Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2 Centenary Bank Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

We aim to provide appropriate financial services especially microfinance to all the people of Uganda particularly in rural areas. We are therefore at the forefront of increasing financial inclusion and reaching out to the unbanked population.

Read our Chaiman’s Statement on page 8

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

TABLE OF CONTENTS

List of Acronyms 5 Vision, Mission and Ownership 6

Chairman’s Statement 8 Board of Directors 10 Managing Director’s Review 11 The Executive Management 13 Corporate Governance 14 Operational and financial review 23

Directors’ Report 30 Directors’ Responsibility For Financial Reporting 31 Report of Independent Auditors 32

Financial Statements 33 Statement of Comprehensive Income 33 Statement of Financial Position 34 Statement of Changes In Equity 35 Statement of Cash Flows 35 Notes To The Financial Statements 36

Sustainability Report 81 Bank Contact Information 98

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

LIST OF ACRONYMS

ABI aBi Finance Ltd ACF Agricultural Credit Facility ALCO Asset and Liability Committee ATM Automated Teller Machines BCP Business Continuity Plan BCMT Business Continuity Management Team BOU Bank of Uganda CBS Core Banking System EaR Earnings at Risk EIB EAC MF Loan European Investment Bank East African Community Microfinance Loan EIB PEF European Investment Bank Private Enterprise Finance Facility IAS International Accounting Standards ICT Information and Communication Technology IFRS International Financial Reporting Standards KCCA Kampala City Council Authority N.S.S.F National Social Security Fund NPAT Net Profit After Tax P.A.Y.E Pay As You Earn ROA Return on Assets ROE Return on Equity RSA Rate Sensitive Assets RSL Rate Sensitive Liabilities SIDI Solidarite’ Internationale pour le Development et l’ investissement SOCI Statement of Comprehensive Income SOFP Statement of Financial Position VSLA Village Savings and Loan Association

Centenary Bank 5 Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 VISION, MISSION 01 AND OWNERSHIP

Our Vision Shareholders

“To be the best provider of Financial Services, espe- • The Catholic Dioceses, which are all independent legal personalities as Registered Trusteeships, cially Microfinance in Uganda.” are: Arua, Fort Portal, Gulu, Hoima, Jinja, Ka- bale, Kasana-Luwero, Lugazi, Kampala, Kasese, Our Mission Statement Kotido, Lira, Masaka, Mbarara, Mityana, Moroto, Nebbi, Soroti, and Tororo. “To provide appropriate financial services especially microfinance to all people in Uganda, particularly in rural • Registered Trustees of the Uganda Episcopal areas, in a sustainable manner and in accordance with Conference. the law.” • SIDI-Solidarite’ Internationale pour le Develop- ment et l’Investissement (International Solidar- Our Values ity for Development and Investment) based in France. • Superior customer service • STICHTING HIVOS-TRIODOS FONDS. An in- • Integrity vestment fund, specializing in investing in micro- • Teamwork finance and trade finance, managed by Triodos • Professionalism Investment Management in the Netherlands. • Leadership • Excellence • Competence • Individual shareholders (4 individuals).

Ownership The Catholic Dioceses of Uganda 38.5% The Registered Trustees of the Uganda Episcopal Conference 31.3% SIDI 11.6% Stichting Hivos-Triodos Fonds 18.3% Individuals 0.3% Total 100%

18.6% 0.3% 38.5%

11.6% Catholic Dioceses

The Registered Trustees of the Uganda Episcopal Conference

SIDI

Stichting Hivos Triodos

Individuals 31.3%

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Centenary Bank won the Bronze Award, Overall Achievement at the 2014 Financial Reporting Awards

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

CHAIRMAN’S denominated operating costs have been affected by the weakening shilling. The depreciation of the shilling also STATEMENT led to an increase in the Bank’s capital expenditure.

The market place continues to be associated with increasing competition from other players and the tel- ecommunication sector. Centenary Bank is however leveraging on the platforms of telecoms to deliver its mobile Banking services through our telephone Bank- ing platform called CenteMobile. The Bank continues to enhance its e- Banking platforms.

Interest rates continued to rise especially in quarter four of 2014 particularly on short tenors. The overnight rate closed the year at 10.7% while the 364 day rate closed at 13.9%. The rise in the rates was attributed to a depreciation of the shilling against other hard currencies. To some extent, changes in the investor senti- ment as well as expectations on forward trends had an impact. We expect upward pressure on interest rates to continue in 2015. The increase in interest rates had an impact on our funding costs hence a decrease in the I am delighted to present the Bank’s annual re- Bank’s interest margin as reflected in the financial report for the year ended 31st December 2014. sults. It has been another year of strong results in the face of increasing competition and im- Return to Shareholders proved macro-economic conditions. Cente- The Bank’s basic earnings per ordinary share have in- nary Bank is a Tier–I financial institution with creased to Shs 2,952 from Shs 2,319 the previous year, a network of service delivery channels spread while return on equity (ROE) increased from 25.3% to 25.9% which is above the Industry ROE of 16.1%. across Uganda. We aim to provide appropri- Despite stiff competition in the sector, the strong per- ate financial services especially microfinance formance posted by the Bank once again demonstrates to all the people of Uganda particularly in ru- our ability to deliver substantial and sustained value for ral areas. We are therefore at the forefront of our shareholders and other stakeholders. The Bank is increasing financial inclusion and reaching out still adequately capitalized and meets all the statutory capital requirements. to the unBanked population The Bank’s Tier II capital adequacy ratio as at 31 De- The Operating Environment cember 2014 was 29.5% (2013: 28.7%) compared The Board and Management keep abreast of happenings with 12% required by Bank of Uganda and this was in the environment because the Bank’s growth entirely above the industry average of 22.2%. The Bank’s good depends on it, especially the forces of macro-economic performance and growth momentum have been driven conditions. On a positive note, 2014 headline inflation by the continued focus on microfinance, convenience declined to 1.8% from 6.7% in 2013. The main driver and affordability of the Bank’s products. of inflation in 2014 was the fall in food prices attributed to increased food supply in the domestic market. This is reflected in the modest increase in the Bank’s operating expenses. THE NUMBERS For the year under review

The Uganda shilling weakened by about 9% against Return on equity Earnings per ordinary share the dollar in 2014 with much of the depreciation occurring in the second half of the year on the back of strong import demand coupled with low export levels, 25.9% Shs2,952 instability in some neighboring countries, low foreign direct investment and reduced remittances from the diaspora. The Bank’s balance sheet which is predomi- nantly denominated in Uganda shillings and the dollar

8 Centenary Bank Annual Report 2014 CHAIRMAN’S STATEMENT

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

THE NUMBERS Corporate Social Investment

Over Over Supported Education 12,500,000 Health 2,500,000 Environment 125 people benefited from the financial people were reached in the bank’s initiatives to raise Church projects and community literacy initiatives. awareness on breast, cervical and prostate cancer initiatives including construction, women programs and nutrition

Corporate Social Investment spend in the energy and transport sectors, increased Centenary Bank believes in sustainability of lives and agricultural output, rebound in private sector credit the environment in which we work, so 1% of the pre- and increased foreign direct investment. 2016 is an vious year’s net profit was devoted to Corporate Social election year and it is common for uncertainties in Investment. In 2014, the Bank focused on health, edu- growth patterns to set in. cation, environment, supporting the social mission of the Church and supporting other community causes. With this macro-economic operating environment, Under education, people benefited from the financial Centenary Bank is set to continue with its growth literacy initiatives. In health, the Bank continued to drive, putting in place adequate structures and systems raise awareness on breast, cervical and prostate can- that will continue to improve customer service. We cer by contributing towards the completion of the can- will continue to consolidate the Bank’s position in the cer ward at Nsambya Hospital, sponsoring the Cancer market place as the leading microfinance provider in Run organized by Uganda Rotary Office, printing and Uganda. distributing brochures with cancer awareness messages countrywide and holding screening camps; these The Bank will continue to leverage on its operational initiatives reached more than 2,500,000 people. Under and financial strength to take advantage of opportuni- environment, the Bank contributed to water and sani- ties in the environment like oil and gas industry not for- tation projects, along with clean energy initiatives and getting the emerging middle class, youth and women. also supported 125 Church projects and community The Bank is set to manage challenges plus risks that lie initiatives including construction, women programs ahead. and nutrition. Conclusion Corporate Governance I wish to express an immense sense of gratitude to all The Board membership remained stable and continued who have enabled the Bank achieve the success regis- to serve with complete dedication. The Board contin- tered in 2014; our customers, shareholders and strate- ues to provide the strategic direction for all the Bank’s gic business partners for the continued loyalty, support, operations. None of the members of the Board had any not forgetting my fellow board members for their guid- conflict of interest in the matters of the Bank on which ance and support. they were required to provide guidance and direction. The various board committees continued to play a vital All the above-mentioned achievements would not be role in supporting the board and management to dis- realized without a passionate team at Centenary Bank charge their duties. At their Annual General meeting comprising of 2,001 staff members. I am sure that with of 07th June 2014, the shareholders re-appointed the the sound leadership and support provided by the board to serve for another three years. As part of their board of Directors and guided by the same vision and oversight duty, the board approved the Bank’s rolling mission, we shall be able to move Our Bank to even strategic plan for the year 2015 – 2017 with a focus greater heights of success. on innovation and execution that will translate into improved productivity and operational efficiency

Environmental Outlook Generally, the operating environment forecasts point Professor John Ddumba-Ssentamu to a better economic environment in 2015 compared Chairman of the Board to 2014. Uganda’s gross domestic product is estimated at 6.7% for the financial year 2014/15 compared to 4.5% for 2013/2014. This growth is expected to be led by public expenditure in the form of infrastructure

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Board of Directors

The Directors who held office during the year were as follows: -

Prof. John Ddumba Ssentamu - Board Chairman Mr. Fabian Kasi - Managing Director Dr. Simon M.S. Kagugube - Executive Director Mr. Jacco Minnaar - Member (Chairman ALCO Committee) Mr. Kimanthi Mutua - Member (Chairman Risk & ICT Strategy Committee) Dr. Peter Ngategize - Member (Chairman Credit Committee) Mr. Henry Kibirige - Member (Chairman Audit Committee) Mr. Andrew Obol - Member (Chairman Compensation and Human Resources Committee) Mt. Rev. Dr. Cyprian K. Lwanga - Member Mt. Rev. Paul Bakyenga - Member Mr. Rene Ehrmann - Member

Alternate Directors Mr. Frederic Foulon Monsignor John Baptist Kauta Fr. Eustachius Lwemalika

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2014 Performance review Notwithstanding the macro-economic turbulences, the Bank continued its growth on all fronts especially profitability and total assets. This growth momentum has been maintained due to continued focus on strategy execution.

The Bank posted a 27.3% growth in profit after tax to close at Shs 73.8 billion compared to Shs 58.0 billion the previous year and representing a market share of 15.2%. Total income went up by 17.7% to reach Shs 324.3 billion up from Shs 275.6 billion the previous year, mainly driven by growth in loans and advances to customers and increase in transaction volumes. Net interest income rose by 20.1% to Shs 210.5 billion from Shs 175.3 billion the previous year. Total expenses in- Introduction creased by 12.0% to Shs 228.8 billion from Shs 204.4 billion mainly attributed to the Bank’s expansion. I am happy to present to you Centenary Bank’s annual report and financial statements During the year, the balance sheet grew impressively for the year 2014. In the year under review, with total assets reaching Shs 1,636.9 billion from Shs 1,451.0 billion the previous year, representing a 12.8% we are pleased with the Bank’s performance increase and close to industry growth of 13.1%. This which aligns well with our vision and also our impressive growth was reflected in the net loan book proven track record of sustained growth. The that grew to Shs 830.9 billion up from Shs 672.3 billion Bank is well positioned with a clear strategy the previous year, a growth of 23.6% which is above and a strong brand. the industry growth of 14.0%. Despite this growth, the Bank maintained a high quality asset portfolio with an average non-performing loan book of 2.8%, which is below the Bank’s set target of 3% and the industry average of 4.1%.

THE NUMBERS For the year under review

Profit after tax Net interest income 27.3% Shs73.8 billion 20.1% Shs210.5 billion

Total income Total expenses 17.7% Shs324.3 12.0% Shs228.8 billion billion

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

THE NUMBERS For the year under review

Total assets Total customer deposits 12.8% Shs1,636.9 21.7% Shs1,175.1 billion billion

Net Loan Book Shareholders funds 23.6% Shs830.9 25.3% Shs317.5 billion billion

Customer deposits grew from Shs 966.0 billion to financing the agro industry, micro credit projects and Shs 1,175.1 billion, a growth of 21.7% which is above supporting expansion of business ventures owned by the industry growth of 14.9%. The Bank continued the youth residents in Kampala district. to attract new customers and closed the year with 1,307,757 deposit accounts compared to 1,240,077 Strategy 2015 the previous year, thereby maintaining the lead posi- Despite the difficult prevailing market conditions, the tion in the industry in terms of customer base. In ad- Bank will remain committed to its long-term strategy dition to customer deposits, the other funding sources which will enable it to capture emerging growth op- of the Bank are represented by equity which increased portunities in Uganda. We expect that the growth mo- by 25.3% to Shs 317.5 billion, up from Shs 253.3 billion mentum will be continued through maintaining efficient the previous year. operations, prudent lending and risk management. The Bank will continue to implement an engaging strategy Business development and innovation that focuses on delighting customers, enhancing pro- With regard to business development and innova- ductivity and efficiency. The Bank will pursue its growth tion, the Bank closed 2014 with 62 branches and 153 focusing on new delivery channels and products. The ATMs at 112 locations. Over the past years, the Bank Bank plans to increase its market share by rolling out has been expanding its footprint in terms of delivery more electronic Banking services and getting on agency channels. In 2012, we expanded by 2 branches and Banking. The Bank will also ensure that customer ser- 11 ATMs. In 2013, we opened 4 service centers and vices are upheld. 4 offsite ATMs. In order to consolidate our position, we decided to open one service center in 2014 and 5 Conclusion offsite ATMs. Expanding by only one service center in I wish to take this opportunity to express my sincere 2014 was mainly attributed to other major investments appreciation to our customers, shareholders and busi- the Bank decided to undertake, including the acquisi- ness partners for their support to the Bank and contin- tion of a new core Banking application and completing ued confidence and trust in our business. I also want the new headquarters. Besides, the Bank’s strategy is to thank the Board of Directors for the oversight and to focus more on other e-Banking channels of service guidance they have given the Bank. Lastly, I am grateful delivery. During the year, the Bank rolled out Point of to management and staff of the Bank for their dedica- Service (POS) machines, joined the Interswitch ATM tion and sacrifice that enabled delivery of this excellent platform and partnered with MTN, Airtel and Ezeey financial performance. Team, we could not have done it money on a number of e-Banking solutions to expand without you! Thank you for continuing to live our core its delivery channels. The Bank introduced a youth sav- values. ings campaign (Centevolution) in recognition of the valuable contribution of the youth to the economy.

Partnerships and collaborations To respond to some of the challenges that Private En- terprises and the youth face in accessing credit facilities, Fabian Kasi the Bank went into partnership with European Invest- Managing Director ment Bank, Abi-Trust, Kampala Capital City Authority and Government of Uganda and the main focus was on

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Shs1,175.1 billion The Executive Management

Mr. Fabian Kasi Dr. Simon M. S. Kagugube Mrs. Peninnah Kasule Mr. Godfrey Byekwaso Managing Director Executive Director Company Secretary General Manager - Finance

Mr. Joseph Kimbowa Mrs. Beatrice Lugalambi Mr. Joseph Lutwama Mr.s. Florence Mawejje General Manager - Operations General Manager - Business General Manager - Credit General Manager-Human Development & Marketing Resource

Mr. Denis Echeru Mr. Arnold Byansi Mr. George K. Thogo General Manager - Risk General Manager-Corporate Mr. Micheal Nyago General Manager - Business Management & Compliance Services General Manager - Audit Technology

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE 04 GOVERNANCE

4.0 Approach tive responsibility. The authority of the Board is The philosophy of the Bank is that best corporate gov- therefore vested in the collective body. ernance should be engrained and intrinsic in all the processes, structure and culture of the Bank. This is (ii) Appointment in harmony with the objectives of good corporate gov- Directors are appointed based on a competency ernance which seeks to protect stakeholders’ interests profile and rotation criteria that ensures there by balancing entrepreneurial leadership with transpar- is a sound mix of relevant skills, experience and ency and control mechanisms, without compromising continuity for good leadership to the Bank. value creation and efficient decision-making. The Bank endeavors to establish and maintain good governance The Board of Directors is appointed by the sharehold- and risk management systems and practices. ers for a term of 3 years in line with the Articles of Association and all appointments including those of any The Bank’s risk management function is responsible alternate directors are subjected to regulatory vetting for identifying and understanding the different types of and approval. The Bank’s approach is that directors risks faced, internally and externally, locally and interna- need sufficient time to understand the business to use- tionally and for measuring and managing them accord- fully apply their skills and this can be achieved and dem- ingly through established and emerging risk manage- onstrated over a medium tenure hence preference for ment methodologies. The Bank has a clearly identified the said term which also promotes stability. Retiring di- enterprise risk management framework that emanates rectors also qualify for reappointment which promotes from the sound governance principles. The risk objec- continuity for the Board. tives are integrated and aligned with the Bank’s wider business development and management objectives. In appointing directors, the shareholders take into account and balance relevant skills, experience and geo- The Bank is a member of the Institute of Corporate graphical representation. The directors’ skills and ex- Governance of Uganda and subscribes to promot- perience canvas: ing corporate governance in various institutions in the country. Members of the Board and senior manage- • Micro finance in line with the Bank’s mission and ment also subscribe to the Institute. vision • Financial and commercial banking skills • Operational experience and capital management 4.1 Codes and Regulations • Regulatory experience The Bank operates in a highly regulated industry with • Risk management and financial control expertise corporate governance principles largely promoted • Corporate planning through appropriate legislation and regulations, against a backdrop of the Bank’s own internal standards ar- The roles of the Board Chairman and the Chief Execu- ticulated in a Corporate Governance Charter. The tive Officer/Managing Director are separate and dis- Bank considers good governance as one of the pillars tinct with the Chairman of the Board of Directors being for sound operation of its business, performance and a non-executive director. To maintain independence, sustainability hence its commitment to compliance the Chairman of the Board is not a member of any of with legislation, regulation, codes and guidelines of best the specialized committees of the Board of Directors practice. The Bank seeks to maintain high standards specified under the Financial Institutions Act (including of governance, including transparency, accountability Audit, ALCO, Risk and Compensation). and fairness to all stakeholders and these are regularly evaluated against relevant local and international best The Bank also has a clear formal demarcation of re- practice, including the King III code in order to embrace sponsibilities between the Board and Management with current best practice. the Board providing strategic oversight, has the responsibility to ensure that the company has effective man- 4.2 Board Structure agement and has ultimate responsibility for the func- tioning of the Bank and its sustainability. Management (i) Structure on the other hand is in charge of the Bank’s day-to-day The Bank has a unitary Board in which the ex- operations. ecutive and non-executive directors are brought together in a single structure and share collec- The Board is accountable for all decisions taken by its

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committees and for its delegation to management of (ii) Reviewing management performance and moni- the business and affairs of the Bank. This delegation is toring progress towards set objectives. reviewed regularly in light of business developments to (iii) Set and enforce clear lines of responsibility and ensure that the Board canvasses and devotes attention accountability throughout the organization in- to any emerging strategic issues; such review has seen cluding clear demarcation of responsibilities be- the instituting of a Board IT (Strategy) Committee for tween the Board and Management and develop a Board oversight on the increasing role of IT in the deliv- position/job description for the Managing Direc- ery of banking services and the new business landscape tor [CEO]. with the advent of telecom companies in the financial (iv) Establish approval authority of different levels of services arena. Senior Management and ensure there is appropriate oversight by management. (iii) Induction and Training (v) Having timely and frank discussions of problems On appointment, every new director receives and issues in relation to the Bank including its fi- a comprehensive induction pack containing a nancial affairs and risk management processes. wide range of information on the Bank. The Di- (vi) Ensure that Board meetings are held at least rector is placed under an orientation program once in every quarter of the financial year. which includes site visits, training on corporate (vii) Recognizing the importance of audit process and governance, a review of the relevant legislation communicating its high importance throughout and regulations, one-on-one meetings with the the Bank and utilizing in a timely and effective Chairman and senior management. Annual re- manner the findings in internal and external au- fresher programmes are arranged in-house and dits and timely correction by management of externally for all directors in areas concerning problems identified by auditors. responsibilities and legal obligations of a director, (viii) Approve compensation of Senior Management corporate governance and corporate strategy, and other key personnel. planning and risk management. (ix) Enforce sound corporate governance in the Personal training is also availed to address indi- Board, Senior Management and organizational vidual directors’ unique needs. All directors are structures, incentive structure, nature and extent encouraged to subscribe for membership with an of transactions with affiliates and related par- institute in corporate governance. ties, Board mandate, composition of the Board, Board’s expectation of management and ensure As part of the Board of Directors’ annual work feedback received from stakeholders is docu- plan, the directors are expected to make site vis- mented and addressed. its. (x) Ensuring that the Bank remains a going concern.

4.3 Remuneration (v) Board meetings Directors’ remuneration is approved by shareholders The Board and its committees convene quarterly and is determined by the directors’ scope of respon- for compliance with both regulatory require- sibility and market surveys in order to obtain sufficient ments and equally so for addressing the business and competitive remuneration in line with the share- needs of the Bank. In addition to the statutory holders philosophy on remuneration of directors. The committees, the Board has 3 additional commit- Board in turn approves the remuneration of Executive tees to oversee the Bank’s unique needs; namely; Directors and senior management also premised upon IT (Strategy) Committee, Credit (Risk) Commit- a philosophy of the position the Bank wishes to have tee and the Shareholding Review Committee. in the industry as well as taking into account perfor- The Board also convenes additional meetings at mance targets of the business, individual senior ex- least once a year for strategic planning and train- ecutives’ achievements of targets, external norms and ing respectively. benchmarks. No member of management is present during proceedings when the members’ remuneration One of the formal and also required arrange- is discussed to avoid conflict of interest. ments through which directors perform their responsibilities to the Bank is attendance of Board (iv) Board Responsibilities meetings. The Board further subscribes to a The key responsibilities of the Board include the code of conduct at its meetings to maintain an following: open and inclusive atmosphere which promotes accountability. Quorum for all meetings is made (i) Establish strategic objectives and corporate val- of non-executive directors to enhance engage- ues and ensure that these are understood with- ment and objectivity. in the organization.

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The Board maintains an annual work plan to fa- tion. cilitate adequate planning and preparation. As a standard and also in line with the regulatory re- The committee’s key terms of reference are as follows: quirements the Board and all its respective com- • Oversee financial reporting to ensure a balance, mittees convene at least quarterly. A register of transparency and integrity of published financial attendance is maintained and individual directors information attendance is monitored and evaluated regularly, • Review the effectiveness of the Bank’s internal along with the membership of the respective financial controls and risk management system committees. • Monitor the effectiveness of the internal audit function The Board has embraced new technology by • Ensure the independence of the audit process adapting to a web portal where its documents • Appoint and assess the performance of the ex- are lodged for constant access by directors using ternal auditor mobile devices. This has enhanced efficiency and • Oversee the Bank’s process for monitoring com- communication. pliance with laws and regulations affecting financial reporting (vi) Board Committees The Board Committees mainly comprise of the B. Board Risk Management Committee specialized committees required under the Fi- The purpose of the Risk Management Committee is to nancial Institutions Act and regulations, and all oversee the Bank’s risk management systems, practices committees have clearly defined written Terms and procedures to ensure effectiveness in risk identifi- of Reference setting out their role and function, cation and management as well as to ensure compliance term, responsibilities and scope of authority. with internal policies and Bank of Uganda regulation. The committees perform a significant role in assisting the Board in the performance of its duties The committee’s main terms of reference include: by providing deeper analysis. The mandates of the “specialized” committees comply with the • Setting the Bank’s risk governance structure to relevant legislation, regulations and emerging ensure that there is a clearly defined mandate best practice. Each committee submits a com- and delegated authorities within the structure. prehensive quarterly report to the Board of Di- • Reviewing of operational risk exposure in re- rectors on their respective activities and recom- spect to IT operations, people, organisational mendations. Directors have full access to the and regulatory compliance levels, business con- documentation of all committees. The Board of tinuity, money laundering issues, disaster recov- Directors also reviews the performance of all its ery measures, key control standards, expansion, committees annually against the approved Terms competition and frauds. of Reference. Adjustments may be made to such • Ensuring that the level of operational risk with- terms where necessary to ensure committees in Centenary Bank is identified, monitored and are highly effective, accountable and enhance remains within agreed risk tolerance levels ap- Board oversight in line with the agreed scope of proved by the Board. activities, priorities and their changing roles. The • Reviewing monthly operational risk assessment chairpersons and members of the committees reports (The operational risk template and the are appointed by the full Board. operational risk dash board). • Reviewing operational risk associated with the A. Board Audit Committee launching of any new products or services. The Board Audit Committee is comprised of inde- • Reviewing Business Continuity testing schedules pendent non-executive directors who are suitably to ensure that plans remain “fit for purpose” at qualified for the committee to perform its mandate. all times. The Board Chairman and the Managing Director and the Head of the Audit function attend the Audit Com- C. Asset and Liability Committee (ALCO) mittee meetings by invitation only, the latter being in To ensure that all assets and liabilities are managed for attendance regularly to present to the Committee. optimum returns within the agreed fundamental guidelines through: Communication between the Board, executive management, Internal Audit and External Auditors is a. Establishing guidelines on the Bank’s tolerance encouraged. Accordingly the committee meets with for risk and expectation from investment; management after its meetings to provide management b. Setting specific financial targets for the Bank and with a sense of its areas of concern requiring interven- monitoring management`s performance against

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

those targets; the subjects at hand to discuss with the Board. c. Monitoring of the Bank’s capital; and d. Ensuring that management implements the as- All directors are required and attend the meetings with sets and liability policy of the Bank the shareholders. During the year one shareholders consultative meeting and Annual General Meeting were D. Board Credit Committee held. The primary role and responsibility of the Credit Com- mittee is to: G. IT Strategy Committee a. Review the Bank’s credit risk, including perfor- The Board IT Strategy Committee provides strategic mance trends, concentrations, loan quality and leadership and governance of the Bank’s IT resources, provisions; services and initiatives, to facilitate direction, oversight, b. Ensure alignment between the Bank’s credit monitoring & evaluation by the Board. strategy and its risk appetite for compliance with the Financial Institutions Act; and The overall objectives of the IT Strategy Committee c. Approve all insider loans, in addition to large are to ensure that the Board: exposures whose limits are reviewed regularly. a. Understands and focuses on the strategic importance of IT, as well as key issues and systems to E. Board Human Resource & Compensation manage IT risks and constraints. Committee b. Provides direction and oversight on IT activities, The primary role and responsibility of the com- as well as monitors and evaluates the impact of mittee is to: investments, initiatives and strategies employed. a. Provide oversight in respect of compliance with c. Places emphasis on driving and supporting busi- the Financial Institutions Act 2004 and the Em- ness strategies and objectives. ployment Act. d. Formulates and regularly reviews the TOR of this b. Review and recommend to the Board terms and committee. conditions of service for Senior Management staff and review their performance annually. (vii) Board Evaluation c. Assist the Board to discharge its human resource The Board conducts an annual evaluation of its management mandate and obligation in terms compliance with governance standards and of its of attracting, retaining and utilising qualified and performance as a collective body. Consequently, competent human resources. an Action Plan for improvement is developed. At d. To ensure that management promotes and/or the Bank, Board evaluation has now been taken maintains a conducive working environment, to a higher level to encompass evaluation of the good employee relations, good customer care performance of the Board Chairman, the individ- and service throughout the bank, and a culture ual directors and the perfomance of the respec- of merit and professionalism that evolves, thrives tive Board Commitees. and percolates throughout all categories of employees. 4.4 Delegation of Authority and F. Shareholding Review Committee Effective Control The primary role and responsibility of the Board Share- There is clear segregation of responsibilities between holding Review Committee is to preserve the integrity the Board and management and between the role of of the Bank’s shareholding structure and provide a plat- the Chairman of the Board and Managing Director. Ac- form for discussion of matters of interest to the Bank’s cordingly the Board provides strategic oversight and substantial shareholders while upholding the fiduciary has the responsibility to ensure that the Bank has effec- duty of directors to act in the best interest of the Bank tive management, while management is in charge of the as a whole. Bank’s day-to-day operations. Authority has been delegated to the Managing Director The Bank also consults with all its shareholders pre- to manage the business. ceding the Bank’s Annual General Meeting. At these There is a clear appreciation of the four eyes principle consultative meetings shareholders receive the Board under the Financial Institutions Act. The Bank has two of Directors’ proposals on shareholding issues raised. Executive Directors including the Managing Director. This forum provides a platform for engaging the share- The Executive Director is a member of the Board of holders and building consensus that would ultimately Directors. form a resolution at a general meeting of shareholders. During the consultative meetings, shareholders The Board operates within an established structure are permitted to bring in delegates who are experts on that ensures that there are adequate processes in place

