centenary rural development bank ltd

CENTENARY RURAL DEVELOPMENT

BANK LIMITED

DIRECTORS' REPORT

AND

ACCOUNTS

31 DECEMBER 2001

CENTENARY RURAL DEVELOPMENT BANK LTD

DIRECTORS’ REPORT AND ACCOUNTS

YEAR ENDED 31 DECEMBER 2001

GLOSSARY OF TERMS

GTZ - German Technical Co-operation

PAPSCA

UNCDF

-

-

DANIDA

CRS

-

-

STROMME -

Programme for the Alleviation of Poverty and Social Costs of Adjustment

United Nations Capital Development Fund

Danish Agency for International Development

Catholic Relief Service

Stromme Foundation

EDF

DFID

FDR

-

-

-

European Development Fund

Department for International Development of the United Kingdom

Fixed Deposit Receipt


DIRECTORS’ REPORT AND ACCOUNTS


CONTENTS

Bank Information

Report of the Directors

Statement of Directors' Responsibilities

Report of the Independent Auditors

Balance Sheet

Profit and Loss Account

Statement of Changes in Equity

Cash Flow Statement

Notes to the Accounts

Detailed Profit and Loss Account

Operating Expenses

PAGE

10-22

Schedule A

8

9

Schedule B

1

2-3

4

5

6

7


BANK INFORMATION


PRINCIPAL PLACE OF BUSINESS AND REGISTERED OFFICE

Talenta House

Plot 7, Entebbe Road

P.O. Box 1892

Kampala

SOLICITORS

Kawanga & Kasule

Kizito Towers

Plot 29, Luwum Street

P.O. Box 216

Kampala

Odere & Nalyanya

3 Parliament Avenue

P.O. Box 22490

Kampala

Kabanza & Co. Advocates

Wilson Road, Kapasi Building

P O Box 128

Kampala

SECRETARY

Mr. Remy K. Ssali

P.O. Box 1892

Kampala

AUDITORS

Ernst & Young

Ernst & Young House

Shimoni Office Village

18 Clement Hill Road

P.O. Box 7215

Kampala

1

3.

1.


REPORT OF THE DIRECTORS


The directors submit their report together with the audited financial statements for the year ended 31

December 2001, which discloses the state of affairs of the bank.

PRINCIPAL ACTIVITIES

The bank takes deposits from the public and various institutions and provides advances to customers.

2.

RESULTS

The results for the year are set out on page 7.

DIVIDENDS

The directors recommend a payment of dividend of Ushs 348,741,950 for the year (2000 -

Ushs 301,420,403).

4. RESERVES

5.

The reserves of the bank are set out on page 8.

DIRECTORS

The directors who served during the year and to the date of this report were: -

Dr. Simon M.S. Kagugube - Chairman (Appointed 23 rd November 2001)

Mr. Adrian M. Sibo

Rt. Rev. Cyprian K. Lwanga

Hon. John B. Kawanga

-

-

-

Member

Member

Member

Mt. Rev. Paul Bakyenga

Msgr. Emmanuel Kibirige

Rt. Rev. Barnabas Halem’Imana

Mr. Christian Schmitz

Ms. Silvia Cornacchia

Mr. Willie Ogule

Mr. Gabriel Opio

-

Drs. Marilou van Golstein Brouwers -

Mr. John S. Taylor -

Mr. Fulgence Mungereza

Mr. Fred Jachan Omach

Mr. Emmanuel Lule

-

-

-

-

-

Member

- Member (Ceased 23 rd November 2001)

-

-

Member (Ceased 23 rd November 2001)

Member (Ceased 17 th March 2001)

-

Member

Member (Ceased 23 rd November 2001)

Member (Appointed 17 th March 2001)

Member (Appointed 23 rd November 2001)





2


REPORT OF THE DIRECTORS (Cont’d)


6. CAPITAL ADEQUACY

The bank monitors the adequacy of its capital using ratios established by the Bank of Uganda

(BOU). These ratios measure capital adequacy by comparing the bank’s eligible capital with its balance sheet assets, off balance sheet commitments and market and other risk positions at a weighted amount to reflect their relative risk.

Tier 1 capital consists of shareholders’ equity. Tier 2 capital includes the bank’s eligible long-term debt and general provisions. Minimum capital adequacy ratios per Bank of

Uganda guidelines are 8% for Tier 1 capital and 12% for Tier 1 + Tier 2 capital.

