annual report - nic bank tanzania the company’s name was originally national ... (assets)...

and Financial StatementsAnnual Report

NIC BANK LIMITED

Annual Report & Financial Statements • 2014 1

BUSINESS REVIEW

3 WhoWeAre 9 FiveYearFinancialReview 10 DeliveringonourStrategicObjectives 15 Chairman’sStatement 18 TaarifayaMwenyekiti 22 GroupManagingDirector’sStatement 24 TaarifayaMkurugenziMkuu

CORPORATE GOVERNANCE

26 TheBoardofDirectors 30 SeniorManagement 32 CorporateInformation 33 StatementonCorporateGovernance 44 CorporateCitizenship 48 EmployeeWelfare 52 Directors’Report 54 StatementofDirectors’Responsibilities

INDEPENDENT AUDITOR’S REPORT

FINANCIAL STATEMENTS

56 StatementofProfitorLoss 57 StatementofComprehensiveIncome 58 StatementofFinancialPosition 59 ConsolidatedStatementofChangesinEquity 60 BankStatementofChangesinEquity 61 StatementofCashFlows 62 NotestotheFinancialStatements

OTHER INFORMATION

144 NoticeoftheAnnualGeneralMeeting145 TangazolaMkutanoMkuuwaMwaka146 Notes147 ProxyForm148 FomuyaUwakilishi

TABLEOFCONTENTS

NIC BANK LIMITED

Annual Report & Financial Statements • 20142

OURMISSIONTobetheleadingfinancialservicesprovidertoourtargetmarket;we

arecommittedtothehigheststandardsofserviceandtoexceedingourstakeholders’expectations.

OURVISIONToestablishlongterm,profitablecustomerrelationshipsthroughthe

provisionofacompleterangeofbankingandfinancialservices.

OURVALUES

NIC BANK LIMITED


WHO WE ARE

OUR HISTORY

NICBank(formerlyNationalIndustrialCreditBankLimited)wasincorporatedinKenyaon29thSeptember1959asajointventurebetweenMercantileCreditLimitedandStandardBank.NICBankwasamongthefirstnon-bankfinancialinstitutionstoprovidehirepurchaseandinstalmentcreditfinancefacilitiesinKenya.

NICBankwentpublicbylistingontheNairobiSecuritiesExchange(NSE) in1971.BarclaysBankofKenyaLimited(BBK)acquired51%ofNICBank’stotalsharesthroughtheacquisitionofMercantileCreditLimitedinthe1970sandthereafter,StandardBank’sshareholdinginthe1980s.Between1993and1996,BBKdivestedallofitssharesinNICBankbysellingthem(i)38%tothepublicthroughtheNSEand,(ii)20%toFirstCharteredSecuritiesLimited.

Inordertoeffectivelydiversifyintomainstreamcommercialbanking,NICBankmergedwithAfricanMercantileBankLimited(AMBank)inNovember1997,throughashareswap.AlthoughtheCompany’snamewasoriginallyNationalIndustrialCreditLimited,andlaterNationalIndustrialCreditBankLimited,allthroughitshistoryitwasknownbyitsinitials–NIC-andtoreflectthis,theBank’snamewasin2005officiallychangedtothepresentNICBankLimited.

In2008,NICBankbroadeneditsservicestocustomersbyprovidinginvestmentbankingproductsandservicesthroughNICCapitalLimited.Thereafter, itacquiredastockbrokingbusiness (Solid InvestmentSecuritiesLimited, laterrenamedNICSecuritiesLimited),andalsosecuredalicensetosellBancassuranceproductsthroughNICInsuranceAgentsLimited.ThiseffectivelypositionedtheBankasa‘one-stopshop’financialservicessolutionproviderinthemarket.

In2009,NICBankacquired51%ofSavingsandFinanceCommercialBankandin2010,rebrandedittoNICBankTanzaniaLimited.AsatDecember2014,itholds70%ofNICBankTanzania.In2012,theGroupestablishedNCBankUgandaasawhollyownedgreen-fieldsubsidiary,whichbeganoperationson1stJune2012.

Laterin2012,theGroupimplementedtheTemenos(T24)corebankingsystem.

In2014, theGroupannouncedastrategicshift towardsanewwayofbanking–brandedNOWbanking, inanswer to theemerging“NOW”generationthatdemandseverythingattheirfingertipsnow.ThroughtheMOVEtoNOWinitiativetheBankfocusesondevelopinginnovativeproductsandservicesthatcanbedeliveredinafastandefficientmannersuchastheNICNOWMobileapplication,onlineaccountopeningandonlinechequedeposit.

Inmid-2014,NICBankreceivedalongtermcreditratingofA+fromGlobalCreditRatings.TheratingwasbasedonthesolidtrackrecordofgrowthexhibitedbytheBankovertheyears,aswellastheexperiencedExecutiveandSeniormanagementteam.

NIC BANK LIMITED


WHO WE ARE (Continued)

OUR PRODUCTS

The product range includes the following:

Corporate Banking

Corporate Overdrafts Thisproductcatersforthefinancingofcustomer’sworkingcapitalcycletakingintoaccounttheleadtimesinprocurementof

stocks,themanufacturingprocessandanytermsofsuppliercreditincludingcreditextendedtothecustomer.

Term Loans Companiesoftenrequirefinancingforprojectssuchasbusinessexpansion,purchaseofstock,purchaseofproperty,construction

ofbusinesspremises,amongstothers.Termloansprovidethemuchneededfundingbymatchingtheloanrepaymentstothecustomerscashflows.

Trade Finance NIC Bank Group provides advice and services that importers and exporters need to achieve their international business

objectives.

TheBankoffersanextensiverangeoftraderelatedproducts,someofwhichinclude: • DocumentaryCredits • BillsforCollection • OpenAccounts • AdvancePayments • GuaranteesandIndemnities • LettersofCredit

NIC BANK LIMITED


Institutional Banking NIC Bank Group’s Institutional Banking offering is designed for non-borrowing corporate organizations and not-for-profit

institutionsincludinglocalandinternationalNon-Governmentalorganizations,donor-fundedGovernmentparastatals,donor-fundedGovernmentministries,diplomaticmissionsandtheiraffiliatedonor/aidentities,faith-basedorganizationsandlocalandmultinationalcorporateorganizations.

Custodial Services Custodialservicesincludestorageandsafekeepingofclientsecurities(assets)includingcash,titledocumentsanddeedsfor

pensionschemes.Wealsocollectdividends,interestandanyotherentitlementsduetoascheme(pensionschememanagement). TheactivitiesofthisbusinessunitareregulatedbytheRetirementBenefitsAuthority(RBA)andtheCapitalMarketsAuthority

(CMA).

Personal Banking

Current Accounts Weofferarangeofsolutionsthatgiveourcustomersaccesstocustomized,affordable,securealternatebankingchannels.

Whetheroneissalariedorself-employed,theoptionof“payasyougo”orpayingaflatfeepermonthisavailable.WealsomakebankingevenmoreconvenientbyofferingadedicatedRelationshipManagerandaccesstopremiumbenefitssuchasnegotiatedratesforcashdepositsandforeignexchangetransactions.

Savings Accounts Forcustomerswhoarekeenonsavingmoney,NICSavingsAccountsofferawidevarietyofsolutionstosuitindividualtastes.In

addition,weofferhigh-yielddepositaccountsofferingtieredinterestratespayablehalfyearly.

Junior Accounts AtNICBank,webelieveincultivatingsoundfinancialmanagementhabitsinouryouthfromchildhoodstagesoflifeintoyoung

adulthood.Weoffertailor-madesolutionsforchildrenandstudentswithlowminimumbalancerequirements,nomonthlyfeesandcompetitiveinterestrates.

Credit Cards NICBankoffersthreetypesofVisabrandedCreditCards:Platinum,GoldandFreedomCreditCard.Thesecardsenableyouto

carryouttransactionsinover200countriesandterritoriesand2.1millionATMsworldwide,givingyouflexibility,convenienceandsecurity,yetitisasgoodascash.Eachcardofferingincludesfreeinsurancecovers(Termsandconditionsapply).

MortgageNICMortgagemakesitpossibleforcustomerstoownpropertybyofferingupto90%financingfor:

• Homeorplotpurchase

• Constructionfinancing

• Equityrelease

• Top-upsonexistingmortgages

• Balancetransfers

SME Banking

NIC Entrepreneur Account

This is a contemporary business account that provides customized business solutions for clients’ business needs. The NICEntrepreneurAccountisdesignedtogiveclientsatotalsolutionforalltheirbusinessneedsrangingfromtransactional,cashflowmanagement,insurance,assetfinancetosavingsandinvestments.

ThisaccountalsogivesyouaccesstotheNICEntrepreneurClub.Theclubregularlyhostsworkshopsthatbringtogetherbusinesspeopleacrossindustries.Attheworkshops,clientsnetworkandreceivevaluabletrainingonemergingissuesandneeds.


NIC BANK LIMITED



Asset Finance NICBankGroup’sAssetFinanceofferinghasbeenaroundsince1959andoffersquickturnaroundtimesandcompetitiveinterest

rates.NICBankGroupoffersfinancingforawiderangeofmovableassetsincluding: • MotorVehicles • Plant&Machinery • ConstructionEquipment • AgriculturalEquipment • ITEquipment • OtherSpecializedEquipment(medical,telecoms)

Insurance Premium Financing (IPF) WeofferInsurancePremiumFinancing(IPF)whichenablesclientstopayfortheirinsurancepremiumsinaffordableinstallments

overaperiodoftime.IPFisalsoavailablethroughNICInsuranceAgentstocustomersoftheGroup.

Treasury Services Cash Transactions or Bureau De Change BureauDeChangetransactionsareover-the-countertransactionsforpurchaseandsaleofforeigncurrency.Weacceptover-the-

countercashforallthemajorforeigncurrencies.

Other products on offer include:• SpotForeignExchangeOperations• InwardForeignRemittances• OutwardForeignRemittances• ForeignDemandDrafts• ForeignCurrentAccounts• ForeignDeposits• ForwardExchangeContracts

Investment Banking through NIC CapitalNICCapitalisasubsidiaryofNICBankandhasitsoriginsin2005whentheBoardofDirectorsresolvedtoestablishanInvestmentBankthatwouldsupporttheevergrowingadvisoryandfinancingneedsofKenyancorporates.NICCapital,throughitsdebtandequityplatforms,advisescompaniesonoptimalcapitalraisingalternatives.TheInvestmentBankisqualifiedinmergers&acquisitions,de-mergers,saleofstake,capitalstructureadvisoryaswellasinpursuingcapitalraisinginitiatives–bothintheprivateandpublicrealms.

Stock Brokerage through NIC SecuritiesNICSecuritiesisastockbrokeragefirmlicensedbytheCapitalMarketsAuthorityandamemberoftheNairobiSecuritiesExchange.NICSecuritiesprovidesinvestorswithasecureplatformtoparticipateinadiversifiedarrayofinvestmentsintheequityandbondmarkets,backedbysolidadvicefromtheresearchandadvisoryteams,toenableclientsmeettheirreturnobjectives.

Bancassurance through NIC Insurance AgentsWeofferinsuranceforallthroughourinsurancebrokeragefunctionavailableatalltheGroup’sbranches.ProductsonofferincludeHealthInsurancei.e.inpatientandoutpatientmedicalcovers;BusinessRisksInsurancewhichcoverspropertydamage,GroupPersonalAccidentcovers;TravelInsurancewhichcoversmedicalexpenses,lossofluggage,andemergencyevacuationfortravellers;HomeInsuranceforhouseholdpropertyincludingpersonaleffectsandMotorVehicleInsuranceforbothprivateandcommercialvehicles.

Leasing through NIC Leasing LLP NICLeasingLLPisapartnershipbetweenNICBankLimitedandMercantileFinanceCompanyLimitedandispartoftheNICBankGroup.TheLLPwasincorporatedinMarch2015toundertakedirectoperatingleasebusiness.NICLeasingLLPallowscustomerstotakeupvarioustypesofassetsonleaseoverspecifiedperiodsoftime.Maintenanceandinsurancearepartoftheleasestructuringthereforeprovidingflexibilityandconvenienceforthecustomer.Thecustomersthereforegettoenjoytheuseoftheassetsandderivebenefitsoverthecontractualperiod.

NIC BANK LIMITED


Mobile BankingNIC Customers can access their bank accounts at their convenience through the new

NOW Mobile Application or App.

NOW Mobile App enables customers with smart phones to conduct all the banking requirements wherever they are.

The App is accessible from most platforms, i.e. Android, Windows and Apple.

The following are some features that clients enjoy once they have downloaded the NOW Mobile App:

• Account balance enquiry and viewing of their mini statements

• Mobile funds transfers via EFT, RTGS, Mobile Money (M-PESA) and internally within NIC

• Mobile requests – Cheque book, statement and forex request

• Mobile airtime top up – for Safaricom, Airtel, Orange & Yu • Bill payments – KPLC Pre paid & Postpaid, Nairobi Water Postpaid, DSTV, Zuku, Access@home, Safaricom Postpaid, Airtel Postpaid, Orange

Postpaid• Mobile Lifestyle- Gives you access to traffic cameras, news, religious

books and cinema guides

• Standing order requests

Customers on the USSD Mobile Banking service (*488#) continue to access the service and conduct majority of the above transactions and requests.

