivery channels and products. The bank plans to increase its market share by enhancing its electronic banking platforms and getting on agency banking. Specifically, the bank expects to complete implementation of a new core banking system which is expected to enhance services to the clients. Also in order to manage the emerging IT risks, the bank will be changing all the ATM cards from Mega stripe to PIN and Chip which is more secure. We will look to taking advantage of the revised financial laws to introduce agency banking and bancassurance.

Conclusion

On behalf of Management I wish to take this opportunity to express my sincere appreciation to our customers, shareholders and business partners for their support to the bank and continued confidence and trust in our business. I also want to thank the Board of Directors for the oversight and guidance they have given the bank. Lastly, I am grateful to the management and staff of the bank for their dedication and sacrifice that enabled delivery of this excellent financial performance. Team, we could not have done it without you! Thank you for continuing to live our core values.

Fabian Kasi Managing Director

MANAGING DIRECTOR’S STATEMENT (continued...)


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Mr. Joseph KimbowaGeneral Manager - Operations

Mr. Fabian Kasi Managing Director

Dr. Simon M. S. KagugubeExecutive Director

Mrs. Peninnah Kasule Company Secretary

Mr. Joseph LutwamaGeneral Manager - Credit

Mr. Godfrey ByekwasoGeneral Manager - Finance

Mrs. Beatrice LugalambiGeneral Manager - Business Development & Marketing

Mr. Micheal NyagoGeneral Manager - Audit

Mr. Denis EcheruGeneral Manager - Risk

Management

Mr. George K. ThogoGeneral Manager - Business

Technology

Mr. Arnold ByansiGeneral Manager-Corporate

Services

General Manager-HumanResource

Mr.s. Florence Mawejje

THE EXECUTIVE MANAGEMENT


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STATEMENT OF CORPORATE GOVERNANCE AND RISK MANAGEMENT

The Board recognises that high standards of corporate governance are important for the

effective functioning of the Bank.

Professor John Ddumba-Ssentamu, Board Chairman.

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Compliance with codes and regulations

The Bank is regulated by the Central Bank which sets corporate governance principles and practices through legislation and regulations. This is enjoined with the Bank’s own philosophy and belief that best corporate governance should be engrained in all its processes, structure and culture.

The Bank therefore bolsters high standards through compliance with legislation and regular evaluation of its own corporate governance charter against much acclaimed corporate governance principles advanced by the King III report. The Company though of private limited liability also made amendments to its Charter to rein in some good corporate governance standards mandatory for public companies under the Code of Corporate Governance promulgated by the new Companies Act of Uganda of 2012 which came into force on 1st July 2013. The Board continues to review and consider emerging trends in corporate governance and sets readiness plans for adoption of relevant principles and practices.

Leadership

Board StructureThe Bank has a unitary board structure and is designed to ensure that the Board focuses on strategy, evaluation of the performance of the company, and monitoring governance, risk and control issues.

The Board delegates specified matters to the Board Committees and remains accountable for all decisions taken by its Committees. Detailed implementation of matters approved by the Board and the day-to-day operational aspects of the business are delegated by the Board of Directors to the Executive Directors.

Board Responsibilities

The business of the company is managed by the Board which exercises all of the powers of the company, subject to the Articles of Association and the Companies Act. The Board is collectively responsible for the long-term success of the company, and to achieve this the Board’s main responsibility and the key actions carried out during the period are set out below: -

(a) Establish strategic objectives and approving both financial and non-financial targets including new products and markets, Corporate Social Investment plans and large capital investments. Management performance is regularly evaluated by the Board for alignment with approved targets and this is achieved through operational and financial performance reviews and dedicated strategy sessions between the Board and Senior Management. The Board goes beyond ensuring that the Bank remains a going concern and attains maximization of shareholder and other stakeholder values through a healthy balance of risk and return within the bank.

(b) The Board holds timely discussions of opportunities, challenges and risks through a holistic and comprehensive analysis covering the short, medium and long term parameters and provides strategic direction.

(c) The Board and its respective committees convene at least once in every quarter of the financial year. To achieve this the Board maintains an annual activities calendar and work plan to ensure meetings are convened as planned and that specifically agreed matters are accomplished.

(d) The Board recognizes the significant importance of the audit process which is therefore communicated throughout the Bank. Findings in both the internal

Statement of Corporate Governance

Centenary Bank embraces best corporate governance practices and their implementation is considered fundamental to its growth and sustainability. The Board is therefore consistent in its commitment to keep abreast with new corporate governance initiatives unfolding constantly on both the international, regional and local scenes to uplift corporate governance for the benefit of the company and for all its stakeholders.

The Bank has remained a dedicated active member of the Institute of Corporate Governance Uganda and supports other local organizations which promote corporate governance in Uganda.

STATEMENT OF CORPORATE GOVERNANCE AND RISK MANAGEMENT (continued...)


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and external audits are reported and utilized in a timely and effective manner for correction by Management of lapses, infractions and issues identified by the Auditors.

(e) Review and set the Bank’s compensation philosophy for recognition and reward as well as approve compensation of senior management and other key human resource.

(f) Establish and clearly demarcate the decision mandates between the Board and Management and review approval authority of different levels of senior management to ensure there is appropriate oversight by Management. The Board also reviews the decision mandates between the Board and Management to take into account organizational growth requirements while maintaining adequate risk control and oversight.

(g) Set, review and approve internal policies and controls in line with prudent risk management.

Board Roles

The names and details of the current Directors on the Board as at the date of this Annual report are set out in the Board of Directors section. Under the board structure the executive and the non-executive directors are brought together in a single body and share collective responsibility. As at the date of this Annual Report, the Board comprises 9 members including the Chairman, 2 Executive Directors (namely the Managing Director and the Executive Director) and 6 non-executive Directors. There are 3 vacant positions on the Board, all for non-executive directors.

The key responsibilities of these stated offices are as follows: -

(a) Board Chairperson The office of the Chairman is non-executive and

provides overall leadership including setting the ethical tone, and setting the Board annual work plan. It also guides Board meetings and sets a conducive atmosphere for frank discussions and is a vital link between the Board and Management. The Board Chairman ensures that through an annual evaluation process for the Board (both collectively and individually) and for Management, a culture of accountability and performance is extended. The Chairman is also responsible for ensuring that the Bank maintains good relationships with its major shareholders, regulators and major stakeholders.

(b) Executive Directors The Central Bank requires financial institutions

to have at least 2 Executive Directors, resident in Uganda who are knowledgeable in the institution’s long term strategy to direct the business of the company. The Bank has two (2) Executive Directors including the Managing Director who is accountable to the Board of Directors and is assigned overall control of management of the Bank. The Managing Director is therefore charged with the responsibility of identifying, jointly with the Executive Director, the business strategy of the Bank. As the Chief Executive Officer, he is also responsible for directing the Bank’s implementation and for acquisition and development of human resource talent with the right competencies/skills to drive the business. The Managing Director ensures that adequately informative reports on the state of affairs of the business are submitted to the Board of Directors on a timely basis along with possible action plans for its alignment with approved targets.

(c) Non-Executive Directors The Bank takes cognizance of the increasing

importance and value of the role of non-executive directors. They bring about independent thinking, outsider perspective, expertise and diversification of views by generating a wider spectrum of options to those proposed by Management. The non-executive directors consequently enrich the final decision of the Board. At the Bank, the quorum for all committees of the Board is accordingly comprised of Non-Executive Directors.

(d) Company Secretary The Board has a service of a full time Company

Secretary who provides guidance to the Chairman and the Board on ethics and good corporate governance. The Company Secretary also guides directors in their duties and responsibilities in consonance with legislation. This is mostly with the Financial Institutions Act and relevant regulations and the new Company’s Act 2012 which greatly enhanced the standard of care for directors. The office of the Company Secretary supports the Board in the annual evaluation process inclusive of identifying the full Board and individual members development needs, plans and appropriate faculty often agreed upon on completion of the evaluation process. The Company Secretary also supports the Board in administering strategic level matters.


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The primary responsibilities of the Managing Director, Chairman, the Lead Independent Director - a recently adopted role - and the Company Secretary are all set out in writing in the Corporate Governance Manual/Board Charter. This is mainly for enhanced transparency and the respective positions are embedded with checks and balances in which no individual has unfettered decision-making power which therefore promotes accountability.

Board Committees

Certain aspects of the Board’s responsibilities have been delegated to the Committees to assist the Board by providing in-depth analysis. The members and Chairmen of the Committees are appointed by the Board of Directors which also approves their tenure. The Chairman of each committee provides a report or update of each meeting to the Board at the subsequent Board meeting and Directors have full access to documents and minutes of Committees. The Board Committees comprise of “specialized committees” required under the Financial Institutions Act and regulations among others. Each committee has elaborate and clear written Terms of Reference setting out their role, function, term of service of members, responsibilities, scope of authority

and operational matters relating to quorum, secretary and attendance of Management. The mandates of the specialized committees comply with relevant legislation and regulations and their performance is reviewed annually for accountability alongside enhancing risk management above the standards set by legislation.

The specialized committees of the Board are Audit, Assets & Liability Committee (ALCO), Human Resources and Compensation and Risk Management. Besides these the Board has additional committees (Credit and IT Strategy) to support it in its oversight since the Board reserved certain ‘high’ risk and large investment decisions to itself.

To innovate succession planning at Board level which still remains a requirement for public companies only, the Board also set up a Nominations Advisory Committee . This role is mainly to advise shareholders as they exercise their mandate, to nominate and appoint directors. Again, as a private company this committee reflects the Bank’s commitment to adopt good corporate governance practices tailored to fit the situation of the company at the time. The mandates of the non-specialized Committees and their performance are also reviewed annually.

Some of the key functions of the Board Committees:

Board Committee

Role and Terms of Reference (TORs)Membership Required under the TORs

Minimum No. of Meetings per year

Audit Reviews and reports to the Board on financial reporting, internal control and risk man-agement systems, independence and effectiveness of both external auditors and the in-ternal audit function and monitoring compliance with legislation. Makes recommenda-tions to the Board for a resolution to be put to shareholders of the company in relation to appointment and remuneration of the external auditors.

4 members all non-executive directors.

4

Assets and Liability Committee

Establishes guidelines in risk tolerance and expectations on investments, financial targets and expenses and supports Board in evaluating business performance. Ensures that Man-agement implements the Assets and Liability Management policy and effectively manages the market risks.

4 members with at least 2 non-executive directors.

4

Human Resource and Compensation

Make recommendations to the Board on remuneration and incentive, compensation plans (including bonuses), and other benefits and contract terms for Senior Management. This is done in line with the institution’s culture, objectives, strategy and industry trends.

4 members all non-executive directors.

4

Risk Management

Oversees Operational Risk Management systems, practices and procedures including risk identification, management, monitoring and control. The Committee also monitors legal suits against the Bank and their materiality and reports on risk assessment levels.

4 members with at least 2 non-executive directors

4

Credit Consider the Bank’s credit strategy, its implementation and reports on the entire credit portfolio of the Bank as well as compliance with applicable statutory and internal ratios and provisioning.


4



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Board Committee

Role and Terms of Reference (TORs)Membership Required under the TORs

Minimum No. of Meetings per year

IT (Strategy) Reviews and reports on governance of the Bank’s IT resources, services and initiatives for direction and alignment with the business.


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Nominations (Advisory)

Review and make recommendations to the Board for it to put to the shareholders for consideration on the structure, size and composition of the Board with an appropriate balance of skills, knowledge, experience and diversity.

4 members all inde-pendent

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Management CommitteesCertain detailed aspects of Board’s responsibilities are delegated, in addition to the Executive Directors, to appropriate management-led committees whose key roles are set out below: -

Management Committee

Role and Terms of Reference (TORs)

Executive Committee

Comprises of Executive Directors, business line and support function heads. Meetings are attended by the head of Internal Audit. The forum performs an advisory role of the office of Managing Director on various matters including formulation, implementa-tion and review of strategy, structure and policy and is responsible for making recommendations on reports from all Management Committees

Assets & Liability Management Committee

Ensures the Bank’s balance sheet is managed in accordance with regulatory requirements and policy set by the Board. It also ensures that the financial performance (income/loss) and status (balance sheet) is optimal, stable and positive through implemen-tation of appropriate strategies in respect of funding, pricing, liquidity and investments.

Human Resource Committee

The Committee is responsible for reviewing, aligning and making recommendations on strategic matters regarding the Bank’s human resource capital.

Credit Committee

Reviews the policy, procedures and performance of the credit business in line with applicable legislation, board mandates and performance targets.

Operational Risk Committee

Responsible for Risk assessment, management and reporting matters arising from discussions of existing and potential operational risk within the various units across the entire Bank.

ICT Committee

Monitors progress, implementation and maintenance of the Bank’s ICT strategic plan and makes recommendations to the Board on adequate policies, standards and procedures especially relating to information security, control and management of data.

21STATEMENT OF CORPORATE GOVERNANCE AND RISK MANAGEMENT (continued...)

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Managing Director/ Executive Commitee

Board AuditCommittee

Board Risk ManagementCommittee

Board ALCOCommittee

Board CreditCommittee

Board HR andCompensation

Committee

Board IT(Strategy)

Committee

Management Responsibility

Board Oversight

Operation RiskCommittee

Management ICT

Management Credit RiskCommittee

Management ALCO

Committee

ManagementHRC

Internal Audit

Assurance

Centenary Bank Board

RISK GOVERNANCE STRUCTURE


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Managing Director/ Executive Commitee

Board AuditCommittee

Board Risk ManagementCommittee

Board ALCOCommittee

Board CreditCommittee

Board HR andCompensation

Committee

Board IT(Strategy)

Committee

Management Responsibility

Board Oversight

Operation RiskCommittee

Management ICT

Management Credit RiskCommittee

Management ALCO

Committee

ManagementHRC

Internal Audit

Assurance

Centenary Bank Board

Board Attendance

The Board scheduled quarterly meetings for itself and its respective committees and all meetings are held in accordance with the Financial Institutions Act in respect to specialized committees. All the scheduled meetings were held during the period. Committees are permitted to convene additional meetings to afford them time to attend to critical matters within their purview. Additional meetings were held for the IT Strategy Committee as the ongoing new core banking project progresses to more critical levels. Overall the Board and its Committees achieved the following average attendance score:

Name of Board Forum Actual attendance of members as %

Board of Directors 96.77%Board ALCO 100%Board Audit Committee 100%Board Risk Committee 95.83%Board Human Resource & Compensation 80%Board IT Strategy 95%Board Credit Committee 96%

Where full attendance was not achieved this was largely due to conflicting prior/national commitments which included engagement of some directors in the preparations for the visit to Uganda by Pope Francis. This was a national event of significant importance for the East and Central African region and also to the Bank’s shareholders. Alternate Directors appointed to “bridge” were also unavailable for the same reasons.

Board composition

Board Changes:Mr. Rene Ehrmann, retired from the Board at the Annual General Meeting held on 12th June 2015 after serving the Board since 2002.

Mr. Jacco Minnaar was a Director from April 2008 to 15 September 2015 by virtue of his employment with Stichting Hivos Triodos Fonds which nominated him to the Board of Directors. Mr. Minnaar left the Board on 15th September 2015 upon his transfer and promotion as Director Energy and Climate with Triodos Investment Management BV.

Their replacements on the Board have been nominated and appointed by the Shareholders and are however

subject to vetting by the Central Bank in accordance with the Financial Institutions Act before assuming the office of director.

Review of Board Composition

The Board has set up a Nominations Advisory Committee which along with the Board is tasked to review matters related to composition of the Board majorly on diversity. The areas include skills, experience and gender concerns, independence and succession plans for key director positions. The Board has been consistent in putting forward to its shareholders a preference for a woman director on the Board and such an appointment is currently contemplated.

The Board made temporal changes in the membership of the Committees to address the vacancies thereon arising from the retirement and early retirement of Mr. Rene Ehrmann and Mr. Jacco Minnaar respectively.

Tenure of directors

The company has no restrictions on length of tenure and age of Directors. It rather recognizes the superseding importance of strong objective judgment, independence of its non-executive Directors, and that it has the right mix of collective knowledge and experience which are critical for the strategic well-being of the company.

Due regard has nonetheless been given to ‘new blood’ on the Board albeit not at the expense of desired continuity in light of the strategic needs of the company. The Articles of Association were therefore amended during the period to introduce retirement by annual rotation of 1/3 of directors who have served longest on the Board as previously, the Board collectively served for a period of 3 years.

Diversity and independence

The Board seeks to ensure that it and its committees have an appropriate composition to discharge their duties effectively and to manage succession issues. To enable the Board to meet its responsibilities, it is important that the Board’s composition is sufficiently diverse and reflects a broad range of knowledge, skills and experience and is committed to the Bank’s mission. The composition of the Board illustrates the diversity of the Board in terms of skills and experience.


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The Corporate Governance regulations to the Financial Institutions Act require at least 5 directors to possess demonstrated expertise and experience relevant to the functions of the financial institution. They do include financial control, accounting, banking, risk and corporate planning. The Bank is compliant and further conducts a skills review as part of its self-evaluation. This indicates the main areas of knowledge and experience of existing Directors and enables the Board to cite skills areas needed for recommendation to its shareholders to observe in submitting nominations of new directors.

Out of the current Non-Executive Directors only two (2) are employees of shareholding companies, however all the non-executive directors are independent in both character and judgment.

In compliance with regulations and best practice, members of the Audit Committee, Compensation (which is joined with Human Resource affairs) and the Nominations Advisory Committee are Non-Executive Directors.

Effectiveness

Review of Board effectiveness

The effectiveness of the Board is important to the success of the company and for that reason the Board conducts an annual review to reflect on its collective performance and that of its individual members.

The review for 2014 was carried out in the period using an internally developed board self-assessment questionnaire. This had been refined over the recent past by an independent consultant who also contributed to the development of questionnaires for the evaluation of the chairman and the individual non-executive directors. The focus of the review was to assess the extent of progress of the Board in the areas of governance, which includes the structure of the board; how its meetings are conducted; recruitment, remuneration and evaluation. It also includes corporate strategy and planning; internal control, compliance and risk management, financial reporting and investor and regulator relations among others.

The Board recognizes that a continuous and constructive evaluation of its performance assists the Board realize its maximum potential. During the period, the Board therefore discussed the results of the review and extracted a work plan to address the areas of development identified; the results generally indicated continued progress of the Bank in

This can be seen in the table below:

Economics Banking Accounting & Finance

Prof. John Ddumba-Ssentamu Mr. Andrew ObolMr. Henry Kibirige

Mr. Kimanthi MutuaMr. Fabian Kasi

Theology & SociologyLegal, Governance and Business Administration

Agricultural Economics

Archbishop Paul BakyengaArchbishop Cyprian Kizito Lwanga

Dr. Simon Kagugube Dr. Peter Ngategize

In order to enhance independence and objectivity, the Financial Institutions Act (Corporate Governance) regulations also require that 50% of the Board should comprise of non-executive directors. The Bank had 7 non-executive directors during the period and was above the mark.

The Bank’s standard Board size is 10 non-executive directors and this has been maintained and justified.



25


its corporate governance. The Chairman separately reviewed the results of the individual performance evaluations. At the end of the evaluation process the Board was able to identify its development areas which fed into the Board training plan for the period.

Board induction and professional development The Board received both local and international training during the year in specialist areas including strategy and company structures. This is typically arranged by the Company Secretary in consultation with the Chairman. The members of the Audit Committee receive written technical updates from the Bank’s External Auditors, Ernst and Young to keep abreast of latest financial reporting development. Developments in the tax arena are received from time to time from the Company’s tax consultants PricewaterhouseCoopers. Directors also attended conferences on corporate governance. The Chairman and the Company Secretary are responsible for preparing and coordinating an induction programme when new directors are appointed to the Board.

Information for Directors

The Chairman is responsible for ensuring that all of the Directors are properly briefed on issues arising at Board meetings and that they have full and timely access to relevant information. To enable the Board to

discharge its duties, all Directors receive appropriate information from time to time, including briefing papers distributed in advance of the Board meetings on an E-board reports software.

Directors can, where they judge it to be necessary to discharge their responsibilities as Directors, obtain independent professional advice at the Company’s expense. The Board committees therefore have access to sufficient resources to discharge their duties, including external consultants and advisers.

External Board appointments and conflicts

At every meeting directors are expected to disclose any area of potential conflict of interest and would therefore be excluded during consideration of the relevant matter under the company’s governance charter. This principle is also practiced in Management. The Chairman and the Board members are also expected to inform of any proposed external appointments they receive as they arise. Each Director’s biographical details and significant time commitments outside of the company are set out in the Board of Directors section.

Going Concern

Based on performance, mid and long term projections the Directors believe and continue to view the Bank as a going concern.


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Prof. John Ddumba SsentamuBoard Chairman. (Ugandan)

Professor of Economics and holds a PhD in Economics, with various interna-tional awards. Currently Vice Chancellor, Makerere University Uganda and previously Ag. Principal, College of Business and Management Sciences. For several years he was Chairman, Microfinance African Institutions Network (based in Lome, Togo), and has contributed greatly to the Centre for Research on Environmental Economics and Policy in Africa as member of its Advisory Board and Committees. Has been Chairman, Academic Board, African Eco-nomic Research Consortium (AERC), Nairobi, Kenya and holds an honourary fellowship of the Uganda Institute of Banking and Financial Services (FUIB, HONS). He has made a number of publications on a spectrum of areas in Eco-nomics. Previously served as member of the Finance Committee of CARITAS, International based in the Vatican.

BOARD OF DIRECTORS

Archbishop Paul Bakyenga Non-Executive Director. (Ugandan)

Holds a doctorate in Sacred Scripture from Rome LSS. Currently Archbishop of Mbarara Diocese which is a shareholder in the Bank and is an advocate for service to the poor which is a bedrock of the mission of the Bank of providing financial services especially to the rural poor. Previously chaired the Uganda Episcopal Conference, the Association of Members of Episcopal Conferences of Eastern Africa (AMECEA) and was Chancellor of Catholic University of East Africa (Nairobi) and Uganda Martyrs University [Nkozi].

Archbishop Cyprian K. LwangaNon-Executive Director. (Ugandan)

Archbishop of Kampala Archdiocese. Was a professor of Canon Law from Ggaba National Seminary and St. Mbaaga Major Seminary and holds a doctor-ate in Canon law from Urbanian University, Rome. As an entrepreneur, he has innovated and set various programmes including Wekembe Corporation Programme (now SACCO) and the Uganda Martyrs Development Foundation. Was head of CARITAS, Africa and has also served on Board of Governors of various Church founded schools/institutions.



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Mr. Henry Kibirige Non-Executive Director. (Ugandan)

Chairman of the Audit Committee. Also a Director on the Board of National Water and Sewerage Corporation. He serves on the Board of Lion Assurance Company Ltd and is the Chairman of its Investment Committee. He holds a Bachelor of Arts degree from Makerere University and most of his career was served in the Bank of Uganda (Central Bank) rising to the level of Execu-tive Director Supervision Function, where he contributed to the liberalization of foreign exchange transactions and implemented legislative and institutional reforms of the country’s financial sector. He worked with Citi Bank (U) as a Banking Consultant after leaving the Central Bank

Mr. Kimanthi MutuaNon-Executive Director. (Kenyan)

Currently Chairs IT (Strategy) and the Assets and Liability Committees (ALCO). A Certified Public Accountant with considerable experience in banking, finance and information technology, he served as founding Managing Director of K-Rep Bank (now Sidian Bank in Kenya between 1999 – 2010). Currently he serves on boards of several organizations, including Sidian Bank, ECLOF International (Chair), PAMIGA Association (Chair) and K-Rep Group of Companies (Chair). He is a faculty member of the Boulder Microfinance Training Program and also advises several organizations, locally and international, on Regulatory & Super-vision issues for financial inclusion, as well as transformation strategies for mi-crofinance institutions.

Dr. Peter Ngategize

Non-Executive Director. (Ugandan)

Currently Chairman of Credit and Risk Management Committees. PhD (Ag-ricultural Economics) and is the National Coordinator of the Medium Term Competitiveness Strategy Secretariat with the Ministry of Finance, Planning and Economic Development of Uganda. In that capacity he is a founder mem-ber and Director of the Agricultural Business Initiative Trust (aBiTrust) and has spearheaded many initiatives towards the Private Sector competitiveness.

BOARD OF DIRECTORS


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Mr. Fabian Kasi Managing Director. (Ugandan)

Managing Director of Centenary Rural Development Bank. He was a Board Chairman of the Association of Microfinance Institutions of Uganda and served on the Board of FINCA Uganda and Kampala Club. He is the current Chairman of the Uganda Bankers Association, a member of the Board of Uganda Institute of Bankers, British American Tobacco (U), PAX Insurance and is the Chairman of the Advisory Board of Microfinance Department of Nkozi University. He holds a Bachelor’s Degree in Commerce, a Masters of Business Administration and is a Fellow of the Association of Chartered Certified Accounts (FCCA), United Kingdom.

