2015 Annual Report and Audited Financial Statements
TRADING AUTOMATION Real time execution of clients’ orders Crested capital ANNUAL report 2015 1 2 crested capital ANNUAL report 2015 TABLE OF CONTENTS
4. CORPORATE INFORMATION 26. Sustainability Report 5. Who we arE 28. CORPORATE SOCIAL RESPONSIBILITY Report 6. company values 29. Corporate governance 7. CHAIRMAN’S STATEMENT 31. CRESTED CAPITAL ACTIVITIES IN PICTURES 9. BOARD OF DIRECTORS 34. Remuneration report 12. CHIEF EXECUTIVE OFFICER’S STATEMENT 35. DIRECTORS REPORT and financial statements
13. MANAGEMENT TEAM 36. STATEMENT OF DIRECTOR’S RESPONSIBILITIES
16. CRESTED CAPITAL STAFF 37. INDEPENDENT AUDITORS’ REPORT
18. our products and services 38. STATEMENT OF COMPREHENSIVE INCOME
19. 2015 SUMMARY 39. STATEMENT OF FINANCIAL POSITION
20. Financial and Operational TRENDS 40. STATEMENT OF CHANGES IN EQUITY
22. BUSINESS REVIEW 41. STATEMENT OF CASH FLOWS 24. RIsk Assessment Review 42. NOTES TO THE FINANCIAL STATEMENTS
Crested capital ANNUAL report 2015 3 CORPORATE INFORMATION
First Floor, Impala House, Plot 13/15 Kimathi Avenue P. O. Box 31736, Kampala, Uganda. Tel: +256 312 230 900 / +256 758 230 900 [email protected] | www.crestedcapital.com
COMPANY SECRETARY AUDITORS Mr. Richard Adubango Plot 13/15 Kimathi Avenue P O Box 31338, Kampala KPMG Uganda REGISTERED OFFICE Certified Public Accountants (Uganda) First Floor, Impala House 3rd Floor, Rwenzori Courts Building Plot 13/15 Kimathi Avenue P O Box 3509, Kampala P O Box 31736, Kampala
BANKERS Members of Uganda Securities Exchange DFCU Bank Limited UAP Nakawa Business Park Impala House P. O. Box 23552, Kampala P.O. Box 70, Kampala
Stanbic Bank Uganda Limited Licensed by Capital Markets Authority Crested Towers 8th Floor, Jubilee Insurance Centre P.O. Box 7131, Kampala P. O. Box, 24565, Kampala
4 crested capital ANNUAL report 2015 Who we arE
History Crested Capital (a trade name of Crested Stocks and Securities Ltd.) are licensed investment advisors and broker dealers by the Capital Markets Authority of Uganda (CMA) and Members of the Uganda Securities Exchange (USE). The company was founded in 2004 and first licensed by the CMA in 2005 and admitted as Members to the USE in 2008. As the leading independent broker dealer in Uganda Crested Capital brings unique energy, focus, and commitment to developing the country’s capital markets.
How to Build the Capital Markets
It takes an enabling regulatory environment
It takes It takes the shouting voice of reason
It takes a bit of selflessness and Most of a bit of selfishness, all, it takes but not too much It takes individuals, commitment of either not institutions
Crested capital ANNUAL report 2015 5 company values
1
Innovation We offer innovative investment strategies and products to help you grow your capital
Sharing Success 2 We will always be fair, share in our company’s success, and acknowledge effort accordingly East Africa We plan and act for the future. Crested Capital will grow as Uganda and the Customer Care region grows 3 We care about you. Offering outstanding customer care is not just a statement for Crested Capital, it’s our mission 4
6 crested capital ANNUAL report 2015 CHAIRMAN’S STATEMENT
Crested Capital continued the same path by re-aligning other operational areas to ensure that our clients are served even better in the year 2015.
In my capacity as Ag chairman Board of directors of Crested Capital, I would like to pay special tribute to Mr. Habib Kagimu who diligently served our board during all the years of turbulence before we could make any profit as a company until the year of 2014 where he guided us into profitability for the first time in history.
Within the first 21 days of this year, Crested embarked on a strategic retreat away from Kampala to plan and strategize on how to become and maintain our leadership position of the largest broker/dealer in our market, a plan that I am sure was well drawn and executed during the period ending December 2015 because a lot that was planned to do was achieved as will be highlighted in the CEO’s statement.
Particular attention was put on how to maintain our profitability level achieved in the previous year 2014 as well as particular growth areas to better serve our clients. I am glad to report that as the year 2015 ended, Crested Capital was able to provide more comfort to our clients as they choose their investment Dear Stakeholders, strategies as well as convenient after sales services for exiting ones. 2015 was an exciting year for Crested Capital. Right from the highly studied re-branding phase which created Interesting for me during the year was the challenge of working Crested Capital, we went straight into the New Year with with a board consisting of a wide range of resources in business zeal to make further footsteps in the capital markets of development and professionalism within Uganda and the entire Uganda. We began with key management changes that East African region. I would like to commend the management created the Treasury and Equity financing departments team and the entire staff for their focus and dedicated execution that added significantly to our existing services. that enabled them sustain the growth momentum which was achieved in the year 2014. All this seemingly normal, I would like to commend the stewardship of our CEO Mr. Robert Baldwin and his Performance in 2015 management team that envisaged this as a very possible Our position on entry into 2015: Our business environment avenue to add to our productiveness. during 2015 was a twofold affair. The overall market performance at the beginning of the year was on a flat and seemingly down word trajectory while Crested Capital was doing the opposite of that showing a steady growth trend. Most of Crested Capital’s revenue being recorded within the first five
Crested capital ANNUAL report 2015 7 months of the year. Focus on the new business lines, a stronger I believe Crested will continue to grow strongly and innovate in risk management environment and our cost management order to continue supporting our clients and customers, despite agenda made Crested Capital a stronger company in 2015. all factors that affect growing businesses. We are very ready to tackle the New Year 2016 with more determination to achieve. Financial Performance; Much of this will be given in the CEO’s We have identified and assembled a strong team for Crested report but a little highlight on this shows that, Bottom line Capital to drive future growth. We will continue to use our Crested capital made a small loss compared to the previous year regional presence to produce better value to all our stakeholders. 2014. of 13,590,798 Uganda shillings compared to a profit of 357,281,159. I am glad to report that this loss was not as a result Appreciation of nonperformance but as a result of increased expenditure on I would like to salute Crested Capital’s management and staff, staff development and growth. customers, shareholders and partners, for their full support and dedication to the company, and for their confidence in the Board The Board of Directors therefore will not recommend any and Management during the year 2015. dividend for the year 2015. I also wish to thank our regulators the Capital markets Authority Factors that impacted our business in 2015. and Uganda securities Exchange for their enabling environment Trade Automation: The Uganda Securities Exchange moved from that has allowed us to continue with our growth. the semi manual trading platform to a fully automated trading platform. I am happy to report that our traders no longer go to the As the board of directors, we pledge to continue supporting and trading floor but are allowed access to the trading platform via providing proper guidance in order to deliver value to both the the on line system purchases by the Uganda Securities Exchange. company and the industry. We are very happy about the development. Its operation so far can be said to be technical but very swift and good.
Crested Capital joined the elite group of international traders by purchasing a Bloomberg screen, order taking and execution Sam Muhanguzi improved tremendously by this screen. Ag. Chairman
Regulatory environment: Our regulators changed from onsite inspections to a self-assessment and report of risks. This gave us a lot of responsibility and confidence in our market. And significantly allowed a lot of time to concentrate on the business as well as staying within compliance parameters.
8 crested capital ANNUAL report 2015 BOARD OF DIRECTORS
Samuel Muhanguzi - Ag Chairman Samuel is a management and technology systems consultant. His current fields of engagement include strategy consulting, investment and social development advisory work in Africa. He began his career in 1984 as a junior officer in the Ugandan army, later joined UNICEF and transited to various positions in the World Bank, para-state agencies for roads, IT and special projects. Samuel has been a pioneer in most organizations – being the first head of IT at UNICEF, Kampala, Manager for MISat National Roads Authority (UNRA), head of IT Portfolio Management at the National Information Technology Authority (NITA), founder of Crested Capital Ltd, Planet Systems and the first citizen interaction center under the President’s office. He has led consultancies in NGOs in Uganda, Kenya and South Africa focusing on organizational development, corporate systems planning, design and implementation, project organization, community development. Samuel is a strong advocate for SME and government involvement in entrepreneurship programmes.
Samuel holds a Master of Science in Information Technology (M Sc) from University of Maryland (USA), a Masters of Business Administration and Management (MBA) from University of Hartford, Paris, France. Earlier studies cover a Bachelor of Arts in Business Administration and Management from Daystar University, two professional diplomas in Information Technology from IMIS, UK. He is a PhD candidate of information systems performance at the University of Cape Town, South Africa. Samuel lives in Kampala, Uganda, with his wife Anne and six children
Robert Baldwin - director and ceo Robert is a founding member of Crested in 2004 and the Chief Executive Officer of the Company since 2006. He is an active Member of the Board/Governing Council of the Uganda Securities Exchange and serves on USE Committee on Business Conduct. He is also a member of the Bank of Uganda’s Task Force on Proposed Debt Market Reforms and the Chairman of the Uganda Securities Broker Dealers Association since 2010. Robert graduated with a BSBA and a major in Marketing and a minor in Japanese from Georgetown University McDonnough School of Business in Washington, DC in 1991.
Crested capital ANNUAL report 2015 9 MARCOS SHIFERAW BITEW - director He is the Founder and CEO African Power Initiative (API) Uganda, and also founder, chairman and shareholder API – Renewable Energy PLC Ethiopia that deals with the production and sell of bio-diesel from candle nut, Jatropha and castor seeds. He is also the founder, chairman and shareholder in Great Lakes machinery Ltd
Mohit K Advani - director He is the managing Director Global Interlink Travel Services Ltd since 2001 todate. Between 1999 AND 2000, he was a General Manager with Global interlink a company specializing in Kenya and Tanzania tours and was also a general sales Agent with Sarova Hotels. Mohit was also the Marketing Director of Adwyn International Ltd an import and trading company between 199-1999 has also been an instructor with International Air Fare Desk (IAFD). Mohit holds a Bachelor of Commerce from the University of Bombay 1996 and also a Diploma in comprehensive travel knowledge, Travel agency management and advanced air fares and ticketing. He is well traveled with extensive tourism Knowledge, Is currently a member of the National Geographic Society, a member of the Uganda Conservation Forum, has been a board member and Executive Treasurer of Association of Uganda Tour Operators, Board member of Charge De Presse of Chaine Des Rotisseurs Kampala and is currently a member of the Board – Crested Capital.
japher kalule kagimu - director With a background in Law from Makerere University, Kampala, his main areas of focus are corporate governance and regulatory affairs, he also oversees the implementation of administrative and human resource procedures. A director of all the companies within the Habib Group, Japher spends much of his time working closely with the Group CEO, overseeing corporate strategy. Japher began his working career in 2006 as a solicitor at Andrew & Frank Advocates before leaving to takeover TelChoice Ltd as Chairman in 2007. Benefiting from a multicultural upbringing, Japher loves to travel and meet new people. He has travelled widely throughout Africa, Asia and Europe. When not travelling, Japher likes to spend time with his young family. His hobbies include creating music, studying film and reading. He also enjoys both watching and playing a wide array of sports, including particular football and basketball.
