Annual Report 2015

Head Office

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Annual Report 2015

CONTENTS ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

About Us 04

Financial Statements

Branch Network 10

Statement of Comprehensive Income 26

Corporate Profile

Statement of Financial Position 27

Chairmans’ Statement 14 Vice Chairmans’ Statement 16 Managing Director’s Statement 18

Statement of Changes in Equity 28 Statement of Cash Flows 30 Notes to the Financial Statements 31

Directors’ Report 21 Statement of Directors’ Responsibilities 24 Independent Auditors’ Report 25

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Annual Report 2015

About us

Crane Bank, founded in the year 1995, now in its 21st year of operations has grown to become one of Uganda’s largest locally owned Ugandan commercial banks; the 4th largest in terms of assets and 5th in terms of deposits. Crane Bank has provided financial services to corporate and retail sectors in Uganda for a number of years, largely focusing on Micro, Small & Medium enterprises (SMEs). The Bank aims not only to provide the best services at the most economical terms to its customers, but also to encourage the culture of banking within the unbanked population. The banks objective is to make banking as easy as possible, by being accessible though its wide network of branches and through educating the rural population about the benefits of banking with a large emphasis on promoting the culture of saving for the benefit of society and overall growth of the country. The Bank provides a wide range of financial products and services, through its nationwide network of 46 branches (23 branches located within Kampala and 23 branches located across the regions of Uganda), over 100 ATMs and Crane Bank Rwanda, a 100% subsidiary which has

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2 branches within Kigali and Crane Financial Services (licenced stock broker from Uganda Securities Exchange). Crane Bank’s philosophy of “Serving to Grow, Growing to Serve” and making banking “Easier thank you think” by increasing accessibility and convenience to its customers remains at the forefront of its objective demonstrated by plans to launch 3 more branches during the year Crane Bank has a team of over 750 professionals including a management team consisting of 110 experienced bankers with over 10 years of experience including qualified Accountants and Risk Managers. The board of Directors consists of experienced entrepreneurs and professionals with diverse backgrounds. The team at Crane Bank has extensive expertise in all areas of banking including Traditional Banking, Treasury, International service, Credit, Retail / Wholesale banking and IT. Crane Bank has been awarded the Bank of the Year award for the 10th time in 2015 by The Banker magazine in conjunction with “The Times”, UK. Crane Bank has been also awarded “The Trade award 2015” by Commerz Bank in addition to others accolades / awarded by Uganda

Annual Report 2015

About us

rating agencies such as The Best Customer Focus Award 2015,The East Africa Responsible Business Award 2015 and The Consumers Preference Award 2015. Crane Bank’s products and services suite has the most innovative products in the region. Along with the Core Banking products tailor made to meet the needs of its clients, it offers a range of accounts and services including:

Accounts • • • • • • • • •

Crane Access Account Crane Saving Account Crane Current Account Crane Fixed Deposit Crane Kids Account Crane Regular Account Maisha Access Account Maisha Saving Account Maisha Fixed Deposit

A shilling saved, a shilling earned.

Services

• • • • • • • • • • • • • • •

Internet Banking Solutions (Corporate / Personal) Payments (URA, NWSC, UMEME, KCCA, NSSF, YAKA, PAYWAY) Money Transfer Service (MoneyGram, Western Union, Xpress Money) Foreign Exchange Service ( Treasury Service) Electronic Fund Transfers (RTGS, SWIFT and TTs) School / University Fee Collection (GU, VU, IUIU, KYU and MUK) Bulk Salary Payments SMS & Email Alerts Agriculture Loan / SME Loans/ Salary Loan Term Loans / Overdraft facilities EIB / ABI Loans Trade Finance (LC, BG etc) 7 Days Banking (selected branches) Extended Banking Hours (selected branches) 24 Hour Call center

By introducing Temenos T24-core banking software, which is capable of handling large volumes and the ability to handle innovative products and services required by our HNI and other clients, Crane Bank has further developed its products and service suite with the introduction of SMS and email alerts with the aim to allow customers to keep track of their finances without having to commute to a bank or ATM. During the year, Crane Bank launched it partnership with Xpress Money to broaden its Money Transfer Service, and Prudential Uganda Ltd to launch a bundled product Crane Maisha with life insurance features, which is designed to

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Annual Report 2015

About us

allow customers to save towards their goals, while keeping a safety net for their loved ones in the event of a death or disability of the account holder. At Crane Bank we are dedicated not only to the financial well-being of our clients, but the well-being of their loved ones and therefore we strive to introduce new and innovative products to encourage saving. Crane Bank also exercises its corporate responsibility beyond its core business. More than 15,000 people benefit from the different initiatives as part of its commitment to society. Crane Bank supports communities in a range of ways, through organizing medical camps, contributing to educational centers, sponsorships of various activities,

Mission Statement

“We will be the preferred provider of financial services and solutions, connecting customers to opportunities. We will nurture long-term customer relationships by providing solutions that combine our technology, delivery channels, experience and financial strength. Our goal and purpose is to create customer loyalty, stakeholder value and employee satisfaction.”

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contributions of school fees, as well as educating the public on financial products. Through such initiatives, Crane Bank has been extremely successful in bringing a large number of non banking population in to the banking mainstream, by increasing accessibility through extended delivery channels, boosting their knowledge and understanding and attracting them with wide variety of affordable products and services delivered through higher standards of customer service, harnessing human skills and use of modern technology. The Bank continues to stand by its motto of “Serving to Grow, Growing to Serve” while aiming to make banking “Easier than you think”.

Vision Statement

“To be a leading Regional Financial Institution with the ability and capacity to provide quality and innovative banking services with unequalled customer experience, create value for all stakeholders.”

Annual Report 2015

Core Values Worthy of Trust and Integrity

• We stand firm for what is right, deliver on commitments, be resilient and trustworthy. • We operate in accordance to the highest standards in all our relationships with Customers, Suppliers, the Community, Regulators and it’s Stakeholders. • We conduct business by the principles of excellence, integrity and good corporate governance.

Customer Focused

• We are committed to providing outstanding customer experience with the aim of building long-term relationships built on trust, confidence and loyalty. • We focus on delivering innovative and responsive products of distinct quality. • We listen to our customers and deliver ever-increasing value in the markets we serve.

Saving with Crane Bank grows your business.

Teamwork and Collaborative Spirit

• We care about individuals and their progress, show respect, be supportive and responsive. • We encourage open dialogue and seek understanding. • We develop, motivate and reward employees who are committed to productivity, quality and teamwork.

Performance Driven

• We take a long term outlook, understand impact of actions on stakeholders, brand and reputation. • We are committed to driving leading, competitive levels of performance, act with urgency and intensity. • We peruse consistent growth in earnings and increasing returns for our stakeholders, as we commit to building the value of the company for the long term.

10 TIME WINNER

BANK OF THE YEAR THE BANKERS AWARDS 2015

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Annual Report 2015

Directors Mr. Joseph N. Biribonwa Dr. Sudhir Ruparelia Mr. Rasik Kantaria ** Mrs. Jyotsna Ruparelia Mr. Tom Mugenga Mr. Alex Rezida Mr. P. K. Gupta* Mr. Syed Anwar* Mr.Vivek Sharma*

- Chairman - Vice Chairman

- Ag. Managing Director - Executive Director - Executive Director

* Indian **Kenyan

Company Secretary Mr. S.R. Nayak

Bank’s Solicitors Masembe, Mukubuya, Adriko,Karugaba & Ssekatawa Advocates 3rd Floor; DTB Center, Plot 17/19 Kampala Road, P. O. Box 7166, Kampala, Uganda Oundo & Co Advocates Plot 1 Pilkington rd, 7th Floor,Southern Wing P. O. Box 11070, Kampala, Uganda

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Registered Office Crane Chambers, Plot 38, Kampala Road, P. O. Box 22572 Kampala,Uganda

Annual Report 2015

Management Executive Management

Mr. P.K. Gupta Ag. Managing Director Mr.Vivek Sharma Executive Director - Finance Mr. Syed Anwar Raza Executive Director - Operations

Senior Management

Mr. S.V. Ranga Babu General Manager Mr. Naresh Sharma Chief Manager Compliance, Corporate Communication and Banking Mr. J.J Shah Head of Kampala Branch & IT Mr. M.S.Varma Deputy Head of Kampala Branch Mr. Peter Opio Head of Operations Mr. R. Sivanandam Head of International Mr. Bongo Ahmed Head of Security Mr. Manish Gupta Head of Audit Mr. Haneefa M Head of Compliance Mr. Byabasaija Francis Kyamiiza Head of Human Resource Mr. S. Ramachandran Head of Credit

Branch Managers

Ms. Mutabaruka Edith Ingabire (Naalya) Ms. Nabukenya Adhela Tricia (Market Street) Mr. Nair Murali Krishnan (Hoima) Mr. Alam M.D Nasir (Jinja Road) Mr. Amogh J Rai (Ntinda) Ms. Kyorigaba Moraine (Ntungamo) Mr. Arun Gangadharan (Ndeeba) Mr. Arun Nambiar (Luwero) Mr. Bakul Sarkar (Lira) Mr. Bernard Kunya (IUIU) Mr. Chandrashekhar S. Salian (Mukono) Mr. Syed Zia Hyder Razvi (Abayita Ababiri) Mr. Syed Mohamed Akbar (Gulu) Mr. Arinaitwe Mactose (Ibanda) Mr. Joshi Vinay Balwant (Soroti) Mr. Joydeep Momaya (Kyengera) Mr. Kesavan Vijayan (Lyantonde) Mr. Malani Narendra Shankerlal (Jinja) Ms. Merab Kansiime (Luwum Street) Mr. Mohammed Asif (Nakivubo) Ms. Tusiime Carol (Najjanakumbi) Ms. Nanyondo Martha (Kikuubo)

Regional Managers

Mr. Syed Anwar Raza - Incharge of Central Region I Mr. S.V. Ranga Babu - Incharge of Central Region II Mr. P. A. Subramanian - Northern & Eastern Region Mr. Twinobusingye Fred - Western Region

Mr.Yogesh Mehra Head of Risk /Senior Manager Training Mr. Avinash Srivastava Ag. Head of Sales and Marketing Mr.Rakesh Gupta Senior Manager Finance Mr. Bala Subramanian Senior Manager International Mr. David Alex Otim Senior Manager International Mr. Umar Farid Senior Manager Operations Mr. Sam Mutunga Senior Manager IT Mr. Syed Zaki Hyder Senior Manager IT Mr. Praveen Das Thoppil Head of Money Transfer Services (MTS) Ms.Sheena Ruparelia Business Development Manager

Mr. Noel Nsubuga (Busia) Ms. Amanyire Robinah (Bugolobi) Mr. Pradyut Shukla (Kyambogo) Mr. Shakil Pathan Ismail (Masaka) Mr. Shinu John Zacharia (Malaba) Ms. Roshni Salian (Kireka) Mr. Sachin Khadtare (Iganga) Mr. Milton Okello (Royal Plaza) Mr. Shrivastava Amit (Mbale) Ms. Kyomugisha Connie (Rushere) Mr. Subramanian Krishnamoorthy (Mbarara) Mr. Kasaija Eddie (6th Street) Ms. Mwonge Magdalene (Entebbe Airport) Mr.Twinobusingye Fred (Kabale) Mr.Yadav Avdhesh (Makerere) Mr. Abiti Francis (Arua) Mr.Kuppusamy Raman (Kisoro) Mr. Matte Davis (Kyambogo University) Mr. Prem Mohandas (Entebbe) Mr. Vishal Chopra (Kabalagala) Ms. Twisingwire Betty (Kiseka) Mr. Onap Donald (Gulu University) Ms. Mandal Madhumita (Kisementi)

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Annual Report 2015

OUR BRANCHES ACROSS KAMPALA

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Annual Report 2015

Branches across Kampala

20. MUKONO

17. NTINDA 8. NAKIVUBO

23. KISEMENTI

6. KIREKA

19. NAALYA

10. MAKERERE UNIVERSITY

18. KYAMBOGO UNIVERSITY 7. JINJA ROAD

11. SIXTH STREET

1. HEAD OFFICE 2. MARKET ST

16. KYAMBOGO 3. ROYAL PLAZA 15. BUGOLOBI

4. KIKUUBO 22. NDEEBA

5. LUWUM ST

9. KISEKA 14. KABALAGALA

12. NAJJANANKUMBI 21. KYENGERA

13. ABAITA BABIRI

17. Ntinda Branch Plot No. 1B,Ntinda Road,Nakawa Kyaggwe,P.O BOX 515 Mukono,Uganda Tel:-0414 -289 971/72/73

KYENGERA BRANCH NOW OPEN FOR BUSINESS

20. Mukono Plot No. 18/20, Jinja Road Kyaggwe,P.O BOX 515 Mukono,Uganda Tel:-0414 -291041/2/3

Our 42nd branch is now open to serve you. Visit us today for a wide range of banking products and services that are designed to help you achieve your goals.

21. Kyengera KYENGERA BRANCH Plot No. 60/61, Block 333 P. O. Box 22572, Kampala, Uganda Tel:-(+256 414) 4341414 /4341420/345 PLOT NO 60 & 61 BLOCK 333 WEST BUGANDA, P.O BOX 22572, KYENGERA [email protected]

• Head Office - Kampala Rd • Sixth Street Branch • Kiseka Mkt Branch • Kikuubo Branch • Nakivubo Branch • Ntinda Branch • Kyambogo Branch • Kyambogo University Branch • Kireka Branch • Naalya Branch • Najjanankumbi Branch

• Abayita Ababiri Branch • Mukono Branch • Jinja Branch • Iganga Branch • Mbale Branch • Gulu Branch • Lira Branch • Arua Branch • Mbarara Branch • Kabale Branch • Masaka Branch

• Makerere University Branch • Hoima Branch • Soroti Branch • Kisoro Branch • IUIU Branch • Entebbe Branch • Entebbe Airport Branch • Jinja Road Branch • Luwum Street Branch • Kabalagala Branch • Malaba Branch

• Market Street Branch • Rushere Branch • Lyantonde Branch • Royal Plaza Branch • Bugolobi Branch • Busia Branch • Ibanda Branch • Ntungamo Branch

Meet a brighter tomorrow Crane Chambers, Plot No. 38, Kampala Road, P.O. Box 22572, Kampala, Uganda, Tel: (+256-41) 4341414, 4341420, 4345345, Fax: (+256-41) 4231578 www.cranebanklimited.com

22. Ndeeba Plot No. 93, Block 333 Mengo, Kibuga, Ndeeba P. O. Box 22572, Kampala, Uganda Tel: (+256 414) 270389, 270390, 2703915

23. Kisementi Crane Plaza, Plot No. 19, Copper Road. P.O Box 22572, Kampala, Uganda. Tel: (+256) 414 230 826 / 827

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Annual Report 2015

OUR BRANCHES ACROSS UGANDA

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1. Arua Plot No. 1, Adumi Road P.O. Box 1256, Arua Tel: +256 (0)476 420 108/9/13/14

2. Gulu Plot No. 23 Gulu Avenue P.O. Box 56, Gulu Tel: +256 (0)471 43 23 31/2, 432320/1

3. Lira Plot No 48, Lira Avenue P.O. Box 456, Lira Tel: +256 (0)473 420971/4

4. Soroti Plot No. 4, Kennedy Square P.O. Box 767 Soroti Tel: +256 (0)454 461007

5. Islamic University in Uganda (IUIU) Plot No. 67/75, IUIU Mbale Tel: +256 (0)454 433043

6. Mbale Plot No. 47, Republic Street P.O.Box 897 Mbale Tel: +256 (0)414 35764,34894, 35754,34876

7. Malaba Plot No 2-4, Tanga Road P.O. Box 5, Malaba Uganda Tel: +256 (0)454 442031/33/34

8. Busia P.O. Box 13 Plot No. 101 & 103, Customs Road Busia Tel: +256 (0)454 443191/192/194 Fax: +256 (0)454 443195

9. Iganga Plot No. 80 & 82, Main Street P.O. Box 105 Iganga Tel: +256 (0)434 242 488, 242490

10. Jinja Plot No. 55, Main Street P.O. Box 321 Jinja Tel: +256 (0)434 122 338/39/146 Fax: +256 (0)434 123 186

11. Entebbe P.O. Box 22, Kampala Road P.O. Box 1078 Entebbe Tel: +256 (0)414 321 631/2/3

12. Entebbe Airport Near Cargo/URA Customs Warehouse P.O. Box 1078 Entebbe,uganda Tel: +256 (0)41 4323207, 4323209, 4323212

13. Masaka Plot 2, Broadway Road, Masaka Tel: +256 (0)481 420 137/138 Fax: +256 (0)481 420 172

14. Lyantonde P.O. Box 1 Plot No. 5 Block 76,Lyantonde Tel: +256 (0)756 770 049/59 Fax: +256 (0)414 231 578

15. Hoima Plot 40, Main Street P.O. Box 252, Hoima Tel: +256 (0)465 440101

Annual Report 2015

Branches across Uganda

SUDAN

KAABONG

MOYO KITGUM

Atiak

1. Arua

KOTIDO

2. Gulu

PADER ABIM

23. Gulu University

MOROTO

LIRA

3. Lira AMURIA APAC

BU ND I

DO AM AI

BU GY O

HOIMA

NAKASEKE

22. Luwero

KIBOGA

KIBAALE

4. Soroti

Fort Portal

BUSHENYI

KAMULI

6. Mbale

KALIRO

MBALE

9. Iganga 10. Jinja 11. Entebbe

Mubende

Jinja

BUSIA

7. Malaba 8. Busia

12. Entebbe Airport

14. Lyantonde IR UNG

RUK

KENYA

13. Masaka MASAKA

18. Mbarara

L. Victoria KALANGALA

RAKAI

I

21. Kabale

KA

AMOLATAR

KAPCHORWA

16. Ibanda

19. Luweero Plot No. 18, Old Kabale Road,Ntungamo P.O Box 202 Tel: +256 (0)756 770087/86

BE R

Masindi

17. Rusherere

18. Mbarara Plot No. 51, High Street P.O.Box 403 Mbarara Tel: +256 (0)486 420220, 20223, 20224 20232, 20236

KATAKWI

15. Hoima

KYENJOJO

17. Rushere Plot No. 52-54, Block 68, Rushere Road P.O. Box 403 Mbarara Tel: +256 (0)756 770 065/035 Fax: +256 (0)414 231 578