Dr. Simon Kagugube Executive Director. (Ugandan)

He holds a Doctorate in the Science of Law (JSD), from Yale Law School (USA), and a Certificate in Public Finance from the University of Bath, (UK). He is an Advocate of the High Court of Uganda. Prior to assuming the office of Executive Director with the Bank, he had served as Chairman of the Board of Directors Centenary Bank in 2002, while also holding the position of Director, Tax and Legal Services PricewaterhouseCoopers. He worked with the Uganda Revenue Authority as Commissioner Value Added Tax and was appointed Dep-uty Commissioner General. Currently Board Chairman, Monitor Publications Limited, a Nation Media Group subsidiary in Uganda, and is a Member of the Board of Nation Media Group where he also serves as member of its Finance and Audit Committees. He is the President, East African School of Taxation.

BOARD OF DIRECTORS

Mr. Andrew P.K. Obol Non-Executive Director. (Ugandan)

Chairs the Human Resource & Compensation Committee. A qualified profes-sional banker. Served on the top management of Uganda Commercial Bank (now Stanbic Bank) and was the Coordinator of CARITAS Kitgum under Gulu Diocese. He is also a member of the area District Service Commission.



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Centenary Bank uses an Enterprise wide Risk Management (ERM) approach which is governed by the Risk Management Framework Policy. The Bank recognizes that many risks within the organization are interrelated and should not be managed independently, but rather across the Bank. This ERM framework sets forth guidance to manage risks across the Bank. It aims to strengthen the Bank’s ability to develop an integrated view of risk and the means to handle risks within a comprehensive approach.

Enterprise-wide Risk Management provides uniform processes to identify, assess, manage, mitigate, and re-port on key risks. It supports Centenary Bank’s Board of Directors (BOD) corporate governance needs, ena-bles informed decision-making, and identifies areas for value optimization.

Centenary Bank’s Enterprise Risk Management (ERM) framework provides Management and staff with the information they need to perform their risk manage-ment-related duties.

The document provides background information such as Centenary Bank’s ERM objectives, policy, and prin-ciples. It also provides detailed formal processes and methodologies for risk identification, assessment, man-agement, monitoring and reporting using information such as process flow diagrams and procedures.

ERM Objectives applicable

Centenary Bank’s ERM program brings risk knowledge and information to the fore in decision-making process-es to mitigate the downside of unrewarded risk while exploiting rewarded risks to benefit from business op-portunities.

The ERM objectives are to:

• Support the Bank’s business growth strategy through the implementation of well-defined and common risk management processes, tools, and techniques.

• Counter losses and improve business value through optimization of risk and return.

• More knowledgeably seize and exploit opportu-nities and quickly identify risks to avoid, both cur-rent and emerging risks.

• Reduce uncertainty and increase the likelihood of success in achieving the bank’s strategic initia-tives.

• Build credibility and sustainable stakeholder con-fidence in Centenary Bank’s governance and risk

management processes and comply with both regulatory and local laws and jurisdictions.

• Improve the understanding of interactions and interrelationships between risks.

• Establish clear accountability and ownership of risk.

• Develop a common language that helps to estab-lish the broad scope of risk and to organize risk management activities, and reinforce Centenary Bank’s risk culture.

• Develop capacity for continuous monitoring and reporting of risk across Centenary Bank, from the operational level to the Board.

Risk Management Policy

The risk management policy defines the Bank’s busi-ness processes, structure, risk profile and risk appetite. It is a guiding document in the application of the bank’s comprehensive risk management framework which is regularly reviewed.

The policy among other things defines the roles and re-sponsibilities of management and the board in the man-agement of existing and emerging risks in the bank and the market respectively. The document defines “Sound Practice” in terms of the Bank’s risk management and provides guidelines for management to address the Bank’s risk profile on an ongoing basis.

Risk Categories

To enhance the understanding of particular sources of risk, their possible consequences, and the practical ap-proaches to managing them, Centenary Bank has de-fined risks into 9 major categories.

These risk categories are groupings that help the bank to consistently identify, assess, measure, monitor and report across on its overall risk exposure. Using con-sistent risk categories across the bank enables aggre-gation and determination of overall risk impact. This

Risk management and control


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enhances the understanding of particular sources of risk, their possible consequences, and the practical ap-proaches to managing them.

Centenary Bank has adopted the following risk catego-ries:

i) Strategic Risk Risk of current and prospective impact on the

Bank’s earnings and capital arising from poor business decisions, improper implementation of decisions or lack of response to industry, eco-nomic or technological changes.

ii) Credit Risk Potential that a Bank borrower or counterparty

will fail to meet their obligations in accordance with agreed terms.

iii) Liquidity Risk Risk resulting from the Bank’s failure to pay its

debts and obligations when due because of its in-ability to convert assets into cash, or its failure to procure enough funds, or, if it can, that the funds come with an exceptionally high cost that may affect the bank’s incomes and capital fund now and in the future.

iv) Market Risk This is the risk that the value of the Bank’s invest-

ments will decrease due to unexpected and/or adverse changes in market factors such as stock and commodity prices as well as interest and for-eign exchange rates.

Key market risks factors for the Bank include Interest Rate Risk and Foreign Exchange Risk which have been described below:

i. Interest Rate Risk: the exposure of the Bank’s financial condition to adverse movements in in-terest rates.

ii. Foreign Exchange Risk: risk associated with doing business in two or more currencies. For-eign exchange price risk relates to possible re-valuation losses (or gains) on long/over bought or short/oversold currency positions in response to movements in exchange rates.

v) Reputation Risk This is the risk arising from changes in public

opinion that impact the Bank’s earnings or ac-cess to capital. This can be mainly thought of as

publicity or operational inadequacies that would have an adverse effect on the Bank’s public im-age.

vi) Operational Risk Risk of direct or indirect loss resulting from inad-

equate or failed internal processes, people, and systems or from the external events or unfore-seen catastrophes. It includes the exposure to loss resulting from the failure of a manual or au-tomated system to process, produce, or analyze transactions in an accurate, timely, and secure manner.

Operational risks increase the Bank’s exposure to other risks by impairing the Bank’s ability to adequately assess, monitor and report on other risks. Operational risks cut across all the Bank’s divisions and include, but not limited to:

Human Resources Risk: The risk arising from inadequate human resources or inappropriate use of available staffing resources.

Business Process Risk: The risk arising from in-adequate implementation and non-adherence to the Bank’s business processes.

Legal Risk: The risk arising from contracts or other arrangements that are not enforceable through available means.

Health & Safety Risk: The risk arising from noncompliance with or lack of health and safety regulations, policies, or procedures.

vii) Compliance Risk Risk of legal or regulatory sanctions, material fi-

nancial loss, or loss to reputation. The Bank may suffer these as a result of its failure to comply with laws, regulations, prudential guidelines, supervisory recommendations and directives, rules, internal policies and procedural guidelines and codes of conduct applicable to its banking ac-tivities.

viii) Information Technology Risk The risk arising from inadequate information

communication technology (ICT) resources or inappropriate use of available ICT resources. This can result in financial loss and lost business opportunities due to unavailability of the ICT re-sources, loss of data integrity and confidentiality.



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ix) Country Risk Refers to the risk of investing in a country, other

than Uganda, resulting from uncertainties arising from the economic, social and political condi-tions of that country that may cause borrowers in that country to be unable or unwilling to fulfill their obligations to the Bank.

The main categories of country risk comprise sovereign, transfer and contagion risk and are described below:

Sovereign risk: Denotes a foreign govern-ment’s capacity and willingness to repay its direct and indirect (i.e. guaranteed) foreign currency obligations.

Transfer risk: This is the risk that a borrower may not be able to secure foreign exchange to service its external obligations.

Contagion risk: This risk arises where adverse developments in one country lead to a down-grade of rating or a credit squeeze not only for that country but also other countries in the re-gion.

Business Continuity Management:

Business Continuity Management (BCM) is a holistic management process that identifies potential impacts that threaten an organization and provides a frame-work for building resilience and the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities.

The Bank has in place an appropriate business conti-nuity management program. Its ultimate purpose is to minimise the impact on the organization and recover from loss of information assets which may result from natural disasters, accidents, equipment failures, and de-liberate actions to an acceptable level. This is through a combination of preventive and recovery controls. The process includes the development, maintenance, and testing of contingency plans and work-around proce-dures necessary to sustain the operational continuity of mission critical processes, information technology sys-tems and resources.

Business Continuity Management Framework

Centenary Rural Development Bank continues to en-sure that a business continuity management process is in place and sufficient financial, organizational, techni-cal, and environmental resources are identified to ad-dress the specific requirements for Business Continuity.

A Business Continuity Management Framework was developed in accordance with best practices and stand-ards to ensure all plans are consistent and to identify priorities for testing and maintenance.

Business Continuity Management (BCM) ProcessBCM is important to the Bank and is the overall respon-sibility of Senior Management to ensure that it is imple-mented. Senior Management is committed to drive the BCP process, provide adequate resources and ensure that the respective plans are well developed, docu-mented, tested, updated and maintained.

Consequently, the following BCP management process has been established to ensure that the plans are de-veloped, documented, tested, updated and maintained;

• The Bank’s plans are developed according to the BCP framework and in compliance with the poli-cies.

• BCP is an ongoing process of development, test-ing, updating and maintenance, and not just a one off project. It is a part of every division Head’s normal responsibilities to ensure that the division has not only planned for the recovery of all criti-cal business processes of that business unit, but has also tested and maintained those plans.

• Each division has an approved Business Continu-ity Recovery Plan for the recovery of its critical business processes.

• Every year, the BCM unit in consultation with the BCP Steering Committee/BCMT establishes the BCP Development Plan for the year. The plan sets out the BCP activities to be undertaken for that year, who is responsible for those activities and the timeline for such activities. The BCP Steering Committee reviews and approves the BCP Development Plan.


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Employee empowerment and engagement in an organization manifests itself in increased staff

satisfaction, high productivity, quality customer service, strong staff retention, reduced costs, and

competitive advantage and overall improved bottom-line.

Read more on Employee empowerments and engagement on page 36

SUSTAINABILITYREPORTING STATEMENT


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Value Added Statement

The Value Added Statement shows the social value added that the Bank makes through its activities. Value added is calculated as the Bank’s performance minus payments such as cost of materials, depreciation and amortisation. The resulting amount is distributed to the stakeholders who include employees, shareholders and the Govern-ment

Value Added Statement For the year ended 31 December 2015

2015 2014 Shs’000 % Shs’000 %Value added Interest income 305,327,547 77.5% 247,067,902 76.4%Commission, fee income 66,990,666 17.0% 58,679,232 18.1%Other revenue 21,582,433 5.5% 17,714,269 5.5%Total income 393,900,646 100% 323,461,403 100%

Less: Interest paid to depositors 39,108,973 37,067,293 Cost of other services 80,331,284 74,913,912 Wealth created 274,460,389 211,480,198 Distribution of wealth Salaries, wages and other benefits 117,502,822 42.8% 96,887,176 45.8%Government 34,910,783 12.7% 21,669,531 10.2%Shareholders - (dividends) 25,516,936 9.3% 18,477,452 8.7%Retention to support future 96,529,849 35.2% 74,446,039 35.2%business growth Wealth distributed 274,460,389 100% 211,480,198 100%

As illustrated by the Value Added Statement, the Bank is a material contributor in a financial sense to various stakeholders.

Of the total wealth created in 2015:• Shs 117.5 billion (42.8%) was distributed to employees as remuneration and benefits.• Shs 34.9 billion (12.7%) was allocated to Government in form of direct and indirect taxes, including charges

in deferred taxation assets and liabilities.• Shs 97.2 billion (35.2%) was retained for investment in business in order to ensure its profitability content-

ment into the future.• Shs 25.5 billion (9.3%) is to be distributed to shareholders as dividends.

Sustainability Reporting Statement

This report represents a commitment by Centenary Bank to sustainable development and to comprehensive reporting thereon to all stakeholders. The report follows guidelines released by the Global Reporting Initiative (GRI), which is a joint initiative coalition for Environmentally Responsible Economies and the United Nations Environment Programme. The guidelines have been issued for voluntary use by organisations for reporting on the economic, environmental and social diversion of their activities, products and services aimed in articulating the understanding contribution to sustainable developments.

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Customers Engagement and Support

a. Customers Engagement Understanding and responding to our custom-

ers’ needs is key to Centenary Bank’s success. The importance of service delivery is funda-mental and a non-negotiable component of our attitude towards customers. Our customers are key to ensuring that we remain a profitable and sustainable organisation. How custom-ers are treated, where we choose to operate, who we provide financial support to and our response to customer needs all have great im-pact on our reputation and financial success.

The Bank engages customers through various means including:

• Call Centre.• Branch network.• Customer seminars/workshops, and product

research.• Dedicated Sales Staff for lending and deposit

mobilisation.• Electronic, digital, print and social media.• Marketing and advertising.• Customer weeks.• CentePoints - Automatic Teller Machines

(ATMs).

With regard to customer weeks, branches to-gether with head and regional office represent-atives, engage branch customers for a whole week through various activities. CenteMobile clinics were set up in branches during the week to educate customers about CenteMobile. Many customers appreciated and enrolled for the service during the weeks. Field visits to mobilise deposits, get feedback from our cus-tomers were also carried out and the weeks crowned off with dinner for selected corporate clientele of the branch.

For SME clients, workshops were organized. They were aimed at discussing strategic busi-ness opportunities. These sessions exposed the SME owners to new ways of doing busi-ness, new developments in the market and other offerings that the Bank has in place to improve what they do. The workshops also helped in obtaining feedback on how the bank can improve its offerings and services.

During the year, the bank increased the num-ber of staff in the Call Center to receive and resolve customer complaints. The Call Centre registerded 123,915 customer issues of which 48,016 were complaints and 75,899 were in-quiries and compliments. 1,070,855 toll free calls were received .

In a bid to address the increasing customer is-sues, the bank has planned to further increase the number of agents per shift and introduce dedicated agent for Runyakitara, Kiswahili and Luo.

b. Customer Confidentiality The Bank demands the highest standards in

carrying out its business activities. Centenary Bank like other banks in the country has always been subject to the common law principle of bank client confidentially. In addition to this, Centenary Bank subscribes to the Code of Banking Practice that requires banks to treat all customers’ personal information as private and confidential. The Bank’s Operational Guide-lines and Staff Rules and Regulations govern the conduct and duties of Bank employees, further emphasizing the importance of customer pri-vacy and detailing the procedures that must be observed in matters regarding confidential in-

formation. In handling such information, we have made a commitment that we will:

Distribution of wealth

2015 2014

SUSTAINABILITY REPORTING STATEMENT (continued...)


35

• Ensure that it is accurate, up to date, neither bi-ased nor misleading;

• Only use it for the purposes for which it was given;

• Keep it only for as long as is necessary; • Keep it securely; • Keep only relevant and required information;

and • Distribute it within the Bank only on a need to

know basis.

C. Money Laundering Money laundering is the process by which banks

are used to disguise or “launder” the proceeds of criminal activity. Such activities undermine a bank’s integrity, damage its reputation, deter honest customers and expose a bank to severe sanctions.

We fully support the international drive against serious crime and are committed to assisting the authorities in preventing money laundering. We have adopted policies and procedures de-signed to protect ourselves from doing business with customers involved in criminal activity.

Our employees must adhere to the following key principles:

• Customer Identification - the identity of every customer must be established from reliable identifying documents.

• Know Your Customer - our staff must know enough about their customers to be able to identify transactions which are inconsistent with their business or personal status, or which do not match the normal pattern of account activ-ity.

• Reporting of Suspicious Transactions – all such transactions are to be reported to the proper authorities immediately.

We take money-laundering prevention very se-riously and have created a rigorous programme to ensure that we can enforce consistent high standards across our network. The Know Your Customer initiative, a key priority within the Bank, is a cornerstone of our anti-money laun-dering programme.

Our policy is based on the Financial Institutions Act 2004 Money Laundering Rules and interna-tional best practices, such as recommendations made by the Financial Action Task Force (FATF).

Financial Products and Services

The bank offers the following products

A. Deposit Products

1. Local Currency Deposits

• CenteSavings Account • CenteCurrent Accounts• CenteFixed Deposit Account • CentePlus Account • CenteJunior Account • CenteVSLA Savings Account• CenteVolution Savings Account• CenteSACCO Savings Account• CenteSACCO Current Account• CenteSupa Woman Personal Savings Account• CenteSupa Woman Group Savings Account• CenteSupa Woman Joint Savings Account• CenteInvestment Club Savings Account• CenteInvestment Club Current Account

2. Foreign Currency Products and Services

• CenteForeign Savings Account • CenteForeign Current Account• CenteForeign Fixed Deposit Account

3. E-banking products

• ATM Service (CentePoint)• CenteMobile Service • PC Banking Service • Merchant POS Service

B. Credit Products1. Business loans• CenteSME/Corporate business Loans• CenteLease• Bank Overdraft

2. Agricultural Loans

• Production Loan• Revolving Production Loan• Marketing Loan• Farm & Asset Equipment Loan

3. Retail/Micro Loans

• CentePersonal Loan• CenteLand Loan• CenteSolar Loan• CenteYouth Loan• CenteMortgage loan• CenteHome Improvement Loan • CenteHome


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4. Trade finance products

• Letters of Credit• Bank Guarantees• Invoice Discounting• Shipment Finance• Local Purchase Order (LPO) Finance• Structured Trade Finance• Commodity Finance• Documentary Collections

C . Money Transfer Services

• Western Union Money Transfer• Real Time Gross Settlement (RTGS)• East African Payment Systems (EAPS)• Electronic Funds Transfer (EFT)• EFT Direct Debit Transfers Option• MTN Mobile Money Transfers• Airtel money • Ezee Money• Telegraphic Money Transfers D. Other Services

• Foreign exchange trading• Bulk Salary processing• SMS Transaction Alerts• Primary dealership services• E-payment services

* e-Visa fees collection service* e-Water payment service* e - Umeme payment service* e-Tax payment service* e-NSSF contributions collection service* Kampala Capital City Authority (KCCA)

fees collection service

For more details about our products and services please refer to the bank’s website www.centenarybank.co.ug

Employee empowerments and engagement

Understanding and responding to our employee needs remains a key aspect to Centenary Bank’s success. Employee Empowerment is a philoso-phy associated with real benefits for the Bank. It’s underlying principle of giving employees the free-dom, flexibility and power to make decisions as well as solve problems leaves an employee feel-ing energized, capable and determined to make

the organization successful. On the other hand, Employee Engagement is the extent to which people enjoy and believe in what they do and feel valued for doing it. People want to be recognized and rewarded for their contributions. An engaged employee is one who is fully absorbed by and en-thusiastic about their work and so takes positive action to further the organization’s reputation and interests.

Employee empowerment and engagement in an organization manifests itself in increased staff satisfaction, high productivity, quality customer service, strong staff retention, reduced costs, and competitive advantage and overall improved bottom-line. To attain the goals above, the Bank empowers and engages its employees in several ways such as those highlighted below:-

a. Staff based HR strategies

The Bank has instituted a regular Staff Cli-mate Survey, an online avenue, through which staffs’ views, ideas and value-adding input is sought. These are valued and used to develop HR strategies that help improve the work environment and elicit staff satisfac-tion. It also contributes positively towards the strategic planning process of the Bank. The Bank has registered a strong work cli-mate that has steadily improved over the years from 69.8% in 2011, to 73.2% in 2013 and 75.2% in 2015. The primary aim of the successive Bank Climate surveys is to track and evaluate progress made in ad-dressing identified employee work related challenges and risks. It also captures new is-sues and enables development of appropri-ate empirical remedial strategies/initiatives to enhance staff engagement, retention, productivity as well as Bank business per-formance and growth generally. The Bank further provides avenues to its employees through which they express their thoughts, feelings, concerns and make contributions on various issues that help to enhance the Bank’s plans and strategies.

These are mainly: Email, Newsletter, meet-ings, helpdesk and managemtent and staff open forums (CenteFusion).

b. Reward and Recognition programs

An engaged employee wants to feel valued



37

for doing what they do and their contribu-tion to the Bank. The Bank has created a ‘sense of worth’ environment in various forms, through a market based competitive compensation, Employee of the Month pro-grams, merit awards, sports & teambuilding models and wellness programs to mention but a few.

c. Occupational Safety & Health (OSH)

OSH committees were formed and are op-erational across all business units. These are supported through the Human Resource Division’s (HRD) continuous follow up and guidance in line with the law.

In compliance with the Labour Law, the Bank undertook registration of all Bank Premises at a cost (statutory). First aid box-es of prescribed standards were procured and circulated to all Bank units/Branches.

Inspection of identified critical Bank units was done by the Ministry of Gender, Labour and Social Development (MOGLSD) i.e. two branches namely Nateete and Kikuu-bo. Two other branches i.e. Ntungamo and Ntinda were inspected by the Bank Branch OSH Committees.

A sensitisation session of Centenary Bank Managers on OSH was conducted by the commissioner, Occupational Safety and Health from the MOGLSD during one of the Quarterly Management Meeting (QMM) sessions.

d. Chaplaincy activities /program

Chaplaincy roll out was strengthened through establishment of Christian commu-nities at all the 63 Centenary Bank branches where holy mass is conducted monthly. This helps to build the spiritual aspect of the employees. Partnerships with other corpo-rate Catholic communities like BOU, KCCA and Vision group were also built.

The Chaplaincy through its reachout annual programs gave back to the needy communi-ties of Butabika Hospital and Luzira Wom-en’s prison. Staff Christmas Carols competi-tions were also successfully held among the Head Office Divisions and some Kampala

Branches.

The Bank actively participated in the prepa-ration for the Papal visit. The Bank spon-sored 400 staff to participate in the Papal walk from Kololo to Namugongo. Staff bought rosaries worth Shs. 1.5 million as a way of contributing to the papal visit prepa-rations. The Chaplaincy also collected ‘Olu-muli’ worth Shs. 3 million toward the same cause. The bank overall contributed over Shs. 150 million towards the Papal Visit.

e. Sports and Team building model

The sports team building concept is focused on delivering occupational benefits to the Bank. Key among these are enhancement of team work/networking, staff motiva-tion, better health, improved performance at work, enthusiasm for institutional goals, talent identification, improved organization for external engagements and furthering thr Bank’s brand visibility.

The first ever CenteFun Day was success-fully held on 21/11/2015. Seven (7) teams were formed based on the sports talent that had been identified through regional and Head Office team building activities. Head Office emerged the overall winners.

The Bank participated in the 2015 Annual Bankers’ Gala and Corporate League ses-sions. The Bank won gold medals in Volley-ball and pool table at the Corporate League. The Bank has also instituted a bi-weekly aerobics class at its Headquarter premises.

f. Performance management

The Bank paid 2014 performance bonus that placed emphasis on recognizing the ex-ceptional contribution of its branch network staff. As part of the Integrated Performance Management system, the Bank rolled out the Balance Score Card tool to all roles up to Officer Level, to enhance its strategic objective of accountability. The bank held workshops for all affected staff to support the roll out and enhance appreciation and use of the tool. The BSC tool provides an enabling environment in which staff moni-tor their individual performance/ contribu-tion in executing the Bank’s strategy.


38


g. Learning & Development undertakings

The Bank continues to empower staff through closing their skills and knowledge gaps on an ongoing basis. By 31st Decem-ber 2015, one hundred seven (107) train-ing events had been implemented for 2,800 staff, at a cost of Shs. 1.84 billion represent-ing 51.8% compared to 114 trainings imple-mented for 2058 staff at a cost of Shs. 1.492 billion, same period last year.

The staff enrolment and completion of learning programs on ‘Click Campus’ on-line platform has continued to grow year on year. With a 78% completion rate as at De-cember 2015, staff were able to cover vari-ous programs including mandatory ones like the Anti-Money Laundering (AML) module. Staff were able to close gaps in areas that enabled them compete for higher positions contributing to a 68.4% internal promotion rate.

h. New Core Banking System capacity building

In October 2015, ‘Exodus’ project train-ings commenced with the main objec-tive of equipping participants with practi-cal knowledge and skills in the New Core Banking System. By 31st December 2015, 886 (47.5%) of the 1864 target participants had been trained in various modules of the new core banking system. The Bank trained Trainers that in turn trained the end users of the system.

i. Talent Management / Succession Plan-ning

The Bank’s people management philoso-phy, is to build its own talent to support the Bank’s growth. The Bank closed the year 2015 with 68.4% of the vacant posi-tions filled internally through promotions and re-designations. One way the Bank has achieved this is to identify the staff develop-ment needs and bridge these gaps through appropriate interventions.