Balance Sheet/ Risk Weighted

Nominal Amount Amount

2002 2001 2002 2001

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Balance sheet assets

Balances with other banks

Advances to customers

Property and equipment

Other accounts receivable

4,060,816 3,461,274 812,163

43,931,179 24,136,059 43,931,179

7,357,032 4,843,833

8,756,778 5,586,799

7,357,032

8,194,553

692,255

24,136,059

4,843,833

5,586,799

Credit related commitments

Total risk weighted assets

Capital adequacy ratios

- -

60,294,927 35,258,946

Tier 1 capital

2002

Capital

2001

Capital Adequacy (%)

2002

16,262,366 12,050,649 21.2

2001

34.2

Tier 1 + Tier 2 capital 17,082,021 12,470,929 22.5 35.4

7. AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office in accordance with Section 159 (2) of the Companies Act.

By Order of the Board

Remy K. Ssali

Secretary

3


STATEMENT OF DIRECTORS' RESPONSIBILITIES


The Companies Act requires the directors to prepare accounts for each financial year, which give a true and fair view of the state of affairs of the bank as at the end of the financial year and of its operating results for that year. It also requires the directors to ensure the bank keeps proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the bank. They are also responsible for safeguarding of the assets of the bank.

The directors accept responsibility for the annual accounts, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with generally accepted accounting practice and in the manner required by the Companies

Act. The directors are of the opinion that the accounts give a true and fair view of the state of the financial affairs of the bank and of its operating results. The directors further accept responsibility for the maintenance of accounting records, which may be relied upon in the preparation of accounts, as well as adequate systems of internal financial control.

Nothing has come to the attention of the directors to indicate that the bank will not remain a going concern for at least the next twelve months from the date of this statement.

……………………….

DIRECTOR

……………………….

Date

……………………….

DIRECTOR

……………………….

Date

………………………..

DIRECTOR

………………………..

Date

4

REPORT OF THE INDEPENDENT AUDITORS to the members of

CENTENARY RURAL DEVELOPMENT BANK LTD.

We have audited the financial statements on pages 6 to 22 which have been prepared on the basis of accounting policies set out on pages 10 and 11. We obtained all the information and explanations which we considered necessary for our audit.

RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND THE INDEPENDENT

AUDITORS

As stated on page 4, the directors are responsible for the preparation of the financial statements which give a true and fair view of the state of the affairs and of the operating results of the bank.

Our responsibility is to form an independent opinion on the financial statements based on our audit and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with International Standards on Auditing. We planned and performed our audit so as to obtain a reasonable assurance that the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of significant estimates and judgements made by the directors in the preparation of the financial statements and whether the accounting policies are appropriate in the bank's circumstances, consistently applied and adequately disclosed.

OPINION

In our opinion, proper books of account have been kept and the financial statements, which are in agreement, therewith, give a true and fair view of the state of the financial affairs of the bank at 31

December 2001 and the profit and cash flows for the year then ended and comply with International

Accounting Standards, the Companies Act and the Financial Institutions Statute, 1993.

Kampala

2002

5


BALANCE SHEET

31 DECEMBER 2001

Notes

ASSETS

Cash and balances at Bank of Uganda

Balances with other financial institutions

2

3

Investments

Loans and advances to customers


4

5

6

7 Property, plant and equipment

TOTAL ASSETS

LIABILITIES

Customer deposits

Managed funds

Retirement benefit obligations

Other accounts payable

TOTAL LIABILITIES

8

9

10

11

2001

Ushs ‘000

12,595,896

880,274

39,895,907

23,852,923

5,606,512

4,843,833

87,675,345

68,466,792

629,422

622,893

6,074,331

2000

Ushs ‘000

7,347,806

351,120

28,681,692

18,177,349

5,208,720

3,710,133

63,476,820

51,091,992

628,050

483,828

3,453,309

75,793,438 55,657,179

CAPITAL AND RESERVES

Share capital

Share premium

Capital reserves

Capital grants

Profit and loss

TOTAL SHAREHOLDERS’ EQUITY

TOTAL SHAREHOLDERS’ EQUITY AND

LIABILITIES

12

13

14

15

3,441,606

826,147

180,000

1,070,574

6,363,580

11,881,907

2,969,280

119,300

190,000

1,230,640

3,310,421

7,819,641

87,675,345 63,476,820

The financial statements were approved by the Board of Directors on………………...….2002 and signed on its behalf by: -