Centenary Bank 17 Annual Report 2014 CORPORATE GOVERNANCE CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

to monitor operations. An assessment of how well the Committee. Board works and its contribution is vital to the achievement of the objectives of the Bank and is done on a The Bank is compliant with all new legislation and regu- regular basis. lations mainly the Companies Act, the Employment Act 4.5 Company Secretary & Regulations and the Financial Institutions Consumer The Board has a service of a full time Company Secre- Protection Guidelines instituted by the Central Bank. tary. This position is a central source of guidance and advice to the Board collectively and to its members on The Bank sponsors a defined contribution provident matters of governance and compliance. Accordingly fund for its staff and this is compliant with the Uganda the Company Secretary ensures that Board members Retirement Benefits Regulatory Authority Act 2012. are cognizant of their duties and responsibilities in The scheme is managed separately from the Bank in consonance with legislation and current best practice accordance with applicable laws and best practice with and that they are versed with changes in the relevant the required employee representation thereon. The laws and governance thinking and trends. The Com- Bank has a compliance function which among other pany Secretary in consultation with the Chairman as- things monitors the ethical conduct of the Bank and sists individual directors identify training relevant to the considers the development of ethical standards and identified needs of the respective directors and assists requirements. The function also reviews complaints the Board in accomplishing their annual work plan and handling and reporting procedures. strategy. 4.8 Going Concern The Company Secretary also plays a pivotal role in re- The Board has reviewed the facts and assumptions on laying decisions of the Board to management for its im- which the Bank is operated and based on these, contin- plementation. ues to view the Bank as a going concern for the foreseeable future. 4.6 Planning Strategy The Board in one of its primary roles concerns itself 4.9 Governance Journey with strategic direction. The Board considers and ap- The Board is aware that corporate governance princi- proves the Bank’s objectives and the strategy and plans ples and best practice evolve and that there is always to achieve these objectives and which is used to meas- room for improvement for the institution. ure management performance. At an annual meeting with management, the Board reviews management’s The Bank has therefore maintained a practice of moni- performance against the approved strategies, objec- toring corporate governance developments and evalu- tives and financial plans. Through a forward planning ating them to ensure that the Bank adopts principles process and outlook, the Board determines areas of im- and practices that are relevant and best fit and serve to provement and aspects of its activities and business that enhance business and community objectives. it will assign high priority. With a continuum of changes in the environment including new legislation, new finan- 4.10 Risk Management and Control cial services delivery channels, the advent of consumer The Bank uses an Enterprise wide Risk Management protection, increased consumer expectations, corpo- (ERM) approach which is governed by the Risk Man- rate governance practices, these are analyzed and an agement Framework Policy. The Bank recognizes that impact assessment made on the risks and opportunities many risks within the organization are interrelated and they bring for strategy. Management’s performance is should not be managed independently, but rather across monitored regularly on its achievement of the agreed the Bank. This ERM framework sets forth guidance to key strategic objectives. Management performance is manage risks across the Bank. It aims to strengthen the subsequently evaluated against the same through a Bal- Bank’s ability to develop an integrated view of risk and anced Score Card. the means to handle risks within a comprehensive approach. 4.7 Compliance Compliance is integral to the Bank’s culture. The over- Enterprise-wide Risk Management provides uniform sight of compliance risk management is delegated to processes to identify, assess, manage, mitigate, and re- the Audit Committee charged with reviewing and ap- port on key risks. It supports Centenary Bank’s Board proving the annual compliance plan. of Directors (BOD) corporate governance needs, enables informed decision-making, and identifies areas for The impact of new and proposed legislation and regula- value optimization. tion is assessed by Management and recommendations submitted to the Board through the Risk Management Centenary Bank’s Enterprise Risk Management (ERM)

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

framework provides Management and staff with the sponsibilities of management and the board in the man- information they need to perform their risk manage- agement of existing and emerging risks in the bank and ment-related duties. the market respectively. The document defines “Sound The document provides both background information Practice” in terms of the Bank’s risk management and such as Centenary Bank’s ERM objectives, policy, and provides guidelines for management to address the principles in addition to the detailed formal processes Bank’s risk profile on an ongoing basis. and methodologies for risk identification, assessment, management, monitoring and reporting using informa- b. Risk Categories: tion such as process flow diagrams and procedures. To enhance the understanding of particular sources of risk, their possible consequences, and the practical ap- ERM Objectives applicable: proaches to managing them, Centenary Bank has defined risks into 9 major categories. Centenary Bank’s ERM program brings risk knowledge These risk categories are groupings that help the bank and information to the fore in decision-making process- to consistently identify, assess measure, monitor and es to mitigate the downside of unrewarded risk while report across on its overall risk exposure. Using con- exploiting rewarded risks to benefit from business op- sistent risk categories across the bank enables aggre- portunities. gation and determination of overall risk impact. This enhances the understanding of particular sources of The ERM objectives are to: risk, their possible consequences and the practical ap- • Support the Bank’s business growth strategy proaches to managing them. through the implementation of well-defined and common risk management processes, tools, and Centenary Bank has adopted the following risk techniques. categories: • Counter losses and improve business value i) Strategic Risk through optimization of risk and return. Risk of current and prospective impact on the • More knowledgeably seize and exploit oppor- Bank’s earnings and capital arising from poor tunities and quickly identify risks to avoid, both business decisions, improper implementation of current and emerging risks. decisions or lack of response to industry, eco- • Reduce uncertainty and increase the likelihood nomic or technological changes. of success in achieving the bank’s strategic initiatives. ii) Credit Risk • Build credibility and sustainable stakeholder con- Potential that a Bank borrower or counterparty fidence in Centenary Bank’s governance and risk will fail to meet their obligations in accordance management processes and comply with both with agreed terms. regulatory and local laws and jurisdictions. • Improve the understanding of interactions and iii) Liquidity Risk interrelationships between risks. Risk resulting from the Bank’s failure to pay its • Establish clear accountability and ownership of debts and obligations when due because of its in- risk. ability to convert assets into cash, or its failure to • Develop a common language that helps to estab- procure enough funds, or, if it can, that the funds lish the broad scope of risk and to organize risk come with an exceptionally high cost that may management activities and reinforce Centenary affect the bank’s incomes and capital fund now Bank’s risk culture. and in the future. • Develop capacity for continuous monitoring and reporting of risk across Centenary Bank, from iv) Market Risk the operational level to the Board. This is the risk that the value of the Bank’s investments will decrease due to unexpected and/or adverse changes in market factors such as stock a. Risk Management Policy and commodity prices as well as interest and for- The risk management policy defines the Bank’s busi- eign exchange rates. ness processes, structure, risk profile and risk appetite. It is a guiding document in the application of the bank’s Key market risks factors for the Bank include Interest comprehensive risk management framework which is Rate Risk and Foreign Exchange Risk which have been regularly reviewed. described below: The policy among other things defines the roles and re- i. Interest Rate Risk: the exposure of a bank’s

Centenary Bank 19 Annual Report 2014 CORPORATE GOVERNANCE CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

financial condition to adverse movements in in- conduct applicable to its banking activities. terest rates. viii) Information Technology Risk The risk arising from inadequate information ii. Foreign Exchange Risk: risk associated with communication technology (ICT) resources or doing business in two or more currencies. For- inappropriate use of available ICT resources. eign exchange price risk relates to possible re- This can result in financial loss and lost business valuation losses (or gains) on long/over bought or opportunities due to unavailability of the ICT re- short/oversold currency positions in response to sources, loss of data integrity and confidentiality. movements in exchange rates. ix) Country Risk v) Reputation Risk Refers to the risk of investing in a country, other This is the risk arising from changes in public than Uganda, resulting from uncertainties arising opinion that impact the Bank’s earnings or access from the economic, social and political conditions to capital. This can be mainly thought of as pub- of that country that may cause borrowers in that licity or operational inadequacies that would have country to be unable or unwilling to fulfill their an adverse effect on the Bank’s public image. obligations to the Bank. The main categories of country risk comprise vi) Operational Risk sovereign, transfer and contagion risk and are Risk of direct or indirect loss resulting from inad- described below: equate or failed internal processes, people, and systems or from the external events or unfore- Sovereign risk: Denotes a foreign government’s seen catastrophes. It includes the exposure to capacity and willingness to repay its direct and in- loss resulting from the failure of a manual or au- direct (i.e. guaranteed) foreign currency obliga- tomated system to process, produce, or analyze tions. transactions in an accurate, timely, and secure manner. Transfer risk: This is the risk that a borrower may not be able to secure foreign exchange to Operational risks increase the Bank’s exposure service its external obligations. to other risks by impairing the Bank’s ability to adequately assess, monitor and report on other Contagion risk: This risk arises where adverse risks. Operational risks cut across all the Bank’s developments in one country lead to a down- divisions and include, but not limited to: grade of rating or a credit squeeze not only for that country but also other countries in the re- Human Resources Risk: The risk arising from gion. inadequate human resources or inappropriate use of available staffing resources. 4.11 Business Continuity Management: Business Continuity Management (BCM) is a holistic Business Process Risk: The risk arising from in- management process that identifies Potential impacts adequate implementation and non-adherence to that threaten an organization and provides a framework the Bank’s business processes. for building resilience and the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities. Legal Risk: The risk arising from contracts or The Bank has in place an appropriate business continu- other arrangements that are not enforceable ity management program with the ultimate purpose to through available means. minimise the impact on the organization and recover from loss of information assets which may result from Health & Safety Risk: The risk arising from natural disasters, accidents, equipment failures, and noncompliance with or lack of health and safety deliberate actions to an acceptable level through a regulations, policies, or procedures. combination of preventive and recovery controls. The process includes the development, maintenance, and vii) Compliance Risk testing of contingency plans and work-around proce- Risk of legal or regulatory sanctions, material fi- dures necessary to sustain the operational continuity of nancial loss, or loss to reputation a bank may suf- mission critical processes, information technology sys- fer as a result of its failure to comply with laws, tems and resources. regulations, prudential guidelines, supervisory recommendations and directives, rules, internal Business Continuity Management Framework policies and procedural guidelines and codes of

20 Centenary Bank Annual Report 2014 CORPORATE GOVERNANCE

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Centenary Rural Development Bank continues to en- • CERUDEB’s plans are developed according to sure that a business continuity management process is CERUDEB’s BCP framework and in compliance in place and sufficient financial, organizational, technical with the policies. and environmental resources are identified to address • BCP is an ongoing process of development, the specific requirements for Business Continuity. A testing, updating and maintenance, and not just Business Continuity Management Framework was de- a one off project. It is a part of every division veloped in accordance with best practices and stand- Head’s normal responsibilities to ensure that the ards to ensure all plans are consistent and to identify division has not only planned for the recovery priorities for testing and maintenance. of all critical business processes of that business unit, but has also tested and maintained those Business Continuity Management (BCM) Process plans. BCM is important to the Bank and is the overall re- • Each division has an approved Business Continu- sponsibility of Senior Management to ensure that it ity Recovery Plans for the recovery of its critical is implemented. At CERUDEB, Senior Management business processes. is committed to drive the BCP process, provide ad- • Every year, the BCM unit in consultation with equate resources and ensure that the respective plans the BCP Steering Committee/BCMT establishes are well developed, documented, tested, updated and the BCP Development Plan for the year. The maintained.Consequently, the following BCP manage- plan sets out the BCP activities to be undertaken ment process have been established to ensure that the for that year, who is responsible for those activi- plans are developed, documented, tested, updated and ties and the timeline for such activities. The BCP maintained Steering Committee reviews and approves the BCP Development Plan.

RISK GOVERNANCE STRUCTURE:

Centenary Bank 21 Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Centenary Bank was the Best Employer Gold Category in the 2014 NSSF Employer Awards.

22 Centenary Bank Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

OPERATIONAL AND 05 FINANCIAL REVIEW

5.0 Financial Definitions

Core capital Permanent equity in the form of issued and fully paid-up shares plus all disclosed reserves less goodwill or any intangible assets Cost-to-income ratio (%) Total operating expenses as a percentage of total income Credit impairment charge (Shs) The amount by which the period profits are reduced to cater for the effect of non-performing loans for the period Credit loss impairment The amount by which gross loans in the SOFP are written [Statement of Financial Position (SOFP)] (Shs) down to cater for non-performing loans Credit loss ratio (%) Provision for credit losses per the Statement of Comprehen- sive Income as a percentage of average net loans Dividend cover (times) Earnings Per Share divided by ordinary dividend per share Dividend per share ( Shs) Total ordinary dividends declared per share with respect to the year Dividend Yield (%) Dividend per share as a percentage of closing share price Earnings per share (cents) Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares Effective tax rate (%) The income tax charge as a percentage of income before tax excluding income from associates Lending Ratio Net loans and advances divided by total deposits Net interest margin (%) Net interest income as a percentage of average earning assets Non-performing loans [NPL] (Shs) Loans whose servicing is due but the borrower has no money on the account from which to recover the installment(s) Percentage change in credit loss ratio (%) Ratio of change in the rate of credit loss impairment between time periods Percentage change in the impairment charge (%) Ratio of change in the rate of impairment charge between time periods Profit for the year (Shs) Annual profit attributable to ordinary shareholders and preference shareholders Return on Assets (%) Earnings as a percentage of average total assets Return on Equity (%) Earnings as a percentage of average equity SOFP credit impairment as a % of gross loans and advances Ratio of SOFP credit impairment to gross loans and advances (%) Supplementary capital General provisions which are held against future and current unidentified losses that are freely available to meet losses which subsequently materialize, and revaluation reserves on banking premises, and any other form of capital as may be determined from time to time. Total capital The sum of core capital and supplementary capital Total capital adequacy Total capital divided by the sum of total risk weighted assets and total risk weighted contingent claims

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

5.1 Performance against financial objectives in 2014

Return on Equity (ROE) Objective: Return of 19.1% Performance: ROE of 25.9% was achieved (2013: 25.3%).

Return on total assets (ROA) Objective: ROA of 4.7% Performance: ROA of 4.8% was achieved (2013: 4.5%).

Cost to income ratio Objective: A ratio of 73.4% Performance: A ratio of 70.6% was achieved (2013: 74.2%).

Provision for credit losses Objective: Statement of comprehensive income (SOCI) charge - 1.1% of the gross loan portfolio Performance: SOCI charge of 1.3% of loans and advances was recorded (2013: 1.4%).

Net loans to deposit ratio Objective: A ratio of 60% - 80% Performance: A ratio of 70.7% was achieved (2013: 69.6%). Loans grew faster relative to the deposits

5.2 Financial highlights - extracts from the financial statements

2014 2013 2012 2014% Shs ‘000’ Shs ‘000’ Shs ‘000’ +/- Financial data Total assets 1,636,923,018 1,451,039,532 1,122,415,626 12.8 Shareholders’ funds 317,501,337 253,337,071 204,468,442 25.3 Total customer deposit 1,175,115,554 965,891,194 818,478,708 21.7 Net loans and advances 830,931,969 672,307,038 556,959,785 23.6 Total income 324,298,922 275,579,308 240,459,902 17.7 Total expenses 228,812,880 204,356,533 171,155,223 12.0 Profit before income tax 95,486,042 71,222,775 69,304,679 34.1 Profit after income tax 73,816,511 58,005,547 54,901,186 27.3

Key performance ratios Cost to income ratio 70.6% 74.2% 71.2% 3.6 Return on assets 4.8% 4.5% 5.3% 0.3 Return on equity 25.9% 25.3% 30.3% 0.5 Lending ratio 70.7% 69.6% 68.0% 1.1 Total expenses to loan ratio 27.5% 30.4% 30.7% -2.9 Capital adequacy ratio (Tier 2) 29.4% 28.7% 26.9% 0.7

Non-financial data Number of depositors 1,307,757 1,240,077 1,300,479 5.5 Number of ATMs 153 147 136 4.1 Number of Branches and services centers 62 61 57 1.6

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 5.3 Statement of Comprehensive income analysys Non-interest income: The Bank’s total income is comprised of interest The Bank’s non-interest income arises from trade fi- income, income from commissions and fees and nancing activities such as letters of credit, transactional other non-operating income. Total income went activities including bank drafts, funds transfers, mobile up by Shs 48.7 billion in 2014 (2013: 35.1 billion) money, trading income and revaluation of currency representing a growth of 17.7% when compared to positions and exchange income on foreign transactions 2013 14.6%. with customers. Net interest income: Net interest income, which is the margin between 5.4 Non-interest income: interest income and interest expense, remained the main source of income for the Bank. Net inter- 2014 2013 est income for the year 2014 was Shs 210.5 billion % % (2013: Shs 175.3 billion) and represents 73.3% of Growth in net non- interest 15.6 20.1 operating income(2013: 72.5%). income Non-interest income as 26.7 27.5 2014 2013 % of total operating income % % Growth in net interest income 20.1 12.4 Non-interest income rose to Shs 76.7 billion (2013: Net interest margin 17.6 18.4 Shs 66.4 billion): following growth in fee and commission income by 12.3% (2013: 17.8%) This growth was Net interest income growth of 20.1 % was mainly driven by higher transaction volumes initiated achieved. Income benefited from strong growth in through customer interactions with the branches, assets of 12.8% in 2014 (2013: 29.3%). service centres and an expanded ATM network. The growth was also attributed to faster growth in loans and investments in government securities. The trend of the Bank’s non-interest income as per percentage of a total income over the last five years is The trend of the Bank’s net interest income and net presented below. interest margin over the last five years is presented below:

Net interest income Non interest income

240,000 19.5 90,000 29.5 220,000 29.0 19.0 80,000 200,000 28.5 70,000 180,000 18.5 28.0 160,000 60,000 18.0 27.5 140,000 17.5 50,000 27.0

120,000 Shs Million 17.0 40,000 26.5 Shs Million 100,000 26.0 80,000 16.5 30,000 25.5 60,000 16.0 20,000 40,000 25.0 15.5 20,000 10,000 24.5 - 15.0 - 24.0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Years Years

Net interest income Net interest margin Non interest income Net interest income

Net Interest Margin Close At 0.8% 0.9 % 17.6% 18.4% 2014 2013 2014 2013 The decrease was mainly attributed to lower interest rates offered to customers.

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Credit impairment charges:

Specific provisions for credit losses for the year 2014 (excluding Credit loss as a % of gross interest in suspense) totaled to Shs 11.3 billion (2013: 9.5 bil- loans and advances lion). The provisions charged to the statement of comprehensive income as a percentage of gross loans and advances closed at 1.3% (2013: 1.4%). 3.5

3.0 Credit impairment charges: 2.5 2014 2013 2.0 % Percentage change in the impairment charge 18.3 48.3 1.5 Credit loss ratio 1.3 1.4 Credit impairment as % of gross loans and advances 2.3 2.3 1.0

Non-performing loans (NPL) - millions 24,215 18,915 0.5 Credit loss impairment (SOFP) - millions 19,789 15,719 - Credit impairment charge - millions 11,295 9,551 2010 2011 2012 2013 2014 Years Credit impairment charges Increased by 18.3% (2013: increase BS impairment/Total Loans NPL/Total Loans by 48.3%). The increase in 2014 was less than that registered in 2013 because the quality of loans improved towards the end Credit Loss Ratio of 2014 due to decentralization of civil servant salary payments more still Agricultural loans performed well because of good rains in 2014 compared to 2013. THE NUMBERS 5.5 Total expenses: For the year under review 2014 2013 % % Total Expenses Growth in total operating expense 12.0 19.4 Change in cost-to-income ratio 3.6 3.0 12.0% Total expenses increased by 12.0% against income growth of 17.7% (2013:19.4% against income growth of 14.6%). The cost-to-income ratio reduced to 70.6% in 2014 from 74.2% in 2013. The staff costs in 2014 were higher by 18.7% compared Income Growth to 2013. Other operating expenses in 2014 were higher by 6.3% when compared to 2013. 17.7% Income and operating expenses

350,000 78.0 Staff Costs 300,000 76.0

250,000 74.0

200,000 72.0

Shs Million 18.7%

150,000 70.0

100,000 68.0 Other Operating Expenses 50,000 66.0

64.0 2010 2011 2012 2013 2014 Years 6.3%

Total Income Operating Expenses Cost/Income Ratio

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

5.6 Statement of financial Position analysis Deposit and loans The Bank’s total assets during the year under review increased by 12.8% (2013: 29.3%) due to the expansion 1,300,000 in the Bank’s distribution channels by 1 service centre, 7 1,200,000 1,100,000 ATMs at 6 locations and growth in its investments, loan 1,000,000 and advances portfolio. 900,000 800,000 Net loans and advances accounted for 50.8% (2013: 700,000 Shs Million 46.3%) of total assets and registered a 23.6% (2013: 600,000 20.7%) growth to close at Shs 830.9 billion in 2014 up 500,000 400,000 from Shs 672.3 billion in 2013. The loan growth was driv- 300,000 en by good customer service, reduced interest rates and 200,000 increased lending opportunities in the market. 100,000

Customer deposits, which consist of current accounts, 2010 2011 2012 2013 2014 savings accounts and time deposits, made up the Bank’s Years main sources of funding. These deposits grew by 21.7% Deposits Loans (2013: 18.0%) to Shs 1,175.1 trillion in 2014 from Shs 965.9 billion in 2013. The good deposit growth is attributed to increased marketing efforts and an increase in the Bank’s distribution channels.

5.7 Deposit composition The number of depositors increased to 1,307,757 in 2014 Funding Mix 2014 (2013: 1,240,077). This came as a result of increased market efforts to bring in more customers. The current account average balance per account in 2014 increased to Shs 7.2 million (2013: Shs 6.1 million); savings accounts average balance per account in 2014 increased to Shs 0.6 million (2013: Shs 0.5 million) and time deposits average balance per account in 2014 increased to Shs 33.9 million (2013: Shs 31.3 million) signifying an improvement in the savings culture by our customers and the bank`s deposit mobilisation strategy. Savings accounts continue to make up the biggest portion of the bank’s deposit liabilities.

5.8 Funding mix

The funding mix has remained rather stable in terms of value. Savings accounts represent 47.9% of total equity and liabilities compared to 44.1% in 2013. The Bank has been able to maintain a stable deposit mix in 2014 due to an increase in its loyal customer base and massive deposit mobilisation. Current accounts represent 17.2% of total equity and liabilities compared to 15.0% for the same period last year. Time deposits constituted 6.7% of total equity and liabilities compared to 7.5% for 2013. Borrowed and managed funds contribute only 5.1% of the total equity and liabilities (2013: 6.4%).

Centenary Bank 27 Annual Report 2014 OPERATIONAL AND FINANCIAL REVIEW

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

5.9 Equity

Equity, which comprises share capital, share premium and retained earnings, finances 19.4% (2013:17.5%) of the total assets. The level of equity is a function Total assets and shareholder equity of earnings which are distributed as dividends and amount of earnings which are ploughed back into the 1,800,000 business. The Bank’s policy is to maintain a sustain- 1,600,000

able dividend growth which satisfies shareholders. 1,400,000

1,200,000 5.10 Capital adequacy 1,000,000 Shs Million 800,000

The Bank monitors its capital adequacy using ratios 600,000 established by the Bank for International Settlement 400,000 (BIS) as approved by Bank of Uganda, the regulator. The ratios measure capital adequacy by comparing 200,000 the Bank’s eligible capital with its statement of finan- - cial position assets, off-statement of financial position 2010 2011 2012 2013 2014 commitments and market and other risk positions Years at weighted amounts to reflect their relative risk. At 31 December 2014, the Bank had a regulatory total Total Assets Sahreholders’ equity capital base of 29.4% (2013: 28.7%) of risk-weighted assets. This compares favorably with the regulatory requirement of 12.0%.

Statement of cash flows analysis

The Bank’s cash flow from / (used in) operating activities went down from Shs 126.7 billion in 2013 to (Shs 13.1 billion) in 2014.

Cash flows in investing activities decreased from Shs 24.4 billion to Shs 14.6 billion during the year ended 2014.

Cash flows from / (used in) financing activities decreased from Shs 29.2 billion in 2013 to (Shs 19.9 billion) in 2014. The reduction was mainly attributed to a reduction in long term borrowings of Shs 9.3 billion.

28 Centenary Bank Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Centenary Bank was voted as the Most Promising Brand on Social Media in the 2014 Digital Impact Awards Africa

Centenary Bank 29 Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 DIRECTORS’ 06 REPORT

Principal activities Risk Management The Bank provides a range of banking and related finan- Managing risk is an integral part of the Bank’s business. cial services especially to the economically disadvan- The Board of Directors is ultimately responsible for risk taged people in rural areas. The Bank is an approved management and has established policies and proce- and licensed financial institution under the Financial dures to control and monitor risk throughout the Bank. Institutions Act 2004 and is a member of the Uganda Banker’s Association. Corporate Social Responsibility Statement Results The Bank is focused on achieving strong sustainable The Bank’s results for the year ended 31 December financial returns while promoting a more decent, dig- 2014 are shown in the statement of comprehensive in- nified and kinder society. We commit considerable come. A general review of the business and operations amounts of resources every year to the humanitarian as well as a financial review discussing the results of the cause both directly and indirectly through our pricing Bank are set out in section 5 of this report. and product mix. Some of our direct community interventions are highlighted in the sustainability report in Dividend section 10. The directors recommend payment of dividends for the year ended 31 December 2014 of Shs 18,477.5 million (2013: Shs 9,652.2 million). The Bank has adopted the reporting mechanism developed by the Global Reporting Initiatives (GRI) in an at- tempt to be transparent about our performance on the Share Capital triple bottom line of people, property and planet. During the year no preference shares were issued. In the sustainability report, the Bank has included a Directors and Directors’ Interest comparison of its performance against the guidelines The directors who held office during the year and to established in the GRI. the date of signing of this report are listed in section 2 of this report. Retirement Benefits The Bank contributes to a retirement benefits scheme None of the directors held any beneficial interest in the covering all of its employees. On attaining the retire- ordinary share capital of the Bank as at 31 December ment age or honorably leaving the service of the Bank, 2014. all permanent staff are eligible for terminal benefits applicable to them. Auditors Ernst & Young have expressed their willingness to continue as external auditors in accordance with section 67 By order of the Board: of the Financial Institutions Act 2004.

Management by Third Parties None of the business of the Bank was managed by a third party or a company in which a director had an interest during the financial year. Mrs. Peninnah T Kasule COMPANY SECRETARY

30 Centenary Bank Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 DIRECTORS’ RESPONSIBILITY 07 FOR FINANCIAL REPORTING

The Bank’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Uganda, 2012 and Financial Institutions Act 2004, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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

The directors accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards, the Companies Act of Uganda, 2012 and Financial Institutions Act 2004. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs and the profit and cash flows for the year ended 31 December 2014. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

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

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

Approval of the Financial Statements The financial statements, as indicated above, were approved by the Board of Directors and signed on its behalf on 9th April 2015 by:

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

Centenary Bank 31 Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 REPORT OF THE INDEPENDENT AUDITORS 08 TO THE MEMBERS OF CENTENARY RURAL DEVELOPMENT BANK LIMITED

Report on the financial statements risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presenta- We have audited the accompanying financial statements tion of the financial statements in order to design audit of Centenary Rural Development Bank Limited, which procedures that are appropriate in the circumstances, comprise the statement of financial position as at 31 but not for the purpose of expressing an opinion on the December 2014, and the statement of comprehensive effectiveness of the Bank’s internal control. An audit income, statement of changes in equity and statement also includes evaluating the appropriateness of account- of cash flows for the year then ended, and a summary ing policies used and the reasonableness of accounting of significant accounting policies and other explanatory estimates made by the directors, as well as evaluating information. the overall presentation of the financial statements. Directors’ responsibility for the We believe that the audit evidence we have obtained financial statements is sufficient and appropriate to provide a basis for our The Bank’s directors are responsible for the prepara- opinion. tion and fair presentation of these financial statements in accordance with International Financial Reporting Opinion Standards and in the manner required by the Compa- In our opinion the accompanying financial statements nies Act of Uganda, 2012 and the Financial Institutions present fairly, in all material respects, the financial po- Act, 2004, and for such internal control as the directors sition of Centenary Rural Development Bank Limited determine is necessary to enable the preparation of fi- as at 31 December 2014, and its financial performance nancial statements that are free from material misstate- and its cash flows for the year then ended in accord- ment, whether due to fraud or error. ance with International Financial Reporting Standards and the requirements of the Companies Act of Uganda, Auditor’s responsibility 2012 and the Financial Institutions Act, 2004. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted Report on other legal requirements our audit in accordance with International Standards As required by the Companies Act of Uganda, 2012, on Auditing. Those standards require that we comply we report to you, based on our audit that: with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the finan- i) we have obtained all the information and expla- cial statements are free from material misstatement. nations which to the best of our knowledge and belief were necessary for the purposes of the audit; An audit involves performing procedures to obtain au- ii) in our opinion proper books of account have dit evidence about the amounts and disclosures in the been kept by the Bank, so far as appears from financial statements. The procedures selected depend our examination of those books; and iii) the Bank’s statement of financial position and on the auditor’s judgment, including the assessment of statement of comprehensive income are in the risks of material misstatement of the financial state- agreement with the books of account ments, whether due to fraud or error. In making those

Ernst & Young House, Certified Public Accountants, Kampala, Uganda.