Below is a snapshot of the Bank’s investment in staff development:-Monthly Training Investment per staff


(Number of Participants)

(UShs)


39

The table below illustrates the comparative picture over the last 3 years;Table below shows Senior Management Diversity

POSITION TITTLE/ CATEGORY2015 2014 2013

Male Female Total Male Female Total Male Female Total

Executive Directors 2 - 2 2 - 2 2 - 2

General Managers 7 3 10 7 3 10 7 3 10

Chief Managers17 6 23 17 6 23 15 6 21

Head Office Managers 38 24 62 39 22 61 39 16 55

Branch Managers/Service Center Heads 56 13 69 48 12 60 41 100 51

Total 120 46 166 113 43 156 104 35 139

Succession planning for Branch Leadership was concluded in the year under review and devel-opment skills / Knowledge gaps were identified. The process helped management to identify the talent pool covering the Branch Manager, Assistant Manager, Credit Administration and Branch Supervisory roles. The Head Office successor pool was also updated during the year. During 2015 Leadership / management training was conducted but mainly among the Branch management teams to bridge the iden-tified critical knowledge gaps.

Staffing highlights as at 31st December, 2015

The Bank closed the year 2015 with a total headcount of 2211 compared to 2001 as at 31st December 2014. 298 staff joined the Bank in 2015, compared to 210 the previous year.

The annual staff turnover rate declined to 4.3 % in 2015 down from 5.2% in 2014, due to continued staff retention and development ini-tiatives. The average age of staff remained at 33.4 years as at December 2015. The aver-age period of service across the board was 5.9 years compared to 5.8 years the previous year.

Females constituted (1005) staff (45.5%) while males constitute (1206) 54.5% of the staff pop-

ulation, compared to 45.3% female and 54.7% male as at 31st December 2014.

A synopsis of Senior Management gender di-versity stood at 72.3% male and 27.7% female in 2015 compared to the ratio 72.4%:27.6% in 2014, reflecting gradual improvement in gen-der mix profile.


2211TOTAL HEAD COUNT

298JOINED THE BANK

10 05FEMALE

12 06MALE

33.4 YEARS

AVERAGE AGE OF STAFF

5.9 YEARS

AVERAGE PERIOD OF SERVICE

4.3%STAFF TURNOVER RATE DECLINED

SENIOR MANAGEMENT

GENDER DIVERSITY27.7%

FEMALE72.3%

MALE


THE NUMBERS

40


In 2015, Centenary Bank centered its Corporate Social Investment (CSI) initiatives under its strategic theme of customer centricity. The aim was to sustainably support the public based on the Bank’s key customer categories which include the microfinance clients, youth, women and the small and medium enterprises.

Following our policy of investing up to 1% of the previous year’s after-tax income, the allocation on the banks CSI increased along with the number of activities and people reached as per table below.

Corporate Social Investment

OUR OBJECTIVES FOR 2015 WERE AS BELOW;

To increase the number of women screened for cervical cancer by 50%

To increase the channels used for financial literacy training by at least two.

To expand the financial literacy training target group

The goals of the Bank’s Corporate Social Investment were;

1. To achieve Centenary Bank’s social and environmental objectives of contributing to a sustainable society.

2. To support communities through partnerships and social and environmental projects.

3. To reinforce the bank’s values.

Item 2013 2014 2015

CSI Amount 550M 580M (5.5%) 636M (9.7%)

Number of activities 211 303 (43.6%) 359 (18.5%)

People reached 15M 16M (6.7%) 19M (18.8%)

We continued our focus on four themes; these were education, health, environment and the social mission of the church. Each of these focus areas was implemented in collaboration with partners and communities.



41

HEALTH‘Bridging the Cancer Gap’ programme 809,000 women were screenedOver 10,000,000 people were educated through parades, electronic, print and social media

EDUCATION

Our Bank works in communities where the bulk of the population is illiterate. Managing their finances therefore becomes even a bigger challenge. It is for this reason that the bank has invested in financial literacy for the last 5 years. In 2015, we trained 720 microcredit customers in five districts, 360 youths in 10 groups, 150 small and medium enterprise owners in three districts and 240 women in Kampala. This was done in partnership with International Labour Organisation (ILO), Private Sector Foundation Uganda (PSFU), European In-vestment Bank (EIB), and Agriculture Business Initiative (ABI Trust). The train-ings focused on Personal Finance, Managing Businesses, Loan utilisation, Sav-ing and Investment and Uses of Banking Facilities.

The Bank further used social media channels of facebook, twitter and youtube to educate the public on financial literacy, there by reaching over 100,000 people. Weekly print media articles responding to the public’s questions on financial literacy where published as part of the CenteBusiness Life program hence improving lives of 160,000 people.

Over 1,470 people were trained

Over 100,000 people were reached via social media

Over 160,000 people lives improved through responses to the weekly print media articles

One of the Supawomen being awarded a certificate after training by Ms. Hellen Tomusange, Supervisor, Women Banking Centenary Bank.

The health sector in Uganda is still wanting. More than half of the population is unable to access sus-tainable health services. It is worse with non-communicable diseases, cancer being among the leading at a rate of 55%. It is for this reason that the Bank partnered with Rotary District 9211 and St. Francis Hospital Nsambya in the ‘Bridging the cancer gap’ programme, to educate the public. Through screen-ing and awareness building sessions. This programme was commissioned in 2011 and the Cancer Ward was officially opened in 2015. Going forward, all proceeds from the cancer run will be used to procure equipment for the cancer ward at St Francis Hospital Nsambya.

In 2015 the Bank participated in the Rotary family health days, and cancer run thereby screening 809,000 women and educating over 10,000,000 through parades, electronic, print and social media.


Participants of the 2015 Cancer Run during the morning aerobics as they prepared for the run.

A CenteBusiness Life article extracted from the NewVision newspaper

42


For the branches where we still use generators, the capacity has been scaled down from 15 - 150kva to 15 - 60kva


THE NUMBERS

Increased allocation on the banks CSI

Increased number of activities

Was allocated on the banks CSI

Were carried out by the bank

People were reached

9.7%

18%

636 million

359 activities

19 million

Preserving the environment remains key for the Bank’s sustainability. In 2015, we increased the number of off-site Automated Teller Machines (ATM’s) us-ing the uninterruptable power supply (UPS) system to back up grid power by 100%. Currently they are 20, and we plan to increase the number by 10 in 2016. For the branches where we still use generators, the capacity has been scaled down from 15 - 150kva to 15 - 60kva, to reduce on amount of carbon released.

Staff were also educated on preserving power and water through a digital campaign that run on all personal computer screens for six months. We also continued to save on paper through the use of duplex printers and electronic devices namely ipads and blackberries for accessing information anytime.

We continued to invest in community activities that preserved the environ-ment, which included donations of refuse bins, community cleaning activities and tree planting.

ENVIRONMENT

Centenary Bank Rubaga branch staff joined hands with green efforts foundation to plant trees in preparation for the Popes’ visit in November 2015.



43

THE SOCIAL MISSION OF THE CHURCH

300 million allocated in supporting the church through direct sponsoring of various programmes, events and publications country wide

OTHER COMMUNITY ACTIVITIESWe were involved in more than 70 community activities

Mbale branch donating a maternity bed and mattresses to St. John the Baptist dispensary

Kamuli Branch donated 10 hospital beds to Kidera Health Centre IV in Buyende District

Centenary Bank owes its foun-dation to the Social Mission of the Catholic Church. It is with this background that the Bank endeavours to support the church in its various activities, both those concerning social development and evangelism. The Bank allocated over 300M (2015) from 138M (2014) to support the church through direct sponsorship of various programmes, events and pub-lications country wide.

Centenary Bank has a long history of supporting communities. We support them through participating in developmental activities and direct donations. We were involved in more than 70 community activities in 2015.


44


The index below comprises indicators from the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines.

The index has been abridged to relate it to the Bank’s disclosure status.

GRI Indicators’ report

PERFORMANCE INDICATORS

TOPIC DISCLOSURE PAGES

DESCRIPTION

1.1 & 1.2 Vision, Mission and Ownership 8 Mission Statement

PROFILE



DESCRIPTION

2.1 Name of reporting organisation 6 & 63 Centenary Rural Development Bank Limited

2.2 Major products or services, including brands if appropriate

35 -36 Financial products and services

2.3 Operational structure of the organisation 16 & 18 - 31 Excecutive Management, Corporate governance

2.4 Description of major divisions, operating com-panies, subsidiaries and joint ventures

16 & 18 - 31 Excecutive Management, Corporate governance

2.5 Countries in which the organisation’s located 6 & 63 Bank contact information, general information

2.6 Nature of ownership 9 Ownership

2.7 Nature of markets served 76 Sectors financed / Industry analysis

2.8 Scale of the reporting organization’s:

Number of employees 39 Staffing

Products produced/services offered 35 - 36 Products and services


GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS



DESCRIPTION

3.1-3.6 Governance structure of the organisation, in-cluding major committees under the board of directors that are responsible for strategy and oversight

18 -13 Corporate governance

ECONOMIC PERFORMANCE INDICATORS



DESCRIPTION

EC1 Net sales and Increase in retained earnings 18 - 31 & 47 -45 & 59 -61

Statement of Comprehensive Income/ Statement of changes in Equity, Financial review

EC3 Geographic breakdown of markets 117 - 120 Branch an ATM Network

EC3 Cost of all goods and services purchased 33 Value added statement

Total employee remuneration 33 Value added statement

EC8 Total taxes of all types paid 33 & 59 & 99 Value added statement/ income statement/ note 14


45SUSTAINABILITY REPORTING STATEMENT (continued...)

HUMAN RIGHTS



DESCRIPTION

HR1 Policies and guidelines dealing with human rights

Human rights recognized, observed and em-bedded in the Ugandan’s Constitution. No evi-dence of transgressions but Bank’s Policies not formally codified.

HR2 Consideration of human rights impacts in mak-ing business decisions

HR3 Policies/procedures to evaluate human rights performance within supply chain

HR4 Global policy/procedures preventing discrimi-nation of any form

HR5 Policy on freedom of association independent of local laws

HR6 Policy excluding child labour

HR7 Description of policy to prevent forced and compulsory labour

PRODUCT RESPONSIBILITY



DESCRIPTION

PR1 Policy for preserving customer health and safety

40 - 43 Customers/Environment

PR2 Product information and labeling policies/pro-cedures

34 - 36 Customers engagement and support/ Finacial products and services

SOCIAL LABOUR PERFORMANCE INDICATORS



DESCRIPTION

LA1 Breakdown of workforce 39 Staffing highlights

LA2 Net employment creation and average turnover

33 & 39 Value added statements /Staffing highlights

LA3 Retention rates 39 Staffing highlights

LA4 Policies/procedures on negotiations with em-ployees over changes in operations

36 - 38 Employee empowerment and engagement

LA5 Health and safety committees 37 Occupational safety and health

LA6 Occupational accidents and diseases 37 Occupational safety and health

LA6 Injury, lost days and absentee rates and work-related fatalities

37 Occupational safety and health

LA8 Policies and programmes on HIV/AIDS 37 Staff welfare issues

LA9 Average hours of training per employee 38 Training and Development Programmes for the year 2015

LA10 Transformation policies and procedures 38 Perfomance management/ talent management

LA11 Composition of senior management and cor-porate governance bodies

23 - 24 & 39 Senior Management Diversity / Diversity and independence

46


The Bank continued its growth momentum in all fronts especially

profitability and total assets. This growth has been maintained

due to continued focus on strategy execution.

Fabian Kasi, Managing Director.

FINANCIAL REVIEW


47

NET PROFIT

COST TO INCOME RATIO

EQUITY CAPITAL

LOAN ASSETS DEPOSITS

REVENUE

37.6%

5.2%

26.2%

22.8% 17.5%

21.5%

Shs101.6 billion

65.3%

Shs400.6 billion

Shs1,020.2 billion

Shs1,380.2 billion

Shs393.9 billion

FINANCIAL HIGHLIGHTS


FINANCIAL REVIEW (continued...)

48


Financial Performance Highlights –Budget Performance

Actual 2015 Budget 2015 Actual 2014 Budget 2014 2015%

Shs.‘000’ Shs.‘000’ Shs.‘000’ Shs.‘000’ +/-

Financial data

Total assets 1,974,400,355 1,973,577,855 1,635,070,774 1,626,395,968 20.8

Shareholders’ funds 400,625,133 377,918,596 317.501,337 365,899,318 26.2

Total customer deposit 1,380,193,855 1,414,443,439 1,175,115,554 1,080,612,941 17.5

Net loans and advances 1,020,227,352 986,476,641 830,931,969 777,502,181 22.8

Total income 393,900,646 323,554,518 324,298,922 357,837,361 21.5

Total expenses 257,388,615 217,137,789 228,812,880 180,009,703 12.5

Profit before income tax 136,512,031 106,416,728 95,486,042 77,827,658 43.0

Profit after income tax 101,601,248 79,794,882 73,816,511 64,750,341 37.6

Key performance ratios

Cost to income ratio 65.3% 71.3% 70.6% 73.4% -5.2

Return on assets 5.6% 4.4% 4.8% 4.7% 0.8

Return on equity 28.3% 23.2% 25.9% 19.1% 2.4

Lending ratio 73.9% 69.7% 70.7% 73.7% 3.2

Total expenses to loan ratio 25.2% 22.0% 27.5% 23.2% -2.3

Capital adequacy ratio (Tier 2) 25.1% 12% 29.4% 12% -4.3

Non-financial data

Number of depositors 1,473,958 1,433,460 1,307,757 1,240,077 12.7

Number of ATMs 157 158 153 147 2.6

Number of Branches 63 66 62 63 1.6



49

Statement of Comprehensive Income Analysis

The Bank’s total income is comprised of interest income, income from commissions and fees and other non-op-erating income. Total income went up by Shs69.6 bil-lion in 2015 (2014: 48.7 billion), representing a growth of 21.5% when compared to 17.7% in 2014. Income moved up as a result of growth in business of both loans and investments.

Reinvigorating customer service, relationship manage-ment, and service processes has been key to the bank’s 2015 performance. The Call Centre has been able to support personal banking complaints and information dissemination. Special attention and care has been given to the top customer tickets. In this regard, there has been an improvement in customer bank interactions and indeed customer satisfaction, which propelled the up-take of the bank products and customer referrals.

In terms of microfinance, the bank has continued to re-spond to the changing needs of the customers. Contrary to other banks, Centenary Bank is able to lend amounts in excess of Shs.15m, against untitled land (kibanja) col-lateral. In the same vein, the bank stayed with the mi-crofinance loan interest rates in 2015, even when other financial institutions were stepping up.

Net interest income

Net interest income, which is the margin between in-terest income and interest expense, remained the main source of income for the Bank. Net interest income for the year 2015 was Shs 267.7 billion (2014: Shs 210.5 bil-lion) and it represents 75.4% of operating income(2014: 73.3%).

2015 2014 % %Growth in net interest income 27.2 20.1Net interest margin 18.4 17.6

Net interest income growth of 27.2 % was achieved. Income benefited from strong growth in assets of 20.8% in 2015 (2014: 12.8%). The growth was also attributed to faster growth in loans and investments in government securities.

The Bank’s net interest margin increased by 0.8% (2014: decreased by 0.8 %) to close at 18.4% (2014: 17.6%).The increase was mainly attributed to a review of inter-est rate offered to customers following the increase in the Central Bank Rate and an increase in rates on Gov-ernment securities. The trend of the Bank’s net interest income and net interest margin over the last five years is presented below:

Non-interest income:

The Bank’s non-interest income arose from trade financ-ing activities such as letters of credit, transactional activi-ties including bank drafts, funds transfers, mobile money, trading income and revaluation of currency positions and exchange income on foreign transactions with custom-ers.

Net non-interest income: 2015 2014 % % Growth in net non- interest income 13.5 15.6Net non-interest income as % of 24.6 26.7total operating income

Net non-interest income rose to Shs 87.1 billion (2014: Shs 76.7 billion) following growth in fee and commis-sion income by 12.6% (2014: 12.3%). This growth was mainly driven by higher transaction volumes initiated through customer interactions with the branches and expanded ATM network. The bank‘s trade finance and treasury activities increased during the year.

The trend of the Bank’s net non-interest income as per percentage of a total income over the last five years is presented below.

Net Interest Income


50


Credit impairment charges

The charge for credit losses for the year 2015 (excluding interest in suspense) decreased by 39% to Shs 6.9 billion (2014:11.3 billion). This charge to the statement of com-prehensive income as a percentage of gross loans and ad-vances remained at 0.7% (2014: 1.3%).

Credit impairment charges decreased by 0.4% (2014: increase by 18.3%). The reduction was due to massive recovery strategy and loan quality improvement in 2015 compared with 2014.

Credit impairment charges:

2015 2014

Percentage change in the (0.4) 18.3impairment charge

Credit loss ratio 0.7 1.3

Credit impairment as % 1.9 2.3of gross loans and advances

Non-performing loans 27,454 24,215(NPL) - millions

Credit loss provision 19,738 19,789(SOFP) - millions

Credit impairment charge - millions 6,873 11,295

Total expenses

2015 2014 % %

Growth in total operating expense 12.5 12.0 Change in cost-to-income ratio 5.2 3.6

Total expenses increased by 12.5% against income growth of 21.5% (2014:12.0% against income growth of 17.7%). The cost-to-income ratio reduced to 65.3% in 2015 from 70.6% in 2014. The staff costs in 2015 were higher by 20.3% compared to 2014. Other operating expenses in 2015 were higher by 16.0% when compared to 2014.

The decrease in cost-to-income ratio is attributed to the continued focus on efficiency in execution of strategy and increased staff productivity.

Statement of Financial Position Analysis

The Bank’s total assets during the year under review in-creased by 20.8% (2014: 12.8%) due to the expansion in the Bank’s distribution channels by 1 branch, 4 ATMs at 4 locations, completion of Mapeera House and growth in its investments, loan and advances portfolio.

Income and Operating Expenses

Credit Loss as a % of Gross Loans and AdvancesNon Interest Income

Despite the i n c r e a s e in value of non-interest Income, the percentage c o n t r i b u -tion to total income de-creased due to faster growth in interest in-come. The objective of he bank is to reverse this trend and increase reliance on non-interest income.



51

Despite the i n c r e a s e in value of non-interest Income, the percentage c o n t r i b u -tion to total income de-creased due to faster growth in interest in-come. The objective of he bank is to reverse this trend and increase reliance on non-interest income.

Loans Mix (%)

Net loans and advances accounted for 51.7% (2014: 50.8%) of total assets and registered a 22.8% (2014: 23.6%) growth to close at Shs 1,020.0 billion in 2015 up from Shs 830.9 billion in 2014. The loan growth was driven by good customer service and increased lending opportunities in the market arising from in-creased outreach.

Customer deposits, which consist of current accounts, savings accounts and time deposits, made up the Bank’s main sources of funding. These deposits grew by 17.5% (2014: 21.7%) to Shs 1,380.2 billion in 2015 from Shs 1,175.1 billion in 2014 despite the economic hardships during the year. The good deposit growth is attributed to increased marketing efforts and an in-crease in the Bank’s distribution channels.

Loan Composition

In accordance with the Bank’s mission, its microfi-nance segment continues to constitute over 50% of loans and advances. For the year ended December 2015, Micro-finance loans were 57% of the gross loans and advances (2014:59%). The number of to-tal borrowers increased to from162, 999 in 2014 to 178,576 in 2015 of which 92,758 (52%) were microfi-nance clients (2014: 86,023;53%)

Deposit composition

The number of depositors increased to 1,473,958 in 2015 (2014: 1,307,757). This came as a result of in-creased market efforts to bring in more customers. The current account average balance per account in 2015 decreased to Shs 6.7 million (2014: Shs 7.2 mil-lion); savings accounts average balance per account in 2015 increased to Shs 0.7 million (2014: Shs 0.6 mil-lion) and time deposits average balance per account in 2015 increased to Shs 38.8 million (2014: Shs 33.9 mil-lion), signifying an improvement in the savings culture by our customers and the bank`s deposit mobilisation strategy.Savings accounts continue to make up the biggest por-tion of the bank’s deposit liabilities.

Funding mix

The funding mix has remained rather stable in terms of value. Savings accounts represent 49.0% of total funding compared to 48.0% in 2014. The Bank has been able to maintain a stable deposit mix in 2015 due to an increase in its loyal customer base and deposit mobilisation. Current accounts represent 14.7% of total funding compared to 17.2% for the same pe-riod last year. Time deposits constituted 6.2% of total funding compared to 6.7% for 2014. Borrowed and managed funds contribute only 5.7% of the total fund-ing (2014: 5.1%). The bank’s borrowing from EIB in-creased during the year.

The decrease in current account average balance and contribution to total equity and liabilities was due to a decrease in account balances held by Government agencies following a change in Local Government Funding by the Ministry of Finance.

Deposits and Loans

Deposit Mix (%)


52


Equity

Equity, which comprises share capital, share premium and retained earnings, finances 20.3% (2014:19.4%) of the total assets. The level of eq-uity is a function of earnings which are distributed as dividends and amount of earnings which are ploughed back into the business. The Bank’s pol-icy is to maintain a sustainable dividend growth which satisfies shareholders. Dividend payable during the year represents 25% of Net profit after tax.

Capital Adequacy

The Bank monitors its capital adequacy using ratios established by the Bank for International Settlement (BIS) as approved by Bank of Uganda, the regulator. The ratios measure capital ad-equacy by comparing the Bank’s eligible capital with its statement of financial position assets, off-statement of financial position commitments and market and other risk positions at weighted

amounts to reflect their relative risk. At 31st December, 2015, the Bank had a regulatory to-tal capital base of 25.1% (2014: 29.4%) of risk-weighted assets and core capital to risk weighted assets of 24.3% (2014:28.5). Risk weighted as-sets increased by 26.5% (2014:19.9%) whereas total capital (net of intangible assets) increased by 8.3% (2014:23.1%). This compares favorably with the regulatory requirement of 12.0% and 8% respectively.

The decrease in Capital Adequacy ratio was due to investment in the new core banking system which is expected to go live in 2016.

Analysis of Cashflow Statement

The bank’s cashflow from operating activities went up to Shs. 14.0billion in 2015 from Shs. 2.0 billion in 2014.

The increase was mainly due to increase in busi-ness revenue, reduction in interbank borrowing and decrease in short-term investments.

Cashflows in investing activities increased from Shs. 32.1 billion in 2014 to Shs. 78.1 billion in 2015 as a result of a decreased investment in Mapeera House building.

Cashflows from financing/(used in) financing ac-tivities increased from a net outflow of Shs. 19.8 billion to a net inflow of Shs. 10.4 billion in 2015 due to additional borrowings.

Total Assets and Shareholder Equity



53

Centenary Bank registered growth and excellent performance despite the changing trends in banking, increasing cost of doing business, competition and

tough macro-economic conditions.

Professor John Ddumba-Ssentamu, Chairman of the Board

AUDITEDFINANCIAL STATEMENTS

54


Principal activitiesCentenary Rural Development Bank (“The Bank or Centenary Bank”) provides a range of banking and related financial services especially to the economically disadvantaged people in rural areas. The Bank is an approved and licensed financial institution under the Financial Institutions Act 2004 and is a member of the Uganda Banker’s Association.

ResultsThe Bank’s results for the year ended 31 December 2015 are shown in the statement of comprehensive in-come.

DividendThe directors recommend payment of dividends for the year ended 31 December 2015 of Shs 25,517 million (2014: Shs 18,477million).

Share capitalDuring the year, no preference shares were issued.

Directors and directors’ interestThe directors who held office during the year and to the date of this report were as follows:

Prof. John Ddumba Ssentamu Board ChairmanMr. Fabian Kasi Managing DirectorDr. Simon M.S. Kagugube Executive DirectorMr. Jacco Minnaar Member (Chairman ALCO Committee until Sept. 2015)

Mr. Kimanthi Mutua Member (Chairman IT Strategy Committee & ALCO wef Q4 2015)

Dr. Peter Ngategize Member (Chairman Credit Committee & Risk Management Committee)

Mr. Henry Kibirige Member (Chairman Audit Committee)

Mr. Andrew Obol Member (Chairman Compensation and Human Resources Committee)

Mt. Rev. Dr. Cyprian K. Lwanga MemberMt. Rev. Paul Bakyenga MemberMr. Rene Ehrmann Member (Until June 2015)

None of the directors held any beneficial interest in the ordinary share capital of the Bank as at 31 December 2015.

AuditorsErnst & Young have expressed their willingness to continue as external auditors in accordance with section 67 of the Financial Institutions Act 2004.

Management by third partiesNone of the business of the Bank was managed by a third party or a company in which a director had an inter-est during the financial year.

DIRECTORS’ REPORT

AUDITED FINANCIAL STATEMENTS (continued...)


55

Risk managementManaging risk is an integral part of the Bank’s business. The Board of Directors is ultimately responsible for risk management and has established policies and procedures to control and monitor risk through-out the Bank.

Corporate Social Investment StatementThe Bank is focused on achieving strong sustainable financial returns while promoting a more decent, dignified and kinder society. We commit considerable amounts of resources every year to the humani-tarian cause both directly and indirectly through our pricing and product mix.

The Bank has adopted the reporting mechanism developed by the Global Reporting Initiatives (GRI) in an attempt to be transparent about our performance on the triple bottom line of people, property and planet.