…..…………………………….. Director

..……………………………….. Director

..……………………………….. Director

6


PROFIT AND LOSS ACCOUNT


Note

INCOME

Interest income

Interest expense

Net interest income

Other operating income

EXPENSES

Operating expenses

Loan loss provisions

(10,409,195)

5

(10,463,004)

PROFIT FROM OPERATIONS BEFORE

16 TAXATION AND EXCEPTIONAL ITEM

EXCEPTIONAL ITEM 17

TAXATION

NET PROFIT FOR THE YEAR

Basic earnings per share

Dividends per share

18

19

20

2001

Ushs ‘000

14,155,979

(944,547)

13,211,432

5,411,803

18,623,235

(13,163,266)

(279,734) (53,809)

(13,443,000)

2000

Ushs ‘000

9,907,701

(717,291)

9,190,410

4,354,125

13,544,535

5,180,235 3,066,313

(2,000,000) -

3,180,235 3,066,313

-

1,047

110

-

3,180,235 3,066,313

1,087

102

7


STATEMENT OF CHANGES IN EQUITY


At 1 January 2000

Net profit for the year

Dividends

Transfer from capital

Note Share Share Capital

Capital Premium Reserves

Ushs ’000 Ushs ’000 Ushs ’000

3,066,313

20

2,833,873 -

-

-

-

-

200,000

-

- reserves

Transfer from capital grants

Grants received

14

15

-

-

-

-

-

-

(10,000)

-

-

Capital Profit and

Grants Loss

Ushs ’000 Ushs ’000

483,781

-

-

-

(266,584)

1,013,443

Total

Equity

Ushs ’000

268,944 3,786,598

3,066,313

(301,420) (301,420)

10,000

266,584

-

-

-

1,013,443

Share premium

Share issue

At 31 December 2000

7,819,641

- 119,300

135,407 -

-

-

2,969,280 119,300 190,000

At 1 January 2001

7,819,641

2,969,280 119,300 190,000

Net profit for the year

Dividends

Transfer from capital reserves

Transfer from capital grants

Grants received

Shares paid up

Share premium

At 31 December 2001

3,180,235

20

14

15

11,881,907

-

-

-

-

-

472,326

-

-

-

-

-

-

-

706,847 -

3,441,606 826,147

-

-

(10,000)

-

-

-

180,000

-

-

-

-

1,230,640 3,310,421

1,230,640 3,310,421

-

-

-

(211,666)

51,600

-

-

3,180,235

(348,742) (348,742)

10,000

211,666

-

-

-

1,070,574 6,363,580

119,300

135,407

-

-

51,600

472,326

706,847

8


CASHFLOW STATEMENT


CASHFLOWS FROM OPERATING ACTIVITIES

Profit after taxation and exceptional item

Adjustments for:

Depreciation

Profits on asset disposal

Loss on asset disposal

Amortisation of intangible asset

Exceptional item

Operating profit before working capital changes

Increase in investments

Increase in customer advances

Increase in other assets accounts

Increase in customer deposits

Increase/(decrease) in managed funds

Increase in retirement benefit obligations

Increase in other liability accounts

Cash generated from operating activities

CASHFLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets

Proceeds from asset disposals

Net cash used in investing activities

Net cash inflows before financing activities

CASHFLOWS FROM FINANCING ACTIVITIES

Dividends paid

Ordinary share capital pay-up

Share premium

Capital grants received

Net cash inflows from financing activities

Increase in cash and cash equivalents

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE

21

END OF THE YEAR 21

2001

Ushs ‘000

3,180,235

1,904,037 1,403,233

(23,649) (39,305)

440

-

2,000,000 -

7,061,063

(11,214,215) (7,129,616)

(5,675,574) (2,275,570)

(397,792) (3,065,756)

17,374,800 11,061,809

1,372

139,065

474,070

7,762,789

(3,235,810) (2,100,586)

221,282 98,560

(3,014,528) (2,002,026)

4,748,261

(201,790)

472,326

706,847

51,600

1,028,983

2000

Ushs ‘000

3,066,313

22,799

106,810

4,559,850

(65,991)

-

1,159,528

4,244,254

(322,138)

135,407

119,300

514,629

447,198

5,589,198 2,689,426

7,698,926 5,009,500

13,476,170

2,242,228

7,698,926

9


NOTES TO THE ACCOUNTS


1. ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below:

(a) Basis of Accounting

The financial statements are prepared under the historical cost convention.