Borderless BankingWiththeT24corebankingsystem,NICBankGroupcustomersnowenjoyseamlessbankingservicesacrosstheregions.

Agency BankingNICBankinpartnershipwithPostBankLimitedoffersAgencyBankingservices.ThisarrangementallowsNICcustomerstodepositorwithdrawcashfromanyofthe102PostBankbranchescountrywide.CorporateclientsalsobenefitimmenselybecausetheycaneasilycollectcashfromanywhereinthecountryanddeposititintotheirNICBankaccountsinrealtime.


VALUE ADDED SERVICESOnline Banking CustomershaveaccesstotheNICOnlineBankingservicefromanywhereintheworldthroughtheinternet.ThefollowingaresomefeaturesthatclientsenjoyoncetheyhavesigneduponNICOnline:

• Checkingaccountstatementsandbalances

• ElectronicFundsTransfers(EFTs)bothwithinNICBankGroupandtootherbanksinKenyaorabroad

•OrderingofBankersCheques

•Salaryandsupplierpaymentprocessing

• Analysisofloansandinvestmentoptions

• M-Pesafunctionality

CustomerscaneffecttransferstoandfromtheirM-Pesaaccountsdirectlytoandfromtheirbankaccounts

• KRAtaxpayments

• Creationandeditingofbeneficiariesforvarioustypesofpayments

• Printingofdepositslipsandswiftpaymentconfirmations

NICBANKLIMITED

AnnualReport&FinancialStatements•20148

Innovation at NIC Bank

Customers are becoming increasingly sophisticated. Innovative new products,alternative banking channels, and superior customer experience define this ever-evolvinglandscape.Asamid-tierplayerinahighlyfragmentedandcompetitivemarket,NICBankisplayingonitslegacystrengthsincorporatebankingandassetfinancingaswecurveoutnewopportunitiesintheretailandsmalltomediumenterprise(SME)segments.

Overthelast10years,NICBankhasseenmarkedgrowthfrombeingalocalfinanciertobecomeanintegratedfinancialservicesproviderintheregion.Theinnovationcultureembeddedwithintheorganisationhasbeenakeyenablertothegrowthandsuccesstheorganizationhasseenovertheseyears.

ThevariousinnovationstheBankhasrolledoutovertheyearsisatestamenttotheInnovationpositionwewanttoowninthemarketplace.

Mobile App Trading

In2014,NICcontinuedtoleverageontheadvancementoftechnologyandwasthefirst bank to launch a share trading feature on the NIC NOW mobile App whichallowscustomerstotradetheirsharesfromthepalmoftheirhands.ThroughtheApp,customerscanaccesstheNairobiSecuritiesExchange(NSE)fromanywhereandtradesharesattheirownconvenience.WiththisnewenhancedfunctionalityourNICSecuritiesclientscanbeassuredthattheynevermissatradingopportunitywithinstantaccesstotheirtradingaccount,fundsandthesecuritiesexchangeinasimple,userfriendlyandphonecompatibleenvironment.Tradescanbeplacedandmanagedonthegothroughappviaitssimple,intuitiveinterface,whichwasdesignedfromthegrounduptofunctionseamlesslyonallmobiledevices.Theappisdesignedtoallowclientstoviewtheiraccountstatus,accessstockprices,retrievestatements,viewportfoliovaluationsandgetinstantmarketupdatesandtips.

Online Share Trading

Inthesameyear,theNICSecuritiesOnlineSharesTradingPlatformwaslaunched.ThisplatformprovidesourclientsaccesstotheNSEandtheirtradingaccountonlinewherevertheyareintheworld.Throughtheonlineportal,clientscanviewthepricesofthevariousstocksontheNSE,placeorders,viewtheirstatementsandportfoliovaluations.

‘Move to Now’ Service

2014markedyetanothermilestonefortheBank.Wetookaboldsteptoaddressthelifestyleof‘theNOWgeneration’.

TheNOWgenerationarethepeopledemandingnotjustcustommadeproductsandservices, but want them faster, easier, safer and as conveniently as possible. Welaunchedanewbankingconcept,MOVEtoNOW,whichtapsintothedigitalecosystemthat has seen our customers morph into NOW consumers demanding for bankingservicesontheGO.

Inlinewiththisstrategy,NICBankGrouphasalreadydevelopedanumberofinnovationssuchasNICNOWMobileApplication,OnlineBanking,OnlineaccountopeningandOnlineChequedepositing.Thisservicegivescustomersthechoiceandflexibilityforeitherfacetofaceornon-facetofacechannelstoengagethebankdependingonthetransactiontherebyaddressingthetimefactorbysavingourcustomerstedioustripstothebranches.

NIC BANK LIMITED


CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2010 2011 2012 2013 2014Shs`000 Shs`000 Shs`000 Shs`000 Shs`000

Assets

Government securities 5,074,031 7,500,288 17,478,232 18,093,150 19,223,686 Loans and advances to customers 38,912,579 54,782,221 69,581,050 81,418,136 100,575,330 Property and equipment 750,530 967,988 1,009,891 1,119,264 1,595,110 Others 14,276,782 15,733,508 20,279,420 20,432,189 24,386,379

Total Assets 59,013,922 78,984,005 108,348,593 121,062,739 145,780,505 LiabilitiesCustomer deposits 48,492,224 66,293,053 83,379,576 91,565,005 100,434,954 Borrowings 303,284 190,280 3,655,414 3,628,169 14,358,480 Other liabilities 1,865,185 1,977,719 5,831,981 8,300,659 8,276,301

Total Liabilities 50,660,693 68,461,052 92,866,971 103,493,833 123,069,735 Total Equity 8,353,229 10,522,953 15,481,622 17,568,906 22,710,770 Total Liabilities and Equity 59,013,922 78,984,005 108,348,593 121,062,739 145,780,505

CONSOLIDATED STATEMENT OF PROFIT OR LOSSInterest income 4,757,544 6,831,580 11,467,574 11,642,416 13,711,068 Interest expense 1,543,893 2,552,092 5,983,706 4,374,437 5,712,949

Net interest income 3,399,471 4,279,488 5,483,868 7,267,979 7,998,119 Credit impairment charges 316,640 258,151 297,485 1,092,873 329,133

Net interest income after credit impairment charges 3,082,831 4,021,337 5,186,383 6,175,106 7,668,986 Non-interest income 1,814,009 2,323,246 2,832,257 3,155,207 3,508,139

Net operating income 4,896,840 6,344,583 8,018,640 9,330,313 11,177,125 Operating expenses 2,288,448 2,739,635 3,500,673 4,320,742 4,946,475

Profit before income tax 2,608,392 3,604,948 4,517,967 5,009,571 6,230,650 Income tax expense 744,474 897,811 1,481,173 1,772,270 2,113,976

Profit for the year 1,863,918 2,707,137 3,036,794 3,237,301 4,116,674Less profit/ (loss) attributable to non-controlling interests 46,686 54,679 52,388 (86,080) (4,181)

Profit attributable to equity holders of the bank 1,817,232 2,652,458 2,984,406 3,323,381 4,120,855Earnings Per Share (Shs) 4.60 5.54 6.03 6.12 7.07 Dividend Per Share (Shs) 0.50 0.50 1.00 1.00 1.00

OTHER DISCLOSURESNon-performing loans and advances a) Non-performing loans and advances 1,570,797 1,961,277 2,332,701 4,520,926 4,032,008 b) Allowance for impairment 1,420,444 1,690,526 1,652,986 2,592,033 2,680,360

c) Net Non-performing loans and advances (a-b) 150,353 270,751 679,715 1,928,893 1,351,648

Number of Employees 514 712 783 909 1,001

Number of Branches 16 24 24 30 32KEY PERFORMANCE INDICATORSReturn on capital employed (ROCE) 31.23% 34.26% 29.18% 28.51% 27.43%Non-interest income to total income 34.79% 35.19% 34.06% 30.27% 30.49%Non-performing loans to total loans 4.04% 3.58% 3.35% 5.55% 4.01%Return on total assets 4.42% 4.56% 4.17% 4.14% 4.27%Cost to Income ratio 43.89% 41.49% 42.10% 41.45% 42.99%

FIVE YEAR FINANCIAL REVIEW

NIC BANK LIMITED


Profit Before Income Tax (PBIT)

• NIC Bank Group aims to achieve consistent growthin profits by growing its core business units anddiversifyingitsrevenuesources.

• In 2014, PBIT grew by 24% year-on-year to Shs6,231m, driven mainly by volume growth in lendingandnon-fundedincome.

• All theGroup’ssubsidiariescontributedpositivelytothegrowthinpre-taxprofits.

Total Income

• Totalincomeincreasedby10%fromprioryeartoShs11,506min2014.Thisincreaselargelyreflectedrobust balance sheet growth and strengthenedperformancefromtheBank’ssubsidiaries.

• We have seen good growth over the years andare strategicaly positioned to maintain the samemomentum.

Earnings Per Share (EPS)

• EPS has grown consistently driven by steady growthinrevenueswhilstconstantlysimplifyingourbusinessmodel and investing in technology so as to increaseefficiencyandeffectivenessandtomakeourbusinessmoreagile.

• EPSgrew16%toShs7.07in2014.NetincomeattributabletoequityholdersincreasedtoShs4,121m.

Profit Before Income Tax (Shs m)

Total Income (Shs m)

Earnings Per Share (Shs)

Return on Equity (ROE)

• The Group achieved a pre-tax ROE of 27% in adifficult year,which isconsistentwith theGroup’sstrategic objectives. This level of return reflectsthe Group’s relative strength and stability, as theindustry felt the effects of the difficult operatingenvironment.

• Year-on-year, pre-tax ROE declined from 29% to27%duetothecapitalinjectioninthelastquarteroftheyear.

Return on Equity (ROE)

DELIVERING ON OUR STRATEGIC OBJECTIVES

2010

2,608

3,605

4,518

5,010

6,231

2011 2012 2013 2014

2010

31%

34%

29% 29%27%

2011 2012 2013 20142010

5,2136,603

8,316

10,42311,506

2011 2012 2013 2014

2010

4.605.54

6.603 6.12 7.07

2011 2012 2013 2014

CAGR 24%

CAGR 22%

CAGR 11%

Compound Annual Growth Rate(CAGR)

Compound Annual Growth Rate(CAGR) Compound Annual Growth Rate(CAGR)


NIC BANK LIMITED


Productivity Ratio (Cost / Income Ratio)

• Efficiency savings were partialy offset by volumerelated expenses and ongoing investments in thebusiness.

• Ourproductivityratioremainsoneofthelowestintheindustryreflectiveofoureffectivecostmanagementstructure.

Loans and advances to customers

• Loans and advances to customers increased by24% year-on-year to Shs 101b in 2014, despite thecompetitiveenvironmentheightenedbytransparencyinlendingrateswiththeintroductionofKenyaBanksReferenceRate(KBRR).

• All our lending business units have contributedpositivelytothisgrowth,withbothretailandcorporateloansportfoliosgrowingby37%and26%respectively.

Productivity Ratio (Cost / Income Ratio)

Loans & Advances to Customers (Shs b)

DELIVERING ON OUR STRATEGIC OBJECTIVES (Continued)

2010

43.9%

41.5%

42.1%

41.5%

43.0%

2011 2012 2013 2014

2010

38.9

54.8

69.6

81.4

100.6

2011 2012 2013 2014

Credit Impairment Charges

• Impairment on loans and advances decreasedsignificantly by 70% to Shs 329m in 2014,driven primaliry by continued strong credit riskmanagementculture.

Credit Impairment Charges (Shs m)

2010

317258 297

1,093

329

2011 2012 2013 2014

Non-Performing Loans

• Total non-performing loans have decreased by11%despitethegrowthintheGroup’sloanbookof 24% year-on-year demonstrating continuedimprovementinthecreditqualityofloanportfolios.

Non-Performing Loans (Shs m)

2010

1,571

1,9612,333

4,5214,032

2011 2012 2013 2014

CAGR 27%

CAGR 27%

Compound Annual Growth Rate(CAGR) Compound Annual Growth Rate(CAGR)

NIC BANK LIMITED


Customer Deposits

• Growth in customer deposits, which is consistentwith the Group’s strategic objective to diversify itscustomerbase,hasovertheyearsbeendrivenmainlybythegrowthindepositbalancesheldbyindividuals,small businesses, government institutions and non-governmentalinstitutions.

• In 2014, customer deposits recorded a 10% increasefromShs91.6b in2013 toShs100.4b in2014,drivenbyfocuseddepositbuildingactivities.Thisfundedtheincrease in loans and advances and our holdings ofTreasurybillsandbondsoverthesameperiod.

Customer Deposits (Shs b)

Total Assets

• TheGroup’stotalassetshavegrownby20%year-on-yeartoShs146b.Thisgrowthwasmainlydrivenbytheincreaseofourlendingbook,cashandourholdingsofTreasurybillsandbonds.

• The growth in assets was funded by the increasein customer deposits, the Shs. 2b Rights Issue,Surbodinated Medium term bond of Shs. 5b andadditionalborrowingsofShs.5b.

Liquidity Ratio

• TheGroupendeavorstobuildstrongliquiditybufferstoguardagainstunexpectedfundingdifficulties.

• TheGrouphassignificantlygrownitsliquiditypositioninadifficultenvironment.

