http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/RSS.ashxAfrican Annual Reports PagesThu, 08 Oct 2009 16:41:38 +0200http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=1http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=1Bank of Barod (Uganda) Ltd2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=2http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=2BOARD OF DIRECTORS2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=3http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=3Bank of Baroda (U) Ltd. Head office: 18, Kampala Road, P.O. Box 7197, Kampala (Uganda) NOTICE IS HEREBY GIVEN that the 37th Annual General Meeting of Bank of Baroda (U) Ltd. will be held in Rwenzori Ball Room "B", Sheraton Kampala Hotel, Ternan Avenue, P.O. Box 7041, Kampala on Friday 22nd June, 2007 at 3.30 p.m. to transact following business:- To receive and consider the audited financial statements - consolidated balance sheet as at 31.12.2006, consolidated income statement for the year ended 31.12.2006, report of the Board of Directors on working & activities of the bank, together with the Auditors' report thereon. To consider and, if deemed fit, to approve the final dividend proposed by the Directors at U.Shs. 701- per share. To confirm the appointment of the following directors on the Board of the bank - (1) Mr. J.w. Muwanga (2) Mr. P.K. Singhvi (3) Mr. V. Santhanaraman. To re-appoint MIs PKF Uganda as Bank's Auditors for the period ending with the next Annual General Meeting of the Bank and to approve their remuneration as proposed by the Board of Directors.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=4http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=4I NOTES I The members entitled to attend and vote the meeting are entitled to appoint a proxy to attend instead of her / him / itself and such proxy need not be a member of the bank. The proxy, in order to be effective, must be received by the bank at least 24 hours before the date of meeting. The format of the proxy form is attached with the annual report. No person shall be entitled to attend the meeting as a duly authorised representative of a Company, unless a copy of the resolution appointing him / her as a duly authorised representative certified to be true copy by the Chairman of the meeting at which it was passed has been deposited at the Head office of the Bar:lk within not less than 24 hours before the date of the meeting. For the convenience of members, admission form is annexed to annual report. The members are requested to fill in and affix their signatures in the space provided therein and hand-over the admission form at the entrance of the meeting place. Proxy / Representative of shareholders should mark on the attendance slip as proxy or representative as the case may be. The final dividend as declared by the Board of Directors and approved by the general members will be paid to those shareholders whose names appear on Bank's Register of shareholders as on 28.06.2007 and same will be mailed by 01.08.2007 after deducting withholding tax wherever applicable. Information of change of address, dividend mandate and particulars of the bank, branch and account number, which the shareholder desires to incorporate in his / her dividend warrant should reach to the Bank before 28.06.2007 to enable the bank to give effect to such intimation. Please note that copies of the Annual Report will not be distributed at the Annual General Meeting, therefore, members are requested to bring their copies of the Annual Report to the meeting. Members are also requested to inform the bank at least 48 hours before, about any other business which they propose to be legally transacted at the meeting.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=5http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=5GLOBAL CHAIRMAN'S STATEMENT It gives me immense pleasure to communicate with all of you at the 37th Annual General Meeting of the shareholders of Bank of Baroda (Uganda) Ltd., one of the oldest and growing subsidiaries of the parent bank - Bank of Baroda, India. The overall performance of the economy, as measured by real Gross Domestic Product (GDP) at market prices, increased by 5.3% for the financial year 2005-06. This was lower than 6.6% increase recorded in the financial year 2004/05. The slowdown in growth is largely attributed to two domestic shocks, viz. the prolonged draught which affected agriculture production and the energy crisis that affected the industrial sector. Despite the slowdown in growth of economy, your Bank has made steady and impressive growth during 2006. Bank's total business were at Shs.186,270Mn. as at 31st December, 2006 and advances have grown by 52%. Gross NPA is at 0.32% of total advances while net NPA continues to be NIL. Net profit after tax has increased from Shs.7,149Mn. (2005) to Shs.8,022Mn., registering a growth of 12.21 %. The Bank's growth is credited to the patronage of the satisfied customers. The parent bank, Bank of Baroda, India's International Bank, is a leading Public Sector Bank in Indian banking space. The Bank has launched a series of customer centric initiatives and the Bank has won great accolades and awards for the innovations and initiatives. The Bank has successfully implemented the Core Banking Solution at over a thousand branches. Bank of Baroda, a great brand in the Indian financial sector, will celebrate the Centenary Year in the current year, which goes to speak of the strength and robustness of the Bank . I place on record my sincere thanks and gratitude to the Government of the Republic of Uganda and Bank of Uganda for their valued guidance, advice and continuous support in strengthening the operations of the Bank. I also express my gratitude to all of our esteemed clients and associates for their continued patronage and support. I acknowledge the contribution of the Board of Directors of the Bank for their valuable guidance and support. I also place on record the contribution of the management and all staff members of the Bank in the growth of the Bank. I am confident that with continued efforts, the Bank will reach newer heights. (Ani! K. Khandelwal) Chairman & Managing Director Bank of Baroda, India2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=6http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=6CHAIRMAN'S STATEMENT I am pleased to welcome you at the 37th Annual General Meeting of your bank and privileged to present this annual report before you. You are aware that your Bank commenced its operations in Uganda in 1953 and has been in service of the nation uninterruptedly for the last -54- years. 2006 was the challenging year for the Ugandan economy. The growth in real Gross Domestic Product (GDP) for the year 2005/06 has been reported below the growth registered during the last financial year 2004/05. The slowdown in growth is largely attributed to the prolonged draught and the energy crisis. The combination of power crisis, high fuel prices & higher inflation also slowed down the pace of growth of financial sector. The main area of economic growth during the financial year 2006 was in the services sector with the expansion of hospitality services i.e. hotels & telecommunications sector continues to grow well. Inter bank foreign exchange rate although exhibited relative stability, it followed a general depreciative trend for most part of the financial year (Jan. - Sep 2006). However, Shillings has appreciated during the last quarter of the financial year & it has appreciated by 4.56% from a monthly mid-exchange rate of 1,854.70 per U.S. dollar in September 2006 to Shs.1,736.00 per U.S. dollar in December 2006. The appreciation pressures were mainly due to increase in dollar inflows in coffee sector, NGOs, and funds for IPOs amid stable corporate dollar demand during the month. Amidst these above said challenges, it is pleasing to report that your Bank has registered remarkable growth in all business parameters during the financial year 2006. The performance highlights in brief are: Operating Profit has further improved during the financial year 2006 despite slow down in economic growth. Gross NPA reduced from 0.55%(Dec'05) to 0.32% (Dec'06) despite sharp increase in advances. Net NPA continues to be Zero. During the financial year your Bank has taken all care for customer comfort and taken various customer centric initiative including product development. Your bank has also introduced two new retail products during the financial year 2006. I express my sincere gratitude to the President and Government of the Republic of Uganda for their continuous support and valuable guidance.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=7http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=7I thank the Government, the various Government Departments & officials of Bank of Uganda for their guidance in strengthening the operations of the Bank. I am equally grateful to authorities of Capital Market Authority, Uganda Securities Exchange & Privatisation Unit for creating favourable environment of equity trading in secondary capital market. I also place on record our appreciation for the continued support received from our valued shareholders and customers without whom the Bank would not have achieved the appreciable results. I appreciate the support rendered by my Director Colleagues of the Bank. I am grateful for the directions and support they have given to the management. On behalf of the Board of Directors and Management of the Bank, I wish to thank the staff members at all levels for their trust and dedicated work exhibited during the year. I am confident this spirit of belongingness will continue and make us to achieve our goals in future. We rededicate ourselves to accomplish the commitments to the customers for rendering highest standard of banking services and enhancement of stakeholders' value in the coming years. 2007 is going to be year of Outstanding Performance. We propose to expand our country wide network and services & continue to be competitive by introducing value added new products and services. In view of CHOGM (Commonwealth Heads of Government Meeting), we look forward for new business opportunities as country expects many private sector investment in industry & services sector. V. Santhanaraman Chairman2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=8http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=8Table of Contents 11 to 12 Statement of changes in equity Cash flow statement 13 to 14 15 16 to 21 22 to 392009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=9http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=9Corporate Information Mr. V.Santhanaraman**rMr. K.K.Shukla** Chairman Managing Director Director Director Director Director Director (Since Resigned) Director (Since Resigned) Director (Since Resigned) Mr. J.K.Chander** f-.