(b) Income

Interest income, commissions, fees and other types of income are recognised in the profit and loss account on an accruals basis. Interest income is suspended when loans are overdue by more than 90 days and is excluded from interest income until received.

(c) Property and Equipment and Depreciation

Property and equipment are stated in the balance sheet at their cost less accumulated depreciation.

Depreciation is calculated to write off the cost of the assets on a straight-line basis over their expected useful lives. The annual rates used are as follows: -

Land and building

Motor vehicles and motor cycles

Furniture fixtures and equipment

Computer equipment and accessories

4.0%

25.0%

12.5%

33.3%

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. 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. Repairs and renovations are charged to deferred expenses and amortised over a period of time.

(d) Foreign Currency Transactions

Foreign currency transactions during the year are converted into Uganda shillings at the rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Uganda shillings at exchange rates ruling at the balance sheet date. The resulting gains and losses are dealt with in the profit and loss account in the year in which they arise.

10


NOTES TO THE ACCOUNTS ( Continued )


(e) Provisions

Provisions are recognized when the bank has a present legal or contractual obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable estimate of the amount of the obligation can be made.

Employee entitlements to annual leave and long service award are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long service award as a result of services rendered by employees up to the balance sheet date.

(f) Bad and Doubtful Debts

Provisioning is made against all doubtful advances in accordance with the Bank of Uganda guidelines:



Standard



Sub-standard



Doubtful



Loss

0-89

90-179

180-364

365 plus

Nil

20%

50%

100%

Bad debts are written off when all reasonable steps towards recovery have failed.

Subsequent recoveries are credited to the profit and loss if previously written off.

(g) Capital and Revenue Grants

Revenue based grants are credited to revenue in the year in which they are received. Capital grants are credited to a special reserve and recognised in the profit and loss account over the useful lives of the assets financed by the capital grants.

(h) Taxation

Taxation is provided in the profit and loss account on the basis of the results included therein adjusted in accordance with the provisions of the Income Tax Act 1997.

Deferred taxation is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and the unused tax credits can be utilized.

(i) Retirement Benefit Obligation

The bank has established a benefit plan and Employee Share Option Plan (ESOP) for the benefit of staff and has set aside funds from its own resources for the plans.

The bank also makes contributions to a statutory pension scheme, the national Social

Security Fund. Contributions are determined by local statute and are shared between employer and employee.

11


NOTES TO THE ACCOUNTS (Continued)


2. CASH AND BALANCES AT BANK OF UGANDA

2001

Ushs ‘000

2000

Ushs ‘000

Cash at hand

2,759,140

Balances with Bank of Uganda

4,588,666

3,040,571

9,555,325

7,347,806

12,595,896

Balances with Bank of Uganda include mandatory reserve deposits of Ushs 5,992 million. These funds are not available to finance the bank’s day-to-day operations

3.

BALANCES WITH OTHER FINANCIAL INSTITUTIONS

Balances with local banks

Balances with foreign banks

4.

INVESTMENTS

96,114 144,393

784,160 206,727

880,274 351,120

Due within one year

Treasury bills

20,645,442

Fixed deposits

7,786,250

28,431,692

Due after one year

PTA Bonds

28,681,692

37,064,907

2,681,000

39,745,907

150,000 250,000

39,895,907

Treasury bills are debt securities issued by the Government of Uganda for a term of three months, six months or a year

5. LOANS AND ADVANCES TO CUSTOMERS

Overdrafts

Commercial loans

18,411,280

15,664

24,120,395

67,231

Gross loans and advances

18,478,511

24,136,059

Specific provisions for impairment

General provision for impairment

18,177,349

(a) Movement in provisions for loan loss is as follows

Specific provisions

(42,856) (118,869)

(240,280) (182,293)

23,852,923

12

Balance brought forward

Provisions for the year

Write offs

Reductions due to improved status

Balance at 31 December

118,869 327,883

617,611 508,397

(297,759) (230,162)

(395,865) (487,249)

42,856 118,869

13




General provision

Balance brought forward



2001

Ushs ‘000

2000

Ushs ‘000

182,293 161,671

508,939 61,607

(450,952) (40,985)

Balance at 31 December

Profit and loss



240,280 182,293

1,126,550 570,004

(846,816) (516,195)

279,734 53,809

Customer advances amounting to Ushs 509 million (2000: Ushs 547 million) are classified as nonperforming. Unrecognised interest related to such loans amounted to Ushs 42,780,874 (2000:Ushs

59,648,000). All loans have been stated at their recoverable amount.