Total Assets (Shs b)

Liquidity Ratio


2010

59.079.0

108.3121.1

145.8

2011 2012 2013 2014

2010

30%

27%

35%

29%

33%

2011 2012 2013 2014

2010

48.566.3

83.4

91.6

100.4

2011 2012 2013 2014

CAGR 20%

CAGR 25%



NIC BANK LIMITED


• TheGroupaimstostrengthenitscapitalratiostosupportinvestors’anddepositors’confidenceandprovidegreateroperationalandstrategicflexibility.

• The regulatory capital adequacy minimum ratios were increased with a 2.5% capital conservation buffereffectiveJanuary2015tocaterforlossesduringperiodsoffinancialandeconomicstrain.

• CapitalratioshaveincreasedduetothesuccessfulRightsIssue,subordinatedmediumtermbond,longtermborrowingsandtheretainedprofitsfortheyear.

• TheBank’sratiosmorethanadequatlymeettherequiredratios.

The trends for NIC Bank Ltd are as shown hereunder:

Bank Capital Adequacy Ratios


2010

15.0%14.7%

16.3% 16.8%

20.5%

2011 2012 2013 2014

2010

14.6%15.0%

15.6%

14.8%

14.4%

2011 2012 2013 2014

2010

15.5% 15.9% 16.4%15.6%

20.9%

2011 2012 2013 2014

1. Core capital to total deposits ratio – Minimum 8%

2. Core capital to total risk weighted ratio (Tier1) – Minimum 10.5%

3. Total capital to total risk weighted ratio (Tier 2) – Minimum 14.5%

NIC BANK LIMITED


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Regulated by the Central Bank of Kenya

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www.nic-bank.com@nicbankkenya

Call: 020 2888217, 0711041111, 0732141111, SMS 20488 or email [email protected]

NIC BANK LIMITED


Dear Shareholder

ItgivesmegreatpleasuretopresenttheNICBankGroupAnnualReportandFinancialStatementsfortheyearended31stDecember2014.

OPERATING ENVIRONMENT IN 2014

Kenya maintained a stable economic environment despite thechallengesofimplementingthedevolvedsystemofgovernanceanduncertaintiesoccasionedbyanumberofsecurityconcernsduringtheyear.Thecountry’seconomyrecordedagrowthrateof5.8%in2014comparedto4.5%in2013.Duringtheyearunderreview,thecountryrebaseditseconomy,resultingina25%riseintheGrossDomesticProducttoShs4.76trillion,effectivelypropellingKenyaintoamiddle-incomestatuseconomy.

The Government accelerated several large-scale publicinfrastructure projects spanning the energy, transport andagriculturesectors.TheseincludethefirstphaseoftheStandardGaugeRailwaylinefromMombasatoNairobi,thesecondcontainerterminal at the Port of Mombasa, the Lamu Port, GreenfieldAirportTerminal inNairobiandanewoilpipeline.Furthermore,the280MegawattOlkariaIandIVgeothermalpowerprojectwascommissionedinDecember2014.

PositiveinvestorsentimentwasevidentintheoversubscribedUSD2billionsovereignEurobond,whichwasfollowedbyafurtherUSD750 million issue in December 2014. Overall investor interest isattributedtopromisingoildiscoveries,robustmanagementoftheeconomy,decisivestepstowardstheintegrationoftheEastAfricaCommunitycountriesandthegrowinginfluenceofNairobiastheregionalhub.

Despite thepressure introducedby theVATAct, inflationclosedtheyearatalowof6.02%.TheKenyanshillingmaintainedastabletrend, despite pressure from the dollar on major internationalcurrencies.TheshillingendedtheyearatShs90.5978totheUSDollar.

TheCentralBankofKenyamonetarypolicycommitteemaintainedtheCentralBankRateat8.5%throughouttheyear,signalingitsintentiontoholdinterestrateslowandmaintainastableinflation.

Anotabledevelopmentin2014wastheintroductionoftheKenyaBanksReferenceRate(KBRR),astheonlybaserateforalllendingbycommercialbanks.Itwasdevelopedaspartoftherecommendationstoenhancethesupplyofprivatesectorcreditandmortgagefinancingbyfacilitatingatransparentcreditpricingframework.TheKBRRratewassetat9.13%inJuly2014,andwillbereviewedevery6months.

The Financial Sector posted strong growth in the second half of 2014. Financial innovations that continue to drive downtransactions’costsandarobustgrowthincustomeradvanceswerethemainfactorsbehindtheimprovedperformance.Overall,customerloansandadvancesgrewby23%toShs1.97trillion,totaldepositsgrewby18%toShs2.3trillion,whiletotalincomegrewby16%toShs415billion.InresponsetothenewCBKPrudentialGuidelinesoncapitaladequacyofbankinginstitutions,totalcapitallevelsincreasedsignificantlyovertheperiod.

TurningtoTanzania,theeconomycontinueditsfastpacedgrowth,registeringaGDPgrowthof7%for2014.Thiswasmainlydrivenbythemining,telecommunications,transportandfinancialservicessectors.Inflationremainedcontainedandendedtheyearat6.1%comparedto7.9%in2013.Theeconomyisexpectedtocontinuegrowing,boostedbynewgasdiscoveriesandtheconstructionofanewport.

Uganda’seconomyreboundedtogrowat6.6%comparedto5.2%registered in2013.Theeconomy isexpected tocontinuegrowingstrongly,providedthattheupcomingcampaignsfornationalelectionsareconductedpeacefully.

NIC GROUP CAPITAL RAISING INITIATIVES

Inordertogrowourbusinessbytappingunfoldingopportunitiesinthedomesticandregionaleconomy,wedecidedtostrengthenourcapitalbasetosupportincreasedlendingtolocalcorporates,SMEsegmentsandretail.

CHAIRMAN’S STATEMENT

NIC BANK LIMITED


NICBankembarkedonasuccessfulcapital-raisingprogrammein2014involvingamixtureofdebtandequity.Thebondandrightsissueswerewellreceivedbythemarketandwereover-subscribed,underlininginvestorconfidenceinourbusinessprospectsgoingforward.

• Medium Term Note / Bond

TheBanklaunchedaShs8billionSubordinatedMediumTermNoteprogrammewiththefirsttrancheofShs3billionbeingissuedin2014.ThefirsttranchereceivedoffersinexcessofShs6.5billionandtheBoardofDirectorsapprovedtheallotmentupsizedtoShs5.5billion.ThebalanceoftheMediumTermNotewillbeissuedwithinthenext5years.

• Rights Issue

FollowingShareholders’approvalduringtheExtraordinaryGeneralMeetingheldon6thAugust2014andsubsequentreceiptof thenecessary regulatoryapprovals, theBankundertookaRights Issueofoneshare forevery fourteensharesheldamountingto42,663,040sharesatadiscountedpriceofShs49.25pershare.Theissueregistereda121%oversubscriptionandresultedinanincreaseofsharecapitalbyShs213,315,200(Shs5pershare)andsharepremiumofShs1,887,839,520(Shs44.25pershare).

DIVIDEND PAYOUT

GiventhestrongperformanceoftheNICBankGroupin2014,forwhichitrecordedaprofitbeforetaxofShs6.2billion,theBoardofDirectorsrecommendsafirstandfinaldividendofShs1pershare.Thisrepresentsadistributionof17%oftheprofitaftertax,equivalenttoShs639million.

ThebalanceoftheprofitretainedistosupporttheGroup’sgrowthstrategyinKenyaandtheregion.

SUBSIDIARIES AND DIVERSIFICATION

ThegrowthanddevelopmentofoursubsidiarycompaniesremainsakeystrategicobjectiveandonethatisaimedatbroadeningtherangeoffinancialservicesofferedtocustomersandenhancingearningsdiversitywithintheNICBankGroup.

NC Bank Uganda, NIC Bank Tanzania, NIC Capital (Investment Banking), NIC Insurance Agents (Bancassurance) and NICSecurities(Brokerage)allcontributedpositivelytotheGroup’sfinancialperformancein2014.

EMPLOYEES AND VALUES

NICBankGrouphadatotalemployeebaseof1,001asatDecember31st2014.Wevalueourpeopleandcontinuouslyinvestinenhancingtheirskillsetsinlinewiththegrowingdemandsofthebusinessandourcustomers.Weappreciatethatinanextremelycompetitiveenvironment,itisnoteasytoretainthebesttalent.ItisforthatreasonthattheGrouphascontinuedtoreformtheemployeerewardandretentionpractices.WestrivetoinfusetheGroup’svaluesofIntegrity,Passion,Responsiveness,InnovationandProfessionalisminallouremployeesacrosstheorganization.

CORPORATE GOVERNANCE AND RECOGNITION

NICBankGroupadherestothehigheststandardsofcorporategovernance.Wecontinuouslyreviewourcorporategovernancestructuresinlinewithexistingandemergingregulatoryrequirements.TheGroup’sgovernancestructuresandprocessesaresetoutingreaterdetailintheCorporateGovernancesectionofthisreport.

In June 2014, NIC Bank Group appointed Mrs. Esther Ngaine as a Non-Executive Director. Mrs. Ngaine brings a wealth ofexperiencetotheBoardhavingrecentlyretiredfromadistinguishedcareerwithaleadinginternationalbank.

Iamalsopleasedtoreportthatin2014NICBankreceivedthefollowingindustryrecognitions;

• InNovember2014,NICBankwasthewinneroftheprestigious‘BestIntegratedMarketingCampaign2014’AwardbytheMarketingSocietyofKenya(MSK)Awards.

• Inthesamemonth,theBankreceivedtheawardfortheBestBondDealoftheYearattheThinkBusinessAwards.NICCapitalalsoemergedas1stRunners-Upinthe‘InvestmentBankoftheYear’and‘LeadTransactionAdvisor’categories,whileNICSecuritiesclinchedthe2ndRunnerUpinthe‘Stockbrokeroftheyear”category,atthesameawards.Theseawardsattesttotheconfidencethatthecapitalmarketsandclientshaveintheadvisoryandtradingservicesthatweoffer.

• AdditionalyinNovember2014,theBankemergedthe2ndRunner-Upinthe“FinanceandInvestmentSector’CategoryattheInstituteofCertifiedPublicSecretariesofKenya(ICPSK)Awards.

CHAIRMAN’S STATEMENT (Continued)

NIC BANK LIMITED


CHAIRMAN’S STATEMENT (Continued)• InOctober2014,NICBankemergedasthe1stRunners-Upinthe‘CorporateGovernance’categoryattheFinancialReporting

(FiRe)AwardspromotedjointlybytheNairobiSecuritiesExchange(NSE),theInstituteofCertifiedPublicAccountantsofKenya(ICPAK),andtheCapitalMarketsAuthority(CMA).

• Earlierin2014,NICBankwasrecognizedattheThinkBankingAwardsasthe1stRunners-Upinthe“BestBankinAssetFinance’Category.

CORPORATE CITIZENSHIP

TheNICBankGroupiscommittedtocorporatesocialresponsibilityandtakesitsrelationshipswithvariousstakeholdersveryseriously.OursuccessasabusinessispremisedonthewellbeingofcommunitiesandtheenvironmentwithinwhichtheGroupoperates.

Inthesecondhalfof2014theBanklaunchedarobustthreeyearCitizenshipstrategyfocusingonfourKeyPillars:Education,Innovation,HealthandHumanitarianassistance/emergingbusinessneeds.

UnderEducation,theBankcontinuedwithitspartnershipwithEdumedTrust,PalmhouseFoundationandJuniorAchievementKenyatosupportstudentsinvariouscountiescountrywideaswellasoptimizeontheemployeesskillsformentorshipsessionsforthestudents.

OnHealth,NICBankGroupprioritizedeffortstostrengthenmanagementofmedicalproductsandtechnologiesbysupportingtheMombasaCountyGovernmentthroughtheMabatiMedicalClinicCentreinMariakaniwheretheGroupfundedthepurchaseofDiagnosticEquipmentforthehospital.

TheGroupcontinuedwithitssupportoftheFarajaCancerSupportTrust,NairobiHospitalChildren’sHeartFund,theMaterHeartRunProgramandtheJiggereradicationcampaignthroughtheAhadiTrust.

POSITIONING FOR GROWTH

Prospects for the domestic and regional economies remain bullish as East African Community (EAC) integration gathersmomentum.

Onthedomesticfront,aMarketPerceptionSurveyconductedbytheCentralBankofKenyainDecember2014showsthattheprivatesectorexpectsinflationandtheforeignexchangeratestoremainstable,andtheeconomyisexpectedtoperformstronglyin2015.Theseexpectationsareunder-pinnedbyanimprovedbusinessenvironmentasaresultofremovalofbottleneckstotradeaswellaslarge-scalepublicinvestmentinenergy,transportandagriculturesectors.

TheregionhascontinuedtoattractincreasingforeigndirectinvestmentintheoilandgassectorsfollowingthediscoveriesofgasinTanzaniaandoilinKenyaandUganda.Thiswillcertainlyspurinvestmentininfrastructure,ICTandservicesthusencouragingbusinessestoexploreopportunitiesintheregion.

TheintroductionoftheSingleVisaisexpectedtobuoytradeandtourismbyfacilitatingeasiermovementofpeopleintheregion.Ourgrowthstrategy isanchoredon leveragingEACeconomic integrationandanticipatedeconomicboomtostrengthenourpresenceintheregion.Weplantoenhanceourbranchfootprintintheregionoverthenextthreeyears.

APPRECIATION

Wewouldnotbewherewearetodaywithouttheconsistent,unwaveringsupportofourvariousstakeholders.