-Mr. J.R.B. Kanyike* Dr. James W. Muwanga* (""' Mr. Pramod K. Singhvi** \' Mr. Vinod Kumar Seth** Mr. M.B. Samant** Mr. F.F.Magezi* REGISTERED OFFICE Bank of Baroda (Uganda) Limited Plot 18 Kampala Road P.O. Box 7197 Kampala Uganda LEGAL ADVISORS Kateera & Kagumire Advocates & Solicitors, 10th Floor, Tall tower, Crested Towers, P.O.Box 7026 Kampala, Uganda COMPANY SECRETARY Mr. V.M. Gupta Bank of Baroda (Uganda) Limited Plot 18 Kampala Road P.O. Box 7197 Kampala Uganda PRINCIPAL CORRESPONDENT Bank of Baroda Mumbai Main Office Vostro Alc Cell 18th Floor, Stock Exchange Building Mumbai, India American Express Bank Limited 1st Floor, 2 Blue Hill Plaza Pearl River, New York 10965, USA BANKS AUDITORS PKF Uganda Certified Public Accountants Plot 37 Yusuf Lule Road P.O. Box 24544 Kampala Uganda (As well as Bank of Baroda branches in New York, London and Brussels)2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=10http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=10Director's Report The directors submit their report together with the audited financial statements for the year ended 31 st December 2006, which disclose the state of affairs of Bank of Baroda (Uganda) Limited ("the company"). The Indian Rupee results, balances and cash flows are presented for information purposes only and have not been audited by PKF Uganda. The net profit after tax for the year is Shs.8,022 million (2005: Shs. 7,149 million). Key financial highlights include: - Advances increased by 51.90% in 2006 to Ushs 52,282 million from Ushs 34,419 million in 2005 net of impairment provision. - Deposits increased by 11 % in 2006 to Ushs 133,988 million from Ushs 120,731 million in 2005 - BaJance sheetsizeincreasedby 16.36% in 2006 to Ushs 194,336millionfrom Ushs 167,012millionin 2005. - Net profit after tax increased by 12.21% in 2006 to Ushs 8,022 million from Ushs 7,149 million in 2005. - Gross NPA reduced from 0.54% of the total advances net of provisions to 0.32% and net NPA is NIL - Capital adequacy ratio improved from 32.04% to 39.02% as at 31.12.2006. - Earnings per share increased to shs 200 (2006) from shs 178 (2005). - Total income increased by 12.83% to shs.23,469 million. - Cost of funds increased from 2.8% to 3.3%. - Yield on advances increased to 18% (2006) from 17.50% (2005) - Return on average assets has been arrived at 6.05% as at 31st December 2006. - Return on shareholders' worth has been arrived at 28.44% as at 31.12.2006. The directors Ibillion). recommend the payment of a dividend of Ushs 2.8 billion (2005: Ushs 2.4 The company's activities expose it to a variety of financial risks, including credit risk and the effects of changes in liquidity, foreign currency exchange rates and interest rates. The company's overall risk management programme focuses on the acceptable level of risk and the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. The company has policies in place to ensure that banking services are availed to customers with performance and credit history.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=11http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=11Director's Report The names of the directors who held office during the year to the date of this report are set out on page 1. The auditors, PKF Uganda, were appointed during the year and in accordance with Section 159(1) of the Companies Act (Cap.11 0). The auditors have been approved by Bank of Uganda in accordance with Section 62 of the Financial Institutions Act 2004, and being 'eligible have indicated their willingness to continue in office. Bank of Baroda (Uganda) Limited (the Bank) monitors the adequacy of its capital using ratios established by Bank of Uganda with reference to computations from International Convergence of Capital Measurement and Capital Standards (Committee on Banking Regulations and Supervisory Practice, Basle, 1988). These ratios measure capital adequacy by comparing the Bank's eligible capital with total risk-adjusted assets plus risk-adjusted off balance sheet items as may be determined by Bank of Uganda by statutory instrument. Assets are weighted according to broad categories of notional credit risk, being assigned a risk weighting according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50% and 100%) are applied. e.g. notes, coins and other cash assets, balances held with Bank of Uganda including securities issued by the Government of Uganda and securities held under the Bank of Uganda have a zero risk weighting, which means that no capital is required to support the holding of these assets. Property and equipment carries a 100% risk weighting. Based on the existing guidelines this Other means that they must be supported by capital equal to 100% of the carrying amount. asset categories have intermediate weightings. Off-balance performance categories sheet. credit related commitments such as guarantees and acceptances, bonds, documentary credit etc., are taken into account by applying different of credit risk conversion factors, designed to convert these items into balance The resulting credit equivalent amounts are then weighted for credit risk sheet equivalents. using the same percentages as for balance sheet assets. Core capital (Tier 1) consists investments. Supplementary of paid-up share capital, retained profits less non-dealing capital (Tier 2) includes revaluation reserves on property, general provisions and non-dealing investments.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=12http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=12Director's Report 2006 Ushs '000 Balance sheet assets net of provisions Cash and balances with Bank of Uganda Deposits and balances due from Banking Institutions in Uganda Deposits and balances due from Banking Institutions outside Uganda Loans and advances to customers Treasury bills and eligible bills Property and equipment Intangible assets Other assets 11,077,126 52,282,672 93,136,264 11,924,779 141,513 1,865,928 194,296,353 Off-balance sheet positions Credit related commitments Total risk-weighted assets Capital adequacy requirement calculation Capital Tier 1 Tier 1 + Tier 2 Capital 27,809,376 34,556,767 12,401,140 206,697,493 10,836,500 13,031,571 2005 Ushs '000 14,651,319 5,000,000 26,715,347 34,419,612 75,786,124 7,552,841 218,766 2,658,651 167,002,660 2006 Ushs '000 2005 Ushs '000 2,167,300 11,077,126 52,282,672 11,924,779 141,513 1,865,928 79,459,318 1,000,000 26,533,847 33,878,345 7,552,841 218,766 2,658,651 71,842,450 18,953,460 185,956,120 9,104,382 88,563,700 Ratio 8,884,775 80,727,225 22,410,474 25,866,843 31.40% 39.02% 27.76% 32.04% Risk weighted amounts for loans and advances to customers are stated net of impairment losses. These balances have also been offset against fixed deposits and short term deposits placed by customers as securities. There is no borrower with either funded or non-funded facilities, exceeding twenty five percent of total capital. The Uganda shilling exhibited a general depreciative trend for most part of the financial year (Jan-Sept 2006). Following a trend, which started in March, the shilling depreciated by 0.36% in April from Shs 1,820.90 to Shs 1,827.50; and by 0.48% in May to Shs 1,836.34 per dollar. However, in the Inter-Bank Foreign Exchange Market (IFEM), the shilling has appreciated rate of Shs during the last quarter of the financial year by 4.56% from a monthly mid-exchange 1,854.70 per US dollar in September 2006 to Shs 1,736.00 per US dollar in December 2006. The bank complied with the minimum core capital and total capital requirements, which are 31.40% and 39.02% as against regulatory requirement of 8% and 12% respectively. Minimum capital for purposes of licensing the bank is Ushs 4 billion.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=13http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=13Director's Report We believe that excellence emanates from good governance therefore, we have adopted high standard of transparency and accountability, professionalism and social responsiveness with improved customer focus to maintain a value driven organization. The audited annual financial statements do not carry any qualification from the statutory auditors. We have duly constituted various Committees of the Board such as Audit Committee, Credit Committee, Risk Management Committee and Personnel & Ad~istration governance tdmmittee to oversee the various"\rovisions of corporate as required under the Financial Institutions Act. These Committees hold meetings at regular intervals to ensure compliance with the requirements of corporate governance. The Human Resource Management the ever-changing competition department continues to play a very important role in scenario.The Bank's mission continues to be to convert every employee of the Bank into a knowledge worker to enable them to cope with increased customer expectations and new areas of banking outside the traditional zone. Mainly Bank of Baroda, India and the Uganda Institute of Bankers conduct the training. In addition, the bank has conducted a number of in-house training programmes and also deputed staff members to India for training. All branches of the bank are interconnected using Equinox Banking Software Solutions. The introduced ATMs at all the software has stabilized during the year and the bank successfully branches. COMPANY SECRETARY KAMPALA 20 - 03 - 20072009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=14http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=14Statement of Corporate Governance Corporate Governance deals with the way companies are led and managed, the role of the Board of Directors and a framework of internal controls. The Board of Bank of Baroda (U) Limited is committed to proper standards of corporate governance and confirms that the group has complied with the provisions of our regulators including the Bank of Uganda, the Capital Markets Authority and the Uganda Securities Exchange. The full Board meets at least four times a year, and has a formal schedule of matters reserved for it.The directors are given appropriate and timely