(b) Economic sector risk concentrations within the customer loan portfolio were as follows:

Agriculture

Manufacturing

Trade and commerce

Transport and utilities

Building and construction

Other services

5,448,925

6. OTHER ACCOUNTS RECEIVABLE

Clearing suspense

Stationary

Staff advances

Interest receivable

1,360,890

Prepaid expenses

Deferred expenses

Bills receivable

Tax deposits


2,315,178

6

8,330,810

29

18,478,511

2001

Ushs ‘000

3,095,842

13

2001

%

598,434 2

8,141,392

45

859,510

550,010

24,136,059

100

4

2

10,890,871

-

2000 2000

Ushs ‘000

13

1,150,456

34

%

576,704 3

656,438 4

45

100

2,715,886

1,271,956

301,913 293,498

228,640 181,130

554,482 349,819

275,777 721,299

34,745

7,418

1,487,651

12,501

7,418

14

1,010,209

5,208,720

5,606,512

15




7. PROPERTY, PLANT AND EQUIPMENT

Leasehold

Land and

Buildings

Ushs ‘000

COST

At 1 January 2001

Additions

Disposals

1,474,831

1,147,731

(206,942)

At 31 December 2001

DEPRECIATION

At 1 January 2001

Charge for the year

2,415,620

352,233

55,694

(9,994) On disposals

At 31 December 2001

NET BOOK VALUE

At 31 December 2001

At 31 December 2000

397,933

2,017,687

1,122,598

Motor

Vehicles

Ushs ‘000

1,021,689

298,284

(23,700)

1,296,273

548,482

299,394

(22,575)

825,301

470,972

473,207

Computer

Equipment

& Accessories

Ushs ‘000

2,405,845

1,242,668

(547,129)

3,101,384

1,598,775

1,213,173

(547,129)

2,264,819

836,565

807,070

Furniture

Fixtures &

Equipment

Ushs ‘000

2,139,080

547,127

-

2,686,207

831,822

335,776

-

1,167,598

1,518,609

1,307,258

Total

Ushs ‘000

7,041,445

3,235,810

(777,771)

9,499,484

3,331,312

1,904,037

(579,698)

4,655,651

4,843,833

3,710,133

16




8. CUSTOMER DEPOSITS

Current accounts

14,837,579

Savings accounts

32,706,289

Time deposits

2001

Ushs ‘000

16,757,951

47,426,420

3,276,065

2000

Ushs ‘000

2,501,558

Foreign currency deposits

1,046,566

51,091,992

1,006,356

68,466,792

9. MANAGED FUNDS

This relates to funds from other organisations, disbursed to the bank for on-lending to its customers.

PAPSCA

UNCDF

CRS

DANIDA

56,000

31,091

-

542,331

629,422

56,000

31,091

2,500

538,459

628,050

The funds from DANIDA are administered by the bank for onward-lending to the people of Rakai through the Reorganised Rakai Rural Credit Scheme.

The grant funds under the PAPSCA programme were disbursed by Experiment in International Living to develop small-scale rural productive enterprises in the districts of Jinja, Iganga, Mukono and Mpigi.

The revolving facility from UNCDF is used to increase the availability of savings and credit services to people engaged in micro and small economic activities in the West Nile region.

10.

RETIREMENT BENEFIT OBLIGATIONS

At beginning of the year 483,828 673,828

340,806 397,612 Staff pension contribution

Contributions paid (201,744) (587,612)

At end of the year 622,893 483,828

The bank is in the process of establishing a benefit plan covering all of its employees and has set aside funds from its own resources for the plan. The contributions to the scheme are invested with ABN Amro Bank. Ushs 341 million (2000: Ushs 398 million), contribution to the scheme has been charged in the profit and loss account.

The bank is also in the process of establishing an Employee Share Option Plan (ESOP) for the benefit of its staff. Ushs 400 million had been set aside for the plan as at 3 December 2001.

17




11. OTHER ACCOUNTS PAYABLE

Dividends payable

Interest in suspense

2001

Ushs ‘000

2000

Ushs ‘000

Bills payable

Clearing suspense

Interbranch account

*Other provisions

348,742 301,420

42,781 59,648

1,709,243 638,991

1,855 -

26,911 158,438

2,000,000 -

1,944,799 *Other accounts payable

2,294,812

6,074,331

3,453,309

* Other provisions relate to uninsured claims payable as workmen compensation to the family of the late Chief Executive of the bank. The full amount of the costs estimated to be incurred has been recognized in the current year profit and loss account .