10 crested capital ANNUAL report 2015 Dr. Thelma Awori - director Dr. Thelma Awori was the Founding Chair and President of the Sirleaf Market Women’s Fund, an organization which was named in honor of Ellen Johnson Sirleaf, Africa’s first female president and the granddaughter of a market woman. The fund helps to build decent workplaces for thousands of market women, enhances their voices in policy making at regional and national levels and offers them direct services such as credit, literacy, water and sanitation, storage, and child care for their children. Her work with market women in urban and rural markets has positioned her well for membership of the Urban Strategy Council of GDF Suez. She is a member of the Global Advisory Board of the Hairou Commission which among other things promotes the participation of women in urban development. Dr. Awori has a passion for promoting transformational leadership among rural women. To further this goal she has established the Institute for Social Transformation that develops leadership and critical thinking skills among women at the community level in rural and urban areas and among development practitioners who work with this target group. Dr. Awori is also experienced in the area of women and international peace keeping which has been invaluable in her tenure as President of Isis Women’s Cross Cultural Exchange and member of the Board of Femme African Solidarity, two organizations that focus on this issue. She also served as a member of the Civil Society Advisory Group to the Secretary General on UN Security Council Resolution 1325. Thelma Awori, a Liberian/Ugandan, received her BA (Hons. cum laude) in Social Relations and Cultural Anthropology from Harvard University and MA in Adult Education and Humanistic Psychology from the University of California, Berkeley. She recently received her Ed. D from Teachers College, Columbia University in New York.
RICHARD ADUBANGO OLAMA - company secretary Richard Adubango Olama, is a graduate of Makerere University Law School in 1997, and thereafter obtained a Post Graduate Diploma in Legal Practice from Law Development Centre in 1998. He is an enrolled advocate of the High Court of Uganda, a partner in Lwere Lwanyaga and Company Advocates. He has offered and concurs to Company Secretary service to many companies and Joint Venture Companies. He has interest in commercial transactions and legal advisory.
Crested capital ANNUAL report 2015 11 CHIEF EXECUTIVE OFFICER’S STATEMENT
Dear Clients and other Stakeholders,
Welcome to the 2015 Annual Report of the Company. To my knowledge this is the first time a privately owned Member of the Uganda Securities Exchange made public its Annual Report and also includes the complete Audited Financial Statements. A very big THANK YOU to the entire team who put this Report together, well done!
On behalf of all of Crested’s staff I hope you enjoy reading about the Company’s activities and achievements during the year. We certainly enjoyed ourselves during the many hours, six day weeks, early mornings and late evenings. As usual the time just The year 2015 required careful flew by and before any of us knew it, the end-of-year party was management due to higher revenue upon us. levels and risks associated with This Annual Report demonstrates the Company’s adherence our exponential growth in 2014. to the highest standards of Corporate Governance which we Consolidation and a steady approach hope shall meet and at times may even exceed those of a Listed helped us to make progress on Company. numerous fronts including re- The journey to producing this Report started six years ago, under branding, new partnerships, the leadership of the then Company Chairman Habib Kagimu investments in technology and in 2010 the Board decided to engage a “big four” external audit firm for Crested. The key statistics from 2011-2015 contained in communication, external and this report are drawn from the Company’s Financial Statements internal training, and improving staff audited by Ernst & Young for five years (2010-2014) and KPMG welfare. one year (2015). The change to KPMG in 2015 was due to statutory rotation of external auditors as per the Capital Markets Authority regulations.
Management thanks the Board of Directors for having the foresight to invest in high-quality external auditors and for the confidence it demonstrates in releasing this Annual Report to the public, for which Crested leads by example. Much like in other areas of Uganda’s Capital Markets.
Finally, I would like to recognize the Staff and Shareholders of the Company and thank all for your continued efforts and support. I conclude with a vote of thanks to our partners and clients without whom Crested Capital’s 2015 countless achievements would not have been possible, nor nearly as much fun
______Robert H. Baldwin Chief Executive Officer 12 crested capital ANNUAL report 2015 MANAGEMENT TEAM
Chief Executive Officer and Director Crested Capital; has 17 years management experience across East Africa including Kenya, Tanzania, Ethiopia, and Uganda. Selected transaction Advisory experience includes: Co-lead Transaction Advisor and Lead Sponsoring Stockbroker for the National Insurance Corporation Rights Issue 2013 and the National Insurance Corporation Bonus Issue 2014. Co-Sponsoring Stockbroker for the Kenya Airways Rights Issue in Uganda 2012, Stockbrokers for the Umeme Limited ESOP and Selling Agents for the Umeme IPO enrolling over 35% of the total shareholders at IPO in 2012.
Robert is a founding member of Crested in 2004 and the Chief Executive Officer of the Company since 2006. He is an active Member of the Board/Governing Council of the Uganda Securities Exchange and serves on USE Committee on Business Conduct. He is also a member of the Bank of Uganda’s Task Force on Proposed Debt Market Reforms and the Chairman of the Uganda Securities Broker Dealers Association since 2010. Robert Baldwin Robert graduated with a BSBA and a major in Marketing and a minor in Japanese from Georgetown University McDonnough School of Business in Washington, DC in 1991.
Manager Compliance & Risk; has 11 years capital markets experience in various roles including research, floor trading, compliance, corporate advisory, and promotion of initial public offers. Joseph led the process to obtain CMA and USE approvals for the NIC Rights Issue 2013 NIC Bonus Issue 2014 and Kenya Airways Rights Issue 2012 in Uganda. Joseph has been involved in several local and regional transactions including: NIC Rights Issue 2013, Kenya Airways Rights Issue 2012, Britam IPO 2012, Bank Du Kigali IPO 2011, Bralirwa IPO 2010, NIC IPO 2010, and Safaricom IPO 2008, among others. He was among the first graduates of Security Industry Training Institute (SITI) stockbrokers’ course (2008) and is a graduate of Business Administration, majoring in Finance at Makerere University Business School in 2003.
Joseph Kibuuka
Manager Dealing; has 11 years capital markets experience with Crested Capital as a projects officer, floor trader, client educator, corporate advisor, and promotion of initial public offers. Kimuli led the roadshow and sales agents’ efforts for the Kenya Airways Rights Issue in Uganda (2012) and played a similar role in Crested’s Advisory team for the NIC Rights Issue 2013 and NIC Rights Issue 2014. Kimuli has been involved in several local and regional transactions including: Britam IPO team leader for sales in Uganda (2011), Kenya Airways Rights Issue (2012), Bank Du Kigali IPO (2011), Bralirwa IPO (2010), NIC IPO (2010), and Safaricom IPO (2008), among others. Kimuli was among the first graduates of Security Industry Training Institute (SITI) stockbrokers’ course (2008) and is a graduate of Business Administration, majoring in Finance at Makerere University Business School in 2003.
Nicholas Kimuli
Crested capital ANNUAL report 2015 13 Manager Finance & Treasury; has 9 years of experience in office administration, accounting, and finance with Crested Capital. Ruth handles all statutory requirements including CMA licensing, USE Membership, URA and NSSF filings. In addition to this, Ruth manages the overall company budgets and operating expenses, processes client settlements in ranges above US$8 million, handles financial relationships with regional and international counterparts, she is also a Licensed Sales Representative by the Capital Markets Authority since 2010 and the in charge as regards to liaison with external auditors for pre-audit and actual audit (Ernst and Young since 2010). Ruth is a graduate of Bachelors of Office and Information Management at Makerere University Business School in 2006
Nabakka Ruth
Internal Auditor; Richard has 17 years experience as an Accountant, he holds a Bachelor of Commerce Degree Majoring in Accounting and holds a Post graduate Diploma in Financial Management. He has worked at AMG International, Enterprise Uganda and Currently Serves crested Capital as Internal Auditor; a portfolio he has held for 3 years. Before this he was Crested Capital’s Accountant a position he held for 3 years
Richard Mugabi
Joseph Sewanyana Chief Accountant, appointed in January 2015 and resigned August 2015
14 crested capital ANNUAL report 2015 Sharing success in pictures 2015
Crested capital ANNUAL report 2015 15 Henry Tamale Institutional Trader
Salima Nakiboneka Martin Echobu Simon Peter Jumba Analyst Fixed Income & Equities Dealer & Operations Officer Accountant
Catherine Namujjuzi Susan Namaganda Sheila Katushabe Compliance & Customer Care Customer Care Relations Customer Care Relations
16 crested capital ANNUAL report 2015 Evelyn Kabarangira Executive Coordinator
Margaret Oguti Drek Murozi Gilbert Olet Accounts Assistant Systems Analyst Trading Support & Operations
Jamadah Serunjogi Musa Kyobe Sherona Nnakitto Administrative Assistant Operations Receptionist
Crested capital ANNUAL report 2015 17 our products and services
What We Do In frontier markets such as Uganda, market participants often play a variety of roles. Crested Capital participate in several segments of the capital markets including:
1. Brokerage Services Trading in both Local and Regional Equities like; Uganda, Kenya and Rwanda UGANDA KENYA British American T Bank of Barodaobacco Britam Development Finance Company Uganda Centum East African Brewies Ltd Kenya Commercial Bank National Insurance Corporation Fahari Kenya Airways Nairobi Securities Exchange New Vision Ltd Stanbic Bank Uganda Real Estate Investment T rust Uganda Clays Limited Standard CharteredSafaricom bank Kenya Umeme Ltd Uchumi
RWANDA
Bank of Kigali Bralirwa shares Crystal Telecom
1. . 7. Sponsoring Broker 2. Investment Advisory 8. Rights Issues 3. Market Advisory 9. Cross-listings 4. Fixed Income (including T-Bills and Bonds) 10. Private Equity 5. Non-discretionary portfolio management 11. Research & Publications 6. Valuation 12. Official subscription Agents of the Economist magazines
18 crested capital ANNUAL report 2015 2015 SUMMARY
Business Operations And Results Overview 1. Re-branded to Crested Capital 2. Investments in facilities, communication, and information technology 3. Revenue declined 18% to Ushs 1.60 Bn (2014: 1.95 Bn) 4. Loss for the year Ushs 25.69 Mn (2014: profit of 340.70 Mn) 5. Total Assets increased 44% to Ushs 2.285 Bn (2014: 1.588 Bn)
2015 2014 Income Statement Ushs ‘000 Ushs ‘000 Income 1,566,353 1,924,809 Foreign Exchange Gain 33,857 26,837 Expenses (1,607,938) (1,459,639) Profit/(Loss) Before Tax (7,729) 492,006 Tax Credit - - Tax expense (17,970) 151,286 Profit/(Loss) for the Year (25,699) 340,720
Statement of financial position Assets Property and equipment 64,188 59,396 Intangible asset 36,967 2,991 Deposit with USE 129,537 129,537 Trade and other receivables 124,096 61,906 Available for Sale Investments 135,188 136,304 Assets Held to Maturity 1,091,789 472,409 Corporate Tax Recoverable 2,347 - Cash and cash equivalents 701,645 725,886 Total Assets 2,285,760 1,588,429
Liabilities Deferred income tax liability 41,667 23,479 Current liabilities, Trade and other payables 1,555,770 844,736 Dividends Payable 54 - Other liabilities 4,634 4,634 Total Liabilities 1,602,125 872,849
Shareholder’s Equity Issued capital 206,600 206,600 Share Premium 415,365 415,365 Available-for-sale reserve 44,539 32,430 Proposed Dividends - 18,355 Retained Earnings 17,131 42,830 Total Shareholders’ Equity and Liabilities 2,285,760 1,588,429
Crested capital ANNUAL report 2015 19 Financial and Operational TRENDS
2011 2012 2013 2014 2015 Ushs Ushs Ushs Ushs Ushs Fees and Commissions 77,522,888 240,465,057 496,904,848 1,821,525,437 1,421,771,167 Other Income 140,969,867 188,136,247 96,281,166 130,120,628 178,438,895 Economist Expenses (56,093,104) (34,967,254) (45,594,984) (43,936,496) (38,658,100) Staff Costs (79,813,532) (131,295,993) (169,694,830) (271,628,520) (477,456,055) Administrative Costs (161,808,863) (275,637,549) (341,694,961) (1,144,074,662) (1,091,824,458) Profit/Loss before Tax (79,222,744) (13,299,492) 36,201,239 492,006,387 (7,728,551) Profit/Loss after Tax (79,222,744) (13,299,492) 66,004,196 340,720,498 (25,699,199)
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 FEES AND COMMISSIONS OTHER INCOME
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Economist Expenses STAFF COSTS
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 ADMINISTRATIVE COSTS Profit/Loss BEFORE Tax
20 crested capital ANNUAL report 2015 2011 2012 2013 2014 2015 Ushs Ushs Ushs Ushs Ushs Non-Current Assets 120,476,595 120,452,491 184,637,318 191,923,957 230,692,976 Current Assets 279,104,110 616,255,416 699,637,150 1,396,505,550 2,055,067,335 Total Assets 399,580,705 736,707,907 884,274,468 1,588,429,507 2,285,760,311
2015 2011 2012 2013 2014 2011 2012 2013 2014 2015 Current Assets Non-Current Assets