DOKOLO

A KAYUNG

16. Ibanda Plot No. 52-54, Block 68, Rushere Road P.O. Box 44 & 46 Kamwengye Road,Ibanda Tel: +256 (0)485 426224, 485 426225, 485 426226 Fax: +256 (0)485 426227

DEM. REP. OF CONGO

19. Ntungamo

21. Kisoro

20. Kabale

Kikagati

RWANDA

20. Kisoro Plot No. 65/75, North Ward Kisoro Town Council Tel: 0486 430028

22. Luweero Plot No. 846, Block 652, Bulemeezi, Luweero. P.O Box 180, Luweero. Tel: 0756 770386, 0756 770390

23. Gulu University Branch DFI Block, University Avenue, Laroo Division P.O Box 56, Gulu, Uganda Tel: 0756 771565, 0756 771531

Mutukula

TANZANIA

Rwanda

Registered Address / Head Office Plot No 10249, Ville De Kigali Nyarugenge, Muhima, P.O Box 4312 Kigali, Rwanda, Tel: +250 25500900/902, Fax: +250 255000920, [email protected]

La Bonne Adresse Branch Plot 5447 La Bonne Adresse Building, Kn 76 Avenue de la Revolution, P.O Box 4312 Kigali, Rwanda, Tel:+250 25500902/904, Fax: +250 255000920, [email protected]

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Annual Report 2015

CHAIRMAN’S STATEMENT

Mr. Joseph N. Biribonwa Chairman On behalf of the Board of Directors, I present to you, the annual report for Crane Bank Limited for the year 2015. During 2015, Bank of Uganda (BOU) strengthened its monetary policy to ensure the annual inflation remained within its target of 5%. Depreciation of the Ugandan Shilling and increasing cost of living has increased inflationary pressures and to counter this, the Central Bank Rate (CBR) increased to 17%, which caused banks to increase and maintain high lending rates. We know the current outlook for the consolidated bank is challenging. Whenever economic conditions do begin to normalize, however, we believe we will be in a very strong position to reap the benefits. Our strong brand and range of products will enable us to do just that. In the meantime, our imperative is to manage the business as effectively as possible during these challenging times, and we have the team to do this. In 2015, the Bank opened two new branches in Uganda and one in Rwanda bringing our total network size to forty six branches in Uganda and two branches in Rwanda. With forty six branches across Uganda, over one hundred

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ATMs and a 100% subsidiary in Rwanda, Crane Bank will continue its expansion plan, reaching a target of fifty branches before the end of 2017, bringing its products and services closer to the entire population of Uganda. In the year 2015, the Bank launched Xpress Money transfer services, Payway, Zeepay (school fees real time collectors) and SMS & Email alerts and also extended banking hours in specific branches from 8:30am to 8:00pm, Monday to Sunday. In carrying on with its aim to launch new and innovative products, the Bank during the past year launched a new bundled product; Crane Maisha an account designed to encourage the culture of saving while allowing you to keep safety net for your loved ones through life insurance. During 2015 the bank has conducted many CSR activities with an aim of giving back to the communities in which it has served for 20 years. Over the past year, Crane Bank has maintained a consistent growth in assets and liabilities and will expect the same in 2016.

Annual Report 2015

2015 Performance •

•

• • •

Robust income performance. Net Operating income, grew by 4.3 per cent reflecting strong revenue growth. Interest income grew by 9.4 per cent driven by increase in Loans and Advances. Resilient core business performance despite the challenging environment the Bank grew its deposits by 5.45 per cent to UGX 1,336,606 million acquiring approximately 61,000 new accounts. Strong liquidity maintained throughout the recent turbulence in financial markets. Profit before tax reduced to UGX 1,841million. A resilient underlying business performance was offset by the impact of market dislocation. Robust capital ratios. Capital adequacy stands at 16.41 per cent and Core capital ratio stands at 15.74 per cent. Crane Banks paid up capital stands at UGX 210 billion as against the BOU requirements of UGX 25 billion.

Our philosophy continues to be

Crane Bank continues to foster a culture centered on the customer, with the aim of “Serving to Grow, Growing to Serve” by offering a wide range of unique and innovative products and exceptional customer service, delivered through our extensive branch network and supported by multiple delivery channels.

Chairman’s Statement

2016 and the future

Crane Bank is fully geared to accelerate into the next trajectory of growth with confidence and conviction. It’s time to think bigger, act faster and leap higher with greater vigor, velocity and enthusiasm towards scaling up the Bank to newer heights. Our robust financial and business model, supported by a widening national branch presence, an inspired culture of professional entrepreneurship and teamwork, has put us in a strong position to address the needs of our clients and move towards our vision. The Bank’s short term outlook remains subject to a range of challenges including: market conditions and the impact of foreign exchange. Crane Bank remains well positioned to deliver superior performance in the medium term due to: its deep expertise in major markets; strength in diversity and ability to adapt its portfolio mix to changing market conditions; the ongoing benefits of continued cost initiatives. Looking forward Crane Bank will be clearly focusing on leveraging the relinquish effort of innovation and the potential of our dedicated and committed staff supported by sound corporate governance.

Overall, our best advocates are our satisfied clients, and we strive to provide extraordinary service at all times. Our equal focus is to operate a safe and sound, strong depositfunded, well-capitalized balance sheet.

On behalf of the Board, I would like to take this opportunity to express our gratitude to Bank of Uganda and the Government for their guidance in pursuing economic policies that have created a supportive business environment for Crane Bank to thrive. Finally, I would like to thank our esteemed customers for their continued support and extend my gratitude to our highly professional staff for their loyalty and dedication to Crane Bank

Crane Bank’s Corporate Social Responsibility initiatives also seek to catalyze and accelerate social and economic inclusion by bridging economic and human development gaps with an aim to make a significant contribution to the integrated development of the country.

Joseph N Biribonwa Chairman

We continue to foster a culture centered on the customer, with the aim of “Serving to Grow, Growing to Serve”. 15

Annual Report 2015

VICE CHAIRMAN’S STATEMENT

Dr. Sudhir Ruparelia Vice Chairman Vision

The Crane Bank slogan ‘Growing to Service and Serving to Grow’ is not a mere cliché. The slogan stands for so much more. It represents the heart and soul of Uganda’s largest indigenous commercial bank. The slogan is the bank’s promise to tailor its products and services to the customers’ needs. It is a pledge to always be relevant to the changing demands of customers. Crane Bank’s close relationship with its customers has brought it immense success. As an indigenous bank, Crane Bank had to find its way in an industry that was dominated by international players. We understand that people are free to chose whom they bank with and that their custom must be earned - not taken for granted.The bank marked a major milestone in December 2004 when deposits crossed Ugx 100 Billion, later winning the prestigious Bank of Year Award for the first time in November 2005. In 2015, Crane Bank was awarded the coveted Financial Times’ Banker Magazine Bank of the Year, Uganda for the 10th time in 11 years. The bank has fully paid share capital of Ugx 210 Billion, which is 8.4 times above the Bank of Uganda regulatory requirement.

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Overview

In today’s challenging market conditions and competitive technological environment, promoting strong risk conduct and embedding a risk management culture throughout Crane Bank are key priorities. Uganda is becoming quite mature. Society is becoming wealthier and wealthier.There are a lot of new ideas everywhere and a lot of times there is no money to back it up. The people in charge of the economy really need to look again. They have pre –set ideas, they need to open them up and be more flexible for the good of this country. The liquidity in the market is very tight at the moment. Hopefully things will get better and the interest rates will start coming down. Our equal focus is to operate a safe and sound , strong deposit fund, well capitalized balance sheet while continuously monitoring and managing risk though a disciplined asset/ liability portfolio.The bank has implemented the Biometric Registration for the staff which will further expand over to the customers to give us an edge over others in terms of client’s safety and security of their funds . This will also help bank to keep its clients and banks funds safe from

Annual Report 2015

fraudsters. The bank is also endeavoring to provide Bancassurance, Branch Expansion, Islamic Banking and Agency Banking as and when approved by the regulator. With the aim of setting higher standards for customer service, Crane bank has gone digital with the use of social media and online platforms to enhance its 24-hour call centre to enable the Bank to have direct communication with the customers through their preferred method of communication. Crane Bank has taken initiative by working with Government authorities to streamline collections. From local Government authorities like URA, KCCA, UMEME, URSB, NSSF to University fee collections, the Bank has fully integrated its system to allow collections from any branch across the country with real time confirmation via SMS from the corresponding authority. Crane bank has also launched Maisha Products recently with life insurance cover; the launch of these products is an indication of our continuous desire to make life much easier for our customers. Crane Bank puts life paramount and these products are a testament to our dedication not only to the financial well-being of our clients but the well-being of their loved ones as well. Crane Bank has always believed in supporting economic transformation, by growing together with its clients and transforming private enterprises. Throughout the years Crane Bank has supported enterprises through funding businesses and projects through products such as Overdrafts, Demand loans, Bank Guarantee and LCs. The Bank has also focused on bridging the knowledge gaps & upgrading skills. Bank has also undertaken Management Development Programme to develop its employees in the critical areas like forex, international, credit as well as preparing them to discharge their duties in the higher responsible positions. Of course such has helped the employees in their development progress also. All of us owe a huge debt of gratitude and respect to our customers who have supported us throughout the hard times.

Vice Chairman’s Statement

communities. This year we have conducted the Blood Camp on 1st August 2015 where we have collected 390 units of blood in conjunction with Uganda Blood Bank. We have also supported Rotary Club in the health camp held at Rushooka in the month of July 2015. On the occasion of 20th year of Crane Bank we had organized an Eye Camp to continue our support to society at large. These are what society needs and we are playing our part. We had sponsors and doctors who have supported as well for this programme. The purpose of the Eye Camp was: • To effectively screen for eye disease and other ailments that can be treated on base. • To perform Cataract operation on side. • To provide general health check up (Blood Pressure, Sugar, HIV, Hepatitis etc). • To Provide the Free Eye glasses to Children and Old age people (Reading and Prescription Glasses). The events was a remarkable success and we screened 4,032 patients countrywide, registered a total of 2,207 patients, given 422 free reading glasses, carried out 275 cataract surgeries and 180 patients received free prescribed glasses.

To our stakeholders

As we carry on to the future, we stay committed to using technology as a key driver in introducing more innovative products and services. Over the coming year, we will build on the accomplishments of 2015 and continue to strive to increase our market presence and development as a countrywide financial institution. Crane Bank owes its growth to our customers and stakeholders. We recognize your continuous support over the years, and that is why we work relentlessly to ensure that we continuously offer our customer efficient and effective service. I would also like to thank our highly experienced employees not only for their dedication but for the right they earn every day to be our customers first choice by delivering trusted advice, service and support to our customers to ensure they reach their financial goals.

Giving back

Crane Bank continued its long-standing support to the society during the year and celebrates its 20th anniversary in 2015. Since 1995, the Bank has contributed its gratitude to numerous community organizations around the country. Throughout the year we continued to support the communities around us, as they form an important part of our vision. Crane Bank has further partnered with The Ruparelia Foundation to ensure we continue to support the

Dr. Sudhir Ruparelia Vice Chairman

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Annual Report 2015

MANAGING DIRECTOR’S STATEMENT

Mr. P.K. Gupta Ag. Managing Director The year 2015 has been a year of consolidation. The Bank concentrated on improving qualitative aspects of business expansion and focused on new products and services for our customers, improving quality of assets by due diligence, skill and technology up-gradation .The Bank also leveraged its strong network of 46 branches across Uganda and served the customers and the stakeholders by offering its large range of products and services and the world class experience. The Bank’s loans & advances reached a level of UGX 1,010.9 Billion against UGX 836.9 Billion in 2014 whereas as the Customer Deposits grew from UGX 1,267.5 Billion in 2014 to UGX 1,336.6 Billion in 2015 indicating the growing confidence of our patrons and customers. Finally, Total Assets increased by 4.3% to UGX 1,794.3 Billion in 2015 against UGX 1,719.8 Billion in 2014. The bank added about 75,000 accounts during the year, pushing the total number of accounts to 499,133 as of December 2015. As a result, the bank registered a rise of 4.0% in its Net Operating Income and recorded UGX 145.1 Billion against UGX 139.1Billion in the previous year. Similarly, the Bank registered a robust rise of 35.5%, UGX 6.4 Billion

18

growth in total non-interest income over the previous years earnings and touched the level of UGX 24.6 Billion in 2015. The bank has an arrangement with aBi finance under global facility and raised UGX 13.5 Billion and USD 1 Million to support the agriculture sector by way of short & medium term agriculture financing in the country. The bank has also made arrangement with Rabo Bank, Netherlands, to finance a cotton initiatives Program to the tune of USD 0.5 million and assisted more than 1,200 small and marginal farmers to improve the living standards of the poor people in Gulu. Further, we have made arrangement with the support of aBi trust to assist the road construction contractors to provide Bank Guarantee at subsidized rates. For the purpose of project financing, Bank has associated itself with European Investment Bank’s Line of Credit to the tune of USD 35 million to cater to high value clientele. The Bank continued its focus on improving the bottomline by diversifying the business mix, upgrading the product and process capabilities and putting in place robust risk management framework to meet the emerging challenges

Annual Report 2015

in the banking industry. Crane bank launched several new service channels during the year introducing Xpress Money, Money Transfer Service, which facilitates the customers to wire money instantly. In addition, the Bank enhanced its services and introduced SMS & Email alerts to allow customer to monitor their banking transactions conveniently with full confidence. The bank maintained its position among top collection agents for UMEME / NWSC and has has also set up one stop centre at Jinja Road branch in Partnership with URA to do all URA PIN generation and KCCA COIN registration and all URA & KCCA payments. Bill payment is currently enabled through Internet banking, Branch Banking and Payway. It includes, Zeepay Fee Collection system, Value added bundled product to allow savings and Fixed Deposit clients to avail insurance cover hassle free (Maisha Savings/Crane Access, Fixed Deposit). The new product, Crane Maisha Savings accounts are designed to allow you to save towards your goals, whilst keeping a safety net for your loved ones in the event of a death or disability of the account holder. Crane Bank offers 3 Crane Maisha products, to cater to all individuals from the age of 18 to 55. The Bank’s retail asset franchise continued to show robust growth and our customer base enhances across Uganda while the overall asset quality in this sector remained stable. It is our endeavor to provide the best in class banking experience through personalized services and taking care of their banking needs. The bank has taken a number of customer centric initiatives such as; Sunday banking, extended banking hours, internet banking to have improved customer convenience and experience. We have also added new banks during the year 2015 in the list of correspondent partners which now stand at 13 banks with the inclusion of Axis Bank. With the state-of-the-art core banking software; Temenos T24, the Bank has been able to enhance the control & monitoring mechanism for efficient risks management (BASEL II compliant), AML, Securities and CRM Modules besides offering more value added products to customers. Further, Bank leveraged the capabilities of T24 system by successfully integrating SWIFT network with its Core Banking System. Towards skill up-gradation, the Bank embarked upon identifying personnel whose career path could be planned through a sustained training and developmental intervention. Considering the progression process combined with growth aspirations, Bank organized “Management Development Programs” for its personnel

Managing Director’s Statement

who were provided conceptual and practical training so that they could be groomed in critical operation areas to shoulder higher responsibilities in supervisory / managerial cadres. Consequently, a substantial number of employees were elevated to higher positions during the year. Bank’s outlook for 2016 seems to be quite positive in view of expected improved economy of Uganda and the committed bank staff. Crane Bank will continue to focus on introducing innovative products at the market driven prices and other need based services for our customers during the current year. The Bank formulated a long term Business Plan on: • Leveraging the Core Banking Solution to commence mobile banking. • Leveraging a network of over 100 ATMs to provide round the clock critical services. • Carrying out continuous improvements in the existing products and introduction of new products. • Micro & Agricultural Sector Financing. • Introducing Bank Assurance, Agency Banking and providing window for Islamic Banking. • Leveraging Bank’s presence in Rwanda for effective business synergy. • To explore the potential of Regional Markets I take this privilege to extend my sincere thanks to our Directors, Regulators, staff in particular and above all the customers for their confidence and unstinted support. I assure all that Bank is marching towards challenging goals and will achieve a new benchmark year after year. We are excited about the future of the bank and look forward to the support and confidence of all our stakeholders in the leadership of the bank. We believe in supporting customers, to grow and expand together, in true spirit of our motto “Serving to Grow, Growing to Serve”. With Warm Regards,

Mr P. K Gupta

Ag. Managing Director

19

Annual Report 2015

Board of Directors

MR. JOSEPH N. BIRIBONWA

DR. SUDHIR RUPARELIA

Chairman

MRS. JYOTSNA RUPARELIA Director

MR. TOM MUGENGA Director

MR. P. K. GUPTA Ag. Managing Director

20

Vice Chairman

MR. RASIK KANTARIA Director

MR. SYED ANWAR Executive Director

MR.VIVEK SHARMA Executive Director

MR. ALEX REZIDA Director

Annual Report 2015

Director’s report

Directors’ Report The directors submit their report together with the audited financial statements for the year ended 31 December 2015, which disclose the state of affairs of Crane Bank Limited (the Group).

Principal Activities

The Bank is engaged in the business of commercial banking and the provision of related services, and is licensed under the Financial Institutions Act, 2004.

Results 2015 Ushs’000 Consolidated

Profit before Taxation

Taxation

Profit for the year

(7,353,364)

(5,165,369)

(12,518,733)

2015 Ushs’000 Bank

2014 Ushs’000 Consolidated

2014 Ushs’000 Bank

1,841,935

57,066,374

58,611,971

(4,973,039)

(9,534,307)

(7,968,535)

(3,131,104)

47,532,067

50,643,436

Corporate Mission Crane Bank is a profit focused bank dedicated to the common objective of providing the highest quality service to our customers and clients in Uganda and around the world. We Strive: • To provide to our team members – loyalty, opportunities and rewards • To provide to our customers – personalized ervice to meet their needs • To provide to our community – leadership, economic growth and philanthropy • To provide to our shareholders – financial gains andsustainability By adopting the highest levels of ethical, legal and moral standards.