information so that they can maintain full and effective control over strategic, financial, operational and compliance issues. Except for direction and guidance on general policy, the Board has delegated authority for the conduct of day to day business to the Chief Executive Officer. It however retains responsibility for establishing and maintaining the Bank's overall internal control of financial, operational and compliance issues and monitoring the performance of the executive management. Four out of six members of the Board are non-e~cutive reappointment in accordance and all directors are subject to periodic On appointment, with the compain'y;s Articles of Association. each director receives information about the Bank and is advised of the legal, regulatory and other obligations of a director of a listed company. They have access to the Company Secretary, who is responsible for ensuring that Board procedures are followed and that applicable laws and regulations are complied with. The remuneration of all directors is subject to regular monitoring to ensure that levels of remuneration and compensation are appropriate. Information on the compensation received and the dealings of the directors with the Bank are included in the annual report in notes 4 and 31. Accountability and Audit The Audit CORJmittee chaired by a non-executive 1\ director receives reports on the findings of regularly reviews and considers changes to improve the bank's the Internal Audit and Fraud and Investigations departments that audit business operations and the internal control environment. It also receives input and reports from the external auditors. In addition, the Committee security, internal control and risk management processes. The Board confirms that it is satisfied that the Bank has adequate resources to continue in business for the foreseeable future. For this reason, it continues to adopt the going concern basis when preparing the financial statements.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=15http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=15I ! Statement of Corporate Governance The Board has a collective responsibility for the establishment and maintenance of a system of internal control that provides reasonable assurance of effective and efficient operations. However, it recognises that any system of internal control can provide only reasonable, and not absolute assurance against material misstatement or loss. The Board attaches great importance for maintaining a strong control environment and the Group's system of internal control includes the assessment of non-financial risks and controls. The Board has reviewed the Bank's internal control policies and procedures and, is satisfied that appropriate procedures are in place. The Board also reviewed the level of bad and doubtful debt provisioning as at 31 December 2006 and is satisfied with their adequacy to cover the credit risk exposure. The Bank ensures that there are written policies and procedures to identify and manage risk including operational risk, balance sheet management, market and credit risk on an ongoing basis. The Bank's business is conducted within a developed control framework, underpinned by policy statements, written procedures and control manuals. The Board has established a management structure which clearly defines roles, responsibilities and reporting lines. Delegated authorities are documented and communicated. The business performance of the Bank is reported regularly to its management and the Board. Performance trends, forecasts as well as actual performance against budgets and prior periods are closely monitored. Financial information is prepared using appropriate accounting policies, which are applied consistently. Operational procedures and controls have been established processing of transactions and the safeguarding of to facilitate complete, accurate and timely of assets. These controls also include the segregation of duties, the regular reconciliation accounts and the valuation of assets and positions. The Bank has an approved Code of Conduct, which sets out the Bank's core values relating to the lawful and ethical conduct of business. All employees have a copy of this Code of Conduct and are expected to observe high standards of integrity and fair dealing in relation to customers, staff and regulators in the communities part of a Bank compliance rules, regulations and legal requirements. in which the Bank operates. This forms structure, which sets policies and standards for compliance with The Board recognises the importance of good communication communicate with all shareholders. The Annual General Meeting (AGM) as well as the published annual reports are used as an opportunity to with all shareholders. The Bank will always give shareholders 21 days notice of the AGM as provided for in the Companies Act.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=16http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=16Statement of Director's Responsibilities The Companies Act (Cap. 110) requires the directors to prepare financial statements for each financial 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 its operating results for that year. It also requires the directors to ensure that the company maintains proper accounting records which disclose, with reasonable accuracy, the financial position of the company. The directors are also responsible for safeguarding the assets of the company. The directors accept responsibilityforthe annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, consistent with prior years and in conformity with International Financial Reporting Standards and the requirements of the Companies Act (Cap. 110). The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company as at 31 st December 2006 and of its operating results for the year then ended. The directors further confirm the accuracy and completeness of the accounting records maintained by the company which have been relied upon in the preparation of the financial statements, as well as on the adequacy of the systems of internal financial control. Nothing has come to the attention of the directors to indicate that the company will not remain a going concern for at least the next twelve months from the date of this statement. -~-2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=17http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=17Report of The Independent Auditors To The Members of Bank of Baroda ( Uganda) Limited We have audited the accompanying financial statements as set out on pages 10-39 of Bank of Baroda (Uganda) Limited, which comprise the balance sheet as at 31 st December 2006 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. The directors' are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This ,responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of 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. 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 our 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 financial statements. The procedures selected depend on the auditor's judgement, including the assesment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the 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 management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit 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 group and the company as at 31 st December 2006 and the group's operating results and cash flows for the year then ended and comply with the Companies Act (Cap.11 0) and the International Financial Reporting Standards and all material provisions under the Financial Institutions Act 2004. PlL(:-~QCertifie~ublic KAMPALA Accountants Date: 30th March 2007 Ref:MD/B037/0026/072009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=18http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=18Consolidated Profit and Loss Account For the year ended 31st December 2006 2006 Notes Interest income Interest expense Net interest income Non interest income Other income Impairment losses on loans and advances Non interest expenses Profit before tax Tax Profit after tax Basic and diluted earnings per share Dividend per share 7 8 6 12(b) 4 3 2 Shs'OOO 19,322,580 (4,870,753) 14,451,827 4,091,285 55,348 (47,811) (7,567,427) 10,983,222 (2,961,395) 8,021,827 Ushs 200.55 Ushs 70.00 2005 Shs'OOO 16,808,205 (3,174,899) 13,633,306 3,482,571 510,548 (80,028) (7,211,792) 10,334,605 (3,185,516) 7,149,089 Ushs 178.73 Ushs 60.00 2006 IR '000 490,421 (123,623) 366,798 103,840 1,404 (1,213) (192,067) 278,762 (75,162) 203,600 IR 5.09 IR 1.78 2005 IR'OOO 414,915 (78,373) 336,542 85,968 12,603 (1,976) (178,025) 255,112 (78,635) 176,477 IR 4.41 IR 1.482009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=19http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=19Company Balance Sheet For the year ended 31st December 2006 Note 2006 Shs'OOO 2005 Shs'OOO 14,651,319 75,786,124 19,051,026 2006 IR '000 330,751 2,363,865 275,038 2005 IR '000 362,656 1,875,894 471,560 • ASSETS Cash and balances with Bank of Uganda Treasury bills and other eligible bills Deposits and balances due from other banking institutions Amounts due from overseas branches of parent company Loans and advances to customers Other assets Taxation Investment in subsidiary Property and equipment Intangible assets TOTAL ASSETS 24 15(a)&(b) 15(c) 12(a) 14 13 9 10 11 13,031,571 93,136,264 10,836,500 11,077,126 12,664,321 281,145 313,473 52,282,672 1,824,940 40,988 40,000 11,924,779 141,513 194,336,353 34,419,612 2,653,942 4,709 10,000 7,552,841 218,766 167,012,660 1,326,971 46,319 1,040 1,015 302,659 3,592 4,932,396 851,970 65,692 117 248 186,952 5,415 4,133,977 LIABILITIES 120,731,051 10,499,845 3,400,713 232,836 Customer deposits Deposits and balances due to other banking institutions Amounts due to overseas branches of parent company Other liabilities Retirement benefit obligations Deferred tax liability TOTAL LIABILITIES 16 17 133,988,074 9,173,747 2,988,392 259,897 18 1,016,756 471,791 25,806 11,678 20 21 22 9,674,270 1,055,268 2,031,471 156,939,586 5,184,083 925,772 923,275 138,735,817 245,540 26,784 51,560 3,983,239 128,319 22,915 22,854 3,434,055 SHAREHOLDERS' EQUITY Share capital Retained earnings Proposed dividend Regulatory general credit risk reserve Revaluation reserves TOTAL SHAREHOLDERS' EQUITY 8 19 4,000,000 23,849,376 2,800,000 532,963 6,214,428 37,396,767 4,000,000 18,420,474 2,400,000 344,196 3,112,173 28,276,843 101,523 605,314 71,066 13,527 157,727 949,157 99,010 457,922 59,406 6,550 77,034 699,922 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Acceptances, guarantees & letters of credit for which there are counter indemnities from customers The financial statements signed on its behalf by: on pages 10 to 39 were approved 194,336,353 167,012,660 4,932,396 4,133,977 25 12,401,140 18,953,460 314,750 469,145 for issue by the board of directors on 20th March 2007 and were &>-r anaging Director Director -~L' T Dir tor ,9- . ~ - _.l-<.