Retirement benefitsThe Bank contributes to a retirement benefits scheme covering all of its employees. On attaining the retirement age or honorably leaving the service of the Bank, all permanent staff are eligible for terminal benefits applicable to them.

By order of the Board:

Mrs. Peninnah T Kasule COMPANY SECRETARY


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The Bank’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Uganda, 2012 and Financial Institutions Act 2004, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, wheth-er due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Under the Companies Act of Uganda, the directors are required to prepare financial statements for each year that give a true and fair view of the state of affairs of the Bank as at the end of the financial year and of the oper-ating results of the Bank for that year. It also requires the directors to ensure the Bank keeps proper accounting records that disclose with reasonable accuracy the financial position of the Bank.

The directors accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with Interna-tional Financial Reporting Standards, the Companies Act of Uganda, 2012 and Financial Institutions Act 2004. The directors are of the opinion that the financial statements give a true and fair view of the state of the finan-cial affairs and the profit and cash flows for the year ended 31 December 2015. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

The directors have made an assessment of the Bank’s ability to continue as a going concern and have no reason to believe the business will not be a going concern for the next twelve months from the date of this statement.

The auditor is responsible for reporting on whether the annual financial statements are fairly presented in ac-cordance with the International Financial Reporting Standards, the Companies Act of Uganda, 2012 and Financial Institutions Act 2004.

Approval of the Financial Statements

The financial statements, as indicated above, were approved by the Board of Directors and signed on its behalf on 4th March 2016 by:

Prof. John Ddumba-Ssentamu Mr. Fabian Kasi Mr. Henry Kibirige Mrs. Peninnah T. KasuleCHAIRMAN, BOARD OF DIRECTORS MANAGING DIRECTOR CHAIRMAN, AUDIT COMMITTEE COMPANY SECRETARY

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING



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Report on the financial statements

We have audited the accompanying financial statements of Centenary Rural Development Bank Limited, which comprise the statement of financial position as at 31 December 2015, and the statement of com-prehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 59 to 115.

Directors’ responsibility for the financial statements

The Bank’s directors are responsible for the preparation and fair presentation of these financial state-ments in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Uganda, 2012 and the Financial Institutions Act, 2004, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we com-ply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assess-ment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presenta-tion of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion the accompanying financial statements present fairly, in all material respects, the financial position of Centenary Rural Development Bank Limited as at 31 December 2015, and its financial per-formance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Uganda, 2012 and the Financial Institutions Act, 2004.

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF CENTENARY RURAL DEVELOPMENT BANK LIMITED


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Report on other legal requirements

As required by the Companies Act of Uganda, 2012, we report to you, based on our audit that:

i) we have obtained all the information and explanations which, to the best of our knowledge and belief were necessary for the purposes of the audit;

ii) in our opinion proper books of account have been kept by the Bank, so far as appears from our examination of those books; and

iii) the Bank’s statement of financial position and statement of comprehensive income are in agree-ment with the books of account.

Certified Public AccountantsKAMPALA

8th April 2016



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Statement of comprehensive income

Note 2015 2014 Shs ‘000 Shs ‘000

Interest income 6(a) 306,784,732 247,573,040

Interest expense 7 (39,108,973) (37,067,293)

Net interest income 267,675,759 210,505,747

Fee and commission Income 8 66,990,666 59,516,751

Net interest, fee and commission income 334,666,425 270,022,498

Loss from financial instruments at fair value 6(b) (1,457,185) (505,138)

Foreign exchange income 9 9,868,336 6,161,964

Other operating income 10 11,714,097 11,552,305

Operating income 354,791,673 287,231,629

Employee benefits 11 (105,183,750) (87,409,176)

Impairment losses on loans and advances 12 (6,872,858) (11,294,916)

Depreciation 22(b) (19,243,295) (17,799,524)

Amortisation 22(c) (1,202,241) (1,307,456)

Operating expenses 13 (85,777,498) (73,934,515)

Profit before income tax 136,512,031 95,486,042

Income tax expense 14 (34,910,783) (21,669,531)

Profit for the year 101,601,248 73,816,511

Other comprehensive income net of tax - - -

Total comprehensive income, net of tax 101,601,248 73,816,511

Basic earnings per ordinary share (shillings per share) 31 4.059 2.952


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Statement of financial position

Note 2015 2014 Shs ‘000 Shs ‘000Assets Cash and balances with Bank of Uganda 15 176,919,896 140,653,147Placements with other banks 16 92,522,927 49,527,599Government securities –held for trading 17(a) 31,885,743 24,180,039Loans and advances to customers 18 1,020,227,352 830,931,969Government securities –held to maturity 17(b) 409,067,314 412,179,522Other assets 19 37,930,814 31,667,816Deferred income tax asset 20 2,548,050 -Deferred expenses 21 1,801,287 9,233,400Finance lease on leasehold land 22(a) 2,178,446 2,223,977Property and equipment 22(b) 197,655,135 132,475,944Intangible assets 22(c) 1,663,391 1,997,361Total assets 1,974,400,355 1,635,070,774

Liabilities Customer deposits 23 1,380,193,855 1,175,115,554Deposits from other banks 24 3,071,430 5,456,389Inter-bank borrowing 25 4,006,082 -Managed funds 26 10,284,689 10,769,684Borrowed funds 27 102,045,662 72,656,320Current income tax payable 14 5,137,889 5,259,400Deferred income tax liability 20 - 300,406Deferred grants 30 536,587 746,576Other liabilities 28 66,858,407 46,686,379Provision for litigation 29 1,640,621 578,729Total liabilities 1,573,775,222 1,317,569,437

Equity Ordinary share capital 32 25,000,000 25,000,000Preference share capital 32 116,624 116,624Share premium 32 1,138,927 1,138,927Regulatory reserve 34 5,239,369 3,377,657Proposed dividends 33(b) 25,516,936 18,477,452Retained earnings 343,613,277 269,390,677Total equity 400,625,133 317,501,337Total equity and liabilities 1,974,400,355 1,635,070,774

The financial statements were approved by the Board of Directors and signed on its behalf on 4th March 2016 by:

Prof. John Ddumba-Ssentamu Mr. Fabian Kasi Mr. Henry Kibirige Mrs. Peninnah T. KasuleCHAIRMAN, BOARD OF DIRECTORS MANAGING DIRECTOR CHAIRMAN, AUDIT COMMITTEE COMPANY SECRETARY



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Statement of changes in equity

Year ended December 2015 Note Ordinary Preference Share Regulatory Retained Proposed TOTAL

shares shares premium Reserve profits dividends

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

At 1 January 2015 25,000,000 116,624 1,138,927 3,377,657 269,390,677 18,477,452 317,501,337

Total comprehensive income - - - - 101,601,248 - 101,601,248

Transfer to regulatory reserve 34 - - - 1,861,712 (1,861,712 ) - -

Dividend paid 33 (a) - - - - - (18,477,452) (18,477,452)

Proposed dividends 33 (b) - - - - (25,516,936) 25,516,936 -

At 31 December 2015 25,000,000 116,624 1,138,927 5,239,369 343,613,277 25,516,936 400,625,133

Year ended December 2014 Note Ordinary Preference Share Regulatory Retained Proposed TOTAL

shares shares premium Reserve profits dividends

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

At 1January 2014 25,000,000 116,624 1,138,927 1,822,018 215,607,257 9,652,245 253,337,071

Total comprehensive income - - - - 73,816,511 - 73,816,511

Transfer to regulatory reserve 34 - - - 1,555,639 (1,555,639) - -

Dividend paid 33 (a) - - - - - (9,652,245) (9,652,245)

Proposed dividends 33 (b) - - - - (18,477,452) 18,477,452 -

At 31 December 2014 25,000,000 116,624 1,138,927 3,377,657 269,390,677 18,477,452 317,501,337


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Statement of cash flows

Note 2015 2014 Shs ‘000 Shs ‘000Cash flows from operating activities Interest receipts 283,657,004 237,844,632 Interest payments (37,320,999) (40,918,505) Fee and commission income 69,671,724 71,679,028Other income received 10,490,357 9,430,404 Recoveries from loans previously written off 10 4,063,117 3,074,268 Payments to employees (101,621,113) (88,188,005) Payments to suppliers and other payments (76,164,903) (67,874,111)Grants received 30 421,187 758,073Income tax paid 14 (37,880,750) (20,355,351) Cash flows from operating activities beforechanges in operating assets and liabilities 115,315,624 105,450,433

Changes in operating assets and liabilities Investments 12,060,603 (65,911,424) Loans and advances to customers 18 (189,295,383) (162,308,211) Other assets 19 (6,217,468) 3,689,596 Customer deposits 23 205,078,301 209,224,360 Deposits from other banks 24 1,621,123 (83,334,524) Other liabilities 28 5,439,038 (4,779,714) 28,686,214 (103,419,917) Net cash flows generated from operating activities 144,001,838 2,030,516 Cash flows from investing activities Additions to deferred expenses 21 (21,105,223) (17,562,349)Additions to property and equipment 22(b) (57,036,694) (14,932,413)Additions to software 22(c) (189,599) -Proceeds from sale of property and equipment 244,800 369,857 Net cash flows used in investing activities (78,086,716) (32,124,905) Cash flows from financing activities Dividends paid 33(a) (18,477,452) (9,652,245) Proceeds from managed/borrowed funds 26,27 45,583,828 5,677,663Repayments of managed/borrowed funds 26,27 (16,679,480) (15,909,627) Net cash flows generated from / (used in) financing activities 10,426,896 (19,884,209) Net increase / (decrease) in cash and cash equivalents 76,342,018 (49,978,598)Net foreign exchange difference 19,574,158 2,529,497Cash and cash equivalents at 1 January 342,532,018 389,981,119 Cash and cash equivalents at 31 December 35 438,448,194 342,532,018



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1. General information

The Bank is incorporated in the Republic of Uganda under the Companies Act 2012 and is domiciled in the Repub-lic of Uganda. The address of its registered office is:

Mapeera HousePlot 44-46 Kampala RoadP. O. Box 1892, Kampala

2. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

a. Basis of preparation

The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS). The financial statements are presented in the functional currency, Uganda Shillings (Shs), rounded to the nearest thou-sand, and prepared on the historical cost basis, except where otherwise stated in the accounting policies below. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. It also requires management to exercise its judgment in the process of applying the Bank’s accounting policies. The areas involving a higher degree of judgment or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

For purposes of reporting under the Companies Act, 2012 of Uganda, the balance sheet in these financial state-ments is represented by the statement of financial position and the profit and loss account is represented by the statement of comprehensive income.

New and amended standards and interpretations

The accounting policies adopted are consistent with those used in the previous year. The following new and amended standards and interpretations that became effective for the Bank during the year did not have any impact on the accounting policies, financial position or performance of the Bank:

• Amendments to IAS 19 Defined Benefit Plans: Employee Contributions• Annual Improvements 2010-2012 Cycle• IFRS 2 Share-based Payment• IFRS 3 Business Combinations• IFRS 8 Operating Segments• IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets• IAS 24 Related Party Disclosures• Annual Improvements 2011-2013 Cycle• IFRS 3 Business Combinations• IFRS 13 Fair Value Measurement• IAS 40 Investment Property

Standards issued but not yet effectiveThe standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Bank’s financial statements are disclosed below. The Bank intends to adopt these standards, if applicable, when they become effective.

NOTES TO THE FINANCIAL STATEMENTS

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NUMBER TITLE EFFECTIVEDATE

EXECUTIVE SUMMARY

IFRS 9 Financial Instruments

1-Jan-18 In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application per-mitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Bank plans to adopt the new standard on the required effective date. During 2015, the Bank has performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reason-able and supportable information being made available to the Bank in the future. Overall, the Bank expects no significant impact on its statement of financial position and equity except for the effect of applying the impairment requirements of IFRS 9. The Bank expects a higher loss allowance resulting in a negative impact on equity and will perform a detailed assessment in the future to determine the extent.

IFRS 15 Revenue from Contracts with Customers

1-Jan-18 IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The Bank plans to adopt the new standard on the required effective date using the full retrospective method. During 2015, the Bank performed a preliminary assessment of IFRS 15, which is subject to changes arising from a more detailed ongoing analysis. Furthermore, the Bank is considering the clarifications issued by the IASB in an exposure draft in July 2015 and will monitor any further developments.

The Bank is still assessing the impact the new standard will have on its revenue.

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The Bank plans to adopt the new standard on the required effective date using the full retrospective method. During 2015, the Bank performed a preliminary assessment of IFRS 15, which is subject to changes arising from a more detailed ongoing analysis. Furthermore, the Bank is considering the clarifications issued by the IASB in an exposure draft in July 2015 and will monitor any further developments.

IFRS 16 Leases 1-Jan-19 The IASB issued IFRS 16 Leases on 13 January 2016. The scope of the new standard includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

Key features• The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to

certain exemptions) in a similar way to finance leases under IAS 17.• Lessees recognise a liability to pay rentals with a corresponding asset, and recognise interest expense and

depreciation separately.• The new standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., per-

sonal computer) and short-term leases (i.e., leases with a lease term of 12 months or less).• Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, dis-

count rate) by the lessee is required upon certain events.• Lessor accounting is substantially the same as today’s lessor accounting, using IAS 17’s dual classification

approach.

The new standard is effective for annual periods beginning on or after 1 January 2019. Early application is permit-ted, but not before an entity applies IFRS 15. The new standard permits a lessee to choose either a full retrospec-tive or a modified retrospective transition approach.

International Financial Reporting Standards and amendments issued but not effective for 31 December 2015 year-end

NOTES TO THE FINANCIAL STATEMENTS (continued...)


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The standards issued but not yet effective which the Bank does not expect to have an impact on the financial state-ments are listed below:

• IAS 14 Regulatory Deferral Accounts• Amendments to IFRS 11 Joint Arrangements: Ac-

counting for Acquisitions of Interests• Amendments to IAS 16 and IAS 38: Clarification of

Acceptable Methods of Depreciation and Amorti-sation

• Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

• Amendments to IAS 27: Equity Method in Separate Financial Statements

• Amendments to IFRS 10 and IAS 28: Sale or Con-tribution of Assets between an Investor and its As-sociate or Joint Venture

• Annual Improvements 2012-2014 Cycle• IFRS 5 Non-current Assets Held for Sale and Dis-

continued Operations• IFRS 7 Financial Instruments: Disclosures• IAS 19 Employee Benefits• IAS 34 Interim Financial Reporting• Amendments to IAS 1 Disclosure Initiative• Amendments to IFRS 10, IFRS 12 and IAS 28 Invest-

ment Entities: Applying the Consolidation Excep-tion

b. Interest income and expense

Interest income and expense on all interest bearing in-struments are recognised using the effective interest method in profit or loss.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts financial instruments estimated future cash payments or receipts through its expected life or, where appropriate, a shorter period, to the net car-rying amount.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised based on the rate of inter-est that was used to discount the future cash flows for the purpose of measuring the impairment loss.

c. Fees and commission income

Fees and commissions are generally recognised on an ac-crual basis when the service has been provided. Loan commitment fees for loans that are likely to be drawn

down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan.Other fees and commissions include; Loan and lease pro-cessing fees, Commitment Fees Overdraft to Customers, commissions on Advance Payment Guarantees, bid bonds & Guarantees, drafts Payable, bills Payable, Inter-branch, RTGS /EFT Transfers, Cheques, uncleared effects and ledger fees.

d. Translation of foreign currencies

The accounting records are maintained in the currency of the primary economic environment in which the Bank operates, Uganda Shillings (“the functional currency”). Transactions in foreign currencies during the year are con-verted to Uganda shilling using the exchange rates prevail-ing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transac-tions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Non–monetary items that are measured in terms of his-torical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition.

e. Financial instruments

A financial instrument is any contract that gives rise to a fi-nancial asset of one entity and a financial liability or equity instrument of another entity.

i) Financial assets

Initial recognition and measurementFinancial assets are classified, at initial recognition, as fi-nancial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the finan-cial asset. Purchases or sales of financial assets that re-quire delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Bank commits to purchase or sell the asset.

Subsequent measurementFor purposes of subsequent measurement financial assets are classified in four categories:• Financial assets at fair value through profit or loss


66


• Loans and receivables• Held-to-maturity investments• Available-for-sale financial investments

Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and finan-cial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are ac-quired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by IAS 39. The Bank has designated its financial assets as held for trading, at fair value through profit or loss. Finan-cial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in profit or loss.

Loans and receivablesThis category is the most relevant to the Bank. Loans and receivables are non-derivative finan-cial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are sub-sequently measured at amortised cost using the effective interest rate (EIR) method, less impair-ment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in profit or loss. This category generally applies to loans and advances to customers, cash and balances with Bank of Uganda, placements with other banks and treas-ury bills.

Held-to-maturity investmentsNon-derivative financial assets with fixed or de-terminable payments and fixed maturities are classified as held to maturity when the Bank has the positive intention and ability to hold them to maturity. After initial measurement, held to matu-rity investments are measured at amortised cost using the EIR, less impairment. Amortised cost is

calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as interest income in profit or loss. The losses arising from impairment are recognised in profit or loss as finance costs.

Available-for-sale (AFS) financial investmentsAFS financial investments include equity invest-ments and debt securities. Equity investments classified as AFS are those that are neither classi-fied as held for trading nor designated at fair value through profit or loss. Debt securities in this cat-egory are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. The Bank did not have any available-for-sale assets as at 31 De-cember 2015 or 2014.

DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similar finan-cial assets) is primarily derecognised (i.e. removed from the Bank’s statement of financial position) when:• The rights to receive cash flows from the

asset have expired, or

• The Bank has transferred its rights to re-ceive cash flows from the asset or has as-sumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrange-ment; and either

(a) The Bank has transferred substantially all the risks and rewards of the asset, or

(b) The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the as-set

When the Bank has transferred its rights to re-ceive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Bank continues to recognise the transferred asset to the extent of the Bank’s continuing in-volvement. In that case, the Bank also recognises



67

an associated liability. The transferred asset and the as-sociated liability are measured on a basis that reflects the rights and obligations that the Bank has retained.

ii) Financial liabilities

Initial recognition and measurementFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives des-ignated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised in-itially at fair value and, in the case of loans and borrow-ings and payables, plus directly attributable transaction costs. The Bank’s financial liabilities include customer deposits, deposits from other banks, loans and bor-rowings and managed funds.

Subsequent measurementThe measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include financial liabilities held for trading and finan-cial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Bank that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in profit or lossFinancial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39 are satisfied. The Bank has not designated any financial liability as at fair value through profit or loss.

Loans and borrowingsThis is the category most relevant to the Bank. After initial recognition, interest-bearing loans and borrow-ings, customer deposits and managed funds are sub-sequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit

or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in profit or loss. This cat-egory generally applies to interest-bearing loans and borrowings, customer deposits, deposits from other banks, and managed funds

DerecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled, or ex-pires. When an existing financial liability is replaced by another from the same lender on substantially differ-ent terms, or the terms of an existing liability are sub-stantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.

OffsettingFinancial assets and liabilities are offset and the net amount presented in the statement of financial posi-tion when, and only when, the bank has a currently en-forceable legal right to set off the recognised amounts and it intends either to settle on a net basis or to real-ise the asset and settle the liability simultaneously. In-come and expenses are presented on a net basis only when permitted under IFRSs.

f. Impairment of financial assets

The Bank assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impair-ment losses are incurred if, and only if, there is objec-tive evidence of impairment as a result of one or more events that occurred after initial recognition of the as-set (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Bank about the following loss events:

The estimated period between a loss occurring and its


68


identification is determined by management for each identified portfolio. In general, the periods used vary between 3 month and 6 months.

• significant financial difficulty of the bor-rower

• a breach of contract, such as default or delinquency in interest or principal repay-ments;

• the granting to the borrower, for econom-ic or legal reasons relating to the borrow-er’s financial difficulty, a concession that the lender would not otherwise consider;

• it becoming probable that the borrower will enter bankruptcy or other financial re-organization;

• the disappearance of an active market for that financial asset because of financial dif-ficulties; or

• observable data indicating that there is a measurable decrease in the estimated fu-ture cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:

• adverse changes in the payment status of borrowers in the group; or

• National or local economic conditions that correlate with defaults on the assets in the group.

Assets carried at amortised costThe Bank first assesses whether objective evi-dence of impairment exists individually for fi-nancial assets that are individually significant, and individually or collectively for financial assets that are not individually significant.

If the Bank determines no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it in-cludes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are in-dividually assessed for impairment and for which an impairment loss is or continues to be recog-nised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans or held-to-maturity investments

carried at amortised cost has been incurred, the amount of the loss is measured as the dif-ference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial instrument’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for meas-uring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Bank may measure impairment on the basis of an instrument’s fair value using an observable market price.

The calculation of the present value of the esti-mated future cash flows of a collateralised finan-cial asset reflects the cash flows that may result from foreclosure less costs for obtaining and sell-ing the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Provisions for impairment on assets assessed individually are referred to as specific provi-sions, whilst provisions for such losses on assets assessed collectively are referred to as general provisions.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the neces-sary procedures have been completed and the amount of the loss has been determined. Subse-quent recoveries of amounts previously written off are reported as other income in the state-ment of comprehensive income.

If, in a subsequent period, the amount of the im-pairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an im-



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provement in the debtor’s credit rating), the previous-ly recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in profit or loss.

In addition to the measurement of impairment losses on loans and advances in accordance with IFRS as set out above, the Bank is required by the Financial Insti-tutions Act 2004 to estimate losses on loans and ad-vances as follows:

Specific provision for the loans and advances consid-ered to be non-performing (impaired) based on the criteria and classification of such loans and advances established by the Bank of Uganda, as follows:

Commercial, Salary, Home Improvements and Micro finance loans above 5 million • Substandard loans with arrears period between

91 to 180 days – 20%• Doubtful loans with arrears period between

180 to 365 days – 50% • Loss with arrears period exceeding 365 days –

100% provision

Microfinance loans up to 5 million• Substandard loans with arrears period between

30 to 59 days – 25%• Doubtful loans with arrears period between 60

to 89 days – 50% • Loss with arrears period exceeding 89 days –

100% provision• General provision of 1% of credit facilities less

specific provision and suspended interest

In the event that provisions computed in accordance with the Financial Institution Act 2004 materially ex-ceed provisions determined in accordance with IFRS, the excess is accounted for as an appropriation of re-tained earnings.

g. Impairment of non-financial assets

At the end of each reporting period, the Bank assesses whether there is any indication that an asset is im-paired, that is, whether its carrying amount is higher than its recoverable amount). If there is an indication that an asset is impaired, then the asset’s recover-able amount is calculated. [IAS 36.9]The recoverable amount is determined by assessing;• If the fair value less costs of disposal or value in

use is more than carrying amount, then it is not necessary to calculate the other amount since

the asset is not impaired. • If fair value less costs of disposal cannot be de-

termined, then recoverable amount is value in use.

• For assets to be disposed of, recoverable amount is fair value less costs of disposal.

The Bank looks at both external and internal indica-tors to determine if an asset is impaired.

External Indicators:• Decline in market value • Negative changes in technology, markets, econ-

omy, or laws• Increases in market interest rates• Net assets of the Bank higher than market capi-

talisation

Internal Indicators: • Obsolescence or physical damage of the asset• Asset is idle as part of a restructuring or held for

disposal• Worse economic performance than expected

If an impairment loss is determined, the loss is recog-nised in profit or loss.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been rec-ognised for the asset in prior years. Such reversal is recognized profit or loss.

h. Property and equipment

Recognition and measurementItems of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attribut-able to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their in-tended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. Purchased software


70


that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and are recog-nised net within other income in profit or loss.

Subsequent costsThe cost of replacing a part of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future eco-nomic benefits embodied within the part will flow to the bank and its cost can be measured reliably. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.

DepreciationDepreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives.

The estimated useful lives for the current and com-parative periods are as follows:

Leased buildings Shorter of 50 years or lease periodComputer hard ware 3 yearsFurniture, fixtures and fittings 5 yearsMotor vehicles & cycles 4 yearsGenerators & office equipment 8 years

Depreciation methods, useful lives and residual val-ues are reassessed at each financial year-end and adjusted prospectively, if appropriate.

i. Fair value measurement

The Bank measures some financial instruments at fair value at each reporting date. Also, fair values of

financial instruments measured at amortised cost are disclosed in Note 4(c).

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place ei-ther:

• In the principal market for the asset or liabil-ity, or

• In the absence of a principal market, in the most advantageous market for the asset or li-ability

The principal or the most advantageous market must be accessible to by the Bank. The fair value of an asset or a liability is measured using the as-sumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another mar-ket participant that would use the asset in its highest and best use. The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable in-puts and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is meas-ured or disclosed in the financial statements are cat-egorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market pric-es in active markets for identical assets or li-abilities

• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirect-ly observable

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank determines whether transfers have occurred be-tween levels in the hierarchy by re-assessing cat-



71

egorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

j. Intangible assets

Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amor-tised on the basis of the expected useful lives of 3 years.