32 Centenary Bank Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 FINANCIAL 09 STATEMENTS

9.0 Statement of comprehensive income

Note 2014 2013 Shs ‘000 Shs ‘000

Interest income 9.48 247,573,040 209,181,388 Interest expense 9.49 (37,067,293) (33,852,506) Net interest income 210,505,747 175,328,882 Fee and commission Income 9.50 58,679,232 52,239,258 Net interest, fee and commission income 269,184,979 227,568,140 (Loss)/income from financial instruments at fair value 9.48 (505,138) 238,171 Foreign exchange income 9.51 6,161,964 5,108,638 Other operating income 9.52 12,389,824 8,811,853 Operating income 287,231,629 241,726,802

Employee benefits 9.53 (87,409,176) (73,620,570) Impairment losses on loans and advances 9.54 (11,294,916) (9,551,125) Depreciation 9.64 (19,106,980) (17,800,564) Operating expenses 9.55 (73,934,515) (69,531,768) Profit before income tax 95,486,042 71,222,775

Income tax expense 9.56 (21,669,531) (13,217,228) Profit for the year 73,816,511 58,005,547

Other comprehensive income - - -

Total comprehensive income, net of income tax 73,816,511 58,005,547

Centenary Bank 33 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.1 Statement of financial position Note 2014 2013 Shs ‘000 Shs ‘000

ASSETS Cash and balances with Bank of Uganda 9.57 140,653,147 244,962,510 Placements with other banks 9.58 49,527,599 28,571,192 Government securities –held for trading 9.59 24,180,039 7,289,093 Loans and advances to customers 9.60 830,931,969 672,307,038 Government securities –held to maturity 9.59 412,179,522 327,255,190 Other assets 9.61 33,520,060 37,164,126 Deferred expenses 9.63 9,233,400 1,700,003 Finance lease on leasehold land 9.64 2,223,977 2,269,508 Property and equipment 9.64 (b) 132,475,944 127,923,956 Intangible assets 9.64 (c) 1,997,361 1,596,916 Total assets 1,636,923,018 1,451,039,532

LIABILITIES Customer deposits 9.65 1,175,115,554 965,891,194 Deposits from other banks 9.66 5,456,389 6,319,817 Inter-bank borrowing 9.67 - 82,471,095 Managed funds 9.68 10,769,684 10,562,122 Borrowed funds 9.69 72,656,320 82,895,846 Current income tax payable 9.56 5,259,400 1,640,550 Deferred income tax liability 9.62 300,406 2,605,073 Deferred grants 9.72 746,576 1,030,250 Other liabilities 9.70 48,538,623 43,619,913 Provision for litigation 9.71 578,729 666,601 Total liabilities 1,319,421,681 1,197,702,461

EQUITY Ordinary share capital 9.74 25,000,000 25,000,000 Preference share capital 9.74 116,624 116,624 Share premium 9.74 1,138,927 1,138,927 Regulatory reserve 9.76 3,377,657 1,822,018 Proposed dividends 9.75 18,477,452 9,652,245 Retained earnings 269,390,677 215,607,257 Total equity 317,501,337 253,337,071 Total equity and liabilities 1,636,923,018 1,451,039,532 Off balance sheet financial instruments 9.78 31,350,646 18,183,974

The financial statements were approved by the Board of Directors and signed on its behalf on 9th April 2015 by:

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

34 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.2 Statement of changes in equity

Year ended 31 December 2013 Note Ordinary Preference Share Regulatory Retained Proposed TOTAL shares shares premium reserve profits dividends Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

At 1 January 2013 25,000,000 116,621 1,138,927 1,924,704 167,151,269 9,136,921 204,468,442 Total comprehensive income for the year - - - - 58,005,547 - 58,005,547 Contributions by and distributions to owners Transfer to regulatory reserve 9.76 - - - (102,686) 102,686 - - Transactions related to owners Dividend paid - - - - - (9,136,921) ( 9,136,921) Proposed dividends 9.75 - - - - (9,652,245) 9,652,245 - Shares paid up 9.74 - 3 - - - - 3 Total contributions by and distributions to owners - 3 - (102,686) (9,549,559) 515,324 (9,136,918) At 31 December 2013 25,000,000 116,624 1,138,927 1,822,018 215,607,257 9,652,245 253,337,071

Note Ordinary Preference Share Regulatory Retained Proposed TOTAL shares shares premium reserve profits dividends Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

At 1January 2014 25,000,000 116,624 1,138,927 1,822,018 215,607,257 9,652,245 253,337,071 Total comprehensive income for the year - - - - 73,816,511 - 73,816,511 Contributions by and distributions to owners Transfer to regulatory reserve 9.76 - - - 1,555,639 (1,555,639) - - Transactions related to owners - Dividend paid - - - - - (9,652,245) (9,652,245) Proposed dividends 9.75 - - - - (18,477,452) 18,477,452 -

Total contributions by and distributions to owners - - - 1,555,639 (20,033,091) 8,825,207 (9,652,245) At 31 December 2014 25,000,000 116,624 1,138,927 3,377,657 269,390,677 18,477,452 317,501,337

9.3 Statement of cash flows Note 2014 2013 Shs ‘000 Shs ‘000

Cash flows from operating activities Interest receipts 237,844,632 196,804,393 Interest payments (40,918,505) (29,748,650) Fee and commission income 71,679,028 54,124,447 Other income received 9,430,404 7,675,286 Recoveries from loans previously written off 9.52 3,074,268 1,857,548 Payments to employees (88,188,005) (74,117,851) Payments to suppliers and other payments (66,235,220) (65,809,934) Grants received 758,073 1,065,896 Income tax paid 9.56 (20,355,351) (12,292,641) Cash flows from operating activities before changes in operating assets and liabilities 107,089,324 79,558,494

Changes in operating assets and liabilities Investments (65,911,424) (64,899,952) Loans and advances to customers (162,308,211) (113,927,789) Other assets 3,689,596 (12,678,705) Customer deposits 209,224,360 147,412,486 Deposits from other banks (83,334,524) 83,586,934 Other liabilities (4,779,714) 8,699,390 (103,419,917) 48,192,364

Centenary Bank 35 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Note 2014 2013 Shs ‘000 Shs ‘000

Net cash flows generated from operating activities 3,669,407 127,750,880

Cash flows from investing activities Additions to deferred expenses 9.63 (7,533,397) - Purchase of property equipment 9.64 (18,917,358) (15,990,270) Purchase of software 9.64 (1,715,173) (772,513) Additions to Mapeera House Project 9.64 (3,438,228) (7,716,182) Proceeds from sale of property and equipment 369,857 101,752 Net cash flows used in investing activities (31,234,299) (24,377,213)

Cash flows from financing activities Dividends paid (9,652,245) (9,136,921) Share capital paid up 9.74 - (3) Proceeds from managed/borrowed funds 5,677,663 38,220,125 Repayments of managed/borrowed funds (15,909,627) (915,078) Net cash flows (used in)/ from financing activities (19,884,209) 28,168,123

Net (decrease) / increase in cash and cash equivalents (47,449,101) 131,541,790 Net foreign exchange difference - 6,000 Cash and cash equivalents at 1 January 389,981,119 258,433,329 Cash and cash equivalents at 31 December 9.77 342,532,018 389,981,119

9.4 Notes to the Financial Statements below. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. It also requires management to exercise its a General information judgment in the process of applying the Bank’s account- Centenary Rural Development Bank Limited is incorpo- ing policies. The areas involving a higher degree of judg- rated in the Republic of Uganda under the Companies ment or complexity, or where assumptions and estimates Act 2012 and is domiciled in the Republic of Uganda. The are significant to the financial statements, are disclosed address of its registered office is: in Note 3. Mapeera House Plot 44-46 Kampala Road c New and amended standards P. O. Box 1892, Kampala. and interpretations The accounting policies adopted are consistent with those of the previous financial year. Amendments result- b Summary of significant ing from improvements to IFRSs to the following stand- accounting policies ards did not have any impact on the accounting policies, The principal accounting policies adopted in the prepa- financial position or performance of the Bank: ration of these financial statements are set out below. These policies have been consistently applied to all years • Investment Entities – Amendments to IFRS 10 presented, unless otherwise stated. Consolidated Financial Statements, IFRS 12 Disclo- sure of Interests in Other Entities and IAS 27 Sepa- Basis of preparation rate Financial Statements The financial statements are prepared in compliance • Offsetting Financial Assets and Financial Li- with International Financial Reporting Standards (IFRS). abilities — Amendments to IAS 32 Financial In- The financial statements are presented in the functional struments: Presentation currency, Uganda Shillings (Shs), rounded to the nearest • Recoverable Amount Disclosures for Non-Fi- thousand, and prepared on the historical cost basis, ex- nancial Assets — Amendments to IAS 36 Impair- cept where otherwise stated in the accounting policies ment of Assets

36 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

• Novation of Derivatives and Continuation d Standards issued but not yet of Hedge Accounting — Amendments to IAS effective 39 Financial Instruments: Recognition and Meas- Standards issued but not yet effective up to the date urement of issuance of the Bank’s financial statements are listed • IFRIC 21 Levies below. This listing is of standards and interpretations • Improvements to IFRSs – 2010-2012 Cycle: issued, which the Bank reasonably expects to be ap- Amendments to IFRS 13 – Short-term receiv- plicable at a future date. The Bank intends to adopt ables and payables those standards when they become effective. The • Improvements to IFRSs – 2011-2013 Cycle: Bank expects that adoption of these standards, amend- Amendments to IFRS 1 – Meaning of ‘effec- ments and interpretations in most cases not to have tive IFRSs’ any significant impact on the Bank’s financial position or performance in the period of initial application but additional disclosures will be required. In cases where it will have an impact the Bank is still assessing the possible impact.

9.5 International Financial Reporting Standards and Amendments issued but not effective for 31 December 2014 year-end

NUMBER TITLE EFFECTIVE DATE EXECUTIVE SUMMARY IFRS 9 Financial 1-Jan-18 In July 2014, the IASB issued the final version of IFRS Instruments 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard in- troduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The adoption of IFRS 9 will have an effect on the classification and measurement of the Bank’s financial assets, but no impact on the classification and measurement of the Bank’s financial liabilities. Amendments Defined Benefit 1-July-14 IAS 19 requires an entity to consider contributions to IAS 19 Plans: Employee from employees or third parties when accounting for Contributions defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. It is not expected that this amendment would be relevant to the Bank, since the Bank does not have defined benefit plans with contributions from employees or third parties.

Centenary Bank 37 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

IFRS 15 Revenue from 1-Jan-17 IFRS 15 was issued in May 2014 and establishes a new Contracts with five-step model that will apply to revenue arising from Customers contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted. The Bank is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

The standards issued but not yet effective which the • A performance target may relate to the opera- Bank does not expect to have an impact on the financial tions or activities of an entity, or to those of an- statements are listed below: other entity in the same group • A performance condition may be a market or • IAS 14 Regulatory Deferral Accounts non-market condition • Amendments to IAS 19 Defined Benefit Plans: • If the counterparty, regardless of the reason, Employee Contributions ceases to provide service during the vesting pe- • Annual improvements 2010-2012 Cycle riod, the service condition is not satisfied • Annual improvements 2012-2014 Cycle • The amendment must be applied prospectively. • Annual improvements 2011-2013 Cycle • Amendments to IFRS 11 Joint Arrangements: Ac- IFRS 3 Business Combinations: Accounting for con- counting for Acquisitions of Interests tingent consideration in a business combination • Amendments to IAS 16 and IAS 38: Clarification The amendment clarifies that all contingent considera- of Acceptable Methods of Depreciation and Am- tion arrangements classified as liabilities or assets aris- ortisation ing from a business combination must be subsequently • Amendments to IAS 16 and IAS 41 Agriculture: measured at Bearer Plants fair value through profit or loss whether or not they fall • Amendments to IAS 27: Equity Method in Sepa- within the scope of IFRS 9 (or IAS 39, as applicable). rate Financial Statements The amendment must be applied prospectively.

9.6 2010-2012 cycle IFRS 8 Operating Segments: Aggregation of op- (issued in December 2013) erating segments In the 2010-2012 annual improvements cycle, the IASB The amendment clarifies that an entity must disclose issued seven amendments to six standards, summaries the judgements made by management of which are provided below. Other than amendments in applying the aggregation criteria in IFRS 8.12, includ- that only affect the standards’ Basis for Conclusions, ing a brief description of operating the changes are effective 1 July 2014. Earlier segments that have been aggregated and the economic application is permitted and must be disclosed. characteristics (e.g., sales and gross IFRS 2 Share-based Payment: Definitions of vesting margins) used to assess whether the segments are simi- conditions lar. The amendment must be applied retrospectively. The amendment defines ‘performance condition’ and ‘service condition’ to clarify various 9.7 Reconciliation of the total of the issues, including the following: reportable segments’ assets to • A performance condition must contain a service the entity’s assets condition The amendment clarifies that the reconciliation of seg- • A performance target must be met while the ment assets to total assets is counterparty is rendering service required to be disclosed only if the reconciliation is re-

38 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

ported to the chief operating decision a new plan of disposal, rather it is a continuation of the maker, similar to the required disclosure for segment original plan. There is, therefore, no interruption of the liabilities. The amendment must be applied retrospec- application of the requirements in IFRS 5. The changes tively. are effective 1 January 2016. Earlier application is permitted and must be disclosed. The amendment must IFRS 13 Fair Value Measurement: Short-term re- be applied prospectively. These amendments are not ceivables and payables expected to have any impact to the Bank. The amendment clarifies in the Basis for Conclusions that short-term receivables and payables with no stat- IFRS 7 Financial Instruments: Servicing contracts ed interest rates can be measured at invoice amounts The amendment clarifies that a servicing contract that when the effect of discounting is immaterial. The includes a fee can constitute continuing involvement in amendment is effective immediately. a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for IAS 16 Property, Plant and Equipment and IAS 38 In- continuing involvement in IFRS 7.B30 and IFRS 7.42C in tangible Assets: Revaluation method – proportionate order to assess whether the disclosures are required. restatement of accumulated depreciation/amortisation The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. The amendments to IAS 16 and IAS 38 clarify that the However, the required disclosures would not need to revaluation can be performed, as be provided for any period beginning before the annual follows: period in which the entity first applies the amendments. • Adjust the gross carrying amount of the asset to market value Applicability of the offsetting disclosures to con- OR densed interim financial statements: • Determine the market value of the carrying The amendment clarifies that the offsetting disclosure amount and adjust the gross carrying amount requirements do not apply to condensed interim finan- proportionately so that the resulting carrying cial statements, unless such disclosures provide a sig- amount equals the market value nificant update to the information reported in the most The amendments also clarify that accumulated recent annual report. The changes are effective 1 Janu- depreciation/amortisation is the difference be- ary 2016. Earlier application is permitted and must be tween the gross and carrying amounts of the disclosed. The amendment must be applied retrospec- asset. The amendments must be applied retro- tively. These amendments are not expected to have spectively. any impact to the Bank.

IAS 24 Related Party Disclosures: Key manage- IAS 19 Employee Benefits: Discount rate: region- ment personnel al market issue The amendment clarifies that a management entity – an The amendment clarifies that market depth of high entity that provides key management personnel servic- quality corporate bonds is assessed based on the cur- es – is a related party subject to the related party dis- rency in which the obligation is denominated, rather closures. In addition, an entity that uses a management than the country where the obligation is located. When entity is required to disclose the expenses incurred for there is no deep market for high quality corporate management services. The amendment must be ap- bonds in that currency, government bond rates must plied retrospectively. be used. The amendment must be applied prospec- In the 2012-2014 annual improvements cycle, the IASB tively. The changes are effective 1 January 2016. Earlier issued five amendments to four standards, summaries application is permitted and must be disclosed. These of which are provided below. The changes are effec- amendments are not expected to have any impact to tive 1 January 2016. Earlier application is permitted and the Bank. must be disclosed. IAS 34 Interim Financial Reporting: Disclosure IFRS 5 Non-Current Assets Held for Sale and of information ‘elsewhere in the interim financial Discontinued Operations: Changes in methods of report’ disposal The amendment clarifies that the required interim dis- Assets (or disposal groups) are generally disposed of closures must either be in the interim financial state- either through sale or distribution to owners. The ments or incorporated by cross-reference between amendment clarifies that changing from one of these the interim financial statements and wherever they are disposal methods to the other would not be considered included within the interim financial report (e.g., in the

Centenary Bank 39 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

management commentary or risk report). The other liabilities denominated in foreign currencies are recog- information within the interim financial report must be nised in the statement of comprehensive income. available to users on the same terms as the interim financial statements and at the same time. The changes Non–monetary items that are measured in terms of are effective 1 January 2016. Earlier application is per- historical cost in a foreign currency are translated using mitted and must be disclosed. The amendment must the spot exchange rates as at the date of recognition. be applied retrospectively. These amendments are not expected to have any impact to the Bank. 9.11 Financial instruments

9.8 Interest income and expense A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or Interest income and expense on all interest bearing in- equity instrument of another entity. struments are recognised using the effective interest method in profit or loss. a. Financial assets Initial recognition and measurement The effective interest method is a method of calculat- Financial assets are classified, at initial recognition, as ing the amortised cost of a financial asset or a financial financial assets at fair value through profit or loss, loans liability and of allocating the interest income or interest and receivables, held-to-maturity investments or avail- expense over the relevant period. The effective inter- able-for-sale financial assets. All financial assets are rec- est rate is the rate that exactly discounts financial in- ognised initially at fair value plus, in the case of financial struments estimated future cash payments or receipts assets not recorded at fair value through profit or loss, through its expected life or, where appropriate, a transaction costs that are attributable to the acquisition shorter period to the net carrying amount. of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame Once a financial asset or a group of similar financial as- established by regulation or convention in the market sets has been written down as a result of an impairment place (regular way trades) are recognised on the trade loss, interest income is recognised based on the rate of date, i.e., the date that the Bank commits to purchase interest that was used to discount the future cash flows or sell the asset. for the purpose of measuring the impairment loss. Subsequent measurement 9.9 Fees and commission income For purposes of subsequent measurement financial assets are classified in four categories: Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan • Financial assets at fair value through profit or loss commitment fees for loans that are likely to be drawn • Loans and receivables down are deferred (together with related direct costs) • Held-to-maturity investments and recognised as an adjustment to the effective inter- • Available-for-sale financial investments est rate on the loan. Other fees and commissions include; Loan and lease Financial assets at fair value through profit or loss processing fees, Commitment Fees Overdraft to Financial assets at fair value through profit or loss in- Customers, commissions on Advance Payment Guar- clude financial assets held for trading and financial assets antees, bid bonds & Guarantees ,drafts Payable, bills designated upon initial recognition at fair value through Payable, Inter-branch, RTGS /EFT Transfers ,Cheques, profit or loss. Financial assets are classified as held for uncleared Effects and ledger fees . trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including 9.10 Translation of foreign currencies separated embedded derivatives are also classified as held for trading unless they are designated as effective The accounting records are maintained in the currency hedging instruments as defined by IAS 39. The Bank has of the primary economic environment in which the designated its financial assets held for trading, at fair Bank operates, Uganda Shillings (“the functional cur- value through profit or loss. Financial assets at fair value rency”). Transactions in foreign currencies during the through profit or loss are carried in the statement of year are converted into Uganda shilling using the ex- financial position at fair value with net changes in fair change rates prevailing at the dates of the transaction. value presented as finance costs (negative net changes Foreign exchange gains and losses resulting from the in fair value) or finance income (positive net changes in settlement of such transactions and from the transla- fair value) in the statement of profit or loss. tion at year-end exchange rates of monetary assets and

40 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Loans and receivables (a) the Bank has transferred substantially all the risks This category is the most relevant to the Bank. Loans and rewards of the asset, or and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted (b) the Bank has neither transferred nor retained in an active market. After initial measurement, such fi- substantially all the risks and rewards of the as- nancial assets are subsequently measured at amortised set, but has transferred control of the asset cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into When the Bank has transferred its rights to receive cash account any discount or premium on acquisition and flows from an asset or has entered into a pass-through fees or costs that are an integral part of the EIR. The arrangement, it evaluates if and to what extent it has EIR amortisation is included in finance income in the retained the risks and rewards of ownership. When it statement of comprehensive income. The losses arising has neither transferred nor retained substantially all of from impairment are recognised in profit or loss. This the risks and rewards of the asset, nor transferred con- category generally applies to trade and other receiva- trol of the asset, the Bank continues to recognise the bles. transferred asset to the extent of the Bank’s continuing involvement. In that case, the Bank also recognises an Held-to-maturity investments associated liability. The transferred asset and the asso- Non-derivative financial assets with fixed or determina- ciated liability are measured on a basis that reflects the ble payments and fixed maturities are classified as held rights and obligations that the Bank has retained. to maturity when the Bank has the positive intention and ability to hold them to maturity. After initial meas- b. Financial liabilities urement, held to maturity investments are measured Initial recognition and measurement at amortised cost using the EIR, less impairment. Am- Financial liabilities are classified, at initial recognition, ortised cost is calculated by taking into account any dis- as financial liabilities at fair value through profit or loss, count or premium on acquisition and fees or costs that loans and borrowings, payables, or as derivatives des- are an integral part of the EIR. The EIR amortisation is ignated as hedging instruments in an effective hedge, as included as interest income in profit or loss. The losses appropriate. All financial liabilities are recognised initial- arising from impairment are recognised in the state- ly at fair value and, in the case of loans and borrowings ment of profit or loss as finance costs. and payables, net of directly attributable transaction costs. The Bank’s financial liabilities include customer Available-for-sale (AFS) financial investments deposits, loans and borrowings and managed funds. AFS financial investments include equity investments and debt securities. Equity investments classified as AFS Subsequent measurement are those that are neither classified as held for trading The measurement of financial liabilities depends on nor designated at fair value through profit or loss. Debt their classification, as described below: securities in this category are those that are intended Financial liabilities at fair value through profit or loss to be held for an indefinite period of time and that may Financial liabilities at fair value through profit or loss be sold in response to needs for liquidity or in response include financial liabilities held for trading and financial to changes in the market conditions. The Bank did not liabilities designated upon initial recognition as at fair have any available-for-sale assets as at 31 December value through profit or loss. Financial liabilities are clas- 2014 or 2013. sified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category Derecognition also includes derivative financial instruments entered A financial asset (or, where applicable, a part of a finan- into by the Bank that are not designated as hedging in- cial asset or part of a group of similar financial assets) is struments in hedge relationships as defined by IAS 39. primarily derecognised (i.e. removed from the Bank’s Separated embedded derivatives are also classified as statement of financial position) when: held for trading unless they are designated as effective hedging instruments. • The rights to receive cash flows from the asset have expired, or Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. • The Bank has transferred its rights to receive Financial liabilities designated upon initial recognition at cash flows from the asset or has assumed an fair value through profit or loss are designated at the obligation to pay the received cash flows in full initial date of recognition, and only if the criteria in IAS without material delay to a third party under a 39 are satisfied. The Bank has not designated any finan- ‘pass-through’ arrangement; and either cial liability as at fair value through profit or loss.

Centenary Bank 41 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Loans and borrowings identified portfolio. In general, the periods used vary This is the category most relevant to the Bank. After in- between 3 month and 6 months. itial recognition, interest-bearing loans and borrowings, customer deposits and managed funds are subsequent- • significant financial difficulty of the borrower ly measured at amortised cost using the EIR method. • a breach of contract, such as default or delin- Gains and losses are recognised in profit or loss when quency in interest or principal repayments; the liabilities are derecognised as well as through the • the granting to the borrower, for economic or EIR amortisation process. Amortised cost is calculated legal reasons relating to the borrower’s financial by taking into account any discount or premium on difficulty, a concession that the lender would not acquisition and fees or costs that are an integral part otherwise consider; of the EIR. The EIR amortisation is included as finance • it becoming probable that the borrower will en- costs in profit or loss. This category generally applies ter bankruptcy or other financial reorganization; to interest-bearing loans and borrowings, customer de- • the disappearance of an active market for that posits and managed funds. financial asset because of financial difficulties; or • observable data indicating that there is a measur- Derecognition able decrease in the estimated future cash flows A financial liability is derecognised when the obligation from a group of financial assets since the initial under the liability is discharged or cancelled, or ex- recognition of those assets, although the de- pires. When an existing financial liability is replaced by crease cannot yet be identified with the individual another from the same lender on substantially differ- financial assets in the group, including: ent terms, or the terms of an existing liability are sub- • adverse changes in the payment status of bor- stantially modified, such an exchange or modification is rowers in the group; or treated as the de-recognition of the original liability and • National or local economic conditions that cor- the recognition of a new liability. The difference in the relate with defaults on the assets in the group. respective carrying amounts is recognised in profit or loss. Assets carried at amortised cost The Bank first assesses whether objective evidence of Offsetting impairment exists individually for financial assets that Financial assets and liabilities are offset and the net are individually significant, and individually or collective- amount presented in the statement of financial position ly for financial assets that are not individually significant. when, and only when, the bank has a currently enforceable legal right to set off the recognised amounts and it If the Bank determines no objective evidence of im- intends either to settle on a net basis or to realise the pairment exists for an individually assessed financial as- asset and settle the liability simultaneously. Income and set, whether significant or not, it includes the asset in a expenses are presented on a net basis only when per- group of financial assets with similar credit risk charac- mitted under IFRSs. teristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and 9.12 Impairment of financial assets for which an impairment loss is or continues to be recognised are not included in a collective assessment of The Bank assesses at each reporting date whether there impairment. is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group If there is objective evidence that an impairment loss on of financial assets is impaired and impairment losses loans or held-to-maturity investments carried at amor- are incurred if, and only if, there is objective evidence tised cost has been incurred, the amount of the loss is of impairment as a result of one or more events that measured as the difference between the asset’s carry- occurred after initial recognition of the asset (a “loss ing amount and the present value of estimated future event”) and that loss event (or events) has an impact on cash flows (excluding future credit losses that have not the estimated future cash flows of the financial asset or been incurred) discounted at the financial instrument’s group of financial assets that can be reliably estimated. original effective interest rate.