>-"-' 9:>._. Director ~ Director Director I Chainnan The accounting policies and notes to the financial statements on pages 16 to 39 form an integral part of these financial statements.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=20http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=20Consolidated Balance Sheet For the year ended 31 st December 2006 Note ASSETS Cash and balances with Bank of Uganda Treasury bills and other eligible bills Deposits and balances due from other banking insitutions Amounts due from overseas branches of parent company Loans and advances to customers Other assets Taxation Property and equipment Intangible assets TOTAL ASSETS LIABILITIES Customer deposits Deposits and balances due to other banking institutions Amounts due to overseas branches of parent company Other liabilities Retirement benefit obligations Deferred tax liability TOTAL LIABILITIES SHAREHOLDERS' Share capital Retained earnings Proposed dividend Regulatory general credit risk reserve Revaluation reserves 8 EQUITY 19 4,000,000 23,887,922 2,800,000 532,963 6,214,428 4,000,000 18,457,811 2,400,000 344,196 3,112,173 101,523 606,292 71,066 13,527 157,727 99,010 458,846 59,406 6,550 77,034 20 21 22 9,677,330 1,055,268 2,031,471 156,942,646 5,190,856 925,772 923,275 138,704,594 245,618 26,784 51,560 3,983,317 128,486 22,915 22,854 3,433,282 18 1,016,756 471,791 25,806 11,678 16 17 133,988,074 9,173,747 120,693,055 10,499,845 3,400,713 232,836 2,987,452 259,897 15(a)&(b) 15(c) 12(a) 14 52,282,672 1,894,099 40,988 11,924,779 141,513 34,419,612 2,669,533 4,709 7,552,841 218,766 1,326,971 48,075 1,040 , 302,659 3,592 851,970 66,078 117 186,952 5,415 13 11,077,126 12,664,321 281,145 313,473 9 10 11 2006 Shs'OOO 13,031,571 93,136,264 10,848,947 2005 Shs'OOO 14,651,319 75,786,124 19,051,549 2006 IR '000 330,751 2,363,865 275,354 2005 IR '000 362,656 1,875,894 471,573 13 194,377,959 167,018,774 4,933,452 4,134,128 TOTAL SHAREHOLDERS' EQUITY EQUITY 25 37,435,313 194,377,959 12,401,140 28,314,180 167,018,774 18,953,460 950,135 4,933,452 314,750 700,846 4,134,128 469,145 TOTAL LIABILITIES AND SHAREHOLDERS' Acceptances, guarantees & letters of credit for which there are counter indemnities from customers The financial statements signed on its behalf by: on pages 10 to 39 were approved for issue by the board of directors on 20th March 2007 and were anaging DirectC?f Director »-rCbDirector -d1-e~qIL Dir tor / I' ~."L<.A.-"-'~' ~ ~ Director Director I Chairman The accounting policies and notes to the financial statements on pages 16 to 39 form an integral part of these financial statements,2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=21http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=21Share Revaluation Reserve Retained earnings Regulatory general credit risk Proposed Dividends Total Total • capital Shs'OOO Year ended 31st December 2005 Shs'OOO Shs'OOO Shs '000 Shs'OOO Shs '000 IR '000 At 1 January 2005 4,000,000 3,246,850 13,642,581 191,077 2,400,000 23,480,508 581,201 Net profit for the year 7,138,616 7,138,616 176,698 Movement in regulatory general credit risk reserve Dividend paid (153,119) 153,119 (2,400,000) (2,400,000) (59,406) Dividend proposed (2,400,000) 2,400,000 Excess depreciation transfer (192,396) 192,396 57,719 1,429 Deferred tax on excess depreciation 57,719 At 31 December 2005 Year ended 31st December 2006 At 1 January 2006 4,000,000 4,000,000 3,112,173 3,112,173 18,420,474 18,420,474 344,196 344,196 2,400,000 2,400,000 28,276,843 28,276,843 699,922 717,686 Net profit for the year 8,020,618 8,020,618 203,569 Movement in regulatory general credit risk reserve Dividend paid (188,767) 188,767 (2,400,000) (2,400,000) (60,914) Dividend proposed (2,800,000) 2,800,000 Additional revaluation surplus 4,828,844 4,828,844 122,559 Excess depreciation transfer (397,051) 397,051 Deferred tax on excess depreciation 119,115 119,115 3,023 Deferred tax on revaluation surplus (1,448,653) (1,448,653) 23,849,376 532,963 2,800,000 37,396,767 (36,767) At end of year 4,000,000 6,214,428 949,1572009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=22http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=22I Consolidated Statement of Changes in Equity For the year ended 31 st December 2006 Share Revaluation reserves Retained earnings Regulatory general credit risk Proposed dividend Total Total • capital Shs'OOO Year ended 31st December 2005 At 1 January 2005 4,000,000 Shs'OOO Shs'OOO Shs '000 Shs'OOO Shs '000 IR '000 3,246,850 13,669,445 191,077 2,400,000 23,507,372 581,865 Net profit for the year 7,149,089 7,149,089 176,958 Movement in regulatory general credit risk reserve Dividend paid (153,119) 153,119 (2,400,000) (2,400,000) (59,406) Dividend proposed (2,400,000) 2,400,000 Excess depreciation transfer (192,396) 192,396 57,719 1,429 Deferred tax on excess depreciation 57,719 At 31 December 2005 4,000,000 3,112,173 18,457,811 344,196 2,400,000 28,314,180 700,846 Year ended 31st December 2006 At 1 January 2006 18,457,811 4,000,000 3,112,173 344,196 2,400,000 28,314,180 718,634 Net profit for the year 8,021,827 8,021,827 203,601 Movement in regulatory general credit risk reserve Dividend paid (188,767) 188,767 (2,400,000) (2,400,000) (60,914) Dividend proposed (2,800,000) 2,800,000 Additional revaluation surplus 4,828,844 4,828,844 122,559 Excess depreciation transfer (397,051) 397,051 Deferred tax on excess depreciation 119,115 119,115 3,023 Deferred tax on revaluation surplus (1,448,653) (1,448,653) (36,768) At end of year 4,000,000 6,214,428 23,887,922 532,963 2,800,000 37,435,313 950,1352009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=23http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=23Consolidated Cash Flow Statement For the year ended 31 st December 2006 2006 2005 Shs '000 2006 IR '000 2005 IR '000 • Shs '000 Cash flow from operating activities Profit before tax Rate adjustment 10,983,222 Adjustments: Depreciation (Gain)/Ioss on disposal of property and equipment 12,065,767 Adjustments for working capital changes (Increase) in loans and advances Decrease/(increase) in other assets Increase/(Decrease) in treasury bills and other eligible bills Increase in customer deposits Increase in other liabilities (Decrease) in deposits and balances due to banking institutions Decrease/(increase) in cash reserve balance Movement in amounts due to overseas branches of parent company Increase in retirement obligations Cash from operations Taxation paid Net cash from/(used in) operating activities Cash flow from investing activities Purchases of property and equipment Purchase of software Proceeds from the sale of equipment Net cash (used in) investing activities Cash flow from financing activities Dividends paid (2,400,000) (548,386) (456,950) (91,436) 129,496 (2,101,540) (3,219,016) (5,320,556) 1,808,768 544,965 (17,863,060) 775,434 (16,018,305) 13,295,019 4,486,474 (1,326,098) 1,082,545 10,983,222 10,334,605 278,762 255,112 695 10,334,605 278,762 255,807 908,705 (7,817) 11,235,493 27,476 22,493 (193) 306,238 278,107 (8,799,972) (1,703,734) (7,566,763) 7,876,068 1,545,741 (3,669,739) (453,377) 19,681 (406,556) 337,437 113,870 (33,657) (217,821) (42,172) (187,296) 194,952 38,260 (90,835) (2,549,126) 463,076 45,908 13,832 (63,097) 11,462 37,955 (3,131,001) (3,016,186) (6,147,187) 3,287 (359,576) (81,701) (441,277) 939 (77,501) (74,658) (152,159) (1,214,410) (415,139) 33,900 (1,595,649) (11,598) (2,321) (30,060) (10,275) 839 (13,918) (39,496) (2,400,000) (60,914) (59,406) Net decrease in cash and cash equivalents Cash and cash equivalents the year (note 23) at the beginning of (8,268,942) (10,142,836) (209,872) (251,061) 48,189,440 58,332,276 1,192,807 1,443,868 Cash and cash equivalents at the end of the year (note 23) 39,920,498 48,189,440 1,013,210 1,192,8072009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=24http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=24Accounting Policies As at 31 st December 2006 Bank of Baroda (Uganda) Limited is incorporated in Uganda under the Companies Act as a public limited company and is domiciled in Uganda. The principal accounting policies adopted in the preparation of these financial statements are set out below: The financial statements are prepared in accordance with and comply with International Financial Reporting Standards (IFRS) and the Companies Act (Cap 110). The financial statements are prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment, and the carrying of available for sale investments at fair value and impaired assets at their recoverable amount. The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgements, 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 the financial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on the directors' best knowledge of current events and actions, actual results may differ from those estimates. The consolidated financial statements incorporate the financial statements of the bank and its subsidiary, Baroda Capital Markets (U) Limited, for the year ended 31 December 2006. All significant consolidation. transactions and balances between group companies are eliminated on Transactions in foreign currencies during the year are converted into Uganda Shillings at rates ruling at the transaction dates. Assets and liabilities at the balance sheet date, which are expressed in foreign currencies, are translated into Uganda Shillings at rates ruling at that date. The resulting differences from conversion and translation are dealt with in the profit and loss account in the year in which they arise.