The useful life of the new Core Banking System (CBS), was revised to 7 years w.e.f year 2014.Costs associated with developing or maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associ-ated with the production of identifiable and unique software products controlled by the bank, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Direct costs include software development employee costs and an appropriate portion of rel-evant overheads.

k. Tax

Current income tax Income tax expense is the aggregate of the charge to profit or loss in respect of current income tax and de-ferred income tax. Current income tax is the amount of income tax payable on the taxable profit for the year determined in accordance with the Ugandan Income Tax Act. Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.

Current income tax relating to items recognised di-rectly in equity or other comprehensive income is recognised directly in equity or other comprehensive income and not in profit or loss. Management period-ically evaluates positions taken in the tax returns with respect to situations in which the tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income taxDeferred income tax is provided using the liabil-ity method on temporary differences between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes at the re-porting date. Deferred income tax liabilities are rec-ognised for all taxable temporary differences, except:

• When the deferred income tax liability arises from the initial recognition of goodwill or an as-set or liability in a transaction that is not a busi-ness combination and, at the time of the trans-action, affects neither the accounting profit nor taxable profit or loss

• In respect of taxable temporary differences as-sociated with investments in subsidiaries, asso-ciates and interests in joint ventures, when the timing of the reversal of the temporary differ-ences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all de-ductible temporary differences, the carry for-ward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects nei-ther the accounting profit nor taxable profit or loss .

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, de-ferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable fu-ture and taxable profit will be available against which the temporary differences can be uti-lised.

Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred income tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

The carrying amount of deferred tax assets is re-viewed at each reporting date and reduced to the extent that it is no longer probable that sufficient tax-


72


able profit will be available to allow all or part of the de-ferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become prob-able that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current income tax assets against current in-come tax liabilities and the deferred income taxes re-late to the same taxable entity and the same taxation authority.

Withholding taxWithholding tax is deducted at source at 20% on in-come earned on treasury bills and bonds. This amount is included under the income tax charge for the year.

Value Added taxValue added tax is chargeable at a rate of 18%. Output VAT is the value added tax you calculate and charge on your own sales of goods and services if you are regis-tered. Input VAT is the value added tax added to the price when you purchase goods or services liable to VAT. VAT payable arises when the output VAT is in ex-cess of input VAT.

l. Employee benefits

The Bank and all its employees contribute to the Na-tional Social Security Fund, which is a defined contribu-tion scheme.

The Bank also operates a defined contribution benefits scheme for its employees. The Bank has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all em-ployees the benefits relating to employee service in the current and prior periods. The assets of the scheme are held in separate trustee administered funds, which are funded by contributions from both the Bank and employees.

The Bank’s contributions to the defined contributions schemes are charged to profit or loss in the year in which they relate.

The estimated monetary liability for employees’ ac-crued annual leave entitlement at the reporting date is recognised as an expense accrual.

m. Contingent liabilities and commitments

Contingent liabilities and commitments comprised letters of credit, acceptances, guarantees and com-mitments to extend credit are not included in assets and liabilities in note 36. They are accounted for as off-statement of financial position transactions and are disclosed as contingent liabilities and commitments.

n. Share capital

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as ‘share premium’ in equity.

Preference shares (irredeemable) classified as share capital in equity.

Dividends on shares are charged to equity in the pe-riod in which they are declared. Proposed dividends are shown as a separate component of equity until de-clared.

o. Cash and cash equivalents

Cash and cash equivalents include cash at hand, depos-its held at call with banks, other short term highly liquid investments with original maturities of three months or less, including: cash and balances with the Bank of Uganda, Treasury and other eligible bills, and amounts due from other banks. Cash and cash equivalents in-clude the cash reserve requirement held with the Bank of Uganda.

p. Comparatives No comparative figures have been adjusted.

q. Grants

Grants are recognised where there is reasonable as-surance that the grant will be received and all attached conditions will be complied with. When the grant re-lates to an expense item it is recognized as income over the period necessary to match the grant on a system-atic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal



73

amounts over the expected useful life of the related asset.

r. Provisions

A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obliga-tion that can be estimated reliably, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.

s. Managed funds and borrowed fundsThe Bank manages funds on behalf of others in terms of specific agreements. The funds are recorded as a liability on receipt of the funds and the correspond-ing investments (as per the agreement) are recorded under cash and cash equivalents or loans and advanc-es to customers. Details of the funds are included in note 26 and 27.

t. Leases

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is de-pendent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Bank as a lesseeLeases that do not transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased items are operating leases. Operat-ing lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Contingent rental payable is recognised as an expense in the period in which they are incurred.

Bank as a lessorWhen assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross re-ceivable and the present value of the receivable is recognised as unearned finance income. Lease in-come is recognised over the term of the lease using the net investment method. The Bank has entered

into finance lease transactions as a lessor (Note 18(b) – Finance Leases).

3 Critical Accounting Estimates and Judgments in Applying Accounting Policies

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judg-ments are continually evaluated and are based on historical experience and other factors, including ex-pectations of future events that are believed to be reasonable under the circumstances.

i. Tax The Bank is subject to various government

taxes under the Ugandan tax laws. Significant judgment is required in determining the pro-vision for income taxes. Significant estimates and judgments are required in determining the provision for taxes on certain transactions. For these transactions, the ultimate tax determi-nation is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. The deferred tax asset /liability is indicated in note 20.

ii Impairment losses on loans and advances The Bank reviews its loan portfolios to assess

impairment at least on a quarterly basis. In de-termining whether an impairment loss should be recorded in profit or loss, the Bank makes judgments as to whether there is any observ-able data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observ-able data indicating that there has been an adverse change in the payment status of bor-rowers in a group, or national or local eco-nomic conditions that correlate with defaults


74


on assets in the Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows.

The methodology and assumptions used for estimating both the amount and timing of fu-ture cash flows are reviewed regularly to re-duce any differences between loss estimates and actual loss experience.

The carrying amount of loans and advances is indicated in note 18(a).

iii. Held-to-maturity investments The Bank follows the guidance of IAS 39 on

classifying non-derivative financial assets with fixed or determinable payments and fixed ma-turing as held-to-maturity. This classification requires significant judgment. In making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity. If the Bank fails to keep these investments to maturity other than for the specific circum-stances – for example, selling a insignificant amount close to maturity – it will be required to re-classify the entire class as available-for-sale. The investments would therefore be measured at fair value and not amortised cost.

The carrying amount of held-to-maturity in-vestments is indicated in note 17(b).

iv. Determining fair values The determination of fair value for financial

assets and liabilities for which there is no observable market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement de-pending on liquidity, concentration, uncertain-ty of market factors, pricing assumptions and other risks affecting the specific instrument.

The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

Level 1: Quoted market price (unadjusted) in an ac-tive market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes in-struments valued using: quoted market prices in ac-tive markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using significant un-observable inputs. This category includes all instru-ments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instru-ments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The fair value disclosures are included in note 4.

4 Financial Risk Management

The Bank’s activities expose it to variety of financial and non-financial risks. These activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the Bank’s business, and the opera-tional risks are inevitable consequences of being in business. The effective management of risk is critical to earnings and balance sheet growth within Cen-tenary Bank where the culture encourages sound commercial decision making, which adequately bal-ances risk and reward. The identification and man-agement of risk remains a high priority and under-pins all business activities.

The Bank’s approach to risk management is based on a well-established risk, compliance and govern-ance process and relies both on individual responsi-bility and collective oversight supported by compre-hensive reporting. This approach balances strong corporate oversight at Head Office level with risk management structures within the business units.

The Bank has governance standards for all major risk



75

types. All standards are applied consistently across the Bank and are approved by the Board through either Bank’s Board Risk Management Committee or Board ALCO Committee.

The standards form an integral part of the Bank’s governance infrastructure reflecting the expecta-tions and requirements of the Board in respect of key areas control across the Bank. The standards ensure alignment and consistency in the manner major risk types across the Bank are identified, measured, managed, controlled and are reported.

The standards underpin the Bank’s governance principles, which are:

Shareholder valueThe Bank’s primary objective is to protect and en-hance shareholder value. As such the risks to this objective drive the Bank’s system of internal con-trol.

EmbeddedThe Bank’s culture reflects its appetite for risk. Risk management is achieved at all levels of the business through a suitable organisational structure, policies, and procedure, and appropriate staff training. Re-sponsibility for risk resides at all levels of manage-ment from the Board down through theorganisation to individuals in office. Each business manager is accountable for managing risk in his or her business area, assisted and supported, where appropriately.

Supported and assuredThe system of governance and internal control pro-vide management and Board with assurance that risks are being managed appropriately. The desig-nated executives and Board Committees regularly receive and review reports on risks, compliance, governance and control process.

ReviewedThe Board of Directors considers the effectiveness of the internal control system and risk manage-ment processes, at least annually. The major risks to which the Bank is exposed, including non – financial risks are:-• Credit risk• Operational risk• Compliance risk• Reputation risk

• Business risk• Strategic risk• Market risk• Liquidity risk• Taxation risk

A combination of these risks occurring concurrently would be the most likely cause of significant loss. The Bank’s approach to managing risk on a holistic basis therefore ensures that risk types are not man-aged in isolation.

a) Credit Risk

Comprehensive resources, expertise and control are in place to ensure efficient and effective manage-ment of credit risk. In lending transactions, credit risk arises through non-performance by counter-party for facilities used. These facilities are typically loans and advances, including the advancement of securities and contracts to support customer obliga-tions (such as letters of credit and guarantees).

Approach to managing credit riskCredit risk is managed by means of a governance structure with clearly defined mandates and del-egated authorities. The Board Risk Committee delegates authority to the Management Credit Risk Committee for the approval of credit proposals. The management further delegates authority within its limits, primarily on a risk adjusted basis.


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Credit Risk Measurement

Internal Risk RatingsThe Bank assesses the credit quality and assigns – watch and standard for performing loans and substandard, doubtful and loss for non-performing borrowers.

Standard and current:

Items that are fully current and the full repayment of the contractual principal and interest amounts are expected.

Watch list: Items for which the borrower is ex-periencing difficulties. Ultimate loss is not expected but could occur if adverse conditions persist.

Substandard1 Items that show underlying well de-fined weaknesses that could lead to probable loss if not corrected. The risk that these items may be impaired is probable and the Bank relies to a large extent on the available security.

Doubtful1 Items that are considered to be im-paired, but are not yet considered fi-nal losses because of pending factors, which may strengthen the quality of the items.

Loss1 Items that are considered to be un-collectible and where the realization of collateral and institution of legal proceedings have been unsuccess-ful. These items are considered of such little value that they should no longer be included in the net assets of the Bank.

1Classified as impaired for accounting purposes

Industry AnalysisThe Bank analyses its customers per industry using vari-ous portfolio segmentation techniques. These include the use of Bank of Uganda categories as well as Interna-tional Standard Classification (SIC) codes whilst ensur-ing compliance with regulatory requirements.

• Agriculture

• Manufacturing

• Trade and commerce

• Transport and utilities

• Building and construction

• Other services

The Bank takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full as and when due. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments.

Such risks are monitored on a revolving basis and are subject to an annual or more frequent review. Limits on the level of credit risk by product, and industry sector are approved by the Board of Directors.

The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on and off-statement of financial position exposures and daily delivery risk limits in relation to trading items. Ac-tual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular anal-ysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate.

Exposure to credit risk is also managed in part by ob-taining collateral and corporate and personal guaran-tees, but a significant portion is personal lending where no such security/undertaking can be obtained.



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As at Dec 2015 Total loan Netting off Exposure Collateral portfolio agreements after 51-100% Coverage Shs 000 (cash accured) netting off Shs 000 over 100% Shs000 Shs000

Secured loans 750,896,923 2,410,956 748,485,967 71,811,327 676,674,640

Un secured loans by cash 289,068,497 - 289,068,497 13,807,116 275,261,381

Total 1,039,965,420 2,410,956 1,037,554,464 85,618,443 951,936,021

Maximum exposure to credit risk before collateral held:

2015 2014 Shs ‘000 Shs ‘000

Credit risk exposure relating to statement of financial position items:

Balances with Bank of Uganda (Note 15) 97,215,868 58,732,147Placements with other banks (Note 16) 92,522,927 49,527,599Investment securities – held to maturity (Note 17) 409,067,314 412,179,522Investment securities – held for trading (Note 17) 31,885,743 24,180,039Loans and advances (Note 18 (a)) 1,039,965,420 850,721,299Other assets 29,960,019 22,634,518

1,700,617,291 1,417,975,124

Credit risk exposures relating to off-statement of financial position items:

- Letters of credit, guarantees and performance bonds (Note 36) 31,123,717 25,023,470- Commitment to extend credit (Note 36) 6,328,088 6,327,176

37,451,805 31,350,646

Total 1,738,069,096 1,449,325,770

The above table represents the worst case scenario of credit risk exposure to the Bank at 31 December 2015 and 2014, without taking into account any collateral held or other credit enhancements attached. The exposures set out above are based on carrying amounts as reported in the statement of financial position.

As shown above, 59.8% (2014: 58.6%) of the total maximum exposure is derived from loans and advances to banks and customers. Investment in debt securities represents 25.4% (2014: 30.1%) of the total maximum exposure.

The table below shows the collateral coverage for secured loans as at year end. The type of collateral held includes land titles, motor vehicles and chattels.

As at Dec 2014 Total loan Netting off Exposure Collateral portfolio agreements after 51-100% Coverage Shs 000 (cash accured) netting off Shs 000 over 100% Shs000 Shs000

Secured loans 639,744,629 754,053 638,990,576 35,599,871 603,390,705

Un secured loans by cash 210,976,670 - 210,976,670 15,274,234 195,702,436

Total 850,721,299 754,053 849,967,246 50,874,105 799,093,141


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Loans and advances to customers are secured mainly by collateral in the form of charges over land and buildings and/or plant and machinery or corporate guarantees. Micro loans can also be secured by chattels.

Loans and advances are summarised as follows: 2015 2014 Shs ‘000 Shs ‘000

Neither past due nor impaired 973,990,998 791,395,724Past due but not impaired 38,520,080 35,111,032Impaired 27,454,342 24,214,543

Gross loans and advances 1,039,965,420 850,721,299Less: Allowance for impairment (19,738,068) (19,789,330)

Net loans and advances 1,020,227,352 830,931,969

Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Bank resulting from both its loans and advance portfolio and debt securities based on the following:

• The Bank exercises stringent controls over granting new loans.• 93.7% (2014: 93.0%) of the loans and advances portfolio are neither past due nor impaired.• 100.0% (2014: 100.0%) of the investments in debt securities are government securities.

Loans and advances neither past due nor impaired

The quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Bank, as follows:

2015 2014 Shs ‘000 Shs ‘000Standard 932,918,680 764,504,141Watch 41,072,318 26,891,583

Total 973,990,998 791,395,724

Loans and advances past due but not impaired

Micro loans that are less than 30 days overdue and other loans that are less than 90 days past due are not considered im-paired, unless other information is available to indicate the contrary. The gross amounts of loans and advances that were past due but not impaired were as follows: 2015 2014 Shs ‘000 Shs ‘000

Past due up to 30 days 24,011,595 25,395,324Past due 31-60 days 7,813,362 6,008,760Past due 61-90 days 6,695,123 3,706,948

Total 38,520,080 35,111,032



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Of the total gross amount of impaired loans, the following amounts have been individually assessed for impairment:

2015 2014 Shs ‘000 Shs ‘000Loans individually assessed for impairment by category

Commercial loans 7,994,307 3,783,057Micro loans 5,223,478 4,525,219Home improvement loans 892,422 868,860Agricultural loans 5,752,261 4,797,658Salary loans 7,233,459 10,068,110Overdrafts 358,415 171,639

27,454,342 24,214,543

Gross loans and advances by category Commercial loans 381,170,822 256,853,882Micro loans 167,374,534 161,617,968Home improvement loans 46,018,861 46,657,323Agricultural loans 125,090,281 127,496,388Salary loans 252,889,344 199,907,497Overdrafts 35,545,430 30,185,205Staff loans 31,876,148 28,003,036

Gross loans and advances 1,039,965,420 850,721,299

Less: Provision for impairment of loans and advances Individually assessed (12,892,365) (14,352,602)Collectively assessed (6,845,703) (5,436,728)

Net loans 1,020,227,352 830,931,969

Other financial assets not impaired

Carrying amounts: Balances with Bank of Uganda 97,215,868 58,732,147Placements with other banks 92,522,927 49,527,599Investment securities- Held-to-maturity 409,067,927 412,179,522Investment securities- Held for trading 31,885,743 24,180,039Other assets 29,960,019 22,634,518

Total 660,652,484 567,253,825


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These are low risk assets which did not exhibit any indicators of impairment as at year end.Movement in provisions for impairment of loans and advances in the statement of financial position are as follows:

Commercial Microfinance Leasing Staff Overdraft Loans Loans portfolio Loans Total

Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000

Non-performing loans - Identified loss:

At 1 January 2015 147,396 395,872 13,619,950 108,404 80,980 14,352,602

Impaired accounts written off (78,283) (1,200,197) (6,025,002) (157,864) (7,461,346)

Additional identified impairment 120,777 1,703,144 13,679,404 204,827 - 15,708,152

Impairments released due (167,811) (383,317) (9,680,162) (12,979) - (10,244,269)to improved status

Movement in interest suspended during the year 19,490 193,482 324,254 - - 537,226

At 31 December 2015 41,569 708,984 11,918,444 142,388 80,980 12,892,365

Performing loans - Unidentified loss:

At 1 January 2015 229,859 807,579 4,215,263 129,458 54,569 5,436,728

Net provisions raised 37,745 374,713 627,976 30,050 338,491 1,408,975

At 31 December 2015 267,604 1,182,292 4,843,239 159,508 393,060 6,845,703

Total 309,173 1,891,276 16,761,683 301,897 474,040 19,738,069

Commercial Microfinance Leasing Staff Overdraft Loans Loans portfolio Loans Total Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000

Non-performing loans - Identified loss:

At 1 January 2014 123,102 443,938 9,656,039 192,794 80,980 10,496,854

Impaired accounts written off - (2,883,922) (4,958,966) (129,139) - (7,972,027)

Additional identified impairment 90,513 4,461,305 12,975,360 158,724 - 17,685,902

Impairments released due (94,392) (1,878,165) (4,519,343) (113,975) - (6,605,875) to improved status

Movement in interestsuspended during the year 28,173 252,716 466,859 - - 747,748

At 31 December 2014 147,396 395,872 13,619,950 108,404 80,980 14,352,602

Performing loans - Unidentified loss:

At 1 January 2014 223,977 754,816 4,117,789 125,256 - 5,221,838

Net provisions raised 5,882 52,763 97,474 4,202 54,569 214,890

At 31 December 2014 229,859 807,579 4,215,263 129,458 54,569 5,436,728

Total 377,255 1,203,451 17,835,213 237,862 135,549 19,789,330



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Movement in provisions for impairment of loans and advances in the statement of comprehensive income are as follows:

2015 2014 Shs ‘000 Shs ‘000Provision for impairment losses Additional identified impairment 15,708,152 17,685,902Additional unidentified impairment 1,408,975 214,890 17,117,127 17,900,792

Reduction due to improved status Identified impairment (10,244,269) (6,605,875) 10,244,269 6,605,875

Provisions for the year 17,117,127 17,900,792Reductions in provision for impairment (10,244,269) (6,605,875)Total statement of comprehensive income movement 6,872,858 11,294,917

Concentration of Risk

Economic sector risk concentrations within the customer loan portfolio were as follows: 2015 2015 Shs ‘000 Shs ‘000 % Credit commitmentsSector analysis by industry Agriculture 180,047,716 17.3 1,002,610Manufacturing 7,890,510 0.8 1,970,418Trade and commerce 205,952,558 19.8 14,026,154Transport and utilities 22,443,306 2.2 122,600Building and construction 245,999,992 23.7 16,253,330Other services 377,631,338 36.3 4,076,694 1,039,965,420 100 37,451,806

2014 2014 Shs ‘000 Shs ‘000 % Credit commitmentsSector analysis by industry Agriculture 145,706,306 17.0 1,611,632Manufacturing 6,460,407 0.8 203,378Trade and commerce 178,439,601 21.0 8,040,825Transport and utilities 20,380,890 2.4 614Building and construction 196,337,346 23.1 15,986,993Other services 303,396,749 35.7 5,507,204 850,721,299 100 31,350,646


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As at 31 December 2015, the Bank had no loans and advances to a single borrower or group of related bor-rowers exceeding 25.0% of core capital (31 December 2014: Nil).

Credit Related Commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guar-antees and standby letters of credit, which represent ir-revocable assurances that the Bank will make payments in the event that a customer cannot meet its obligation to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Bank on behalf of the customer authorizing a third party to draw drafts up to a stipulated amount under specific terms and conditions, are collateralized by the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing.

Commitments to extend credit represent unused por-tions of authorizations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards.

The Bank monitors the term of maturity of credit com-mitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

Impaired loans and advances

Individually impaired loans and securities are loans and advances and investments in debt securities (other than those carried at fair value through profit or loss) for which the bank determines that there is objective evi-dence of impairment and it does not expect to collect all principal and interest due according to the contractual terms of the loan agreement. These loans are graded as standard and watch in the bank’s internal credit risk

grading system. Investments in debt securities carried at fair value through profit or loss are not assessed for impairment but are subject to the same internal grading system.

Past due but not impaired loans

Past due but not impaired loans other than those carried at fair value through profit or loss, are those for which contractual interest or principal payments are past due, but the bank believes that impairment is not appropriate on the basis of the level of security / collateral available and / or the stage of collection of amounts owed to the bank.

Loans with renegotiated terms

Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s fi-nancial position and where the bank has made conces-sions that it would not otherwise consider. Once the loan is restructured it remains in this category for at least one year and returned to normal category there after satisfactory performance.

Allowances for impairment

The Bank establishes an allowance for impairment loss-es on assets carried at amortised cost or classified as available for sale that represents its estimate of incurred losses in its loan and investment debt security portfolio. The main components of this allowance are a specific loss component that relates to individually significant ex-posures, and a collective loan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans that are considered individually insignificant as well as individually significant exposures that were subject to individual assessment for impairment but not found to be individually impaired. Assets carried at fair value through profit or loss are not subject to impairment testing as the measure of fair value reflects the credit quality of each asset.



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Write-off policy

The Bank writes off a loan or an investment debt security balance, and any related allowances for im-pairment losses, when the Bank Credit Committee determines that the loan or security is uncollectible. This determination is made after considering informa-tion such as the occurrence of significant changes in the borrower’s / issuer’s financial position such that the borrower / issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardized loans, write-off decisions generally are based on a product-specific past due status.

Collateral held

The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property such as land and buildings and plant and ma-chinery, other registered securities over assets e.g. chattels for micro loans, and corporate guarantees. Estimates of fair value are based on the value of col-lateral assessed at the time of borrowing, and gener-ally are not updated except when a loan is individually assessed as impaired. Collateral generally is not held over loans and advances to banks within the board approved risk tolerance limit, except when securities are held as part of reverse repurchase and securities borrowing activity. Collateral usually is not held against investment securities and no such collateral was held at 31 December 2015 or 31 December 2014. As an internal requirement, the forced sale value of the col-lateral security is over and above the amount of loans and advances disbursed.

b) Operational Risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank’s processes, personnel , technology and in-frastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. Operation-al risks arise from all the Bank’s operations.

The Bank’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Bank’s reputation with overall cost ef-fectiveness and to avoid control procedures that re-strict initiative and creativity.Operational risk is a responsibility of the Board’s Risk, Board Human Resources and Compensation and Board IT Risk Committees

c) Market Risk

Market risk arises from decrease in the market value of portfolio of financial instruments caused by adverse movements in the market variables such as currency exchange rates, interest rates, credit spreads and implied volatilities on all the above. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while optimizing the return on risk. The Board grants the general authority to take on market risk exposures to the Board Asset and Liability Committee (ALCO). The ALCO sets market risk standards and policies to ensure that the measurement, reporting, monitoring and management of market risk is maintained. The day to day implementation of these policies rests with the Treasury Department and Management Assets and Li-ability Committee (MALCO).

The Bank manages risk through a range of market risk and capital risk limits. Stress testing and basic risk man-agement measures (permissible instruments, concen-tration of exposures, gap limits and maximum tenor) are used to facilitate this process.

(i) Interest Rate RiskThe Bank takes on exposure to the effects of fluctua-tions in the prevailing levels of market interest rates on its financial position and cash flows. Interest mar-gins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. The Asset and Liability Committee sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored monthly.


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Methods of Measuring and Managing the Interest Rate Risk:

There are a good number of techniques and tools avail-able for measuring and managing interest rate risk rang-ing from simple calculation to highly complex simula-tions and modeling. The technique that Centenary Bank utilises is explained below:

Gap Analysis: Under this, interest sensitive assets and liabilities are classified into various time bands according to their ma-turity in the case of fixed interest rates, and residual ma-turity towards next repricing date in the case of floating interest rates.