Objective evidence that a financial asset or group of The carrying amount of the asset is reduced through assets is impaired includes observable data that comes the use of an allowance account and the amount of the to the attention of the Bank about the following loss loss is recognised in the profit and loss account. If a loan events: or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment The estimated period between a loss occurring and its loss is the current effective interest rate determined identification is determined by management for each under the contract. As a practical expedient, the Bank

42 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

may measure impairment on the basis of an instru- 100% provision ment’s fair value using an observable market price. • General provision of 1% of credit facilities less The calculation of the present value of the estimated specific provision and suspended interest future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclo- In the event that provisions computed in accordance sure less costs for obtaining and selling the collateral, with the Financial Institution Act 2004 materially ex- whether or not foreclosure is probable. ceed provisions determined in accordance with IFRS, the excess is accounted for as an appropriation of re- For the purposes of a collective evaluation of impair- tained earnings. ment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics 9.13 Impairment of non-financial assets are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ At the end of each reporting period, the Bank assesses ability to pay all amounts due according to the contrac- whether there is any indication that an asset is impaired, tual terms of the assets being evaluated. that is, whether its carrying amount is higher than its recoverable amount). If there is an indication that an Provisions for impairment on assets assessed individu- asset is impaired, then the asset’s recoverable amount ally are referred to as specific provisions, whilst provi- is calculated. [IAS 36.9]The recoverable amount is de- sions for such losses on assets assessed collectively are termined by assessing; referred to as general provisions. • If the fair value less costs of disposal or value in When a loan is uncollectible, it is written off against use is more than carrying amount, then it is not the related provision for loan impairment. Such loans necessary to calculate the other amount since are written off after all the necessary procedures have the asset is not impaired. If an impairment loss is been completed and the amount of the loss has been determined, the loss is recognised through profit determined. Subsequent recoveries of amounts previ- or loss. ously written off are reported as other income in the statement of comprehensive income. • If fair value less costs of disposal cannot be determined, then recoverable amount is value in use. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related • For assets to be disposed of, recoverable amount objectively to an event occurring after the impairment is fair value less costs of disposal. was recognised (such as an improvement in the debt- or’s credit rating), the previously recognised impair- The Bank looks at both external and internal in- ment loss is reversed by adjusting the allowance ac- dicators to determine if an asset is impaired. count. The amount of the reversal is recognised in the statement of comprehensive income. External Indicators: • Decline in market value In addition to the measurement of impairment losses • Negative changes in technology, markets, econo- on loans and advances in accordance with IFRS as set my, or laws out above, the Bank is required by the Financial Insti- • Increases in market interest rates tutions Act 2004 to estimate losses on loans and ad- • Net assets of the Bank higher than market capi- vances as follows: talisation

Specific provision for the loans and advances consid- Internal Indicators: ered to be non-performing (impaired) based on the • Obsolescence or physical damage of the asset criteria, and classification of such loans and advances • Asset is idle as part of a restructuring or held for established by the Bank of Uganda, as follows: disposal • Worse economic performance than expected • Substandard loans with arrears period between 91 to 180 days – 20% 9.14 Property and equipment

• Doubtful loans with arrears period between 180 i. Recognition and measurement to 365 days – 50% Items of property and equipment are measured at cost less accumulated depreciation and accu- • Loss with arrears period exceeding 365 days – mulated impairment losses.

Centenary Bank 43 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.15 Fair value measurement Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self- The Bank measures financial instruments at fair value constructed assets includes the cost of materials and at each reporting date. Also, fair values of financial indirect labour, any other costs directly attributable to struments measured at amortised cost are disclosed in bringing the assets to a working condition for their in- Note 4(a). tended use, the costs of dismantling and removing the items and restoring the site on which they are located Fair value is the price that would be received to sell an and capitalised borrowing costs. Purchased software asset or paid to transfer a liability in an orderly transac- that is integral to the functionality of the related equip- tion between market participants at the measurement ment is capitalised as part of that equipment. date. The fair value measurement is based on the pre- sumption that the transaction to sell the asset or trans- When parts of an item of property or equipment have fer the liability takes place either: different useful lives, they are accounted for as separate • In the principal market for the asset or liability, or items (major components) of property and equipment. • In the absence of a principal market, in the most The gain or loss on disposal of an item of property and advantageous market for the asset or liability equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of The principal or the most advantageous market must property and equipment, and are recognised net within be accessible to by the Bank. The fair value of an as- other income in profit or loss. set or a liability is measured using the assumptions that market participants would use when pricing the asset ii. Subsequent costs or liability, assuming that market participants act in their The cost of replacing a part of an item of prop- economic best interest. erty or equipment is recognised in the carrying amount of the item if it is probable that the future A fair value measurement of a non-financial asset takes economic benefits embodied within the part will into account a market participant’s ability to generate flow to the bank and its cost can be measured economic benefits by using the asset in its highest and reliably. The costs of the day-to-day servicing of best use or by selling it to another market participant property and equipment are recognised in profit that would use the asset in its highest and best use. The or loss as incurred. Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are (iii) Depreciation available to measure fair value, maximising the use of Depreciation is recognised in profit or loss on a relevant observable inputs and minimising the use of straight-line basis over the estimated useful lives unobservable inputs. All assets and liabilities for which of each part of an item of property and equipment fair value is measured or disclosed in the financial state- since this most closely reflects the expected pat- ments are categorised within the fair value hierarchy, tern of consumption of the future economic ben- described as follows, based on the lowest level input efits embodied in the asset. Leased assets under that is significant to the fair value measurement as a finance leases are depreciated over the shorter whole: of the lease term and their useful lives. Land is not depreciated. • Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities The estimated useful lives for the current and comparative periods are as follows: • Level 2 — Valuation techniques for which the lowest level input that is significant to the fair Leased buildings Shorter of 50 years value measurement is directly or indirectly ob- or lease period servable Computer hard ware 3 years Furniture, fixtures and fittings 5 years • Level 3 — Valuation techniques for which the Motor vehicles & cycles 4 years lowest level input that is significant to the fair Generators & office equipment 8 years value measurement is unobservable

Depreciation methods, useful lives and residual values For assets and liabilities that are recognised in the fi- are reassessed at each financial year-end and adjusted nancial statements on a recurring basis, the Bank deter- if appropriate. mines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair

44 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

value measurement as a whole) at the end of each re- taxable profit or loss porting period. • In respect of taxable temporary differences associated with investments in subsidiaries, asso- 9.16 Intangible assets ciates and interests in joint ventures, when the timing of the reversal of the temporary differ- Acquired computer software licenses are capitalised on ences can be controlled and it is probable that the basis of the costs incurred to acquire and bring to the temporary differences will not reverse in the use the specific software. These costs are amortised foreseeable future. on the basis of the expected useful lives of 3 years Deferred tax assets are recognised for all deductible (33.3%). temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets Costs associated with developing or maintaining com- are recognised to the extent that it is probable that tax- puter software programs are recognised as an expense able profit will be available against which the deductible as incurred. Costs that are directly associated with the temporary differences, and the carry forward of un- production of identifiable and unique software prod- used tax credits and unused tax losses can be utilised, ucts controlled by the bank, and that will probably gen- except: erate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs • When the deferred tax asset relating to the de- include software development employee costs and an ductible temporary difference arises from the appropriate portion of relevant overheads. initial recognition of an asset or liability in a transaction that is not a business combination and, at 9.17 Tax the time of the transaction, affects neither the accounting profit nor taxable profit or loss . Current income tax Income tax expense is the aggregate of the charge to • In respect of deductible temporary differences the statement of comprehensive income in respect of associated with investments in subsidiaries, as- current income tax and deferred income tax. Current sociates and interests in joint ventures, deferred income tax is the amount of income tax payable on the tax assets are recognised only to the extent that taxable profit for the year determined in accordance it is probable that the temporary differences will with the Ugandan Income Tax Act. Current income tax reverse in the foreseeable future and taxable assets and liabilities for the current period are meas- profit will be available against which the tempo- ured at the amount expected to be recovered from or rary differences can be utilised paid to the taxation authorities.

Current income tax relating to items recognised di- Deferred income tax relating to items recognised out- rectly in equity or other comprehensive income is side profit or loss is recognised outside profit or loss. recognised directly in equity or other comprehensive Deferred income tax items are recognised in correla- income and not in profit or loss. Management periodi- tion to the underlying transaction either in OCI or di- cally evaluates positions taken in the tax returns with rectly in equity. respect to situations in which the tax regulations are subject to interpretation and establishes provisions Deferred income tax assets and deferred income tax where appropriate. liabilities are offset if a legally enforceable right exists to set off current income tax assets against current in- Deferred income tax come tax liabilities and the deferred income taxes re- Deferred income tax is provided using the liability late to the same taxable entity and the same taxation method on temporary differences between the tax authority. bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Withholding tax Deferred income tax liabilities are recognised for all Withholding tax is deducted at source at 20% on in- taxable temporary differences, except: come earned on treasury bills and bonds. This amount • When the deferred income tax liability arises is included under the income tax charge for the year. from the initial recognition of goodwill or an asset or liability in a transaction that is not a busi- Value Added tax ness combination and, at the time of the trans- Value added tax is chargeable at a rate of 18%. Output action, affects neither the accounting profit nor VAT is the value added tax you calculate and charge on

Centenary Bank 45 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

your own sales of goods and services if you are regis- the Bank of Uganda, Treasury and other eligible bills, tered. Input VAT is the value added tax added to the and amounts due from other banks. Cash and cash price when you purchase goods or services liable to equivalents include the cash reserve requirement held VAT. VAT payable arises when the output VAT is in ex- with the Bank of Uganda. cess of input VAT. 9.22 Comparatives 9.18 Employee benefits No comparative figures have been adjusted. The Bank and all its employees contribute to the Na- tional Social Security Fund, which is a defined contribu- 9.23 Grants tion scheme. Grants are recognised where there is reasonable as- The Bank also operates a defined contribution benefits surance that the grant will be received and all attached scheme for its employees. The Bank has no legal or conditions will be complied with. When the grant re- constructive obligation to pay further contributions if lates to an expense item it is recognized as income over the fund does not hold sufficient assets to pay all em- the period necessary to match the grant on a system- ployees the benefits relating to employee service in the atic basis to the costs that it is intended to compensate. current and prior periods. The assets of the scheme Where the grant relates to an asset, it is recognized are held in separate trustee administered funds, which as deferred income and released to income in equal are funded by contributions from both the Bank and amounts over the expected useful life of the related employees. The Bank’s contributions to the defined asset. contributions schemes are charged to profit or loss in the year in which they relate. 9.24 Provisions

The estimated monetary liability for employees’ ac- A provision is recognised if, as a result of a past event, crued annual leave entitlement at the reporting date is the Bank has a present legal or constructive obligation recognised as an expense accrual. that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle 9.19 Contingent liabilities and the obligation. commitments 9.25 Managed funds and Contingent liabilities and commitments comprised of borrowed funds letters of credit, acceptances, guarantees and commitments to extend credit are not included in assets The Bank manages funds on behalf of others in terms and liabilities in note 36. They are accounted for as of specific agreements. The funds are recorded as a off-statement of financial position transactions and are liability on receipt of the funds and the corresponding disclosed as contingent liabilities and commitments. investments (as per the agreement) are recorded under cash and cash equivalents or loans and advances 9.20 Share capital to customers. Details of the funds are included in note 26 and 27. Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value 9.26 Leases of the shares is classified as ‘share premium’ in equity. The determination of whether an arrangement is a Preference shares (irredeemable) classified as share lease, or contains a lease, is based on the substance of capital in equity. the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on Dividends on shares are charged to equity in the pe- the use of a specific asset or assets and the arrange- riod in which they are declared. Proposed dividends ment conveys a right to use the asset. are shown as a separate component of equity until declared. Bank as a lessee Leases that do not transfer to the Bank substantially 9.21 Cash and cash equivalents all the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease pay- Cash and cash equivalents include cash at hand, depos- ments are recognised as an expense in profit or loss its held at call with banks, other short term highly liquid on a straight-line basis over the lease term. Contingent investments with original maturities of three months or rental payable is recognised as an expense in the period less, including: cash and non-restricted balances with in which they are incurred.

46 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

held-to-maturity. This classification requires sig- Bank as a lessor nificant judgment. In making this judgment, the When assets are leased out under a finance lease, the Bank evaluates its intention and ability to hold present value of the lease payments is recognised as a such investments to maturity. If the Bank fails to receivable. The difference between the gross receiv- keep these investments to maturity other than able and the present value of the receivable is recog- for the specific circumstances – for example, sell- nised as unearned finance income. Lease income is ing a insignificant amount close to maturity – it recognised over the term of the lease using the net will be required to re-classify the entire class as investment method. The Bank has entered into finance available-for-sale. The investments would there- lease transactions as a lessor (Note 18(b) – Finance fore be measured at fair value and not amortised Leases). cost. The carrying amount of held-to-maturity investments is 9.27 Critical Accounting Estimates indicated in note 17(b). and Judgments in Applying Accounting Policies iii. Determining fair values The determination of fair value for financial as- The Bank makes estimates and assumptions that affect sets and liabilities for which there is no observ- the reported amounts of assets and liabilities within the able market price requires the use of valuation next financial year. Estimates and judgements are con- techniques as described in accounting policy 2 tinually evaluated and are based on historical experi- (e)(v). For financial instruments that trade infre- ence and other factors, including expectations of future quently and have little price transparency, fair events that are believed to be reasonable under the value is less objective, and requires varying de- circumstances. grees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing i. Impairment losses on loans and advances assumptions and other risks affecting the specific The Bank reviews its loan portfolios to assess instrument. impairment at least on a quarterly basis. In determining whether an impairment loss should be The Bank measures fair values using the following fair recorded in profit or loss, the Bank makes judge- value hierarchy that reflects the significance of the in- ments as to whether there is any observable data puts used in making the measurements: indicating that there is a measurable decrease in the estimated future cash flows from a portfo- Level 1: Quoted market price (unadjusted) in an active lio of loans before the decrease can be identi- market for an identical instrument. fied with an individual loan in that portfolio. This evidence may include observable data indicating Level 2: Valuation techniques based on observable in- that there has been an adverse change in the pay- puts, either directly (i.e., as prices) or indirectly (i.e., de- ment status of borrowers in a group, or national rived from prices). This category includes instruments or local economic conditions that correlate with valued using: quoted market prices in active markets defaults on assets in the Management uses esti- for similar instruments; quoted prices for identical or mates based on historical loss experience for as- similar instruments in markets that are considered less sets with credit risk characteristics and objective than active; or other valuation techniques where all sig- evidence of impairment similar to those in the nificant inputs are directly or indirectly observable from portfolio when scheduling its future cash flows. market data.

The methodology and assumptions used for estimating Level 3: Valuation techniques using significant unob- both the amount and timing of future cash flows are servable inputs. This category includes all instruments reviewed regularly to reduce any differences between where the valuation technique includes inputs not based loss estimates and actual loss experience. on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This The carrying amount of loans and advances is indicated category includes instruments that are valued based on in note 18. quoted prices for similar instruments where significant unobservable adjustments or assumptions are required ii. Held-to-maturity investments to reflect differences between the instruments. The Bank follows the guidance of IAS 39 on clas- sifying non-derivative financial assets with fixed The fair value disclosures are included in note 4. or determinable payments and fixed maturing as

Centenary Bank 47 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

iv. Taxes enhance shareholder value. As such the risks to The Bank is subject to various government taxes under this objective drive the Bank’s system of internal the Ugandan tax laws. Significant judgement is required control. in determining the provision for income taxes. Signifi- cant estimates and judgements are required in deter- • Embedded: mining the provision for taxes on certain transactions. The Bank’s culture reflects its appetite for risk. For these transactions, the ultimate tax determination Risk management is achieved at all levels of the is uncertain during the ordinary course of business. business through a suitable organisational struc- Where the final tax outcome of these matters is dif- ture, policies, and procedure, and appropriate ferent from the amounts that were initially recorded, staff training. Responsibility for risk resides at such differences will impact the current and deferred all levels of management from the Board down income tax assets and liabilities in the period in which through the organisation to individuals in office. such determination is made. The deferred tax liability is Each business manager is accountable for manag- indicated in note 20. ing risk in his or her business area, assisted and supported, where appropriately.

9.28 Financial Risk Management • Supported and assured: The system of governance and internal control The Bank’s activities expose it to variety of financial and provide management and Board with assurance non-financial risks. These activities involve the analysis, that risks are being managed appropriately. The evaluation, acceptance and management of some de- designated executives and Board Committees gree of risk or combination of risks. Taking risk is core regularly receive and review reports on risks, to the Bank’s business, and the operational risks are in- compliance, governance and control process. evitable consequences of being in business. The effective management of risk is critical to earnings and bal- • Reviewed: ance sheet growth within Centenary Bank where the The Board of Directors considers the effective- culture encourages sound commercial decision making, ness of the internal control system and risk man- which adequately balances risk and reward. The identi- agement processes, at least annually. The major fication and management of risk remains a high priority risks to which the Bank is exposed, including non and underpins all business activities. – financial risks are:-

The Bank’s approach to risk management is based on a • Credit risk well-established risk, compliance and governance pro- • Operational risk cess and relies both on individual responsibility and col- • Compliance risk lective oversight supported by comprehensive report- • Reputation risk ing. This approach balances strong corporate oversight • Business risk at Head Office level with risk management structures • Strategic risk within the business units. • Market risk • Liquidity risk The Bank has governance standards for all major risk • Taxation risk types. All standards are applied consistently across the Bank and are approved by the Board through either A combination of these risks occurring concurrently Bank’s Board Risk Management Committee or Board would be the most likely cause of significant loss. The ALCO Committee. Bank’s approach to managing risk on a holistic basis therefore ensures that risk types are not managed in The standards form an integral part of the Bank’s gov- isolation. ernance infrastructure reflecting the expectations and requirement of the Board in respect of key areas con- 9.29 Credit Risk trol across the Bank. The standards ensure alignment and consistency in the manner major risk types across Comprehensive resources, expertise and control the Bank are identified, measured, managed, controlled are in place to ensure efficient and effective manage- and are reported. ment of credit risk. In lending transactions, credit risk arises through non-performance by counter-party for The standards underpin the Bank’s governance princi- facilities used. These facilities are typically loans and ples, which are: advances, including the advancement of securities and contracts to support customer obligations (such as let- • Shareholder value: ters of credit and guarantees). The Bank’s primary objective is to protect and

48 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Approach to managing credit risk: Total Assets And Shareholder Equity

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

9.30 Credit Risk Measurement

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

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

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

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

Doubtful Items that are considered to be impaired, but are not yet considered final losses because of pending factors, which may strengthen the quality of the items.

Loss Items that are considered to be uncollectible and where the realization of collateral and institution of legal proceedings have been unsuccessful. These items are considered of such little value that they should no longer be included in the net asset of the Bank.

9.31 Classified as impaired for requirements. accounting purposes • Agriculture • Manufacturing • Industry Analysis • Trade and commerce The Bank analyses its customers per industry using • Transport and utilities various portfolio segmentation techniques. These • Building and construction include the use of Bank of Uganda categories as • Other services well as International Standard Classification (SIC) codes whilst ensuring compliance with regulatory The Bank takes on exposure to credit risk which

Centenary Bank 49 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

is the risk that a counterparty will be unable to pay and off-statement of financial position exposures and amounts in full as and when due. The Bank structures daily delivery risk limits in relation to trading items. Ac- the levels of credit risk it undertakes by placing limits on tual exposures against limits are monitored daily. the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Exposure to credit risk is managed through regular Such risks are monitored on a revolving basis and are analysis of the ability of borrowers and potential bor- subject to an annual or more frequent review. Limits rowers to meet interest and capital repayment obliga- on the level of credit risk by product, and industry sec- tions and by changing these lending limits where ap- tor are approved by the Board of Directors. propriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal The exposure to any one borrower including banks and guarantees, but a significant portion is personal lending brokers is further restricted by sub-limits covering on where no such security/undertaking can be obtained.

Maximum exposure to credit risk before collateral held

2014 2013 Shs ‘000 Shs ‘000

Credit risk exposure relating to statement of financial position items: Balances with Bank of Uganda (Note 9.57) 58,732,147 177,372,531 Placements with other banks (Note 9.58) 49,527,599 28,571,192 Investment securities – held to maturity (Note 9.59) 412,179,522 327,255,190 Investment securities – held for trading (Note 9.59) 24,180,039 7,289,093 Loans and advances (Note 9.60) 850,721,299 688,025,729 Other assets 24,486,762 30,167,782 1,419,827,368 1,258,681,517 Credit risk exposures relating to off-statement of financial position items: - Letters of credit, Guarantees and performance bonds (Note 9.78) 25,023,470 13,951,477 - Commitment to extend credit (Note 9.78) 6,327,176 4,232,497 31,350,646 18,183,974 Total 1,451,178,014 1,276,865,491

The above table represents the worst case scenar- As shown above, 58.6% (2013: 53.8%) of the to- io of credit risk exposure to the Bank at 31 Decem- tal maximum exposure is derived from loans and ber 2014 and 2013; without taking into account advances to banks and customers. Investment in any collateral held or other credit enhancements debt securities represents 30.1% (2013: 26.2%) of attached. For the financial assets, the exposures the total maximum exposure. set out above are based on carrying amounts as reported in the statement of financial position.

50 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

The table below shows the collateral coverage for secured loans as at year end. The type of collateral held includes land titles, motor vehicles and chattels. As at 31 December 2014

Total loan Netting off Exposure Collateral portfolio agreements after 51-1005 Coverage Shs 000 (cash accured) netting off Shs 000 over 100% Shs000

Secured loans 639,744,629 754,053 638,990,577 35,599,871 604,144,759 Partly secured 210,976,670 - 210,976,670 15,274,234 195,702,436 Total 850,721,299 754,053 849,967,247 50,874,105 799,847,195

As at 31 December 2013

Total loan Netting off Exposure Collateral portfolio agreements after 51-1005 Coverage Shs 000 (cash accured) netting off Shs 000 over 100% Shs000

Secured loans 537,250,515 1,106,634 536,143,881 45,206,941 490,936,940 Partly secured 150,775,214 - 150,775,214 - - Total 688,025,729 1,106,634 686,919,095 45,206,941 490,936,940

Loans and advances to customers are secured mainly by and debt securities based on the following: collateral in the form of charges over land and buildings and/or plant and machinery or corporate guarantees. Mi- • The Bank exercises stringent controls over granting cro loans can also be secured by chattels. new loans. • 93.0% (2013: 93.5%) of the loans and advances Management is confident in its ability to continue to con- portfolio are neither past due nor impaired. trol and sustain minimal exposure of credit risk to the • 100.0% (2011: 100.0%) of the investments in debt Bank resulting from both its loans and advance portfolio securities are government securities. Loans and advances are summarised as follows:

2014 2013 Shs ‘000 Shs ‘000

Neither past due nor impaired 791,395,724 643,265,263 Past due but not impaired 35,111,032 25,845,549 Impaired 24,214,543 18,914,917 Gross loans and advances 850,721,299 688,025,729 Less: Allowance for impairment (19,789,330) (15,718,691) Net loans and advances 830,931,969 672,307,038

Loans and advances neither past due 2014 2013 nor impaired Shs ‘000 Shs ‘000 The quality of the portfolio of loans and advances that were neither past due nor impaired can be Standard 764,504,141 640,666,376 assessed by reference to the internal rating sys- Watch 26,891,583 2,598,887 tem adopted by the Bank, as follows: Total 791,395,724 643,265,263

Centenary Bank 51 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Loans and advances past due but not 2014 2013 impaired Shs ‘000 Shs ‘000

Micro loans that are less than 30 days overdue and Past due up to 30 days 25,395,324 18,877,716 other loans that are less than 90 days past due are not considered impaired, unless other informa- Past due 31-60 days 6,008,760 4,794,234 tion is available to indicate the contrary. The gross Past due 61-90 days 3,706,948 2,173,599 amounts of loans and advances that were past due Total 35,111,032 25,845,549 but not impaired were as follows:

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

2014 2013 Shs ‘000 Shs ‘000

Loans individually assessed for impairment by category Commercial loans 3,783,057 6,515,209 Micro loans 4,525,219 2,684,365 Home improvement loans 868,860 964,574 Agricultural loans 4,797,658 2,673,173 Salary loans 10,068,110 5,562,842 Overdrafts 171,639 514,754 24,214,543 18,914,917 Gross loans and advances by category Commercial loans 256,853,882 222,040,421 Micro loans 161,617,968 113,913,555 Home improvement loans 46,657,323 45,204,996 Agricultural loans 127,496,388 109,506,182 Salary loans 199,907,497 150,775,213 Overdrafts 30,185,205 23,579,668 Staff loans 28,003,036 23,005,694 Gross loans and advances 850,721,299 688,025,729

Less: Provision for impairment of loans and advances Individually assessed (14,352,602) (10,496,853) Collectively assessed (5,436,728) (5,221,838) Net loans 830,931,969 672,307,038

Other financial assets not impaired Carrying amounts: Balances with Bank of Uganda 58,732,147 177,372,531 Placements with other banks 49,527,599 28,571,192 Investment securities- Held-to-maturity 412,179,522 327,255,190 Investment securities- Held for trading 24,180,039 7,289,093 Other assets 24,486,762 30,167,782 Total 569,106,069 570,655,788

These are low risk assets which did not exhibit any indicators of impairment as at year end.

52 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Movement in provisions for impairment of loans and advances in the statement of financial position are as follows:

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

Non-performing loans - Identified loss: At 1 January 2014 123,102 443,938 9,656,039 192,794 80,980 10,496,854 Impaired accounts written off - (2,883,922) (4,958,966) (129,139) - (7,972,027) Additional identified impairment 90,513 4,461,305 12,975,360 158,724 - 17,685,902 Impairments released due to improved status (94,392) (1,878,165) (4,519,343) (113,975) - (6,605,875) Movement in interest suspended during the year 28,173 252,716 466,859 - - 747,748 At 31 December 2014 147,396 395,872 13,619,950 108,404 80,980 14,352,602

Performing loans - Unidentified loss: At 1 January 2013 223,977 754,816 4,117,789 125,256 - 5,221,838 Net provisions raised 5,882 52,763 97,474 4,202 54,569 214,890 At 31 December 2014 229,859 807,579 4,215,263 129,458 54,569 5,436,728

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

Non-performing loans - Identified loss: At 1 January 2013 433,571 271,765 9,391,139 4,700 80,980 10,182,155 Impaired accounts written off - (2,067,411) (5,801,755) - - (7,869,166) Additional identified impairment 117,346 3,355,307 10,247,907 221,259 - 13,941,819 Impairments released due to improved status (427,815) (1,115,723) (4,181,252) (33,165) - (5,757,955) At 31 December 2013 123,102 443,938 9,656,039 192,794 80,980 10,496,853

Performing loans - Unidentified loss: At 1 January 2013 187,958 389,923 3,178,490 98,207 - 3,854,578 Net provisions raised 36,019 364,893 939,299 27,049 - 1,367,260 At 31 December 2013 223,977 754,816 4,117,789 125,256 - 5,221,838

Total 347,079 1,198,754 13,773,828 318,050 80,980 15,718,691

Centenary Bank 53 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Movement in provisions for impairment of loans and advances in the As at 31 December 2014, the Bank statement of comprehensive income are as follows: had no loans and advances to a single borrower or group of related borrow- 2014 2013 ers exceeding 25.0% of core capital Shs ‘000 Shs ‘000 (31 December 2013: Nil).