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=25http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=25Accounting Policies As at 31 st December 2006 The carrying amount of the bank's financial assets and property and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such condition exists, the asset's recoverable amount is estimated and an impairment loss recognised whenever the carrying amount of an asset exceeds its recoverable amount. Financial assets and liabilities are offset and the net amount reported in the b,alance sheet 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. Interest income and interest expense is recognised on an accrual basis taking into account the effective interest rate of the interest earning asset or the interest bearing liability. Interest Income and Expense includes the amortization of any discount or premium or other differences between the initial carrying amount of an interest bearing instrument and its amount of maturity calculated on an effective interest rate basis. Revenue is recognised only when it is probable that the economic thetransaction will flow to the bank. benefits associated with All property and equipment is initially recorded at cost. Land and buildings are subsequently shown at market value, based on valuations are stated at historical cost less depreciation. by professional independent valuers, less subsequent accumulated depreciation and impairment losses. All other property and equipment Increases in the carrying amount arising on revaluation are credited to a revaluation reserve Decreases that offset previous increases of the same asset are charged against the revaluation reserve; all other decreases are charged to the income statement.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=26http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=26Accounting Policies As at 31 st December 2006 Depreciation is calculated on a straight line and reducing balance basis to write down the cost of assets, or the revalued amounts, to its residual value over its estimated useful life using the following annual rates: Rate - % 5.0 20-33.3% Method Straight line basis Straight line basis Reducing balance Reducing balance Buildings Computer equipment Motor vehicles Furniture, fittings and equipment 20 12.5 Freehold land is only depreciated where the cost is not separately identifiable from !he related developments. On disposal of revalued assets, amounts in the revaluation reserve relating to that asset are transferred to retained earnings. With effect from 2000, excess depreciation computed each year on past revaluation surpluses are transferred from capital to revenue reserves, net of deferred tax. Gains or losses on disposal of property and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. Computer software costs which are clearly identifiable and controlled by the bank and have probable benefit exceeding the cost beyond one year are recognised as an intangible asset. These assets are amortised using the straight line method over their estimated useful life of three years. Costs associated with the maintenance of existing computer software programs and modifications are expensed as incurred. Intangible assets are stated at cost net of accumulated amortisation and impairment losses. A majority of the bank's employees are eligible for annual leave and long service awards. The bank also contributes for its employees to the National Social Security Fund (NSSF). Provisions for annual leave and long service awards and contributions to NSSF are charged to the income statement as incurred. Any differences between the charge to income and NSSF contributions payable is recorded in the balance sheet under other payable while separate provisions are made for leave pay and long service awards. Employee entitlements to long term service awards are recognised when they accrue to employees. A provision is made for the estimated liability for such entitlements as a result of services rendered by employees up to the balance sheet date.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=27http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=27Accounting Policies As at 31 st December 2006 Loans and advances are recognised when cash is advanced to borrowers and are subsequently carried at amortised cost less provision for impairment losses. Loans originated by the group by providing money directly to borrowers, other than those created with the intention of short term profit taking, are classified as originated loans and receivables. These are carried at amortised cost, which is the present value of the expected future cash flows, discounted at the instruments' original effective interest rate. Loan origination fees together with related direct costs are treated as part of the cost of transaction. Loans and advances are shown at the gross amount adjusted for any provision for impairment losses. A provision for loan impairment is established if there is objective evidence that the bank will not be able to collect all amounts due according to the original contractual terms of the loan. The amount of the provision is the difference between the carrying amount and the estimated recoverable amount. Specific provisions are recognised for loans and advances that are individually significant. General provision is measured and recognised on a portfolio basis where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. This is estimated based upon historical patterns of losses in each component, the credit ratings allocated to the borrowers and reflecting the current economic climate in which the borrowers operate. Current tax is provided on the basis of the results for the year, adjusted in accordance with tax legislation. Deferred tax 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. Currently enacted tax rates at the balance sheet date are used to determined deferred tax. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. A financial asset or liability is recognised when the company becomes party to the contractual provisions of the instrument. The bank classifies its financial assets into the following categories: Financial assets at fair value through profit or loss; loans, advances and receivables; held-to-maturity investments; and available for sale assets. Management determines the appropriate classification of its investments at initial recognition. This category has two sub-categories: Financial assets held for trading and those at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=28http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=28Accounting Policies As at 31st December 2006 Loans, advances and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the company provides money, goods or services directly to a debtor with no intention of trading the receivable. Held-to-maturity investments are non derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. Where a sale occurs other than an insignificant amount of held-to-maturlty assets, the entire category would be tainted and classified as available for sale. Financial assets that are not; (a) financial assets at fair value through profit or loss (b) loans, advances and receivables or (c)financial assets held to maturity Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans, advances and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of "financial assets at fair value through profit or loss" are included in the income statement in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised directly inequity, until the financial asset is derecognised or impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in the income statement. Dividends on available-for-sale equity instruments are recognised in the income statement when the group's right to receive payment is established. Fair values of quoted investments in active markets are based on quoted bid prices. Equity securities for which fair values cannot be measured reliably are measured at cost less impairment. If it is probable that the bank will not be able to collect all amounts due (principal and interest) according to the contractual terms of loans, receivables or held-to-maturity investments carried at amortised cost, an impairment or bad debt loss has occurred. The amount of the loss is the difference between the asset's carrying amount and the present value of expected future cash flows discounted at the financial instrument's original effective interest rate (recoverable amount). The carrying amount of the asset is reduced to its estimated recoverable amount through use of the provision for bad and doubtful debts account. The amount of the loss incurred is included in the income statement for the period.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=29http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=29Accounting Policies As at 31 st December 2006 After initial recognition, the bank measures all financial liabilities including customer deposits other than liabilities held for trading at amortised cost. Liabilities held for trading (financial liabilities acquired principally for the purpose of generating a profit from short term fluctuations in price or dealer's margin) are subsequently measured at their fair values. 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.' For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 91 days maturity from the date of acquisition and other instruments with right of rediscounting at notional cost including cash and balances with Bank of Uganda (excluding cash reserve ratio), government securities and deposits and balances due to and from banking institutions. Letters of credit, acceptances, guarantees and performance bonds are accounted for as off balance sheet transactions and disclosed as contingent liabilities. Estimates of the outcome and of the financial effect of contingent liabilities is made by the 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 the income statement. Securities sold under sale and repurchase agreements (Repos) are retained in the financial statements with the counter party liability included in amounts due to banking institutions. Securities purchased from Bank of Uganda under agreement to resale (Reverse Repos) are disclosed as treasury bills and other eligible bills, as they are held until maturity after which they are re-purchased and such are not negotiable or discounted during the tenure of the Reverse Repo agreement. These are included in government securities. Cash flows from Repo agreements activities. are included as part of cash flows from operating Provisions are recognised when the bank has a present legal or constructive obligation, as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where necessary comparative figures have been adjusted presentation in the current year. to conform with changes in2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=30http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=30Notes to the Financial Statements As at 31 st December 2006 BUSINESS SEGMENTS The major part of business of the group, which is all within Uganda, falls under the category of banking, with other income comprising less than 2% of the total income of the group. No segment information is therefore reported. 