* Included in other accounts payable is Ushs 380 million advanced to the bank by PL 480 Title

II Program for Delivery Systems for Rural Finance, a project which aims at installing a Wide

Area Network that links all branches.

12. SHARE CAPITAL

Authorised and Issued

3,900,000 ordinary shares of Ushs 1,000 each

3,900,000

100,000 preference shares of Ushs 1,000 each

4,000,000

Fully Paid

3,900,000

100,000

4,000,000

100,000

3,349,979 (2000 – 2,879,432) Ordinary shares of Ushs 1,000 each

2,879,432

91,627 (2000 – 89,848) Preference shares of Ushs 1,000 each

2,969,280

13. SHARE PREMIUM

At 31 December 1999

Shares paid up

At 31 December 2000

Number of Shares

Preference

91,627

Ordinary

88,733

1,118

89,851

3,349,979

3,441,606

Share Premium

2,745,140

134,289

2,879,429

89,848

Ushs ‘000

-

119,300

119,300

18

Shares paid up

At 31 December 2001

1,776 470,550

91,627 3,349,979

706,847

826,147

19




14. CAPITAL RESERVES

At the beginning of the year

Transfers to profit and loss account

2001

Ushs ‘000

2000

Ushs ‘000

190,000 200,000

(10,000) (10,000)

At the end of the year 180,000 190,000

This is the amortisation of the amount considered as the excess of the valuation of the land and building in Masaka given to the bank as share contribution by Masaka Diocese.

15. CAPITAL GRANTS

At the beginning of the year

Additions during the year

Transfers to profit and loss account

At the end of the year

1,230,640

16. PROFIT FROM OPERATION BEFORE TAXATION

AND EXCEPTIONAL ITEM

Profit before taxation and exceptional item is stated after charging: -

1,230,640 483,781

51,600 1,013,443

(211,666) (266,584)

1,070,574

Depreciation

1,403,233

Auditors' remuneration

Employees retirement benefit plan

Directors' emoluments:

As directors

1,904,037

35,000

340,806

30,000

397,612

For management

Foreign exchange gain

17. EXCEPTIONAL ITEM

Exceptional item

86,158

5,489

41,386

38,475

498,582 316,613

2,000,000 -

The charge relates to uninsured claims payable as workmen compensation to the family of a former

Chief Executive of the bank, who died while on duty during the course of the year.

The full amount of the costs estimated to be incurred has been recognized in the current year profit and loss account.

18. TAXATION

The bank has a certificate of incentives from the Uganda Investment Authority up to December 2002, which exempts it from 100% corporation taxation.

20




2001

Ushs ‘000

2000

Ushs ‘000

19. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share for both years are the same as basic earnings per share.

Net profit attributable to shareholders

3,066,313

Weighted average number of ordinary shares

3,180,235

3,036,279

2,820,895

Basic earnings per share

20. DIVIDENDS PER SHARE

Preference 15%

1,047 1.087

Ordinary 10%

13,744 13,477

334,998

348,742

287,943

301,420

Dividends per share Ushs 110 Ushs 102

The dividends per share are calculated by dividing the ordinary dividend attributable to shareholders by the weighted average number of ordinary shares in issue during the year.

21. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:

Cash at hand 3,040,571

2,759,140

Balances with other financial institutions

Balances at Bank of Uganda

4,588,666

880,274

9,555,325

351,120

13,476,170

7,698,926

22. CONTINGENT LIABILITIES AND COMMITMENTS



Contingent liabilities - There were no contingent liabilities arising in the ordinary course of business from which it is anticipated that any material liabilities will arise at 31 December 2001.



Capital commitments

Authorised but not contracted for

Authorised and contracted for

4,565,042 793,572

1,155,000 -

5,720,042 793,572

The capital commitment at 31 December 2001 are in respect of computer software purchases. The

Bank’s management is confident that future revenues and funding will be sufficient to cover this commitment

21



Guarantees and performance bonds

Guarantees

Performance bonds

133,404

44,829

6,500

31,174

22




23. DFID TECHNICAL ASSISTANCE

The accounts do not include the value of the services rendered by experts from DFID, as the details of this value have not been given to the bank.