Provision for impairment losses 9.33 Credit Related Additional identified impairment 17,685,902 13,941,820 Commitments Additional unidentified impairment 214,890 1,367,260 The primary purpose of these instru- 17,900,792 15,309,080 ments is to ensure that funds are available to a customer as required. Guar- Reduction due to improved status antees and standby letters of credit, Identified impairment (6,605,875) (5,757,955) which represent irrevocable assuranc- 6,605,875 (5,757,955) es that the Bank will make payments in the event that a customer cannot meet

its obligation to third parties, carry the Provisions for the year 17,900,792 15,309,080 same credit risk as loans. Documen- Reductions in provision for impairment (6,605,875) (5,757,955) tary and commercial letters of credit, which are written undertakings by the Total statement of comprehensive Bank on behalf of the customer au- income movement 11,294,917 9,551,125 thorizing a third party to draw drafts up to a stipulated amount under specific terms and conditions, are collat- Concentration of Risk eralized by the underlying shipments Economic sector risk concentrations within the customer loan portfo- of goods to which they relate and lio were as follows: therefore carry less risk than a direct borrowing. 2014 2014 Shs ‘000 Shs ‘000 Commitments to extend credit repre- % Credit sent unused portions of authorizations commitments to extend credit in the form of loans, guarantees or letters of credit. With Sector analysis by industry respect to credit risk on commitments Agriculture 145,706,306 17.0 1,611,632 to extend credit, the Bank is potentially Manufacturing 6,460,407 0.8 203,378 exposed to loss in an amount equal to the total unused commitments. How- Trade and commerce 178,439,601 21.0 8,040,825 ever, the likely amount of loss is less Transport and utilities 20,380,890 2.4 614 than the total unused commitments Building and construction 196,337,346 23.1 15,986,993 since most commitments to extend credit are contingent upon customers Other services 303,396,749 35.7 5,507,204 maintaining specific credit standards. 850,721,299 100 31,350,646 The Bank monitors the term of maturity of credit commitments because longer-term commitments generally 2013 2013 have a greater degree of credit risk Shs ‘000 Shs ‘000 than shorter-term commitments. % Credit commitments 9.34 Impaired loans and Sector analysis by industry advances Individually impaired loans and securi- Agriculture 121,783,100 17.7 886,626 ties are loans and advances and invest- Manufacturing 4,942,245 0.7 921,793 ment debt securities (other than those Trade and commerce 159,978,982 23.3 6,511,773 carried at fair value through profit or loss) for which the bank determines Transport and utilities 16,405,700 2.4 2,000 that there is objective evidence of Building and construction 152,346,469 22.1 6,027,606 impairment and it does not expect to Other services 232,569,233 33.8 3,834,176 688,025,729 100 18,183,974

54 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

collect all principal and interest due according to the can no longer pay the obligation, or that proceeds from contractual terms of the loan agreement. These loans collateral will not be sufficient to pay back the entire ex- are graded as standard and watch in the bank’s inter- posure. For smaller balance standardized loans, write- nal credit risk grading system. Loans and advances and off decisions generally are based on a product-specific investment debt securities carried at fair value through past due status. profit or loss are not assessed for impairment but are subject to the same internal grading system. 9.39 Collateral held

9.35 Past due but not impaired loans The Bank holds collateral against loans and advances to customers in the form of mortgage interests over prop- Past due but not impaired loans other than those car- erty such as land and buildings and plant and machinery, ried at fair value through profit or loss, are those for other registered securities over assets e.g. chattels for which contractual interest or principal payments are micro loans, and corporate guarantees. Estimates of fair past due, but the bank believes that impairment is not value are based on the value of collateral assessed at appropriate on the basis of the level of security / collat- the time of borrowing, and generally are not updated eral available and / or the stage of collection of amounts except when a loan is individually assessed as impaired. owed to the bank. Collateral generally is not held over loans and advances to banks within the board approved risk tolerance limit, 9.36 Loans with renegotiated terms except when securities are held as part of reverse re- purchase and securities borrowing activity. Collateral Loans with renegotiated terms are loans that have been usually is not held against investment securities and no restructured due to deterioration in the borrower’s fi- such collateral was held at 31 December 2014 or 31 nancial position and where the bank has made conces- December 2013. As an internal requirement, the forced sions that it would not otherwise consider. Once the sale value of the collateral security is over and above the loan is restructured it remains in this category for at amount of loans and advances disbursed. least one year and returned to normal category there after satisfactory performance. 9.40 Operational Risk

9.37 Allowances for impairment Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the The Bank establishes an allowance for impairment Bank’s processes, personnel , technology and infra- losses on assets carried at amortised cost or classified structure, and from external factors other than credit, as available for sale that represents its estimate of in- market and liquidity risks such as those arising from le- curred losses in its loan and investment debt security gal and regulatory requirements and generally accepted portfolio. The main components of this allowance are standards of corporate behavior. Operational risks arise a specific loss component that relates to individually from all the Bank’s operations. significant exposures, and a collective loan loss allowance established for groups of homogeneous assets in The Bank’s objective is to manage operational risk so as respect of losses that have been incurred but have not to balance the avoidance of financial losses and damage been identified on loans that are considered individually to the Bank’s reputation with overall cost effectiveness insignificant as well as individually significant exposures and to avoid control procedures that restrict initiative that were subject to individual assessment for impair- and creativity. ment but not found to be individually impaired. Assets carried at fair value through profit or loss are not sub- 9.41 Market Risk ject to impairment testing as the measure of fair value reflects the credit quality of each asset. Market risk arises from decrease in the market value of portfolio of financial instruments caused by adverse 9.38 Write-off policy move in the market variables such as currency exchange rates, interest rates, credit spreads and implied volatili- The Bank writes off a loan or an investment debt secu- ties on all the above. The objective of market risk man- rity balance, and any related allowances for impairment agement is to manage and control market risk exposures losses, when the Bank Credit Committee determines within acceptable limits, while optimizing the return on that the loan or security is uncollectible. This determi- risk. The Board grants the general authority to take on nation is made after considering information such as the market risk exposures to the Board Asset and Liabil- occurrence of significant changes in the borrower’s / is- ity Committee (ALCO). The ALCO sets market risk suer’s financial position such that the borrower / issuer standards and policies to ensure that the measurement,

Centenary Bank 55 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

reporting, monitoring and management of market risk ties are captured into various buckets, using judgmental is maintained. The day to day implementation of these factors by studying behavioral patterns, customer seg- policies rests with the Treasury Department. mentation, and roll over history, etc, on a continuous basis which eventually leads to a dynamic gap analysis. The Bank manages risk through a range of market risk and capital risk limits. Stress testing and basic risk man- In order to evaluate the earnings exposure, inter- agement measures (permissible instruments, concen- est Rate Sensitive Assets (RSA) in each time band are tration of exposures, gap limits and maximum tenor) netted off against the interest Rate Sensitive Liabilities are used to facilitate this process. (RSL) to produce a repricing “Gap” for that time band.

9.42 Interest Rate Risk A positive gap indicates that the Bank has more RSA than RSL. A positive or asset sensitive gap means that The Bank takes on exposure to the effects of fluctua- an increase in market interest rates could cause an in- tions in the prevailing levels of market interest rates crease in the net interest margin and vice versa. Con- on its financial position and cash flows. Interest mar- versely, a negative or liability sensitive gap implies that gins may increase as a result of such changes but may the Bank’s net interest margin could decline as a result reduce or create losses in the event that unexpected of increase in market rates and vice versa. movements arise. The Asset and Liability Commit- tee sets limits on the level of mismatch of interest rate The positive or negative gap is multiplied by the as- repricing that may be undertaken, which is monitored sumed interest rate changes to derive the Earnings at monthly. Risk (EaR). The EaR method helps to estimate how much the earnings might be impacted by an adverse Methods of Measuring and Managing the Interest movement in interest rates. The assumed changes Rate Risk: in interest rate are estimated on basis of past trends, There are a good number of techniques and tools forecasting of interest rates, etc. The off-statement of available for measuring and managing interest rate risk financial position items are excluded from the gap re- ranging from simple calculation to highly complex sim- port because the Bank does not bear any interest rate ulations and modeling. The technique that Centenary risk on these items. Bank utilises is explained below: The table below summaries the Bank’s exposure to in- Gap Analysis: terest rate risks. Included in the table are the Bank’s Under this, interest sensitive assets and liabilities are assets and liabilities at carrying amounts, categorized classified into various time bands according to their ma- by the earlier of contractual re-pricing or maturity turity in the case of fixed interest rates, and residual dates. The carrying amounts of derivative financial maturity towards next repricing date in the case of instruments which are principally used to reduce the floating interest rates. exposure to interest rate movements are included in ‘Other Assets’ and ‘Other Liabilities” under the heading The size of the gap in a given time band is analyzed to ‘Non-interest Bearing’. The off-statement of financial study the interest rate exposure and the possible ef- position gap represents the net notional amounts of all fects on the Bank’s earnings. Items in assets and liabili- interest-sensitive derivative financial instruments.

56 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Interest rate risk exposure

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

31 December 2014 Financial assets Cash and short-term funds 1,501,356 - - - 139,151,791 140,653,147 Due from other banks 44,831,161 - - - 4,696,438 49,527,599 Investments 57,643,802 378,715,759 - - - 436,359,561 Loans and advances to customers 7,006,916 216,861,064 358,846,480 40,326,312 207,891,196 830,931,969 Other financial assets - - - - 35,944,140 35,944,140 Total financial assets 110,983,235 595,576,823 358,846,480 40,326,312 387,683,565 1,493,416,416

Non-financial assets Property & equipment - - - - 134,473,304 134,473,304 Other assets - - - - 9,033,298 9,033,298 Total non-financial assets - - - - 143,506,602 143,506,602 Total assets 110,983,235 595,576,823 358,846,480 40,326,312 531,190,167 1,636,923,018

Liabilities Due to customers and other banks 11,791,522 881,830,049 418,152 - 286,532,220 1,180,571,943 Managed/ borrowed funds - - 10,000,000 - 73,426,004 83,426,004 Other liabilities - - - - 55,423,734 55,423,734 Capital & Reserves - - - - 317,501,337 317,501,337 Total liabilities 11,791,522 881,830,049 10,418,152 - 732,883,295 1,636,923,018

Net on-SOFP gap 99,191,713 (286,253,226) 348,428,328 40,326,312 (201,693,128) - Net off-SOFP gap - - - - 31,350,646 31,350,646

Total interest sensitivity gap 99,191,713 (286,253,226) 348,428,328 40,326,312 (170,342,482) 31,350,646

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

31 December 2013 Financial assets Cash and short-term funds - - - - 244,962,510 244,962,510 Due from other banks 11,427,480 - - - 17,143,712 28,571,192 Investments 41,636,019 292,908,264 - - - 334,544,283 Loans and advances to customers 5,050,642 181,319,705 283,878,180 31,971,876 170,086,635 672,307,038 Other financial assets - - - - 30,167,782 30,167,782 Total financial assets 58,114,141 474,227,969 283,878,180 31,971,876 462,360,639 1,310,552,805

Centenary Bank 57 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

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

Non-financial assets Property & equipment - - - - 129,520,872 129,520,872 Other assets - - - - 41,133,637 41,133,637 Total non-financial assets - - - - 140,486,727 140,486,727 Total assets 58,114,141 474,227,969 283,878,180 31,971,876 602,847,366 1,451,039,532

Liabilities Due to customers and other banks 13,415,036 94,921,072 338,606 - 863,536,297 972,211,011 Managed/ borrowed funds 92,471,095 - - - 83,457,968 175,929,063 Other liabilities - - - - 49,562,387 49,562,387 Capital & Reserves - - - - 253,337,071 253,337,071 Total liabilities 105,886,131 94,921,072 338,606 - 1,249,893,723 1,451,039,532

Net on-SOFP gap (47,771,990) 379,306,897 283,539,574 31,971,876 (647,046,357) - Net off-SOFP gap - - - - 10,175,082 10,175,082

Total interest sensitivity gap (47,771,990) 379,306,897 283,539,574 31,971,876 (636,871,275) 10,175,082

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

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

2014 (578,345) 74,075 317,208 388,755 Interest rate sensitivity gap Cumulative interest rate sensitivity gap (578,345) (504,270) (187,062) 201,693 Cumulative interest rate sensitivity gap as a percentage of total assets 6% 5% 19% 2%

2013 2,494 106,392 222,649 315,511 Interest rate sensitivity gap Cumulative interest rate sensitivity gap 2,494 108,886 331,535 647,046 Cumulative interest rate sensitivity gap as a percentage of total assets 0% 8% 23% 45%

58 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Interest sensitivity analysis The table below shows the increase / (decline) in 12-month earnings for upward and downward instan- Impact on equity taneous parallel rate shocks. 2014 2013 Impact on profit before tax Shs million Shs million 2014 2013 + 500 bps rate shock 15,844 12,667 Shs million Shs million - 500 bps rate shock (15,844) (12,667) + 500 bps rate shock 10,478 9,563 + 100 bps rate shock 3,169 2,533 - 500 bps rate shock (10,478) (9,563) - 100 bps rate shock (3,169) (2,533) + 100 bps rate shock 2,096 1,913 - 100 bps rate shock (2,096) (1,913) Assuming no management intervention, a parallel 500bps increase in all yield curves Assuming no management intervention, a parallel would increase the equity for the next fi- 500bps increase in all yield curves would increase the nancial year by Shs 15,844 million. A par- forecast net interest income for the next financial year allel decreases in all yield curves would by Shs 10,478 million. A parallel decreases in all yield decrease the equity for the next financial curves would decrease the forecast net interest in- year by Shs 15,844 million. Whilst a parallel come for the next financial year by Shs 10,478 million. 100bps increase in all yield curves would in- Whilst a parallel 100bps increase in all yield curves crease the equity for the next financial year would increase the forecast net interest income for by Shs 3,169 million. A parallel decreases in the next financial year by Shs 2,096 million. A parallel all yield curves would decrease the equity decreases in all yield curves would decrease the fore- for the next financial year by Shs 3,169 mil- cast net interest income for the next financial year by lion. Shs 2,096 million.

9.43 Currency risk The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Asset and Liability Committee sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summaries the Bank’s exposure to foreign currency exchange rate risk at 31 December 2014 and 31 December 2013. Included in the table are the Bank’s assets and liabilities at carrying amounts, categorized by currency. EUROS, TZ & GBP USD KSH TOTAL Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 31 December 2014 Assets Cash and balances at the Central Bank 784,619 10,603,837 2,298,139 13,686,595 Due from other banks 1,005,613 1,202,228 2,488,596 4,696,437 Investments - 5,326,421 5,326,421 Loans and advances to customers - 23,688,526 7,800 23,696,326 Other accounts receivable 28,364 902,012 10,435 940,811 Property & equipment - - - - Total assets 1,818,596 36,396,603 10,131,391 48,346,590

Liabilities Customer deposits and balances due to other banks 1,366,977 35,351,855 8,867,094 45,585,926 Managed funds - Other accounts payable 4,157 311,181 16,957 332,295 Total liabilities 1,371,134 35,663,036 8,884,051 45,918,221 Net on-SOFP position 447,462 733,567 1,247,340 2,428,369 Net off-SOFP position - 5,294,091 209,598 5,503,689 Overall net position 447,462 6,027,658 1,456,938 7,932,058 % of Net position over core capital 0.15 2.05 0.49 2.96

Centenary Bank 59 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

GBP USD OTHERS TOTAL Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 31 December 2013 Total assets 1,676,608 39,340,386 17,284,734 58,301,728 Total liabilities 750,045 37,358,666 9,328,794 47,437,505 Net on-SOFP position 926,563 1,981,720 7,955,940 10,864,223 Net off-SOFP position (795,684) (1,331,496) (1,620,419) (3,747,599) Overall net position 130,879 650,224 6,335,521 7,116,624 % of Net position over core capital 0.05 0.27 2.64 2.96

Parallel rate shocks

2014 2013 The tables below shows the increase (decline) in 12 month Shs million Shs million earnings for upward (appreciation) and downward (depre- + 500 bps exchange rate change 397 731 ciation) of the shilling on all foreign currencies on instanta- neous parallel rate changes over the next 12 months. -500bps exchange rate change (397) (731) +100bps exchange rate change 79 146 -100bps exchange rate change (79) (146)

Assuming no management intervention a parallel appreciation of the shilling by 500bps on all foreign currencies would increase the forecast earnings by Shs397 million whilst a fall or depreciation shall reduce forecast earnings by Shs 397 million.

A 100bps appreciation of the shilling on all currencies would increase the forecast earnings for the next financial year by Shs 79 million whilst a full or depreciation shall reduce forecast earnings by Shs 79 million. 9.44 Liquidity Risk

Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.

The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, and calls on cash settled contingencies. The Bank does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. Bank of Uganda requires that the Bank maintain a cash reserve ratio of 8.0% of total deposits. In addition, Bank of Uganda sets limits on the minimum proportion of liquid funds available to meet such calls at 20% and other borrowing facilities that should be in place to cover withdraws at unexpected levels of demand. The Treasury Department monitors liquidity ratios on a daily basis.

The Bank incorporates the following elements as part of a cohesive liquidity management process:

• Short term and long term cash flow managements • Maintaining a structurally sound financial position • Foreign currency liquidity management • Preserving a diversified funding base • Undertaking regular liquidity stress testing • Maintaining adequate liquidity contingency plan.

60 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

The table below presents the undiscounted cash flows payable by the Bank under financial liabilities by remaining contractual maturities at the reporting date.

<1 mth 1-12 mth 1-5 Years Over 5 Years TOTAL Shs’ 000 Shs’ 000 Shs’ 000 Shs’ 000 Shs’ 000

Assets Cash and short-term funds 140,653,147 - - - 140,653,147 Due from other banks 49,527,599 - - - 49,527,599 Investments 637,210 435,722,351 - - 436,359,561 Loans and advances at amortised cost 165,386,070 242,727,124 380,056,963 42,761,812 830,931,969 Other assets 14,111,018 19,409,042 - - 33,520,060 370,315,044 697,858,517 380,056,963 42,761,812 1,490,992,336 Liabilities Due to customers and other banks 1,117,561,646 62,524,689 480,700 4,908 1,180,571,943 Managed funds - - 10,769,684 - 10,769,684 Borrowed funds 3,651,779 10,505,958 69,541,978 664,279 84,363,994 Other liabilities 39,039,972 3,800,410 5,950,602 669,527 49,460,512 1,160,253,398 76,831,057 86,742,964 1,338,715 1,325,166,134

Net liquidity gap (789,938,354) 621,027,460 293,313,999 41,423,097 165,826,202

Off balance sheet mismatch 11,565,581 18,882,424 897,641 5,000 31,350,646

Net liquidity mismatch (778,372,773) 638,909,884 294,211,640 41,428,097 197,176,848

Fair value versus carrying amounts of financial assets and liabilities carried at amortised cost The fair values of financial assets and liabilities together with the carrying value shown in the statement of financial position are analysed as follows:

31 December 2014 31 December 2013 Carrying Amount Fair Value Carrying Amount Fair Value Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Assets Cash and short-term funds 140,653,147 140,653,147 244,962,510 244,962,510 Due from other banks 49,527,599 49,527,599 28,571,192 28,571,192 Investments 436,359,561 436,359,561 334,544,283 334,544,283 Loans and advances at amortised cost 830,931,969 996,836,683 672,307,038 853,138,699 Other assets 33,520,060 33,520,060 30,167,782 30,167,782 1,490,992,336 1,656,897,050 1,310,552,805 1,491,384,466

Liabilities Due to customers and other banks 1,180,571,943 1,180,741,945 975,824,260 977,308,137 Managed funds 10,769,684 14,489,351 105,242,104 135,041,887 Borrowed funds 72,656,320 110,498,627 10,562,123 13,205,845 Other liabilities 49,460,512 52,058,104 44,286,514 47,781,272 1,313,458,459 1,357,788,026 1,135,915,001 1,173,337,141

Centenary Bank 61 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

At 31 December 2014 Level 1 Level 2 Level 3 Total Shs‘000 Shs‘000 Shs‘000 Shs‘000

Assets measured at fair value Government securities at fair value - 24,180,039 - 24,180,039 - Assets and liabilities not measured at fair value for which fair values have been disclosed Loans and advances - - 996,836,683 996,836,683 Managed funds - - 14,489,351 14,489,351 Borrowed funds - - 110,498,627 110,498,627 Other liabilities - - 52,058,104 52,058,104

At 31 December 2013 Level 1 Level 2 Level 3 Total Shs‘000 Shs‘000 Shs‘000 Shs‘000

Assets at fair value Government securities at fair value - 7,289,093 - 7,289,093 - Assets and liabilities not measured at fair value for which fair values have been disclosed Loans and advances 853,138,699 853,138,699 Managed funds 135,041,887 135,041,887

Borrowed funds 13,205,845 13,205,845

Other liabilities 47,781,272 47,781,272

The fair value of the financial assets and liabilities is in- financial liabilities, as well as other non-current fi- cluded at the amount at which the instrument could be nancial liabilities is estimated by discounting future exchanged in a current transaction between willing par- cash flows using rates currently available for debt ties, other than in a forced or liquidation sale. on similar terms, credit risk and remaining maturities. The following methods and assumptions were used to estimate the fair values: • Fair values of the Bank’s interest-bearing borrowings and loans are determined by using DCF meth- • Long-term fixed-rate and variable-rate receivables/ od using discount rate that reflects the issuer’s bor- borrowings are evaluated by the Bank based on rowing rate as at the end of the reporting period. parameters such as interest rates, individual cred- The own non-performance risk as at 31 December itworthiness of the customer and the risk char- 2014 was assessed to be insignificant. acteristics of the financed project. Based on this evaluation, allowances are taken into account for Financial instruments not measured at fair value the expected losses of these receivables. As at 31 December 2014, the carrying amounts of such re- i. Loans and advances ceivables, net of allowances, were not materially The estimated fair value of loans and advances rep- different from their calculated fair values. resents the discounted amount of estimated future cash flows expected to be received. Expected cash • Fair value of the treasury bonds is based on price flows are discounted at current market rates to de- quotations at the reporting date. The fair value of termine fair value. unquoted instruments, loans from banks and other

62 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

ii. Government securities and investments in an active market is based on discounted cash held-to-maturity flows using interest rates for new debts with sim- The fair value for these held-to-maturity assets ilar remaining maturity. The carrying amounts are is based on market prices. Where this informa- a reasonable approximation of this. tion is not available, fair value is estimated using quoted market prices for securities with similar iv. Borrowings and managed funds credit, maturity and yield characteristics. The The interest rates charged on borrowings held carrying amount of investment securities is a rea- by the bank based on WACC or other bases for sonable approximation of fair value. determining market interest rates. The interest rates are variable and in line with market rates iii. Deposits due to customers and other banks for similar facilities. The fair values of such inter- The estimated fair value of deposits with no stat- est bearing borrowings not quoted in an active ed maturity, which includes non-interest bearing market is based on discounted cash flows using deposits, is the amount repayable on demand interest rates for similar facilities. and this is the carrying amount. The estimated fair value of interest-bearing deposits not quoted

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy are as shown below:

Valuation Significant Range technique unobservable inputs (weighted average) 2014 2013 Loans and advances DCF method WACC 12.6% 13.6% Managed funds and borrowed funds DCF method WACC 12.6% 13.6%

9.45 Capital Management designed to convert these items into balance sheet equivalents. The resulting credit equivalent amounts The Bank monitors the adequacy of its capital using are then weighted for credit risk using the same per- ratios established by Bank of Uganda, which ratios are centages as for statement of financial position assets. broadly in line with those for the Bank for International Settlements (BIS). These ratios measure capital ade- The Bank’s objectives when managing capital, which is quacy by comparing the Bank’s eligible capital with its broader than the equity on the face of the statement of statement of financial position assets, off-statement of financial position, are: financial position commitments and market and other risk positions at weighted amounts to reflect their rela- • To comply with the capital requirement set by tive risk. Bank of Uganda • To safeguard the Bank’s ability to continue as a The market risk approach covers the general market going concern so that it can continue to provide risk and the risk of open positions in currencies and debt returns to the shareholders and and equity securities. Assets are weighted according to • To maintain a strong capital base to support the the amount of capital deemed to be necessary to sup- development of the Bank’s business. port them. Four categories of risk weights (0%, 20%, 50%, 100%) are applied; for example cash and money Capital adequacy and the use of regulatory capital are market instruments have a zero risk weighting which monitored monthly by management, employing tech- means that no capital is required to support the hold- niques based on guidelines developed by Basel commit- ing of these assets. Property and equipment carries a tee as implemented by Bank of Uganda, for supervisory 100% risk weighting, meaning that it must be support- purposes. The required information is filled with Bank ed by capital equal to 100% of the carrying amount. of Uganda on a quarterly basis. Certain asset categories have intermediate weightings. Bank of Uganda requires each bank to: Off-statement of financial position credit related commitments and forwards are taken into account by ap- a. Hold the minimum level of the regulatory capital plying different categories of credit conversion factors, of Ushs 25,000,000,000 (Shs Twenty five billion); b. Maintain a ratio of total regulatory capital to the

Centenary Bank 63 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

risk –weighted assets of not less than 12.0%; in arriving at tier 1 capital. and c. Maintain core capital of not less than 8.0% of Tier 2 capital (Supplementary Capital): Revalu- risk weighted assets. ation reserves, unidentified impairment allowance, statutory regulatory reserves (reserves created by The Bank’s regulatory capital is divided into two tiers: appropriations of retained earnings), subordinated debt and hybrid capital instruments. Tier 1 capital (core capital): Share capital, share premium, retained earnings and reserves created by The table below summaries the composition of regu- appropriations of retained earnings. The book value latory capital and the ratios of the Bank, for the years of goodwill, current year losses, prohibited loans ended 31 December 2013 and 2014. During those to insiders; investments in unconsolidated financial two years, the Bank complied with all of the external- statements, deficiencies in provisions for losses and ly imposed capital requirements to which it is subject. other deductions determined by BOU are deducted

2014 2013 Shs 000 Shs 000 Core Capital (Tier 1) Permanent equity 25,116,624 25,116,624 Share premium 1,138,927 1,138,927 Prior years’ retained profits 215,607,257 167,151,269 Proposed dividends (18,477,452) (9,652,245) Net after-tax profits (current year-to-date) 73,816,511 58,005,547 297,201,867 241,760,122 Computer software (1,997,361) (1,596,916) Unrealised foreign exchange gains (65,747) (238,171) Tier 1 Capital 295,138,759 239,925,035 Supplementary Capital (Tier 2) Unencumbered general provisions for losses 8,814,385 7,043,856 Tier 2 Capital 8,814,385 7,043,856 Total Capital (Tier 1+Tier 2) 303,953,144 246,968,891

The increase of the regulatory capital in the year 2014 is mainly due to the contribution of the current-year profit.

The risk–weighted assets are measured by means of hierarchy of five risk weights classified according to the nature of portfolio holding and reflecting an estimate of credit and market risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-statement of financial position exposure, with some adjustments to reflect the more contingent nature of potential losses.

64 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

The table below summarises the composition of the risk weighted assets of the Bank for the years ended 31 December 2014 and 31 December 2013.

9.46 Statement of financial position

Nominal amounts Risk weighted amounts 2014 2013 2014 2013 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Assets Notes, coins & other cash assets 81,921,000 67,589,979 0% Balances with Bank of Uganda 58,732,147 177,372,531 0% Due from commercial banks in Uganda 44,837,023 11,545,817 20% 8,967,405 2,309163 Due from commercial banks outside Uganda

(1) Rated AAA to AA (-) 3,719,164 7,491,149 20% 743,833 1,498,230 (2) Rated A (+) to A (-) 806,099 9,381,818 50% 403,050 4,690,909 (3) Rated A (-) and non-rated 165,313 152,409 100% 165,313 152,409 Investment securities 436,359,561 334,544,283 0% - - Loans and advances to customers 830,931,969 672,307,038 100% 830,931,969 672,307,038 Other accounts receivable 44,977,437 41,133,637 100% 44,977,437 41,133,637 Property and equipment 132,475,944 127,923,956 100% 132,475,944 127,923,956

Off-statement of financial position items Contingencies secured by cash collateral 5,691,443 1,241,258 0% - - Guarantees & acceptances 4,178,266 6,914,925 100% 4,178,266 6,914,925 Performance bonds 11,199,166 2,452,296 50% 5,599,583 1,226,148 Documentary credits (trade related) 3,954,594 3,342,998 20% 790,919 668,600 Other commitments 6,327,177 4,232,497 50% 3,163,589 2,116,248 Total risk-weighted assets 1,666,276,303 1,467,626,591 1,032,397,306 860,941,263

2014 Ratio 2013 Ratio Shs ’000 Shs ‘000 Capital ratios Tier 1 Capital (Core) 295,138,759 28.6% 239,925,035 27.9% Tier 1 + Tier 2 Capital (Total) 303,953,144 29.4% 246,968,891 28.7%

FIA 2004 minimum ratio capital requirement Core capital 8% 8% Total capital 12% 12%

The Bank’s total capital adequacy ratio improved from 28.7% to 29.4% as at 31 December 2014 and Tier 1 capital increased from 27.9% to 28.6% as at 31 December 2014 showing that the Bank is well capitalised.

9.47 Trend in risk-weighted assets Shs million 2010 2011 2012 2013 2014 Total assets 807,238 944,044 1,122,296 1,451,040 1,636,923 Risk-weighted assets 479,528 646,689 860,941 862,538 1,032,397

Centenary Bank 65 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Trends in risk weighted assets

1,800,000 Turnover 1,600,000

1,400,000 The Bank’s turnover is derived substantially

1,200,000 from the business of banking and related activities and comprises net interest income, fees

Shs Million 1,000,000 and commission income, trading income and 800,000 other income. These revenues are shown in 600,000 the statement of comprehensive income and

400,000 accompanying notes and represent the most appropriate equivalent of turnover compared 200,000 with other forms of business enterprise. - 2010 2011 2012 2013 2014

Years Risk - weighted assets Total Assets 2014 2013 Shs ‘000 Shs ‘000 9.48 Interest income Interest on loans 192,910,797 162,488,656 Interest on treasury bills held to maturity 42,431,071 37,316,896 Interest on treasury bonds 2,111,827 1,674,202 Interest on inter-bank placements 10,119,345 7,701,634 247,573,040 209,181,388

The interest on impaired loans as at 31 December 2014 was Ushs 2.969 billion (2013: Ushs 2.220 billion).