The size of the gap in a given time band is analyzed to study the interest rate exposure and the possible effects on the Bank’s earnings. Items in assets and liabilities are captured into various buckets, using judgmental factors by studying behavioral patterns, customer segmenta-tion, and roll over history, etc, on a continuous basis which eventually leads to a dynamic gap analysis.

In order to evaluate the earnings exposure, interest Rate Sensitive Assets (RSA) in each time band are netted off against the interest Rate Sensitive Liabilities (RSL) to produce a repricing “Gap” for that time band. A posi-tive gap indicates that the Bank has more RSA than RSL. A positive or asset sensitive gap means that an increase in market interest rates could cause an increase in the net interest margin and vice versa. Conversely, a nega-tive or liability sensitive gap implies that the Bank’s net interest margin could decline as a result of increase in market rates and vice versa.

The positive or negative gap is multiplied by the assumed interest rate changes to derive the Earnings at Risk (EaR). The EaR method helps to estimate how much the earnings might be impacted by an adverse move-ment in interest rates. The assumed changes in interest rate are estimated on basis of past trends, forecasting of interest rates, etc. The off-statement of financial posi-tion items are excluded from the gap report because the Bank does not bear any interest rate risk on these items.

The table on page 85 summarises the Bank’s exposure to interest rate risks. Included in the table are the Bank’s assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. The carrying amounts of derivative financial instruments which are principally used to reduce the exposure to interest rate movements are included in ‘Other Assets’ and ‘Other Liabilities” under the heading ‘Non-interest Bearing’. The off-statement of financial position gap represents the net notional amounts of all interest-sen-sitive derivative financial instruments



85

Interest rate risk exposure Over 5 Fixed& Nov- <1 mth 1-12 mth 1-5 Years Years interest bearing TOTAL Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000

31 December 2015

Financial assets

Cash and short-term funds - - - - 176,919,896 176,919,896

Due from other banks 81,933,951 - - - 10,588,976 92,522,927

Investments 67,777,422 373,175,635 - - - 440,953,057

Loans and advances to customers 11,761,829 255,438,624 471,382,697 52,953,389 228,690,813 1,020,227,352

Other financial assets - - - - 36,487,803 36,487,803

Total financial assets 161,473,202 628,614,259 471,382,697 52,953,389 452,687,488 1,767,111,035

Liabilities

Due to customers and other banks 20,249,258 1,072,048,661 732,145 - 294,241,303 1,387,271,367

Managed/ borrowed funds - - - - 112,330,352 112,330,352

Other liabilities - - - - 74,173,503 74,173,503

Total liabilities 20,249,258 1,072,048,661 732,145 - 480,745,158 1,573,775,222

Net on-SOFP gap 141,223,944 (443,434,402) 470,650,552 52,953,389 (28,057,670) 193,335,813

Net off-SOFP gap - - - - 37,451,805 37,451,805

Total interest sensitivity gap 141,223,944 (443,434,402) 470,650,552 52,953,389 9,394,135 230,787,618

Over 5 Fixed& Nov- <1 mth 1-12 mth 1-5 Years Years interest bearing TOTAL

Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000

31 December 2014

Financial assets

Cash and short-term funds 1,501,356 - - - 139,151,791 140,653,147

Due from other banks 44,831,161 - - - 4,696,438 49,527,599

Investments 57,643,802 378,715,759 - - - 436,359,561

Loans and advances to customers 7,006,916 216,861,064 358,846,480 40,326,312 207,891,196 830,931,969

Other financial assets - - - - 34,091,896 34,091,896

Total financial assets 110,983,235 595,576,823 358,846,480 40,326,312 385,831,321 1,491,564,172

Liabilities

Due to customers and other banks 11,791,522 881,830,049 418,152 - 286,532,220 1,180,571,943

Managed/ borrowed funds - - 10,000,000 - 73,426,004 83,426,004

Other liabilities - - - - 53,571,490 53,571,490

Total liabilities 11,791,522 881,830,049 10,418,152 - 413,529,714 1,317,569,437

Net on-SOFP gap 99,191,713 (286,253,226) 348,428,328 40,326,312 (27,698,393) 173,994,735

Net off-SOFP gap - - - - 31,350,646 31,350,646

Total interest sensitivity gap 99,191,713 (286,253,226) 348,428,328 40,326,312 3,652,253 205,345,381


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>3months >6months Within 3 but within 6 but within After 12 months months 12 months months Shs million Shs million Shs million Shs million

2015

Interest rate sensitivity gap 30,365 (110,859) (221,717) 532,998

Cumulative interest rate sensitivity gap 30,365 (80,493) (302,210) 230,788Cumulative interest rate sensitivitygap as a percentage of total assets 2% (5%) (17%) 13%

2014

Interest rate sensitivity gap 27,628 (71,563) (143,127) 392,407

Cumulative interest rate sensitivity gap 27,628 (43,935) (187,062) 205,345Cumulative interest rate sensitivitygap as a percentage of total assets 2% (3%) (13%) 14%

The re-pricing gaps for the Bank’s portfolios are shown below. Positions are managed by currency to take account of the fact that interest rates are unlikely to move together. All assets and liabilities are sited in gap intervals based on their re-pricing characteristics. Assets and liabilities, for which no specific contractual re-pricing or maturity dates exist are placed in gap intervals based on management judgment, where appropriate, based on the most likely re-pricing behavior.

Interest sensitivity analysis

The table below shows the increase / (decline) in 12-month earnings for upward and downward instantaneous parallel rate shocks.

Impact on profit before tax 2015 2014 Shs million Shs million+ 500 bps rate shock 16,125 10,478- 500 bps rate shock (16,125) (10,478)+ 100 bps rate shock 3,225 2,096- 100 bps rate shock (3,225) (2,096)

Assuming no management intervention, a parallel 500bps increase in all yield curves would increase the forecast net interest income for the next financial year by Shs 16,125 million. A parallel decreases in all yield curves would decrease the forecast net interest income for the next financial year by Shs 16,125 million. Whilst a parallel 100bps increase in all yield curves would increase the forecast net interest income for the next financial year by Shs 3,225 million. A parallel decreases in all yield curves would decrease the forecast net interest income for the next financial year by Shs 3,225 million.

Impact on equity 2015 2014 Shs million Shs million+ 500 bps rate shock 20,031 15,844- 500 bps rate shock (20,031) (15,844)+ 100 bps rate shock 4,006 3,169- 100 bps rate shock (4,006) (3,169)



87

Assuming no management intervention, a parallel 500bps increase in all yield curves would increase the equity for the next financial year by Shs 20,031 million. A parallel decreases in all yield curves would decrease the equity for the next financial year by Shs 20,031 million. Whilst a parallel 100bps increase in all yield curves would increase the equity for the next financial year by Shs 4,006 million. A parallel decreases in all yield curves would decrease the equity for the next financial year by Shs 4,006 million.

(ii) Currency risk

The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its finan-cial position and cash flows. The Asset and Liability Committee sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summarises the Bank’s exposure to foreign currency exchange rate risk at 31 December 2015 and 31 December 2014. In-cluded in the table are the Bank’s assets and liabilities at carrying amounts, categorized by currency.

EUROS GBP USD TZ & Kshs TOTAL31 December 2015 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Assets

Cash and balances at the Central Bank 1,243,406 12,500,182 3,205,689 16,949,277

Due from other banks 1,184,387 7,632,376 1,772,213 10,588,976

Investments - 5,878,691 5,878,691

Loans and advances to customers - 32,775,135 1,221 32,776,356

Other accounts receivable 32,902 45,764 11,373 90,039

Total assets 2,460,695 52,953,457 10,869,187 66,283,339

Liabilities

Customer deposits and balances due to other banks 1,249,764 53,360,744 11,947,942 66,558,450

Managed funds -

Other accounts payable 36,685 349,223 1,901 387,809

Total liabilities 1,286,449 53,709,967 11,949,843 66,946,259

Net on-SOFP position 1,174,246 (756,510) (1,080,656) (662,920)

Net off-SOFP position 168,986 7,192,088 146,776 7,507,850

Overall net position 1,343,232 6,435,578 (933,880) 6,844,930

% of Net position over core capital 0.42 2.00 (0.29) 2.15

GBP USD OTHERS TOTAL31 December 2014 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Total assets 1,818,596 36,396,603 10,131,391 48,346,590

Total liabilities 1,371,134 35,663,036 8,884,051 45,918,221

Net on-SOFP position 447,462 733,567 1,247,340 2,428,369

Net off-SOFP position - 5,294,091 209,598 5,503,689

Overall net position 447,462 6,027,658 1,456,938 7,932,058

% of Net position over core capital 0.15 2.05 0.49 2.96


88


The table below shows the increase (decline) in 12 month earnings for upward (appreciation) and downward (de-preciation) of the shilling on all foreign currencies on instantaneous parallel rate changes over the next 12 months.

Parallel rate shocks: 2015 2014 Shs million Shs million+500bps exchange rate change 331 397-500bps exchange rate change (331) (397)+100bps exchange rate change 66 79-100bps exchange rate change (66) (79)

Assuming no management intervention a parallel appreciation of the shilling by 500bps on all foreign currencies would increase the profit for the year and retained earnings by Shs 331 million (2014: Shs 397 million) whilst a fall or depreciation shall reduce the profit for the year and retained earnings earnings by Shs 331 million (2014: Shs 397 million).

A 100bps appreciation of the shilling on all currencies would increase the profit before tax and retained earnings by Shs 66 million (2014: 79 million) whilst a full or depreciation shall reduce the profit before tax and retained earnings by Shs 66 million (2014: 79 million).

d. Liquidity Risk

Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.

The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, ma-turing deposits, and calls on cash settled contingencies. The Bank does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. Bank of Uganda requires that the Bank maintain a cash reserve ratio of 8.0% of total depos-its. In addition, Bank of Uganda sets limits on the minimum proportion of liquid funds available to meet such calls at 20% and other borrowing facilities that should be in place to cover withdraws at unexpected levels of demand.

The Treasury Department monitors liquidity ratios on a daily basis.

The Bank incorporates the following elements as part of a cohesive liquidity management process:

• Short term and long term cash flow managements

• Maintaining a structurally sound financial position

• Foreign currency liquidity management

• Preserving a diversified funding base

• Undertaking regular liquidity stress testing

• Maintaining adequate liquidity contingency plan.



89

The table below presents the undiscounted cash flows payable by the Bank under financial liabilities by remaining contractual maturities at the reporting date.

<1month 1-12 months 1-5 years over 5 years Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Assets

Cash and short-term funds 176,919,896 - - - 176,919,896

Due from other banks 92,522,927 - - - 92,522,927

Investments 67,777,422 373,175,635 - - 440,953,057

Loans and advances at amortised cost 18,646,871 404,965,169 747,339,479 83,928,124 1,254,879,643

Other assets 10,764,468 9,962,536 17,203,810 - 37,930,814

366,631,584 788,103,340 764,543,289 83,928,124 2,003,206,337

Liabilities

Due to customers and other banks 1,281,084,057 105,455,165 732,145 1,387,271,367

Managed funds - - 10,284,689 - 10,284,689

Borrowed funds 1,743,750 8,269,578 72,736,449 42,500,067 125,249,844

Other liabilities 28,082,815 21,776,854 16,998,739 - 66,858,408

1,310,910,622 135,501,597 100,752,022 42,500,067 1,589,664,308

Liquidity gap (944,279,038) 652,601,743 663,791,267 41,428,057 413,542,029

Off balance sheet items (14,123,870) (21,998,716) (1,329,219) - (37,451,805)

Net liquidity gap (958,402,908) 630,603,027 662,462,048 41,428,057 376,090,224

The table below presents the maturity analysis of the bank’s assets and liabilities at their carrying amounts.

<1month 1-12 months 1-5 years over 5 years Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Assets

Cash and short-term funds 176,919,896 - - - 176,919,896

Due from other banks 92,522,927 - - - 92,522,927

Investments 67,777,422 373,175,635 - - 440,953,057

Loans and advances at amortised cost 15,160,058 329,239,975 607,593,072 68,234,247 1,020,227,352

Other assets 20,029,196 19,094,369 126,798,109 77,855,449 243,777,123

372,409,499 721,509,979 734,391,181 146,089,696 1,974,400,355

Liabilities

Due to customers and other banks 1,281,084,057 105,455,165 732,145 1,387,271,367

Managed/Borrowed Funds - - 87,076,566 25,253,696 10,284,689

Other liabilities 22,676,486 40,617,086 10,879,932 - 74,173,604

Capital and Reserves 25,516,936 375,108,197 400,625,133

1,303,760,543 171,589,187 98,688,732 400,361,893 1,974,400,355

Liquidity gap (931,351,044) 549,920,792 635,702,449 (254,272,197) -

Off balance sheet items (14,123,870) (21,998,716) (1,329,219) - (37,451,805)

Net liquidity gap (945,474,914) 527,922,076 634,373,230 (254,272,197) 37,451,805


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The fair values of financial assets and liabilities together with the carrying value shown in the statement of financial posi-tion are analysed as follows:

31 December 2015 31 December 2014

Carrying Amount Fair Value Carrying Amount Fair Value

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Assets

Cash and short-term funds 176,919,896 176,919,896 140,653,147 140,653,147

Due from other banks 92,522,927 92,522,927 49,527,599 49,527,599

Investments 440,953,057 440,953,057 436,359,561 436,359,561

Loans and advances at amortised cost 1,020,227,352 1,280,635,278 830,931,969 1,011,763,630

Other assets 37,930,814 43,770,079 31,667,816 31,667,816

1,768,554,046 2,034,801,237 1,489,140,092 1,669,971,753

Liabilities

Due to customers and other banks 1,387,271,367 1,387,519,869 1,180,571,943 1,180,741,945

Managed funds 10,284,689 13,775,486 10,769,684 14,813,196

Borrowed funds 102,045,662 153,336,422 72,656,320 114,103,026

Other liabilities 66,858,407 72,628,067 46,686,379 48,476,127

1,566,460,125 1,627,259,844 1,310,684,326 1,358,134,294

Fair value hierarchy

At 31 December 2015 Level 1 Level 2 Level 3 Total

Shs‘000 Shs‘000 Shs‘000 Shs‘000

Assets measured at fair value -

Government securities at fair value - 31,885,743 - 31,885,743

Assets and liabilities not measured at fair value for which fair values have been disclosed

Loans and advances - - 1,202,599,905 1,202,599,905

Managed funds - - 13,775,486 13,775,486

Borrowed funds - - 153,336,422 153,336,422

Other liabilities - - 72,628,067 72,628,067

At 31 December 2014 Level 1 Level 2 Level 3 Total

Shs‘000 Shs‘000 Shs‘000 Shs‘000

Assets at fair value -

Government securities at fair value - 24,180,039 - 24,180,039

Assets and liabilities not measured at fair value for which fair values have been disclosed

Loans and advances - - 996,836,683 996,836,683

Managed funds - - - 14,489,351

Borrowed funds - - 110,498,627 110,498,627

Other liabilities - - 52,058,104 52,058,104



91

The fair value of the financial assets and liabilities is included at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date.

The following methods and assumptions were used to estimate the fair values:Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Bank based on parameters such as interest rates, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected losses of these receivables.

Fair value of the treasury bonds is based on price quotations at the reporting date. The fair value of unquoted instru-ments, loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by dis-counting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

Fair values of the Bank’s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 December 2015 was assessed to be insignificant.

e. Financial instruments not measured at fair valuei. Loans and advances The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows

expected to be received. Expected cash flows are discounted at current market rates to determine fair value.

ii. Government securities and investments held-to-maturity The fair value for these held-to-maturity assets is based on market prices. Where this information is not available,

fair value is estimated using quoted market prices for securities with similar credit, maturity and yield character-istics. The carrying amount of investment securities is a reasonable approximation of fair value.

iii. Deposits due to customers and other banks The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is

the amount repayable on demand and this is the carrying amount. The estimated fair value of interest-bearing deposits not quoted in an active market is based on discounted cash flows using interest rates for new debts with similar remaining maturity. The carrying amounts are a reasonable approximation of this.

iv. Borrowings and managed funds The interest rates charged on borrowings held by the bank based on WACC or other bases for determining

market interest rates. The interest rates are variable and in line with market rates for similar facilities. The fair values of such interest bearing borrowings not quoted in an active market is based on discounted cash flows us-ing interest rates for similar facilities.

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy are as shown below:

Valuation technique Significant Range (weighted average) unobservable inputs 2015 2014

Loans and advances DCF method WACC 21.8% 22.5%

Managed funds and borrowed funds DCF method WACC 10.3% 11.7%

The loans and advances have a carrying amount of Ushs 1,020,227,352 (level 3 in the fair value hierarchy) whereas managed funds and borrowed funds have carrying amounts of Ushs 10,284,689 and Ushs 102,045,662 (level 3 in the fair value hierarchy) respectively.


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f. Capital Management

The Bank monitors the adequacy of its capital using ratios established by Bank of Uganda, which ratios are broadly in line with those for the Bank for International Settlements (BIS). These ratios measure capital adequacy by comparing the Bank’s eligible capital with its statement of financial position assets, off-statement of financial position commit-ments and market and other risk positions at weighted amounts to reflect their relative risk.

The market risk approach covers the general market risk and the risk of open positions in currencies and debt and equity securities. Assets are weighted according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50%, 100%) are applied; for example cash and money market instru-ments have a zero risk weighting which means that no capital is required to support the holding of these assets. Property and equipment carries a 100% risk weighting, meaning that it must be supported by capital equal to 100% of the carrying amount. Certain asset categories have intermediate weightings. Off-statement of financial position credit related commitments and forwards are taken into account by applying different categories of credit conversion factors, designed to convert these items into balance sheet equivalents. The resulting credit equivalent amounts are then weighted for credit risk using the same percentages as for statement of financial position assets.

The Bank’s objectives when managing capital, which is broader than the equity on the face of the statement of finan-cial position, are:

• To comply with the capital requirement set by Bank of Uganda;• To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns to the

shareholders and;• To maintain a strong capital base to support the development of the Bank’s business.

Capital adequacy and the use of regulatory capital are monitored monthly by management, employing techniques based on guidelines developed by Basel committee as implemented by Bank of Uganda, for supervisory purposes. The required information is filled with Bank of Uganda on a quarterly basis.Bank of Uganda requires each bank to:

a. Hold the minimum level of the regulatory capital of Ushs 25,000,000,000 (Shs Twenty five billion);b. Maintain a ratio of total regulatory capital to the risk –weighted assets of not less than 12.0%; andc. Maintain core capital of not less than 8.0% of risk weighted assets.

The Bank’s regulatory capital is divided into two tiers:

Tier 1 capital (core capital): Share capital, share premium, retained earnings and reserves created by appropriations of retained earnings. The book value of goodwill, current year losses, prohibited loans to insiders; investments in un-consolidated financial statements, deficiencies in provisions for losses and other deductions determined by BOU are deducted in arriving at tier 1 capital.

Tier 2 capital (Supplementary Capital): Revaluation reserves, unidentified impairment allowance, statutory regulatory reserves (reserves created by appropriations of retained earnings), subordinated debt and hybrid capital instruments.



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The table below summaries the composition of regulatory capital and the ratios of the Bank, for the years ended 31 December 2015 and 2014. During those two years, the Bank complied with all of the externally imposed capital re-quirements to which it is subject.

2015 2014 Shs 000 Shs 000Core Capital (Tier 1) Permanent equity 25,116,624 25,116,624 Share premium 1,138,927 1,138,927 Prior years’ retained profits 269,390,677 215,607,257 Appropriation from retained profits (1,861,712) (1,555,639) Proposed dividends (25,516,936) (18,477,452) Net after-tax profits (current year-to-date) 101,601,248 73,816,511 369,868,828 295,646,228

Computer software (50,392,052) (1,997,361) Unrealised foreign exchange gains and deferred tax asset (2,925,416) (65,747) Tier 1 Capital 316,551,360 293,583,120

Supplementary Capital (Tier 2) Unencumbered general provisions for losses 10,796,131 8,814,385 Tier 2 Capital 10,796,131 8,814,385 Total Capital (Tier 1+Tier 2) 327,347,491 302,397,505

The increase of the regulatory capital in the year 2015 is mainly due to the contribution of the current-year profit.

The risk–weighted assets are measured by means of hierarchy of four risk weights classified according to the nature of portfolio holding and reflecting an estimate of credit and market risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-statement of financial position exposure, with some adjustments to reflect the more contingent nature of potential losses.

The table on the next page summarises the composition of the risk weighted assets of the Bank for the years ended 31 December 2015 and 31 December 2014


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Statement of financial position Nominal amounts Risk weighted amounts 2015 2014 2015 2014

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Assets

Notes, coins & other cash assets 79,704,028 81,921,000 0% - -

Balances with Bank of Uganda 97,215,868 58,732,147 0% - -

Due from commercial banks in Uganda 76,058,502 44,837,023 20% 15,211,700 8,967,405

Due from commercial banks outside Uganda

(1) Rated AAA to AA (-) - 3,719,164 20% - 743,833

(2) Rated A (+) to A (-) 16,281,447 806,099 50% 8,140,724 403,050

(3) Rated A (-) and non-rated 182,978 165,313 100% 182,978 165,313

Investment securities 440,953,057 436,359,561 0% - -

Loans and advances to customers 1,019,366,583 830,206,386 100% 1,019,366,583 830,206,386

(net of those secured by cash)

Other accounts receivable 41,910,547 43,125,193 100% 41,910,547 43,125,193

Property and equipment 197,655,135 132,475,944 100% 197,655,135 132,475,944

Off-statement of financial position items

Contingencies secured by cash collateral 6,407,205 5,691,443 0% - -

Guarantees & acceptances 11,937,764 4,178,266 100% 11,937,764 4,178,266

Performance bonds 8,317,813 11,199,166 50% 4,158,907 5,599,583

Documentary credits (trade related) 4,460,935 3,954,594 20% 892,187 790,919

Other commitments 6,328,088 6,327,176 50% 3,164,044 3,163,588

Total risk-weighted assets 2,006,779,950 1,663,698,475 1,302,620,569 1,029,819,480

2014 Ratio 2013 Ratio Shs ’000 Shs ‘000

Capital ratios

Tier 1 Capital (Core) 316,551,360 24.3% 293,583,120 28.5%

Tier 1 + Tier 2 Capital (Total) 327,347,491 25.1% 302,397,505 29.4%

FIA 2004 minimum ratio capital requirement

Core capital 8% 8%

Total capital 12% 12%

The Bank’s total capital adequacy ratio went down from 29.4% to 25.1% as at 31 December 2015 and Tier 1 capital decreased from 28.5% to 24.3% as at 31 December 2015 showing that the Bank is well capitalised. The drop was due to deduction of costs related to the new Core banking system.

Trend in risk-weighted assets

Shs million 2011 2012 2013 2014 2015

Total assets 944,044 1,122,296 1,451,040 1,635,071 1,974,400

Risk-weighted assets 646,689 725,911 862,538 1,029,819 1,302,621



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g. Financial instruments by category

At 31 December 2015 (All figures in Ushs’000)

Financial Held to Available- Fair value Total liabilities at maturity for-sale though profit amortised cost or loss -held for trading

Financial Assets

Cash and bank balances with Bank of Uganda 176,919,896 - - - 176,919,896

Placements with other banks 92,522,927 - - - 92,522,927

Government securities- held for trading - - - 31,885,743 31,885,743

Loans and advances to customers 1,020,227,352 - - - 1,020,227,352

Government securities-held to maturity - 409,067,314 - - 409,067,314

Other assets 37,930,814 - - - 37,930,814

Total 1,327,600,989 409,067,314 - 31,885,743 1,768,554,046


Financial Liabilities

Cash and bank balances with Bank of Uganda 140,653,147 - - - 140,653,147

Placements with other banks 49,527,599 - - - 49,527,599

Government securities- held for trading - - - 24,180,039 24,180,039

Loans and advances to customers 830,931,969 - - - 830,931,969

Government securities-held to maturity - 412,179,522 - 412,179,522

Other assets 31,667,816 - - - 31,667,816

Total 1,052,780,531 412,179,522 - 24,180,039 1,489,140,092

Risk-weighed Assets

Total Assets

Trend in risk-weighted assets


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At 31 December 2014 (All figures in Ushs’000)


Financial liabilities

Customer deposits 1,380,193,855 - - - 1,380,193,855

Deposits from other banks 3,071,430 - - - 3,071,430

Inter-bank borrowing 4,006,082 - - - 4,006,082

Managed funds 10,284,689 - - - 10,284,689

Borrowed funds 102,045,662 - - - 102,045,662

Other liabilities 66,858,407 - - - 66,858,407

Total 1,566,460,125 - - - 1,566,460,125


Financial liabilities

Trading Total

Customer deposits 1,175,115,554 - - - 1,175,115,554

Deposits from other banks 5,456,389 - - - 5,456,389

Managed funds 10,769,684 - - - 10,769,684

Borrowed funds 72,656,320 - - - 72,656,320

Other liabilities 46,686,379 - - - 46,686,379

Total 1,310,684,326 - - - 1,310,684,326

5 Turnover

The Bank’s turnover is derived substantially from the business of banking and related activities and comprises net interest income, fees and commission income, trading income and other income. These revenues are shown in the statement of com-prehensive income and accompanying notes and represent the most appropriate equivalent of turnover compared with other forms of business enterprise.