TheBoard,ManagementandStaffhighlyappreciatethesupportofourover25,000shareholders.ThesuccessofthebondandrightsissuesistestimonytotheconfidencetheyhaveintheBank.TheBoardandManagementofNICBankGroupassuresthemofourcommitmenttogrowingshareholdervalue.

Ourcustomersarethereasonforourbusiness.Wedonottaketheirsupportforgrantedandcontinuallystrivetobeworthyofthetrustbestowedonus.

WealsoremainhighlyappreciativeofourbusinesspartnersandtheregulatorswhocontinuetoprovideinvaluablesupportnotjustinKenya,butacrosstheregionwherewehaveapresence.

OnbehalfoftheBoard,IwishtothankeachandeveryemployeeofNICBankGroupforplayingtheirpartinmaking2014yetanothersuccessfulyear.

Inconclusion,IthankmyfellowDirectorsfortheircontributionandcommitmenttotheGroupatbothboardandcommitteelevels.

J P M NdegwaChairman

NIC BANK LIMITED


NinaonafaharikubwakuwasilishaRipotinaTaarifayaMwakayaKifedhayaBenkiyaNICBankGroupkatikamwakauliokamalizikiatarehe31Desemba2014.

MAZINGIRA YA KIBIASHARA YA MWAKA 2014

Kenyailiendeleakushuhudiamazingirathabitiyakiuchumilichayachangamotozakutekelezamfumowaserikaliyaugatuzipamojanahaliyataharukiiliyosababishwanavisakadhaavyaukosefuwausalamakatikamwakahuo.Uchumiwanchiulikuakwa5.8%mwaka2014ikilinganishwana4.5%katikamwaka2013.Katikamwakahuounaorejelewa,nchiiliratibishaupyauchumiwakenamatokeoyakeyakawaniukuwajiwa25%katikaJumlayaMapatoyaKitaifa(GDP)nahatimayekuipandishaKenyahadikufikiahadhiyamataifayenyeuchumiwakatikati.

Serikali iliharakishamiradikadhaamikubwayaummainayojumuishasektazakawi,usafirinakilimo.MiradihiinikamavileawamuyakwanzayamradiwaReliyaKisasakutokaMombasahadiNairobi,sehemuyapiliyakituochaBandariyaMombasa,BandariyaLamu,mradiwaGreenfieldkatikaUwanjamkuuwaNdegepapahapajijiniNairobinabombajipyalakusafirishamafuta.Vilevile,mradiwakawiyaardhiniyenyeMegawati280unaofahamikakamaOlkaria1naIVulizinduliwamnamoDesemba2014.

Mtazamomzuriwawawekezajiulishuhudiwawakatiwakuuzatoleokuu lahisazaEurobondkwaDolazaMarekani (USD)2bilioni,ambalolilifuatiwanatoleojinginelaUSD750milionimweziDesemba2014.Jumlayamvutowawawekezajiilihusishwanaugunduziwamafutayavisukuku,usimamizimzuriwauchumi,hatuabunifuzinazoelekeakatikauundajiwaJumuiyayaAfrikaMashariki(EAC)pamojanauchipukajiwajijilaNairobikamakitovuchauchumiwaukandahuu.

LichayamsukumoulioibuliwanauanzishajiwaSheriayaushuruwaVAT,mfumkowabeiulishukachinihadi6.02%mwishonimwamwaka.ShilingiyaKenyailidumishamkondothabiti,lichayamsukumokutokakwadoladhidiyasarafukuuduniani.ShilingiilifungamwakaikibadilishwakwaSh90.5978kwakilaDolayaMarekani.

KamatiyaserayakifedhayaBenkiKuuyaKenya(CBK)ilidumishaRibaya8.5%yaBenkiKuuyaKenyakwamwakamzima,ikiashirialengo lake lakudumishaviwangovyachini vya ribapamojanakuthibitimfumko.Kati yamiradi yamaendeleo iliyodhiihirikamnamomwakawa2014ilikuwanipamojanauanzishajiwaKiwangochaKuthibitiRibakatikaBenkizaKenya(KBRR),kamamsingiwa ribakwabenki zote zakibiashara zinazokopesha fedha. Ilibuniwakamasehemuyamapendekezo yaliyotolewa ilikuupanguvuufadhiliwakifedhanamakaokatikasektayakibinafsikwakuwezeshauwepowamuongozowawaziwaukadiriajiwamikopo.KiwangochaRibachaKBRRkiliwekwakuwa9.13%mnamoJulai2014,nakitakadiriwaupyakilabaadayamiezi6.

SektayaKifedhailipataukuajimkubwakatikanusuyapiliyamwaka2014.Ubunifuwakifedhaunaoendeleakupunguzagharamayashughulizakifedha,naukuajimkubwawawatejawanaotakamikopondizozilizokuwasababukuuzilizochangiauimarikajiwamatokeoyetu.Kwajumla,mikopoyawatejanaarubuniilikuakwa23%hadikufikiaSh1.97trilioni,uwekajiakibaukakuakwa18%hadiSh2.3trilioni,hukujumlayamapatoikikuakwa16%hadikufikiaSh415bilioni.KatikakuandamaMiongozoMipyanaKamilifuyaCBKkuhusuupatikanajiwamitajiyakifedhakwenyeasasizabenki,jumlayaviwangovyamtajivilikuakwakiasichakuridhishakatikamudahuounaorejelewa.

TukirudiupandewaTanzania,uchumiuliendeleakustawiharaka,ambapoulisajiliukuajiwaGDPwa7%katikamwakawa2014.Hiihasa ilitokananasekta zauchimbajimadini,mawasiliano yasimu,usafirinahudumazakifedha.Mfumkowabeiulizidikudhibitiwanakufungamwakaukisimamiakatika6.1%ikilinganishwana7.9%mwaka2013.Uchumiunatarajiwakuzidikukuahukuukipigwajekinataarifayakugunduliwakwagesinaujenziwabandarimpya.

UchumiwaUgandanaoulizindukanakukuakwa6.6%ikilinganishwana5.2%iliyopatikanamnamo2013.Uchumihuounatarajiwakuendeleakukuakwakasi,ilmuradikampenizijazozauchaguziziendelezwekwanjiayaamani.

MIKAKATI YA UKUSANYAJI MTAJI WA SHIRIKA LA NIC

Ilikukuzabiasharayetukwakuwekezakwenyemiradiinayoibukakatikauchumiwakitaifanaulewakikanda,tuliamuakuimarishamsingiwetuwamtaji ilikuwezeshaukopeshajiulioongezekakwamashirikayahumunchininaBiasharazaKiwangoKidogo(SME)pamojanazilezarejareja.

BenkiyaNICilirejeleamipangofaafuyakuchangishamtajimnamo2014ikijumuishamsetowamadeninahisa.Hatizadhamananamatoleoyahisayalipataufanisimkubwakwenyesokonahatawanunuziwakapitishakiwangokilichokuwakimewekwa,haliiliyodhihirishaimaniwaliyonayowawekezajikwenyebiasharayetu.

TAARIFA YA MWENYEKITI

NIC BANK LIMITED


TAARIFA YA MWENYEKITI (Inaendelea)

• Hati za Dhamana za Kipindi cha Wastani

BenkihiiilizinduampangowaHisa/HatizaDhamanawaKipindichaWastanichaSh8BilioniambapoKiwangochamgaowasehemuyakwanzayaSh3bilionikilitolewamnamowamwaka2014.SehemuhiyoyakwanzailipatawanunuziwaliozidithamaniyajumlailiyowekwawalipotoaSh6.5bilioni.BodiyaWakurugenziWakuuililazimikakuongezamgaohadikufikiaSh5.5bilioni.SaliolatoleohilolaHisazaKipindichaWastanilitatolewakatikamudawamiaka5ijayo.

• Toleo la Hisa

Kufuatia idhinisho lililotolewa na wenyehisa kwenye Mkutano Maalum uliofanyika tarehe 6 Agosti 2014 na kisha kupataidhinizasheriazilizostahili, BenkihiiiliamuakuuzaToleolaHisakatikakiwangochahisamojakwakilahisakuminannezinazomilikiwanakufanikiwakuuzahisa42,663,040kwabeiiliyopunguzwayaSh49.25kwakilahisa.Toleohilolilinunuliwakwa121%zaidiyathamaniiliyohitajikanakupelekeakuongezekakwamtajiwahisakwaSh213,315,200(Sh5kwakilahisa)nakufikishajumlayathamaniyahisakuwaSh1,887,839,520(Sh44.25kwakilahisa).

ULIPAJI MGAO

KuambatananamatokeomazuriyaBenkiyaNICkatikamwaka2014,yaliyotoafaidakablayaushuruyaSh6.2bilioni,BodiyaWakurugenziWakuuinapendekezamgaowakwanzanawamwishowaSh1kwakilahisa.Hiiinawakilishamgaowa17%wafaidabaadayakutolewaushuru,ambaonisawanaSh639milioni.SaliolafaidalililohifadhiwalitasaidiamkakatiwaukuajiwaBenkinchiniKenyanaukandamzimakwaujumla.

MATAWI NA UPANUZI WA KIKANDA

UkuajinaustawiwamatawiyakampuniyetuunabakiakuwalengomuhimulakimikakatilinalodhamiriakupanuakiwangochahudumazetuzakifedhazinazotolewakwawatejanakuwezeshamapatoyaliyopanukayaBenkiyaNIC.

Matawi ya Benki Uganda, Tanzania, Biashara za NIC Capital (Huduma ya Benki ya Uwekezaji), Maajenti wa Bima ya NIC(Bancassurance)naNICSecurities(UdalaliwaHisa),yoteyalichangiakatikamafanikioyamatokeoyakifedhayaBenkihiikatikamwakawa2014.

WAFANYAKAZI NA THAMANI

ShirikalaBenkiyaNIClilikuwanajumlayawafanyakazi1,001kufikiatarehe31Desemba2014.Tunawathaminiwatuwetunatunaendeleakuwekezakatikauimarishajiwamaarifayaokulingananamahitajiyakibiasharanawatejayanayozidikupanuka.Tunatambua kuwa katika mazingira yenye ushindani mkubwa, si rahisi kubakia na wafanyakazi wenye vipawa vya juu. Nikutokananasababuhiyoambapokampunihiiimeendeleakufanyiamageuzimienendoyakeyakuwazawidinakuwahifadhikaziniwafanyakaziwake.Tunajizatitikujiegemezakatikamienendoyakimaadili,ari,uwajibikaji,ubunifunaUtaalamumiongonimwawafanyakaziwetukotekwenyeshirikaletulote.

USIMAMIZI WA SHIRIKA NA UTAMBULIKAJI

ShirikalaBenkiyaNIClinadumishaviwangovyajuuvyausimamiziwashirika.Tunaendeleakutathminimiundoyausimamiziwetu wa shirika kulingana na kanuni za kisheria zilizopo na zinazoibuka. Miundo na harakati za usimamizi wa Shirika hiliimenakiliwakwamapanazaidikatikasehemuyaUsimamiziwaShirikayaRipotihii.

MnamoJuni2014,ShirikalaBenkiyaNIClilimteuaBiEstherNgainekamaMkurugenziMkuuasiyenamamlakayautendaji.Bi.NgaineanaingiakatikaBodihiinaujuzimpanabaadayakustaafukutokabenkimaarufuyakimataifahivimajuzi.

Ningependapiakutangazakwambakatikamwakawa2014BenkiyaNICilitambuliwakatikasektakadhaazabiasharahiikamaifuatavyo:

• KatikamweziwaNovemba2014,BenkiyaNICiliibukamshindiwaTuzoya‘KampeniBorayaMauzo-Msetomnamomwaka2014’,tuzoiliyotolewanaChamachaMauzochaKenya(MSK).

• Mwezihuohuo,Benkihii ilipokeatuzoyaBiasharaBorayaHatizaDhamanayaMwakakwenyetuzoza‘ThinkBusinessAwards’. Biashara ya NIC Capital pia iliibuka nambari mbili katika vitengo vya tuzo za Benki Bora ya Uwekezaji yaani‘InvestmentBankoftheYear’napiaileMshauriMkuuwaUsimamiziwaKibiasharayaani‘LeadTransactionAdvisor’,hukubiasharayaNICSecuritiesikimalizayatatukatikatuzozaDalaliBorawaMwakayaani(StockbrokeroftheYear)kwenyetuzohizo.Hiiinadhihirishaimaniwaliokonayowahusikawamasokoyahisanawatejakwenyehudumazaushaurinabiasharatunazotoa.

NIC BANK LIMITED


• Bado katika mwezi wa Novemba 2014, Benki ya NIC iliibuka nambari tatu katika kitengo cha ‘Sekta ya Kifedha naUwekezaji’wakatiwaTuzozaICPSK.

• MnamoOktobamwaka2014,BenkiyaNICiliibukanambarimbilikatikakitengocha‘UsimamiziwaShirika’kwenyeTuzozaUtoajiRipotizaKifedha(FiRe)shughuliambayoilidhaminiwanaSokolaHisalaNairobi(NSE)kwaushirikianonaTaasisiyaMahasibuwaUmmaWalioidhinishwanchiniKenya(ICPAK),naMamlakayaMasokoyaHisa(CMA).

• Mapemamwaka2014,BenkiyaNICilitambuliwakwenyehaflayaTuzoza‘ThinkBankingAwards,kamanambarimbilikatikakitengocha“BestBankinAssetFinance’.