21

Annual Report 2015

Philosophy of Corporate Governance

The Bank’s corporate governance philosophy encompasses not only regulatory and legal requirements, but also several best practices aimed at a high level of business ethics, effective supervision and enhancement of value for all stakeholders. The corporate governance framework at Crane Bank Limited is based on an effective and independent Board, the separation of the Board’s supervisory role from the executive management and the constitution of Board committees comprising a majority of independent Directors and chaired by an independent Director, to oversee all functional areas.

Board of Directors

Crane Bank Limited has a broad-based Board of Directors. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. The Board has constituted six committees. These are; 1. Audit Committee; 2.. Credit Committtee; 3. Human Resources Committee 4. Board Compensation Committee; 5. Asset Liability Management Committee; and 6. Risk Management Committee.

22

Corporate Social Responsibility At Crane Bank, corporate social responsibility is not inconsistent with objectives of profitability and shareholder value. Crane Bank has always recognized the responsibility that the Corporates should have towards the communities they operate in.The Bank’s objective in this area is enshrined in its mission statement. As a constructive partner in the communities in which we operate, Crane Bank has been taking concrete actions to realize its social responsibility objectives, thereby building sustainable long-term value creation. Crane Bank’s Corporate Social Responsibility initiatives also seeks to catalyse and accelerate social and economic inclusion by bridging economic and human developments gaps. Some of Crane Bank’s Corporate Social Responsibility initiatives during the year 2015 included: • Supporting Cancer patients; • Donating medical equipment to hospitals • Organising blood drives • Supporting local and religious communities • Sports sponsorship • Employing persons with disabilities • Sponsoring childrens school fees

Annual Report 2015

Director’s report

“Our philosophy is to provide our community with leadership, economic growth and philanthropy.”

Information Technology

Crane Bank has identified technology as a key driver of its growth strategy and continues to leverage information technology as a strategic tool for its business operations to gain competitive advantage by offering customer convenience and improved service as well as improving productivity and efficiency. The Bank has also embarked on augmenting the traditional channels with Credit Card products and Internet Banking offering with a view to enhance customer convenience and provide services on a continuous and location independent basis.

Subsidiary

During 2014, the Bank opened a 100% owned subsidiary bank in Rwanda incorporated as Crane Bank Rwanda Limited. The results of the subsidiary have been consolidated in the current year financial statements

Dividend

The directors have not proposed any dividend for the year 31 December 2015. (2014: Ushs 0.1206 per share) amounting to Ushs 25.32 billion).

Directors

The present membership of the board is shown on page 2.

Auditors

The auditors, KPMG, being eligible have expressed their willingness to continue in office in accordance with Section 167 (2) of the Companies Act (2012).

Financial Statements

The financial statements were approved by the Board of Directors on 15/04/2016. BY ORDER OF THE BOARD

Secretary Kampala Date: 29th April 2016

23

Annual Report 2015

STATEMENT OF DIRECTORS’ RESPONSIBILITIES. The Bank’s directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements, comprising the statement of financial position as at 31 December 2015, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards, the Ugandan Companies Act and the Financial Institutions Act (2004) and for such internal controls 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 consolidated and separate 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 Ugandan Companies Act, 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 company as at the end of the financial year and of the operating results of the company for that year. It also requires the directors to ensure the company keeps proper accounting records that disclose with reasonable accuracy the financial position of the company. The directors accept responsibility for the consolidated and separate financial statements set out on pages 26 to 78 which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and the reporting requirements of the Financial Institutions Act 2004 and the Ugandan Companies Act. 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 results and cash flows for the year ended 31 December 2015. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. The directors have made an assessment of the company’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.

Approval of the Financial Statements

The consolidated and separate financial statements, as indicated above, were approved by the board of directors on 15/04/2016 and were signed on its behalf by:

Mr. Joseph N. Biribonwa Chairman

Dr. Sudhir Ruparelia Vice Chairman

Date: 29th April 2016

24

Mr. P. K Gupta Ag. Managing Director

Annual Report 2015

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CRANE BANK LIMITED. We have audited the accompanying consolidated and separate financial statements of Crane Bank Limited, which comprise the consolidated and separate statement of financial position as at 31 December 2015 and the consolidated and separate statements of comprehensive income, changes in equity and cash flows for the year then ended and the notes comprising accounting policies and other explanatory information as set out on pages 26 to 78.

Directors’ Responsibility for the Financial Statements

As stated on page 24 the company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards,Ugandan Companies Act and the Financial Institutions Act (2004) and for such internal controls 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the

directors, as well as evaluating the overall presentation of the consolidated and separate financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated and separate financial statements give a true and fair view of the financial position of Crane Bank Limited as at 31 December 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting standards and the Financial Institutions Act, 2004 and the Ugandan Companies Act.

Report on other legal and regulatory requirements As required by the Ugandan we report to you based on

Companies Act, our audit, that:

I. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; II. In our opinion, proper books of account have been kept by the Bank so far as appears from our examination of those books; and III. The Bank’s statement of financial position and statement of comprehensive income are in agreement with the books of account.

KPMG Certified Public Accountants P O Box 3509 Kampala, Uganda Date: 29th April 2016

25

Annual Report 2015

STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2015 Notes

2015 Ushs’000 Consolidated

2015 Ushs’000 Bank

2014 Ushs’000 Consolidated

2014 Ushs’000 Bank

Interest income

4

209,100,082

207,299,832

189,921,494

189,416,871

Interest expense

5

(96,216,036)

(95,703,170)

(89,249,108)

(89,215,833)

112,884,046

111,596,662

100,672,386

100,201,038

NET INTEREST INCOME Fees and commission income

6

38,057,795

37,842,809

32,679,350

32,573,124

(1,593,868)

(1,593,868)

(1,226,870)

(1,226,870)

36,463,927

36,248,941

31,452,480

31,346,254

(5,888,685)

(5,921,744)

5,901,193

5,864,178

3,251,876

3,228,474

2,731,371

1,752,623

146,711,164

145,152,333

140,757,430

139,164,093

17

(50,358,552)

(50,358,552)

(11,221,503)

(11,221,503)

8

(103,705,976)

(92,951,846)

(72,469,553)

(69,330,619)

(7,353,364)

1,841,935

57,066,374

58,611,971

(5,165,369)

(4,973,039)

(9,534,307)

(7,968,535)

(12,518,733)

(3,131,104)

47,532,067

50,643,436

Fees and commission expenses Net fee and commission income Net foreign exchange (losses)/ gains

7

Other operating income NET OPERATING INCOME Impairment losses on loans and advances Operating expenses (LOSS) / PROFIT BEFORE TAX Income tax expense

10

(LOSS) / PROFIT FOR THE YEAR Other Comprehensive income Items that are or may be reclassified to profit or loss Foreign currency translation differences Change in available for sale financial assets

30

Net amount transferred to profit or loss

30

Income tax relating to components of other comprehensive income

27

Total other comprehensive income / (loss) for the year Total comprehensive (loss) / income for the year

6,319,342

-

(1,361,645)

-

1,402,138

1,402,138

804,549

804,549

-

-

-

(454,339)

(454,339)

(284,890)

(284,890)

7,267,141

947,799

(841,986)

519,659

(5,251,592)

(2,183,305)

46,690,081

51,163,095

The accounting policies and notes on pages 31 to 78 form an integral part of these financial statements.

26

Annual Report 2015

STATEMENT OF FINANCIAL POSITION For the year ended 31 December 2015 Notes ASSETS

2015 Ushs’000 Consolidated

2015 Ushs’000 Bank

2014 Ushs’000 Consolidated

2014 Ushs’000 Bank

Cash and balances held with the central Banks

11

203,591,851

199,970,142

179,202,638

174,489,666

Deposits and balances due from other banking institutions

12

86,112,920

85,134,631

135,685,974

110,993,091

Government securities

13

186,694,619

150,513,742

186,709,557

186,571,442

Corporate bonds

14

2,820,591

2,820,591

5,039,584

5,039,584

Investment in equity shares

15

17,303,970

17,303,970

16,035,122

16,035,122

Loans and advances to customers (net)

16

975,647,176

971,381,192

844,128,583

844,128,583

Corporate tax receivable

10(c)

16,949,517

16,949,517

6,868,755

6,820,981

Other assets

18

9,129,710

8,786,029

11,044,989

10,705,434

Property and equipment

19

269,171,097

268,083,246

286,919,230

281,889,101

Operating lease prepayments

20

11,863,660

11,863,660

13,764,052

13,764,052

Intangible assets

21

30,108,284

27,075,727

36,515,072

33,080,282

Goodwill

22

690,392

690,392

690,392

690,392

Investment in subsidiary

23

-

33,769,426

-

35,608,291

1,810,083,787 1,794,342,265

1,722,603,948

1,719,816,021

TOTAL ASSETS EQUITY AND LIABILITIES Customer deposits

24

1,355,771,332

1,336,606,410

1,271,353,179

1,267,548,891

Other liabilities

25

42,868,862

42,299,323

29,667,630

29,398,030

Deposits and balances due to other banking institutions

26

108,398,902

107,387,508

89,435,375

88,592,960

Deferred tax liability

27

21,613,581

19,823,477

20,143,344

18,545,570

1,528,652,677 1,506,116,718

1,410,599,528

1,404,085,451

210,000,000

210,000,000

TOTAL LIABILITIES EQUITY Share capital

28

Retained earnings Proposed Dividend

29

Translation Reserve

210,000,000

210,000,000

60,912,868

72,665,002

53,439,792

55,804,297

-

-

25,321,718

25,321,718

4,957,697

-

(1,361,645)

-

Fair value reserve

30

5,560,545

5,560,545

4,612,746

4,612,746

Regulatory reserve

31

-

-

19,991,809

19,991,809

281,431,110

288,225,547

312,004,420

315,730,570

1,810,083,787 1,794,342,265

1,722,603,948

1,719,816,021

TOTAL EQUITY TOTAL EQUITY AND LIABILITIES

The financial statements on pages 26 to 78 were approved and authorised for issue by the board of directors on 15/04/2016 and were signed on its behalf by:

Chairman

Vice Chairman

Ag. Managing Director

The accounting policies and notes on pages 31 to 78 form an integral part of these financial statements.

27

Annual Report 2015

STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 CONSOLIDATED

Share

Retained

Proposed

Translation

Fair value

Regulatory

capital

earnings

Dividend

Reserve

reserve

reserve

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Year ended 31 December 2014 At start of year

210,000,000

23,944,960

23,619,084

-

4,093,087

26,529,428

288,186,559

Retained earnings from Crane Financial Services

-

746,864

-

-

-

-

746,864

Net profit for the year

-

47,532,067

-

-

-

-

47,532,067

Other comprehensive income, net of tax

-

-

-

(1,361,645)

519,659

-

(841,986)

Transfer to Retained Earnings

-

6,537,619

-

-

-

(6,537,619)

-

Translation Reserve for the year

-

-

-

-

-

-

-

- Proposed for 2014

-

(25,321,718)

25,321,718

-

-

-

-

- Paid in 2014

-

-

(23,619,084)

-

-

-

(23,619,084)

53,439,792 25,321,718

(1,361,645)

Dividend

At 31 December 2014 At start of year Net profit for the year

210,000,000

4,612,746 19,991,809 312,004,420

210,000,000

53,439,792

25,321,718

(1,361,645)

4,612,746

19,991,809

312,004,420

-

(12,518,733)

-

-

-

-

(12,518,733)

-

19,991,809

-

-

-

(19,991,809)

-

-

-

(25,321,718)

-

-

-

(25,321,718)

6,319,342

947,799

7,267,141

4,957,697

5,560,545

- 281,431,110

Other comprehensive income, net of tax Transfer to Retained Earnings Dividend - 2014 dividend Paid in 2015 Movement in Reserve At 31 December 2015

210,000,000

60,912,868

-

The accounting policies and notes on pages 31 to 78 form an integral part of these financial statements.

28

Annual Report 2015

STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 Bank

Share

Retained

Proposed

Fair value

Regulatory

capital

earnings

Dividend

reserve

reserve

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

210,000,000

23,944,960

23,619,084

4,093,087

26,529,428

288,186,559

Net profit for the year

-

50,643,436

-

-

-

50,643,436

Other comprehensive income for the year

-

-

-

519,659

-

519,659

Transfer to Retained Earning

-

6,537,619

-

-

(6,537,619)

Year ended 31 December 2014 At start of year

-

Dividend

-

- Proposed for 2014

-

(25,321,718)

25,321,718

-

-

-

- Paid in 2014

-

-

(23,619,084)

-

-

(23,619,084) -

At 31 December 2014

210,000,000

55,804,297

25,321,718

4,612,746

19,991,809

315,730,570

At start of year

210,000,000

55,804,297

25,321,718

4,612,746

19,991,809

315,730,570

Net profit for the year

-

(3,131,104)

-

-

-

(3,131,104)

Restated Loans written off

-

-

-

-

-

-

Transfer to Retained Earning

-

19,991,809

-

-

(19,991,809)

-

Transfer from regulatory reserve

-

-

-

-

-

-

- 2014 dividend Paid in 2015

-

-

(25,321,718)

-

-

(25,321,718)

Movement in Reserve

-

-

-

947,799

210,000,000

72,665,002

-

5,560,545

Dividend

At 31 December 2015

947,799 -

288,225,547

The accounting policies and notes on pages 31 to 78 form an integral part of these financial statements.

29

Annual Report 2015

STATEMENT OF CASH FLOWS For the year ended 31 December 2015 Notes

2015

2015

2014

2014

Ushs’000 Consolidated

Ushs’000

Ushs’000

Ushs’000

Bank

Consolidated

Bank

CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations

35

5,342,567

22,900,544

155,600,049

124,975,226

(14,230,233)

(14,278,007)

(7,079,759)

(2,340,265)

(8,887,666)

8,622,537

148,520,290

122,634,961

Purchase of property and equipment

(5,623,202)

(5,484,995)

(217,578,222)

(212,322,244)

Purchase of intangible assets

(2,115,762)

(2,053,963)

(5,358,313)

(1,545,646)

50,000

(9,045,791)

Taxation paid Net cash generated from operations

Cash flows from investing activities

Investment in Rwanda subsidiary Proceeds from sale of shares Net cash used in investing activities

241,654

241,654

-

-

(7,497,310)

(7,297,304)

(222,886,535)

(222,913,681)

18,963,527

18,794,548

34,557,586

33,715,171

Financing activities Refinance under EIB & ACF Dividends paid Net cash flows from financing activities Net (decrease)/increase in cash and cash equivalents

(25,321,718)

(25,321,718)

(23,619,084)

(23,619,084)

(6,358,191)

(6,527,170)

10,938,502

10,096,087

(22,743,167)

(5,201,937)

(63,427,743)

(90,182,633)

323,256,230

291,109,757

400,433,229

400,433,229

(22,743,167)

(5,201,937)

(78,538,644)

(109,323,472)

300,513,063

285,907,820

321,894,585

291,109,757

Movement in cash and cash equivalents At start of year Net increase 32 Translation difference At end of year

4,383,575

-

1,361,645

-

304,896,638

285,907,820

323,256,230

291,109,757

The accounting policies and notes on pages 31 to 78 form an integral part of these financial statements.

30

Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS 1 Reporting entity Crane Bank Limited is incorporated in Uganda under the Companies Act, and is licensed to carry out financial institution business under the Financial Institutions Act 2004. The registered office is located at Crane Chambers, Plot 38 Kampala Road, P.O. Box 22572 Kampala, Uganda. 2 Principal accounting policy (a) Basis of accounting The Financial statements have been prepared in accordance with and comply with the International Financial reporting Standards (IFRS). (b) Basis of Measurement The Financial statements have been prepared on the historical cost basis except for the following: • Financial instruments at fair value through Profit or loss are measured at fair value • Available-for-sale financial assets are measured at fair value (c ) Functional and presentation currency These financial statements are presented in Uganda shillings, which is the Bank’s functional currency. All amounts have been rounded to the nearest thousands, except when otherwise indicated. (d) Use of estimates and judgement i) Assumptions and estimates of uncertainties The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of financial statements and reported amounts of revenues and expenses during the reported period. The estimates and associated assumptions are based on historical experiences, the results of which form the basis of making the judgments about the carrying values and liabilities that are not readily apparent from other sources. Actual results ultimately may differ from these estimates. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Bank regularly reviews its assets and makes judgments in determining whether an impairment loss should be recognized in respect of observable data that may impact on future estimated cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2013 is set out below in

relation to the impairment of financial instruments and in the following notes: Note (27) - recognition of deferred tax assets: availability of future taxable profit against which carry forward tax losses can be used; Note (22) - impairment testing for goodwill: key assumptions underlying recoverable amounts; and Notes (25) and (37)- recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources. ii) Impairment losses on loans and advances The specific counterparty component of the total allowances for impairment applies to claims evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about counterparty’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the head of the business unit (Credit Risk function). A collective component of the total allowance is established for: • Groups of homogeneous loans that are not considered individually significant; and • Groups of assets that are individually significant but that were not found to be individually impaired (loss ‘incurred but not reported’ or IBNR). The collective allowance for groups of homogeneous loans is established using , a formula approach based on historical loss rate experience. Management applies judgement to ensure that the estimate of loss arrived at on the basis of historical information is appropriately adjusted to reflect the economic conditions and product mix at the reporting date. Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances with similar credit risk when there is objective evidence to suggest that they contain impaired items, but the individual impaired items cannot yet be identified. A component of collectively assessed allowances is for country risks. In assessing the need for collective loan loss allowances, management considers factors such as credit quality, portfolio size, concentrations, and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimated future cash flows, the model assumptions and parameters used in determining collective allowances.

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Annual Report 2015

iii) Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

basis over the commitment period. Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.

(e) Revenue recognition (i) Interest income and expense Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or financial liability.

(f ) Financial assets and liabilities (i) Recognition A financial instrument is a contract that gives rise to both a financial asset of one enterprise and a financial liability of another enterprise. Financial instruments held by the Bank include balances with Bank of Uganda, loans and advances, investments in government securities, balances with banks, deposits, derivatives and group balances.