2006 2005 2006 IR '000 2005 IR '000 • Shs'OOO 1 INTEREST INCOME Company and Group Income from Treasury bills Income from Treasury bonds Income earned from placements and repos Income from loans and advances Other 3,418,890 6,591,063 1,859,379 7,264,864 188,383 19,322,580 Shs'OOO 5,274,033 5,275,193 866,034 5,231,550 161,395 16,808,205 86,774 167,286 47,192 184,388 4,781 490,421 130,191 130,220 21,378 129,142 3,984 414,915 2 INTEREST EXPENSE Company and Group Current accounts Foreign exchange demand deposit Savings accounts Time deposits Other 46,223 298,576 3,788,698 737,256 4,870,753 5,716 47,183 420,152 2,140,244 561,604 3,174,899 1,173 7,578 96,160 18,712 123,623 141 1,165 10,372 52,832 13,863 78,373 3 NON INTEREST INCOME Group Fee and commission income Gains less losses arising from dealing in foreign currencies 642,230 4,091,285 577,734 3,482,571 16,300 103,840 14,261 85,968 3,449,055 2,904,837 87,540 71,707 4 NON INTEREST EXPENSES Group Staff costs Professional services Advertising and marketing Depreciation (Note 15 ) Repairs & maintenance of property and equipment Auditors' remuneration Other professional expenses Directors' emoluments as executives Directors' emoluments as non-executives Management fees General expenses 3,089,397 74,866 115,000 1,082,545 226,006 37,021 23,705 71,280 2,400 1,084,875 1,760,332 7,567,427 2,862,609 235,788 114,726 908,705 261,237 38,362 79,946 2,400 1,334,700 1,373,319 7,211,792 78,412 1,900 2,919 27,476 5,736 940 602 1,809 61 27,535 44,678 192,067 70,664 5,820 2,832 22,432 6,449 947 1,973 59 32,947 33,902 178,0252009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=31http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=31, Notes to the Financial Statements As at 31st December 2006 2006 2005 Shs'OOO 2006 IR '000 2005 IR '000 • 5 Shs'OOO The following are included within staff costs: Staff leave provisions Terminal benefits (gratuity) 62,000 131,460 101,732 73,121 1,579 3,959 1,764 22,252 The bank operates a gratuity scheme for its employees (refer to note 21 ).The gratuity provisions are not actuarially determined on the basis that the existing provisions have been prudently determined. PROFIT BEFORE TAX Group Profit before tax is arrived at after charging/(crediting); Depreciation expense Directors' emoluments (executives) Directors' emoluments (non-executives) Auditors fees excluding VAT at 18% (Gain)/Ioss on sale of property, plant & equipment 1,082,545 71,280· 2,400 • 31,021 908,705 79,946 2,400 32,670 (7,817) 27,476 1,809 61 787 22,437 1,974 59 807 (193) 1,187,246 1,015,904 30,133 25,084 6 INCOME TAX Group Current tax Current period WHT as final tax Prior year under/(over) provision 3,182,737 Deferred tax (note 22 ) Deferred tax (credit)/charge Income tax charge (221,342) 146,509 (5,618) 3,616 2,483,221 699,516 9,227 3,039,007 80,780 3,029,780 63,026 17,754 228 75,019 74,791 2,961,395 3,185,516 75,162 78,6352009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=32http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=322006 Shs'OOO Tax on the group's profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows: Profit before tax Tax calculated at a rate of 30% (2005: 30%) Tax effect of non deductible incomes Under/(Over) provision in prior years Tax effect on opening balance of deferred tax WHT as final tax Tax effect of non-deductible costs Tax charge 699,516 365,345 2,961,395 10,983,222 3,294,966 (1,398,433) 2005 Shs'OOO 2006 IR '000 2005 IR '000 • 10,334,605 3,100,381 9,227 278,762 83,629 (35,493) 255,112 76,534 228 1,021 17,754 75,908 3,185,516 9,273 75,162 852 78,635 7 EARNINGS PER SHARE Basic earnings per share is calculated on the profit attributable to the shareholders and on the weighted average number of shares outstanding during the year. Group Net profit for the year attributable to shareholders Number of ordinary shares outstanding during the year Basic earnings per share Diluted earnings per share 8,021,827 40,000,000 200.55 200.55 7,149,089 40,000,000 178.73 178.73 203,600 40,000,000 5.09 5.09 176,477 40,000,000 4.41 4.41 Dividend per share is calculatedon dividends of Ushs 2,800,000,000(2005: Ushs 2,400,000,000)and on the number of shares in issue at the respective balance sheet dates of 40 million (2005:40 million). Payment of dividends is subject to withholdingtax at the rate of 10% and 15% for shares owned by residents and non residents and nil on shares owned by govemment. Company and Group Cash in hand Balances with Bank of Uganda 2,074,126 10,957,445 13,031,571 1,885,106 12,766,213 14,651,319 52,643 278,108 330,751 46,661 315,995 362,656 Balances with Bank of Uganda include the mandatory depOSitswhich are advised fortnightly by the Central Bank based on the deposit balances held for the past two weeks. As at 31 December 2006, the mandatory deposits were 7.6% of total deposits (2005: 9.1% of total deposits).2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=33http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=33Notes to the Financial Statements As at 31 st December 2006 Group Due from other banks Placements with other banks Company Due from other banks Placements with other banks 12,447 10,836,500 10,848,947 182,023 18,869,526 19,051,549 181,500 316 275,038 275,354 4,506 467,067 471,573 4,493 10,836,500 10,836,500 18,869,526 19,051,026 275,038 275,038 467,067 471,560 The weighted average effective rate of interest on local placements at 31 December 2006 was 7.07% and foreign placements 5.3% (2005: Local placements 7.2% and foreign placements 4.77%)2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=34http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=34i Notes to the Financial Statements As at 31 st December 2006 2006 Shs'OOO 2005 Shs'OOO 2006 IR '000 2005 IR '000 • 12 LOANS AND ADVANCES TO CUSTOMERS Company and Group a) Loans and advances to customers Overdrafts Demand and term loans Personal Loans Other Gross loans and advances Less: Provisions for impairment losses Net loans and advances (168,483) 52,282,672 (188,770) 34,419,612 (4,276) 1,326,971 (4,672) 851,970 26,565,204 23,924,951 1,952,406 8,594 52,451,155 19,976,114 14,221,886 400,260 10,122 34,608,382 674,244 607,232 , 49,553 218 1,331,247 494,458 352,027 9,907 250 856,642 b) Provision for impaired loans and advances Movement in provisions for impairment are as follows: Movement in Regulatory General Credit Risk Reserve At 1 January 2006 Increase in Risk reserve during 2006 At end of year Movement in specific Provisions At 1 January 2006 Additional provision in the year Recoveries 188,770 376,337 (328,526) 47,811 Rate adjustment Net additional provision in the year Write ofts during the year At end of year 47,811 (68,098) 168,483 80,028 (8,575) 188,770 1,213 (1,729) 4,276 117,317 188,367 (108,339) 80,028 4,791 9,552 (8,338) 1,213 2,903 4,663 (2,682) 1,981 (5) 1,976 (212) 4,672 344,196 188,767 532,963 191,077 153,119 344,196 8,736 4,791 13,527 4,850 3,886 8,736 Advances to customers include loans to employees of Ushs 1,003 million (2005: Ushs 400 million). The weighted average effective interest rate on Ushs loans and advances to customers at 31 December 2006 was 22% (2005: 23%) and 8% (2005: 8%) for foreign currency loans and advances. The aggregate amount of non-performing loans and which are fully impaired was Ushs 168 million as at 31 December 2006 (2005: Ushs 189 million). The General Regulatory Risk reserve requirement is minimum 1% of advances net of impairment and the same is complied.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=35http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=35Notes to the Financial Statements As at 31 st December 2006 2005 IR '000 3,530 91,196 5,402 167,216 15,552 313,473 14 OTHER ASSETS Group Uncleared effects (net) Clearing account Stationery account Deposit of local cover Others 36,764 1,153,668 143,006 560,661 1,894,099 1,755,371 489,208 147,045 57,272 220,637 2,669,533 934 29,281 3,630 14,230 48,075 43,450 12,109 3,640 1,418 5,461 66,078 Company Uncleared effects (Net) Clearing account Stationery account Deposit of local cover Others 36,764 1,153,668 143,006 491,502 1,824,940 1,755,371 489,208 147,045 5~,272 205,046 2,653,942 933 29,281 3,630 12,475 46,319 43,450 12,109 3,640 1,418 5,075 65,6922009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=36http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=36Notes to the Financial Statements As at 31 st December I 2006 15 PROPERTY AND EQUIPMENT Company and Group • a) Year ended 31st December 2006 Land & Buildings Shs'OOO Cost or valuation At start of year Additions Revaluation At end of year Depreciation At start of year Charge for the year On revaluation Computer equipment Shs'OOO Motor vehicles Shs'OOO Furniture& equipment Shs'OOO Total Shs'OOO 6,615,025 227,014 3,823,717 10,665,756 1,073,006 533,288 (1,005,127) 601,167 2,688,847 47,321 2,736,168 2,004,167 180,344 548,829 2,449,714 182,615 12,302,415 , 456,950 3,823,717 16,583,082 4,749,574 913,856 (1,005,127) 548,829 393,773 31,011 2,632,329 1,278,628 169,213 At end of year 2,184,511 424,784 1,447,841 4,658,303 Net book value At 31st December 2006 10,064,589 551,657 124,045 1,184,488 11,924,779 The Bank premises were re-valued in 2006 by an independent professional firm of surveyors. Valuation was conducted on the basis of the open market value. The book values of the properties were adjusted up to the revaluations and the resultant uplifUsurplus net of deferred tax was credited to revaluation reserves in shareholders equity. Land and buildings include the Kampala main Branch freehold property - with the carrying value of Ushs 8.423 billion - and the leasehold properties housing four Branches, namely: Jinja, 19anga, Mbale and Mbarara - with a carrying value of Ushs 1,627 million. The carrying value of the Kampala main property (freehold) as at the year-end, therefore represented 84% of the totalcarrying value of Land and Buildings. IAS 17 requires that payment made to secure a lease for land should be presented as Prepaid Operating Lease Rentals under non-current assets in the balance sheet and amortised over the period of the lease. In view of the difficulty in apportioning the cost of land from the purchase price, since these properties were already developed prior to acquisition, and the weak market price of land outside Kampala resulting in a significant portion of the valuation being attributed to the leasehold improvements, management have attributed the entire valuation to leasehold improvements. Leaseholdland is therefore not considered material to warrant separate disclosure. Land and buildings on leasehold are therefore deemed to represent buildings and therefore presented as part of Property and Equipment and depreciated at 5%.