2011 2012 2013 2014 2015 TOTAL ASSETS 2011 2012 2013 2014 2015 Ushs Ushs Ushs Ushs Ushs Equity 184,157,175 288,512,706 358,299,782 715,580,941 683,634,457 Non-Current Liabilities - - - 23,478,523 41,667,225 Current Liabilities 215,423,530 448,195,201 525,974,686 849,370,043 1,560,458,629 Total Equity and Liabilities 399,580,705 736,707,907 884,274,468 1,588,429,507 2,285,760,311
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 EQUITY Non-Current Liabilities
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Current Liabilities Total Equity and Liabilities Crested capital ANNUAL report 2015 21 BUSINESS REVIEW
Review of the past 12 months In June we started proprietary trading on the Nairobi Securities 2015 has behaved like someone with a split personality: Exchange (NSE) using an online platform. Crested also held its everything good January to July and volatile from August to Annual General Meeting which approved the addition of three December. independent Directors to the Board. Finally in June we hired Mr. Bloomberg! Overall, by the end of 2015 Crested: • Extended its dominance in total trades at the USE with 40% Crested had an Acting CEO during July and August: Nicholas (2014: first place 33%) Kimuli. The USE launched the Automated Trading System (ATS) • Continued high trading volume with Ushs 90 Billion traded and floor-traders went the way of the white rhino: nearly extinct! (2014: 125 Billion, 2013: 21 Billion) Still in August four Crested staff including two traders; Henry • Were second place among brokers with 30% of the 5 Billion Tamale, Martin Echobu, a research analyst (Salima Nakiboneka), gross commission (1.45 Billion). and the CEO travelled to Nairobi to meet with clients and • Had ongoing lead transaction advisor mandates in energy partners. and agriculture. We also invested in a Router and LAN upgrading our IT network. We rolled out the new Crested Capital brand, implemented “no-more-ragtag”, extended our lead in retail while fighting for At the end of August we were displaced from Impala House for international business. We also grew our existing businesses: three working days due to a Kampala Capital City Authority fixed income and economist while launching new income beautification project. Also in August we had a departure in the streams such as prompt, Equity Finance and Treasury’s Accounts department. proprietary portfolio management. Finally, in August and September we extended a 5 year tradition, Here’s how we did it four Crested teams travelled upcountry to 18 towns, conducted 61 presentations to 1,162 people and opened 333 Securities 2015 Milestones Central Depository Accounts, the most during any field trip. January kicked off the year with Crested’s largest team ever: 19! This was achieved with Capital Market Authority support also All attended extensive clay pottery training at the African Village for the first time in history. Still in September, Kimuli Nicholas Mukono where we held our annual retreat. visited Nairobi on short notice to meet partner investment bankers while Crested launched new payment platforms with In February Crested re-branded with new stationary including MTN and AIRTEL mobile money. letterheads, business cards, order forms, uniforms, as well as indoor and outdoor signage. The CEO attended a capital markets October we were informed by the Capital Market Authority event in Kigali. (CMA) that they would use our internal risk-based system to asses Crested’s compliance. In March we made an unsuccessful bid for a Lead Transaction Advisor for an agricultural bond by aBI Trust. The bond has never In November we completed office redesign level 1 upgrading come to market. public spaces and painting interior walls. Finally in November Crested launched Health Insurance Coverage for staff plus up In April we took the initiative to sponsor monthly “Media to 4 dependants. This is our largest single milestone of the year Breakfasts” with off-the-record discussions about the capital according to the EXO. markets with journalists, other brokers, and the USE. 7 such events were held in 2015. There was still more to achieve in December including the Equity finance pilot, launching the upgraded Crested Capital website, In May we achieved a milestone 4 years in the making after ongoing advisory projects in Rwanda and Uganda, and of course signing a 3 year brokerage services contract with NSSF. May, Christmas and New Year’s. Crested were recognized by the CMA with TWO Kikonyogo awards: Winner, Most Active retail broker and Runner-up Most Coming Up In 2016 Active Institutional broker. A BIG Congratulations to the team!! • Bonds, Bonds, Bonds • Implementation of E-Crest • Education, Education, Education
22 crested capital ANNUAL report 2015 The Board of Directors, Management, and staff of Crested Capital thank our regulators, Capital Markets Authority, Uganda Securities Exchange and our clients for the two Kikonyogo awards won in 2015.
Crested Capital received, Most Active Retail Broker for the year and Runner-up Most Active Instructional Broker at the ceremony hosted by CMA
Crested capital ANNUAL report 2015 23 RIsk Assessment Review
As the CMA moved from compliance to risk based supervision in • The compliance team ensures that the risks are contained 2014, the need for Crested’s compliance team to keep in check within the set appetite and that the risk management the various risks variant in our market increased. Our principle process is diligently followed. business is stock brokerage and investment advisory. • The internal auditor in his audit function provides We are also the authorized subscription agents of the Economist independent assurance and reports the findings to the Magazine. board.
The risks that are inherent in our business environment The management of such risks is detailed in the discussion below. include Market risk, Liquidity risk, Compliance/Regulatory risk, Operations risk, Reputation risk and Technology risk. The Market Risk company’s overall risk management focuses on developing Market risk is the risk that adverse changes in the financial market strong systems and processes that will predict the risks and put rates or prices will affect a company’s income or the value of its in place strong mitigants to absorb any shocks that may happen financial assets. We strive to maintain a balance between the risk from time to time. and the return as well as meeting the customer requirements. Our board has the ultimate responsibility of setting our Our Customer care, trading and research functions are always up risk appetite along management and thereafter make dated with market information and as such guide the customers recommendations. during order taking, order execution and the projections on • All employees at Crested Capital are tasked with ensuring market trends. effective risk management within their scope of work.
24 crested capital ANNUAL report 2015 Liquidity risk and ensuring that the business is conducted within the legal and Liquidity risk is the risk that from insufficiency of financial regulatory requirements and guidelines. resources to meet financial resources available to meet obligations that fall due. We strive to ensure that we have enough Reputation risk liquidity by maintaining enough float to meet our payables. This is a risk on company’s reputation as a result of the company’s business conduct or those of its clients. At Crested Capital, it is Operational risk the responsibility of employees to conduct themselves in a This is risk that results from inadequacy of or insufficiency of the professional way. Most of the reputation risks arise from ethical internal processes, systems and people. The company ensures and social issues or as a consequence of occurrence of operational that there’s efficiency and effectiveness of the available resources, risk. The internal control systems have been strengthened to client instructions are properly taken and executed. Proper risk minimize risk of operational and financial failure. In addition to profiling is made where risks are identified, assessed, quantified this, complete assessment of reputation implications is made and managed in a timely manner. The business continuity before strategic matters are concluded. principal hails high in the priority areas as disaster recover methods are in place and were tested to see their effectiveness. Strategic risk This helps manage adverse effects from unforeseen disasters to This is the risk that arises from adverse outcomes resulting the business. The company also has a guarantee fund in place to from a weak competitive position or from a choice of strategy, cater for any shortfalls in settling client’s obligation both under market, structures and services. External shocks like unstable normal and stressed conditions. macroeconomic conditions, low market activities will all have a major impact on the revenue streams and as such the company Compliance and Regulatory risk has diversified its products and payment systems to ensure that This is from not meeting the market regulations and guidelines. we remain competitive. Developments and changes in the regulatory landscape coupled with the complexity of the business continue to be a challenge as Crested Capital remains committed and focused in containing the Company has to navigate a proliferation of new regulatory the above mentioned risks within the acceptable appetite levels requirements and stakeholder expectations, without losing yet maximizing opportunities that are present in the financial focus on performance objectives, sustainability value and good markets in order to sustainably grow the business across the East corporate governance. Therefore, the compliance and executive African region. functions are tasked with implementation of the risk frame work
The company ensures “that there’s efficiency and effectiveness of the available resources. Client instructions are properly taken and executed. Proper risk profiling is made where risks are identified, assessed, quantified and managed in a timely manner. “
Crested capital ANNUAL report 2015 25 Sustainability Report
Crested Capital will always ensure that all it does leads to Regional Presence business continuity. We create, build and develop our people. While we appreciate that ours is a Ugandan business, we invest We invest in the future by cultivating a culture in us that ensures in understanding the region. We strive to work with strong a right direction of the company. partners in order to have the region on our side and we go and make it happen. We strive to have presence in every East African We build our Client base. market and ensure to serve the region best. The cost of doing, training and capacity building is a big part of our business, however, we believe in this investment because it We will always remain compliant to all laws and regulations. We is the future. will comply with the necessary statutory responsibilities and that our clients find an open door of Crested Capital every time they Staff development and Empowerment return for business thus emphasizing our continued business We believe in development of our team. A big percentage of our sustainability. staff was supported and encouraged to further studies in 2015. When the opportunity arises, we endeavour to train our staff to End of Year Party ensure competitiveness in our market in the future. Crested Capital holds an end of year celebration for Staff, Directors and Partners with the purpose of deepening a personal We always look at the feasibility of our actions in relationship and work relationship. to the future, the nature of our business is service based and For 2015 the party was held at Aagan Restaurant where the best therefore we put in place customised accessories to help us serve performing staff were recognised for the contribution made each customer flawlessly as they come. This ensures satisfaction towards the development of the company. for our customers and sustains customer business.
End of year celebration for Staff, Directors and Partners at Aangan Restaurant, 2015
26 crested capital ANNUAL report 2015 Color Run at Ambrosoli International School
Sensitization about the stock market at Kyambogo University
Crested capital ANNUAL report 2015 27 CORPORATE SOCIAL RESPONSIBILITY Report
As we strive to build a reputable and professional corporation, high on the agenda as Crested Capital plans for its year. We always we continue to expand our Corporate Social Responsibility plan to provide free financial literacy to Ugandans upcountry. in our society. Crested Capital is very proud of building an According to a report from our customer care team, over 6,000 ‘investment cream’ of the young society and thereby impacting people in the country side received free training on savings and lives positively. investments in 2015. We are proud that a big number of these come through as leaders in their societies to continue to share Crested Capital’s programme of enhancing financial literacy to the their knowledge to other citizens of our country Uganda. entire country has seen enormous fruits already. Over thousands of potential investors in the past four years have received free As we continue to do the same, we have given hope to a lot of specialized training and a few of those have gone ahead to get school going (University) belief and comfort to pursue education internships by Crested Capital. Notably, most members of the in anticipation that there is life after school. In this country where Uganda Securities Exchange (USE) have staff who rooted from employment is not a must. Students retain some hope that they Crested Capital. can join the employment world through the continued internship programme that Crested Capital offers. Our nationwide financial literacy programme continues to be ... we provide free financial literacy to Ugandans upcountry.