When calculating the effective interest rate, the Bank estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability. Interest income and expense presented in the statement of profit or loss include: • interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest basis; • interest on available-for-sale investment securities calculated on an effective interest basis; Interest income and expense on all trading assets and liabilities are considered to be incidental to the bank’s trading operations and are presented together with all other changes in the fair value of trading assets and liabilities in net trading income. Fair value changes on other derivatives held for risk management purposes, and other financial assets and financial liabilities carried at fair value through profit or loss, are presented in net income from other financial instruments at fair value through profit or loss in the statement of comprehensive income. ii) Fees and commission Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate as above. Other fees and commission income – including account servicing fees, investment management fees, sales commission, placement fees and syndication fees – are recognised as the related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fees are recognised on a straight-line

32

iii) Other income Other income comprises gains less losses related to trading assets and liabilities and includes all realised and unrealised fair value changes, interest and foreign exchange differences.

The bank initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on the trade date, which is the date on which the bank becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. (ii) Classification Management determines the appropriate classification of its financial instruments at the time of purchase and re-evaluates its portfolio on a regular basis to ensure that all financial instruments are appropriately classified. The classification of financial instruments at initial recognition depends on the purpose and the management’s intention for which the financial instruments were acquired and their characteristics.

• Held for trading assets and liabilities are those assets and

•

•

liabilities that the Bank acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position taking. Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity, and which are not designated at fair value through profit or loss or available-for-sale. Available-for-sale investments are non-derivative investments that are not designated as another category of financial assets. Available for sale assets are recognised on the date they are transferred to the bank.

• Loans and advances and amounts due from banks are

recognised when cash is advanced to borrowers. Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an

Annual Report 2015

•

active market. They arise when the Bank provides money, goods or services directly to a debtor with no intention of trading the receivable. Financial liabilities: The Bank classifies its financial liabilities other than guarantees and loan commitments as measured at amortised cost or fair value through profit and loss.

(iii) Measurement Initial measurement of financial instruments All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss, which are recorded at fair value. Subsequent measurement of financial instruments Amortised cost measurement The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment

Notes to the Financial Statements.

If an asset or a liability measured at fair value has a bid price and an ask price, then the bank measures assets and long positions at a bid price and liabilities and short positions at an ask price. Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Bank on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfoliolevel adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

Fair value measurement ‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the bank has access at that date. The fair value of a liability reflects its non-performance risk.

(iv) Derecognition of financial instruments Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

When available, the bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

• The Bank has transferred its rights to receive cash flows

If there is no quoted price in an active market, then the bank uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

•

• The rights to receive cash flows from the asset have expired; or

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

•

from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: The Bank has transferred substantially all the risks and rewards of the asset; or The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the Bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay. Financial liabilities

33

Notes to the Financial Statements.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (v) Identification and measurement of impairment At each reporting date the Bank assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. The Bank considers evidence of impairment at both a specific asset and collective level. All individually significant financial assets are assessed for specific impairment. All significant assets found not to be specifically impaired are then collectively assessed for any impairment that may have incurred but not yet identified. Assets that are not individually significant are then collectively assessed for impairment by grouping together financial assets (carried at amortised cost) with similar risk characteristics.

specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances and held-to-maturity investment securities with similar risk characteristics. In assessing collective impairment the Bank uses statistical modelling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical modelling. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate. Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial assets and the present value of estimated future cash flows discounted at the assets’ original effective interest rate.

• Significant financial difficulty of the issuer or obligor; • A breach of contract, such as default or delinquency in

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised. If the cash flows of the renegotiated asset are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and the new financial asset is recognised at fair value. The impairment loss before an expected restructuring is measured as follows.

• The Bank granting to the borrower, for economic or legal

• If the expected restructuring will not result in

Objective evidence that financial assets (including equity securities) are impaired can include:

interest or principal repayments;

• • •

reasons relating to the borrower’s financial difficulty, a concession that the lender would not otherwise consider; It becoming probable that the borrower will enter bankruptcy or other financial reorganisation; The disappearance of an active market for that financial asset because of financial difficulties; or Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:

(i) Adverse changes in the payment status of borrowers in the group; or (ii) National or local economic conditions that correlate with defaults on the assets in the group. Financial assets carried at amortised cost The Bank considers evidence of impairment for loans and advances and held-to-maturity investment securities at both a specific asset and a collective level. All individually significant loans and advances and held-to-maturity investment securities are assessed for specific impairment. Those found not to be

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Annual Report 2015

derecognition of the existing asset, then the estimated cash flows arising from the modified financial asset are included in the measurement of the existing asset based on their expected timing and amounts discounted at the original effective interest rate of the existing financial asset.

• If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired assets continues to be recognised through the unwinding of the discount. If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then the decrease in impairment loss is reversed through profit or loss. Available for sale financial assets

Annual Report 2015

Impairment losses on available-for-sale investment securities are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in impairment attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through profit or loss; otherwise, any increase in fair value is recognised through OCI. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is always recognised in OCI. The Bank writes off a loan or an investment debt security, either partially or in full, and any related allowance for impairment losses, when Bank Credit determines that there is no realistic prospect of recovery. (v) Renegotiated loans Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR. (vi) Offsetting Financial assets and liabilities are offset and the net amount reported in the statement of financial position when and only when, there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Income and expense are presented on a net basis only when permitted under IFRS or from gains and losses arising from a group of similar transactions such as the Bank’s trading activity. Ugandan Financial Institutions Act 2004 requirements In addition to the measurement of impairment losses on loans and advances in accordance with International Financial Reporting Standards as set out above, the Bank is also required by the Ugandan Financial Institutions Act 2004 to estimate losses on loans ad advances as follows: i) A specific provision for those loans and advances considered to be non-performing based on criteria and classification of

Notes to the Financial Statements.

such loans and advances established by the Bank of Uganda, as follows: a) Substandard assets with arrears period between 90 days and 180 days – 20% b) Doubtful assets with arrears period between 180 days and 360 days – 50% c) Loss assets with arrears period over 360 days – 100% In addition to the arrears period, the Bank must follow subjective criteria in arriving at the classification attributed to the assets. ii) A general provision of at least 1% of total outstanding credit facilities net of specific provisions and interest in suspense. Where provisions for impairment of loans and advances in accordance with the Ugandan Financial Institutions Act 2004 exceed amounts determined in accordance with International Financial Reporting Standards, the excess is taken to the regulatory general credit risk reserve as an appropriation of retained earnings. Otherwise no further accounting entries are made. (g) Staff loans In the normal course of business, the Bank advances loans to employees at below market rate. These loans are measured initially at fair value. The favourable loan term offered to employees are dependent on the continued employment and therefore relate to services to be rendered in future periods. The interest benefit is forfeited if the employee leaves the bank. The benefit is a long term benefit to the employees and the discount arising from the difference between the nominal value and the market value is treated as a prepayment and expensed inprofit or loss in the period in which the services are rendered. (h) Trading assets and liabilities • Trading assets and liabilities’ are those assets and liabilities that the Bank acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position taking. Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statement of financial position, with transaction costs recognised in profit or loss. All changes in fair value are recognised as part of net trading income in profit or loss. Trading assets and liabilities are not reclassified subsequent to their initial recognition, except that non-derivative trading assets, other than those designated at fair value through profit or loss on initial recognition, may be reclassified out of the fair value through profit or loss – i.e. trading – category if they are no longer held for the purpose of being sold or repurchased in the near term and the following conditions are met.

35

Notes to the Financial Statements.

• If the financial asset would have met the definition of

loans and receivables (if the financial asset had not been required to be classified as held-for-trading at initial recognition), then it may be reclassified if the bank has the intention and ability to hold the financial asset for the foreseeable future or until maturity.

• If the financial asset would not have met the definition of loans and receivables, then it may be reclassified out of the trading category only in rare circumstances.

i) Derivative financial instruments Derivatives, which comprise forward foreign exchange contracts and swaps, are initially recognised at fair value on the date the derivative contract is entered into and are subsequently measured at fair value. The fair value is determined using forward exchange market rates at the reporting date or appropriate pricing models. The Bank has no derivatives which qualify for hedge accounting. Changes in the fair value of derivatives are recognised immediately in profit and loss. j) Loans and advances Loans and advances’ are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Bank does not intend to sell immediately or in the near term.Loans and advances to banks are classified as loans and receivables. Loans and advances are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method. When the bank purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing), the arrangement is accounted for as a loan or advance, and the underlying asset is not recognised in the bank’s financial statements. k) Investment securities Investment securities are initially measured at fair value plus, in the case of investment securities not at fair value through profit or loss, incremental direct transaction costs, and subsequently accounted for depending on their classification as either held to maturity, fair value through profit or loss, or available-for-sale. i) Held-to-maturity Held-to-maturity investments’ are non-derivative assets with fixed or determinable payments and fixed maturity that the bank has the positive intent and ability to hold to maturity, and which are not designated as at fair value through profit or loss or as available-for-sale. Held-to-maturity investments are carried at amortised cost using the effective interest method, less any impairment

36

Annual Report 2015

losses. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale, and would prevent the bank from classifying investment securities as held-to-maturity for the current and the following two financial years. However, sales and reclassifications in any of the following circumstances would not trigger a reclassification:

• sales or reclassifications that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value;

• sales or reclassifications after the bank has collected substantially all of the asset’s original principal; and

Sales or reclassifications that are attributable to non-recurring isolated events beyond the bank’s control that could not have been reasonably anticipated. ii) Fair value through profit or loss The bank designates some investment securities at fair value, with fair value changes recognised immediately in profit or loss. iii) Available-for-sale Available-for-sale investments’ are non-derivative investments that are designated as available-for-sale or are not classified as another category of financial assets. Available-for-sale investments comprise equity securities and debt securities. Unquoted equity securities whose fair value cannot be measured reliably are carried at cost. All other available-for-sale investments are measured at fair value after initial recognition. Other fair value changes, other than impairment losses are recognised in OCI and presented in the fair value reserve within equity. When the investment is sold, the gain or loss accumulated in equity is reclassified to profit or loss. A non-derivative financial asset may be reclassified from the available-for-sale category to the loans and receivables category if it would otherwise have met the definition of loans and receivables and if the bank has the intention and ability to hold that financial asset for the foreseeable future or until maturity. l) Intangible assets and goodwill (i) Goodwill In 2006, the Bank acquired the business of Stanhope Finance Company. The difference between the net assets taken over and the consideration given was recognised as goodwill. The goodwill has been assessed for impairment as at 31 December 2015 in accordance with IAS 36, Impairment. No impairment was noted. (ii) Software Software acquired by the Bank is measured at cost less accumulated amortization and any accumulated impairment losses.

Annual Report 2015

Expenditure on internally developed software is recognised as an asset when the Bank is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits, and can reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly attributable to developing the software and capitalised borrowing costs, and are amortised over its useful life. Internally developed software is stated at capitalised cost less accumulated amortisation and impairment. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Software is amortised on a straight-line basis in profit or loss over its estimated useful life, from the date on which it is available for use. The estimated useful life of software for the current and comparative periods is ten years. m) Impairment of non financial assets At each reporting date, the Bank reviews the carrying amounts of its non-financial assets (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The ‘recoverable amount’ of an asset or CGU is the greater of its value in use and its fair value less costs to sell. ‘Value in use’ is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. The Bank’s corporate assets do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation

Notes to the Financial Statements.

or amortisation, if no impairment loss had been recognised. n) Deposits and subordinated liabilities Deposits and subordinated liabilities are the Bank’s sources of debt funding. Deposits and subordinated liabilities are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest rate method; any difference between proceeds net of transaction costs and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest rate method. Sales and repurchase agreements Amounts paid on securities sold under sale and repurchase agreements (REPOS) are recognised in the financial statements as assets with the counterparty liability included in amounts due to banking institutions. Securities purchased from Bank of Uganda under agreements to resell (reverse Repos), are disclosed with treasury bills as they are held to maturity after which they are repurchased and are not negotiable or discounted during the tenure. o) Foreign currencies Transactions in foreign currencies during the year are converted into Uganda Shillings at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Foreign currency differences arising on translation are generally recognised in profit or loss. p) Property and equipment (i) Recognition and measurement Property and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling

37

Annual Report 2015

Notes to the Financial Statements.

and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. If significant parts of an item of property or equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed frequently to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is credited to the asset revaluation reserve in equity through other comprehensive income, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in the profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve. An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (ii) Subsequent cost Subsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the bank. Ongoing repairs and maintenance are expensed as incurred. (iii) Depreciation Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the bank will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives of significant items of property and

38

equipment are as follows: Leasehold buildings Over lower of lease term and 2% Fixtures, fittings and equipment Motor vehicles Computers ATM

15% 25% 10-20% 10%

(iv) Impairment The Bank assesses at each reporting date whether there is any indication that any item of property and equipment is impaired. If any such indication exists, the Bank estimates the recoverable amount of the relevant assets. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. (q) Provisions A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. (i) Restructuring A provision for restructuring is recognised when the Bank has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for. (ii) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. (iii)Bank levies A provision for bank levies is recognised when the condition that triggers the payment of the levy is met. If a levy obligation is subject to a minimum activity threshold so that the obligating event is reaching a minimum activity, then a provision is recognised when that minimum activity threshold is reached.

Annual Report 2015

(r) Financial guarantees and loan commitments Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other facilities. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. Financial guarantee liabilities or loan commitments to provide a loan at below market interest rate are initially recognised at their fair value, and the initial fair value is amortised over the life of the financial guarantee or commitment. The liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment to settle the liability when a payment under the guarantee has become probable. Financial guarantees and loan commitments are included within other liabilities. (s) Contingent liabilities Letters of credit, acceptances, guarantees and performance bonds are accounted for as off statement of financial position transactions and disclosed as contingent liabilities. Estimates of the outcome and financial effect of contingent liabilities is made by management based on the information available up to the date the financial statements are approved for issue by the directors. Any expected loss is charged to profit or loss. (t) Dividends Dividends on ordinary shares are charged to equity in the period in which they are declared. Proposed dividends are shown as a separate component of equity until declared. (u) Operating leases Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Payments made under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. The prepaid operating lease rentals are recorded in the statement of financial position and amortised over the remaining lease term. (v) Income tax Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in OCI. (i) Current tax Current tax’ comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Notes to the Financial Statements.

(ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the bank expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss. (w) Employee benefits (i) Retirement benefit obligations The Bank also operates a defined contribution pension plan. The contribution payable to a defined contribution plan is in proportion to the services rendered to the Bank by the employees and is recorded as an expense under ‘staff costs’. Unpaid contributions are recorded as a liability. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. The Bank also contributes to the National Social Security Fund (NSSF). NSSF contributions are also charged to profit or loss as incurred. (ii) Share based payment transactions Certain senior management participate in a share based payment arrangement organised and managed at group level. The fair value of the amounts payable to employees in respect of share application rights which are settled in cash is recognised as an expense with the corresponding increase in liabilities over the period in which the employees become unconditionally entitled for payment. The liability is re-measured at each reporting date and at the settlement

39

Notes to the Financial Statements.

date. Any changes in fair value of the liability are recognised as personnel expenses in profit or loss. (iii) Short term benefits Short term benefits consist of salaries, bonuses and any non monetary benefits. They exclude equity based benefits and termination benefits. Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under a short term cash bonus only if the Bank has a present legal or constructive obligation to pay this amount. (x) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, including: cash and balances with Bank of Uganda, treasury and other eligible bills, and amounts due from other banks. Cash and cash equivalents excludes the cash reserve requirement held with Bank of Uganda. (y)Earnings per share The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all any potentially dilutive ordinary shares which comprise share options granted to employees. (z) Segment reporting Segment results that are reported to the Bank’s CEO (being the chief operating decision maker) include items that are directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses and tax assets and liabilities. (aa) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015. At the date of Authorisation of the financial statements of the group for the year ended 31-December-2015, the following standards were in issue but not yet effected. Sale or Contribution of Assets between an 1-Jan-16 Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) Accounting for Acquisitions of Interests in 1-Jan-16 Joint Operations (Amendments to IFRS 11) Amendments to IAS 41 - Bearer Plants 1-Jan-16 (Amendments to IAS 16 and IAS 41)

40

Annual Report 2015 Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciations and Amortisation Equity Method in Separate Financial Statements (Amendments to IAS 27) IFRS 14 Regulatory Deferral Accounts Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) Disclosure Initiative (Amendments to IAS 1) IFRS 15 Revenue from Contracts with Customers IFRS 9 Financial Instruments (2014) IFRS 16 Leases

1-Jan-16

1-Jan-16 1-Jan-16 1-Jan-16

1-Jan-16 1-Jan-17 1-Jan-18 1-Jan-19

All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity). The applicable standards are discussed below Defined benefit plans – Employee contributions (Amendments to IAS 19) The amendments introduce relief that will reduce the complexity and burden of accounting for certain contributions from employees or third parties. Such contributions are eligible for practical expedient if they are: 1.     Set out in the formal terms of the plan; 2.     Linked to service; and 3.     Independent of the number of years of service. When contributions are eligible for the practical expedient, a company is permitted (but not required) to recognise them as a reduction of the service cost in the period in which the related service is rendered. The amendments apply retrospectively for annual periods beginning on or after 1 July 2014 with early adoption permitted. The adoption of these changes will not affect the amounts and disclosures of the group’s financial statements Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.