JUKUMU LA SHIRIKA KWA JAMII

Shirika la Benki ya NIC limejitolea kudumisha jukumu la shirika kwa jamii na huchukulia mahusiano yake na wadaumbalimbali kwa uzingativu mkubwa. Ufanisi wetu kama shirika la kibiashara umeegemezwa kwa uthabiti wa jamii namazingiraambayoShirikahililinaendesheabiasharayake.

Katikanusuyapiliyamwaka2014,BenkihiiilizinduamikakatimadhubutiyamiakamitatukwawanajamiinainayolengaNguzonneKuu:

Elimu,Ubunifu,AfyanamsaadawaKibinadamu/mahitajiibukayakibiashara.

KuhusuElimu,Benkihii iliendeleanaushirikianowakenamashirikayaEdumedTrust,WakfuwaPalmhousenaJuniorAchievementKenyakwalengolakuwasaidiawanafunzikutokakauntimbalimbalinchinimbalinakutumiavyemamaarifayawafanyakazikwaajiliyashughulizakuwaelekezawanafunzihao.

KuhusuAfya,ShirikalaBenkiyaNIClilizipaumuhimujitihadazakuimarishausimamiziwabidhaazaafyanateknolojiakwakusaidiaSerikaliyaKauntiyaMombasakupitiaKituochaAfyachaMabatiMedicalCliniceneolaMariakaniambapoShirikahilililifadhiliununuziwaVifaavyaKutathminiMagonjwayawagonjwakatikahiyo.

ShirikahilililiendeleanampangowakusaidiashirikalaFarajaCancerSupportTrust,HazinayaWatotoyaNairobiHospitalChildren’sHeartFund,mpangowambiowaMaterHeartRunpamojanakampeniyauangamizajiwaFunzakupitiakwashirikalaAhadiTrust.

KUJIWEKA TAYARI KWA UKUAJI

UwezekanowaustawiwauchumiwanchihiinaukandahuuunabakiakuwamwingihukujuhudizakuimarishaJumuiyayaAfrikaMashariki(EAC)zikishikakasi.

Katikaupeowakitaifa,UtafitiwaMtazamowaKimasokoulioendeshwanaBenkiKuu yaKenyamnamoDesemba2014unaonyeshakwambasektayakibinafsiinatarajiakushuhudiauthabitikatikamfumkowabeinaviwangovyaubadilishanajiwasarafuzakigeni,hukuuchumiukitarajiwakuimarikakatikamwaka2015.Matarajiahayayanaegemeakwamazingirayakibiasharayaliyoimarikakufuatiakuondolewakwavikwazovyakibiasharapamojanauwekezajiwaummawakiwangochajuukatikasektazakawi,uchukuzinakilimo.

UkandahuuumeendeleakuvutiauwekezajiwamojakwamojawakigenikatikasektazamafutanagesikufuatiakugunduliwakwagesinchiniTanzanianamafutanchiniKenyanaUganda.Halihiibilashakaitainuauwekezajikatikamiundomsingi,Teknohama(ICT)nahudumanyinginezohivyobasikupelekeawawekezajikutafutanafasizakibiasharakatikaukandahuuwaAfrikaMashariki.

UanzishajiwaVisaMojaunatarajiakuboreshabiasharanautaliikwakuwezeshakurahisishataratibunamifumoyausafiriwawatukwenyeukandahuu.MkakatiwetuwaukuajiumejikitakatikakuinuabiasharayapamojayaAfrikaMashariki(EAC)namatarajioyakukuakwauchumiilikuimarishauwepowetukatikaukandahuu.Tunapangakuimarishamatawiyetukatikaukandahuukwenyekipindichamiakamitatuijayo.


NIC BANK LIMITED


SHUKRANI

Hatungekuwahapatulipofikaleobilamsaadathabitinausiokatikawawadauwetumbalimbali.

Bodihii,WakurugenzinaWafanyakaziwanatambuakwadhatimchangowawenyehisawetuwanaozidi25,000.UfanisiwamatoleoyahatizadhamananahisanithibitishotoshalaimaniwaliyonayokatikaBenkihii.BodinaUsimamiziwaShirikalaBenkiyaNICwanawahakikishiakujitoleakwetukatikaudumishajiwaviwangovyathamaniyawenyehisawetuinayoendeleakukua.

Mhimili wa biashara yetu ni wateja. Hatufanyii masihara mchango wao, hivyo tunaendelea kujitahidi kustahili imaniwaliyotuwekea.

PiatunasaliakutambuakwadhatiwashirikawetuwakibiasharanawasimamizikisheriawanaoendeleakutupamchangowaowathamanikuusiotunchiniKenya,lakinipiakatikasehemuzotetunazotoahudumazetu.

KwaniabayaBodihii,ningependakushukurukilamfanyakaziwaShirikalaBenkiyaNICkwakuwajibikakikaziilikufanikishamwaka2014.

Kwakuhitimisha,ninawashukuruWakurugenziwenzangukwamchangowaowadhatinakujitoleakwaShirikahilikatikaviwangovyabodinakamati.

J P M NdegwaMwenyekiti


NIC BANK LIMITED


A Year of Growth

NICBankGrouprecordedstrongresults in2014and it ismypleasure to present highlights of our financial performance,operationaldevelopmentsandtheoutlookfor2015.

Over the course of 2014, we maintained progressively goodgrowth quarter on quarter, delivering against a balancedscorecard of growth and efficiency supported by a stronggovernanceandcontrolframework.

Tosupportourgrowthin2014andbeyond,weembarkedonasuccessfulcapitalraisingexercisewhichsawusraiseinexcessofShs12billion inadditionalcapital tosupportgrowth intheloanbookforSME,RetailandCorporatesegments.

Financial Performance

TheNICBankGrouprecordedprofitaftertaxofShs4.1billionfortheyearended31stDecember2014representinganincreaseof27%fromtheShs3.2billionnetprofitrecordedin2013.

NetoperatingincomefortheyearexcludingcreditimpairmentchargeswasShs11.5billion,agrowthof10%over2013.Thisincrease was driven by robust growth in the balance sheet,enhancedbusinessefficienciesandstrengthenedperformancefromtheBank’ssubsidiaries.

Netinterestincomegrewby10%toShs8.0billion,whilenon-fundedincomealsogrewby11%toShs3.6billioninlinewiththeGroup’sstrategytodiversifyitsrevenuesources.

TheGroup’scosttoincomeratioincreasedmarginallyto43%comparedto42%theprioryear,representingoneofthebestefficiencyratiosinthemarket.

TheGroup’sloanbookasat31stDecember2014stoodatShs100.6billion,a24%increasefromShs81.4billiontheprioryear,whilecustomers’depositsclosedatShs100.4billionreflectinga10%growthfromShs91.6billion.

TheGroup’scorecapitalbaseclosedtheyear2014atShs22.8billion,agrowthofShs5.1billionover2013.

Operational Highlights

In2014, theBanklaunched itsawardwinningMOVETONOWstrategicplatform.ItisonthisplatformthattheBankintroduceditsmobileapp,NICNOW,whichallowscustomerstodotheirbankingattheirconvenience.

NICBankGroupcontinuedtoleverageontheadvancementoftechnology and was the first bank to launch a share tradingfeature on NIC NOW, which allows customers to trade theirsharesfromthepalmoftheirhands.

GROUP MANAGINGDIRECTOR’SSTATEMENT

NIC BANK LIMITED


TheGroupalsolauncheditsVisaPlatinumCreditCard,aprestigiousofferingtargetingtheaffluentsegmentofourcustomerbase.ThecreditcardhasoneofthehighestlimitsinthemarketandoffersawiderangeofbenefitstoourPlatinumcustomers.

Wealsoopenedtwonewbranches,oneinNairobi (Riverside,Waiyakiway)andanotheroneinMachakostown,bringingthetotalnumberofbranchesto32.OurVillageMarketbranchwasalsorefurbishedandrelocatedtocaterforthegrowingcustomerbase.Ourtotalcustomeraccountbasenowstandsat179,852representingagrowthof16%comparedto2013.

2015 Outlook

2015marksthebeginningofournewstrategiccycle.Ourstrategycallsforaclearfocusonkeysegmentsoftheeconomy(retail,SMEand localcorporates),ourbrand,ourpeopleandright-scaling inorder todeliveracceptablereturns toourshareholders.Weremainveryoptimisticaboutthefuture.WearepositioningourselvestogrowourRetailandSMEsegmentsalongsideouralreadystrongCorporateBankingandAssetFinancebusinesses.

Thiswillbesupportedbyanenhancedbranchfootprintacrosstheregionaswellasproductsandservicesthatleverageinnovative,newmulti-channelsolutionsandstrategicallianceswithcomplementarypartners.

OnbehalfoftheManagementandStaffofNICBankGroup,IsincerelyextendourappreciationtoourBoard,shareholders,customers,regulatorsandbusinesspartners.WeshallcountonyoursupportaswetakeNICBanktogreaterheights.

John GachoraGroup Managing Director

GROUP MANAGING DIRECTOR’S STATEMENT (Continued)

NIC BANK LIMITED


ShirikalaBenkiyaNIClilipatamatokeomazurikatikamwakawa2014,nakwahivyoninafurahakuuninapowasilishakwenukwamukhtasaritumatokeoyakifedha,upanuziwautendakazinamustakabaliwabiasharayetukatikamwakawa2015.

Katikamwakawa2014,tulidumishaukuajithabititokarobomojayamwakahadinyingine,tukifanikiwakufikiamalengoyetuyaukuajipamojanautendakaziborauliowezeshwanausimamizimzurinamuongozoborawakudhibitishughulizetu.

Ilikuwezeshaukuajiwetumwaka2014nabaadaye, tulizingatiashughulinamikakatiyakukusanyamtaji,hatuaambayoilituwezeshakukusanyamtajiwaziadawaSh12bilioniilikuinuaukuajiwamikopokwavitengovyaBiasharazaKiwangoKidogo(SME),UchuuzinahalikadhalikaMashirika.

Matokeo ya Kifedha

ShirikalaBenkiyaNIClilipatafaidayaSh4.1bilionibaadayaushurukatikamwakauliokamilikiatarehe31Desemba2014,ambayonisawanaongezekola27%kutokaSh3.2bilionikamafaidabaadayaushuruiliyopatikanamwaka2013.

Jumla ya mapato katika mwaka huo yalifika Sh11.5 bilioni, ukuaji wa 10% yakilinganishwa na mapato ya mwaka 2013.Ongezeko hili lilisukumwa na ukuaji madhubuti kwenye mahesabu ya mizania, uboreshaji wa biashara ulioimarika namatokeoyaliyoimarikayamatawiyaBenki.

Mapatoyaribabaadayakutoagharamayalikuakwa10%hadikufikiaSh8.0bilioni,hukumapatoyasiyofadhiliwayakikuakwa11%hadiSh3.6bilioni,yakiingilianasawanamkakatiwakupanuanjiazamapatozashirikahili.

NgawirayaGharamanamapatoyaShirikahiliiliongezekakidogohadikufikia43%kutoka42%katikamwakauliotangulia,hiiikiwakilishamojawapoyangawiraborazaidikwenyesoko.

ShughulizaukopeshajizaShirikahilikufikiatarehe31Desemba2014zilifikishaSh100.6bilioni,sawanaongezekola24%kutokaSh81.4bilionimwakauliotangulia,hukuakibazawatejazikiwaSh100.4bilionimwishonimwamwaka,hii ikiakisiukuajiwa10%kutokaSh91.6bilioni.

Mtaji mkuu wa Shirika hili ulifunga mwaka 2014 ukiwa umegonga Sh22.8 bilioni, huu ukiwa ni ukuaji wa Sh5.1 bilioniukilinganishwanaulewa2013.

Ripoti ya Utendakazi

Katikamwaka2014,BenkihiiilizinduamuongozowamkakatiwaHAMIAKWAUSASA(MOVETONOW)ulioshindatuzo.NikatikamsingihuoambapoBenkihiiilianzishahudumayakeyasimuyamkononiyaNICNOW,ambayoinawawezeshawatejakuendeshashughulizabenkizaokwawepesi.

NIC iliendeleakujiinuakutokananamaendeleoyakiteknolojiana ikawabenkiyakwanzakuzinduahudumayauuzajinaununuziwahisakwenyeNICNOW,hudumainayowawezeshawatejakuuzanakununuahisakwenyeviganjavyamikonoyao.

ShirikahilipialilizinduaKadiyaMkopoyaVisayaPlatinum,hililikiwatoleolakifaharilinalolengakundilawatejawetuwenyeuwezomkubwawakifedha.KadihiyonimiongonimwazilezenyekiasikikuuchafedhakwenyesokonahutoamanufaamapanakwawatejawetuwaPlatinum.

PiatulifunguamatawimawilimapyakatikaeneolaNairobi(Riverside)namjiwaMachakosnahivyokufikishamatawiyetukuwa32kwa jumla.Tawi letu laVillageMarketpia lilifanyiwauboreshajinakuhamishwailikukidhiongezekolawateja.Jumlayawatejawetuwametimu179,852kwasasa,hiiikiwakilishaukuajiwa16%ikilinganishwanamwaka2013.