(Loss)/income from financial instruments at fair value Fair value (loss) / gain on held for trading securities (505,138) 238,171 (505,138) 238,171 9.49 Interest expense Savings accounts 13,152,428 11,008,348 Current accounts 544,008 343,176 Fixed deposit accounts 9,565,802 10,365,088 Managed/borrowed funds 7,856,883 8,329,810 Inter-bank borrowings 5,948,172 3,806,084 37,067,293 33,852,506

9.50 Fee and commission income Trade related fees and commitment 13,776,423 11,577,332 Ledger fees 17,888,977 16,697,719 Other commissions and fees 27,013,832 23,964,207 58,679,232 52,239,258

9.51 Foreign exchange income Foreign trade commission 3,081,171 2,512,737 Revaluation gain 3,080,793 2,595,901 6,161,964 5,108,638

9.52 Other operating income Income from bullion van hire 14,724 10,760 Recovery of written off loans 3,074,268 1,857,548 Sale of ATM cards & banking stationery 4,102,499 3,505,327 Release of unutilised accruals 1,556,567 853,819 Credit Reference Bureau search fee income 344,615 423,301 Grant income 1,041,747 836,185 Uncollected ATM cards 456,055 382,677 Other income 1,799,349 942,236 12,389,824 8,811,853

66 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Other income 2014 2013 Shs ‘000 Shs ‘000 Fees on current accounts 61,958 - Penalties 47,101 8,552 Profit on sale of assets 365,913 33,172 Cash overages 217,780 165,543 Miscellaneous income 837,520 548,679 Income from uncollected balances 10,569 - Early redemption fees 258,508 185,845 Lease application fees - 445 1,799,349 942,236

9.53 Employee benefits expense Staff salaries 60,918,835 53,188,763 Staff bonuses 13,993,895 9,512,638 NSSF contributions 7,620,800 6,716,476 Retirement plan contributions 4, 875,646 4,202,693 87,409,176 73,620,570

9.54 Impairment losses on loans and advances Credit losses impairment-Identified 11,080,027 8,183,865 Credit losses impairment-Unidentified 214,889 1,367,260 11,294,916 9,551,125

9.55 Operating expenses Auditors’ remuneration and expenses 221,607 210,877 Software costs 3,986,538 2,707,631 Premises cost 11,631,093 11,520,895 Insurance 6,081,284 5,295,053 Security 3,218,390 3,010,956 Office expenses 11,752,244 10,374,051 Equipment lease expenses 1,476,776 1,332,483 Motor vehicle expenses 2,458,401 2,540,287 Telephone, telex and postage 5,557,786 5,740,235 Corporate Social Responsibility (CSR) 457,626 797,612 Advertising and marketing 4,655,112 4,247,017 Directors’ emoluments and other expenses 3,065,168 2,711,072 Consultancy and legal fees 2,947,637 1,711,982 Recruitment and training 1,497,246 1,462,505 Staff transfer 802,416 987,285 Seminars & conferences 322,985 276,462 Subscription 493,767 345,850 Stationery 4,897,014 4,688,472 Transport & travel 5,430,120 5,201,138 Bank charges 529,518 1,538,376 Long-term rental amortization 45,532 45,750 Cash shortages and other losses 859,461 1,353,715 Other operating expensesb 1,546,794 1,432,064 73,934,515 69,531,768

Other operating expenses 2014 2013 Shs ‘000 Shs ‘000 Foreign exchange loss 34,289 - Funeral expenses 53,454 66,071 Business promotion account 313,937 232,843 Annual General Meeting 57,918 48,285 Licence (Bank) - 400

Centenary Bank 67 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Cashiers allowance 235,567 235,720 MTN Mobile Money expense - 60 WARID Pesa Mobile Money expense - 60 Loss on sale of assets - 27,422 Management fees expense 606,574 714,132 Meeting expenses 118,903 65,240 Financial card fees expenses 89,741 17,135 Other expenses 36,411 24,694 1,546,794 1,432,064 9.56 Income tax expense Current income tax 15,065,619 6,323,657 Withholding tax expense 8,908,579 7,798,220 Deferred tax credit (2,304,674) (1,348,135) Prior year under provision 7 443,486 21,669,531 13,217,228

The tax on the Bank’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows: 2014 2013 Shs ‘000 Shs ‘000 Profit before income tax 95,486,042 71,222,775

Tax calculated at 30.0% (2013: 30.0%) 28,645,812 21,366,832 Tax effect of: - Expenses not deductible for tax 1,326,193 2,084,884 - Income not subject to tax (17,211,060) (17,811,397) - Prior year adjustment 7 (221,311) - 20% final tax on treasury bills 8,908,579 7,798,220 Income tax expense 21,669,531 13,217,228

Movement in current tax payable is as follows:- At 1 January 1,640,550 (632,173) Under provision in prior years- current tax 3 443,486 Current income tax expense 23,974,198 14,121,878 Tax paid during year (20,355,351) (12,292,641) At 31 December 5,259,400 1,640,550

Further information on deferred income tax is presented in Note 9.62.

2014 2013 Shs ‘000 Shs ‘000 9.57 Cash and balances with Bank of Uganda Cash in hand – Uganda Shillings 72,131,981 59,757,900 Cash in hand – Foreign Currency 9,789,019 7,832,079 Bank of Uganda clearing account 57,230,791 80,761,154 Bank of Uganda Repo 1,501,356 96,611,377 140,653,147 244,962,510

Due within < 1 month 140,653,147 244,962,510

9.58 Placements with other banks Balances with local banks 5,862 118,337 Balances with foreign banks 4,690,576 17,025,375 Placements with local banks 44,831,161 11,427,480 49,527,599 28,571,192

Due within < 1 month 49,527,599 28,571,192

68 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

The weighted average effective interest rate on placement with other banks was 10.8% (2013:12.7%).

2014 2013 Shs ‘000 Shs ‘000 9.59 Government securities (a) Government securities held for trading Government bonds 24,180,039 7,289,093 24,180,039 7,289,093

Treasury bills are debt securities issued by the Central Bank for a term of three months, six months and twelve months, whilst bonds are also issued for a term of two years, three years, five years and ten years.

The weighted average effective interest rate on treasury bills and bonds was 12.5% (2013: 12.6%) and 13.8% (2013:10.4%) respectively.

Government securities held to maturity 2014 2013 Shs ‘000 Shs ‘000 Government treasury bills 412,179,522 327,255,190

Maturity analysis of government securities held-to-maturity Short Term (1-3 months) 128,171,233 109,158,324 Medium Term (3-6 months) 95,283,935 96,917,958 Long Term (Over 6 months and within 12 months) 188,724,354 121,178,908 412,179,522 327,255,190

2014 2013 Shs ‘000 Shs ‘000 9.60 Loans and advances to customers Overdrafts 30,185,205 23,579,668 Commercial loans 270,765,529 238,876,858 Micro finance loans 500,203,696 384,854,639 Finance leases 21,563,833 17,708,870 Staff loans 28,003,036 23,005,694 Gross loans and advances 850,721,299 688,025,729 Provision for loan impairment – identified losses (14,352,602) (10,496,853) Provision for loan impairment – unidentified losses (5,436,728) (5,221,838)

Net loans and advances 830,931,969 672,307,038 Maturity analysis of loans and advances Short Term (1-3 Months) 33,708,722 25,601,502 Medium Term (3-6 Months) 18,973,937 13,954,277 Long Term (Over 6 Months and within 12 months) 211,299,237 175,242,570 Long Term (Over 12 months) 586,739,403 473,277,378 850,721,299 688,025,729

Centenary Bank 69 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

% 2014 % 2013 Shs ‘000 Shs ‘000 Sector Analysis Agriculture 17.1 145,706,306 17.7 121,783,100 Manufacturing 0.8 6,460,407 0.7 4,942,245 Trade and Commerce 21.0 178,439,601 23.3 159,978,982 Transport and Utilities 2.4 20,380,890 2.4 16,405,700 Building and Construction 23.1 196,337,346 22.1 152,346,469 Other Services 35.7 303,396,749 33.8 232,569,233 100 850,721,299 100 688,025,729

Finance leases 2014 2013 Shs’000 Shs’000 Gross investments in finance leases

No later than 1 year 388,454 257,078 Later than 1 year but no later than 5 years 25,422,802 22,511,088 Later than 5 years 1,154,700 - 26,965,956 2,768,166

Unearned future finance income on finance leases (5,402,123) (5,059,296) Net investment in finance leases 21,563,833 17,708,870

Analysis of net investment in finance leases

No later than 1 year 364,156 246,524 Later than 1 year but no later than 5 years 20,449,759 17,462,346 Later than 5 years 749,918 21,563,833 17,708,870

This is a form of financing an asset where the asset serves as the main security. The leases are offered for a period between 1 to 7 years depending on the type of equipment financed and the anticipated cash flows. The average interest rate on these facilities for 2014 was 26.1% for Ushs facilities and 10.0% for USD facilities (2013: 26.1% and 10.1% respectively). 2014 2013 Shs ‘000 Shs ‘000 9.61 Other assets Cheques in transit 173,972 308,716 Staff advances 21,207 16,308 Accrued late fee payment 734,066 683,502 Accounts receivable 9,554 436,732 Prepaid expenses 7,495,011 5,056,392 Sundry stationery stock 1,538,287 1,939,952 Western Union commission receivable 229,550 399,583 Outward clearing 962,650 1,108,743 Mobile E-money 7,265,263 9,970,379 Deferred staff loan off market discount 10,792,115 8,613,386 Unsettled interbank trading deals 693,750 3,832,400 Value Added Tax 1,919,053 3,478,333 Other sundry assets 1,685,582 1,319,700 33,520,060 37,164,126

All other assets are due within one year.

70 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.62 Deferred income tax Deferred income taxes are calculated on all temporary differences under the liability method at the applicable rate of 30.0%. The movement on the deferred income tax account is as follows:

2014 2013 Shs’000 Shs’000 At 1 January 2,605,073 3,953,208 Prior year adjustment 7 (644,797) Credit to statement of comprehensive income (Note 9.56) (2,304,674) (683,338) At 31 December 300,406 2,605,073

Charge/ (Credit) to 1 January 2014 SOCI 31 Dec 2014 Shs’000 Shs’000 Shs’000 Deferred tax liability Accelerated tax depreciation 7,408,517 (1,276,576) 6,131,941 Fair value adjustments 27,639 (151,541 (123,902 7,436,156 (1,428,117) 6,008,039 Deferred tax asset Provisions (1,766,531) (38,100) (1,804,631) Opening balance adjustment - - - Deferred income (3,064,552) (838,450) (3,903,002) (4,831,083) (876,550) (5,707,633) Net deferred tax liability 2,605,073 (2,304,667) 300,406

Charge/ (Credit) to 1 January 2013 SOCI 31 Dec 2013 Shs’000 Shs’000 Shs’000

Deferred income tax liability Accelerated tax depreciation 7,824,309 (415,792) 7,408,517 Fair value adjustments (43,812) 71,451 27,639 7,780,497 (344,341) 7,436,156 Deferred income tax asset Provisions (1,328,295) 438,237) (1,766,532) Deferred income (2,498,994) (565,557) (3,064,551) (3,827,289) (1,003,794) (4,831,083) Net deferred income tax liability 3,953,208 (1,348,135) 2,605,073

9.63 Deferred expenses 2014 2013 Shs ‘000 Shs ‘000 At start of year 1,700,003 3,640,307 Net additions/transfers 7,533,397 (1,940,304) At end of year 9,233,400 1,700,003

Centenary Bank 71 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

These include expenses incurred on major renovations on branches rented by the Bank and expenses incurred on the Bank’s upcoming core banking implementation project, whose benefit is estimated to spread over more than one year. They are deferred and amortised upon completion of renovations over a period of the lower of five years and the lease tenor. The expenses on the core banking project will be capitalised as intangible assets upon completion. 9.64 Finance lease on leasehold land 2014 2013 Shs ‘000 Shs ‘000 Cost At 1 January 2,536,543 2,536,543 Additions - - At 31 December 2,536,543 2,536,543

Amortisation At 1 January 267,035 221,285 Charge for the year 45,531 45,750 At 31 December 312,566 267,035

Net carrying amount 2,223,977 2,269,508

The finance lease relates to costs incurred when acquiring the leasehold land on plot 44-46 Kampala Road. The costs are being amortised on a straight line basis over the life of the lease agreement. The lease agreement for plot 44 – 46 Kampala Road became effective November 2009 for ninety nine years. As at 31st December 2014 the remaining lease period is 94 years.

At the inception of the lease, the obligations associated with the acquisition was all paid up front in full as required by the local laws. Therefore, all the lease payments/installments were paid upfront at the beginning of the lease and as at 31 December 2014 there were no other lease obligations outstanding.

As at 31 December 2014

Computer Furniture Motor Equipment Fixture & Work-in Buildings Vehicles & &accessories Equipment Progress Total Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 COST At 1 January 2014 71,566,200 11,944,669 38,181,066 57,570,894 7,716,182 186,979,011 Additions 3,438,228 227,278 2,640,739 4,631,119 11,418,222 22,355,586 Disposals - ( 1,189,981) (2,388,530) (261,461) - (3,839,972) Transfer from work-in-progress 7,716,182 - - - (7,716,182) - Impairment - - - (110,489) - (110,489) At 31 December 2014 82,720,610 10,981,966 38, 433,275 61,830,063 11,418,222 205,384,136

DEPRECIATION At 1 January 2014 2,247,567 6,951,084 26,526,870 23,329,534 - 59,055,055 Charge for the year 1,555,999 2,119,730 5,679,156 8,444,639 - 17,799,524 On disposals - (1,188,631) (2,385,806) (261,461) - (3,835,898) Impairment - - - (110,489) - (110,489) At 31 December 2014 3,803,566 7,882,183 29,820,220 31,402,223 - 72,908,192 Computer Furniture

72 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Motor Equipment Fixture & Work-in Buildings Vehicles & &accessories Equipment Progress Total Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Net Carrying Amount At 31 December 2014 78,917,044 3,099,783 8,613,055 30,427,841 11,418,222 132,475,944

Cost At 1 January 2013 65,634,442 9,272,041 34,559,147 51,135,828 - 160,601,458 Additions 5,931,758 2,770,641 3,770,988 6,889,802 7,716,182 27,079,371 Disposals - ( 98,013) (149,069) (454,736) - (701,818) At 31 December 2013 71,566,200 11,944,669 38,181,066 57,570,894 7,716,182 186,979,011

Depreciation At 1 January 2013 918,259 5,188,422 20,871,347 15,894,201 - 42,872,229 Charge for the year 1,329,308 1,847,331 5,804,592 7,807,419 - 16,788,650 On disposals - (84,669) (149,069) (372,086) - (605,824) At 31 December 2013 2,247,567 6,951,084 26,526,870 23,329,534 - 59,055,055

Net Carrying Amount At 31 December 2013 69,318,633 4,993,585 11,654,196 34,241,360 7,716,182 127,923,956

Capital work in progress relates to the ongoing works at Mapeera House.

Intangible assets 2014 2013 Shs ‘000 Shs ‘000 Cost At 1 January 6,440,001 5,667,488 Additions 1,715,173 772,513 Write downs (8,267) - At 31 December 8,146,907 6,440,001

AMORTISATION At 1 January 4,843,085 3,831,171 Charge for the year 1,307,456 1,011,914 Write down (995) - At 31 December 6,149,546 4,843,085

NET CARRYING AMOUNT At 31 December 1,997,361 1,596,916

9.65 Customer deposits

Current accounts 281,075,829 217,639,269 Savings accounts 784,414,283 639,577,210 Time deposits 109,625,442 108,674,715 1,175,115,554 965,891,194

The weighted average effective interest rate on customer deposits was 2.0% (2013: 2.1%). Customer deposit balances are due within one year.

Centenary Bank 73 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013 Shs ‘000 Shs ‘000 9.66 Deposits and balances due to banks and other financial institutions Balances from local banks 2,715,713 3,388,748 Other finance institutions 2,740,676 2,931,069 5,456,389 6,319,817

Deposits and balances due to banks and other financial institutions are due within one year.

2014 2013 Shs ‘000 Shs ‘000 9.67 Inter-bank borrowing Borrowings from banks - 82,471,095 - 82,471,095

Inter-bank borrowings relate to short-term borrowings from local banks. The interest rates range between 7% and 12% and the term of the loans ranges between 2 to 7 days.

As at 31st December 2014 there were no interbank borrowings.

2014 2013 Shs ‘000 Shs ‘000 9.68 Managed funds Danida - 19,704 ACF-BOU 734,869 267,065 Rural Electrification Fund 76,252 42 Youth Venture capital fund 6,500,532 6,975,311 KCCA Fund 3,258,031 3,300,000 Managed Funds UECCC & WENRECCO 200,000 - 10,769,684 10,562,122

a. DANIDA: c. Rural Electrification Fund: This was a grant to the people of Rakai District from On 8 August 2011, the Bank signed a Memorandum of the Danish International Development Assistance (Da- Understanding with the Government of Uganda to im- nida). Rakai District Local Government were the legal prove and increase the provision of energy in the rural owners of the credit Capital fund and Centenary Bank sector in Uganda. These funds are at zero interest and the administrators of the fund. The fund aimed at in- are applied as subsidies to qualifying rural borrowers creasing productivity and production in the local com- to offset the cost of electrification. Their application is munity and to contribute to the general improvement certified by Rural Electrification Board staff. Fresh re- of the standards of living of the people of Rakai District. plenishment on application are made by Government The fund was terminated effective August 2013 and subject to availability. the balance paid off in 2014. d. Government of uganda youth b. ACF-BOU: venture capital fund: The Government of Uganda through the central bank The Bank is a Participating Partner in the Government created an agricultural credit facility for the purpose of Uganda (GoU) revolving Youth Venture Capital Fund of supporting agricultural expansion and moderniza- (YVCF) established in Financial Year 2011/12 to facili- tion in partnership with commercial banks. Loans are tate job creation and employment generation targeted advanced to customers at 10%. In April and August at addressing the rampant unemployment problem 2014 funds worth Shs 545 million and Shs 147 million among the Ugandan youth by supporting financially respectively were advanced by the Central Bank. (31 viable start-up micro, Small and Medium Enterprises December 2013: Nil). operated by Youth Entrepreneurs. Under the scheme

74 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 the bank makes an equal contribution to the revolving f. UECCC AND WENRECO: fund and as at 31 December 2014 the fund stood at Shs On 13th June 2014, the Bank signed a Memorandum 6.5 billion (31 December 2013: Shs 6.9 billion). of Understanding with the with West Nile Rural Elec- trification Company Limited (WENERECO) in part- e. KCCA Youth Venture Capital Fund: nership with Uganda Energy Credit Capitalisation The Bank in collaboration with Kampala Capital City Company(UECCC) to collaborate in financing hydro Authority signed a Memorandum of Understand- power connections UECC to avail Shs 200 Million at a ing on 30 October 2012 to take custody and on-lend zero cost for on lending and to share risk by offering a the authority’s Youth Venture Capital funds worth Shs default risk cover of up to 10%. 3.3 billion to eligible youth as per criteria set out and WENRECO to participate in mobilisation of potential agreed upon. The fund is for 5 years subject to renewal applicants for the power connection loan. terms and conditions acceptable to both parties. The The project was to target West Nile sub regions that funds are to support expansion of business ventures can be effectively served by Koboko service center, owned by the youth residents in Kampala district. Nebbi and Arua branches.

2014 2013 Shs ‘000 Shs ‘000 9.69 Borrowed funds Triodos 10,000,000 21,157,486 European Investment Bank(EIB PEFF) 14,310,585 18,526,274 Solar loan 586,110 388,353 Agribusiness Business Initiative Trust 20,325,171 15,396,644 EAC MF Loan (EIB) 27,434,454 27,427,089 72,656,320 82,895,846

a. Eib –Peff c. Triodos: (Private Enterprise Finance Facility): This is a syndicated loan agreement between Cente- This is a global loan facility extended to a group of fi- nary Bank and Triodos Investment Management B.V to nancial institutions in Uganda from Cotonuo invest- finance the expansion of the loan portfolio. The first ment facility resources. The facility is used to finance tranche of Shs 10 billion was repayable in December private enterprises in agro industry, fishing, construc- 2012 and was renegotiated for renewal for another tion, food processing, manufacturing, tourism and ser- three years. There were two facilities each of Shs 10 vices provided to these sectors and in health and educa- billion with a tenure of three years maturity in Decem- tion sectors. Repayments are made semiannually and ber 2013 priced at 91 days plus 5.25% & 2015 priced at interest is computed on reducing balance. The interest 182 days plus 3.15% respectively. The one of Decem- rate charged on this facility is not fixed or uniform but ber 2013 was repaid on 2 January 2014 is dependent on the tenure of the loan for which it is disbursed. In 2014 two loans were retired of Shs 2.5 billion (Euros d. Solar Loan: 864,200) and Shs 1.4 billion ( euro 500,000) Centenary Bank signed a Solar Refinance facility of USD 250,000 with Uganda Energy Credit Capitalisation Company on 12th July 2012. The refinance facility is b. EIB EAC MF LOAN denominated in Ushs and the shilling liability is deter- (European Investment Bank; East African mined at the exchange rate applicable on every release Community Microfinance Loan) of funds. The Bank drew down Shs 128.8 million in Oc- This is a Global Facility from the Cotonou Investment tober 2012. Facility which is used by the EAC Banks for the financing The refinance interest rate is 8.15% per annum fixed. of micro credit projects. This was a bullet disbursement The repayment of the principal borrowed is in 18 equal of the Uganda Shillings equivalent of Euro 8 million (ap- half yearly installments commencing 12 months after proximately UGX 27B). Interest is payable at 10.008% draw down. The funds are applied exclusively for the semi annually but there is a two year grace period for purpose of provision of solar loans to rural households. payment on the principal. The loan tenure is 7 years. The loans are secured by promissory notes.

Centenary Bank 75 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

In 2014 there was an additional funding of Shs 255.9Million e. Agri Business Initiative (ABI) Trust As at the end of December 2013 the Bank had secured two five year lines of credit from ABI Trust under the Agribusiness Loan Guarantee Company Limited. The first loan of Shs 10 billion was at the interest rate of 15.5%. The second loan of Shs 5 billion was secured at an interest rate of 12%. The loan is to support the Bank’s effort in agricultural lending.

On 3 july 2014 it secured another line of Shs. 5.0 Billion at an interest rate of 11.25%

9.70 Other liabilities 2014 2013 Shs ‘000 Shs ‘000 Bills payable 994,368 946,711 Clearing suspense 197,825 214,922 Unearned fees on late payments 627,561 564,791 Deferred fee income 13,010,011 10,215,172 Guarantees - Cash collateral 411,577 413,735 Contract staff (Terminal benefits) 632,644 620,083 Accrued expenses 6,883,831 5,941,796 PAYE payable 3,493,617 2,893,603 N.S.S.F payable 1,743,028 1,461,957 Unsettled interbank trading bills 690,500 3,827,500 Accounts payable 1,089,299 2,202,296 Uganda Revenue Authority Payable 9,339,630 5,451,047 Unclaimed balances (Nostro A/cs) 3,287 397,212 Value Added Tax 1,852,244 1,955,306 Excise duty on bank charges 439,716 - Real Time Gross Settlement 216,045 1,073,885 Other payablesa 6,913,441 5,439,897 48,538,623 43,619,913

2014 2013 Shs ‘000 Shs ‘000 9.71 Provisions for litigation Legal cases 571,749 244,924 Defalcations 6,980 421,677 578,729 666,601

The Bank is a litigant in several cases which arise from normal day-to-day banking activities. The directors and management believe the Bank has strong grounds for success in majority of them and are confident that they should get a ruling in their favor and none of the cases individually or in aggregate would have a significant impact on the Bank’s operations. Management carried out an assessment of all the cases outstanding as at 31 December 2014 and where considered necessary, provisions made as indicated above.

2014 2013 Shs ‘000 Shs ‘000 9.72 Deferred grants At start of year 1,030,250 800,538 Additions 758,073 1,065,897 Transfers to statement of comprehensive income (1,041,747) (836,185) At end of year 746,576 1,030,250

76 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

The opening balance at the start of the year relates to grants in form of cars, laptops and scanners to assist the Bank to set up the leasing portfolio and a grant from USAID to procure a mobile bank van to improve outreach in the Northern region where infrastructure is not so well developed. Grant additions include:

2014 2013 Shs ‘000 Shs ‘000

ABI Trust - 408,208 GIZ 179,669 72,414 Agrifin 578,404 585,275 758,073 1,065,897 a. AbiTrust and Private Sector ported the Bank in financing a baseline survey on SAC- Foundation COs , Village Savings and Loan Association( VSLAs) and The Bank partnered with AbiTrust and Private Sec- farming groups based in Karamoja to inform whether tor Foundation Uganda to extend financial literacy to the groups are bankable and investigate the most ef- millions of people through the “CenteBusinessLife” fective, impactful financial products and appropriate programme. This was done through classroom train- channels of delivering such products to the sub-region. ings, electronic media training, print media messages, The Bank, under the same programme, was supported market vendor training and mentorships. Over 10,000 to install solar systems in the service outlets located in Small and Medium Enterprises (SMEs) in 9 districts Moroto and Kotido. There is no unfulfilled condition countrywide have improved their businesses. There is as at the year end. no unfulfilled condition as at the year end. c. AGRIFIN Project b. GIZ Financial Systems The World Bank has contributed towards the support Development Program of agriculture extension through training, setting up GIZ Financial Systems development Programme satellite service centres and enhancing service delivery (FSD), through the support of the German Develop- of the agricultural product. There is no unfulfilled con- ment Cooperation of the German Government, sup- dition as at the year end.

9.73 Earnings per ordinary share

Basic earnings per share are calculated by dividing the profit attributable to the ordinary equity holders of the Bank by the weighted average number of ordinary shares in issue during the year

2014 2013 Shs ‘000 Shs ‘000 Net income 73,816,511 58,005,547 Dividends to preference shareholders (23,324) (23,324) Net income attributable to ordinary shareholders 73,793,187 57,982,223 Weighted average number of ordinary shares (No.) 25,000,000 25,000,000 Basic earnings per ordinary share (shilling per share) 2.952 2.319

There were no potentially dilutive shares outstanding at 31 December 2014 or 2013. Diluted earnings per share are therefore the same as basic earnings per share.

Centenary Bank 77 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013 Shs 000 Shs 000 9.74 Share capital Authorized 28,825,356 ordinary shares (2013: 28,825,356) of Shs 1,000 each 28,825,356 28,825,356 150,000 non-redeemable preference shares of Shs 1,000 each 150,000 150,000 28,975,356 28,975,356

Issued and fully paid 25,000,000 ordinary shares (2013:25,000,000) of Shs 1,000 each 25,000,000 25,000,000

116,624 preference shares (2013: 116,624) of Shs 1,000 each 116,624 116,624 25,116,624 25,116,624

The issued number of shares as at year end was 25,000,000 ordinary shares and 116,624 preference shares (2013: 25,000,000 ordinary shares and 116,624 preference shares). All issued shares are fully paid.

Movements in capital during the year were as follows:

Share Premium Preference Ordinary At 1 January 2014 1,138,927 116,624 25,000,000 Shares paid up - - - At 31 December 2014 1,138,927 116,624 25,000,000

Movements in capital during 2013 were as follows:

Share premium Preference Ordinary At 1 January 2013 1,138,927 116,621 25,000,000 Shares paid up & bonus issue - 3 - At 31 December 2013 1,138,927 116,624 25,000,000

The holders of ordinary shares are entitled to receive dividend from time to time and are entitled to one vote per share at meeting of the Bank. Holders of preference shares receive a non-cumulative coupon of 20% and they do not carry the right to vote. All shares rank equally with regards to the Bank’s residual assets except that the preference shareholders have priority over ordinary shareholders but participate only to the extent of the face value of the shares.

2014 2013 Shs ‘000 Shs ‘000 9.75 Proposed dividends Preference - 20.0% 23,324 23,324 Ordinary - 25% of NPAT (2013: 16.6%) 18,454,128 9,628,921 18,477,452 9,652,245

Dividend per ordinary share (Shs) 738.17 385.16

The directors recommend the payment of a dividend of Shs 738.17per share (2013: 385.16per share) totaling Shs 18,477,452 (2013: Shs 9,652,245). Dividends are subject to withholding tax at rates which vary depending on the tax residence status of the recipient and double tax agreements in place.

78 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013 Shs 000 Shs 000 9.76 Regulatory reserve At start of year 1,822,018 1,924,704 Transfer from/to retained earnings during the year 1,555,639 (102,686) At end of year 3,377,657 1,822,018

The regulatory reserve represents amounts by which provisions for impairment of loans and advances determined in accordance with the Financial Institutions Act 2004 exceed those determined in accordance with International Financial Reporting Standards. These amounts are appropriated from retained earnings in accordance with the Bank’s accounting policy.

2014 2013 Shs 000 Shs 000 9.77 Cash and cash equivalents Cash and balances with Bank of Uganda (Note 9.57) 140,653,147 244,962,510 Balances with other financial institutions (Note 9.58) 49,527,599 28,571,192 Treasury bills and other eligible bills < 91 days 128,171,233 109,158,324 Government securities held for trading (Note 9.59) 24,180,039 7,289,093 342,532,018 389,981,119

9.78 Off-statement of financial position financial instruments and capital commitments

Guarantees and performance bonds 2014 2013 Shs 000 Shs 000 Acceptances and letters of credit 3,954,594 3,342,998 Performance bonds 15,846,321 3,233,714 Bid securities bond guarantees 5,222,555 7,374,765 Commitments to extend credit 6,327,176 4,232,497 31,350,646 18,183,974 Capital Commitments

2014 2013 Shs 000 Shs 000 Capital expenditure authorised and contracted 48,137,000 33,491,329 48,137,000 33,491,329

The expenditure will be funded from the Bank’s internal resources.