Annual Report 2015 The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. The group is assessing the potential impact on its financial statements the application of this standard. Disclosure Initiative (Amendments to IAS 1) The amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements. The amendments apply for annual periods beginning on or after 1 January 2016 and early application is permitted. The group is assessing the potential impact on its financial statements the application of this standard. IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The standard specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers in recognising revenue being: Identify the contract(s) with a customer; Identify the performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as) the entity satisfies a performance obligation. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption is permitted. The group is assessing the potential impact on its financial statements the application of IFRS 15 IFRS 9: Financial Instruments O24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. This standard will have a significant impact on the Group, which will include changes in the measurement bases of the Group’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised in the Group. The standard is effective for annual periods beginning on

Notes to the Financial Statements.

or after 1 January 2018 with retrospective application, early adoption is permitted. (ab) Basis of consolidation The consolidated financial statements incorporate the consolidated financial statements of the company and all entities which are controlled by the company. Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the consolidated financial statements of subsidiaries to bring their accounting policies in line with those of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent. Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. Business combinations The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments. The acquiree’s identifiable assets, liabilities and contingent

41

Notes to the Financial Statements.

liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held-For-Sale and discontinued operations, which are recognised at fair value less costs to sell. Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date. On acquisition, the group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date. Non-controlling interest arising from a business combination is measured either at their proportionate share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations. In cases where the group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the period. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment. Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. 3 FINANCIAL RISK MANANGEMENT a) Introduction and overview The Bank has exposure to the following risks from its use of financial instruments: • Credit risk; • Liquidity risk; • Market risk; and • Non financial risks This note presents information about the bank’s exposure to each of the above risks, the bank’s objectives, policies and processes for measuring and managing risk and the bank’s management of capital. RISK MANAGEMENT FRAMEWORK Risk is an integral part of the banking business and the Bank aims at the delivery of superior shareholder value by achieving an appropriate trade-off between risk and returns. The Bank is exposed to various risks, including credit risk, market risk

42

Annual Report 2015 and operational risk. The Bank’s risk management strategy is based on a clear understanding of various risks, disciplined risk assessment and measurement procedures and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with the industry best practices. The risk management function is supported by a Board Risk Management Committee using a comprehensive range of quantitative tools. The Board Risk Management Committee is responsible for the assessment, management and mitigation of risk in the Bank. This Committee is accountable to the Board of Directors. The Internal Audit department independently reviews the risk assumed on a periodic basis and reports to Board of Directors. b) Credit Risk The Bank takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Bank by failing to pay amounts in full when due. Credit risk is the most important risk for the Bank’s business: management therefore carefully manages the exposure to credit risk. Credit exposures arise principally from lending and investment activities. There is also credit risk associated with off-balance sheet items, such as loan commitments. Credit risk management and control is centralised in the Board Credit Committee which reports regularly to the Board of Directors. The Bank structures the levels of credit risk it undertakes by placing limits over and above the regulatory limits, on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Such risks are monitored on a revolving basis and subject to frequent review. Credit related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

Annual Report 2015

Notes to the Financial Statements.

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43

Annual Report 2015

Notes to the Financial Statements.

Maximum exposure to credit risk before collateral held 2015

2014

Ushs‘000

Ushs‘000

174,130,488

127,525,588

85,134,631

110,993,091

Government securities - Held to maturity

150,513,742

186,571,442

Loans and advances to customers (Net)

971,381,192

844,128,583

Balance with Bank of Uganda Deposits and balances due from banking institutions

Investment in Bond - Held to maturity

2,820,591

5,039,584

17,303,970

16,035,122

Acceptances and letters of credit

93,308,802

36,566,596

Letters of guarantee and performance bonds

38,339,111

36,926,311

Commitments to lend

73,431,428

83,278,349

1,606,363,955

1,447,064,666

Investment in equity shares Credit risk exposures relating to off balance sheet items

Total

The above table represents a worse case scenario of credit risk exposure to the Bank at 31 December 2015 and 2014, without taking account of any collateral held or other credit enhancements attached. For on-balance sheet assets, the exposures set out above are based on carrying amounts as reported in the statement of financial position. As shown above 66.17% of the total maximum exposure is derived from loans and advances to banks and customers (2014: 66.02%). 9.44% represents investments in debt securities (2014: 13.24%). Loans and receivables to customers are secured by collateral in the form of charges over land and buildings and/or plant and machinery or corporate guarantees. Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Bank resulting from both its loan and advances portfolio and debt securities based on the following: 1. The Bank exercises stringent controls over the granting of new loans 2. 82.35% of the loans and receivables are neither past due nor impaired 3. 98.14% of the investments in debt securities are government securities.

Loans and receivables are summarised as follows: Neither past due nor impaired Past due but not impaired Individually impaired

2015

2014

Ushs‘000

Ushs‘000

832,575,892

728,641,020

36,064,395

88,931,974

142,358,442

19,361,608

1,010,998,729

836,934,602

Gross Less: allowance for impairment (Note 16)

(50,728,106)

(12,142,428)

960,270,623

824,792,174

64,117,405

64,117,405

Net Other loans and advances Provision for impaired loans and advance Total

44

(53,006,836)

(44,780,996)

11,110,569

19,336,409

971,381,192

844,128,583

Annual Report 2015

Notes to the Financial Statements.

No other financial assets are either past due or impaired. Loans and advances neither past due nor impaired The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Bank.

Loans and advances are summarised as follows: Standard Watch List Total

2015

2014

Ushs‘000

Ushs‘000

806,132,122

742,106,509

62,508,165

82,150,001

868,640,287

824,256,510

Loans and advances past due but not impaired Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. The gross amounts of loans and advances that were past due but not impaired were as follows: 2015

2014

Ushs‘000

Ushs‘000

Past due up to 30 days

10,870,077

6,781,974

Past due 31 – 60 days

16,855,140

56,858,174

Past due 61 – 89 days

8,339,178

25,291,826

36,064,395

88,931,974

186,545,220

150,616,417

Total Fair value of collateral held Loans and advances individually impaired

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

Overdrafts

2015

2014

2015

2014

Ushs‘000

Ushs‘000

Ushs‘000

Ushs‘000

Individually assessed impaired loans and advances

119,235,728

11,942,067

23,122,714

7,4195,41

Fair value of collateral held

131,780,665

13,172,000

33,426,250

8,922,500

Renegotiated Loans Restructuring activities include extended payment arrangements, approved external management plans, modification and deferral of payments. Restructuring policies and practices are based on indicators or criteria that, in the judgement of local management, indicate that payment will most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied to term loans – in particular, customer finance loans. In the majority of cases, restructuring results in the asset continuing to be impaired. There were no renegotiated loans that would otherwise be past due or impaired (2014: Nil).

45

Annual Report 2015

Notes to the Financial Statements.

3 FINANCIAL RISK MANAGEMENT (Continued) Concentrations of risk of financial assets with credit risk exposure Industry sector risk concentrations were as follows for on and off balance sheet items: Financial

Transport

Whole-sale

and Commu-

and retail

Other

Institutions

Manufacturing

-nications

Trade

Agriculture

Industries

Individuals

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

-

-

-

-

-

-

85,134,631

-

-

-

-

-

-

150,513,742

80,305,279 155,047,269

62,931,561

517,751,676

Year ended 31 December 2015 Assets

Deposits and balances due from banking institutions Government securities Loans and advances to customers Corporate bonds Total

85,134,631

150,513,742 - 138,205,216 2,820,591

-

238,468,964 138,205,216

-

-

-

80,305,279 155,047,269

-

62,931,561

517,751,676

56,757,728 1,010,998,729 -

2,820,591

56,757,728 1,249,467,693

Year ended 31 December 2014 Assets Deposits and balances due from banking institutions Government securities Loans and advances to customers Corporate bonds Total

110,993,091

-

-

-

-

-

-

110,993,091

-

-

-

-

-

-

186,571,442

57,226,787 129,112,866

48,511,679

423,853,957

48,948,386

836,934,605

-

-

-

-

5,039,584

57,226,787 129,112,866

48,511,679

423,853,957

186,571,442 - 129,280,930 5,039,584

-

302,604,117 129,280,930

-

48,948,386 1,139,538,722

(c ) Liquidity risk

Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations on its financial liabilities. It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. Management of liquidity risk

The Bank has access to a diverse funding base. Funds are raised mainly from deposits and share capital. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. The Bank strives to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities. The Bank continually assesses liquidity risk by identifying and monitoring changes in funding required to meet business goals and targets set in terms of the overall bank strategy. In addition, the Bank has an Asset and Liability committee that meet on a regular basis to monitor Liquidity risk, review and approve liquidity policies and procedures. Exposure of Liquidity risk A key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as including cash in hand, balances with Bank of Uganda, placements maturing within three months and investments for which there is an active and liquid market less any deposits from banks, other borrowings and commitments maturing within three months. Details of the reported ratio of net liquid assets to deposits from customers at the reporting date were as follows;

46

Annual Report 2015

Notes to the Financial Statements.

3. FINANCIAL RISK MANAGEMENT (Continued) c) LIQUIDITY RISK REMAINING CONTRACTUAL MATURITY ANALYSIS The Bank’s liquidity position is as follows: More than 1

More than 3

More than 6

months but

months but

months but

Up to 1

less than 3

less than 6

less than 12

Over 12

months

months

months

months

months

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

199,970,142

-

-

-

-

199,970,142

85,134,631

-

-

-

-

85,134,631

-

6,307,129

18,550,537

5,548,365

120,107,710

150,513,741

109,621,470

333,041,076

185,325,470

217,658,140

125,735,036

971,381,192

16,949,517

-

-

-

Investment in equity shares

-

-

-

-

17,303,970

17,303,970

Corporate bonds

-

-

-

-

2,820,591

2,820,591

Other Assets

-

-

-

-

350,268,481

350,268,481

411,675,760

339,348,205

203,876,007

223,206,505

616,235,788

1,794,342,265

664,709,122

254,188,777

142,302,090

132,500,470

142,905,951

1,336,606,410

429,468

-

-

-

106,958,040

107,387,508

42,299,323

-

-

-

308,049,024

350,348,347

707,437,913

254,188,777

142,302,090

132,500,470

557,913,015

1,794,342,265

92,200,954

22,754,325

65,993,652

5,129,969

19,000,440

205,079,340

(387,963,107)

62,405,103

(4,419,735)

85,576,066

39,322,333

(205,079,340)

31 December 2015 Assets Cash and bank balances with Bank of Uganda Deposits and balances due from banking institutions Government securities Loans and advances to customers Corporate tax receivable

Total assets

16,949,517

Equity and Liabilities Customer deposits Refinance under ACF & EIB Other Liabilities & Capital

Total equity and liabilities Off Balance Sheet Liabilities

Net liquidity gap

47

Annual Report 2015

Notes to the Financial Statements.

3. FINANCIAL RISK MANAGEMENT (Continued) c) LIQUIDITY RISK REMAINING CONTRACTUAL MATURITY ANALYSIS The Bank’s liquidity position is as follows: More than 1

More than 3

More than 6

months but

months but

months but

Up to 1

less than 3

less than 6

less than 12

Over 12

months

months

months

months

months

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Cash and bank balances with Bank of Uganda

174,489,666

-

-

-

-

174,489,666

Deposits and balances due from banking institutions

110,993,091

-

-

-

-

110,993,091

-

1,223,605

25,962,726

11,401,251

147,983,860

186,571,442

133,480,921

88,261,991

188,872,448

186,491,369

247,021,854

844,128,583

6,820,981

-

-

-

-

6,820,981

Investment in equity shares

-

-

-

-

16,035,122

16,035,122

Corporate bonds

-

-

-

-

5,039,584

5,039,584

2,075,629

1,990,152

1,695,480

10,498,143

359,478,148

375,737,552

427,860,288

91,475,748

216,530,654

208,390,763

775,558,568

1,719,816,021

687,453,207

242,108,466

202,607,149

132,311,980

3,068,089

1,267,548,891

86,351,005

88,592,960

31 December 2014 Assets

Government securities Loans and advances to customers Corporate tax receivable

Other Assets

Total assets Equity and Liabilities Customer deposits Refinance under ACF & EIB

2,000,000

Other Liabilities & Capital

22,854,070

384,773

2,046,183

3,791,409

334,597,735

363,674,170

712,307,277

242,493,239

204,895,287

136,103,389

424,016,829

1,719,816,021

75,250,234

30,581,229

37,356,316

11,743,673

1,839,805

156,771,257

(359,697,223)

(181,598,720)

(25,720,949)

60,543,701

349,701,934

(156,771,257)

Total equity and liabilities Off Balance Sheet Liabilities

Net liquidity gap

48

241,955

Annual Report 2015

Notes to the Financial Statements.

d) MARKET RISK Market risk is the risk of loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices.The Bank’s exposure to market risk is a function of its asset and liability management activities and its role as a financial intermediary in customer related transactions. The objective of market risk management is to minimise the impact of losses due to market risks on earnings and equity capital. Market risk policies include Asset-Liability Management (ALM) policies. ALM policies are approved by the Asset-Liability Board Committee (ALCO) and the Board of Directors. ALCO’s role encompasses stipulating liquidity, interest rate and foreign exchange risk limits, monitoring risk levels by adherence to set limits, articulating the Bank’s interest rate view and determining business strategy in the light of the current and expected business environment. These sets of policies and processes are articulated in the ALM policy. d (i) INTEREST RATE RISK The Bank is exposed to various risks associated with the effects of fluctuations of the levels of prevailing market interest rates on its financial position and cash flows. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. The ALCO is the monitoring body for compliance with these limits and is assisted by risk management in its day-to-day monitoring activities.The table below summarises the exposure to interest rate risks. Included in the table below are the bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The bank does not bear an interest rate risk on off balance sheet items.

REMAINING CONTRACTUAL MATURITY ANALYSIS

More than 1

More than 3

months but

months but

Up to 1

less than 3

less than 6

Over

interest

months

months

months

6 months

bearing

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

-

-

-

-

199,970,142

199,970,142

32,024,644

-

-

-

53,109,987

85,134,631

-

6,307,129

18,550,537

125,656,075

-

150,513,741

Non

31 December 2015 Assets Cash and bank balances with Bank of Uganda Deposits and balances due from banking institutions Government securities

109,621,470

333,041,076

185,325,470

343,393,176

-

971,381,192

Corporate bonds

Loans and advances to customers

-

-

-

2,820,591

-

2,820,591

Investment in equity shares

-

-

-

-

17,303,970

17,303,970

Other Assets

-

-

-

-

367,217,998

367,217,998

141,646,114

339,348,205

203,876,007

471,869,842

637,602,097

1,794,342,265

624,173,835

254,188,777

142,302,090

275,406,421

40,535,287

1,336,606,410

429,468

-

-

106,958,040

-

-

-

-

350,348,347

350,348,347

624,603,303

254,188,777

142,302,090

382,364,461

390,883,634

1,794,342,265

(482,957,189)

85,159,428

61,573,917

89,505,381

246,718,463

-

Total assets Liabilities Customer deposits Refinance under ACF & EIB Other Liabilities & Capital Total liabilities Interest sensitivity gap

107,387,508

49

Annual Report 2015

Notes to the Financial Statements.

REMAINING CONTRACTUAL MATURITY ANALYSIS

More than 1

More than 3

months but

months but

Up to 1

less than 3

less than 6

Over

interest

months

months

months

6 months

bearing

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

174,489,666

174,489,666

67,119,920

110,993,091

Non

31 December 2014 Assets Cash and bank balances with Bank of Uganda Deposits and balances due from banking institutions Government securities Loans and advances to customers

43,873,171 -

1,223,605

25,962,726

159,385,111

-

186,571,442

133,480,921

88,261,991

188,872,448

433,513,223

-

844,128,583

Corporate bonds

-

-

-

5,039,584

-

5,039,584

Investment in equity shares

-

-

-

-

16,035,122

16,035,122

Other Assets

-

-

-

-

382,558,533

382,558,533

177,354,092

89,485,596

214,835,174

597,937,918

640,203,241

1,719,816,021

642,835,020

242,108,466

202,607,149

135,380,069

44,618,187

1,267,548,891

2,000,000

-

241,955

86,351,005

-

88,592,960

-

-

-

-

363,674,170

363,674,170

644,835,020

242,108,466

202,849,104

221,731,074

408,292,357

1,719,816,021

(467,480,928)

(152,622,870)

11,986,070

376,206,844

231,910,884

-

Total assets Liabilities Customer deposits Refinance under ACF & EIB Other Liabilities & Capital Total liabilities Interest sensitivity gap

50

Annual Report 2015

Notes to the Financial Statements.

3 FINANCIAL RISK MANAGEMENT (Continued) d) MARKET RISK (Continued) d (ii) CURRENCY RISK The bank’s currency position is as follows: Sterling US dollars

pounds

Euro

Other

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Cash and bank balances with Bank of Uganda

59,452,433

1,990,612

2,016,798

259,160

63,719,003

Deposits and balances due from banking institutions

34,339,866

4,170,167

6,259,334

8,340,620

53,109,987

-

-

-

-

-

554,686,193

26,256

68,114

3,688

554,784,251

Corporate bonds

-

-

-

-

-

Investment in equity shares

-

-

-

13,000

13,000

648,478,492

6,187,035

8,344,246

8,616,468

671,626,241

597,070,185

5,882,656

7,822,215

28,807

610,803,863

93,779,044

19,542

184,165

173,835

94,156,586

Total liabilities

690,849,229

5,902,198

8,006,380

202,642

704,960,449

Net balance sheet position

(42,370,737)

284,837

337,866

8,413,826

(33,334,208)

31 December 2015 Assets

Government securities Loans and advances to customers

Total assets Liabilities and shareholders’ funds Customer deposits Refinance under ACF & EIB

51

Annual Report 2015

Notes to the Financial Statements.

3 . FINANCIAL RISK MANAGEMENT (Continued) d) MARKET RISK (Continued) d (ii) CURRENCY RISK The bank’s currency position is as follows: Sterling US dollars

pounds

Euro

Other

Total

Ush’000

Ush’000

Ush’000

Ush’000

Ush’000

Cash and bank balances with Bank of Uganda

37,571,245

1,347,861

2,056,500

331,510

174,489,666

Deposits and balances due from banking institutions

55,376,858

4,379,674

3,958,369

3,460,863

110,993,091

31 December 2014 Assets

Government securities Loans and advances to customers Corporate bonds Investment in equity shares

186,571,442 478,666,269

67,238

286,803

-

-

-

105

844,811,584 5,039,584

-

-

-

590

16,035,122

571,614,372

5,794,773

6,301,672

3,793,068

1,337,940,489

517,991,728

5,190,528

5,715,050

126,788

1,267,548,891

79,534,639

-

-

-

88,592,960

Total liabilities

597,526,367

5,190,528

5,715,050

126,788

1,356,141,851

Net balance sheet position

(25,911,995)

604,245

586,622

3,666,280

(18,201,362)

Total assets Liabilities and shareholders’ funds Customer deposits Refinance under ACF & EIB

52

Annual Report 2015

Notes to the Financial Statements.