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=37http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=37Notes to the Financial Statements As at 31 st December 2006 • b) Property and equipment (continued) Year ended 31st December 2005 Land & Buildings Shs'OOO Cost At start of year Additions Disposals At end of year Depreciation At start of year Charge for the year On disposal At end of year 1,073,006 742,255 330,751 6,615,025 6,425,516 189,509 Computer equipment Shs'OOO Motor vehicles Shs'OOO Furniture & equipment Shs'OOO Total Shs'OOO 1,922,412 766,435 624,209 25,000 (100,380) 2,216,248 233,466 11,188,385 1,214,410 (100,380) 2,688,847 548,829 2,449,714 12,302,415 1,820,869 183,298 429,340 38,730 (74,297) 1,119,075 159,553 4,111,539 712,332 (74,297) 2,004,167 393,773 1,278,628 4,749,574 Net book value At 31st December 2005 5,542,019 684,680 155,056 1,171,086 7,552,841 2006 Shs'OOO 2005 Shs'OOO 2006 IR '000 2005 IR '000 Cost Less: accumulated depreciation Net book value 3,091,377 (949,631) 2,141,746 2,864,363 (795,062) 2,069,301 78,461 (24,102) 54,359 70,900 (19,680) 51,2202009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=38http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=38Notes to the Financial Statements As at 31 st December 2006 c) Intangible assets Company and group 2006 Shs '000 Cost or valuation At start of year Additions At end of year Amortisation At start of year Charge for the year At end of year Net book value At 31st December 2006 16 CUSTOMER DEPOSITS Group 2006 Shs'OOO Current deposits Savings deposits Time deposits 44,038,314 37,461,963 52,487,797 133,988,074 Company Current deposits Savings deposits Time deposits 2005 Shs'OOO 36,811,041 37,529,329 46,352,685 120,693,055 2006 IR '000 1,117,724 950,811 1,332,178 3,400,713 2005 IR '000 911,164 928,944 1,147,344 2,987,452 141,513 218,766 196,373 168,689 365,062 196,373 196,373 415,139 91,436 506,575 2005 Shs'OOO • 415,139 415,139 44,038,314 37,461,963 52,487,797 133,988,074 36,820,036 37,529,329 46,381,686 120,731,051 1,117,724 950,811 1,332,178 3,400,713 911,387 928,944 1,148,061 2,988,392 The weighted average effective interest rate on interest bearing current and savings deposits at 31 December 2006 was 2% (2005: 2%) and 9.07% (2005: 6.58%) for time deposits. 17 DEPOSITS AND BALANCES DUE TO OTHER BANKING INSTITUTIONS Company and group Nostro accounts Other bank borrowings 9,173,747 9,173,747 284,499 10,215,346 10,499,845 232,836 232,836 7,042 252,855 259,8972009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=39http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=39Notes to the Financial Statements As at 31 st December 2006 18 AMOUNTS DUE TO OVERSEAS BRANCHES OF PARENT COMPANY 2006 Ushs'OOO Company and Group Nostro accounts 19 SHARE CAPITAL Company and group No. of shares Ordinary share capital Shs'OOO Authorised: 40,000,000 ordinary shares of Ushs 100 each Reconciliation of share value to the rupees Issued and fully paid: 40,000,000 ordinary shares of Ushs 100 each Reconciliation Balance at beginning of the year Translation differences Balance at 31 December 2006 40,000,000 4,000,000 101,523 40,000,000 4,000,000 Ordinary share capital IR '000 101,523 1,016,756 471,791 25,806 11,678 2005 Ushs'OOO 2006 IR '000 2005 IR '000 • 40,000,000 n/a 40,000,000 4,000,000 n/a 4,000,000 100,125 1,398 101,523 The total authorised number of ordinary shares is 40,000,000 (2005: 40,000,000) with a par value of Shs 100 per share. All issued shares are fully paid. 20 OTHER LIABILITIES Group Unearned interest (treasury bills/treasury bonds) Interest payable Leave entitlement Bills payable Outward clearing account Uncleared effects (Net) Capital Gains tax provision PAVE and withholding tax payable Outstanding demand drafts Others 2006 Ushs'OOO 3,647,697 1,409,840 78,746 2,378,492 386,434 420,830 247,750 287,593 819,948 9,677,330 2005 Ushs'OOO 2006 IR '000 92,581 35,783 2005 IR '000 133,164 1,399,405 1,959,031 1,999 60,368 9,808 3,296 34,639 48,491 10,496 9,331 10,521 11,712 128,486 420,830 376,982 425,037 476,407 5,190,856 10,681 6,288 7,299 20,811 245,6182009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=40http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=40Notes to the Financial Statements As at 31 st December 2006 Company Unearned interest on treasury bills/ treasury bonds Interest payable Leave entitlement Bills payable Outward clearing account Uncleared effects (Net) Capital Gains tax provision Outstanding tax payable Outstanding demand drafts Others 386,434 420,830 247,750 287,593 816,888 9,674,270 21 RETIREMENT BENEFIT OBLIGATIONS 420,830 376,982 425,037 469,634 5,184,083 3,647,697 1,409,840 78,746 2,378,492 133,164 1,399,405 1,959,031 9,808 10,681 6,288 7,299 20,733 245,540 10,496 9,331 10,521 11,545 128,319 92,581 35,783 1,999 60,368 3,296 34,639 48,491 2006 Ushs'OOO 2005 Ushs'OOO 2006 IR '000 2005 IR '000 The retirement benefit obligations comprise of gratuity and social security. The gratuity is computed at 55% of the monthly salary last drawn by each employee multiplied by each completed year of service, subject to eligibility under the terms and conditions of the scheme. At 1 January Additional provisions made during the year Payments made At 31 December 925772 131,460 (1,964) 1,055,268 887,817 73,120 (35,165) 925,772 23,497 3,337 (50) 26,784 21,976 1,809 (870) 22,915 The bank also makes contributions to the National Social Security Fund. Contributions are determined by local statute and are shared between employer and employee. For the year ended 31 December 2006,the bank contributed Ushs 192 million (2005: Ushs 180 million), which has been charged to the income statement. Deferred tax is calculated on all temporary timing differences under the liability method using a principal tax rate of 30% (2005: 30%). The movement on the deferred tax account is as follows: At start of year Rate adjustment 2006 Shs'OOO 923,275 923,275 2006 IR '000 22,854 579 23,433 (5,618) 33,745 51,560 Credited to profit and loss account Charged to equity At end of year (221,342) 1,329,538 2,031,4712009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=41http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=41I Notes to the Financial Statements As at 31 st December 2006 Charged 01.01.06 Charged to P/L Shs'OOO Deferred tax assets/liabilities Excess depreciation over capital allowances Property revaluations Currency translations Provisions (404,848) 923,275 (50,605) (221,342) 1,329,538 (455,453) 2,031,471 (10,275) 23,433 (1,284) , (5,618) 362,555 965,568 (170,737) 1,329,538 191,818 2,295,106 9,202 24,507 (4,333) Shs'OOO to equity/ reserves Shs'OOO Shs'OOO IR '000 31.12.06 01.01.06 Charged to P/L IR '000 Charged toequity/ reserves IR '000 IR '000 31.12.06 4,868 33,745 58,251 (11,560) 33,745 51,560 23 ANALYSIS OF CASH AND CASH EQUIVALENTS For the purposes of the cash flow statement, cash equivalents include short term liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, with the exception of government securities which can be readily rediscounted at nominal costs. 2006 Ushs'OOO 2005 Ushs'OOO 2006 IR '000 2005 IR '000 Cash in hand Balances due from group companies 2,074,125 11,077,126 1,885,106 12,664,321 52,643 281,145 46,661 313,473 institutions Repos from BOU Treasury bills maturing within 90 days Treasury bonds maturing within 90 days Total 10,848,947 5,250,000 7,987,300 2,683,000 39,920,498 19,051,549 275,354 133,249 471,573 12,264,196 2,324,268 48,189,440 202,723 68,096 1,013,210 303,569 57,531 1,192,807 24 INVESTMENTS IN SUBSIDIARIES Company Baroda Capital Markets (U) LId Net investment 40,000 40,000 10,000 10,000 1,015 1,015 248 2482009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=42http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=42Notes to the Financial Statements As at 31 st December 2006 25 OFF BALANCE SHEET FINANCIAL INSTRUMENTS, CONTINGENT LIABILITIES AND COMMITMENTS Company and group In common with banking business, the bank conducts business involving acceptances, guarantees, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations from third parties. At the year end, the contingencies were as follows: 2006 Contingent liabilities Acceptances and letters of credit Letters of guarantees and performance bonds Shs'OOO 6,887,972 3,321,364 10,209,336 Commitments Undrawn formal stand-by facilities, credit lines and other commitments to lend 2,191,804 12,401,140 2005 Shs'OOO 6,582,460 10,128,698 16,711,158 2006 IR '000 174,822 84,299 259,121 2005 IR '000 162,932 250,710 413,642 2,242,302 18,953,460 55,629 314,750 55,503 469,145 Contingent liabilities are secured by both cash and property collaterals. Commentary on contingent liabilities Letters of credit, acceptances, guarantees and performance bonds are generally 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. These obligations are accounted for as off balance sheet transactions and disclosed as contingent liabilities. The company is a defendant in various legal actions, which in the opinion of the directors, after taking appropriate legal advice, the outcome of such actions will not give rise to any significant loss. Commitments to lend are agreements to lend to a customer in future, subject to certain conditions. Such commitments are normally made for a fixed period. The bank may withdraw from its contractual obligation for the undrawn portion of agreed credit limits by giving reasonable notice to the customer. 