28 crested capital ANNUAL report 2015 Corporate governance
Staff undergoing corporate governance training
Crested Capital’s Board of Directors commit to implementing Composition sound governance practices so that the business remains The board composition was restructured in 2015 to increase the sustainable and relevant to the stake holders. number of independent Board members to four. This was aimed The company’s frame work is in such a way that the levels of at increasing diversity of skills and experience. All the directors’ authority are well defined and the company’s board processes competences and skills can be referenced on Board of Directors’ and functions are stipulated as well. page (pg. 9)
Compliance with Market Laws and Regulation. The objectives of the Board Charter is to ensure that Board Crested Capital is licensed by the Capital Markets Authority as a members are fully aware of their responsibilities, knowledgeable broker/dealer and a member of the Uganda Securities Exchange. about the various regulation that affects their conduct while As such we are bound by the rules and regulations of the Capital upholding corporate governance principles in all their dealings Markets Authority (CMA) and the Uganda Securities Exchange on behalf of the company. (USE). The Board has an obligation of reporting to the shareholders on The board ensures these rules are observed and the Compliance the business performance, review the risk profile of the company department oversees the implementation of the company’s risk as well as the internal and external audit reports. The board also management framework and reports to the board on a quarterly reviews the remuneration and evaluates the performance of the basis. Chief Executive Officer, in addition to carrying out a succession plan. In the board’s mandate also lies the task of reviewing and Governance Structure approving the annual strategic plan that is to be adopted to foster The company has a unitary board structure with the roles of the business growth and success. chairman and the chief executive director clearly separated. The chairman is an independent and non-executive member. His Chief Executive Officer responsibility is to give leadership to the Board and ensure it The Chief Executive Officer gives oversight to the management executes its duties diligently. team to ensure that the set policies and objectives are followed and accountability made to the Board. The Chief Executive Officer
Crested capital ANNUAL report 2015 29 reports to the Board on an annual basis and more frequently if Board meetings such issues that require urgent reviews or/and approvals arise. The board met twice in the year. Adhoc meetings held when required given the urgency of the issues at hand. Reports and Board evaluation supporting documents are provided to the directors prior to the The Board acknowledges the importance of continuous meeting. assessment and evaluation of its functions. Having had a restructuring in the third quarter of 2015, the Board had an Attendance of Board meetings in 2015 was as follows; assessment of the training needs of its newly appointed Board Director 02.07.2015 04.12.2015 members which will be used as the basis for their training and Sam Muhanguzi Attended Absent evaluation during the year 2016. The evaluation of the Chief Executive Officer was also carried out as is the case every year. Robert Baldwin Attended Attended The evaluation was against the annual targets and it is the basis Marcos Bitew Attended Attended of his remuneration. Japher Kalule Attended Attended Kagimu Access to information Mohit K. Advani N/A Attended The Board receives information from the Chief Executive Thelma Awori N/A Absent with apology Officer and where more information is required then senior management team is requested to provide the information. Strategic planning The board is tasked with providing the strategic direction Appointments and resignation of Directors through medium and long term together with the help of the The appointment and resignation of Directors is construed by the management team. Here, non-executive directors objectively Company’s Act, 2012 and the Company’s Articles of association. guide and challenge where necessary the proposals on the Directors can appoint proxies to attend meetings on their behalf different strategies. Performance of the approved strategies is when they are unable to do so. At the annual general meetings then evaluated during the semi-annual Board meetings. the directors are appointed and are subject to rotation at the next AGM. Selection of the director depends on their diversity in skills, knowledge and other relevant competencies. Company secretary The Board appointed Mr. Richard Adubango as the company secretary and his responsibilities include among others The following changes have occurred since the last AGM: ensuring that the board is always acquainted with its duties and responsibility, coordinating the meetings as well as maintaining Appointments updated records of the company. 1. Mr. Marcos Bitew - independent and non-executive Director - 10th May 2013 2. Mr. Japher Kalule Kagimu - independent and non- Remuneration structure The salary is in such a way that it is attractive and ensures that executive Director - 02nd July 2015 the company retains employees. Annual incentives in form 3. Mr. Mohit K. Advani - independent and non-executive of bonuses are given to employees as a reward for their extra- Director - 02nd July 2015 ordinary performance. 4. Dr. Thelma Awori - independent and non-executive Director - 02nd July 2015 Benefits The company offers medical insurance to all employees and Resignations: management ensures that the work environment is conducive 1. Mr. Habib Kagimu - 02nd July 2015 for all employees to achieve their objectives through provision of voice airtime, lunch and other expense reimbursements and Delegation of authority allowances. The Board ensures that the company’s operations run efficiently within acceptable control framework through delegation of duties. The Chief Executive Officer is empowered to manage the Director’s Remunerations Directors receive allowance of UGX 250,000 per full board operational aspects of the company’s business together with the meeting. management team.
The Board will constitute its first board committees in 2016.
30 crested capital ANNUAL report 2015 CRESTED CAPITAL ACTIVITIES IN PICTURES
Cake cutting during end-of-year party at Aangan 2015 Annual sports gala at Vienna College 2015
Staff retreat at Flame Tree Stable, Gayaza Annual sports gala at Vienna College 2015
Media breakfast at Amagara restaurant Excellent customer care “service with a smile”
Crested capital ANNUAL report 2015 31 32 crested capital ANNUAL report 2015 Crested capital ANNUAL report 2015 33 Remuneration report
Remuneration Philosophy and policy Directors’ Remuneration The main objective of the policy is to ensure that all staff receive The remuneration packages and long-term incentives for the incentives to encourage excellent performance that promotes directors are determined using the same basis and qualifying sustainable growth and success of the company. This objective is criteria as for other employees. in line with our second core value; Sharing Success. Terms of services Remuneration Structure All Directors are provided with a letter of appointment setting out the terms of engagement. Fixed Pay Crested Capital offers its employees a fixed pay which is Fees intended to attract and retain the finest employees to guarantee All Directors receive an allowance per full board meeting. a competitive edge in both the local market and regional capital markets. Further details are contained in our audited financial report.
Variable Pay Crested Capital offers incentives in form of bonuses to make sure employees are rewarded for achieving set monthly targets. Individual employee bonuses are based on personal performance, which is both financial and non-financial.
Benefits The company offers benefits to its employees in line with the regulatory requirements i.e. workman’s compensation. Crested Capital also gives medical cover to employees and dependants. Another tangible benefit is the opportunity to travel in the region and further abroad to interact with potential investors and partners.
Long Term Performance Incentives Annual Bonus incentives are provided to all employees of Crested Capital along with awards basing on their performance and overall contribution to the company’s results for the year.
34 crested capital ANNUAL report 2015 REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2015
The Directors present their report together with the AUDITORS audited financial statements of Crested Stocks and The auditors, KPMG, were appointed during the year Securities Limited (“the Company”) for the year ended and being eligible have expressed their willingness to 31 December 2015. continue in office in accordance with Section 167 (2) of the Companies Act of Uganda. PRINCIPAL ACTIVITIES Crested Stocks and Securities Limited is a company BY ORDER OF THE BOARD limited by shares and incorporated in Uganda under the Ugandan Companies Act. The Company is now trading under the trade name, Crested Capital. The Company is a Licensed Investment Advisor and Secretary Broker/Dealer by the Capital Markets Authority of Kampala Uganda and is a Member of the Uganda Securities Exchange. Date: 04 March, 2016
FINANCIAL RESULTS The results for the year ended 31 December 2015 are set out on page 38.
BOARD OF DIRECTORS The directors who served during the year and up to the date of this report are set out on Directors’ page (pg 9).
DIVIDENDS The directors do not recommend the payment of a dividend (2014: Ushs 18,355,686)
Crested capital ANNUAL report 2015 35 STATEMENT OF DIRECTOR’S RESPONSIBILITIES
The Company’s Directors are responsible for the Company as at the end of the financial year and of the preparation and fair presentation of the financial operating results of the Company for that year. It also statements of Crested Stocks and Securities Limited set requires the directors to ensure the Company keeps out on pages 38 to 60 which comprise the statement proper accounting records that disclose with reasonable of financial position as at 31 December 2015, and accuracy the financial position of the Company. the statements of comprehensive income, changes in equity and cash flows for the year then ended, and The directors accept responsibility for the financial the notes to the financial statements which include a statements set out on pages 38 to 60, which have summary of significant accounting policies and other been prepared using appropriate accounting policies explanatory notes, in accordance with International supported by reasonable and prudent judgments and Financial Reporting Standards, the Capital Markets estimates, in conformity with International Financial Authority Act and the Companies Act of Uganda, and Reporting Standards, the Capital Markets Authority Act for such internal controls as the Directors determine and the Companies Act of Uganda. The directors are is necessary to enable the preparation of financial of the opinion that the financial statements give a true statements that are free from material misstatements, and fair view of the state of the financial affairs and the whether due to fraud or error. profit and cash flows for the year ended 31 December 2015. The directors further accept responsibility for the The Directors’ responsibilities includes: designing, maintenance of accounting records that may be relied implementing and maintaining internal controls upon in the preparation of financial statements, as well relevant to the preparation and fair presentation of as adequate systems of internal financial control. these financial statements that are free from material misstatement, whether due to fraud or error; selecting The directors have assessed the Company’s ability to and applying appropriate accounting policies; and continue as a going concern and have no reason to making accounting estimates that are reasonable believe the business will not be a going concern for the in the circumstances. They are also responsible for next twelve months from the date of this statement. safeguarding the assets of the Company. The auditor is responsible for reporting on whether the annual financial statements are fairly presented in Under the Ugandan Companies Act, the directors are accordance with the International Financial Reporting required to prepare financial statements for each year Standards, the Capital Markets Authority Act and the that give a true and fair view of the state of affairs of the Ugandan Companies Act.