3 FINANCIAL RISK MANAGEMENT (Continued) d) MARKET RISK (Continued) d (ii) CURRENCY RISK (Continued)

i) Financial assets The Bank’s statement of financial position includes the following financial assets that are not measured at fair value: Deposits and balances due from banks, Government securities, investments in bonds and loans and advances to customers. These financial assets are carried at amortised cost at the rates agreed with the various counter parties.The estimated fair value of these financial assets approximates to their carrying amount. ii) Financial liabilities Financial liabilities on the Bank’s statement of financial position include deposits from banks and due to customers. The estimated fair value of current account deposits and other deposits with no stated maturity is the carrying amount which is also the amount repayable on demand. The directors are of the view that the carrying amount of interest bearing deposits is the best approximation to their fair value. iii) Fair value hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether inputs used in the valuation techniques of financial instruments are observable or unobservable. Financial instruments are grouped into 3 levels based on the degree to which fair value data / input is observable. I. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed debt and equity instruments traded mainly on the Uganda Securities Exchange. II. Level 2 fair value measurements are thos derived from inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as a price) or indirectly (i.e. derived from prices). Input data for this category is sourced mainly from Reuters and the Uganda Securities Exchange III. Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs). 31 December 2015 Available-for-sale financial assets

31 December 2014 Available-for-sale financial assets

Level 1

Level 2

Level 3

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

17,303,970

-

-

17,303,970

17,303,970

-

-

17,303,970

Level 1

Level 2

Level 3

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

16,035,122

-

-

16,035,122

16,035,122

-

-

16,035,122

The fair value of all other financial instruments has been estimated based on their amortised cost.

e) CAPITAL MANAGEMENT The Bank’s objectives when managing capital, which is a broader concent than the “equity” on the statement of financial position are: • to comply with the capital requirements set by the FIA 2004 • to safeguard the Bank’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and • to maintain a strong capital base to support the development of its business. Capital adequacy and use of regulatory capital are monitored regularly by management, employing techniques based on the guidelines developed by the Basel Committee, as implemented by the FIA 2004 for supervisory purposes. The required information is filed with the Central Bank on a quarterly basis.

53

Annual Report 2015

Notes to the Financial Statements.

The FIA 2004 requires each bank to: (a) hold the minimum level of regulatory capital ; (b) maintain a ratio of total regulatory capital to the risk-weighted assets plus risk-weighted off-balance sheet assets (the ‘Basel ratio’) at or above the required minimum of 8%; (c) maintain core capital of not less than 8% of total deposit liabilities; and (d) maintain total capital of not less than 12% of risk-weighted assets plus risk-weighted off-balance sheet items. The Bank’s total regulatory capital is divided into two tiers: • Tier 1 capital (core capital): shareholders’ equity. • Tier 2 capital (supplementary capital): (subject to prior approval) of revaluation reserves, subordinated debt not exceeding 50% of Tier 1 capital and hybrid capital instruments. Qualifying Tier 2 capital is limited to 100% of Tier 1 capital. The risk weighted assets are measured by means of a hierarchy of four risk weights classified according to the nature of – and reflecting an estimate of the credit risk associated with – each asset and counterparty. A similar treatment is adopted for offbalance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses. The table below summarises the composition of regulatory capital and the ratios of the Bank at 31 December: 2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Tier 1 capital

254,898,883

221,129,457

226,234,328

196,425,332

Tier 1 + Tier 2 capital

264,368,854

230,599,428

234,498,152

204,689,156

On-balance sheet positions

1,319,774,417

1,319,774,417

1,230,389,776

1,230,389,776

Off-balance sheet positions

85,433,957

85,433,957

70,375,623

70,375,623

1,405,208,374

1,405,208,374

1,300,765,399

1,300,765,399

Tier 1 capital

18.14%

15.74%

17.39%

15.10%

Tier 1 + Tier 2 capital

18.81%

16.41%

18.03%

15.74%

210,000,000

210,000,000

210,000,000

210,000,000

72,665,002

72,665,002

53,439,792

55,804,297

282,665,002

282,665,002

263,439,792

265,804,297

-

33,769,426

-

35,608,291

27,766,119

27,766,119

37,205,464

33,770,674

254,898,883

221,129,457

226,234,328

196,425,332

General provision

9,469,971

9,469,971

8,263,824

8,263,824

Tier 2 capital

9,469,971

9,469,971

8,263,824

8,263,824

Risk-weighted assets

Total risk-weighted assets Basel ratio

Tier 1 capital includes Permanent shareholder’s equity Retained earnings

Less: 1. Investment in unconsolidated financial subsidiaries 2. Goodwill and other intangible assets Tier 1 capital Tier 2 capital includes:

54

Annual Report 2015

Notes to the Financial Statements.

3. FINANCIAL RISK MANAGEMENT (Continued) e) CAPITAL MANAGEMENT (continued) Break down of Risk weighted assets for 2015

Notes, coins and other cash assets Balances with BOU (includes clearing accounts) Due from other commercial banks in Uganda

31-Dec-15

Risk

Reqd. Capital

Shs’000

Weight

Shs’000

25,839,654

0%

-

176,545,572

0%

-

32,024,644

20%

6,404,929

-

20%

-

27,353,062

50%

13,676,531

Due from banks outside Uganda with long-term ratings as follows: (1) Rated AAA to AA(-) (2) Rated A(+) to A(-) (3) Rated A(-) and non-rated

25,756,925

100%

25,756,925

Uganda government Securities

150,513,742

0%

-

Loans and advances

950,544,103

100%

950,544,103

20,124,561

100%

20,124,561

279,946,906

100%

279,946,906

23,320,462

100%

23,320,462

Investments Bank Premises and other fixed assets (net of depreciation) All other assets (to be reduced by deduction made for goodwill, intangible assets, investments in unconsolidated subsidiaries and future income tax benefits) Total Risk-weighted assets

1,711,969,631

1,319,774,417

CONTINGENT CLAIMS: Contingent secured by cash collateral

11,585,048

0%

-

Direct credit substitutes(guarantees and acceptances)

28,339,378

100%

28,339,378

Transaction related (Performance bonds and standbys)

6,780,558

50%

3,390,279

Documentary credits(trade related and self-liquidating)

84,942,929

20%

16,988,586

Other commitments(unused formal facility)

73,431,428

50%

36,715,714

Total Risk-weighted contingent claims CAPITAL REQUIREMENTS BASIS

85,433,957 1,405,208,374

55

Annual Report 2015

Notes to the Financial Statements.

3. FINANCIAL RISK MANAGEMENT (Continued) e) CAPITAL MANAGEMENT (continued) Break down of Risk weighted assets for 2014

Notes, coins and other cash assets

31-Dec-14

Risk

Reqd. Capital

Shs’000

Weight

Shs’000

46,964,078

0%

Nil

130,832,101

0%

Nil

43,873,171

20%

8,774,634

-

20%

-

(2) Rated A(+) to A(-)

47,775,270

50%

23,887,635

(3) Rated A(-) and non-rated

19,344,650

100%

19,344,650

31-Dec-14

Risk

Reqd. Capital

Shs’000

Weight

Shs’000

Balances with BOU (includes clearing accounts) Due from other commercial banks in Uganda Due from banks outside Uganda with long-term ratings as follows: (1) Rated AAA to AA(-)

Break down of Risk weighted assets for 2014 (Continued) Uganda government Securities

186,571,442

0%

Nil

Loans and advances

844,128,583

100%

844,128,583

Investments Bank Premises and other fixed assets (net of

21,074,706

100%

21,074,706

295,653,153

100%

295,653,153

17,526,415

100%

17,526,415

depreciation) All other assets (to be reduced by deduction made for goodwill, intangible assets, investments in unconsolidated subsidiaries and future income tax benefits) Total Risk-weighted assets

1,653,754,306

1,230,389,776

CONTINGENT CLAIMS: Contingent secured by cash collateral

9,298,690

0%

Nil

Direct credit substitutes(guarantees and acceptances)

13,890,473

100%

13,890,473

Transaction related (Performance bonds and standbys)

15,950,754

50%

7,975,377

Documentary credits(trade related and self-liquidating)

34,352,990

20%

6,870,598

Other commitments(unused formal facility)

83,278,349

50%

41,639,175

Total Risk-weighted contingent claims CAPITAL REQUIREMENTS BASIS

56

70,375,623 1,300,765,399

Annual Report 2015

Notes to the Financial Statements.

3. FINANCIAL RISK MANAGEMENT (Continued) f ) IFRS 7 MARKET RISKS - SENSITIVITY ANALYSIS The objective of the Bank’s market risk management is to manage and control market risk exposures in order to optimize return on risk while maintaining a market profile consistent with the Bank’s mission. Market risk is the risk that movements in market risk factors, including foreign exchange rates and interest rates will reduce the Bank’s income or capital. A principal part of the Bank’s management of market risk is to monitor the sensitivity of projected net interest income under varying interest rate scenarios (simulation modeling) and the sensitivity of future earnings and capital to varying foreign exchange rates. the Bank aims, through its management of market risk, to mitigate the impact of prospective interest rate movements and foreign exchange fluctuations which could reduce future earnings and capital. For simulation modeling, the Bank uses a combination of scenarios relevant to local businesses and local markets. These scenarios are used to illustrate the effect on the Bank’s earnings and capital. a) Interest Rate Risks – Increase / Decrease of 10% in net interest margin The Interest Rate Risks sensitivity analysis is based on the following assumptions. • Changes in the market interest rates affect the interest income or expenses of variable interest financial instruments • Changes in Market interest rates only affect interest income or expenses in relation to financial instruments with fixed interest rates if these are recognized at their fair value. • The interest rate changes will have a significant effect on interest sensitive assets and liabilities and hence simulation modeling is applied to net interest margins. • The interest rates of all maturities move by the same amount and, therefore, do not reflect the potential impact on net interest income of some rates changing while others remain unchanged. • The projections make other assumptions including that all positions run to maturity. The table below sets out the impact on future net interest income of an incremental 10% parallel fall or rise in all yield curves at the beginning of each quarter during the 12 months from 1 January 2015. Assuming no management actions, a series of such rise and fall would impact the future earnings and capital as illustrated in the table below; Amount

Scenario 1

Scenario 2

Ushs(millions)

10% Increase

10% Decrease

31-Dec-15

in Net interest margin

in Net interest margin

1,842

13,002

-9,318

Adjusted core capital

221,129

232,289

209,970

Adjusted total capital

230,599

241,759

219,440

1,405,208

1,405,208

1,405,208

Profit before income tax

Risk Weighted Assets (RWA)

%

%

%

Adjusted core capital to RWA

15.74%

16.53%

14.94%

Adjusted total capital to RWA

16.41%

17.20%

15.62%

Assuming no management actions, a series of such appreciation would decrease net interest income for 2015 by Ushs 11,174 million, while a series of such falls would increase interest income for 2015 by Ushs 11,174 million. Also a series of such rises would increase the adjusted core capital to RWA and Adjusted total capital to RWA by 0.79% and 0.79% respectively, while a series of such falls would decrease the adjusted core capital to RWA and Adjusted total capital to RWA by 1.58% and 1.58% respectively. Both the revised capital ratios are well above the minimum capital requirement of 8% and 12% respectively.

57

Annual Report 2015

Notes to the Financial Statements.

FINANCIAL RISK MANAGEMENT (Continued) f ) IFRS 7 MARKET RISKS - SENSITIVITY ANALYSIS (continued) b) Foreign Exchange Risks – Appreciation/Depreciation of Ushs against other currencies by 10% The foreign exchange risks sensitivity analysis is based on the following assumptions; • Foreign exchange exposures represent net currency positions of all currencies other than Uganda Shillings. • The currency risk sensitivity analysis is based on the assumption that all net currency positions are highly effective. • The base currency in which the Bank’s business is transacted are Uganda Shillings. The table below sets out the impact on future earnings of an incremental 10% parallel fall or rise in all foreign currencies at the beginning of each quarter during the 12 months from 1 January 2015. Assuming no management actions, a series of such rise and fall would impact the future earnings and capital as illustrated in the table below;

Profit before income tax

Amount

Scenario 1

Scenario 2

Ushs(millions)

10% appreciation

10% Depreciation

31-Dec-15

of Ush

of Ush

1,842

1,916

1,768

Adjusted core capital

221,129

221,204

221,055

Adjusted total capital

230,599

230,674

230,525

1,405,208

1,405,208

1,405,208

%

%

%

Risk Weighted Assets (RWA) Adjusted core capital to RWA

15.74%

15.74%

15.73%

Adjusted total capital to RWA

16.41%

16.42%

16.41%

Assuming no management actions, a series of such appreciation would decrease earnings for 2015 by Ushs 2,381 million, while a series of such falls would increase earnings for 2015 by Ushs 2,381 million. Also a series of such rises would decrease the adjusted core capital to RWA and Adjusted total capital to RWA by 0.17% and 0.17% respectively, while a series of such falls would increase the adjusted core capital to RWA and Adjusted total capital to RWA by 0.17% and 0.17% respectively. Both the revised capital ratios are well above the minimum capital requirement of 8% and 12% respectively. b) Foreign Exchange Risks – Appreciation/Depreciation of Ushs against other currencies by 10% The foreign exchange risks sensitivity analysis is based on the following assumptions; • Foreign exchange exposures represent net currency positions of all currencies other than Uganda Shillings. • The currency risk sensitivity analysis is based on the assumption that all net currency positions are highly effective. • The base currency in which the Bank’s business is transacted are Uganda Shillings. The table below sets out the impact on future earnings of an incremental 10% parallel fall or rise in all foreign currencies at the beginning of each quarter during the 12 months from 1 January 2015.

58

Annual Report 2015

Notes to the Financial Statements.

FINANCIAL RISK MANAGEMENT (Continued) f ) IFRS 7 MARKET RISKS - SENSITIVITY ANALYSIS (continued) c) Financial Risk on Investment in equity shares – Appreciation/Depreciation of 25% The Risk sensitivity analysis on Investments in equity is based on the following assumptions; • Investments are made in Uganda Stock Exchange and Nairobi Stock Exchange. • The Base currency in which the Bank’s business is transacted are Uganda Shillings. The table below sets out the impact on future earnings of an incremental 25% parallel fall or rise in the investments market value at the beginning of each quarter during the 12 months from 1 January 2015 Assuming no management actions, a series of such rise and fall would impact the future earnings and capital as illustrated in the table below;

Profit Before Income Tax

Amount

Scenario 1

Scenario 2

Ushs(millions)

25% appreciation

25% Depreciation

31-Dec-15

of Ush

of Ush

1,842

6,168

-2,484

Adjusted Core Capital

221,129

225,455

216,803

Adjusted Total Capital

230,599

234,925

226,273

1,405,208

1,405,208

1,405,208

%

%

%

Adjusted Core Capital to RWA

15.74%

16.04%

15.43%

Adjusted total Capital to RWA

16.41%

16.72%

16.10%

Risk Weighted Assets (RWA)

Assuming no management actions, a series of such appreciation would increase Investment Fair Value Reserve for 2015 by Ush. 4,326 million, while a series of such falls would decrease future earnings by Ush.4,326 Million. Also a series of such rises would increase the adjusted core capital to RWA and Adjusted total capital to RWA by 0.31% and 0.31% respectively, while a series of such falls would decrease the adjusted core capital to RWA and Adjusted total capital to RWA by 0.31% and 0.31% respectively. Both the revised capital ratios are well above the minimum capital requirement of 8% and 12% respectively.

59

Annual Report 2015

Notes to the Financial Statements.

4

Loans and advances Placements

Fixed and short term deposits Savings accounts

7

Consolidated

Bank

Consolidated

Bank

184,069,979

183,890,611

158,499,147

158,499,147

20,373,099

20,156,695

27,299,899

27,245,500

4,657,004

3,252,526

4,122,448

3,672,224

209,100,082

207,299,832

189,921,494

189,416,871

89,553,709

89,168,430

84,128,138

84,099,330

3,306,466

3,205,047

2,474,098

2,471,615

3,355,861

3,329,693

2,646,872

2,644,888

95,703,170

89,249,108

89,215,833

Transactional fee and commission

24,777,856

24,643,450

18,295,886

18,189,660

Credit related fee and commission

13,279,939

13,199,359

14,383,464

14,383,464

38,057,795

37,842,809

32,679,350

32,573,124

(5,888,685)

(5,921,744)

5,901,193

5,864,178

(5,888,685)

(5,921,744)

5,901,193

5,864,178

2015

2015

2014

2014

Ushs ‘000

Ushs ‘000

Ushs ‘000

Ushs ‘000

Consolidated

Bank

Consolidated

Bank

FEE AND COMMISSION INCOME

NET FOREIGN EXCHANGE/(LOSS) INCOME

OPERATING EXPENSES Administration expenses

19,474,447

18,046,862

15,593,509

14,918,581

Establishment expenses

18,536,284

17,847,492

15,527,230

15,089,266

Depreciation (note 19)

25,552,354

20,627,207

12,647,136

12,432,119

Employee benefits expense (note 9)

25,748,592

23,121,533

22,116,001

20,712,941

1,461,223

1,461,223

1,395,711

1,395,711

Directors’ emoluments

60

2014 Ushs ‘000

96,216,036

Realised gains

8

2014 Ushs ‘000

INTEREST EXPENSE Demand deposits

6

2015 Ushs ‘000

INTEREST INCOME Government securities

5

2015 Ushs ‘000

Deposit protection fund contribution

2,773,131

2,773,131

1,899,627

1,899,627

Amortisation of intangible asset (note 21)

9,064,824

8,058,518

2,268,027

1,908,344

Auditors’ remuneration

531,086

451,845

275,312

227,030

Amortisation of operating lease prepayments (note 20)

564,035

564,035

747,000

747,000

103,705,976

92,951,846

72,469,553

69,330,619

Annual Report 2015

9

2015

2015

2014

2014

Ushs ‘000

Ushs ‘000

Ushs ‘000

Ushs ‘000

Consolidated

Bank

Consolidated

Bank

22,174,865

19,752,640

18,882,936

17,594,223

2,681,954

2,566,338

2,394,975

2,316,865

891,773

802,555

838,090

801,853

25,748,592

23,121,533

22,116,001

20,712,941

2015

2015

2014

2,014

Ushs ‘000

Ushs ‘000

Ushs ‘000

Ushs ‘000

Consolidated

Bank

Consolidated

Bank

-

-

(16,624,380)

(6,851,463)

(4,149,471)

(4,149,471)

4,872,242

(4,872,242)

-

-

-

-

(1,015,898)

(823,568)

2,217,831

3,755,170

(5,165,369)

(4,973,039)

(9,534,307)

(7,968,535)

(7,353,364)

1,841,935

57,066,374

58,611,971

2,206,009

(552,581)

(17,119,912)

(17,583,591)

4,822,877

4,822,877

6,047,009

6,047,009

7,873,477

7,873,477

Expenses not deductible for tax purposes

(9,268,916)

(6,317,997)

(3,824,223)

(1,794,772)

Withholding tax paid on bills interest and dividend

(4,149,471)

(4,149,471)

(4,872,242)

(4,872,242)

3,585,716

3,585,716

EMPLOYEE BENEFITS EXPENSES Salaries and wages Other benefits National Social Security Fund contributions

10

Notes to the Financial Statements.