6(a) Interest income 2015 2014 Shs ‘000 Shs ‘000Interest on loans 238,991,345 192,910,797Interest on treasury bills held to maturity 60,477,780 42,431,071Interest on treasury bonds 3,746,381 2,111,827Interest on inter-bank placements 3,569,226 10,119,345 306,784,732 247,573,040

The interest on impaired loans as at 31 December 2015 was Ushs 3.506 billion (2014: Ushs 2.969 billion).



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6(b) Loss from financial instruments at fair value

2015 2014 Shs ‘000 Shs ‘000 Fair value loss on held for trading securities (1,457,185) (505,138) (1,457,185) (505,138)

7. Interest expense 2015 2014 Shs ‘000 Shs ‘000Savings accounts 16,139,076 13,152,428Current accounts 527,676 544,008Fixed deposit accounts 11,423,325 9,565,802Managed/borrowed funds 9,276,729 7,856,883Other financial costs 109,117 -Inter-bank borrowings 1,633,050 5,948,172 39,108,973 37,067,293

8 Fee and commission income 2015 2014 Shs ‘000 Shs ‘000Trade related fees and commision 16,319,536 13,776,423Ledger fees 19,059,069 17,888,977Other commissions and fees 31,612,061 27,851,351 66,990,666 59,516,751

9 Foreign exchange income 2015 2014 Shs ‘000 Shs ‘000Foreign trade commission 3,907,899 3,081,171Revaluation gain 5,960,437 3,080,793 9,868,336 6,161,964

10 Other operating income 2015 2014 Shs ‘000 Shs ‘000Income from bullion van hire 1,021 14,724 Recovery of written off loans 4,063,117 3,074,268 Sale of ATM cards & banking stationery 4,703,874 4,102,499 Release of unutilised accruals 948,778 1,556,567 Credit Reference Bureau search fee income - 344,615 Grant income 631,176 1,041,747 Uncollected ATM cards 526,601 456,055 Other income* 839,530 961,830 11,714,097 11,552,305


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*Other income 2015 2014 Shs ‘000 Shs ‘000Fees on current accounts 51,238 61,959 Gain on sale of securities 285 - Penalties 37,058 47,101 Profit on sale of assets 230,470 365,913 Cash overages 174,703 217,780 Income from uncollected balances - 10,569 Early redemption fees 345,776 258,508 839,530 961,830

11 Employee benefits expense 2015 2014 Shs ‘000 Shs ‘000Staff salaries 73,986,654 60,918,835 Staff bonuses 17,397,398 13,993,895NSSF contributions 8,202,860 7,620,800Retirement plan contributions 5,596,838 4, 875,646 105,183,750 87,409,176

12 Impairment losses on loans and advances 2015 2014 Shs ‘000 Shs ‘000Credit losses impairment-Identified 5,463,883 11,080,027 Credit losses impairment-Unidentified 1,408,975 214,889 6,872,858 11,294,916

13 Operating expenses 2015 2014 Shs ‘000 Shs ‘000Auditors’ remuneration and expenses 317,402 221,607 Software costs 5,362,638 3,986,538 Premises cost 14,474,801 11,631,093 Insurance 7,785,244 6,081,284 Security 3,580,718 3,218,390 Office expenses 12,139,803 11,752,244 Equipment lease expenses 3,940,760 1,476,776 Motor vehicle expenses 2,361,766 2,458,401 Telephone, telex and postage 6,309,518 5,557,786 Corporate Social Responsibility (CSR) 636,156 457,626 Advertising and marketing 5,057,486 4,655,112 Directors’ fees and other expenses 3,572,454 3,065,168 Consultancy and legal fees 2,368,438 2,947,637 Recruitment and training 2,039,755 1,497,246 Staff transfer 1,118,832 802,416 Seminars & conferences 480,889 322,985 Subscription 616,491 493,767 Stationery 4,778,976 4,897,014 Transport & travel 6,225,974 5,430,120



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2015 2014 Shs ‘000 Shs ‘000Bank charges 664,606 529,518 Long-term rental amortization 45,532 45,532 Cash shortages and other losses 831,760 859,461 Other operating expenses* 1,067,499 1,546,794 85,777,498 73,934,515

*Other operating expenses 2015 2014 Shs ‘000 Shs ‘000Foreign exchange loss 117,840 34,289 Funeral expenses 81,303 53,454 Business promotion account 246,741 313,937 Annual General Meeting expenses 83,052 57,918 Licence (Bank) 18,762 6,410 Cashiers allowance 249,863 235,567 Loss on sale of assets 19 - Management fees expense 25,660 606,574 Meeting expenses 231,093 118,903 Financial card fees expenses 1,995 119,742 Debt Collection Expenses 11,171 - 1,067,499 1,546,794

14 Income tax expense

2015 2014 Shs ‘000 Shs ‘000Current income tax 23,821,612 15,065,619Withholding tax expense 12,844,832 8,908,579Prior year over provision 1,092,795 -Current year deferred tax credit (1,805,059) (2,304,674)Prior year under provision – deferred tax (1,043,397) 7 34,910,783 21,669,531

The tax on the Bank’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows: 2015 2014 Shs ‘000 Shs ‘000Profit before income tax 136,512,031 95,486,042Tax calculated at 30.0% (2014: 30.0%) 40,953,609 28,645,812Tax effect of: - Expenses not deductible for tax 767,348 1,326,193 - Income not subject to tax (19,267,248) (17,211,060)- Prior year under provision – deferred tax (1,043,397) 7- Prior year over provision – current tax 1,092,795 -- 20% final tax on treasury bills 12,844,832 8,908,579Adjustment to under taxation on revalued assets not recognised (437,156) -Income tax expense 34,910,783 21,669,531


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Movement in current tax payable is as follows:- 2015 2014 Shs ‘000 Shs ‘000At 1 January 5,259,400 1,640,550Over provision in prior years- tax 1,092,795 3Current income tax expense 36,666,444 23,974,198Tax paid during year (37,880,750) (20,355,351)At 31 December 5,137,889 5,259,400

15. Cash and balances with Bank of Uganda 2015 2014 Shs ‘000 Shs ‘000Cash in hand – Uganda Shillings 66,937,234 72,131,981Cash in hand – Foreign Currency 12,766,794 9,789,019Bank of Uganda clearing account 97,215,868 57,230,791Bank of Uganda Repo -` 1,501,356 176,919,896 140,653,147Due within < 1 month 176,919,896 140,653,147

Balances on hand and with the Central Bank are non-interest bearing and include the minimum cash reserve require-ment of Shs 104.8 billion as at 31 December 2015 (2014: Shs 91.3 billion). The mandatory reserve is based on the value of deposits as adjusted in accordance with Bank of Uganda Regulations.

Banks are required to maintain a prescribed minimum cash reserve comprising cash in hand and balances with Bank of Uganda. This reserve is available to finance the Bank’s day-to-day activities; however there are restrictions as to its use and sanctions for noncompliance. The amount is determined as a percentage of the average outstanding customer deposits over a cash reserve cycle period of fourteen days.

16. Placements with other banks 2015 2014 Shs ‘000 Shs ‘000 Balances with local banks 3,242 5,862Balances with foreign banks 10,585,734 4,690,576Placements with local banks 76,055,260 39,504,740Placements with foreign banks 5,878,691 5,326,421 92,522,927 49,527,599Due within < 1 month 92,522,927 49,527,599

The weighted average effective interest rate on placement with other banks was 12.2% (2014:10.8%)

17 Government securities 2015 2014 Shs ‘000 Shs ‘000(a) Government securities held for trading Government Treasury bills 10,882,881 -Government bonds 21,002,862 24,180,039 31,885,743 24,180,039



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Maturity analysis of Government bonds 2015 2014 Shs ‘000 Shs ‘000No more than twelve months after the reporting period 2,060,169 -More than twelve months after the reporting period. 18,942,693 24,180,039

21,002,862 24,180,039 (b) Government securities held to maturity 2015 2014 Shs ‘000 Shs ‘000 Government treasury bills 409,067,314 412,179,522

409,067,314 412,179,522

Treasury bills are debt securities issued by the Central Bank for a term of three months, six months and twelve months, whilst bonds are also issued for a term of two years, three years, five years and ten years.

The weighted average effective interest rate on treasury bills and bonds was 18.2% (2014: 12.5%) and 14.2% (2014:13.8%) respectively.

Maturity analysis of government securities held-to-maturity 2015 2014 Shs ‘000 Shs ‘000 Short Term (1-3 months) 137,119,628 128,171,233Medium Term (3-6 months) 115,037,292 95,283,935Long Term (Over 6 months and within 12 months) 156,910,394 188,724,354

409,067,314 412,179,522

18(a) Loans and advances to customers 2015 2014 Shs ‘000 Shs ‘000 Overdrafts 35,545,430 30,185,205Commercial loans 352,872,208 270,765,529Micro finance loans 591,373,020 500,203,696Finance leases (18b) 28,298,614 21,563,833Staff loans 31,876,148 28,003,036Gross loans and advances 1,039,965,420 850,721,299

Provision for loan impairment – identified losses (12,892,365) (14,352,602)

Provision for loan impairment – unidentified losses (6,845,703) (5,436,728) Net loans and advances 1,020,227,352 830,931,969


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Maturity analysis of loans and advances 2015 2014 Shs ‘000 Shs ‘000Short Term (1-3 Months) 42,769,615 33,708,722Medium Term (3-6 Months) 21,622,424 18,973,937Long Term (Over 6 Months and within 12 months) 246,285,937 211,299,237Long Term (Over 12 months) 729,287,444 586,739,403 1,039,965,420 850,721,299

% 2015 % 2014 Shs ‘000 Shs ‘000Sector Analysis Agriculture 17.3 180,047,716 17.1 145,706,306Manufacturing 0.8 7,890,510 0.8 6,460,407Trade and Commerce 19.8 205,952,558 21.0 178,439,601Transport and Utilities 2.2 22,443,306 2.4 20,380,890Building and Construction 23.6 245,999,992 23.1 196,337,346Other Services 36.3 377,631,338 35.7 303,396,749 100 1,039,965,420 100 850,721,299

18 (b) Finance leases 2015 2014 Shs’000 Shs’000 Minimum lease Present Value of Minimum lease Present Value of payments lease payments payments lease payments

receivable receivable receivable receivable

No Later than 1 Year 713,943 674,936 388,454 364,156

Later than 1 Year but no later than 5 Years 30,678,922 24,898,041 25,422,802 20,449,759

Later than 5 Years 4,314,451 2,725,637 1,154,700 749,918

35,707,316 28,298,614 26,965,956 21,563,833

Less: amounts representing unearned

finance income (7,408,702) - (5,402,123) -

Net Investment in Finance Leases 28,298,614 28,298,614 21,563,833 21,563,833

This is a form of financing an asset where the asset serves as the main security. The leases are offered for a period between 1 to 7 years depending on the type of equipment financed and the anticipated cash flows. The average interest rate on these facilities for 2015 was 20.8% for Ushs facilities and 9.9% for USD facilities (2014: 26.1% and 10.0 % respectively). Future minimum lease payments receivable together with the present value of the net minimum lease receipts are shown above.

19 Other assets 2015 2014 Shs ‘000 Shs ‘000Cheques in transit 89,441 173,972Staff advances 16,113 21,207Accrued late fee payment 826,664 734,066Accounts receivable 135,537 9,554



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All other assets are due within one year.

20 Deferred income tax (asset)/liability

Deferred income taxes are calculated on all temporary differences under the liability method at the applicable rate of 30.0%. The movement on the deferred income tax account is as follows:

2015 2014 Shs ‘000 Shs ‘000At 1 January 300,406 2,605,073Credit to statement of comprehensive income (Note 14) (2,848,456) (2,304,667)At 31 December (2,548,050) 300,406

1 Jan 2015 Movement 31 Dec 2015 Shs’000 Shs’000 Shs’000

Deferred tax liability Accelerated tax depreciation 6,131,942 (638,847) 5,493,095Fair value adjustments (123,902) (437,156) (561,058)

6,008,040 (1,076,003) 4,932,037Deferred tax asset Provisions (1,804,631) (741,266) (2,545,897)Deferred income (3,903,003) (1,031,187) (4,934,190)

(5,707,634) (1,772,453) (7,480,087)

Net deferred tax liability/(asset) 300,406 (2,848,456) (2,548, 050)

1 Jan 2014 Movement 31 Dec 2014 Shs’000 Shs’000 Shs’000

Deferred income tax liability Accelerated tax depreciation 7,408,517 (1,276,576) 6,131,942Fair value adjustments 27,639 (151,541) (123,902)

7,436,156 (1,428,117) 6,008,039

Deferred income tax asset Provisions (1,766,531) (38,100) (1,804,631)Deferred income (3,064,552) (838,450) (3,903,003)

(4,831,083) (876,550) (5,707,633)

Net deferred income tax liability 2,605,073 (2,304,667) 300,406

2015 2014 Shs ‘000 Shs ‘000Prepaid expenses 7,057,838 7,495,011Sundry stationery stock 912,957 1,538,287Western Union commission receivable 418,015 229,550Outward clearing 843,897 962,650Mobile E-money 9,397,002 7,385,307Deferred staff loan off market discount 16,377,147 10,792,115Unsettled interbank trading deals - 693,750Value Added Tax recoverable 38,684 66,809Other sundry assets 1,817,519 1,565,538 37,930,814 31,667,816

( Other Assets continued...)


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21 Deferred expenses 2015 2014 Shs ‘000 Shs ‘000At start of year 9,233,400 1,700,003Additions 21,105,223 17,562,349Transfer to property and equipment, and operating expenses (28,537,336) (10,028,952)At end of year 1,801,287 9,233,400

These include capital expenses incurred but for which the capital items have not yet been put into use. In addition, it includes prepayments made on the bank’s operational activities. The transfers to property and equipment, and operating expenses are analysed in the table below;

2015 2014 Shs’000 Shs’000 Computer equipment & accessories 6,430,575 2,640,739Furniture, fixtures & equipment 11,089,681 4,626,064Intangible assets 678,671 1,715,173Motor vehicles 391,210 156,370Work in progress-core banking system 9,488,732 -Operating expenses 458,467 890,606 28,537,336 10,028,952

The transfers to property and equipment, and operating expenses are under notes 22(b) and 13 respectively.

22(a) Finance lease on leasehold land

2015 2014 Shs’000 Shs’000Cost At 1 January and 31 December 2,536,543 2,536,543

Amortisation At 1 January 312,566 267,035Charge for the year 45,531 45,531At 31 December 358,097 312,566

Net carrying amount 2,178,446 2,223,977

The finance lease relates to costs incurred when acquiring the leasehold land on plot 44-46 Kampala Road. The costs are being amortised on a straight line basis over the life of the lease agreement. The lease agreement for plot 44 – 46 Kampala Road became effective November 2009 for ninety nine years. As at 31st December 2015 the remaining lease period is 93 years.

At the inception of the lease, the obligations associated with the acquisition was all paid up front in full as required by the local laws. Therefore, all the lease payments/installments were paid upfront at the beginning of the lease and as at 31 December 2015 there were no other lease obligations outstanding.



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At 31 December 2015 Computer Work In Buildings Motor Equipment & Furniture Work In Progress Vehicles & Accessories Fixtures & Progress Core Banking Total Cycles Equipment Mapeera System

Cost

At 1 Jan 2015 82,720,610 10,981,966 38,433,275 61,830,063 11,418,222 - 205,384,136

Additions 590,895 - 3,538,744 13,667,126 - 39,239,929 57,036,694

Transfers from

deferred expenses 391,210 6,430,575 11,089,681 - 9,488,732 27,400,198

Disposals - ( 765,733) (737,821) (492,394) - - (1,995,948)

Transfer from

work-in-progress - - - 11,418,222 (11,418,222) - -

At 31 Dec 2015 83,311,505 10,607,443 47,664,773 97,512,698 - 48,728,661 287,825,080

Depreciation

At 1 Jan2015 3,803,566 7,882,183 29,820,220 31,402,223 - - 72,908,192

Charge for the year 1,652,518 1,694,149 5,483,357 10,413,271 - - 19,243,295

On disposals - (755,448) (733,848) (492,246) - - (1,981,542)

At 31 Dec 2015 5,456,084 8,820,884 34,569,729 41,323,248 - - 90,169,945

Net Carrying Amount

At 31 Dec 2015 77,855,421 1,786,559 13,095,044 56,189,450 - 48,728,661 197,655,135

At 31 December 2014

Computer Work In Buildings Motor Equipment & Furniture Work In Progress Vehicles & Accessories Fixtures & Progress Core Banking Total Cycles Equipment Mapeera System

CostAt 1 Jan 2014 71,566,200 11,944,669 38,181,066 57,570,894 7,716,182 - 186,979,011 Additions 3,438,228 70,908 - 5,055 11,418,222 - 14,932,413Transfer fromdeferred expenses - 156,370 2,640,739 4,626,064 - - 7,423,173Disposals - ( 1,189,981) (2,388,530) (261,461) - - (3,839,972) Transfer from work-in-progress 7,716,182 - - - (7,716,182) - -

Impairment - - - (110,489) - - (110,489)

At 31 Dec 2014 82,720,610 10,981,966 38,433,275 61,830,063 11,418,222 - 205,384,136 Depreciation At 1 Jan 2014 2,247,567 6,951,084 26,526,870 23,329,534 - - 59,055,055Charge for the year 1,555,999 2,119,730 5,679,156 8,444,639 - - 17,799,524On disposals - (1,188,631) (2,385,806) (261,461) - - (3,835,898)Impairment - - - (110,489) - - (110,489)At 31 Dec 2014 3,803,566 7,882,183 29,820,220 31,402,223 - - 72,908,192 Net Carrying Amount

At 31 Dec 2014 78,917,044 3,099,783 8,613,055 30,427,841 11,418,222 - 132,475,944

22(b) Property and Equipment


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22(c) Intangible assets 2015 2014 Shs’000 Shs’000CostAt 1 January 8,146,907 6,440,001Additions 189,599 -Transfers from deferred expenses 678,671 1,715,173Write downs - (8,267)

At 31 December 9,015,177 8,146,907

AMORTISATION At 1 January 6,149,546 4,843,085Charge for the year 1,202,240 1,307,456Write down - (995)

At 31 December 7,351,786 6,149,546 NET CARRYING AMOUNT

At 31 December 1,663,391 1,997,361

23 Customer deposits 2015 2014 Shs’000 Shs’000Current accounts 291,169,869 281,075,829Savings accounts 966,593,498 784,414,283Time deposits 122,430,488 109,625,442

1,380,193,855 1,175,115,554

The weighted average effective interest rate on customer deposits was 2.0% (2014: 2.1%). Customer deposit balances are due within one year.

24 Deposits and balances due to banks and other financial institutions

2015 2014 Shs’000 Shs’000Balances from local banks 395,748 2,715,713Other finance institutions 2,675,682 2,740,676

3,071,430 5,456,389

Deposits and balances due to banks and other financial institutions are due within one year. The average interest rate on the deposits and balances due to banks and other financial institution was 0.18% (2014: 0.19%)

25 Inter-bank borrowing

2015 2014 Shs’000 Shs’000Borrowings from banks 4,006,082 -

4,006,082 -



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Inter-bank borrowings relate to short-term borrowings from local banks. The interest rates range between 1% and 29% and the term of the loans ranges between 2 to 7 days.As at 31st December 2015, there was one interbank borrowing from Equity Bank.

26 Managed funds

2015 2014 Shs’000 Shs’000Agricultural Credit Facility-Bank of Uganda 760,618 734,869Rural Electrification Fund 74,855 76,252Youth Venture capital fund 6,068,778 6,500,532KCCA Fund 3,180,438 3,258,031Managed Funds UECCC & WENRECCO 200,000 200,000

10,284,689 10,769,684

ACF-BOU

The Government of Uganda through the central bank in partnership with commercial banks, Uganda Development Bank Ltd and micro-deposit taking institutions (MDIs) created the Agricultural Credit Facility. The facility was created for the provision of medium term credit facilities to agriculture and agro-processing projects on more favorable terms as opposed to the open market. The credit facilities are advanced to customers at an interest rate of 12%. The other objectives of the facility include the promotion of commercial agriculture, increasing access to finance by agribusi-nesses, increased agricultural production thus food security as well as boosting the confidence of financial institution in lending to agriculture.

Rural Electrification Fund

On 8 August 2011, the Bank signed a Memorandum of Understanding with the Government of Uganda to improve and increase the provision of energy in the rural sector in Uganda. These funds are at zero interest and are applied as subsidies to qualifying rural borrowers to offset the cost of electrification. Their application is certified by Rural Electrification Board staff. Fresh replenishment on application are made by Government subject to availability.In 2015 no additional funds were received because the government suspended its operation to carry out a country-wide audit on all the systems installed by the solar providers.

Government Of Uganda Youth Venture Capital Fund

The Bank is a Participating Partner in the Government of Uganda (GoU) revolving Youth Venture Capital Fund (YVCF) established in Financial Year 2011/12 to facilitate job creation and employment generation targeted at addressing the rampant unemployment problem among the Ugandan youth by supporting financially viable start-up micro, Small and Medium Enterprises operated by Youth Entrepreneurs. Under the scheme the bank makes an equal contribution to the revolving fund and as at 31 December 2015 the fund stood at Shs 6.1 billion (31 December 2014: Shs 6.5 billion).

KCCA Youth Venture Capital Fund

The Bank in collaboration with Kampala Capital City Authority signed a Memorandum of Understanding on 30 Oc-tober 2012 to take custody and on-lend the authority’s Youth Venture Capital funds worth Shs 3.3 billion to eligible youth as per criteria set out and agreed upon. The fund is for 5 years subject to renewal terms and conditions ac-ceptable to both parties. The funds are to support expansion of business ventures owned by the youth residing and working in Kampala District.


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UECCC and WENRECO

On 13th June 2014, the Bank signed a Memorandum of Understanding with the West Nile Rural Electrification Com-pany Limited (WENERECO) in partnership with Uganda Energy Credit Capitalisation Company (UECCC) to col-laborate in financing hydro power connections. UECCC provided the bank with Shs 200 million at a zero cost for on lending and to share risk by offering a default risk cover of up to 10%. WENRECO, on the other hand, is to participate in mobilisation of potential applicants for the power connection loan.

The project targets West Nile sub regions that can be effectively served by Koboko, Paidha, Nebbi and Arua branches.

27 Borrowed funds 2015 2014 Shs’000 Shs’000Triodos - 10,000,000EIB PEFF I & II 10,395,870 14,310,585Solar loan (UECCC) 512,846 586,110ABI Trust 29,224,623 20,325,171EIB EAC MF 25,253,696 27,434,454EIB ECA PEFF 36,658,627 -

102,045,662 72,656,320

Triodos

This was a syndicated loan agreement between Centenary Bank and Triodos Investment Management B.V to finance the expansion of the loan portfolio. This facility was paid off at the end of its 3 year tenure in December 2015.

EIB PEFF (Private Enterprise Finance Facility) I & II

This was a global loan facility extended to a group of financial institutions in Uganda from Cotonuo Investment facility resources. The availability of this line of credit expired in 2012; the outstanding amount is principal plus interest on already drawn funds.

The facility was used to finance private enterprises in agro industry, fishing, construction, food processing, and manu-facturing, tourism and services provided to these sectors and in health and education sectors. Repayments are made semiannually and interest is computed on reducing balance. The interest rate charged on this facility was not fixed or uniform but was dependent on the tenure of the loan for which it was disbursed. In 2015, the EURO equivalent of UShs. 4 billion was paid off.

EIB EAC (European Investment Bank, East African Community) Microfinance facility

This is a Global Facility from the Cotonou Investment Facility which is used by East African Community banks for the financing of micro credit projects. This was a bullet disbursement (in 2014) of the UShs. equivalent of EURO 8 million. The loan tenure is 7 years at a fixed interest rate of 10.008%.

EIB ECA PEFF (European Investment Bank, East and Central Africa Private Enterprise Finance Facility)

The loan agreement was signed in December 2014 for an agreed maximum amount of the UShs. equivalent of EURO 20 million. The first tranche was disbursed in 2015 and as at December 2015, EURO 9.1million had been drawn down. The loan agreement allows for minimum and maximum tenures of 4 years and 7 years respectively. Rates vary by tenure but do not exceed 10%.



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Solar Loan

Centenary Bank signed a solar refinance facility of USD 250,000 with Uganda Energy Credit Capitalisation Company on 12th July 2012. The refinance facility is denominated in Ushs and the shilling liability is determined at the exchange rate applicable on every release of funds. The Bank drew down Shs 128.8 million in October 2012.