In 2013, the Bank embarked on Phase three construction of its new headquarters on Plot 44-46 Kampala Road and this was estimated to cost USD 16.3m. In 2013 USD 3.0m was advanced and by 2014 total payment was USD 9.2m, it’s estimated that the remaining USD 7.0 million under this project will fall due for payment during the period 2015. Phase three revised completion date is May 2015.

Operating lease commitments - Bank as a lessee

The Bank has entered into commercial leases for motor vehicles and photo copiers. These leases have an average life of two years with a renewal option included in the contracts. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under non–cancellable operating leases as at 31 De- cember are, as follows: 2014 2013 Ushs ‘000 Ushs ‘000 Within one year 1,476,776 1,332,483

Centenary Bank 79 Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.79 Related party transactions and balances

2014 2013 Shs’000 Shs’000 (i) Directors’ remuneration

Fees to non-executive directors 514,407 382,500 Emoluments to executive directors 2,138,625 1,863,426 Emoluments to directors 2,653,032 2,245,926 Other expenses – non-executive directors 412,136 450,784 Other expenses - executive directors - 14,362 3,065,168 2,711,072

2014 2013 Shs’000 Shs’000 (ii) Loans and advances to related parties At 1 January 26,021,517 9,013,296 Advanced during the year 14,473,215 20,340,300 Repaid during the year (8,327,585) (3,332,079) At 31 December 32,167,147 26,021,517

The value of security pledged for the above loans amounts to Ushs 160.8 billion as at 31 December 2014 (2013: Ushs 107.8 billion). The average period of the loans is 48 months.

There was no impairment charge or provision for impairment of these loans as at 31 December 2014 or 31 De- cember 2013.

(iii) Substantial shareholders (>5% of shareholding) Shareholder name 2014 2013 Shs’000 Shs’000 % % Catholic Archdiocese of Kampala 5.3 5.3 Registered Trustees of the Uganda Episcopal Conference 31.3 31.3 SIDI (France) 11.6 11.6 Stiching Hivos Triodos 18.3 18.3 Total 66.5 66.5

(iv) Loans to shareholders and guarantees by shareholders

2014 2013 Shareholder Shs’000 Shs’000 Catholic Diocese of Kabale 464,329 524,060 Catholic Archdiocese of Kampala 20,375,,089 17,777,339 Catholic Diocese of Lugazi 946,321 1,389,559 Catholic Diocese of Hoima 1,038,416 271,324 Catholic Diocese of Gulu 21,438 Catholic Diocese of Jinja 508,495 Catholic Diocese of Arua 198,419 225,140 Catholic Archdiocese of Lira 226,599 244,759 Catholic Diocese of Masaka 4,853,485 2,305,877 Catholic Archdiocese of Tororo 319,277 352,982 Catholic Diocese of Fort Portal 139,091 123,808 Catholic Archdiocese of Mbarara 1,458,956 675,980 Catholic Diocese of Kasana, Luweero 271,712 386,838

80 Centenary Bank Annual Report 2014 FINANCIAL STATEMENTS

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Catholic of Diocese Kasese 3,732 370,083 Catholic Diocese of Kotido - 15,000 Catholic Diocese of Mityana 158,914 284,154 Total 30,984,273 24,946,903

Executive Directors 438,874 308,439 Non-Executive Directors 47,099 38,587

EXCO members 696,901 727,588 1,182,874 1,074,614 Total 32,167,147 26,021,517

The average interest rate for loans advanced to dioceses was 22.7% %( 2013: 18%). SUSTAINABILITY 10 REPORT

10.0 Introduction 10.1 Value Added Statement for This report represents a commitment by Centenary the year Bank to sustainably develop and to comprehensively The Value Added Statement shows the social value report to all stakeholders. added that the Bank makes through its activities. Value The report follows guidelines released by the Global added is calculated as the Bank’s performance minus Reporting Initiative (GRI), which is a joint initiative payments such as cost of materials, depreciation and coalition for Environmentally Responsible Economies amortisation. The resulting amount is distributed to and the United Nations Environment Programme. the stakeholders who include employees, sharehold- The guidelines have been issued for voluntary use by ers and the Government. organisations for reporting on the economic, environmental and social diversion of their activities, products and services aimed at articulating the contribution to sustainable developments. Value Added Statement for the year ended 31 December 2014

2014 2013 Shs’000 % Shs’000 % Value added Interest income 247,067,902 76.2% 209,419,559 76% Commission, fee income 58,679,232 18.1% 52,239,258 19% Other revenue 18,553,637 6.0% 13,920,491 5% Total income 324,300,771 100% 275,579,308 100% Less: Interest paid to depositors 37,067,293 33,852,506 Cost of other services 74,915,761 100% 69,431,716 100% Wealth created 212,317,717 100% 172,295,086 100%

Distribution of wealth 2014 2013 Salaries, wages and other benefits 97,724,695 46.0% 83,271,747 48.3% Government 21,669,531 10.2% 13,217,228 7.7% Shareholders - (dividends) 18,477,452 8.7% 9,652,245 5.6% * Retention to support future business growth 74,446,039 35.1% 66,153,866 38.4%

Wealth distributed 212,317,717 100% 172,295,086 100%

Retention surplus 55,339,059 48,353,302 Depreciation 19,106,980 17,800,564 Retention to support future business growth 74,446,039 66,153,866

Centenary Bank 81 Annual Report 2014 SUSTAINABILITY REPORT

CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

As illustrated by the Value Added Statement, the Bank is a Distribution of wealth material contributor in a financial sense to various stake- 60 holders.

50 Of the total wealth created in 2014: 40 • Shs97.7 billion (46.0%) was distributed to employ- 30 ees as remuneration and benefits. • Shs 21.7 billion (10.2%) was allocated to Govern- 20 ment in form of direct and indirect taxes, including charges in deferred tax assets and liabilities. 10 • Shs 18.5 billion (8.7%) is to be distributed to share- 0 Salaries, Government Shareholders Retention to holders as dividends in 2014 Wages -(dividends) support • Shs 74.4 billion (35.1%) was retained for invest- & other future growth benefits ment in business in order to ensure its profitability 2014 2013 contentment into the future.

10.2 Shareholders engagement 10.3 Customer engagement and and involvement support

Shareholders are entitled to a fair return after all the a. Customer engagement stakeholders have been settled. Shareholders contrib- Understanding and responding to our custom- ute the long-term operating capital, which together ers’ needs is the key to Centenary Bank’s suc- with borrowings, provide the financial resources nec- cess. The importance of service delivery is fun- essary for the Bank to operate and invest for future damental and a non-negotiable component of growth. Ordinary shareholders assume the respon- our attitude towards customers. Our customers sibility of ownership and are entitled to a fair return are key to ensuring that we remain a profitable on investment after all other stakeholders (employees, and sustainable organisation. How customers are suppliers, providers of credit and Government) have treated, where we choose to operate who we been settled. provide financial support to and our response to customer needs all have great impact on our We understand and recognize that creating and pro- reputation and financial success. tecting shareholder value over the long-term is contingent on honouring the interest of all stakeholders. In The Bank engages customer contacts through recognition of responsibility to our shareholders, the various means including: Bank operates in an open governance environment in which we do not only meet our legal obligations but • CentePoints - Automatic Teller Machines (ATMs) also subscribe to the best practices in corporate gov- and Point Of Service (POS) ernance. Considerable attention is paid to the govern- • Branch network ance process so as to ensure that it is operating both • Customer seminars/workshops, and product re- effectively and efficiently throughout the Bank. search The Bank proactively engages the shareholders in • Dedicated Sales Staff for lending and deposit mo- continuous communication of strategies and financial bilisation performance. Presentations of results, shareholders’ • Electronic, mobile and telephone communica- conference, one-on-one meetings, Annual General tion, print and electronic media Meetings, and the annual report are some of the ways • Marketing and advertising. in which contacts are maintained. b. Customer week With regard to customer week, branches with head and regional office representatives engage branch customers for a whole week through serving customers at the branch and visiting some in the field. CenteMobile clinics were set up in

82 Centenary Bank Annual Report 2014 SUSTAINABILITY REPORT

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

branches during the week to educate customers • Distribute it within the Bank only on a need to about the service. Many clients appreciated and know basis. enrolled for the service during the week. Field visits to mobilise deposits and get feedback from d. Money Laundering our customers were carried out and the week Money laundering is the process by which banks crowned off with a dinner for selected clientele are used to disguise or “launder” the proceeds of the branch. of criminal activity. Such activities undermine For SME clients, workshops were organized for a bank’s integrity, damage its reputation, deter customers. The workshops are aimed at discuss- honest customers and expose a bank to severe ing strategic business opportunities. These ses- sanctions. sions exposed the SME owners to new ways of doing business, new developments in the market We fully support the international drive against technologically and other offerings that the Bank crime and are committed to assisting the authori- has in place to improve what they do. The work- ties in preventing money laundering. We have shops also helped in obtaining feedback on how adopted policies and procedures designed to the bank can improve its offerings and services. protect ourselves from doing business with customers involved in criminal activity. c. Customer Confidentiality The Bank demands the highest standard in carry- Our employees must adhere to the following key ing out its business activities. As an integral point principles: of banking activities, banks accumulate sensitive • Customer Identification - the identity of every information regarding customers and their per- customer must be established from reliable iden- sonal affairs. Centenary Bank like other banks in tifying documents. the country has always been subject to the common law principle of bank client confidentially. In • Know Your Customer - our staff must know addition to this, Centenary Bank subscribes to enough about their customers to be able to the Code of Banking Practice that requires banks identify transactions which are inconsistent with to treat all customers’ personal information as their business or personal status, or which do not private and confidential. The Bank’s Operational match the normal pattern of account activity. Guidelines and Staff Rules and Regulations govern the conduct and duties of Bank employees, • Reporting of Suspicious Transactions – all further emphasizing the importance of customer such transactions are to be reported to the prop- privacy and detailing the procedures that must be er authorities immediately observed in matters regarding confidential information. We take money-laundering prevention very seri- ously and have created a rigorous programme to We hold a growing array of information about ensure that we can enforce consistent high stand- customers, potential customers, staff, suppliers ards across our network. The Know Your Cus- and other stakeholders. Some of this data is of tomer initiative, a key priority within the Bank, is a personal and sensitive nature. We have a duty a cornerstone of our anti-money laundering pro- to handle this information responsibly. We rec- gramme. ognize that there is a growing need for transparency over the way we conduct our business, but Our policy is based on the Financial Institutions we will not compromise on our commitment to Act 2004 Money Laundering Rules and interna- keeping customer related information confiden- tional best practices, such as recommendations tial. made by the Financial Action Task Force (FATF).

In handling such information, we have made a e. Fair Treatment of Customers commitment that we will: Financial products and services are becoming in- creasingly sophisticated tools. Selling them calls • Ensure that it is accurate, up to date, neither bi- for knowledge, skill and judgment. ased nor misleading; • Only use it for the purposes for which it was giv- For our employees, the basic rules are: en; • Do not sell an unsuitable product to a customer • Keep it only for as long as is necessary; - that is, a product that does not meet his or her • Keep it securely; needs/expectations. • Keep only relevant and required information; and • Know enough about Centenary Bank’s products

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and about the customer (risk appetite, objec- 10.5 Financial products and services tives, finances and personal circumstances) to judge the effect which the products will have and 10.5.1 Local currency deposit product whether the products will meet his or her needs. • Make every effort to ensure that the customer a. CenteSavings Account properly understands more complex products Deposit account designed for regular savers. and their risks. Cash withdrawals are made over the counter • Explain product features and fees/charges clearly and by the use of the ATM/CenteCard. Account both face-to-face and in any marketing literature opened with only Shs 10,000. and software. b. CenteCurrent Account 10.4 Significant partnerships Transaction based account which can be opened with external stakeholders either by individuals as a personal current account or by Companies, Partnerships, Societies, In addition to those who extended grants, the Bank Clubs and Associations as non-personal account. has other significant partnerships. In the year 2014, It is operated by use of a cheque book and an the Bank maintained some very significant relationships ATM Card issued upon request. with key external stakeholders, which relationships impacted positively to the business value and the social c. CenteFixed Deposit Account performance of the Bank, suffice to mention are the This is an ideal account for customers interested following: in earning attractive interest rates for their savings. The deposits are fixed for an agreed period Verma Uganda Limited of time subject to no withdrawals before the Verma partnered with the Bank to rollout an innovative elapse of the period. Minimum amount to be Collaborative Credit Scheme for financing acquisition fixed is Shs 300,000 and maximum amount to be of motor cycle for business and personal use. fixed is open.

Rotary Uganda Bridging the Cancer Gap Pro- d. CentePlusAccount gramme Special Personal Savings Account designed to The Bank partnered with Rotary Uganda and Nsam- motivate customers to accumulate savings for fi- bya Hospital through a campaign “Bridging the Cancer nancing future plans or investments thus enabling Gap”, a project aimed at increasing awareness on pros- people to realize their personal dreams. Holders tate, breast and cervical cancer. Over 25,000 women of the account earn attractive interest paid de- have been reached through screening, seminars, litera- pendant on the credit balance strata in which the ture, sensitization through media and the cancer run. account falls. The more one saves and higher one earns. International Labour Organization (ILO) The Bank partnered with International Labour Organi- e. CenteJuniorAccount zation (ILO) under their Youth Entrepreneurship Facil- Account designed specially for children under ity (YEF) where 390 youths have been trained. the age of 18 years and is operated by the sponsor (Parent/Guardian) in trust for the child until Kampala City Council Authority (KCCA) the child attains a contractual age of 18 years af- The Bank partnered with the KCCA to contribute to- ter which the account automatically converts to wards registration and streamlining of Boda Boda op- personal savings account to be operated by the eration in the City. The partnership is earmarked to last child on his or her own. for a period of three years. f. CenteVolution Savings Account GIZ A special savings account designed to meet the The Bank partnered with GIZ and rolled out Karamoja financial needs and preferences of the youth who linkage banking project and financial literacy was con- are students in Tertiary educational institutions ducted. that fall in the age bracket of 18 to 26 years.

g. CenteSACCO Savings Account

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A special savings account designed for the pur- Current account denominated in foreign curren- pose of motivating SACCOs and to accumulate cies i.e. US Dollar, British Pound Sterling, Euros for financing their lending operations or future and Kenya Shillings. Transactions can in both for- investment plans thus enabling them to realize eign and local currencies. their shared objectives and goals c. CenteForeign Fixed Deposit Account Account where a customer’s deposits in foreign h. CenteSACCO Current Account currency are fixed for the agreed period of time Deposit account designed for SACCOs that pre- subject to non-withdrawals before the elapse of fer a checking account for the purpose of accu- the period. Interest income is forfeited for with- mulating savings for financing their lending op- drawals made before maturity period. erations or future investment plans thus enabling them to realize their shared objectives and goals. 10.5.3 E-Banking products i. CenteVSLA Savings Account a. CentePoint Savings account designed for the purpose of mo- CentePoint is a 24hour round-the-clock auto- tivating VSLAs to accumulate savings for financ- mated teller machine for Centenary Bank that ing their lending operations or future investment enables customers and customers of other Finan- plans thus enabling them to realize their shared cial Institutions on Interswitch to check account objectives and goals balance, mini account statement, withdraw and deposit cash by use of ATM Cards. Currently the j. CenteSupaWoman Savings Account Bank has 153 ATMs located on-site in all bank A special savings account targeted at women branch offices and offsite in strategic places in the who desire to save as individuals to improve their main towns around the country. level of income and livelihoods. b. CenteMobile k. CenteSupaWoman Group Savings Account CenteMobile is an M-Banking end-to-end e- Savings account targeted at formal and infor- commerce and information content service that mal women groups who desire to save jointly as will allow customers to perform transactions and a Group with a common goal of improving their accessing banking information using their mobile level of income and livelihoods. phones 24/7 in any location that has mobile network coverage. The service is also enhanced with l. CenteInvestment Club Savings Account mobile wallet to Bank service where customers Savings account targeted at investment clubs for can transfer money from their mobile money ac- members that desire to save and invest jointly as counts to their Centenary Bank account and vice a Group or Club in a business or income gener- versa. ating activity with a common goal of improving their level of income and livelihoods. c. PC Banking Service A facility that enables Centenary Bank custom- m. CenteInvestment Club Current Account ers’ access their account information using their A current account for investment clubs whose Personal computers from the convenience of members desire to save and invest to either gen- their offices and home. erate income or acquire assets with the aim of improving their level of income and livelihoods d. Merchant POS Service and prefer a checking account. Under this, the bank enables customers to use Point Of Sale (POS) terminals with their Cente- 10.5.2 Foreign currency products and Cards to pay for goods and services retail outlets services and other facilities like super markets, groceries, hospitals, petrol stations and hardware shops. a. CenteForeign Savings Account Savings account designed for US Dollar, British Pound Sterling, Euros and Kenya Shillings. Fea- tures include restricted cash withdrawals. b. CenteForeign Current Account

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10.5.4 Credit Products c. Marketing Loan Post-harvest short-term loan targeted at crop Business Loans Producer-farmers, Processors and Wholesalers a. CenteSME/Corporate business Loans and or Dealers for procurement of produce dur- Loans extended to SME’s and Corporate organi- ing harvest, financing expenses directly related zations engaged in business in a variety of sec- transportation, storage and or to cater for work- tors including trade/, transport, communication, ing capital needs for stocking with a sole aim to industry/ manufacturing, agriculture (animal hus- re-sell in the near future. The loan is restricted bandry, fisheries, crop finance, Government sec- to agricultural crop commodities that have a tor, building/construction, and service sectors. sustained demand throughout the year (such as The loans can be used to finance working capital, maize, rice, millet, sorghum, oil seeds.) acquisition of business assets and infrastructural development. d. Farm & Asset Equipment Loan Short and medium-term loan targeted at Pro- b. CenteLease ducer-farmers and Commercial-farmers for the A short-to-medium term finance lease to aid the purpose of financing purchase of small and high acquisition of assets by individuals and/or organi- value farm equipment respectively. Small value zations actively engaged in agricultural produc- equipment can include items such as sprayers, tion, processing & marketing and other busi- farm tools like pickaxes, hoes, steel ploughs, ness activities outside the agricultural sector like paddlers and tractor attachments/accessories, transportation, tourism & recreation, trade & fodder cutting machine, tractor oil engine, and commerce, education services, health services, pump. Higher value farm equipment are big-tick- small scale processing & manufacturing, hotel. et equipment such as tractors, combine harvest- ers, rice haulers. c. Bank Overdraft Short term credit facility designed to meet the Retail /Micro Loans bank customers’ urgent day-to-day cash requirements for their business transactions. The facility a. CentePersonal Loan. is renewable based on borrower’s existing credit Personal loan with both irregular and irregular history with the Bank within a period of twelve repayments targeted at individual micro, retail months. and High Net Worth customers for the purpose of financing a variety of consumption needs in- Agribusiness Finance Loans cluding among others needs like medical treatment/insurance, payment of school/tuition fees, a. Production Loan purchase of educational requirements, purchase Loan designed to finance business activities in the of assets, financing a start-up business or any agricultural production, processing and market- legally productive, socially and environmentally ing value chain, animal production (Diary, poul- acceptable business or none business activity/ try and piggery projects), fishing and fish farming, project. bee keeping as well as food processing i.e. grain mills, oil mills and hullers. The loan period and b. CenteLand Loan. repayment plan is dependent on the nature and Loan designed for the purpose of financing land season of the agricultural activity to be financed. purchase, survey and registration. The loan is targeted at the Micro and Retail customer seg- b. Revolving Production Loan ments. Survey and registration of land is under- Line of Credit facility offered to producer farm- taken by the Bank’s accredited Land Surveyors ers for the purpose of financing cultivation ex- who guarantee delivery of the land registration penses for raising crops such as purchase of agro certificate to the Bank. in-puts including but not limited to crop seeds, fertilizers, pesticides and meeting of Labour ex- c. CenteSolar Loan penses etc. A farmer is appraised only once pro- Short term loan for financing the purchase and vided there occurs no change in the land holding installation of solar power at places of residence and if no request for loan reschedule is requested or business premises. for reasons like weather vagaries or any external event that may result to unanticipated financial d. CenteYouth Loan stress. The loan targets Ugandan youth aged between 18 and 35 years and it is a short to medium term

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loan designed for the purpose of financing busi- value before the maturity date. The facility is of- ness expansion. The loans support business ven- fered to the customers of the Bank who trade on tures owned by young entrepreneurs and the credit terms. eligible sectors include manufacturing, agro-processing, primary agriculture, fisheries, livestock, d. Shipment Finance health, transport, education, ICT, tourism, con- The Bank offers shipping finance to facilitate cus- struction, printing and service contractors among tomers engaged in export and import trade. It others. can be post-shipment or pre-shipment finance. e. CenteMortgage e. Local Purchase Order (LPO) Finance A medium-to-long term housing finance product Short-term credit facility offered to the supplier targeting salary earners as well as economically for the purpose of mobilizing resources and sub- active rural and urban low, middle and high regu- sequent serving of the LPO lar income earners engaged in self-employment. The loan can be used for the purpose of financing f. Structured Trade Finance housing needs through purchase, construction or This various structured trade finance deals in- completion. clude: Back to back Letters of credit, structured pre-shipment finance, Warehouse finance and f. CenteHome Improvement Loan Stock Financing. Short medium term loan for home owners with regular income earnings for the purpose of fi- g. Commodity Finance nancing home improvement either through con- A financing technique where by the commodity/ struction/renovation of residential/commercial good are placed at the custody and control of a houses, erecting of perimeter wall/fence, installa- Collateral Manager tion of power and energy systems, kitchenettes, water supply and sanitation systems and building h. Documentary Collections of latrines. The Bank facilitates trading of goods between parties and collection of sale proceeds as well as 10.5.5 Trade Finance Products acceptance of the documents arising there from, both locally and internationally. a. Letters of Credit An undertaking issued by the Bank for the ac- 10.5.6 Money Transfer Services count of the buyer/applicant to pay the beneficiary/seller to facilitate importation/exportation a. Western Union Money Transfer of goods and services, and also facilitate local A fast and secure way of sending and receiving trade, provided that the terms of the LC are money locally and globally to/from more than complied with. 400 countries. The service is available for individual to individual transactions and there is no b. Bank Guarantees requirement for the sender or receiver to have Written irrevocable undertakings issued by the an account with the bank. Bank to pay the beneficiary a specific sum of money on demand in the event that its customer/ b. Real Time Gross Settlement (RTGS) applicant has not fulfilled his/her contractual ob- The Bank handles payment transfers on behalf of ligation within the validity of the guarantee. The its customers for anywhere in Uganda. The Bank Bank guarantees Bid security/Bid bonds, perfor- handles payment transfers on behalf of its cus- mance guarantees, advance payment guarantee, tomers for any amount through the Real Time retention guarantees, shipping guarantees and Gross Settlement. customs bonds

c. East African Payment Systems (EAPS) c. Invoice Discounting Faster and secure funds transfer within East Af- Short-term facility where the Bank offers to pay rica in the currency of the East African region. a discounted amount against the invoice face

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d. Electronic Funds Transfer (EFT) count holders with Centenary bank access to The Bank handles transfer of customers’ funds their account information by use of their mobile from one account to another account(s) in other phone handsets financial institutions within the shortest possible time d. Primary dealership services Centenary Bank is a registered Primary Dealer e. EFT Direct Debit Transfers Option for Treasury bills/bonds. It transacts directly with EFT Direct Debit Transfer Option facilitates Bank of Uganda on behalf of its customers and the transfer of money for school fees from the the investing public. Any member of the public, parents’/guardians’ accounts to the educational with or without a Centenary Bank account is eli- institutions’ accounts electronically, after the cus- gible to invest in Treasury bills through Centenary tomer has executed a Direct Debit Agreement bank. (DDA). The DDA, when executed, authorizes the bank to remit school fees money from the e. E - Payments parent’s/guardian’s bank account through elec- • e-USA VISA Fees Collection Service tronic transfer to the educational institutions The Bank accepts payments for the United States bank account. of America VISA application fees in all its branches irrespective of whether the customer has an f. MTN Mobile Money Transfers account with the Bank or not. Customers can pay Centenary Bank offers MTN mobile money ser- VISA application fees directly at the counter and vices where the bank can send or receive money receive a payment receipt for delivery to US Em- from an unregistered customer. bassy in Kampala.

g. Airtel Money transfer • e-Water Payment Service The Bank offers Airtel Money services for send- The Bank accepts payments for National Water ing and receiving money by both customers and and Sewerage Cooperation (NW&SC) water bills non-customers. irrespective of whether the customer has an account with the Bank or not. Customers can pay h. Ezee Money services their bills by cash or cheques directly at the coun- Ezee Money Agents collect deposits on behalf of ter free of charge, receive a receipt with an in- the Bank, transfer money and make bill payments stant SMS notification for credit of the customer on behalf of the Bank customers. NW&SC or alternatively sign a Standing Order for Direct Debit option. i. Telegraphic Money Transfers Customers are able to transfer money instantly • e -Tax Payment Service to and from their accounts on locally and interna- The Bank accepts payments for Uganda Revenue tional basis/Instant outward and inward interna- Authority (URA) taxes irrespective of whether tional money transfers. the customer has an account with the Bank or not. People intending to pay taxes deposit cash 10.5.7 Other Services directly at the counter and receive a payment receipt for delivery to URA. a. Foreign exchange trading The Bank offers attractive rates for buying and • e-NSSF Contributions Collection Service selling of foreign currencies including USD, GBP, The Bank on behalf of the National Social Se- Euro and Kenya Shillings. curity Fund (NSSF) accepts payments from organizations that have registered to remit their b. Bulk Salary processing employees social contributions. The cash for the The Bank offers instant processing of bulk salaries contributions is credited directly to NSSF’s Col- of employees of private companies, public lim- lection Account held in the Bank ited companies and nonprofit organizations who receive their salaries through centenary bank. • e-UMEME Payment Service c. SMS Transaction Alerts The Bank accepts payments for UMEME bills ir- A Short Message Service (SMS) banking facility respective of whether the customer has an ac- that enables mobile phone users who are account with the Bank or not. Customers can pay

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their bills by cash or cheques directly at the customer complaints, good customer service counter free of charge, receive a receipt with and dedicated Team. Human Resource Division an instant SMS notification for credit of the cus- was recognized for timely response, feedback tomer UMEME account. and delivering as promised.