INCOME TAX EXPENSE (a) Income tax expense Income tax Witholding Tax Prior year over provision of corporation tax Deferred income tax

(b) Reconciliation of income tax expense The tax on the Company’s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows: Profit before income tax Tax at applicable rate of 30% (2014: 30%) Tax effect of: Tax effect of non-taxable income Income taxable at other rates

Tax on difference of BOU and IFRS provision Income tax expense

(5,165,369)

(4,973,039)

(9,534,307)

(7,968,535)

(6,868,755)

(6,868,755)

(11,512,701)

(11,512,701)

4,149,471

4,149,471

11,723,705

11,723,705

(10,000,000) (10,000,000)

(2,048,083)

(2,048,083)

c) Movement in tax receivable At start of year Current income tax expense Income tax paid Income tax withheld at source

(4,230,233)

(4,230,233)

(4,847,067)

(4,799,293)

Prior year over provision of corporation tax

-

-

-

-

Tax paid on URA audit for 2011 and 2012

-

-

(184,609)

(184,609)

(16,949,517) (16,949,517)

(6,868,755)

(6,820,981)

61

Annual Report 2015

Notes to the Financial Statements.

11

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

CASH AND BALANCES HELD WITH CENTRAL BANKS Cash on hand Balances with Central Bank (includes cash reserve requirement)

27,392,235

25,839,654

47,842,340

46,964,078

176,199,616

174,130,488

131,360,298

127,525,588

203,591,851

199,970,142

179,202,638

174,489,666

Included in the balances with Bank of Uganda is a minimum cash reserve requirement maintained in accordance with the provisions of the BOU Act.The reserve requirement is based on the value of customer deposits as adjusted by the Bank of Uganda and is monitored on a rolling fortnightly basis. These funds are available for the day to day operations of the bank. However, sanctions apply should the minimum requirement be breached. As at 31 December 2015, the reserve required was Shs. 106,250 million (2014 : Shs. 99,350 million).

12

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Balances due from correspondent banks

53,134,076

53,109,987

67,173,903

67,119,920

Placements with other banks

32,978,844

32,024,644

68,512,071

43,873,171

86,112,920

85,134,631

135,685,974

110,993,091

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

31,242,380

1,213,000

30,233,900

30,233,900

Less: unearned interest

(91,191)

(91,191)

(1,362,334)

(1,362,334)

Treasury bills at amortised cost

31,151,189

1,121,809

28,871,566

28,871,566

155,543,430

149,391,933

157,837,991

157,699,876

186,694,619

150,513,742

186,709,557

186,571,442

DEPOSITS AND BALANCES DUE FROM OTHER BANKING INSTITUTIONS Maturing within 30 days of the balance sheet date:

13

GOVERNMENT SECURITIES Treasury bills at redemption value

Treasury bonds - at amortised cost

Included in the above analysis are Treasury bills with contractual maturity of less than 90 days amounting to Shs 803,047 million (2014: Shs 5,627 million). These have been classified as cash and cash equivalents (Note 28) in accordance with accounting policy.

62

Annual Report 2015

14

Notes to the Financial Statements.

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

5,039,584

5,039,584

20,633,656

20,633,656

(2,239,584)

(2,239,584)

(15,573,000)

(15,573,000)

Accrued interest

20,591

20,591

(21,072)

(21,072)

At 31 December

2,820,591

2,820,591

5,039,584

5,039,584

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

16,035,122

16,035,122

15,229,724

15,229,724

Disposals

(246,693)

(246,693)

-

-

Fair value (loss) / gain

1,514,466

1,514,466

804,549

804,549

1,075

1,075

849

849

17,303,970

17,303,970

16,035,122

16,035,122

CORPORATE BONDS At 1 January Matured during the year

15

2015

INVESTMENT IN EQUITY SHARES Available for sale At 1 January

Unrealised foreign exchange gain

At 31 December

Investments in equity shares comprises 359,693 shares of New Vision Printing and Publishing Corporation Limited, 152,503,325 shares of Stanbic Bank Uganda Limited, 62,500,000 shares of Bank of Baroda Uganda Limited, 1,444,208 shares of DFCU, 99,096,923 shares of National Insurance Company (NIC) and 10,000 shares of KCB (Kenya) Ltd. These shares are quoted on the Uganda Securities Exchange (except KCB (Kenya) Ltd) listed in Nairobi Securities Exchange. The shares are classified as available for sale and are measured at fair value using the year end quoted market prices. During the year the Bank sold 488,500 UMEME shares at open market.

16

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Overdrafts

358,208,246

356,420,715

282,954,820

282,954,820

Loans

653,491,980

651,013,528

551,977,567

551,977,567

2,526,816

2,526,816

104,297

104,297

73,305

73,305

520,868

520,868

964,365

964,365

1,377,050

1,377,050

1,015,264,713

1,010,998,729

836,934,602

836,934,602

LOANS AND ADVANCES TO CUSTOMERS

Bills discounted Advances to staff Credit card balances

Other loans and advances (see note below) Gross advances

64,117,405

64,117,405

64,117,405

64,117,405

1,079,382,118

1,075,116,134

901,052,007

901,052,007

63

Annual Report 2015

Notes to the Financial Statements.

16

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Individually assessed

(32,667,599)

(32,667,599)

(4,158,097)

(4,158,097)

Collectively assessed

(18,060,507)

(18,060,507)

(7,984,331)

(7,984,331)

(50,728,106)

(50,728,106)

(12,142,428)

(12,142,428)

LOANS AND ADVANCES TO CUSTOMERS (Continued) Less: Provision for impaired loans and advances

Other loans and advances (see note below) Total

(53,006,836)

(53,006,836)

(44,780,996)

(44,780,996)

(103,734,942)

(103,734,942)

(56,923,424)

(56,923,424)

975,647,176

971,381,192

844,128,583

844,128,583

Included in overdrafts are amounts due from related parties amounting to approximately Ushs 1,003 million (2014 - Ushs 4,639 million).

The aggregate amount of non performing loans and advances was Ushs 142,358 million (2014 - Ushs 19,362 million). This is included in the balance sheet net of provisions amounting to Ushs 81,903 million (2014 - Ushs 4,116 million). The other loans and advances relates to loans that have been written off per FIA guidelines, but for which, there is objective evidence that the loans are recoverable as at 31 December 2015. 2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Within three months

442,662,546

442,662,546

222,425,913

222,425,913

Between three and six months

187,120,230

185,325,470

188,872,448

188,872,448

Over six months

385,481,937

383,010,713

425,636,241

425,636,241

1,015,264,713

1,010,998,729

836,934,602

836,934,602

155,047,269

155,047,269

123,893,877

123,893,877

The maturity analysis of advances to customers is as follows:

Gross advances to customers Economic risk concentration within loans and advances portfolio is as follows: Trade and commerce Agriculture Manufacturing Transport, communication, electricity and water Building and construction Others

62,931,561

62,931,561

46,927,440

46,927,440

138,205,216

138,205,216

126,729,162

126,729,162

97,456,954

97,456,954

78,577,132

78,577,132

382,980,446

382,980,446

305,715,032

305,715,032

178,643,267

174,377,283

155,091,959

155,091,959

1,015,264,713

1,010,998,729

836,934,602

836,934,602

As at 31 December 2015, the bank had no exposures to a single borrower or group of borrowers exceeding 25% of its total capital.

64

Annual Report 2015

17(a)

Notes to the Financial Statements.

PROVISION FOR IMPAIRED LOANS AND ADVANCES Consolidated

Individually

Collectively

assessed

assessed

Ushs’000

Ushs’000

Total Ushs’000

At 1 January 2015

48,939,093

7,984,331

56,923,424

Provision for the year

39,396,527

10,124,284

49,520,811

Recovery

(1,137,772)

-

(1,137,772)

Loans written off

(1,523,412)

(48,109)

(1,571,521)

At 31 December 2015

85,674,436

18,060,506

103,734,942

Bank

Individually

Collectively

Total

assessed

assessed

At 1 January 2015

Ushs’000

Ushs’000

Ushs’000

48,939,093

7,984,331

56,923,424

Provision for the year

39,396,527

10,124,284

49,520,811

Recoveries

(1,137,772)

-

(1,137,772)

Loan written off

(1,523,412)

(48,109)

(1,571,521)

At 31 December 2015

85,674,436

18,060,506

103,734,942

Consolidated

Individually

Collectively

Total

assessed

assessed

Ushs’000

Ushs’000

Ushs’000

At 1 January 2014

34,952,624

10,912,800

45,865,424

Provision for the year

16,176,524

(2,928,469)

13,248,055

Recoveries

(2,099,267)

-

(2,099,267)

(90,788)

-

(90,788)

At 31 December 2014

48,939,093

7,984,331

56,923,424

Bank

Individually

Collectively

Total

assessed

assessed

Loan written off

Ushs’000

Ushs’000

Ushs’000

34,952,624

10,912,800

45,865,424

Provision for the year

16,176,524

(2,928,469)

13,248,055

Recoveries

(2,099,267)

-

(2,099,267)

(90,788)

-

(90,788)

48,939,093

7,984,331

56,923,424

Provision for the year

39,396,527

10,124,284

49,520,811

Recoveries

(1,137,772)

-

(1,137,772)

1,975,513

-

1,975,513

40,234,268

10,124,284

50,358,552

At 1 January 2014

Loan written off At 31 December 2014 Net Charge to Profit and Loss Consolidated Year ended 31 December 2015

Direct write offs Charge for the year

65

Annual Report 2015

Notes to the Financial Statements.

Bank Year ended 31 December 2015 Provision for the year

39,396,527

10,124,284

49,520,811

Recoveries

(1,137,772)

-

(1,137,772)

1,975,513

-

1,975,513

40,234,268

10,124,284

50,358,552

Provision for the year

16,176,524

(2,928,469)

13,248,055

Improvements in credit

(2,099,267)

-

(2,099,267)

72,715

-

72,715

14,149,972

(2,928,469)

11,221,503

Provision for the year

16,176,524

(2,928,469)

13,248,055

Recovery

(2,099,267)

-

(2,099,267)

72,715

-

72,715

14,149,972

(2,928,469)

11,221,503

Direct write offs Charge for the year Consolidated Year ended 31 December 2014

Direct write offs Charge for the year Bank Year ended 31 December 2014

Direct write offs Charge for the year

17(b)

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

19,991,809

19,991,809

26,529,428

26,529,428

(19,991,809)

(19,991,809)

(6,537,619)

(6,537,619)

-

-

19,991,809

19,991,809

Specific provision as per BOU guidelines

52,493,994

52,493,994

68,651,409

68,651,409

General provision as per BOU guidelines

9,469,971

9,469,971

8,263,824

8,263,824

61,963,965

61,963,965

76,915,233

76,915,233

(103,734,942)

(103,734,942)

(56,923,424)

(56,923,424)

(41,770,977)

(41,770,977)

19,991,809

19,991,809

Clearing accounts

2,410,880

2,415,084

3,306,513

3,317,250

Prepaid expenses

5,392,356

5,143,140

6,688,916

6,508,914

Other receivables

1,326,473

1,227,805

1,049,560

879,270

9,129,710

8,786,029

11,044,989

10,705,434

Regulatory credit risk reserve Balance at beginning of year Transfer from/(to) revenue reserves Total balance of statutory reserve as at 31 December Analysis of provisions

Provision as per BOU guidelines Provisions as per IAS 39 (Deficit)/Excess of BOU provision over IFRS provision 18

66

OTHER ASSETS

Annual Report 2015

19

Notes to the Financial Statements.

PROPERTY AND EQUIPMENT

Consolidated

Freehold land and

Equipment, furniture

Motor

buildings

and fittings

Computers

vehicles

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

41,025,304

36,144,143

37,874,030

2,528,693

117,572,170

COST At 1 January 2014 Additions

171,740,462

34,856,483

10,557,710

423,567

217,578,222

At 31st December 2014

212,765,766

71,000,626

48,431,740

2,952,260

335,150,392

At 1 January 2015

212,765,766

71,000,626

48,431,740

2,952,260

335,150,392

11,737

4,373,928

772,945

47,392

5,206,002

1,753,557

-

-

-

-

-

Additions Transfer from Operating Lease Prepayment Disposals Exchange difference

1,753,557 (52,700)

(52,700)

191,037

109,522

605,664

26,991

933,214

214,722,097

75,484,076

49,810,349

2,973,943

342,990,465

At 1 January 2014

2,995,547

15,835,854

14,691,498

2,050,295

35,573,194

Charge for the year

4,163,754

4,427,018

3,786,911

269,453

12,647,136

Exchange difference

574

1,463

8,326

469

10,832

At 31 December 2014

7,159,875

20,264,335

18,486,735

2,320,217

48,231,162

At 1 January 2015

7,159,875

20,264,335

18,486,735

2,320,217

48,231,162

13,232,270

6,001,783

5,973,583

344,718

25,552,354

-

-

-

(52,700)

(52,700)

3,447

13,269

67,175

4,661

88,552

20,395,592

26,279,387

24,527,493

2,616,896

73,819,368

At 31 December 2015

194,326,505

49,204,689

25,282,856

357,047

269,171,097

At 31 December 2014

205,605,891

50,736,291

29,945,005

632,043

286,919,230

At 31st December 2015 DEPRECIATION

Charge for the year Eliminated on disposals Exchange difference At 31 December 2015 NET BOOK VALUE

67

Annual Report 2015

Notes to the Financial Statements.

19

PROPERTY AND EQUIPMENT Freehold land and

Equipment, furniture

buildings

and fittings

Computers

vehicles

Total

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Ushs’000

41,025,304

36,144,143

37,874,030

2,528,693

117,572,170

Additions

170,667,390

34,241,276

7,141,619

271,959

212,322,244

At 31st December 2014

211,692,694

70,385,419

45,015,649

2,800,652

329,894,414

At 1 January 2015

211,692,694

70,385,419

45,015,649

2,800,652

329,894,414

11,737

4,174,371

837,487

44,200

5,067,795

1,753,557

-

-

-

1,753,557

-

-

-

(52,700)

(52,700)

213,457,988

74,559,790

45,853,136

2,792,152

336,663,066

At 1 January 2014

2,995,547

15,835,854

14,691,498

2,050,295

35,573,194

Charge for the year

4,152,413

4,398,084

3,621,454

260,168

12,432,119

At 31 December 2014

7,147,960

20,233,938

18,312,952

2,310,463

48,005,313

At 1 January 2015

7,147,960

20,233,938

18,312,952

2,310,463

48,005,313

Charge for the year

9,005,276

5,887,530

5,432,206

302,195

20,627,207

Eliminated on disposals

-

-

-

(52,700)

(52,700)

At 31 December 2015

16,153,236

26,121,468

23,745,158

2,559,958

68,579,820

At 31 December 2015

197,304,752

48,438,322

22,107,978

232,194

268,083,246

At 31 December 2014

204,544,734

50,151,481

26,702,697

490,189

281,889,101

Bank

Motor

COST At 1 January 2014

Additions Transfer from Operating Lease Prepayment Disposals At 31st December 2015 DEPRECIATION

NET BOOK VALUE

68

Annual Report 2015

20

OPERATING LEASE PREPAYMENTS

Notes to the Financial Statements.

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

16,012,553

16,012,553

16,012,553

16,012,553

COST At 1 January and 31 December Additions Transfer to Land & Building

417,200

417,200

-

-

(1,753,557)

(1,753,557)

-

-

14,676,196

14,676,196

16,012,553

16,012,553

2,248,501

2,248,501

1,501,501

1,501,501

564,035

564,035

747,000

747,000

2,812,536

2,812,536

2,248,501

2,248,501

11,863,660

11,863,660

13,764,052

13,764,052

AMORTISATION At 1 January Charge for the year At 31 December NET BOOK VALUE At 31 December

Payments to acquire interests in leasehold land are treated as operating lease prepayments and amortized over the term of the related lease. During the year, land that had initially been held under finance lease (under land and Buildings asset category) has been transferred to operating leases in accordance with the terms of the new lease agreements.

21

INTANGIBLE ASSETS

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

45,580,690

41,768,023

40,222,377

40,222,377

2,115,762

2,053,963

5,358,313

1,545,646

678,751

-

48,375,203

43,821,986

45,580,690

41,768,023

At 1 January

9,065,618

8,687,741

6,779,397

6,779,397

Charge for the year

9,064,824

8,058,518

2,268,027

1,908,344

Exchange difference

136,477

-

18,194

-

18,266,919

16,746,259

9,065,618

8,687,741

30,108,284

27,075,727

36,515,072

33,080,282

690,392

690,392

690,392

690,392

COST At 1 January Additions: Computer Software Exchange difference At 31 December AMORTISATION

At 31 December NET BOOK VALUE At 31 December The intangible assets relate to computer software acquired to support the bank’ s operations. 22

GOODWILL COST At 1 January and 31 December

In 2006, the Bank acquired the business of Stanhope Finance Company. The difference between the net assets taken over and the consideration given was recognised as goodwill. The goodwill has been assessed for impairment as at 31 December 2015 in accordance with IAS 36, Impairment. No impairment was noted (2014: Nil).

69

Annual Report 2015

Notes to the Financial Statements.