Approval of the financial statements The financial statements, as indicated above, were approved by the Board of Directors on 04 March, 2016 and were signed on its behalf by:
______Date: 04 March, 2016 Chief Executive Officer Ag. Chairman
36 crested capital ANNUAL report 2015 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CRESTED STOCKS AND SECURITIES LIMITED Report on the Financial Statements used and the reasonableness of accounting estimates We have audited the financial statements of Crested made by management, as well as evaluating the overall Stocks and Securities Limited which comprise the presentation of the financial statements. statement of financial position as at 31 December 2015, We believe that the audit evidence we have obtained and the statements of comprehensive income, changes is sufficient and appropriate to provide a basis for our in equity and cash flows for the year then ended, and audit opinion. the notes to the financial statements which include a summary of significant accounting policies and other Audit Opinion explanatory notes as set out on pages 38 to 60. In our opinion, the financial statements give a true and fair view of the financial position of Crested Stocks Director’s Responsibility for the Financial and Securities Limited as at 31 December 2015 and of Statements its financial performance and cash flows for the year As stated on page 36, the Company’s directors are then ended in accordance with International Financial responsible for the preparation and fair presentation Reporting Standards, the Capital Markets Authority Act of these financial statements in accordance with and the Companies Act of Uganda. International Financial Reporting Standards, the Capital Markets Authority Act and the Companies Act Report on Other Legal Requirements of Uganda, and for such internal control as the directors As required by the Companies Act of Uganda and the determine is necessary to enable the preparation Capital Markets Authority Act, we report to you based of financial statements that are free from material on our audit, that: misstatement, whether due to fraud or error. 1. We have obtained all the information and explanations, which, to the best of our knowledge Auditors’ Responsibility and belief, were necessary for the purpose of our Our responsibility is to express an opinion on these audit; financial statements based on our audit. We conducted 2. in our opinion, proper books of account have been our audit in accordance with International Standards kept by the Company, so far as appears from our on Auditing. Those standards require that we comply examination of those books; and with ethical requirements and plan and perform the 3. The Company’s Statement of Financial Position audit to obtain reasonable assurance about whether and Statement of Comprehensive Income are in the financial statements are free from material agreement with the books of account. misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, KPMG whether due to fraud or error. In making those risk Certified Public Accountants assessments, we consider internal controls relevant Third Floor, Rwenzori Courts to the entity’s preparation and fair presentation of the Plot 2&4A, Nakasero Road financial statements in order to design audit procedures P O Box 3509, that are appropriate in the circumstances, but not for the Kampala, Uganda purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies Date: 07 March, 2016
Crested capital ANNUAL report 2015 37 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014 Notes Ushs Ushs Revenue Fees and commissions 3 1,421,771,167 1,821,525,437 Interest income 4 27,293,985 6,794,095 Other income 5 117,287,530 96,489,396 Gross income 1,566,352,682 1,924,808,928
Expenses Operating expenses 6 (38,658,100) (43,936,496) Staff costs 7 (477,456,055) (271,628,520) Administration expenses 8 (1,091,824,458) (1,144,074,662) Foreign exchange gain 33,857,380 26,837,137 (Loss)/ Profit before taxation (7,728,551) 492,006,387
Taxation charge 10(a) (17,970,648) (151,285,889) (Loss)/ Profit for the year (25,699,199) 340,720,498
Other Comprehensive income Other comprehensive income 15(b) 17,297,713 23,658,087 Deferred Income Tax Effect 15(b) (5,189,314) (7,097,426) 12,108,401 16,560,661
Total comprehensive (loss) / income for the year (13,590,798) 357,281,159 The notes set out on pages 42 to 60 form an integral part of these financial statements
38 crested capital ANNUAL report 2015 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2015 2015 2014 Notes Ushs Ushs Assets Non-current assets Intangible assets 11 36,967,579 2,990,873 Property and Equipment 12 64,188,233 59,395,920 USE guarantee fund 13 129,537,164 129,537,164 230,692,976 191,923,957
Current assets Trade and Other Receivables 14 124,096,937 61,906,659 Available for Sale investments 15 135,188,098 136,304,096 Investments Held to-Maturity 16 1,091,789,352 472,408,993 Corporation tax recoverable 10(b) 2,347,694 - Bank and cash balances 701,645,254 725,885,802 2,055,067,335 1,396,505,550 Total assets 2,285,760,311 1,588,429,507
EQUITY AND LIABILITIES Capital and reserves Issued Capital 206,600,000 206,600,000 Share Premium 415,365,051 415,365,051 Available For Sale Reserve 15(b) 44,538,672 32,430,271 Proposed Dividends - 18,355,686 Retained earnings 17,130,734 42,829,933 Total equity 683,634,457 715,580,941
Non-current liabilities Deferred tax liability 20 41,667,225 23,478,523
Current liabilities Amounts Due to Customers 17 1,256,558,261 378,883,269 Trade and Other payables 18 299,211,754 369,242,223 Corporation tax payable 10(b) - 96,610,109 Amount Due to Related Parties 19 4,634,442 4,634,442 Dividends Payable 54,172 - Total Current liabilities 1,602,125,854 872,848,566
Total equity and liabilities 2,285,760,311 1,588,429,507 The financial statements on pages 38 to 60 were approved by the Directors on 04 March, 2016 and signed on its behalf by:
______Chief Executive Officer ______Ag. Chairman The notes set out on pages 42 to 60 form an integral part of these financial statements
Crested capital ANNUAL report 2015 39 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015
Issued Share Share Accumulated Available For Proposed Total capital premium Profit/(loss) Sale Reserves Dividends Ushs Ushs Ushs Ushs Ushs Ushs At 1 January 2014 206,600,000 415,365,051 (279,534,879) 15,869,610 - 358,299,782 Other Comprehensive income - - - 23,658,087 - 23,658,087 Deferred tax on fair value of AFS - - - (7,097,426) - (7,097,426) investments Profit for the Year - - 340,720,498 - - 340,720,498 Proposed Dividends - - (18,355,686) - 18,355,686 - At 31 December 2014 206,600,000 415,365,051 42,829,933 32,430,271 18,355,686 715,580,941
At 1 January 2015 206,600,000 415,365,051 42,829,933 32,430,271 18,355,686 715,580,941 Other comprehensive income - - - 17,297,715 - 17,297,715 Deferred tax on fair value of AFS - - - (5,189,314) - (5,189,314) investments Loss for the Year - - (25,699,199) - - (25,699,199) Dividends paid - - - - (18,301,514) (18,301,514) Dividends Payable - - - - (54,172) (54,172) At 31 December 2015 206,600,000 415,365,051 17,130,734 44,538,672 - 683,634,457 The notes set out on pages 42 to 60 form an integral part of these financial statements
40 crested capital ANNUAL report 2015 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014 Ushs Ushs CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/ Profit before taxation (7,728,551) 492,006,387 Adjusted for: Depreciation 35,237,318 11,101,819 Amortization 2,478,074 2,169,527 Gain on Disposal of property and equipment (166,150) (3,400,568) Penalty for under provision of tax 413,595 - Interest income - (6,794,095) 30,234,286 495,083,070 Changes in working capital balances: (increase) /Decrease in trade and other receivables (62,190,278) 85,022,612 Decrease / (increase) in amounts due to Customers 877,674,992 (68,388,017) Increase in trade and other payables (70,030,469) 295,147,264 Cash generated from operating activities 775,688,531 806,864,929 Corporation tax paid (96,610,109) (6,961,975) Withholding Tax Paid (7,732,549) (384,038) Net cash generated from operating activities 671,345,873 799,518,916
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (40,412,982) (46,782,666) Purchase of intangible assets (36,454,780) - Sale/ (Purchase) of Available for Sale Investments 18,413,713 (110,686,138) Proceeds from Sale of Available for Sale reserve - 39,466,693 Purchase of Held to maturity investments (619,380,359) (150,516,393) Increase in USE guarantee fund - (1,003,567) Interest received - 3,006,233 Investment in fixed deposits - (220,000,000) Proceeds from Sale of Assets 549,501 7,627,121 Net cash used in investing activities (677,284,907) (478,888,717)
CASH FLOWS FROM FINANCING ACTIVITIES Increase in Amounts due to related parties - 26,001 Dividend Paid (18,301,514) - Net cash (used in) / generated from financing activities (18,301,514) 26,001 (Decrease) / increase in cash and cash equivalents (24,240,548) 320,656,200 Cash and cash equivalents at beginning of year 725,885,802 405,229,602 Cash and cash equivalents at end of year 701,645,254 725,885,802 Represented by: Bank and cash balances 701,645,254 725,885,802 The notes set out on pages 42 to 60 form an integral part of these financial statements
Crested capital ANNUAL report 2015 41 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1. REPORTING ENTITY accumulated impairment losses. Crested Stocks and Securities Limited is a company Cost includes expenditures that are directly attributable limited by shares and incorporated in Uganda under the to the acquisition of the asset. The cost of self- Companies Act of Uganda. The Company is a Licensed constructed assets includes the cost of materials and Investment Advisor and Broker/Dealer by the Capital direct labour, any other costs directly attributable to Markets Authority of Uganda and is a Member of the bringing the asset to a working condition for its intended Uganda Securities Exchange. use, and the costs of dismantling and removing the items and restoring the site on which they are located. 2. PRINCIPAL ACCOUNTING POLICIES Purchased software that is integral to the functionality The principal accounting policies adopted in the of the related equipment is capitalised as part of that preparation of these financial statements are set out equipment. below: If significant parts of an item of property or equipment have different useful lives, then they are accounted for a) Basis of accounting The financial statements have been prepared in as separate items (major components) of property and accordance with and comply with International equipment. Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). An item of property and equipment is derecognised The financial statements have been prepared on the upon disposal or when no future economic benefits historical cost basis.” are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the b) Functional and presentation currency carrying amount of the asset) is included in profit or The financial statements are presented in Uganda loss in the year the asset is derecognised. Shillings (Ushs), which is the Company’s functional currency. (ii) Subsequent cost Subsequent expenditure is capitalised only when it c) Revenue Recognition is probable that the future economic benefits of the Revenue is measured at the fair value of the expenditure will flow to the company. Ongoing repairs consideration received or receivable from provision of and maintenance are expensed as incurred. services. Revenue is reduced for estimated customer rebates and other similar allowances. Fees and commissions are recognized on an accrual basis on (iii) Depreciation delivery of the related service. Depreciation is calculated to write off the cost of items of property and equipment less their estimated Interest income is recognized on an accrual basis residual values using the straight-line method over by reference to the principal outstanding and at the their estimated useful lives, and is generally recognised effective interest rate applicable. in profit or loss. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. d) Property and Equipment (i) Recognition and measurement Property and Equipment are stated at the cost of bringing the assets to their present location and condition less accumulated depreciation and any
42 crested capital ANNUAL report 2015 The estimated useful lives of significant items of Software is amortised on a straight line basis over its property and equipment are as follows: estimated useful life, from the date that it is available for use. The estimated useful life of software for the Motor vehicles 25.00% current and comparative periods is five years. Furniture and fittings 12.50% Amortisation methods, useful lives and residual values Office Equipment 20.00% are reviewed at each reporting date and adjusted if Computer equipment 33.33% appropriate.