• Kampapa Capital City Authority (KCCA) b. Increased Employee Engagement The Bank collects taxes like trade licenses, The Human Resource Business Partnering ground rent for KCCA (HRBP) model was adopted and the Unit was set up and staffed with a Chief Manager and 2 Managers to effectively deliver the HR strategy 10.6 Employee empowerments bank wide and enhance engagement. 45 Branch- and engagement es were visited by HR in the year 2014. The purpose of this program was to gain an under- Employee empowerment and engagement are standing of the Branch Performance regarding HR strategies that enable employees to progres- “THE BIG SIX”, Share the 2013 Climate Survey sively make more meaningful decisions about findings, remedial interventions hitherto imple- their jobs. Employee empowerment helps em- mented; new HR initiatives as well as respond to ployees contextualise and own their work, take identified staff concerns. The Business Partner- responsibility for their results, and helps employing team is currently engaging other line divisions ees serve customers at the level of the organi- to provide more HR solutions to various issues. zation where the customer interface exists. To attain the goals above, the Bank empowers and c. Plenty of Contexts engages its employees in several ways such as Most leaders carry lots of information in their those highlighted below; brains. Unfortunately, many employees do not get the benefit of all that information, yet they a. Open Communication are expected to take action and make good de- Staffs’ views, ideas and value-adding input is cisions as if they understood every nuance. The sought, valued and used to improve motivation, Bank has made strides to ensure that important performance and business environment. The information is shared with all staff in a structured Bank provides to its employees structured ways and consistent manner through the Corporate through which they make their thoughts, feel- Communications department including staff ings, concerns and recommendations on vari- transfers, promotions, new joiners, exits, New ous issues known easily and regularly through Core Banking FAQ’S among other things. An Email, Newsletter, branch and centefusion staff employee who clearly understands the values, meetings as well as the bank wide annual climate purpose and direction of the company can easily survey. The Climate Survey is an avenue through make consistent decisions and take appropriate which staff voice their views and concerns to action at any junction. management thus contributing collectively and positively towards the strategic planning process d. Career Growth and Self-Improvement in the Bank. Hitherto, the Bank has undertaken The Bank assists its employees set a plan for four surveys: 2006, 2009, 2011, and 2013, the growth and rewards them as they advance latest being on-line. The primary aim of the suc- through internal rotations, promotions and re- cessive Bank Climate surveys is to track and designation/re-deployments. That way they are evaluate progress made in addressing identified enabled to apply their newly-learned skills as employee work related challenges and risks. It they step up to leadership opportunities. As at also captures new issues and enables develop- end of 2014, 45.83 % of Management positions ment of appropriate empirical remedial strate- were filled internally and approximately 77.4% gies/initiatives to enhance staff engagement, (151) other positions filled internally through re- retention, productivity as well as Bank business designations, and promotions. performance and growth generally. e. Performance, Recognition and The Climate Survey 2013 identified and rated Reward Management four best performing H/O divisions: Business i. The Job Evaluation Project led by KPMG was Technology for prompt feedback & very com- conducted with Job Evaluation undertaken for mitted Team, Credit for meeting targets, timely the agreed benchmark jobs. A new and more delivery and teamwork, Operations for reduced simplified bank wide job grade and salary struc-

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ture based on scientific approach was established g. Human Capital Development for the Bank. As a result, an internal equity and Programs, 2014. retention salary review was implemented in July In the realm of human capital development, 2014. greater emphasis was laid on Management development & Advanced Leadership training for top ii. The Employee of the month program initiative and middle level Management employees (mak- was approved and implemented effective Sep- ing it possible for approximately 46% of the va- tember 2014. In September 30 staff were recog- cant management positions to be filled internal- nized and rewarded and 39 in October. ly). Using the 70:20:10 employee development approach, the Bank placed more emphasis on iii. The Merit Award proposal was reviewed: a to- on-job training, coaching and mentoring to fast tal of 148 staff were recognized and rewarded track staff capability to contribute to the Bank’s for continuous long service, excellent sports fast growth. The Library, getAbrastract and the personality and overall branch performance. e-Learning delivery Channel, “Click –Campus”, The following 3 branches qualified for and were that enabled the Bank to provide diverse train- awarded the best branch award: Kasese (Gold), ing and development interventions cost effec- Kabalagala (Silver) and Nateete (Bronze). tively and efficiently across the network, within approved budget limits. Through the eLearning iv. Staff were paid bonuses for 2013 overall com- program the Bank saved a total of 1,674 man pany performance as well as individual contribu- hours and UGX 550M, while it managed to wid- tion. en the scope and coverage of the Bank staff development population. f. Staff compensation and benefits A number of achievements were registered in h. Training Budget Performance 2014; as highlighted below: Overall training and development budget performance realised a positive variance of UGX 477M i. Staff Retirement scheme (22%). The New Core Banking Project training • Claims settlement turnaround time improved vote accounted for 43% of the budget, and pro- greatly in 2014. ject training commenced three months to end of • Amendment of the Trustee Deed was made in the year. liaison with the amended law. • Members earned 15.7% interest, the highest i. Staffing highlights as at 31st December since inception of the scheme. 2014. • Online system was launched and PIN numbers As at 31st December 2014, total head count to access member statements were availed to all stood at 2001 against 1867 staff as at December scheme members 2013. 210 staff were recruited in 2014, com- • A proposal on Board of Trustee composition pared to 218 the previous year. made to the Sponsor, in relation to the amended Among the new recruits 40% (85) were Loans law. Officers, 29% (60) were Banking Officers, 11% (23) were Office Attendants and 20% (42 only) ii. Staff Medical care were in other roles. The bank continues to provide medical care to The annual staff turnover rate declined to 5.2% its employees and their eligible dependants un- in 2014 down from 7.0% in 2013, due to contin- der two Medical Insurance service providers ued staff retention and development initiatives. (AAR & Jubilee Insurance Company of Uganda) The average age of staff stood at 33.4 years compared to 33.5 years as at December 2013. The iii. Occupational Safety and Health (OSH) average period of service across the board was • OSH guidelines were developed and communi- 5.8 years compared to 5.1 years the previous cated to all staff year. • OSH committees were formed across all busi- Females constituted 907 staff (45.3%) while ness units males constitute 1094 (54.7%) of the staff popu- • In compliance with the Labour Law, the Bank lation, compared to 40.6% female and 59.4% paid workplace occupational safety and Health male as at 31st December 2013. non-tax revenue of UGX 14.7M/= for 63 work- A synopsis of Senior Management gender di- places for the period November 2014 to Nov versity stood at 69.3% male and 30.7% female 2017 compared to the ratio 73.2%:26.8% in 2013, reflecting gradual improvement in gender mix profile.

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The table below illustrates the comparative picture over the last 3 years; Table 1 Senior Management Diversity

Position Title/Category 2014 2013 2012

Male Female Total Male Female Total Male Female Total

Executive Directors 2 - 2 2 - 2 2 - 2

General Managers 7 3 10 7 3 10 8 2 10

Chief Managers 16 6 22 15 6 21 16 4 20

Head Office Managers 35 23 58 38 19 57 27 16 43

Branch Managers/SCH 46 15 61 47 12 59 31 8 39

Total 106 47 153 109 40 149 84 30 114

10.7 Corporate Social Investment

Centenary Bank is committed to sustainable value-creation for our stakeholders. One of the ways we achieve this it through our Corporate Social Investment initiatives, which are aligned to the bank’s strategic objectives. The initiatives focus on contributing to development of communities countrywide. The bank’s Corporate Social Investment (CSI) policy is that initiatives are funded by up to 1% of the previous year’s after-tax income. The allocation on the banks CSI increased by 5% from Ugx 550M in 2013 to Ugx 580M in 2014. The number of activities increased by 43% from 211 to 303 and people reached remained averagely the same between 15M and 16M.

THE GOALS OF THE BANK’S CORPORATE SOCIAL INVESTMENT WERE;

To achieve Centenary Bank’s To support To reinforce social and environmental communities through our values. objectives of contributing partnerships and social to sustainable and environmental development of society. projects.

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OUR TARGETS FOR 2014 WERE AS BELOW;

To train 300 youth in finan- To expand the scope To measure impact of cial literacy. of initiatives done for particular activities communities done in 2013

117 million was invested in Financial Literacy training EDUCATION Over 12,500,000 people were impacted through different channels

During the year, the bank invested UShs 117 million in Financial Literacy training for youths and small and medium enterprises. The youths training was done in partnership with International Labour Organisation (ILO) where 390 youths in business acquired skills in budgeting, record keeping, costing and financial forecasting.

The training for Small and Medium Enterprises (SME’s) was implemented together with Pri- vate Sector Foundation Uganda (PSFU) and the activities included evaluation of market vendor trainings previously done in 2013, classroom trainings, radio talk shows, newspaper articles and training through digital versatile disc (DVD) recordings. Over 12,500,000 people were impacted through the channels. The trainings focused on Book keeping, Personal Finance, Saving and In- vestment and Managing Family Businesses and Uses of Banking Facilities.

Youths under the Consortium for enhancing University Responsiveness to Agribusiness Development Limited (CURAD) with financial literacy training material just after the training.

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HEALTH ENVIRONMENT

‘Bridging the Cancer Gap’ campaign Close to 14 million 167 million was contributed was invested in environment preservation Ushs 67million was used to organise the cancer run 75 solar systems Ushs 100million was used for raising cancer awareness were lent out at a subsidized price

In 2014, the bank continued to invest in raising cancer awareness in the ‘Bridging the Cancer Gap’ campaign. This In 2014, the bank continued to was in partnership with Rotary District 9211 and St. Raph- roll out clean energy solutions ael of St. Francis Hospital Nsambya. Out of the Ushs 167 in its off-site Automated Teller million that was contributed, Ushs 67million was used in Machines (ATMs) by using the organising the cancer run whose proceeds completed the uninterruptable power supply cancer ward at St. Raphael of St. Francis Hospital Nsambya (UPS) system to back up grid and Ushs 100million was used to raise cancer awareness power. 10 more ATMs were through other initiatives namely the family health days, the connected to this power, an Rotary District conference and leadership events. increase of 100% from 2013. This replaces the use of gener- ator power. The bank has also continued with the Ministry of Energy partnership to lend solar systems bought at a subsidized price; and in 2014, 75 systems were lent out. The bank further invested close to 14M in community activities that preserved the environment; these included donations of refuse bins and cleaning activities. The Bank also uses automatic switches Participants during the 2014 Cancer Run in all branch security lights and signages.

General Manager Finance, Mr. Godfrey Byekwaso (in blue) Mpigi Branch Staff donating dust- parking medicines during a Rotary Health camp in Kayunga bins to Gombe Hospital. district that the bank participated in.

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

THE SOCIAL MISSION OF THE CHURCH THE NUMBERS For the year under review Over 138 million allocated in supporting the church through direct sponsoring of various programmes, events and publications country wide

Centenary Bank owes its foundation to the Social Mission of the Increased Catholic Church. It is with this background that the Bank endeav- allocation on ours to support the church in its various activities both those con- the banks CSI cerning social development and the evangelism of people. The Bank allocated over 138 million in supporting the church through 5% direct sponsorship of various programmes, events and publications countrywide.

580 million Was allocated on the banks CSI

Increased number of activities 43% Mukono branch staff donating shs20m to Lugazi diocise team led by Rt. Rev . Matthias Ssekamanya. The contribution was towards their computerization project. 303 activities OTHER COMMUNITY ACTIVITIES Were carried Over 100M invested in community initiatives out by the bank In addition to the above activities, Centenary Bank supports communities through participating in developmental activities and direct donations. The bank invested over Ugx100M in community initiatives in 2014.

15 to 16 million People were reached

Ishaka, Ntugamo, Kanungu, Najjanankumbi and Mukono branches donate 30 computers to schools in their communities.

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10.8 List of Global Reporting Initiative (GRI) indicators

The index below comprises indicators from the GRI Sustainability Reporting Guidelines. The index has been abridged to relate it to the Bank’s disclosure status.

Vision and Strategy

PERFORMANCE TOPIC DISCLOSURE DESCRIPTION INDICATORS PAGES

1.1 & 1.2 Vision Mission and Ownership 6 Mission Statement

PROFILE

2.1 Name of reporting organisation 36 Centenary Rural Development Bank Limited

2.2 Major products or services, including 84 - 88 Financial products and services brands if appropriate

2.3 Operational structure of the organisation 13 -21 Executive management, Corpotare Governance

2.4 Description of major divisions, operating 13 - 21 Executive management, companies, subsidiaries and joint ventures Corpotare Governance

2.5 Countries in which the organisation’s 36 General Information located

2.6 Nature of ownership 6 Ownership

2.7 Nature of markets served 84 Financial products and services

2.8 Scale of the reporting organization’s:

Number of employees 90 Staffing highlights

Products produced/services offered 84 - 88 Financial products and services

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PERFORMANCE TOPIC DISCLOSURE DESCRIPTION INDICATORS PAGES Net sales 33 Statement of Comprehensive Income Total capitalization 34 Statement of Financial position 2.9 List stakeholders 80, 82 - 84 Related parties Report, Share- holder, Customer and external stakeholder engagement 2.10 Contact details 99 -102 Bank contact information 2.11 Reporting Period 32 Report of the Independent Audi- tor 2.12 Date of most recent previous report 31 December 2013. 2.13 Report Scope 32 Report of the Independent Audi- tor 2.14 Significant changes in size, structure, ownership, 8 & 11 Chairman’s Statement products/services Managing Director’s review 2.15 Basis for reporting 36 - 81 Summary of Significant accounting policies 2.16 Restatements of information 36 - 81 Summary of Significant accounting policies 2.17 Decision not to apply GRI principles Applied on a limited scale 2.18 Accounting Criteria/definitions 36 - 81 Notes to financial ststements 2.19 Significant changes in measurement methods 36 - 81 Summary of Significant accounting policies 2.20 – 2.21 Independent assurance 32 Report of the Independent Audi- tor 2.22 Information availability 99 -102 Bank contact information

Governance structure and management systems

3.1-3.6 Governance structure of the organisation, 14 - 21 Corporate governance including major committees under the board of directors that are responsible for strategy and oversight

Economic performance indicators

EC1 Net sales 33 Statement of Comprehensive Income EC2 Geographic breakdown of markets 99 - 102 Branch Network EC3 Cost of all goods and services purchased 33 Statement of Comprehensive Income EC4 Percentage of contracts paid in accordance with 90 Staffing highlights agreed terms EC5 Total employee remuneration 81 Value Added Statement For the year ended 31 December 2014 EC7 Increase in retained earnings 35 Statement of changes in Equity EC8 Total taxes of all types paid 81 Value added statement/ income statement EC10 Donations by type 92 - 94 Coporate Social Investment

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PERFORMANCE TOPIC DISCLOSURE DESCRIPTION INDICATORS PAGES LA1 Breakdown of workforce 90 Staffing highlights LA2 Net employment creation and average 90 Staffing highlights turnover LA3 Union representation Not applicable LA4 Policies/procedures on negotiations with 90 Human capital development employees over changes in operations LA5 Occupational accidents and diseases 90 Staff medical care LA6 Health and safety committees 90 Staff medical care LA7 Injury, lost days and absentee rates and work- Not applicable related fatalities LA8 Policies and programmes on HIV/AIDS 90 Staff medical care LA9 Average hours of training per employee 89 Employee empowerments and engagement LA10 Transformation policies and procedures 89 Employee empowerments and engagement LA11 Composition of senior management and 91 Senior Management Diversity corporate governance bodies

Human rights

HR1 Policies and guidelines dealing with human rights HR2 Consideration of human rights impacts in making business Human rights decisions recognized, observed and HR3 Policies/procedures to evaluate human rights performance embedded in the within supply chain Ugandan’s HR4 Global policy/procedures preventing discrimination of any Constitution. form No evidence of HR5 Policy on freedom of association independent of local laws transgressions but Bank’s Poli- HR6 Policy excluding child labour cies not formally HR7 Description of policy to prevent forced and compulsory codified. labour SO4 Awards received for social, environmental and ethical Managing Director’s performance report

Product responsibility

PR1 Policy for preserving customer health and safety Customers/ Environment PR2 Product information and labeling policies/procedures Customers

Centenary Bank 97 Annual Report 2014 CENTENARY RURAL DEVELOPMENT BANK LTD

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 BANK CONTACT 11 INFORMATION

Principal Place of Business Company Secretary/General Manager, Legal and Registered Office Mrs. Peninnah T. Kasule Mapeera House Tel: +256 417 202117 Plot 44-46, Kampala Road E-mail: [email protected] P. O. Box 1892 Kampala Tel: +256 414-251276/7 General Manager, Credit Toll free line: 0800 200555 Mr. Joseph Lutwama Fax: +256 414-251273/4 Tel: +256 417 202501 E-mail: [email protected] E-mail: [email protected] Website; http://www.centenarybank.co.ug General Manager, Business Technology Mr. George T. Thogo Secretary Tel: +256 417 202123 Peninnah Tibagwa Kasule E-mail: [email protected] Mapeera House Plot 44-46, Kampala Road General Manager, Human Resources P. O. Box 1892 Mrs. Florence Mawejje Kampala Tel: +256 417 202801 E-mail: [email protected] Auditors Ernst & Young General Manager, Operations Certified Public Accountants Mr. Joseph Kimbowa Plot 18 Clement Hill Road Tel: +256 417 202901 P. O. Box 7215 Kampala E-mail: [email protected] Uganda General Manager, Finance Mr. Godfrey Byekwaso Correspondent Banks Tel: +256 417202701 1. National West Minister Bank PLC- UK E-mail: godfrey.byekwaso @centenarybank.co.ug 2. Citibank NA New York - USA 3. Deutsche Bank AG - Germany General Manager, Business Development 4. Deutsche Bank Trust Company - USA Mrs. Lugalambi Beatrice 5. Co-operative Bank of Kenya Tel: +256 417 202301 6. Citibank N.A – Kenya E-mail: [email protected] 7. Ivory Bank–South Sudan 8. Sparkase Aachen Bank-UK General Manager, Risk 9. I&M Bank–Rwanda Mr. Denis Echeru 10. CRDB – Tanzania Tel: +256 317 202108 E-mail: [email protected]

EXECUTIVE MANAGEMENT General Manager, Corporate Services Mr. Arnold Byansi Bernard Managing Director Tel: +256 317 202408 Mr. Fabian Kasi E-mail: [email protected] Tel: +256 417 202124 E-mail: [email protected] General Manager, Audit Mr. Michael Nyago Executive Director Tel: +256 417 202608 Dr. Simon M.S. Kagugube E-mail: [email protected] Tel: +256 417 2120 E-mail: [email protected]

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BRANCH NETWORK Gulu Branch Kagadi Town Council Plot 426, Gulu Street P.O. Box 35 Kagadi Branch opened in 2014 P. O. Box 957 Gulu Tel: +256 392 892372 Mbarara Corporate Branch Tel: +256 471-432572 Plot 28 Masaka Road, Kamuli Branch P.O B0x 662, Mbarara Hoima Branch Plot 4, Kitimbo Road Tel: +256 485 420624 Pax Arcade, Fort Portal Road Kamuli Town Council P. O. Box 472 Hoima P. O. Box 168 Tel: +256 465-440193 Tel:+256 414 663226 Continuing Branches +256 392-751733 Kanungu Branch Apac Branch Ibanda Branch Kanungu – Kihihi Road Plot 22 Akokoro Road Plot 4, Main Street Kanungu Town Council Apac Town P. O. Box 395Ibanda P.O. Box 20 Tel: +256 414 663211 Tel: +256 485-426998 Tel: +256 414 663194

Arua Branch Iganga Branch Kasese Branch Plot 3, Avenue Road Plot 43 Main Street Plot 213, Portal Street P. O. Box 246 Arua Iganga town P. O. Box 87 Kasese Tel: +256 476-420013 PO Box 101 Iganga Tel: +256 483 444041 +256 372-260001 Tel: +256 434242143 +256 483 444424

Bugiri Branch Isingiro Branch Kapchorwa Branch Plot 117, Grant Street Plot 17A, High Street Plot 1, Market Street Iganga-Tororo Highway Isingiro Town Council P. O. Box 286 Kapchorwa P. O. Box 137 Bugiri P. O. Box 1892 Kampala Tel: +256 414 663208 Tel: +256 434-250074 Tel: +256 414 663235 Kayabwe Branch Bwaise Branch Ishaka Branch Plot 64, Kayabwe Plot 526 Bwaise- Kawempe Plot 432, Rukungiri Road Masaka road Bombo Road P. O. Box 36 Bushenyi P.O Box 1063 Masaka P .O. Box 1982 Kampala Tel: +256 414 663230 Tel: +256 414 663223 Tel: +256 414-566096 Jinja Branch Kayunga Branch Bwera Brach Plot 6, Nizam West Road Block 123, Plot 300, Plot 102, Bukonjo Block (Opp. Uganda Main Street, Tel: +256 712 751729 Telecom Office) Kayunga Central Bwera Town P. O. Box 1767 Jinja P.O Box 18257, Kayunga Tel: +256 434-122007 Tel: +256 414 663207 Entebbe Road Branch +256 434122012 Plot 7, Entebbe Road Talenta Kiboga Branch House Kabalagala Branch Plot 101, Hoima Road P. O. Box 1892 Kampala Block 245, Plot 551, P. O. Box 28 Kiboga Tel: +256 414 506009 Kabalagala Town, Tel: +256 414 663224 P. O. Box 1892 Kampala Entebbe Road Annex Tel: +256 414-501490 Kikuubo Branch Plot 18/20, Entebbe Road Annex 1st Floor, Unifam Plaza P. O. Box 1892 Kampala Plot 15, Nakivubo Road Tel: +256 414 506009 Kabale Branch P. O. Box 1892 Kampala Plot 129, Kabale Road Tel: +256 414 258795/91 Fort Portal Branch P. O. Box 385Kabale Golden Jubilee Building Tel: +256 486 423671 Kireka Branch Fort Portal- Kasese road Plot 1653, Kireka P. O. Box 124 Fort portal Kagadi Branch Tel: +256 414 663193 Tel: +256 483-422791/8 Plot 69 Prime House Fort Prtal- Kyenjojo Road

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Kitgum Branch Mapeera House Branch Namirembe Road Branch Plot 7/8, Ogwok Road Plot 44/46, Kampala Road Plot 16, Namirembe Road P. O. Box 147 Kitgum Plot 2, Burton Street P. O Box 25229. Kampala Tel: +256 414 663200 P. O. Box 1892 Kampala Tel: +256 414-345295 Tel: +256 317 202287 Kisoro Branch Najjanankumbi Branch Plot 27 Kisoro- Kabale Road Masaka Branch Plot 1032, Entebbe Road PO Box 10 Plot 6, Edward Avenue Freedom City Mall, Tel: +256 486 430026 P. O. Box 1063. Masaka Entebbe Road Tel: +256 481-420406 P. O. Box 1892 Kampala Koboko Branch Tel: +256 414 501222 Plot 19, Central Road Mbale Branch Koboko Town Plot 54, Republic Street Nateete Branch P. O. Box 194 Kampala P. O. Box 818 Mbale Plot 3, Old Masaka Road Tel: +256 414598648 Tel: +256 454-434002 P. O. Box 1892 Kampala Tel: +256 414-660637/1 Kotido Branch Mbarara Main Branch Block 20, Moroto Road Plot 25/27, High Street Ntinda Branch Kotido Town P. O. Box 1352 Mbarara Plot 36 - 38 P.O Box 88 Kotido Tel: +256 485 421540 Ntinda Capital Shoppers Building Tel: +256 392751796 Ntinda-Nakawa Road Masindi Branch Tel: +256 414289844 Kumi Branch Plot 59/61, Masindi Port Road Plot 39, Ngora Road, Kumi P. O. Box 5 Masindi Ntungamo Branch PO Box 1892, Kampala Tel: +256 465-420000 Plot 4C, Tel: +256 414 663222 New Mbarara-Kabale Road Mityana Branch P. O. Box 136 Ntungamo Kyenjojo Branch Plot 50, Corner House Tel: +256 485 424012 Plot 2/6, Nyantungo Road P. O. Box 156 Mityana P. O. Box 1077 Kyenjojo Tel: +256 464-442791 Nebbi Branch Tel: +256 414 663196 +256 414 -663215 Plot 1/3/5, Bishop Orombi Road P. O. Box 179 Nebbi Kyotera Branch Moroto Branch Tel: +256 414598643 Plot 6, Kyotera Road Plot 25, Lira Street. Moroto Town P. O. Box 116 Kyotera Tel: +256 414 663202 Paidha Branch Tel: +256 481-432676 Plot 16, Arua Road Mpigi Branch Tel:+256 716 420013 Lira Branch Plot 106, Butambala Road Obote Avenue Mpigi Town Rubaga Branch Plot 4-7, Soroti Road Tel: +256 414 664508 Rubaga Cathedral P. O. Box 817 Lira Admission block Tel: +256 473-420124 Mubende Branch PO Box 1892 Kampala Plot 20, Main Street, Tel:+256 414 271453 Lugogo Branch Mubende Town Plot 3A2 & 3A3 Sports Lane P. O. Box 332 Mubende Rukungiri Branch Forest Mall, ground floor, Tel: +256 464-444059 Plot 13 Republic Road Rukungiri unit G3 Lugogo +256 464-444068 P. O. Box 353 Rukungiri P. O. Box 1892 Kampala Tel: +256 486-442177 Tel: 0414 663220 Mukono Branch Jinja Road Soroti Branch Lyantonde Branch P. O. Box 790 Mukono Plot 36, Gweri Road Plot 226, Lyantonde Town Council Tel: +256 414-291618/9 P. O. Box 420 Soroti P. O. Box 49, Lyantode Tel: +256 414 663205 Tel: 0382280689 Nakivubo Road Branch Mukwano Arcade Tororo Branch Makerere Branch (Opposite St. Balikudembe Plot 3, Uhuru Drive St. Augatine’s Student Centre Market) P. O. Box 1146 Tororo P. O. Box 1892 Kampala P. O. Box 6171Kampala Tel: +256 454-445018 Tel: +256 (0) 414 535750 Tel: +256 414-507047/6

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Wakiso Branch Bweyogerere town, Katwe Plot 249, Wakiso District Kampala-Mukono highway Block 7, Plot 1230, Kibuga Headquaters Road Opposite Total Petrol Station, Katwe P. O. Box 69 Wakiso Entebbe –Kitooro Tel: +256 414-380501 Block 438, Plot 505 Nkumba Kawempe Kobil petrol station Wobulenzi Branch Gulu Near Kawempe market Kasana Luweero Diocese Lacor Hospital (KALUDO) House Juba Road Kawuku Plot 249, Gulu Road Block 419/420, Plot 311, Entebbe P. O. Box 186 Wobulenzi Gulu road Tel: +256 414 620006 Andrea Olal Road +256 414 620468 Opposite Shell petrol Station Kyengera Devine Mercy Arcade, Masaka road Gayaza OFF SITE ATMs Near Mirembe Supermarket Lira Gayaza Road Gapco Petrol station ATMs opened in 2014 Olwol Roads Iganga Dokolo Plot 43, Main Street, Iganga town Lugazi Angwenchibange Parish Plot 94, Jinja road. Lugazi Akaidebe Zone, Parcel Jinja Road Dokolo Town Coffee Development building Luwum Street (3 ATMs) Plot 15, Kampala Plot 25, JBK Plaza, Kakiri Block 204 Kakiri, Plot 287/288 Kasubi Luzira Plot 3648, Next to Bishop Cyprian Kihangire Lukaya Petrol City Fuelling Station SS, Port Bell road Block 185, Plot 101 Mutuba II Kasubi town Buddu, Lukaya Makindye Kabalagala Plot 1100- SIM Towers, Makindye Matugga Shell Petrol Station, Kabalagala Opposite Makindye Military Block 91, Plot 5 Barracks St. Francis of Assis Catholic Parish Kabwohe Sheema Block2, plot 521, Makerere Hill Rushere Kabwohe, Bushenyi district Ham Towers, Tuskys Shopping Mall Plot 18 Rushere, Near Wandegeya Trading Centre Kiruhura Kajjansi Block 383 Makerere University Business School Plot 162, Opp. Kajjansi market (MUBS) Continuing ATMs Nakawa Capital Shoppers Plot 123, Sebei Lane Arua Kalerwe Catholic Center Building, Gayaza road next to Pearl Micro Mbale (2 ATMs) Near Christ the King Church, Finance Canos Guest House, Naboa road Avenue Road Kalisizo Mbarara Bugolobi Ziladamu building, Plot 2-4 Plot 28, Masaka Road Plot 69-71, Spring road, New Masaka road Mbarara Town Middle East Hospital & shopping complex building Bugolobi Kamwokya Mpigi Boxing Supermarket Kamwokya Block 92 Mpigi Town Council Busia Market Plot 106, Butabala road Plot 93, Customs road, Busia town Park village, Mpigi Kasana Luweero Bweyogerere Gulu highway Mulago Block 236, plot 232, Next to Diocesan Cathedral Business Centre near Hospital UPET Petrol station Chapel, Mulago Hospital

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Mini Price (2 ATMs) Ntinda Plot 48/50 Ben Kiwanuka Street Ntinda Road Trading Centre Plot 5A (shop B) opposite the mosque Mukwano Shopping Mall (3 ATMs) Nyendo Mukwano Arcade Buiding Plot 495, 497, 498 JOBASCA Building, Nakawa Next to St. Joseph’s Nyendo Plot 38, Jinja Road Catholic Church Shell Petrol station Kitovu Road, Nyendo Masaka

Nakulabye Oasis Mall Road Master Hotel, Plot 589 Nakumatt Shopping Mall, Balintuma road Yusuf Lule road, Kampala

Namugongo Rwebikona Block 222 plot 146 Plot 43, Fort Portal road Namugongo road towards the Uganda Martyrs Catholic Shrine Sironko Plot 20, Block D, Nansana Kapchorwa road Masitowa Nansana, Hoima road Sironko town

Ndeeba Wandegeya (2 ATMs) Block 16, Plot 553 Plot 166, Nsike at Christine Motel Next to Hotel Catherine Wandegeya- Kampala

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Centenary Rural Development Bank Limited. Head Office: Mapeera House,Plot 44-46, Kampala Road, P. O. Box 1892 Kampala Tel: +256 414-251276/7 Toll free line: 0800 200555 Fax: +256 414-251273/4 E-mail: [email protected] Website; http://www.centenarybank.co.ug