TAARIFA YA MKURUGENZI MKUU

NIC BANK LIMITED


TAARIFA YA MKURUGENZI MKUU (Inaendelea)

Mustakabali wa 2015

Mwaka2015unakuwamwanzowamzungukompyawakimikakati.Mkakatiwetuunahitajiumulikajiangavuwasektakuuzauchumi(uchuuzi,SMEnamashirikayahumunchini),mfumowabiasharayetu,watuwetunakuwekaviwango-sahihivyautendakaziilikufanikishamapatoyanayokubalikakwawenyehisawetu.Amakwahakika,tunamatumainimengikuhusumustakabaliwakibiasharayetu.TunajiwekaimarailikukuzavitengovyetuvyaUchuuzinaSME,sambambanabiasharayetuyaShughulizaBenkikwenyeShirikanaAmalizaKifedha(CorporateBankingnaAssetFinance).

Mikakatihiiitapigwajekinaupanuziwamatawiyetukotekatikaukandahuupamojanabidhaanahudumazinazowezeshaubunifu,msetowanjiampyazausuluhishajinaulinganishajiwamikakatinawashirikawetukimahuluti.

Kwa niaba ya Wafanyakazi wa Shirika la Benki ya NIC, ninatoa shukrani zangu za dhati kwa bodi, wenyehisa, wateja,wasimamiziwakiserikalinawashirikawetuwakibiashara.TutazidikutegemeamchangowenuhukutukiendeleakuinuaBenkiyaNIChadikwenyeupeowajuunaufanisi.

John GachoraMkurugenzi Mkuu

NIC BANK LIMITED


THE BOARD OF DIRECTORS

From left to right seated: John Gachora I James P M Ndegwa I Frederick M Mbiru

From left to right standing: Andrew S M Ndegwa I Paras V Shah I Francis N Mwanzia I Michael L Somen I Esther Ngaine I I Ochola – Wilson I George A Maina I Kairo Thuo I Livingstone Murage I Alan J Dodd

NIC BANK LIMITED


From left to right standing: Andrew S M Ndegwa I Paras V Shah I Francis N Mwanzia I Michael L Somen I Esther Ngaine I I Ochola – Wilson I George A Maina I Kairo Thuo I Livingstone Murage I Alan J Dodd

NIC BANK LIMITED


James P M Ndegwa

Age: 51

Chairman (Non-Executive)

Mr. Ndegwa holds a MA (Hons) degree from Oxford University, UK, and is an Associate of the Chartered Insurance Institute, UK. He is the Chairman of First Chartered Securities Limited and a director of several companies. Prior to his present position, he was the Managing Director of Lion of Kenya Insurance Company until 2003. He joined the Board on 19th November 2003 and was appointed Chairman in 2005.

Frederick M Mbiru

Age: 77

Vice Chairman (Non-Executive Independent)

Mr. Mbiru holds a Bachelor of art degree in Business Administration (Hons) degree from Makerere University and is an Associate of the Chartered Institute of Bankers. He is currently a Management Consultant and a director of several companies having retired as General Manager of Barclays Bank of Kenya in 1993. He joined the Board on 16th February 1993.

John Gachora

Age: 47

Group Managing Director (Executive)

Mr. Gachora holds a Masters Degree in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology, USA as well as an Masters in Business Administration from the Wharton School, University of Pennsylvania, USA. He joined NIC from Barclays Africa where he had been Managing Director and Head of Corporate & Investment Banking. Prior to this, he held several executive positions at Absa Bank, in South Africa, as well as Bank of America and Credit Suisse First Boston in the United States. He joined NIC Bank in September 2013 as Group Managing Director and was appointed to the Board on 21 August 2013.

Andrew S M Ndegwa

Age: 47

Director (Non-Executive)

Mr. Ndegwa holds a MA (Hons) degree in Philosophy, Politics and Economics from Oxford University, UK. He is the Executive Director of First Chartered Securities Limited and a director of several companies. He previously worked for Citibank and AMBank until 1995. He joined the Board on 23rd April 1997.

Alan J Dodd

Age: 59

Executive Director

Mr. Dodd holds a BA (Hons) degree in Economics from Portsmouth University, UK. He is an Associate of the Chartered Institute of Bankers. He has extensive regional and international banking experience covering East and Southern Africa, Middle East and Asia. He joined NIC Bank in January 2006 as Director, Corporate Banking, and was appointed to the Board on 22nd February 2006.

George A Maina

Age: 63

Director (Non-Executive Independent)

Mr. Maina holds a B. Tech (Hons) degree in Aeronautical Engineering and Design from Loughborough University, UK. He is currently a Business Consultant and a director of several companies. He has extensive experience in the oil industry in Africa, the Caribbean and Central America including being Managing Director of Kenya Shell and BP Kenya Limited from 1998 to 2002. He joined the Board on 1st June 2002.

THE BOARD OF DIRECTORS (Continued)

NIC BANK LIMITED


THE BOARD OF DIRECTORS (Continued)

I Ochola – Wilson

Age: 66

Director (Non-Executive, Independent)

Mrs. Ochola-Wilson holds a Bachelor of arts degree from Dar-es-Salaam University and an Masters in Business Administration from University of British Columbia, Canada. She is currently a Business Consultant having retired as a Project Manager for DFID’s Business Partnership Programme in 2005. She joined the Board on 5th November 1999.

Esther Ngaine

Age: 57


Ms. Ngaine, is a senior banker with over 36 years of experience in a global financial institution. Prior to joining the NIC Bank board, Ms. Ngaine was the Director and Head of Public Sector at Citibank. She has extensive banking experience and over the years has a played a role in the development of the Financial Services Sector in Kenya and the East Africa Region. She joined the Board in June 2014.

Michael L Somen

Age: 78


Mr. Somen is a Barrister-at-Law, Grays Inn, England, and holds an Masters in Business Administration (Hons) degree from Brasenose College, Oxford. He is an Advocate of the High Court of Kenya. He retired in 2002 as Senior Partner of Hamilton Harrison & Mathews Advocates but remained as a consultant with the firm until 2010. He joined the Board on 21st February 2001.

Francis N Mwanzia

Age: 70

Director (Non-Executive Independent)

Mr. Mwanzia holds a Bachelor of Commerce (Hons) degree from University of Nairobi and is a qualified member of the Association of Chartered Certified Accountants, UK and Chartered Institute of Secretaries and Administrators, UK. He is also a member of ICPAK and ICPSK. He is currently a businessman having retired as Group Financial Controller and Company Secretary of NAS Airport Services in 1999. He joined the Board on 3rd August 1995.

Kairo Thuo

Age: 40


Mr Thuo is both a lawyer and accountant by profession. He is a consultant and a founder member of Viva Africa Consulting LLP and Viva Africa Consulting Limited and was previously responsible for establishing and running the Tax Transaction Advisory group at Deloitte and Touche. He joined the board on 27 November 2013.

Paras V Shah

Age: 41


Mr Shah, is a lawyer by profession and a Certified Public Secretary. He holds an LLB (Hons) degree, from King’s College London, Diploma in legal practice from the College of Law, London, Diploma in Legal practice from Kenya School of Law and Diploma in Management from Henley School of Management. He is an Advocate of the High Court of Kenya and currently a partner of Hamilton Harrison & Mathews Advocates. He joined the Board on 23rd February 2010.

Livingstone Murage

Age: 57

Group Company Secretary (Executive)

Mr. Murage holds a Bachelor of Commerce(Hons) degree from University of Nairobi and is a Certified Public Accountant and a Certified Public Secretary. He is also a member of ICPAK and ICPSK. He previously worked for PriceWaterhouse and Mobil Oil before joining the banking sector in 1986. He was appointed Company Secretary on 2nd September 1999.

NIC BANK LIMITED


John GachoraGroup Managing Director (Executive)

Mr. Gachora holds a Masters Degree in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology, USA as well as an Masters in Business Administration from the Wharton School, University of Pennsylvania, USA. He joined NIC from Barclays Africa where he had been Managing Director and Head of Corporate & Investment Banking. Prior to this, he held several executive positions at Absa Bank, in South Africa, as well as Bank of America and Credit Suisse First Boston in the United States. He joined NIC Bank in September 2013 as Group Managing Director and was appointed to the Board on 21 August 2013.

Alan J Dodd Director, Corporate Banking (Executive)

Mr. Dodd holds a BA (Hons) degree in Economics from Portsmouth University, UK. He is an Associate of the Chartered Institute of Bankers. He has extensive regional and international banking experience covering East and Southern Africa, Middle East and Asia. He joined NIC Bank in January 2006 as Director, Corporate Banking, and was appointed to the Board on 22nd February 2006.

Livingstone MurageGroup Company Secretary (Executive)

Mr. Murage holds a Bachelor of Commerce (Hons) degree from University of Nairobi and is a Certified Public Accountant and a Certified Public Secretary. He is also a member of ICPAK and ICPSK. He previously worked for PriceWaterhouse and Mobil Oil before joining the banking sector in 1986. He was appointed Company Secretary on 2nd September 1999.

Sankul MandaviaDirector, Treasury

Mr. Mandavia holds a Bachelor of Science in Business Administration from United States International University (USIU). Before his appointment he was the Assistant General Manager Institutional Banking and Liability Management at Commercial Bank of Africa. He also served as Head of Treasury at First American Bank of Kenya.

Julius KamauDirector, Operations & Technology

Mr. Kamau holds a degree in Bachelor of Commerce, Marketing from the University of Nairobi. He joined NIC Bank from Ecobank-Kenya where he was the Head of Operations & Technology. Prior to this, he held various positions at Citi Bank and Standard Chartered Bank respectively. He is a Certified Public Accountant, CPA (K) with 15 years of extensive experience in managing banking, IT operations and projects.

Margaret KimumaDirector, Credit Risk

Ms. Kimuma holds a Bachelor of Science in International Business Administration from United States International University (USIU) as well as a Diploma in Customer Relationship Management from the Institute of Financial Services (UK). Prior to her appointment, she was the Head of Credit Risk. She has 22 years of experience in banking having also worked for Barclays Bank (K) Limited. Ms. Kimuma is an Associate of the Kenya Institute of Bankers.

SENIOR MANAGEMENT

Rosalind Kimani-GichuruDirector, Marketing, Communication & Citizenship

Mrs. Gichuru holds a Masters in Business Administration from Northeastern University, Boston, US and a Bachelor of Commerce degree from McMaster University, Hamilton, Ontario, Canada. She is a seasoned Marketer with over 17 years of Marketing Strategy, Trade Execution and Leadership experience in the United States and across Africa. Her Marketing career began at The Gillette Company in Boston Massachusetts where she held Brand Management positions in the Duracell and Oral B / Braun Divisions for the US market. She then joined NIC Bank from The Coca-Cola System where she held leadership positions with Coca-Cola SABCO and The Coca-Cola Company across 39 countries in Sub Sahara Africa.

NIC BANK LIMITED


SENIOR MANAGEMENT (Continued)

Maurice OpiyoManaging Director, NIC Capital Ltd

Mr. Opiyo holds a Bachelor in Business Administration degree in Finance from Maseno University and is in the final stages of achieving Chartered Financial Analyst (CFA) certification. He joined NIC Group in 2009 as a Senior Associate from Old Mutual where he was a Senior Investment Analyst. Maurice successfully built his career at NIC Capital rising to the position of Associate Director before his appointment to Managing Director, NIC Capital.

David Abwoga Director, Finance & Strategy

Mr. Abwoga holds a Bachelor of Arts degree in Economics from Moi University and an MBA (Strategic Management) from the University of Nairobi. He joined NIC Bank from Citibank N.A where he was the East Africa Cluster Chief Financial Officer (CFO), responsible for Kenya, Tanzania, Uganda and Zambia. Prior to this, he held various executive management positions at Citi, Marshalls (EA) Ltd and Deloitte & Touché. David is a Certified Public Accountant, CPA (K) and CPS (K) with 22 years of extensive experience in Audit, Operations and Finance.

Catherine KaritaGeneral Manager, NIC Securities Ltd

Ms. Karita holds a Masters in Business Administration from the University of Baltimore, Baltimore County and a Bachelor of Science Degree in Information Systems from the University of Maryland. Prior to joining NIC Bank Catherine was the Head of Corporate and Institutional Sales at CfC Stanbic Financial Services Limited where she established the Local and Foreign Institutional business. Her banking career started off at Bank of America, in the US where she worked for 4 years in Relationship Management and various Sales positions.

Faith MwendiaGeneral Manager, NIC Insurance Ltd

Mrs. Mwendia holds a Bachelor of Commerce Degree (1st Class Honors) from University of Nairobi. Prior to this role, she worked as a Relationship Manager in the Insurance Premium Finance Department of NIC Bank. Faith steered the set up the Bancassurance department in NIC Bank Group in 2008. Before joining NIC Bank Mrs. Mwendia worked at CBA Bank.

Monicah W. KihiaDirector, Human Resources

Mrs. Kihia holds a Masters in Business Administration in Marketing & Strategic Management from the University of Nairobi, and Bachelor of Education (Mathematics & Economics) from Egerton University. Prior to joining NIC Bank, Mrs. Kihia held various roles with Citibank N.A with the latest being Head of Learning & Development – Sub Sahara Africa cluster and Deputy East Africa HR Head & Senior HR Business Partner – Kenya. Monica is a Certified Executive Coach by the Academy of Executive Coaching.

Pankaj KansaraManaging Director, NIC Bank Tanzania Ltd

Mr. Kansara holds a Masters in Business Administration in Finance and Banking from the University of Wisconsin, USA as well as a Bachelor of Business Administration in Accounting from Loyola College of Baltimore, USA. Mr. Kansara has been in the banking industry for over 25 years having worked with several Local and Multinational Banks in Kenya.