(iv) Impairment f) Impairment of tangible and intangible assets The Company assesses at each reporting date whether At each end of reporting period, the Company reviews there is any indication that any item of property and the carrying amounts of its tangible and intangible equipment is impaired. If any such indication exists, assets to determine whether there is any indication the Company estimates the recoverable amount of the that those assets have suffered an impairment loss. If relevant assets. An impairment loss is recognised for the any such indication exists, the recoverable amount of amount by which the asset’s carrying amount exceeds the asset is estimated in order to determine the extent its recoverable amount. The recoverable amount is the of the impairment loss (if any). Where it is not possible higher of an asset’s fair value less costs to sell and value to estimate the recoverable amount of an individual in use. asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. For the purposes of assessing impairment, assets Where a reasonable and consistent basis of allocation are grouped at the lowest levels for which there are can be identified, corporate assets are also allocated to separately identifiable cash flows (cash-generating individual cash-generating units, or otherwise they are units). Gains and losses on disposal of property and allocated to the smallest group of cash-generating units equipment are determined by reference to their carrying for which a reasonable and consistent allocation basis amount and are taken into account in determining can be identified. operating profit. Intangible assets with indefinite useful lives and e) Intangible assets intangible assets not yet available for use are tested Software acquired by the Company is measured at cost for impairment annually, and whenever there is an less accumulated amortisation and any accumulated indication that the asset may be impaired. impairment losses. Expenditure on internally developed software is recognised as an asset when the Company is Recoverable amount is the higher of fair value less able to demonstrate its intention and ability to complete costs to sell and value in use. In assessing value in use, the development and use the software in a manner that the estimated future cash flows are discounted to their will generate future economic benefits, and can reliably present value using a pre-tax discount rate that reflects measure the costs to complete the development. current market assessments of the time value of money and the risks specific to the asset for which the estimates The capitalised costs of internally developed software of future cash flows have not been adjusted. include all costs directly attributable to developing the software and capitalised borrowing costs, and are If the recoverable amount of an asset (or cash- amortised over its useful life. generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash- Internally developed software is stated at capitalised generating unit) is reduced to its recoverable amount. cost less accumulated amortisation and impairment. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued Subsequent expenditure on software assets is amount, in which case the impairment loss is treated as capitalised only when it increases the future economic a revaluation decrease. benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit)
Crested capital ANNUAL report 2015 43 is increased to the revised estimate of its recoverable intent and ability to hold to maturity, and which are amount, but so that the increased carrying amount not designated at fair value through profit or loss or does not exceed the carrying amount that would available-for-sale. have been determined had no impairment loss been • Available-for-sale investments are non-derivative recognised for the asset (cash-generating unit) in prior investments that are not designated as another years. A reversal of an impairment loss is recognised category of financial assets. Available for sale assets immediately in profit or loss, unless the relevant asset is are recognised on the date they are transferred to carried at a revalued amount, in which case the reversal the Company. of the impairment loss is treated as a revaluation • Receivables are non-derivative financial assets increase. with fixed or determinable payments that are not quoted in an active market. They arise when g) Financial instruments the Company provides money, goods or services Financial assets are recognized initially at cost using directly to a debtor with no intention of trading the settlements date accounting. Held to maturity receivable. investments are subsequently measured at amortized • Financial liabilities: The Company classifies its cost while financial assets held for trading and available financial liabilities other than guarantees and loan for sale are measured at fair value. commitments as measured at amortised cost or fair value through profit and loss. (a) Financial assets and financial liabilities (iii) Measurement (i) Recognition Initial measurement of financial instruments The Company initially recognises loans and receivables All financial instruments are measured initially at their on the date that they are originated. Regular way fair value plus transaction costs, except in the case of purchases and sales of financial assets are recognised financial assets and financial liabilities recorded at fair on the trade date at which the Company commits to value through profit or loss, which are recorded at fair purchase or sell the asset. All other financial assets and value. liabilities (including assets and liabilities designated at fair value through profit or loss are recognised initially Subsequent measurement of financial instruments on the trade date, which is the date that the Company a) Amortised cost measurement becomes a party to the contractual provisions of the The ‘amortised cost’ of a financial asset or financial instrument. liability is the amount at which the financial asset or A financial asset or financial liability is measured financial liability is measured at initial recognition, initially at fair value plus, for an item not at fair value minus principal repayments, plus or minus the through profit or loss, transaction costs that are directly cumulative amortisation using the effective interest attributable to its acquisition or issue. method of any difference between the initial amount recognised and the maturity amount, minus any (ii) Classification reduction for impairment Management determines the appropriate classification of its financial instruments at the time of purchase b) Fair value measurement and re-evaluates its portfolio on a regular basis to ‘Fair value’ is the price that would be received to sell ensure that all financial instruments are appropriately an asset or paid to transfer a liability in an orderly classified. The classification of financial instruments transaction between market participants at the at initial recognition depends on the purpose and measurement date in the principal or, in its absence, the the management’s intention for which the financial most advantageous market to which the Company has instruments were acquired and their characteristics. access at that date. The fair value of a liability reflects its non-performance risk. • Held-to-maturity financial assets are non-derivative assets with fixed or determinable payments and When available, the Company measures the fair value fixed maturity that the company has the positive of an instrument using the quoted price in an active
44 crested capital ANNUAL report 2015 market for that instrument. A market is regarded as Financial liabilities - The Company derecognises a active if transactions for the asset or liability take place financial liability when its contractual obligations are with sufficient frequency and volume to provide pricing discharged, cancelled or expire. information on an ongoing basis. (iv) Offsetting If there is no quoted price in an active market, then the Financial assets and liabilities are offset and the net Company uses valuation techniques that maximise the amount reported in the statement of financial position use of relevant observable inputs and minimise the use when and only when, there is a legally enforceable of unobservable inputs. The chosen valuation technique right to set off the recognised amounts and there is an incorporates all of the factors that market participants intention to settle on a net basis, or realise the asset and would take into account in pricing a transaction. settle the liability simultaneously. The best evidence of the fair value of a financial Income and expense are presented on a net basis only instrument at initial recognition is normally the when permitted under IFRS or from gains and losses transaction price – i.e. the fair value of the consideration arising from a group of similar transactions such as the given or received. If the Company determines that the fair Company’s trading activity. value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted h) Provisions price in an active market for an identical asset or liability Provisions are recognised when the Company has a nor based on a valuation technique that uses only data present legal or constructive obligation as a result of from observable markets, then the financial instrument past events, it is probable that an outflow of resources is initially measured at fair value, adjusted to defer the embodying economic benefits will be required to settle difference between the fair value at initial recognition the obligation, and a reliable estimate of the amount and the transaction price. Subsequently, that difference can be made. is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market i) Retirement benefit obligations data or the transaction is closed out. National Social Security Fund The company makes contributions to the National (iv) Derecognition Social Security Fund (NSSF) which is a statutory Financial assets - The Company derecognises a financial retirement benefit scheme established under the NSSF asset when the contractual rights to the cash flows Act. This is a defined contribution scheme into which from the financial asset expire, or it transfers the rights the Company contributes 10% of the employees’ gross to receive the contractual cash flows in a transaction cash emoluments. The Company’s contribution is in which substantially all the risks and rewards of charged to profit or loss as it falls due. ownership of the financial asset are transferred or in which the Company neither transfers nor retains j) Cash and cash equivalents substantially all the risks and rewards of ownership For the purposes of the statement of cash flows, cash and it does not retain control of the financial asset. and cash equivalents comprise cash on hand, deposits Any interest in such transferred financial assets that held at call with banks, other short-term highly liquid qualify for derecognition that is created or retained investments and bank overdrafts. by the Company is recognised as a separate asset or liability. On derecognition of a financial asset, the k) Comparatives difference between the carrying amount of the asset Where necessary, comparative figures have been (or the carrying amount allocated to the portion of the adjusted to conform with changes in presentation in asset transferred) and the sum of (i) the consideration the current year. received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or l) Translation of foreign currencies loss that had been recognised in other comprehensive Assets and liabilities at the end of the reporting period income is recognised in profit or loss. which are expressed in foreign currencies are translated into Uganda Shillings at the rate of exchange ruling Crested capital ANNUAL report 2015 45 at the reporting date. Foreign currency transactions assumptions that affect the reported amounts of assets during the year are translated into Uganda Shillings at and liabilities within the next financial year. the rates ruling at the transaction dates. The resulting differences are dealt with in profit or loss in the year in Estimates and judgments are continually evaluated which they arise. and are based on historical experience and other factors, including expectations of future events that are m) Taxation believed to be reasonable under the circumstances. Tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit i. Critical judgements in applying accounting or loss except to the extent that it relates to items policies recognized directly in equity or in other comprehensive income. Deferred tax: Management makes assumptions with regards to i. Current tax availability of future taxable profits against which carry Current tax is the expected tax payable or receivable on forward losses can be used. the taxable income for the year using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. ii. Key sources of estimation uncertainty ii. Deferred tax Impairment Deferred tax is recognised in respect of temporary At the end of each reporting period, the company differences between the carrying amounts of assets reviews the carrying amounts of its tangible and other and liabilities for financial reporting purposes and the assets to determine whether there is any indication that amounts used for taxation purposes. those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the Deferred tax is not recognised for: asset is estimated in order to determine the extent of • Temporary differences on the initial recognition the impairment loss. of assets or liabilities in a transaction that is not a business combination and that affects neither Equipment accounting nor taxable profit or loss; Critical estimates are made by the Company in • Temporary differences arising on the initial determining depreciation rates and useful lives for recognition of goodwill. equipment at the end of each reporting period. • Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences n) Adoption of new and revised standards when they reverse, using tax rates enacted or The accounting policies adopted are consistent with substantively enacted at the reporting date. those used in the previous financial year except the following standards, amendments and interpretations Deferred tax assets and liabilities are offset if there is a which the Company has adopted. The adoption of legally enforceable right to offset current tax liabilities these standards, amendments and interpretations did and assets, and they relate to taxes levied by the same not have significant effect on the financial performance tax authority on the same taxable entity or on different or position of the Company. tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and IAS 32 Offsetting Financial Assets and Financial liabilities will be realized simultaneously. Liabilities (effective for annual periods beginning Critical accounting judgments and key sources of on or after 1 January 2015) estimation uncertainty The amendments to IAS 32 clarify the offsetting criteria In the process of applying the company’s accounting in IAS 32 by explaining when an entity currently has policies, management has made estimates and a legally enforceable right to set-off and when gross settlement is equivalent to net settlement. 