The refinance interest rate is 8.15% per annum fixed. The repayment of the principal borrowed is in 18 equal half yearly installments commencing 12 months after draw down. The funds are applied exclusively for the purpose of provision of solar loans to rural households. The loans are secured by promissory notes.In 2014 there was an additional funding of Shs 255.9 million. In 2015 there was no additional funding received. The Bank expects to sign a new contract of USD 150,000 in 2016.

Agri Business Initiative (aBi) Trust The Bank partnered with aBi trust and Private Sector Foundation Uganda to extend financial literacy to millions of peo-ple through the “CenteBusinessLife” programme. This was done through classroom training, electronic media training, print media messages, market vendor training and mentorships. Over 10,000 Small and Medium Enterprises (SMEs) in 9 districts countrywide have improved their businesses.

During the year 2015, two facilities were secured that is Shs. 3.9 billion and Shs. 5 billion priced at 12.5% and 11.25% respectively.

There is no unfulfilled condition as at the year end.

28 Other liabilities 2015 2014 Shs’000 Shs’000Bills payable 959,645 994,368Clearing suspense 259,138 197,825Unearned fees on late payments 542,573 627,561Deferred fee income 16,447,303 13,010,011Guarantees - Cash collateral 262,291 411,577Contract staff (Terminal benefits) 790,748 632,644Accrued expenses 9,644,100 6,883,831PAYE payable 3,863,049 3,493,617N.S.S.F payable 1,906,661 1,743,028Centemobile service charge 1,507,648 690,500Accounts payable 5,354,691 1,510,235Uganda Revenue Authority collections 19,157,389 9,339,630Unclaimed balances (Nostro A/cs) 8,863 3,287Excise duty on bank charges 439,528 439,716Real Time Gross Settlement 949,402 216,045Withholding tax payable 1,245,485 936,579Other payables 3,519,893 5,555,925

66,858,407 46,686,379

29 Provisions for litigation 2015 2014 Shs’000 Shs’000Legal cases 1,520,636 571,749Defalcations 119,985 6,980

1,640,621 578,729


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The Bank is a litigant in several cases which arise from normal day-to-day banking activities. The Directors and Manage-ment believe the Bank has strong grounds for success in majority of them and are confident that they should get a ruling in their favor and none of the cases individually or in aggregate would have a significant impact on the Bank’s operations. Management carried out an assessment of all the cases outstanding as at 31 December 2015 and where considered necessary, provisions were made as indicated above.

30 Deferred Grants 2015 2014 Shs’000 Shs’000At start of year 746,576 1,030,250Additions / Direct Transfers 421,187 758,073Transfers to profit or loss (631,176) (1,041,747)

At end of year 536,587 746,576 The opening balance at the start of the year 2015 and 2014 relates to grants in form of cars, laptops and scanners to as-sist the Bank to set up the leasing portfolio and a grant from USAID to procure a mobile bank van to improve outreach in the Northern region where infrastructure is not so well developed. Grant additions include: 2015 2014 Shs’000 Shs’000ABI Trust 390,816 - ILO 16,967 -GIZ 13,404 179,669 Agrifin - 578,404

421,187 758,073

GIZ Financial Systems Development Program

GIZ Financial Systems development Programme (FSD), through the support of the German Development Cooperation of the German Government, supported the Bank in financing a baseline survey on SACCOs , Village Savings and Loan Association( VSLAs) and farming groups based in Karamoja to inform whether the groups are bankable and investigate the most effective, impactful financial products and appropriate channels of delivering such products to the sub-region. The Bank, under the same programme, was supported to install solar systems in the service outlets located in Moroto and Kotido. There is no unfulfilled condition as at the year end.

aBi Trust

In July 2015, Centenary Bank partnered with ABi Trust to set up a service center in Adjumani. The aim of this was to transform the social and economic livelihoods of Adjumani district through offering affordable financial services to the people of West Nile and the sorrounding areas. The agreement was to support the bank with a total contribution of Shs. 403.8 million 47% of the total budgeted cost of Shs. 851.5 million. The grant was disbursed quarterly in two tranches and by 31st December 2015 Shs. 390.8 million had been disbursed.

ILO

The bank received financial support of 4,700USD (equivalent 16.9 million) from International Labour Organisation (ILO) under the Women Entrepreneurship Development and Economic Empowerment(WED-EE) Project to organize and conduct a training of trainers on gender sensitive financial services.

22 staff were trained on how to use the FAMOS guide tool kit which kit enables the institution to build a business case of “why targeted and holistic interventions for women” is beneficial and promotes a win – win situation for a better-served woman and an expanded client base for the financial institution.



111

31 Earnings per ordinary share Basic earnings per share are calculated by dividing the profit attributable to the ordinary equity holders of the Bank by the weighted average number of ordinary shares in issue during the year 2015 2014 Shs’000 Shs’000Net income 101,601,248 73,816,511Dividends to preference shareholders (116,624) (23,324)Net income attributable to ordinary shareholders 101,484,624 73,793,187Weighted average number of ordinary shares (No.) 25,000,000 25,000,000

Basic earnings per ordinary share (shillings per share) 4.059 2.952 There were no potentially dilutive shares outstanding at 31 December 2015 or 2014. Diluted earnings per share are there-fore the same as basic earnings per share.

32 Share capital 2015 2014 Shs’000 Shs’000 Authorized 28,825,356 ordinary shares (2014: 28,825,356) of Shs 1,000 each 28,825,356 28,825,356150,000 non-redeemable preference shares of Shs 1,000 each 150,000 150,000

28,975,356 28,975,356

2015 2014 Shs’000 Shs’000Issued and fully paid 25,000,000 ordinary shares (2014:25,000,000)of Shs 1,000 each 25,000,000 25,000,000116,624 preference shares (2014: 116,624) of Shs 1,000 each 116,624 116,624

25,116,624 25,116,624 The issued number of shares as at year end was 25,000,000 ordinary shares and 116,624 preferences. Shares (2014: 25,000,000 ordinary shares and 116,624 preference shares). All issued shares are fully paid.

There was no movement in share capital and share premium in 2015 and 2014.

Share Premium Preference OrdinaryAt 1 January and 31 December 2015 1,138,927 116,624 25,000,000

Share Premium Preference Ordinary At 1 January and 31 December 2014 1,138,927 116,624 25,000,000

The holders of ordinary shares are entitled to receive dividend from time to time and are entitled to one vote per share at meeting of the Bank. Holders of preference shares received a non-cumulative coupon of 100% (2014: 20%) and they do not carry the right to vote. All shares rank equally with regards to the Bank’s residual assets except that the preference shareholders have priority over ordinary shareholders but participate only to the extent of the face value of the shares. Share premium is the reserve that resulted from the ordinary shares being sold at a price that was over and above the nominal share price of Shs 1,000.


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33 (a) Cash dividends on shares declared and paid 2015 2014 Shs’000 Shs’000Final dividend for ordinary shares for 2014 (Shs 738 per share): 25% of NPAT 18,454,128 9,652,245(2013 [Ushs 386 per share]: 16.6%)

Final dividend for preference shares for 2014: 20.0% of issued and fully paid 23,324 23,324(2013: 20%)

18,477,452 9,675,569

33(b) Proposed dividends 2015 2014 Shs’000 Shs’000Final dividend for ordinary shares for 2015(Shs 1,016 per share) and 2014 25,400,312 18,454,128(Shs 738 per share): 25% of NPAT

Final dividend for preference shares for 2015: 100.0% of issued and fully paid 116,624 23,324(2014: 20%)

25,516,936 18,477,452

Proposed dividends on ordinary and preference shares are subject to approval at the annual general meeting and are not recognised as a liability as at 31 December. Dividends are subject to withholding tax at rates which vary depending on the tax residence status of the recipient and double tax agreements in place.

34 Regulatory reserve 2015 2014 Shs’000 Shs’000At start of year 3,377,657 1,822,018Transfer from retained earnings during the year 1,861,712 1,555,639

At end of year 5,239,369 3,377,657 The regulatory reserve represents amounts by which provisions for impairment of loans and advances determined in accordance with the Financial Institutions Act 2004 exceed those determined in accordance with International Financial Reporting Standards. These amounts are appropriated from retained earnings in accordance with the Bank’s accounting policy and BOU guidelines.

35 Cash and cash equivalents 2015 2014 Shs’000 Shs’000Cash and balances with Bank of Uganda (Note 15) 176,919,896 140,653,147Balances with other financial institutions (Note 16) 92,522,927 49,527,599Treasury bills and other eligible bills < 91 days 137,119,628 128,171,233Government securities held for trading (Note 17) 31,885,743 24,180,039

438,448,194 342,532,018



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36.Off-statement of financial position financial instruments and capital commitments36.1 Guarantees and performance bonds

2015 2014 Shs’000 Shs’000Acceptances and letters of credit 4,460,935 3,954,594Performance bonds 12,332,041 15,846,321Bid securities bond guarantees 14,330,741 5,222,555Commitments to extend credit 6,328,088 6,327,176

37,451,805 31,350,646

36.2 Capital Commitments 2015 2014 Shs’000 Shs’000Capital expenditure authorised and contracted 12,160,569 48,137,000

12,160,569 48,137,000 The expenditure was funded from the Bank’s internal resources.

In 2013, Phase three of the Bank’s new headquarters on Plot 44-46 Kampala Road commenced at an estimated cost of USD 16.3M. By close of year 2015 a total of USD 12.8M had been made (2014: USD 9.2M). The remaining amount of USD 3.5M (equivalent to UShs. 12.2Bn) under this project mainly relates to defect liability and will be paid in the year 2016. Phase three was completed and handed over to the bank in November 2015. .

36.3 Operating lease commitments - Bank as a lessee

The Bank entered into commercial leases for motor vehicles and photo copiers. These leases have an average life of two years with a renewal option included in the contracts. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under non–cancellable operating leases as at 31 December are, as follows:

2015 2014 Shs’000 Shs’000Within one year 3,940,760 1,476,776

37 Related party transactions and balances

(i) Directors’ remuneration 2015 2014 Shs’000 Shs’000Fees to Non-Executive Directors 654,866 514,407 Emoluments to Executive Directors 2,163,873 2,138,625

Emoluments to directors 2,818,739 2,653,032 Other expenses – Non-Executive Directors 740,081 412,136 Other expenses - Executive Directors 13,634 -

3,572,454 3,065,168


114


(ii) Loans and advances to related parties 2015 2014 Shs’000 Shs’000At 1 January 32,167,147 26,021,517 Advanced during the year 20,316,458 14,473,215 Repaid during the year (12,879,808) (8,327,585)

At 31 December 39,603,797 32,167,147

The value of security pledged for the above loans amounts to Ushs 180.7 billion as at 31 December 2015 (2014: Ushs 160.8 billion). The average period of the loans is 48 months. The average interest rate was 23% (2014: 21%)

(iii) Substantial shareholders (>5% of shareholding) 2015 2014 % %Shareholder name Catholic Archdiocese of Kampala 5.3 5.3Registered Trustees of the Uganda Episcopal Conference 31.3 31.3SIDI (France) 11.6 11.6Stiching Hivos Triodos 18.3 18.3

Total 66.5 66.5

(iv) Loans to shareholders and guarantees by shareholders

2015 2014 Shs’000 Shs’000Shareholder Catholic Diocese of Kabale 346,257 464,329Catholic Archdiocese of Kampala 21,237,875 20,375,089Catholic Diocese of Lugazi 2,375,227 946,321Catholic Diocese of Hoima 1,581,009 1,038,416Catholic Diocese of Gulu 39,033 21,438Catholic Diocese of Jinja 349,063 508,495Catholic Diocese of Arua 1,276,729 198,419Catholic Archdiocese of Lira 717,612 226,599Catholic Diocese of Masaka 6,518,389 4,853,485Catholic Archdiocese of Tororo 178,292 319,277Catholic Diocese of Fort Portal 628,687 139,091Catholic Archdiocese of Mbarara 2,063,385 1,458,956Catholic Diocese of Kasana, Luweero 566,259 271,712Catholic of Diocese Kasese 30,000 3,732Catholic Diocese of Mityana 137,963 158,914

Total 38,045,780 30,984,273

Executive Directors 260,716 438,874 Non-Executive Directors 45,607 47,099 EXCO members 1,251,694 696,901 1,558,017 1,182,874

Total 39,603,797 32,167,147



115

The average interest rate for loans advanced to dioceses was 20.9% (2014: 22.7%).

(v) Key management compensation

2015 2014 Shs’000 Shs’000Salaries and short term employee benefits 5,457,181 5,127,302Post-employment benefits 1,615,116 1,457,355

Total 7,072,297 6,584,657


116


Understanding and responding to our customers’ needs is key to Centenary Bank’s success. The importance of service delivery is fundamental and a

non-negotiable component of our attitude towards customers.

Read more on page 34.

BRANCH ANDATM NETWORK


117

BRANCH NETWORK

Apac BranchPlot 22 Akokoro RoadApac TownTel: +256 414 663211

Arua BranchPlot 3, Avenue RoadP. O. Box 246 AruaTel: +256 476-420013 +256 372-260001

Adjumani BranchPlot 20, Manyi Road

Bugiri BranchPlot 117, Grant StreetIganga-Tororo HighwayP. O. Box 137 BugiriTel: +256 434-250074

Bundibugyo BranchPlot II, Block D, Bundibujyo Town Council, Fort Portal Road Highway

Bwaise BranchPlot 526 Bwaise- Kawempe Bombo RoadP .O. Box 1982 KampalaTel: +256 414-566096

Bwera BrachPlot 102, Bukonjo BlockTel: +256 712 751729Bwera Town

Entebbe Road BranchPlot 7, Entebbe Road Talenta HouseP. O. Box 1892 KampalaTel: +256 414 506009

Entebbe Road AnnexPlot 18/20, Entebbe Road AnnexP. O. Box 1892 KampalaTel: +256 414 506009

Fort Portal BranchGolden Jubilee BuildingFort Portal- Kasese RoadP. O. Box 124 Fort portalTel: +256 483-422791/8

Gulu BranchPlot 426, Gulu StreetP. O. Box 957 GuluTel: +256 471-432572

Hoima BranchPax Arcade, Fort Portal RoadP. O. Box 472 HoimaTel: +256 465-440193+256 392-751733

Ibanda BranchPlot 4, Main StreetP. O. Box 395IbandaTel: +256 485-426998

Iganga BranchPlot 43 Main StreetIganga townPO Box 101 IgangaTel: +256 434242143

Isingiro BranchPlot 17A, High StreetIsingiro Town CouncilP. O. Box 1892 KampalaTel: +256 414 663235

Ishaka BranchPlot 9, Cell C – Ward IV, Rukungiri Road, Ishaka Town

Jinja BranchPlot 6, Nizam West Road(Opp. Uganda Telecom Office)P. O. Box 1767 JinjaTel: +256 434-122007

Kabalagala BranchBlock 245, Plot 551, Kabalagala Town,P. O. Box 1892 KampalaTel: +256 414-501490

Kabale BranchPlot 129, Kabale RoadP. O. Box 385KabaleTel: +256 486 423671

Kagadi BranchPlot 69 Prime HouseFort Portal- Kyenjojo RoadKagadi Town CouncilP.O. Box 35 KagadiTel: +256 392 892372

Kamuli BranchPlot 4, Kitimbo RoadKamuli Town CouncilP. O. Box 168Tel:+256 414 663226

Kanungu BranchKanungu – Kihihi RoadKanungu Town CouncilP.O. Box 20 Tel: +256 414 663194

Kasese BranchPlot 213, Portal StreetP. O. Box 87 KaseseTel: +256 483 444041Kapchorwa BranchPlot 1, Market StreetP. O. Box 286 KapchorwaTel: +256 414 663208

Kayabwe BranchPlot 64, KayabweMasaka RoadP.O Box 1063 MasakaTel: +256 414 663223

Kayunga BranchBlock 123, Plot 300, Main Street, Kayunga CentralP.O Box 18257, KayungaTel: +256 414 663207

Kiboga BranchPlot 101, Hoima RoadP. O. Box 28 KibogaTel: +256 414 663224

Kikuubo Branch1st Floor, Unifam PlazaPlot 15, Nakivubo RoadP. O. Box 1892 KampalaTel: +256 414 258795/91

Kireka BranchPlot 1653, KirekaTel: +256 414 663193

Kitgum BranchPlot 7/8, Ogwok RoadP. O. Box 147 KitgumTel: +256 414 663200

Kisoro BranchPlot 27 Kisoro- Kabale RoadPO Box 10Tel: +256 486 430026

Koboko BranchPlot 19, Central RoadKoboko TownP. O. Box 194 KampalaTel: +256 414598648

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Kotido BranchBlock 20, Moroto RoadKotido TownP.O Box 88 KotidoTel: +256 392751796

Kumi BranchPlot 39, Ngora Road, KumiPO Box 1892, KampalaTel: +256 414 663222Kyenjojo BranchPlot 2/6, Nyantungo RoadP. O. Box 1077 KyenjojoTel: +256 414 663196

Kyotera BranchPlot 6, Kyotera RoadP. O. Box 116 KyoteraTel: +256 481-432676

Lira BranchObote AvenuePlot 4-7, Soroti RoadP. O. Box 817 LiraTel: +256 473-420124

Lugogo BranchPlot 3A2 & 3A3 Sports LaneForest Mall, Ground Floor, Unit G3 LugogoP. O. Box 1892 KampalaTel: 0414 663220

Lyantonde BranchPlot 226, Lyantonde Town CouncilP. O. Box 49, LyantodeTel: 0382280689

Makerere BranchSt. Augatine’s Student CentreP. O. Box 1892 KampalaTel: +256 (0) 414 535750

Mapeera House BranchPlot 44/46, Kampala RoadPlot 2, Burton StreetP. O. Box 1892 KampalaTel: +256 317 202287

Masaka BranchPlot 6, Edward AvenueP. O. Box 1063. MasakaTel: +256 481-420406

Mbale BranchPlot 54, Republic StreetP. O. Box 818 MbaleTel: +256 454-434002

Mbarara BranchPlot 25/27, High StreetP. O. Box 1352 MbararaTel: +256 485 421540

Masindi BranchPlot 59/61, Masindi Port RoadP. O. Box 5 MasindiTel: +256 465-420000

Mityana BranchPlot 50, Corner HouseP. O. Box 156 MityanaTel: +256 464-442791

Moroto BranchPlot 25, Lira Street. Moroto TownTel: +256 414 663202

Mpigi BranchPlot 106, Butambala RoadMpigi TownTel: +256 414 664508

Mubende BranchPlot 20, Main Street, Mubende TownP. O. Box 332 MubendeTel: +256 464-444059

Mukono BranchJinja RoadP. O. Box 790 MukonoTel: +256 414-291618/9

Nakivubo Road BranchMukwano Arcade(Opposite St. BalikudembeMarket)P. O. Box 6171KampalaTel: +256 414-507047/6

Namirembe Road BranchPlot 16, Namirembe RoadP. O Box 25229. KampalaTel: +256 414-345295

Najjanankumbi BranchPlot 1032, Entebbe RoadFreedom City Mall, Entebbe RoadP. O. Box 1892 KampalaTel: +256 414 501222

Nateete BranchPlot 3, Old Masaka RoadP. O. Box 1892 KampalaTel: +256 414-660637/1

Ntinda BranchPlot 36 - 38Ntinda Capital Shoppers BuildingNtinda-Nakawa RoadTel: +256 414289844

Ntungamo BranchPlot 4C, New Mbarara-Kabale RoadP. O. Box 136 NtungamoTel: +256 485 424012

Nebbi BranchPlot 1/3/5, Bishop Orombi RoadP. O. Box 179 NebbiTel: +256 414598643

Paidha BranchPlot 16, Arua RoadTel:+256 716 420013

Pallisa BranchPlot 38, Outa Road, Paliisa Town Council

Rubaga BranchRubaga CathedralAdmission blockPO Box 1892 KampalaTel:+256 414 271453

Rukungiri BranchPlot 13 Republic Road RukungiriP. O. Box 353 RukungiriTel: +256 486-442177

Soroti BranchPlot 36, Gweri RoadP. O. Box 420 SorotiTel: +256 414 663205

Tororo BranchPlot 3, Uhuru DriveP. O. Box 1146 TororoTel: +256 454-445018

Wakiso BranchPlot 249, Wakiso District Headquaters RoadP. O. Box 69 WakisoTel: +256 414-380501

Wobulenzi BranchKasana Luweero Diocese(KALUDO) HousePlot 249, Gulu RoadP. O. Box 186 WobulenziTel: +256 414 620006

BRANCH AND ATM NETWORK (continued...)


119BRANCH AND ATM NETWORK (continued...)

OFF SITE ATMs

AruaCatholic Center Building,Near Christ the King Church,Avenue Road

BugolobiPlot 69-71, Spring Road,Middle East Hospital & shopping complex building Bugolobi

BusiaPlot 93, Customs Road, Busia town

Bweyogerere Block 236, plot 232, UPET Petrol stationBweyogerere town, Kampala-Mukono highway

DokoloAngwenchibange ParishAkaidebe Zone, ParcelDokolo Town

Entebbe –KitooroBlock 438, Plot 505 Nkumba

Gulu Lacor Hospital, Juba Road

Gulu (second ATM)Andrea Olal Road Opposite Shell petrol Station

GayazaNear Mirembe SupermarketGayaza Road

IgangaPlot 43, Main Street, Iganga town

Jinja RoadCoffee Development buildingPlot 15, Kampala

Kasubi Plot 3648, Petrol City Fuelling Station Kasubi town

KabalagalaShell Petrol Station, Kabalagala

KabwoheSheema Block2, plot 521, Kabwohe, Bushenyi district

KajjansiBlock 383 Plot 162, Opp. Kajjansi market

Kakiri Block 204 Kakiri, Plot 287/288

KalerweGayaza Road next to Pearl Micro Finance

KalisizoZiladamu building, Plot 2-4 New Masaka Road

KamwokyaBoxing Supermarket Kamwokya Market

Kasana LuweeroGulu highwayNext to Diocesan Cathedral

KatweBlock 7, Plot 1230, KibugaOpposite Total Petrol Station, Katwe

Kawempe Kobil petrol station Near Kawempe market

KawukuBlock 419/420, Plot 311, Entebbe Road

KisenyiPlot 1475, Mwanga II Road, Kisenyi, Kampala.

KyengeraDevine Mercy Arcade, Masaka Road

LiraGapco Petrol stationOlwol RoadsLugazi Plot 94, Jinja Road. Lugazi

Lukaya Block 185, Plot 101 Mutuba IIBuddu, Lukaya

Luwum Street (3 ATMs)Plot 25, JBK Plaza,

Luzira Next to Bishop Cyprian Kihangire SS, Port Bell Road

MakindyePlot 1100- SIM Towers, MakindyeOpposite Makindye Military Barracks

Makerere HillHam Towers, Tuskys Shopping MallNear Wandegeya Trading Centre

Makerere University Business School (MUBS)Nakawa Capital ShoppersPlot 123, Sebei Lane

MatuggaBlock 91, Plot 5St. Francis of Assis Catholic Parish

Mbale (2 ATMs)Canos Guest House, Naboa Road

MbararaPlot 28, Masaka RoadMbarara Town

Mengo Masengere Plot 1164 & 151, Mengo, Kampala

MpigiBlock 92 Mpigi Town CouncilPlot 106, Butabala RoadPark village, Mpigi

Mulago Business Centre near HospitalChapel, Mulago Hospital

Mini Price (2 ATMs)Plot 48/50 Ben Kiwanuka Street

Mukwano Shopping Mall (3 ATMs)Mukwano Arcade Buiding

NakawaPlot 38, Jinja RoadShell Petrol stationNakulabyeRoad Master Hotel, Plot 589 Balintuma Road

NamugongoBlock 222 plot 146Namugongo Road towards the Uganda Martyrs Catholic Shrine

NansanaMasitowa Nansana, Hoima Road

120


NdeebaBlock 16, Plot 553 Nsike at Christine Motel

NtindaNtinda Road Trading CentrePlot 5A (shop B) opposite the mosque

NyendoPlot 495, 497, 498 JOBASCA Building, Next to St. Joseph’s Nyendo Catholic ChurchKitovu Road, Nyendo Masaka

Oasis MallNakumatt Shopping Mall,Yusuf Lule Road, Kampala

RusherePlot 18 Rushere, Kiruhura

RwebikonaPlot 43, Fort Portal Road

SeetaPlot 965, Block 110 , Seeta, Mukono District.

SironkoPlot 20, Block D, Kapchorwa RoadSironko town

Wandegeya (2 ATMs)Plot 166, Next to Hotel CatherineWandegeya- Kampala

BRANCH AND ATM NETWORK (continued...)


121YOUR NOTES

122


YOUR NOTES


123

124


Centenary Rural Development Bank Limited. Head Office: Mapeera House,Plot 44-46, Kampala Road, P. O. Box 1892 Kampala

Tel: +256 414-251276/7 Toll free line: 0800 200555Fax: +256 414-251273/4 E-mail: [email protected]

Website; http://www.centenarybank.co.ug

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