John OkuloManaging Director, NC Bank Uganda Ltd

Mr. Okulo holds a Masters in Science in Economics from the University of Gdansk in Poland. He has 14 years of extensive banking experience in East Africa having worked for various multinational banks in both Kenya and Uganda. Mr. Okulo has spent most of his banking career in corporate banking.

NIC BANK LIMITED


CORPORATE INFORMATION

DIRECTORS

J P M Ndegwa - ChairmanF M Mbiru - Vice ChairmanJ Gachora - Group Managing Director•A Dodd• **G A MainaF N MwanziaA S M NdegwaI Ochola-WilsonM L SomenP V ShahK ThuoE N Ngaine

•Executive directors**British

CREDIT RISK COMMITTEE

F M Mbiru - ChairmanF N MwanziaA S M NdegwaM L SomenP V Shah

EXECUTIVE COMMITTEE

A S M Ndegwa - ChairmanG A MainaM L SomenP V Shah

RISK MANAGEMENT COMMITTEE

G A Maina - ChairmanF M MbiruI Ochola-Wilson

AUDIT COMMITTEE

F N Mwanzia - ChairmanF M MbiruI Ochola-WilsonK Thuo

NOMINATIONS COMMITTEE

G A Maina - ChairmanJ P M NdegwaA S M NdegwaP V Shah

HUMAN RESOURCES AND COMPENSATION COMMITTEE

I Ochola-Wilson - ChairmanF M MbiruA S M Ndegwa

GROUP COMPANY SECRETARY

L MurageCertified Public Secretary (Kenya)NIC House, Masaba RoadP.O Box 44599 - 00100Nairobi

REGISTERED OFFICE

NIC HouseMasaba RoadP.O Box 44599 - 00100Nairobi

REGISTRARS AND TRANSFERS OFFICE

Custody & Registrars Services Limited6th Floor, Bruce House, Standard StreetP.O Box 8484 - 00100Nairobi

AUDITORPricewaterhouseCoopersCertified Public Accountants (Kenya)PwC TowerWaiyaki Way/Chiromo Road, WestlandsP.O Box 43963 - 00100Nairobi

NIC BANK LIMITED


Theroleofthefinancialservicesindustryinsocietyhascomeunderincreasedscrutinyinrecentyears.Thisisparticularlysoasaresultofthehighprofilemalpracticesandcorporatefailuresthatalmostledtothecollapseofthefinancialbankingindustryindifferentpartsoftheworld,andthedevastatingimpactthatthesehavehadonthoseeconomiesandsociety.Someofthesemalpracticesand failureshavebeenbroughtaboutbyperceivedbreakdowns in thecorporategovernancestructures in theaffectedinstitutions.Theseinclude:

• Theuseofinappropriatecompensationandrewardstructuresthatpromotedimprudentrisktakingandincreasedfocusonshort-termgainattheexpenseofthelong-termstabilityoftheinstitution;

• Thefailureofcommercialbankstofullyunderstandtherisksassociatedwithcomplexfinancialstructures;

• Risk management structures and controls that failed to keep pace with the increased complexity and size of financialtransactionsandrelationships;

• Inadequatedisclosuresinfinancialstatementsabouttheforeseeableriskfactorsandaboutthesystemsformonitoringandmanagingrisks;and

• Conflictsofinterestamongstdifferentstakeholdersinfinancialinstitutions.

Thestrengthandwellbeingofthefinancialsystemiscriticaltobotheconomicandsocialdevelopmentandfinancialregulatorsaroundtheworldhavetakenmeasurestoensurethatthefailuresexperiencedintherecentpastdonotrecur.TheNICBankGroup’smainregulators,theCentralBankofKenya(CBK),theBankofTanzania(BOT),theBankofUganda(BOU),theCapitalMarketsAuthority(CMA),theNairobiSecuritiesExchange(NSE)andtheInsuranceRegulatoryAuthority(IRA),haveenhancedtheirregulationsandenrichedriskmanagementguidelinessothatbanksandotherfinancialinstitutionscaneffectivelymitigatethemyriadriskstowhichtheyareexposed.TheGrouphasfullyembracedthesechangesandremainsattheforefrontinadoptingbestpracticesincorporategovernanceandriskmanagementintherapidlyevolvingfinanciallandscape.

During2014,theNICBankGroupachievedhighlevelsofcorporategovernancebycontinuingtoadheretothefollowingprinciplesamongstothers:

• Optimisingshareholderreturnsthroughtheadoptionofappropriatestrategiesaimedatenablingandpromotingthelongtermprosperityofthebusiness;

• Timelyandrelevantdisclosuresandtransparencytoprovidestakeholderswithaclearunderstandingofourbusinesses;

• Implementation of strong audit procedures through ensuring audit independence, maintaining strong internationallyrecognisedaccountingprinciples,ensuringtheundertakingofawellscopedannualauditandmaintenanceofrobustinternalcontrols;

• WelldefinedBoarddutiesandaccountabilities,ensuringappropriatedirectorcompetencies,maintaininganappropriatemixofnon-executiveandindependentnon-executivedirectors,establishmentofindependentcommitteesandundertakingannualboardevaluations;

• Employeeparticipationinenhancingstakeholders’longterminterests;

• Compliancewithlawsanddisclosureofpoliciestoallrelevantstakeholders;and

• Upholdingthehighestlevelsofintegrityintheorganisation’scultureandpracticesthroughawelldefinedandimplementedcodeofconductandethics.

TheBoardiscommittedtoensuringthatthebusinessisruninaprofessional,transparent,justandequitablemannersoastoprotectandenhanceshareholdervalueandsatisfytheinterestsofallitsstakeholders.Inadditiontotheaboveconsiderations,theprinciplesandstandardsimplementedandadheredtobytheBoardandNICBankGroup’sgovernancestructure,havebeendevelopedwithclosereferencetoguidelinesoncorporategovernanceissuedbytheCentreforCorporateGovernance,theCapitalMarketsAuthorityforpubliclylistedcompaniesinKenya,theCentralBankofKenyaforthebankingindustry,andotherbestpractices.

STATEMENT ON CORPORATE GOVERNANCE

NIC BANK LIMITED


TherolesplayedbyeachoftheabovecommitteesaredescribedlaterinthissectionoftheAnnualReport.

During 2014, the Board’s focus was geared towards the achievement of compliance with the qualitative aspects of goodgovernancewhilstensuringthatimplementationmatchestheneedsofthebusiness.

Board Size, Composition and Independence

TheBoardconsistsoftwelveDirectors,tenofwhomareNon-executiveDirectors(includingtheChairman).AmongtheDirectorsareeightIndependentNon-executiveDirectors.InJune2014themembershipoftheBoardwasincreasedbytheappointmentofoneadditionalDirector.

TheNon-executiveDirectorsareindependentofManagement.Theirroleistoadvise,constructivelychallenge,provideoversight,andmonitorthesuccessoftheManagementindeliveringtheagreedstrategywithintheapprovedriskappetiteandcontrolframeworkthatissetbytheBoard.

TheBoardiswellcomposedintermsoftherangeanddiversityofskills,backgroundandexperienceofDirectors,andhasanappropriatebalanceofExecutive,Non-executive,andIndependentNon-executiveDirectors.

TheDirectors’abridgedbiographiesappearonpage28to29ofthisAnnualReport.

STATEMENT ON CORPORATE GOVERNANCE (Continued)

NICBankGroup’sgovernancestructureissummarizedinthechartbelow:

NIC BANK LIMITED


AlltheNon-executiveDirectorsaresubjecttoretirementbyrotation,andmustseekre-electionbyshareholdersatleastonceevery three years in accordance with the Articles of Association of the Company. Any Director appointed during the year isrequiredtoretireandseekre-electionatthenextAnnualGeneralMeeting.

Board Responsibilities

TheBoard’sprincipaldutyistopromotethelong-termsuccessoftheGroupbycreatinganddeliveringsustainableshareholdervalue.TheBoardCharterdefines thegovernanceparameterswithinwhich theBoardexistsandoperates, setsout specificresponsibilitiestobedischargedbytheBoard,itscommitteesandDirectorscollectively,aswellascertainrolesandresponsibilitiesincumbentupontheDirectorsasindividuals.

AsummaryoftheBoard’sresponsibilitiesisasfollows:

• ProvidingentrepreneurialleadershiptotheGroupwithinaframeworkofprudentandeffectivecontrolswhichenablesrisktobeassessedandmanaged;

• Strategyformulationandensuringthatthereareadequatepolicies,systemsandstructurestosuccessfullyimplementtheGroupstrategies;

• Monitoring theGroup’sperformanceagainst itsstrategicplansandobjectivesonanongoingbasis,aswellas throughmandatoryquarterlymeetings;

• Reviewandapprovalofthepublicationofthequarterlyfinancialstatements;

• Theselection,appointmentandappraisalofseniorexecutiveofficerswhoarequalifiedandcompetenttomanagetheaffairsoftheGroupeffectively;

• Approvalof theriskmanagement framework,andensuring that thereareadequatestructuresandsystemsto identify,measure,controlandmonitorthekeyrisksfacingtheGroup,includingcompliancerelatedrisks;

• Reviewingtheeffectivenessofthesystemsformonitoringandensuringcompliancewithrelevantlaws,regulations,industryrulesandstandards;

• DeterminingthetermsofreferenceofallBoardCommittees,andthereviewingofreportsandminutesofthedeliberationsofthoseCommittees;

• Developing,reviewingandmonitoringtheGroup’scorporategovernancepoliciesandpractices;and

• ReviewingtheGroup’scapitallevelstoensurethatthereisadequatecapacityfortheplannedgrowthandexpansionwithinthestrategiccycle,andapprovingmajorcapitalexpenditure,acquisitionsanddivestitures.

Chairman and Group Managing Director

TherolesandresponsibilitiesoftheChairmanoftheBoardandtheGroupManagingDirectorremaindistinctandseparate.TheChairmanprovidesoverallleadershiptotheBoardwithoutlimitingtheprinciplesofcollectiveresponsibilityforBoarddecisions.TheGroupManagingDirectorisresponsibletotheBoardandtakesresponsibilityfortheeffectiveandefficientrunningoftheGroupanditssubsidiariesonaday-to-daybasis.

TheDeputyChairmandeputizesfortheChairmanatmeetingsoftheBoardandsupportshiminhisrole.

Board Remuneration

Non-executiveDirectorsarepaidamonthlyfee,togetherwithasittingallowanceforeverymeetingattended.Theyarenoteligibleforpensionschememembership,anddonotparticipateinanyoftheCompany’sremunerationorcompensationschemes.

DetailsoftheDirectors’feesfortheNon-executiveDirectorsandremunerationoftheExecutiveDirectorspaidin2014aresetoutinnote40(c)ofthefinancialstatements.


NIC BANK LIMITED


Directors’ Shareholding

NoneoftheDirectorsasattheendofyear2014heldsharesintheirindividualcapacityofmorethan1%oftheCompany’stotalequity.

Board and Strategy Meetings

TheBoardanditsCommitteesmeetregularlyinaccordancewithbusinessrequirements.AllDirectorsparticipateindiscussingthestrategy,performanceandthefinancialandriskmanagementoftheGroup.MeetingsoftheBoardarestructuredtoallowsufficienttimeforconsiderationofallmattersandtheChairmanencouragesconstructivechallengeanddebate.

TheBoardWorkPlantogetherwiththecalendarofmeetingsfor2014wasfixedinadvanceandprovidedtoallDirectors.Adequatenotice was given for each meeting and the agenda and supporting papers were distributed in advance of all Board and itsCommitteemeetingstoallowtimeforappropriatereviewandtofacilitatefulldiscussionatallmeetings.

In2014, inadditionto the fourscheduledBoardmeetings, theBoardhelda further twoboardmeetingstoconsiderspecialmattersincludingthecapitalraisinginitiatives.TheBoardalsoheldatwodayretreattoreviewtheachievementsofthe2012-2014StrategicPlanandtodiscussandformulatethe2015-2017StrategicPlan.Themainthrustofthe2015-2017strategiccycleistopositiontheGrouptogrowitsSMEandRetailsegmentsalongsidethealreadyverystrongCorporateBankingandAssetFinancebusinesses.

TheBoardateachofitsregularmeetingsduringthecourseoftheyearreviewedthefollowing:

• Progressagainstfinancialobjectives,businessdevelopments,andinvestorandexternalrelations.

• ReportsfromtheChairsofBoardCommitteesontherespectiveactivitiesoftheBoardandmanagementcommitteessincethepreviousBoardmeeting.

• PresentationsfromtheGroupManagingDirectoronthemacroeconomicenvironmentandtheimpactonbankingbusiness,areviewofthefinancialservicesindustryandcapitalmarketsoverview,areviewoftheregulatoryandcompetitiveenvironment,strategyandbusinessdevelopment,andthefinancialperformanceofthebankingindustry.

• The Group’s risk appetite profile, top and emerging risks, risk management, liquidity, litigations, compliance and anyreputationalissues.

MembersofExecutiveManagementareregularlyinvitedtoattendBoardanditsCommitteemeetingsasrequiredandmakepresentationstogivetheDirectorsgreaterinsightsintotheirbusinessareas.