24. FINANCIAL INSTRUMENTS

The bank is exposed to market risk including primarily changes in interest rates and currency exchange rates. The bank does not hold or issue derivative financial instruments for trading purposes.

25. CREDIT RISK

Geographical concentrations of assets, liabilities and off balance sheet items

The bank operates wholly in Uganda and its assets and liabilities are managed in Uganda.

Credit risk

As one of the largest Ugandan banks, the bank accounts for a significant share of credit exposure to many sectors of the economy. However, the bank’s credit risk is well spread over a diversity of personal and commercial customers.

26. CURRENCY RISK

Concentrations of assets, liabilities and off balance sheet items

The bank had the following significant currency positions as at 31 December 2001

GBP USD USHS Other Total

ASSETS

Cash and balances at central Bank

Due from other banks

Investments




Total assets

LIABILITIES

Customer deposits

Managed funds



Total liabilities

Net balance sheet position

39,709

124,252

-

-

-

-

163,961

13,823

-

-

-

13,823

150,138

108,664 12,440,154 7,369 12,595,896

631,581 73,278 51,163 880,274

1,881,000 38,014,907 - 39,895,907

-

19,713

-

23,852,923

5,586,799 -

4,843,833

23,852,923

5,606,512

4,843,833

2,640,958 84,811,89458,532 87,675,345

992,533

992,533

1,648,425

67,460,436 -

629,422 -

622,893 -

5,739,333 -

74,452,084 -

68,466,792

629,422

622,893

5,739,333

75,458,440

10,359,810 58,532 12,216,905

23




27. LIQUIDITY RISK

Maturities of assets and liabilities

The table below analyses assets and liabilities of the Bank into relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date.

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the bank. It is unusual for banks ever to be completely matched since business transacted is often of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses

The maturity of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the bank and its exposure to changes in interest rates and exchange rates.

As at 31 December 2002

Up to 1 1-12 1-5 Over 5

Month Months Years Years Total

ASSETS

Cash and balances at central Bank

Due from other banks

Investments




7,434,140

Total assets

116,502,131

LIABILITIES

Customer deposits

Managed funds



Total liabilities

98,029,098

Net liquidity gap

18,473,033

15,631,769 -

- 2,803,816

-

-

- 37,915,337 150,000

-

-

-

42,781,623

9,785,446

-

-

-

-

-

-

-

-

15,631,769

2,803,816

38,065,337

42,781,623

9,785,446

3,302,758 4,131,382

15,631,769 93,286,222 3,452,758 4,131,382

87,968,072 4,348,543 1,000

- - -

-

506,225

-

3,387,811

- 92,317,615

638,142 638,142

1,179,305 -

- -

1,179,305

3,894,036

88,474,297 7,736,354 1,180,305638,142

(72,842,528) 85,549,868 2,272,453 3,493,240

24




28. INTEREST RATE RISK

The bank is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The table below summarises the exposure to interest rate risks. Included in the table 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 interest rate risk on off balance sheet items.

0 to 3 4 to 6 6 Months 1 to 5 Over 5 Non Interest Total

Months

Ushs ’000

Months

Ushs ’000 to 1 Year Years

Ushs ’000 Ushs ’000

Years

Ushs ’000

Bearing

Ushs ’000

Dec 2001

Ushs ’000

Cash on hand and balance at BOU

Government securities

-

8,738,892

-

15,567,071

-

12,758,944

-

-

-

-

12,595,896

-

12,595,896

37,064,907

Other investments - 50,000 50,000 150,000 - - 250,000

Balances with other banks

Loans and advances

Other accounts receivables


Customer deposits

Proposed dividend

Managed funds


Share premium

Share capital

Capital and other reserves

Retained profits

Interest sensitivity gap

Cumulative gap

3,461,274

-

-

-

12,200,166

66,574,665

-

-

-

-

-

66,574,665

-

-

(54,374,499)

-

-

-

-

15,617,071

1,830,523

-

-

-

-

-

1,830,523

-

-

13,786,548

(54,374,499) (40,587,951)

-

23,852,923

-

-

36,661,867

60,604

-

-

-

-

-

60,604

-

-

36,601,263

-

-

-

-

150,000

1,000

-

-

-

-

-

1,000

-

-

149,000

(3,986,688) (3,837,688)

-

-

-

-

-

629,422

-

-

-

-

-

629,422

-

-

(629,422)

(4,467,110)

5,606,512

4,843,833

-

-

23,046,241

-

13,744

-

6,348,482

826,147

3,441,606

1,250,574

6,698,578

18,579,131

4,467,110

-

3,461,274

23,852,923

5,606,512

4,843,833

87,675,345

68,466,792

13,744

629,422

6,348,482

826,147

3,441,606

1,250,574

6,698,578

87,675,345

-

-

25




29. EMPLOYEES

The average number of employees for the bank during the year was 491 (2000:389).