26 CAPITAL COMMITMENTS2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=43http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=43Notes to the Financial Statements As at 31 st December 2006 • 27 INTEREST RATE RISK The bank rates is exposed to various position impact Included risks associated and cash of interest flows. with the effects The management The table of fluctuation closely in the prevailing the interest levels of market interest on its financial adverse date. monitors rate trends to interest to minimise the potential balance contractual sheet rate changes. summarises at carrying the exposure amounts, financial rate risk at the by the earlier of in the table are the assets dates. The bank does sheet items. and liabilities categorised repricing or maturity not have any derivative instruments. The company does not bear an interest rate risk on off balance AT 31ST DECEMBER 2006 up to 1 month 1 to 3 months Shs'OOO 3 to 12 months Shs'OOO 1 to 5 years Shs'OOO Over 5 years Shs'OOO non· interest bearing Shs'OOO Total ASSETS Shs'OOO Shs'OOO Cash and Bank of Uganda balances Government securities Loans and advances Deposits and balances due from other banking institutions Other assets Amounts due from group companies Property and equipment Intangible assets Taxation Total assets 23,562,502 23,165,873 73,051,545 47,068,649 496,440 4,696,428 6,380,698 7,660,714 3,188,233 8,612,840 2,592,520 7,174,741 6,422,201 45,928,585 27,122,960 31,420,098 15,648,551 496,440 13,031,571 13,031,571 93,136,264 52,282,672 10,848,947 1,894,099 1,894,099 11,077,126 11,924,779 141,513 40,988 27,032,950 11,924,779 141,513 40,988 194,377,959 LIABILITIES AND SHAREHOLDERS' EQUITY Customer deposits Deposits & balances due to other banking institutions Amount due to overseas branches of parent company Other liabilities Retirement benefit obligations Deferred tax liability Capital and reserves Total liabilities and equity 15,068,228 12,388,965 46,648,140 16,810,404 43,072,337 133,988,074 5,245,615 87,719 543,860 1,947,368 1,349,185 9,173,747 1,016,756 9,677,330 1,055,268 2,031,471 37,435,313 21,330,599 12,476,684 47,192,000 18,757,772 1,349,185 93,271,719 1,016,756 9,677,330 1,055,268 2,031,471 37,435,313 194,377,959 Gap as at 31 December 2006 As at 31 December 2005 Total assets 2,231,903 10,689,189 25,859,545 28,310,877 (852,745) (66,238,769) 18,915,138 18,487,999 70,939,402 31,899,890 1,679,177 25,097,168 167,018,774 Total liabilities 17,311,409 3,093,115 53,002,643 19,905,238 1,584,250 72,122,119 167,018,774 Interest sensitiVity gap 1,603,729 15,394,884 17,936,759 11,994,652 94,927 (47,024,951 )2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=44http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=44Notes to the Financial Statements As at 31 st December 2006 28 LIQUIDITY RISK • The table below analyses assets and liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Upto 1 month AT 31ST DECEMBER 2006 ASSETS Cash and Bank of Uganda balances Government securities Loans and advances Deposits & balances due from other banking institutions Other assets Amounts due from group companies Property and equipment Intangible assets Taxation recoverable Total assets 38,488,172 23,165,873 73,051,545 47,068,649 7,660,714 1,894,100 4,696,428 6,380,698 11,924,779 141,513 40,988 12,603,720 3,188,233 10,848,947 1,894,100 11,077,126 11,924,779 141,513 40,988 194,377,959 13,031,570 8,612,840 2,592,520 7,174,741 6,422,201 45,928,585 27,122,960 31,420,098 15,648,551 496,440 13,031,570 93,136,264 52,282,672 Shs'OOO 1-3 months Shs'OOO 3 -12 months Shs'OOO 1· 5 years Shs'OOO Over 5 years Shs'OOO Total Shs'OOO LIABILITIES AND SHAREHOLDERS' EQUITY 41,491,228 12,385,965 55,456,140 24,654,741 133,988,074 Customer deposits Deposits and balances due to other banking institutions Amount due to overseas branches of parent company Other liabilities Retirement benefit obligation Deferred tax liability Capital and reserves Total liabilities and equity 5,245,614 87,719 543,860 1,947,368 1,349,186 9,173,747 1,016,757 1,704,014 1,210,526 1,055,266 2,031,471 37,435,313 49,457,613 14,739,476 59,140,352 30,224,548 40,815,970 3,140,352 3,622,439 1,016,757 9,677,331 1,055,266 2,031,471 37,435,313 194,377,959 Net liquidity gap (10,969,441) 8,426,397 13,911,193 16,844,101 (28,212,250) Off balance sheet position 1,543,860 5,596,491 2,140,351 928,662 10,209,364 Credit commitments 140,351 245,614 1,805,839 2,191,804 AT 31ST DECEMBER 2005 Total assets 35,671,757 19,056,941 70,939,402 31,899,890 9,450,784 167,018,774 Total liabilities 43,003,270 4,522,466 65,033,362 26,037,971 28,421,705 167,018,774 Net liquidity gap (7,331,513) 14,534,475 5,906,040 5,861,919 (18,970,921 ) The figures returned indicate a mismatch of assets and liabilities. Management is of the view that the mismatch does not subject the bank to severe liquidity risks because maturities for all government securities and balances with overseas banks can be restructured in accordance with business demands.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=45http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=45Notes to the Financial Statements As at 31 st December 20062009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=46http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=46Notes to the Financial Statements As at 31st December 2006 In the normal course of business, the bank has placed foreign currencies with the parent company,Bank of Baroda, India and its overseas branches at interest rates obtainable from the open market. This section provides details of the bank's exposure to risk and describes the methods used by management to control risk. The most important types of financial risks to which the bank is exposed are credit risk, liquidity risk and market risk. Market risk includes currency risk and interest rate risk. The bank's credit exposure at the balance sheet date from financial instruments held or issued for trading purposes is represented by the fair value of instruments with a positive fair value at that date, as recorded on the balance sheet. The risk that counter-parties to trading instruments might default on their obligations is monitored on an ongoing basis. In monitoring credit risk exposure, consideration is given to trading instruments with a positive fair value and to the volatility of the fair value of trading instruments. To manage the level of credit risk, the bank deals with counter-parties of good credit standing, enters into master netting agreements whenever possible, and when appropriate, obtains collateral. An assessment of the extent of which fair values of collaterals cover existing credit risk -exposures on loans and advances to customers. The bank also monitors concentrations of credit risk that arise by industry and type of customer in relation to the bank loans and advances to customers by carrying a balanced portfolio.The bank has no significant exposure to any individual customer or counter-party. Liquidity risk arises in the general funding of the bank's activities and in the management of positions. It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable toliquidate an asset at a reasonable price and in an appropriate time frame. 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 anyone 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.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=47http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=47Notes to the Financial Statements As at 31 st December 2006 The bank's operations are subject to the risk of interest rate fluctuations to the extent that interest earning assets and interest bearing liabilities mature or reprice at different times or in differing amounts. Risk management activities are aimed at optimizing net interest income, given market interest rates levels consistent with the bank's business strategies. The bank does not have any significant interest rate risk exposures. The bank is exposed to currency risk through transactions in foreign currencies. The bank's transactional exposures give rise to foreign currency gains and losses that are recognized in the income statement. In respect of monetary assets and liabilities in foreign currencies,the group ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies at spot rates when considered appropriate. Interest rate, currency, credit, liquidity and other risks are actively managed by management to ensure compliance with the bank's risk limits. The bank's risk limits are assessed regularly to ensure their appropriateness given its objectives and strategies and current market conditions. A variety of techniques are used by the bank in measuring the risks inherent in its trading, and non-trading positions. As at 31 December 2006, there were no assets pledged to secure liabilities and there were no secured liabilities outstanding. The bank is incorporated in Uganda under the Companies Act (Cap 110) and has been licensed under the Financial Institutions Act 2004 to conduct retail banking services. The financial statements are presented in Uganda Shillings to the nearest thousand(Shs'OOO). At the year end, the exchange rate of the Uganda Shilling to the US dollar was Ushs 1,743 : US$1 whilst the closing rate of the Uganda shilling to the Indian Rupee was IR 1 : 39.4 Ushs. The amounts in Indian Rupees (IR) are presented for information purposes only.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=48http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=48Shareholdig Pattern As at 31st December 2006 HOLDING NO. OF SHARES Bank of Baroda, India Bank of Baroda, London Managing Director Public Holding 31,997,060 2,920 20 8,000,000 40,000,000 J~ % 80 20 100 AMOUNT IN Mn. Shs 3,200 800 4,0002009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=49http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=49Proxy Form 1/ We of . appoint . . . being (a) member(s) of the above named company, hereby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . as proxy to vote for me / us and on my / our behalf at the Annual General Meeting of the Company, to be held on the 22nd June, 2007 and at every adjournment thereof. Note: This form should be deposited with Company Secretary of the Bank within not later than 24 hours of the meeting. The Shareholders or his / her proxy must produce this admission form in order to obtain admission to the Annual General Meeting. Shareholders meeting. or their proxies are requested to sign the admission form before attending the2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=50http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=50Chairman, Mr. V. Santanaraman, discussing future business strategy with Directors, Mr. K. K. Shukla and Dr. J. W. Muwanga, other senior Managers look on.2009-10-08T16:41:38+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=51http://ipaper.ipapercms.dk/AfricanShareHolder/ug/BOBU/2006/?Page=512009-10-08T16:41:38+02:00