46 crested capital ANNUAL report 2015 The adoption of the amendments did not have a The new requirements are effective from 1 January significant impact on the financial statements ofthe 2016, with earlier adoption permitted. Company. IAS 16 and IAS 38 Clarifications of Acceptable Standards and interpretations issued during the Methods of Depreciation and Amortisation year but not yet effective The amendments to IAS 16 Property, Plant and IFRS 10 and IAS 28 Sale or Contribution of Assets Equipment explicitly state that revenue-based methods between an Investor and its Associate or Joint of depreciation cannot be used for property, plant and Venture equipment. The amendments require the full gain to be recognised The amendments to IAS 38 Intangible Assets introduce when assets transferred between an investor and a rebuttable presumption that the use of revenue- its associate or joint venture meet the definition of based amortisation methods for intangible assets is a ‘business’ under IFRS 3 Business Combinations. inappropriate. The presumption can be overcome only Where the assets transferred do not meet the when revenue and the consumption of the economic definition of a business, a partial gain to the extent of benefits of the intangible asset are ‘highly correlated’, unrelated investors’ interests in the associate or joint or when the intangible asset is expressed as a measure venture is recognised. The definition of a business of revenue. is key to determining the extent of the gain to be recognised. The amendments apply prospectively for annual The adoption of these changes will not affect the periods beginning on or after 1 January 2016 and amounts and disclosures of the Company’s transactions early adoption is permitted. The adoption of these with associates or joint ventures. changes will not affect the amounts and disclosures of the Company’s property, plant and equipment and IFRS 11 Accounting for Acquisitions of Interests in intangible assets Joint Operations The amendments require business combination IAS 27 Equity Method in Separate Financial accounting to be applied to acquisitions of interests in a Statements joint operation that constitutes a business. The amendments allow the use of the equity method Business combination accounting also applies to the in separate financial statements, and apply to the acquisition of additional interests in a joint operation accounting not only for associates and joint ventures while the joint operator retains joint control. The but also for subsidiaries. additional interest acquired will be measured at fair The amendments apply retrospectively for annual value. The previously held interest in the joint operation periods beginning on or after 1 January 2016 with early will not be remeasured adoption permitted. The amendments apply prospectively for annual The adoption of these changes will not affect the periods beginning on or after 1 January 2016 and early amounts and disclosures of the Company’s interests in adoption is permitted. other entities. The adoption of these changes would not affect the amounts and disclosures of the Company’s interests in IFRS 14 Regulatory Deferral Accounts joint operations. IFRS 14 provides guidance on accounting for regulatory deferral account balances by first-time adopters of IFRS. IAS 41 Bearer Plants To apply this standard, the entity has to be rate-regulated The amendments to IAS 16 Property, Plant and i.e. the establishment of prices that can be charged to its Equipment and IAS 41 Agriculture require a bearer plant customers for goods and services is subject to oversight (which is a living plant used solely to grow produce over and/or approval by an authorised body. several periods) to be accounted for as property, plant The standard is effective for financial reporting years and equipment in accordance with IAS 16 Property, beginning on or after 1 January 2016 with early Plant and Equipment instead of IAS 41 Agriculture. The adoption is permitted. produce growing on bearer plants will remain within The adoption of this standard is not expected to have an the scope of IAS 41. impact the financial statements of the Company’s given
Crested capital ANNUAL report 2015 47 that it is not a first time adopter of IFRS. IFRS 15 Revenue from Contracts with Customers IFRS 10, IFRS 12 and IAS 28 Investment Entities: This standard replaces IAS 11 Construction Contracts, Applying the Consolidation Exception IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, The amendment to IFRS 10 Consolidated Financial and IFRIC 15 Agreements for the Construction of Real Statements clarifies which subsidiaries of an investment Estate, IFRIC 18 Transfer of Assets from Customers and entity are consolidated instead of being measured at SIC-31 Revenue – Barter of Transactions Involving fair value through profit and loss. The amendment also Advertising Services. modifies the condition in the general consolidation The standard contains a single model that applies exemption that requires an entity’s parent or ultimate to contracts with customers and two approaches to parent to prepare consolidated financial statements. recognising revenue: at a point in time or over time. The amendment clarifies that this condition is also met The standard specifies how and when an IFRS reporter where the ultimate parent or any intermediary parent will recognise revenue as well as requiring such entities of a parent entity measures subsidiaries at fair value to provide users of financial statements with more through profit or loss in accordance with IFRS 10 and informative, relevant disclosures. The standard provides not only where the ultimate parent or intermediate a single, principles based five-step model to be applied parent consolidates its subsidiaries. to all contracts with customers in recognising revenue The amendment to IFRS 12 Disclosure of Interests in being: Identify the contract(s) with a customer; Identify Other Entities requires an entity that prepares financial the performance obligations in the contract; Determine statements in which all its subsidiaries are measured at the transaction price; Allocate the transaction price fair value through profit or loss in accordance with IFRS to the performance obligations in the contract; and 10 to make disclosures required by IFRS 12 relating to recognise revenue when (or as) the entity satisfies a investment entities. performance obligation. The amendment to IAS 28 Investments in Associates and IFRS 15 is effective for annual reporting periods Joint Ventures modifies the conditions where an entity beginning on or after 1 January 2017, with early need not apply the equity method to its investments in adoption is permitted. associates or joint ventures to align these to the amended The Company is assessing the potential impact on its IFRS 10 conditions for not presenting consolidated financial statements resulting from the application of financial statements. The amendments introduce relief IFRS 15. when applying the equity method which permits a non-investment entity investor in an associate or joint IFRS 9: Financial Instruments (2014) venture that is an investment entity to retain the fair On 24 July 2014 the IASB issued the final IFRS 9 value through profit or loss measurement applied by Financial Instruments Standard, which replaces earlier the associate or joint venture to its subsidiaries. versions of IFRS 9 and completes the IASB’s project to The amendments apply retrospectively for annual replace IAS 39 Financial Instruments: Recognition and periods beginning on or after 1 January 2016, with early Measurement. application permitted. This standard introduces changes in the measurement The adoption of these changes will not affect the bases of the financial assets to amortised cost, fair value amounts and disclosures of the Company’s interests in through other comprehensive income or fair value other entities. through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for IAS 1 Disclosure Initiative classification into these categories are significantly The amendments provide additional guidance on different. In addition, the IFRS 9 impairment model has the application of materiality and aggregation when been changed from an “incurred loss” model from IAS preparing financial statements. 39 to an “expected credit loss” model. The amendments apply for annual periods beginning The standard is effective for annual periods beginning on on or after 1 January 2016 and early application is or after 1 January 2018 with retrospective application, permitted early adoption is permitted. The adoption of these changes will not affect the The Company is assessing the potential impact on its amounts and disclosures of the Company’s interests in financial statements resulting from the application of other entities. IFRS 9 (2015). 48 crested capital ANNUAL report 2015 3. FEES AND COMMISSIONS 2015 2014 Ushs Ushs Brokerage commission 1,392,308,382 1,787,201,137 Advisory Revenue 29,462,785 34,324,300 1,421,771,167 1,821,525,437
4. INTEREST INCOME 2015 2014 Ushs Ushs Interest income on Held to Maturity investments 8,769,190 1,920,191 Interest income on Fixed deposits 18,524,795 4,873,904 27,293,985 6,794,095
5. OTHER INCOME 2015 2014 Ushs Ushs Economist revenue 74,299,761 82,997,158 Dividends earned 5,168,594 2,530,045 Guarantee fund interest - 1,003,566 Sundry income 3,448,659 6,558,059 Disposal of Assets 166,150 3,400,568 Prompt settlement 8,532,721 - Capital gain/loss on Available For Sale Investments 8,543,350 - Recoveries from Client Balances 13,818,379 - Other income 3,309,916 - 117,287,530 96,489,396
6. OPERATING EXPENSES 2015 2014 Ushs Ushs Economist Expenses 38,658,100 43,936,496 38,658,100 43,936,496
Crested capital ANNUAL report 2015 49 7. STAFF COSTS 2015 2014 Ushs Ushs Salaries and wages 418,516,466 213,815,899 Staff welfare 23,477,853 41,105,910 NSSF Contribution 35,461,736 16,706,711 477,456,055 271,628,520
8. ADMINISTRATION EXPENSES 2015 2014 Ushs Ushs Rent 89,999,999 60,235,413 Bad debts 842,110 - Commission Expense 640,848,914 832,806,404 Communications 31,249,610 25,025,269 Printing and Stationary 31,541,972 25,561,737 Audit Fees 22,840,000 17,400,000 Travel and Accommodation 36,304,149 20,050,844 Bid Expenses - 10,000 Insurance 17,632,890 8,201,957 Driving Services 1,565,000 7,870,000 Marketing and Advertising 14,424,753 20,894,553 Motor vehicle 12,076,100 6,458,300 Repairs and Maintenance 13,419,422 4,775,500 Depreciation 35,237,318 11,101,819 Amortization of intangible assets 2,478,074 2,169,527 Training Expenses 17,079,040 5,132,800 Legal and Professional Fees 8,480,000 19,039,814 Electricity 6,592,281 - Local Service Tax 1,330,000 780,000 Bank charges 11,578,628 14,759,673 Subscriptions and Dues 68,093,244 36,129,320 General Office Supplies 18,869,568 - Director’s Fees 1,250,000 - VAT Adjustment 1,009,209 - Small office Equipment 6,515,581 - Other Expenses 566,596 25,671,732 1,091,824,458 1,144,074,662
50 crested capital ANNUAL report 2015 9. PROFIT BEFORE TAXATION 2015 2014 Ushs Ushs The profit before taxation is arrived at after charging: Auditors’ remuneration 22,840,000 17,400,000 Depreciation 35,237,318 11,101,819 Staff Costs 477,456,055 271,628,520 Amortization of intangible assets 2,478,074 2,169,527
10. TAXATION a) Income tax expense 2015 2014 Ushs Ushs Current tax 2,297,752 111,519,059 Withholding tax on interest income from treasury bills 2,673,508 384,038 Total current tax 4,971,260 111,903,097 Deferred tax charge 12,999,388 39,382,792 17,970,648 151,285,889
The tax on the Company’s (loss) / profits before tax differs from the theoretical amount that would arise using the basic tax rate of 30% as follows:- 2015 2014 Ushs Ushs (Loss)/Profit before tax (7,728,551) 492,006,387 Tax calculated at a rate of 30% (2,318,565) 147,601,916 Tax effect of: Withholding tax on interest income from treasury bills 2,673,508 384,038 Tax effect of expenses not deductible and income non taxable 17,615,705 3,299,935 Income tax charge 17,970,648 151,285,889
Withholding tax on interest income from government securities (Treasury bills and Government bonds) is treated as final tax. b) Tax recoverable/(payable) 2015 2014 Ushs Ushs At 1 January (96,610,109) 7,946,975 Corporation tax charge for the year (4,971,260) (111,903,097) Withholding tax paid on Treasury Bills 2,673,508 384,038 Withholding tax recoverable 5,059,041 - Tax paid 96,610,109 6,961,975 Penalty for under provision in current year (413,595) - At 31 December 2,347,694 (96,610,109)
Crested capital ANNUAL report 2015 51 11. INTANGIBLE ASSETS Software Work in Progress Total Ushs Ushs Ushs COST At 1 January 2014 6,574,315 - 6,574,315 Additions - - - Transfer from WIP - - - At 31 December 2014 6,574,315 - 6,574,315