23

INVESTMENT IN SUBSIDIARIES Crane Financial Services Limited

2014 Ushs’000

Bank

Bank

50,000

50,000

33,719,426

35,558,291

33,769,426

35,608,291

50,000

50,000

1,012,321

1,104,235

Liabilities

(37,918)

(130,051)

Net assets

974,403

974,184

50,000

50,000

Retained earnings

924,403

924,184

Shareholders’ funds

974,403

974,184

Crane Bank Limited Rwanda (i)

2015 Ushs’000

Crane Financial Services Limited: At 1 January and 31 December Summary of financial position: Assets

Shareholders’ equity

Crane Financial Services Limited is a fully owned subsidiary of the bank and is a licensed broker on the Ugandan Securities Exchange. The subsidiary has not been consolidated in these financial statements as the directors are of the view that it is insignificant to the users of these consolidated financial statements.

(ii)

2015

2014

Ushs’000

Ushs’000

Bank

Bank

Crane Bank Limited - Rwanda: Crane Bank Limited received a license from Central Bank Rwanda to do business in the country in 2014. On account of which they paid USD 9.2 million for capital and USD 1.3 million for Software purchased and other payments as part of pre incorporation expense and other expenses At 1 January and 31 December

33,719,426

35,558,291

Summary of financial position: Assets Liabilities

Net assets

70

53,728,244

38,097,916

(22,443,380)

(7,189,960)

31,284,864

30,907,956

2015

2014

Ushs’000

Ushs’000

Bank

Bank

Shareholders’ equity

33,747,857

23,865,000

Retained earnings and Reserves

(2,462,993)

7,042,956

Shareholders’ funds

31,284,864

30,907,956

Annual Report 2015

24

Notes to the Financial Statements.

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

Term deposits

806,569,004

799,135,256

786,733,709

784,950,585

Demand deposits

408,933,110

399,066,842

351,250,871

349,425,069

Savings accounts

116,925,665

115,317,003

105,520,522

105,350,889

Accrued interest

23,343,553

23,087,309

27,848,077

27,822,348

1,355,771,332 1,336,606,410

1,271,353,179

1,267,548,891

22,815,278

22,815,278

CUSTOMER DEPOSITS

The maturity analysis of customer deposits is as follows: (a) From Government and parastatals: Within three months

265,355,735

265,355,735

Between three and six months

72,899,494

72,899,494

20,239,141

20,239,141

Over six months

141,087,097

141,087,097

166,610,084

166,610,084

479,342,326

479,342,326

209,664,503

209,664,503

653,542,164

653,542,164

711,097,013

708,959,686

69,402,596

69,402,596

95,766,485

95,766,486

153,484,246

134,319,324

254,825,178

253,158,216

876,429,006

857,264,084

1,061,688,676

1,057,884,388

1,355,771,332 1,333,606,410

1,271,353,179

1,267,548,891

(b) From private sector and individuals: Within three months Between three and six months Over six months

25

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

792,596

792,596

594,496

594,496

OTHER LIABILITIES Bankers’ cheques Letters of credit and guarantee margins

11,823,597

11,585,047

4,240,389

4,240,389

URA Collection Account

12,566,381

12,566,381

10,107,425

10,107,425

Sundry liabilities

13,511,928

13,180,939

11,835,617

11,566,017

4,150,191

4,150,191

2,869,866

2,869,866

24,169

24,169

19,837

19,837

42,868,862

42,299,323

29,667,630

29,398,030

Deferred fee income Foreign bills for collection

Letters of credit are written by the bank to support performance by a customer to third parties. The bank will only be required to meet these obligations in the event of the customer’s default. The customer deposits a percentage of the value of the letter of credit (the margin) with the bank and this is refundable when the term of the letter of credit expires or when performance of the guaranteed transaction is completed.

71

Annual Report 2015

Notes to the Financial Statements.

26

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

1,440,862

429,468

2,842,415

2,000,000

DEPOSIT AND BALANCE DUE TO OTHER BANKING INSTITUTIONS AND REFINANCE UNDER ACF AND EIB

(a)

Deposit and balance due to banking institutions

(b)

Other borrowings Refinance under Agriculture Credit Facility Refinance under European Investment Bank Refinance under RABO Bank Refinance under ABI Trust

663,714

663,714

914,571

914,571

90,376,342

90,376,342

74,759,639

74,759,639

-

-

643,750

643,750

15,917,984

15,917,984

10,275,000

10,275,000

106,958,040

106,958,040

86,592,960

86,592,960

108,398,902

107,387,508

89,435,375

88,592,960

In the year 2010, the Bank received Ushs 1 billion under ACF refinance scheme from Bank of Uganda (BoU). The loan comprises two separate loans whose tenure is eight years. The interest rate on this debt is fixed at10%. In the year 2011, the Bank signed a two year contract with EIB under a global facility for a loan with a limit of 40 million Euros.The loans was to be used exclusively for financing of Projects. The Refinance under EIB scheme comprises four loans whose tenure varies between eight to ten years. The interest rate on this debt is variable at Libor . In the year 2013, the Bank received USD 0.5 million from RABO Bank refinance scheme of small agriculture loans, which was repaid during the year 2015 In the year 2013, the Bank received USD 1 million and UGX 7,500 million from aBi Trust for refinance scheme of SMEs. 27

DEFERRED TAXATION Deferred income tax is calculated using the enacted income tax rate of 30% (2014: 30%). The movement on the deferred income tax account is as follows:

At start of year

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

20,143,344

18,545,570

22,015,850

22,015,850

Charge to the statement of comprehensive income

1,015,898

823,568

(2,217,831)

(3,755,170)

Tax effect of revaluations of available-for-sale assets

454,339

454,339

284,890

284,890

-

60,435

-

19,823,477

20,143,344

18,545,570

Exchange differrence on translation of Rwanda subsidiary At end of year

21,613,581

The deferred income tax (asset)/liability, deferred income tax charge/(credit) in the profit and loss account, and deferred income tax charge/(credit) in equity are attributable to the following items:

72

Annual Report 2015

Consolidated

Notes to the Financial Statements.

At 1 January

(Charged)/

Charged/

credited

(credited)

At 31 December

to P/L

to equity

Ushs’000

Ushs’000

Ushs’000

Ushs’000

21,847,124

415,458

-

22,262,582

1,754,181

-

454,339

2,208,520

Year ended 31 December 2015 Deferred income tax liabilities Property and equipment Available for sale fair value reserve Exhange rate adjustment

60,435

-

-

60,435

23,661,740

415,458

454,339

24,531,537

Deferred income tax assets Provision for impairment of loans and advances

Net deferred income tax liability

(3,518,396)

600,440

-

(2,917,956)

(3,518,396)

600,440

-

(2,917,956)

20,143,344

1,015,898

454,339

21,613,581

18,263,519

3,583,605

-

21,847,124

1,754,182

(284,891)

284,890

1,754,181

Year ended 31 December 2014 Deferred income tax liabilities Property and equipment Available for sale fair value reserve Exhange rate adjustment

-

-

20,017,701

3,298,714

284,890

23,661,740

60,435

1,998,149

(5,516,545)

-

(3,518,396)

1,998,149

(5,516,545)

-

(3,518,396)

22,015,850

(2,217,831)

284,890

20,143,344

At 1 January

(Charged)/

Charged/

At 31 December

credited

(credited)

Deferred income tax assets Provision for impairment of loans and advances

Net deferred income tax liability Bank

to P/L

to equity

Ushs’000

Ushs’000

Ushs’000

Ushs’000

20,309,785

223,537

-

20,533,322

Year ended 31 December 2015 Deferred income tax liabilities Property and equipment Available for sale fair value reserve

1,754,181

-

454,339

2,208,520

22,063,966

223,537

454,339

22,741,842

-

(409)

-

(409)

Deferred income tax assets Carry forward tax losses Provision for impairment of loans and advances

Net deferred income tax liability

(3,518,396)

600,440

-

(2,917,956)

(3,518,396)

600,031

-

(2,918,365)

18,545,570

823,568

454,339

19,823,477

73

Annual Report 2015

Notes to the Financial Statements.

Year ended 31 December 2014 Deferred income tax liabilities Property and equipment Available for sale fair value reserve

18,263,519

2,046,266

-

20,309,785

1,754,182

(284,891)

284,890

1,754,181

20,017,701

1,761,375

284,890

22,063,966

1,998,149

(5,516,545)

-

(3,518,396)

1,998,149

(5,516,545)

-

(3,518,396)

22,015,850

(3,755,170)

284,890

18,545,570

Deferred income tax assets Carry forward losses

Net deferred income tax liability

28

SHARE CAPITAL Authorised Issued and fully paid:

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

210,000,000

210,000,000

210,000,000

210,000,000

The Bank has issued and fully paid share capital to Shs 210 billion divided into 210 billion ordinary shares of Ushs 1 each. (2013 : Shs 210 billion) divided into 210 billion ordinary shares of Ushs 1 each.

29

DIVIDENDS The directoes do not recommend payment of a divident (2014: Ushs. 23.6 billion)

30

AVAILABLE FOR SALE INVESTMENTS - FAIR VALUE RESERVE IAS 39 requires the bank to recognise fair value gains or losses on revaluation of available for sale (AFS) financial instruments directly in the statement of changes in equity.These gains are then recycled to the income statement when the AFS financial instruments are derecognised.The reserve is undistributable. The movement in the reserve is stated below.

31

2015

2015

2014

2014 Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

At start of year

4,612,746

4,612,746

4,093,087

4,093,087

Fair value (losses) / gains

1,514,466

1,514,466

804,549

804,549

Net amount reclassified to profit or loss

(112,328)

(112,328)

-

-

Net deferred tax on movements in reserves

(454,339)

(454,339)

(284,890)

(284,890)

At end of year

5,560,545

5,560,545

4,612,746

4,612,746

REGULATORY RESERVE At start of the year Decrease At end of year

19,991,809

19,991,809

26,529,428

26,529,428

(19,991,809)

(19,991,809)

(6,537,619)

(6,537,619)

-

-

19,991,809

19,991,809

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 accounting policy. The reserve is not distributable.

74

Annual Report 2015

32

Notes to the Financial Statements.

ANALYSIS OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE STATEMENT CASH FLOWS 2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

27,392,235

25,839,654

47,842,340

46,964,078

176,199,616

174,130,488

131,360,298

127,525,588

2,191,787

-

1,361,645

-

Deposits and balances due from other banks (note 12)

86,112,920

85,134,631

135,685,974

110,993,091

Government securities maturing < 90 days (note 13)

13,000,080

803,047

5,627,000

5,627,000

304,896,638

285,907,820

321,877,257

291,109,757

Cash at hand Balances with Bank of Uganda Exchange/ Transalation Reserve

For purposes of the statement of cash flows, cash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including: cash and balances with the central bank, amounts due from other banks and government securities. Included within cash and cash equivalents is the minimum cash reserve requirement (Note 9). 33

RELATED PARTIES

The bank is controlled by Dr Sudhir Ruparelia who controls 48.67% of the voting rights in the bank by virtue of shares held directly and by close members of his family. There are other parties and companies related to the Bank Limited through common shareholdings and/ or directorships. In the normal course of business, current accounts/ overdrafts are operated and placings of foreign currencies are made with the Bank by other related companies at interest rates in line with the market. The relevant transactions and balances are shown below:

Loans and advances to related parties At 1 January Advances during year Repayments during year Exchange revaluation At 31 December Interest income earned on the above

2015

2015

2014

2014

Ushs’000 Consolidated

Ushs’000

Ushs’000

Ushs’000

Bank

Consolidated

Bank

4,639,184

4,639,184

4,533,977

4,533,977

52,234,916

52,234,916

78,428,605

78,428,605

(55,920,844)

(55,920,844)

(78,332,426)

(78,332,426)

49,349

49,349

9,028

9,028

1,002,605

1,002,605

4,639,184

4,639,184

828,781

828,781

930,322

930,322

1,619,727

1,619,727

1,301,634

1,301,634

Deposits due to: Other related parties Interest expense incurred on the above

Advances to customers at 31 December 2015 include loans to directors, loans to companies controlled by directors or their families, and loans to employees as follows: 33

RELATED PARTIES (continued)

Loans to directors At start of year Advanced during the year Repaid during the year Exchange difference At end of year

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

36,601

36,601

7,589

7,589

49,037

49,037

36,056

36,056

(38,139)

(38,139)

(7,853)

(7,853)

3,554

3,554

809

809

51,053

51,053

36,601

36,601

75

Annual Report 2015

Notes to the Financial Statements.

At 31 December 2015 advances to companies controlled by directors or their families amounted to Shs. 1,003 million (2014: Shs 4,639 million). At 31 December 2015 advances to employees amounted to Shs 73 million (2014: Shs 520 million). All the above loans were issued at interest rates of 16% (2014: 16%) and were all performing as at 31 December 2015 and 2014. 

Interest income earned on loans to directors and employee advances

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

106,495

106,495

147,287

147,287

2014

2014

No provisions have been recognised in respect of loans given to related parties (2014: Nil). 2015

2015

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

3,782,675

3,782,675

6,936,741

6,936,741

35,621,544

35,621,544

53,810,944

53,810,944

(37,539,719)

(37,539,719)

(57,343,273)

(57,343,273)

421,312

421,312

378,263

378,263

2,285,812

2,285,812

3,782,675

3,782,675

508,581

508,581

591,171

591,171

3,008,342

3,008,342

3,205,458

3,205,458

2,791,496

2,791,496

2,952,417

2,952,417

2,791,496

2,791,496

2,952,417

2,952,417

2015

2015

2014

2014

Deposits by directors and related parties At start of year Received during the year Withdrawn during the year Exchange difference At end of year Interest expense incurred Key management compensation Salaries and other short-term employment benefits Directors’ remuneration Fees for services as a director Other emoluments (included in key management compensation above)

33

RELATED PARTIES (Continued)

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

29,848,724

29,848,724

27,715,572

27,715,572

893,906,827

893,906,827

565,535,077

565,535,077

(876,099,147) (876,099,147)

(565,068,701)

(565,068,701)

Deposits At 1 January Deposits during the year Withdrawals during the year Exchange revaluation At 31 December

4,452,264

4,452,264

1,666,776

1,666,776

52,108,668

52,108,668

29,848,724

29,848,724

1,619,727

1,619,727

1,301,634

1,301,634

828,781

828,781

930,322

930,322

Interest: Interest paid to related parties Interest earned from related parties

All related party transactions are on commercial terms and in the normal course of business. Directors’ emoluments have been disclosed in note 6.

76

Annual Report 2015

Notes to the Financial Statements.

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

120,000

120,000

120,000

120,000

11,574,659

11,574,659

10,245,823

10,245,823

1,537,306

1,537,306

1,021,913

1,021,913

Staff welfare expenses

238,901

238,901

749,882

749,882

Travelling expenses

552,951

552,951

510,986

510,986

Sundry expenses

540,192

540,192

74,762

74,762

Services Provided: Management services provided Services received: Lease of premises and accommodation, Utilities Insurance premium

34

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

FUTURE RENTAL COMMITMENTS UNDER OPERATING LEASES Amount payable in respect of obligations under operating leases expiring: Within one year

35

12,400,099

12,400,099

9,144,261

9,144,261

Between one and two years

8,981,767

8,981,767

7,633,323

7,633,323

Between two and five years

20,451,353

20,451,353

16,760,358

16,760,358

41,833,219

41,833,219

33,537,942

33,537,942

(7,353,364)

1,841,935

57,784,805

58,611,971

25,552,354

20,627,207

12,647,136

12,432,119

9,064,824

8,058,518

2,268,027

1,908,344

-

-

(806,247)

(806,247)

564,035

564,035

747,000

747,000

(1,074)

(1,074)

-

-

-

-

NOTES TO THE STATEMENT OF CASH FLOWS CASH GENERATED FROM OPERATING ACTIVITIES Reconciliation of profit before tax to cash genrated from operations Profit before taxation Adjusted for: Depreciation Amortisation on intangible asset Excahgne gain on AFS investment Amortisation of operating lease prepayments Other non cash item Revaluation adjusment on investment in Rwanda Profit on disposal of shares Profit before working capital changes

-

1,838,865

(107,290)

(107,290)

27,719,485

32,822,196

72,640,721

72,893,187

7,388,018

31,233,747

(662,622)

(524,507)

-

Changes in: Government securities maturing after 90 days Corporate bonds Loans and advances Other assets

2,218,993

2,218,993

31,188,144

31,188,144

(131,518,593)

(127,252,609)

(188,568,836)

(188,568,836)

1,915,279

1,919,405

Elimination of the subsidiary on consolidation

(386,515)

(726,070)

26,601,961

-

Customer deposits

84,418,153

69,057,519

208,771,201

204,966,913

Other liabilities

13,201,232

12,901,293

6,015,995

5,746,395

5,342,567

22,900,544

155,600,049

124,975,226

Cash generated from operations

77

Annual Report 2015

Notes to the Financial Statements.

36 (a)

(b)

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

CONTINGEMENT LIABILITIES Letters of guarantee and performance bonds

38,339,111

38,339,111

36,926,311

36,926,311

Acceptances and letters of credit

93,308,802

93,308,802

36,566,596

36,566,596

131,647,913

131,647,913

73,492,907

73,492,907

Outstanding legal matters The Bank is a defendant in other outstanding legal cases in the normal course of its business of which an amount of Ushs 2.4 billion can be reliably measured. Based on the professional legal advice, the outcome of all outstanding legal claims is not likely to result in material losses to the Bank. Accordingly only a provision of Ushs. 42.7 million has been made in these financial statements.

37

COMMITMENTS

Undrawn formal standby facilities, credit lines and other commitments to lend 38

CAPITAL COMMITMENTS There were no capital commitments at year end (2014:Nil)

78

2015

2015

2014

2014

Ushs’000

Ushs’000

Ushs’000

Ushs’000

Consolidated

Bank

Consolidated

Bank

73,431,428

73,431,428

83,278,349

83,278,349

24 hour Call Center Call us +256 (0) 756 777811 +256 (0) 704 700700

+256 (0) 772 222001 +256 (0) 772 222002

Find us www.cranebanklimited.com Crane Bank Limited

@cbl_cranebank

Annual Report 2015

Head Office Crane Chambers, Plot No.38, Kampala Road, P.O.Box 22572, Kampala Uganda Tel: +256 (0)414 341414, 341420, 345345,Fax: +256 (0)414 231578 Website: www.cranebanklimited.com, E-mail:[email protected]

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