30. INCORPORATION

The bank is incorporated in Uganda under the Companies Act.

31. CURRENCY

These accounts are presented in Uganda shillings (Ushs).

26


DETAILED PROFIT AND LOSS ACCOUNT


INTEREST INCOME

Schedule

Loans

6,111,871

Placements with other banks

Treasury bills investments

2,866,322

9,907,701

INTEREST EXPENSE

Savings accounts

Time deposit accounts

Foreign currency accounts

Net interest income

9,190,410

OTHER INCOME

Commissions and fees

2,824,928

Bank charges

Stationery income

Rental income

Grants

Recoveries on advances written off

Exchange gains

Other income

4,338,907

EXPENDITURE

Financial expenses

Administrative costs

3,784,297

Staff expenses

4,693,036

Other charges and expenses

1,871,719

Loan loss provision

B

B

B

B

MANAGEMENT

INFORMATION

SCHEDULE A

2001

Ushs '000

2000

Ushs '000

7,800,438

362,555 929,508

5,992,986

14,155,979

722,637 524,830

206,680 168,688

15,230 23,773

944,547 717,291

13,211,432

3,606,442

271,738 236,164

563,427 472,219

90,080 9,856

154,481 362,267

188,097 33,861

498,582 316,613

38,956 82,999

5,411,803

77,304

4,315,419

6,685,014

2,085,529

60,413

279,734 53,809

10,463,004

PROFIT FROM OPERATION BEFORE

TAXATION AND EXCEPTIONAL ITEM

3,066,313

13,443,000

5,180,235


OPERATING EXPENSES


Schedule

FINANCIAL EXPENSES

Commission on drafts

Ledger fees

Cheque clearing charges

Commission on foreign cheques

Fines

ADMINISTRATION COSTS

Withholding tax

Rent and rates for office premises

Office expenses

Commission to parish agents

Motor vehicle running and maintenance

Telephones and other communication expenses

Transport and travel

Legal and consultancy fees

Audit fees and expenses

Insurance

Security

General entertainment costs

Staff training

Seminars and conferences

Advertising and publicity

Newspapers journals and periodicals

Subscriptions

Donations

Annual general meeting expenses

Recruitment costs

Transportation of cash

Licenses

Uniforms

Cashier allowances

Settlements

Staff welfare

Fraud and defalcations

Staff houses maintenance

3,784,297

MANAGEMENT

INFORMATION

SCHEDULE B

2001

Ushs '000

2000

Ushs '000

7,316

24,310

20,560

25,118

-

77,304

7,476

12,834

1,519

28,723

9,591

60,143

- 21,750

301,620 262,486

1,173,188 937,615

2,280 2,225

441,437 294,144

361,761 272,665

293,168 237,429

228,931 332,036

91,236 34,745

250,387 171,148

210,664 229,700

17,022 16,780

307,687 254,087

13,797 8,629

217,146 361,918

8,529 7,175

13,962 19,426

15,186

16,511

8,356

87,752

3,000

5,148

55,797

14,621

6,808

34,743

64,103

3,000

5,277

50,817

61,034

90,214

43,342

67,440

38,530 26,398

1,076 3,790

4,315,419


OPERATING EXPENSES (Continued)


STAFF EXPENSES

Salaries

3,062,902

Staff allowances

NSSF

Employee share option plan

Retirement scheme

Other staff expenses

4,693,036

OTHER CHARGES & EXPENSES

Depreciation

1,403,233

Amortisation of goodwill

Directors expenses

Diocesan advisory committee expenses

Other loan provisions

Loans write offs

Shortages

TOTAL OPERATING EXPENSES

10,409,195

1,871,719

MANAGEMENT

INFORMATION

SCHEDULE B

2001

Ushs ‘000

2000

Ushs ‘000

5,522,889

336,461 917,321

406,031 249,052

- 170,000

346,280 227,612

73,353 66,149

6,685,014

1,904,037

-

91,647

11,979

77,630

-

236

106,810

79,861

8,054

42,865

230,162

734

2,085,529

13,163,266

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