1 ANNUAL REPORT 2015 Annual Report & Financial Statements l 2015 2 Annual Report & Financial Statements l 2015 3 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 Annual Report & Financial Statements l 2015 4 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 Annual Report & Financial Statements l 2015 5 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 The amount by which gross loans in the SOFP are written down to cater for Financial Position (SOFP)] (Shs) 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 Ratio of change in the rate of impairment charge between time periods charge (%) 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 % Ratio of SOFP credit impairment to gross loans and advances of 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 Annual Report & Financial Statements l 2015 6 BANK CONTACT INFORMATION 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. Annual Report & Financial Statements l 2015 7 VISION MISSION AND OWNERSHIP 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. Annual Report & Financial Statements l 2015 8 OUR VISION “To be the best provider of Financial Services, especially Microfinance.” OUR MISSION STATEMENT “To provide appropriate financial services especially microfinance to all people, particularly in rural areas, in a sustainable manner and in accordance with the law.” OUR VALUES SUPERIOR INTEGRITY TEAMWORK PROFESSIONALISM CUSTOMER SERVICE LEADERSHIP EXCELLENCE COMPETENCE Annual Report & Financial Statements l 2015 9 SHAREHOLDERS • 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). OWNERSHIP The Registered Trustees of Various Catholic Dioceses in Uganda 38.5% The Registered Trustees of the Uganda Episcopal Conference 31.3% Solidarite’ Internationale pour le Development et I’Investissement (International Solidarity for Development SIDI and Investment) 11.6% Stichting Hivos-Triodos Fonds 18.3% Individuals 0.3% To tal 100% Annual Report & Financial Statements l 2015 10 Professor John Ddumba-Ssentamu Chairman Board of Directors Annual Report & Financial Statements l 2015 CHAIRMAN’S STATEMENT 11 CHAIRMAN’S STATEMENT 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. 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 THE NUMBERS industry and in a bid to expand with minimal structural costs, the number For the year under review 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. 19.9% 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 91 DAY TREASURY 2015. The consequent effect in the industry was an increase in lending rates BILL AVERAGE YIELD 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. 22.8% During the year, the Uganda shilling also weakened from USD/UGX 2,275 182 DAY TREASURY as at 31st December 2014 to USD/UGX 3,375