At 1 January 2015 6,574,315 - 6,574,315 Additions 1,402,500 35,052,280 36,454,780 At 31 December 2015 7,976,815 35,052,280 43,029,095
AMORTISATION At 1 January 2014 1,413,915 - 1,413,915 Charge for the year 2,169,527 - 2,169,527 At 31 December 2014 3,583,442 - 3,583,442
At 1 January 2015 3,583,442 - 3,583,442 Charge for the year 2,478,074 - 2,478,074 At 31 December 2015 6,061,516 - 6,061,516
NET BOOK VALUE At 31 December 2015 1,915,299 35,052,280 36,967,579 At 31 December 2014 2,990,873 - 2,990,873
52 crested capital ANNUAL report 2015 12. EQUIPMENT Furniture and Office Computer And Motor vehicles Total fittings Equipment Accessories Ushs Ushs Ushs Ushs Ushs COST At 1 January 2014 11,729,520 26,791,142 1,114,000 34,123,862 73,758,524 Additions 15,900,000 3,544,556 8,835,000 18,503,110 46,782,666 Disposals (11,729,520) - - - (11,729,520) At 31 December 2014 15,900,000 30,335,698 9,949,000 52,626,972 108,811,670
At 1 January 2015 15,900,000 30,335,698 9,949,000 52,626,972 108,811,670 Disposals - (525,000) - (5,762,000) (6,287,000) Additions - 7,712,034 1,144,068 31,556,880 40,412,982 At 31 December 2015 15,900,000 37,522,732 11,093,068 78,421,852 142,937,652
DEPRECIATION At 1 January 2014 4,890,245 11,398,211 417,814 29,110,628 45,816,898 Charge for the year 2,853,435 1,744,506 1,036,300 5,467,578 11,101,819 Eliminated on disposal (7,502,967) - - - (7,502,967) At 31 December 2014 240,713 13,142,717 1,454,114 34,578,206 49,415,750
At 1 January 2015 240,713 13,142,717 1,454,114 34,578,206 49,415,750 Eliminated on disposal - (312,499) - (5,591,150) (5,903,649) Charge for the year 3,975,000 4,631,490 2,218,613 24,412,215 35,237,318 At 31 December 2015 4,215,713 17,461,708 3,672,727 53,399,271 78,749,419
NET BOOK VALUE At 31 December 2015 11,684,287 20,061,024 7,420,341 25,022,581 64,188,233 At 31 December 2014 15,659,287 17,192,981 8,494,886 18,048,766 59,395,920
Crested capital ANNUAL report 2015 53 13. UGANDA SECURITIES EXCHANGE GUARANTEE FUND 2015 2014 Ushs Ushs 129,537,164 129,537,164
14. TRADE AND OTHER RECEIVABLES 2015 2014 Ushs Ushs Trade receivables 69,605,772 31,469,087 Prepayments 37,796,200 540,701 Accountable Advances 3,826,950 - Other receivables 13,710,125 29,896,871 Provisions for bad debts (842,110) - 124,096,937 61,906,659
15. a) AVAILABLE FOR SALE INVESTMENTS Quoted Equities 2015 2014 Ushs Ushs At 1 January 136,304,096 41,426,564 Purchase of Available For Sale 171,791,791 110,686,138 Sale Of Available For Sale (190,205,505) (39,466,693) Fair Value Gain or Loss 17,297,715 23,658,087 135,188,097 136,304,096 b) AVAILABLE FOR SALE RESERVE This reserve comprises changes in fair value of available-for-sale investments. These are investments in quoted shares that are strictly held for investment purposes and their mark to market adjustments are recycled to Profit and loss once the respective investment is liquidated. 2015 2014 Ushs Ushs At 1 January 32,430,271 15,869,610 Net Movement on revaluation 17,297,713 23,658,087 of Available for sale reserve Deferred tax on revaluation of (5,189,314) (7,097,426) Available for sale reserve 44,538,670 32,430,271
16. INVESTMENTS HELD TO MATURITY This relates to Investment in Government Treasury Bills Investments Held to Maturity 2015 2014 Ushs Ushs 1,091,789,352 472,408,993 1,091,789,352 472,408,993
54 crested capital ANNUAL report 2015 17. AMOUNTS DUE TO CUSTOMERS 2015 2014 Ushs Ushs Due to customers 1,256,558,261 378,883,269 1,256,558,261 378,883,269
18. TRADE AND OTHER PAYABLES 2015 2014 Ushs Ushs Trade payables 267,740,939 317,454,295 Accrued expenses 411,945 6,673,317 Other payables 31,058,870 45,114,611 299,211,754 369,242,223
19. AMOUNTS DUE TO RELATED PARTIES 2015 2014 Ushs Ushs Due to Company Directors 4,634,442 4,634,442 4,634,442 4,634,442 20. DEFFERED TAX The movement in the deferred income tax liability is as follows: Charge to profit or Charge to other At 31 December At 1 January 2015 loss comprehensive income 2015 Ushs Ushs Ushs Ushs Arising from: Accelerated tax depreciation 11,636,482 7,252,918 - 18,889,400 Unrealised foreign exchange loss (2,056,647) 5,999,103 - 3,942,456 Fair value gains on AFS assets 13,898,688 - 5,189,314 19,088,002 Provisions - (252,633) - (252,633) Net deferred tax liability/ (asset) 23,478,523 12,999,388 5,189,314 41,667,225
Deferred tax assets and liabilities and the deferred tax charge/(credit) as at 31 December 2014 are attributed to the following items:- At 1 January Charge to profit or Charge to other At 31 December 2014 loss comprehensive income 2014 Ushs Ushs Ushs Ushs Arising from: Accelerated tax depreciation 5,539,616 6,096,866 - 11,636,482 Unrealised foreign exchange loss (4,532,937) 2,476,290 - (2,056,647) Fair value gains on AFS assets 6,801,262 - 7,097,426 13,898,688 Net deferred tax liability/(asset) 7,807,941 8,573,156 7,097,426 23,478,523 21. OTHER RELATED PARTY BALANCES AND TRANSACTIONS Key management compensation Salaries and benefits 145,543,940 89,090,670 Board allowances 1,250,000 - Crested capital ANNUAL report 2015 55 22. FINANCIAL RISK MANAGEMENT The company has exposure to the following risks from its use of financial instruments a) Credit Risk b) Market Risk c) Capital management d) Liquidity Risk The company is exposed to various risks, including credit risk, market risk, capital management and liquidity risk. The company’s risk management strategy is based on a clear understanding of the various risks, disciplined risks assessment and measurement procedures and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with the financial services industry best practices. The management is responsible for the assessment, management and mitigation of risk in the company. The company’s overall risk management programme focuses on unpredictability of changes in the business environment and seeks to minimise the potential adverse effect of such risks on its performance by setting acceptable levels of risk. The company does not hedge any risks. a) Credit Risk Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company extension of credit to its customers. For risk management reporting purposes, the Company considers all elements of credit risk exposure such as individual obligator default risk, nature of customer and sector risk.
The financial management objectives and policies are as outlined below: The Company’s credit risk is primarily attributable to trade and other receivables, estimated by the Company’s management based on prior experience, existing financial and economic factors faced by the debtor and the exit options available. The credit risk on liquid funds and fixed deposits with financial institutions is also low, because the institutions are banks with high credit-ratings.
The amount that best represents the Company’s maximum exposure to credit as at end of year is made up as follows: 2015 Fully Performing Past due Impaired Ushs Ushs Ushs Financial assets Bank balances 701,645,254 - - Available For Sale Investments 135,188,098 - - Trade and other receivables (less prepayments) 60,515,806 24,942,821 842,110 897,349,158 24,942,821 842,110
2014 Fully Performing Past due Impaired Ushs Ushs Ushs Financial assets Bank balances 725,885,802 - - Available For Sale Investments 136,304,096 - - Trade and other receivables (less prepayments) 42,137,671 19,228,287 - 904,327,569 19,228,287 -
56 crested capital ANNUAL report 2015 23. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Market risk Market risk is the risk that fair value of cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within the acceptable parameters, while optimising the return on risk. The market risks the company faces are foreign exchange risk and price risk (market prices) as described below.
(i) Currency Risk Foreign exchange risk is the risk resulting from adverse changes/movements in foreign exchange rates and arises where there is a mismatch between currency inflows and outflows. The company has transactional currency exposures. Such exposure arises from sales or purchases in currencies other than the company’s functional currency.
Key Currency exposures 31 December 2015 US dollar KES RWF USH Total Ushs Ushs Ushs Ushs Ushs Assets USE guarantee fund - - - 129,537,164 129,537,164 Trade receivables and Prepayments 25,794,559 11,926,767 3,310,561 83,065,050 124,096,937 Available for Sale investments - 28,951,722 26,239,500 79,996,876 135,188,098 Financial Assets Held to Maturity - - - 1,091,789,352 1,091,789,352 WHT Receivable - - - 2,347,694 2,347,694 Bank and cash balances 35,003,593 107,516,838 - 559,124,823 701,645,254 Total assets 60,798,152 148,395,327 29,550,061 1,945,860,959 2,184,604,499 Liabilities Amounts Due to Customers - - - 1,256,558,261 1,256,558,261 Trade and Other payables 1,653,649 - - 297,558,105 299,211,754 Amount Due to Related Parties - - - 4,634,442 4,634,442 Total liabilities 1,653,649 - - 1,558,750,808 1,560,404,457 Liquidity gap As at 31 December 2015 59,144,503 148,395,327 29,550,061 387,110,151 624,200,042 As at 31 December 2014 18,512,727 50,392,750 18,705,951 591,745,042 679,523,635
(ii) Price Risk Equity price risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market price. The company has no significant concentration of price risk.
(c) Capital Management The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the debt and equity balance. The company’s overall strategy remains at maximising stakeholders’ value.
As at 31 December 2015, the company maintained a fixed deposit of Ushs 129 million in the Guarantee fund of the Uganda Securities Exchange. This deposit is interest earning effective January 2012 The company is required to maintain a minimum monthly net capital of Ushs 15 million as a condition for the Capital Markets Authority License
Crested capital ANNUAL report 2015 57 23. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Liquidity risk management Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations on its financial liabilities. Ultimate responsibility for liquidity risk management rests with the Governing Council, which has built an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk through continuous monitoring of forecast and actual cash flows.
The table below analyses financial assets and liabilities all of which mature within the next 12 months 31 December 2015 Up to 3 Months 3 to 12 Months 1 to 5 years Over 5 years Total Ushs Ushs Ushs Ushs Ushs Assets USE guarantee fund - - - 129,537,164 129,537,164 Trade receivables and Prepayments 99,154,115 24,942,822 - - 124,096,937 Available for Sale investments 135,188,098 - - - 135,188,098 Financial Assets Held to-Maturity 1,084,489,352 - 7,300,000 - 1,091,789,352 WHT Receivable 660,853 1,686,841 - - 2,347,694 Bank and cash balances 701,645,254 - - - 701,645,254 Total Assets 2,021,137,672 26,629,663 7,300,000 129,537,164 2,184,604,499
Liabilities Amounts Due to Customers 1,256,558,261 - - - 1,256,558,261 Trade and Other payables 299,211,754 - - - 299,211,754 Amount Due to Related Parties - - 4,634,442 - 4,634,442 Total liabilities 1,555,770,015 - 4,634,442 - 1,560,404,457
Liquidity gap As at 31 December 2015 465,367,657 26,629,663 2,665,558 129,537,164 624,200,042 As at 31 December 2014 495,547,429 10,540,800 4,053,045 - 510,141,274
58 crested capital ANNUAL report 2015 24. FAIR VALUE MEASUREMENT The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Company determines fair values using other valuation techniques.
(a) Valuation models
The company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.
Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments e.g quoted equity securities. These items are exchange traded positions.
Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
Level 3: inputs that are unobservable. This category includes all instruments for which 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 instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.
2015 2014 Level 1 Total Fair Value Level 1 Total Fair Value Ushs Ushs Ushs Ushs Available For Sale Investments 135,188,098 135,188,098 136,304,096 136,304,096
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorized Assets Level 1 Level 2 Level 3 Total fair values Total carrying amount USE guarantee fund - - 129,537,164 129,537,164 129,537,164 Trade receivables and Prepayments - - 124,096,937 124,096,937 124,096,937 Available for Sale investments - - 135,188,098 135,188,098 135,188,098 Financial Assets Held to-Maturity - 1,091,789,352 - 1,091,789,352 1,091,789,352 WHT Receivable - - 2,347,694 2,347,694 2,347,694 Bank and cash balances - - 701,645,254 701,645,254 701,645,254 Liabilities Amounts Due to Customers - - 1,256,558,261 1,256,558,261 1,256,558,261 Trade and Other payables - - 299,211,754 299,211,754 299,211,754 Amount Due to Related Parties - - 4,634,442 4,634,442 4,634,442
Crested capital ANNUAL report 2015 59 25. EMPLOYEES The average number of employees of the company during the year was 17 (2014: 16)
26. USE OF ESTIMATES AND JUDGMENTS The company makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The company regularly reviews its assets and makes judgments in determining whether an impairment loss should be recognized in respect of observable data that may impact on future estimated cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
27. CONTINGENT LIABILITIES There were no significant contingent liabilities as at the close of the year.
28. CURRENCY These financial statements are presented in Uganda Shillings (Ushs). As at 31 December 2015, the exchange rate of the Ushs to the US$ was Ushs 3,372.05 US$1 (2014: Ushs 2,850 US$1). The exchange rate of the Ushs to Kshs was Ushs 34.82 1 Ksh (2014: Ushs 30.2 Ksh).
60 crested capital ANNUAL report 2015 The Economist Magazine
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First Floor, Impala House, Plot 13/15 Kimathi Avenue P. O. Box 31736, Kampala, Uganda. Tel: +256 312 230 900 / +256 758 230 900 [email protected] | www.crestedcapital.com
Crested capital ANNUAL report 2015 61 First Floor, Impala House, Plot 13/15 Kimathi Avenue P. O. Box 31736, Kampala, Uganda Tel: +256 312 230 900 / +256 758 230 900 [email protected] | www.crestedcapital.com
62 crested capital ANNUAL report 2015