TheBoardhasownershipovertheGroup’sstrategicdirection.AteachBoardmeetingprogresstowardsthetargetsoftheapprovedbusinessplansisreviewedandguidanceprovidedtoSeniorManagementasappropriate.

DirectorsareatcompletelibertytocommunicatedirectlywithSeniorManagementwithaviewtoclarifyinganyissuesthathaveasignificanteffectontheGroup’sperformance.

ThesummaryoftheBoardandBoardCommitteemeetingsandattendanceisshownonpage43.

Directors’ external activities and Conflicts of Interest

DirectorshaveastatutorydutytoavoidsituationsinwhichtheyhaveormayhaveintereststhatconflictwiththoseoftheGroup.Businesstransactionswithallparties,includingtheDirectorsortheirrelatedpartiesarecarriedoutatanarms’length.

In2014,theDirectorssubmittedtheirannualdeclarationsofinterestswhichincluded:

• AnacknowledgementthatshoulditcometotheattentionofaDirectorthatamatterconcerningtheGroupmayresultinaconflictofinterest,theyareobligedtodeclarethesameandwillexcludethemselvesfromanydiscussionordecisionoverthematterinquestion.

• Anacknowledgement thatshould theDirectorbeappointed to theBoardoracquireasignificant interest inabusinesscompetingwiththeGroup,theDirectorwillbeobligedtooffertheirresignation.

• AnacknowledgementthattheforegoingalsoappliestointerestsoftheimmediatefamilymembersoftheDirectors.

BusinesstransactionswiththeDirectorsortheirrelatedpartiesaredisclosedonpageinnote40ofthefinancialstatements.


NIC BANK LIMITED


Board Structure

The Board operates under a comprehensive structure made up of Committees established to assist it in discharging itsresponsibilities and obligations. The Committees assist the Board in carrying out its functions and ensuring that there isindependentoversightofinternalcontrolsandriskmanagement.

The Board has determined the purpose and number of Committees required to support it in carrying out its duties andresponsibilitiesandinguidingManagement.TheseCommitteeshavebeenestablishedwithsetsofspecifictermsofreference,whicharecontinuouslyreviewedandupdated.TheappointmentofthememberstotheseCommitteesdrawsontheskillsandexperienceofindividualDirectors.TheroleplayedbytheBoardCommitteeshasbecomeincreasinglyimportantovertheyearsandformsaprincipalpointofcontactbetweentheDirectorsandSeniorManagement.

TheBoardCommitteesare:Audit;CreditRisk;Executive;HumanResources&Compensation;Nominations;andRiskManagement.ThesearesupportedbyfivekeyManagementCommittees:ExecutiveManagement(Excom),Management(Mancom),AssetsandLiabilitiesManagement(ALCO),CreditRiskManagementandSeniorRiskCommittees.

All theBoardCommitteeshaveat leastthreenon-executivedirectorsasmembers.TheChairof theCommitteesmustbeanon-executiveDirectorwhile insomeCommitteessuchas theAudit,Nominations,HumanResources&CompensationandRiskManagement,theyareIndependentNon-executiveDirectorswiththemajorityofthemembershipbeingIndependentNon-executiveDirectorsasprescribedbytheCentralBankofKenyaPrudentialGuidelines.

AteverymeetingoftheBoardtheChairofeachCommitteepresentsanupdateofitsactivities,decisionsandrecommendationsoftheirrespectiveCommitteessincethepreviousBoardmeeting.

MembershipofthevariousBoardCommitteesisshownonpage32.

TheGroupCompanySecretarysitsinalltheBoardandCommitteemeetingsandisresponsibleformonitoringandcoordinatingthecompletionanddispatchofBoardandCommitteeagendapapers,andotherbriefingmaterials.TheGroupCompanySecretaryisalsoresponsible forensuring that theminutesof theCommittees’deliberationsarecirculated ina timelymanner to theCommittees’membersandtheBoard.AllDirectorshaveaccesstotheservicesandadviceoftheGroupCompanySecretary.Detailsoftheskills,experienceandexpertiseoftheGroupCompanySecretaryaresetoutonpage29ofthisReport.

ManagementandexternalserviceprovidersplusanyrequiredSubjectMatterExpertsattendbyinvitationfromtimetotimeascircumstancesdictate.Directors’attendanceofthesecommitteesisprovidedonpage43TheBoardandDirectors’EvaluationsaresenttotheCentralBankofKenyaasrequiredbylawannually,bythe31stMarchofeachyear.

DetailsoftheseCommitteesaregivenherebelow:

• Audit Committee

ThecommitteeplaysavitalroleinensuringtheintegrityofthefinancialstatementspriortothereviewandapprovalbytheBoard.Tothisend,theAuditCommitteereviewstheaccountingpolicies,financialreportingandregulatorycompliancepracticesoftheGroup.TheCommitteealsocontinuallyevaluatestheeffectivenessoftheinternalcontrolsystemsoftheGroupinaccordancewithitsapprovedauditplan.

TheCommitteeisinvolvedintheappointment,supervisionandperformanceappraisaloftheexternalauditorandtheinternalauditor.TheCommitteereceivesreportsonthefindingsoftheinternalandexternalauditorsandManagement’scorrectiveactionsinresponsetothefindings.TheCommitteemeetsquarterlyandtheexternalauditorsareinvitedtoattendwhenevernecessarybutatleasttwiceinayearwheretheymeetwithoutSeniorManagement’spresence.Eachyear,theCommitteereviewsandapprovestheoverallscopeandplansfortheexternalauditactivities,includingthefeeswhichhavetoberatifiedbytheshareholders.Externalauditperformanceisreviewedannually.

TheCommitteeafterevery three years invitesprequalifiedauditfirms tobid forprovisionofprofessionalauditand taxservices.Theauditfirmsmakepresentations to theCommitteeandareevaluatedonasetcriteriaand theCommitteerecommendstotheBoardeitherthereappointmentoftheexistingauditfirm,orappointmentofanewauditfirm.TheBoardthenrecommendstotheshareholdersthereappointmentofanexistingauditorortheappointmentofanewauditor.

TheAuditCommitteeisinvolvedintheappointmentandperformanceassessmentoftheHeadofInternalAudit,whoreportsdirectlytothisCommittee.TheCommitteealsoreviewstheoverallscope,annualplansandbudgetfortheInternalAuditfunction’sactivitiesandoverseesthealignmentofriskmanagementprogramsandInternalAuditactivities.TheCommitteereviewsallInternalAuditreportsandhasregulardirectaccesstotheHeadofInternalAudit.


NIC BANK LIMITED



• Credit Risk Committee

TheCommitteereviewsandoverseestheoveralllendingpoliciesoftheGroupandapprovescreditapplicationsthatareabovetheapprovallimitsformanagement.Itensuresthatthereareeffectiveprocedurestoidentifyandmanageirregularandproblemfacilities,minimizecreditlossandmaximizerecoveries.

The Committee regularly reviews and recommends to the Board discretionary credit limits for the Board Credit RiskCommitteeandManagementCreditRiskCommittee.

• Executive Committee

ThecommitteeassiststheBoardindischargingitsresponsibilitiesrelativetostrategy,technology,andgeneraloperationsoversight.Thecommitteemeetsregularly toreviewandrecommendforBoardapprovalmajorcapitalprojects,periodicstrategicplans,annualbudgetsandkeypolicyguidelinesasdevelopedbymanagement.

• Human Resources and Compensation Committee

TheCommitteereviewstheHumanResourcespoliciesandproceduresandensuresthattheyadequatelysupporttheGroup’sstrategy.ItensuresthattheGroupcontinuestoprovideremunerationpackagesthatfairlyrewardstafffortheircontributiontothebusinessandcontinuestoattract,motivateandretainstaffofthehighestcaliber.

ThecommitteeensuressuccessionplansareinplaceforallseniorexecutivemanagementoftheGroup.

• Nominations Committee

TheNominationsCommitteeprovidesanefficient,effectiveandreliablemechanismthatidentifiesandrecommendstotheBoardtheappointmentof individualstoserveasDirectorsoftheGroup.ItconductsregularreviewsoftherequiredmixofskillsandexperienceofDirectorsoftheGroupinordertoensuretheeffectivenessoftheBoardanditsCommitteesinmeetingtheneedsofthebusiness.

• Risk Management Committee

The Risk Management Committee is responsible for setting the strategic risk parameters through policies/guidelines,tolerance limits, andapproving the riskmanagementstrategyaswell assignificantpoliciesandprograms.Thereafter,itmonitorscompliancewiththeriskpolicies,limitsandprograms.Italsoreviewstheadequacyoftheriskmanagementframework inrelation to therisks facedby theGroupand incomparison to theapproved tolerances.TheCommittee isassistedinthesefunctionsbyvariousmanagementlevelcommitteesthatundertakebothregularandad-hocreviewsoftheGroup’sriskmanagementenvironment,theresultsofwhicharereportedatappropriatelevelsforreviewandaction.

Theriskmanagementpolicies,whicharereviewedbytheCommittee,aredetailedonpages78to106andareinlinewithInternationalFinancialReportingStandards.

Management Committees

AsignificantfactorintheGroup’songoingsuccessisthestrengthofthemanagementteam.Membersofthemanagementteambring togethera vital combinationof leadershipskillsandextensiveexperience fromboth localand internationalbanks.Toharnessthatstrength,theGroupManagingDirectorhasestablishedcommitteestoassisthiminthemanagementoftheGroup.ThesecommitteesarechairedbytheGroupManagingDirectorandincludetherespectiveHeadsofDepartments,withotherseniormanagersbeingco-optedonaneedbasis.Thesecommitteesinclude:

• The Executive Management Committee (EXCOM)

Thiscommitteemeetsregularlyandatleastmonthlytodiscussstrategyformulationandimplementation,policymattersandfinancialperformance.Itisalsochargedwiththeresponsibilityofensuringcompliancewiththeregulatoryframeworkandguidelinesandadherencetocompanypolicyandprocedures.ThiscommitteealsoservesasalinkbetweentheBoardandManagement.

• The Management Committee (MANCOM)

ThiscommitteemeetsmonthlytoreviewoperationalissuesoftheGroup,withemphasisontheassessmentandmonitoringoftheinstitution’soperationalrisks.

NIC BANK LIMITED



• The Assets and Liabilities Management Committee (ALCO)

Thiscommitteemeetseverymonthormorefrequentlyifnecessary.ALCO,ariskmanagementcommittee,istaskedwiththeresponsibilityofensuringthatallforeseeablefundingcommitmentsanddepositwithdrawalscanbemetasandwhentheyfalldue,andthattheGroupwillnotencounterdifficultiesinmeetingitsobligationsorfinancialliabilitiesastheyfalldue.Thisincludesmanagementofoperationalrisks,interestrate,marketandexchangeraterisksandensuringcompliancewithstatutoryrequirementsgoverningliquidity,cashratioandforeignexchangeexposure,investmentpolicies,anditsinternalcapitaladequacymanagement.

• The Management Credit Risk Committee

ThiscommitteemeetsregularlytoapprovenewcreditapplicationsandrenewalswithinthedelegatedlimitssetbytheBoard.ThecommitteealsoregularlymakesrecommendationstotheBoardCreditRiskCommitteeontherevisionoflimits.Allapprovalsareindependentoftheoriginatingbusinessunit.

• The Senior Credit Risk Committee

ThiscommitteemeetsmonthlytoreviewtheperformanceoftheGroup’slendingbookanddeterminesthelevelofprovisionsrequiredinaccordancewiththeapprovedpoliciesandregulatoryguidelines.

Board and Directors Effectiveness and Evaluation in 2014

InordertoensurethatBoardmembersareeffectiveintheircontributiontothemanagementoftheGroup,itisimportantthattheydevelopagoodunderstandingoftheGroupanditsoperations.Thisisachievedthroughvarioustraininganddevelopmentsessionstoensurethattheyunderstandtherelevantfacetsofthecomplexandconstantlyevolvingfinancialservicesindustry.ThisisparticularlyimportanttoensurethattheyappreciatealltheriskstowhichtheGroupisexposed,theimpactontheGroupanditsoperations,andhowtoeffectivelymanageandmitigatetheserisks.

AspartoftheContinuousProfessionalDevelopmentprogramme,allthedirectorsoftheGroupattendedafulldaytrainingon15thSeptember2014covering:

• AreviewoftheregulatoryenvironmentintheEastAfricaregion

• TheRegulatorylandscape,aBaselperspective

• Supervisoryexpectationsofbanks

• RoleoftheRegulator

Directors also gain further knowledge about the Group through site visits, informal interaction with management and staff,regularin-depthreportsandpresentations.

Inordertoassessandimprovethecapacity,functionalityandeffectivenessoftheBoardanditsCommittees,anannualself-evaluationreviewisundertaken.Theself-evaluationreviewsthecapacity,functionalityandeffectivenessoftheBoardandindividualDirectorsduringthefinancialyear.ThereviewisalsoinaccordancewiththerequirementsoftheCentralBankofKenyaPrudentialGuidelinesonCorporateGovernance.

TheevaluationmeasurestheperformanceoftheBoardagainstitskeydutiesandresponsibilities,thatofitscommitteesandindividualmembersoftheBoard.

The 2014 evaluation process was conducted through questionnaires and the Directors were evaluated against the followingcriteriaamongstothers;

• EffectivepreparationforandparticipationatmeetingsoftheBoardanditsCommittees.

• Understandingofbusinessandspecifically thefinancial industry,andkeepingabreastof the latestdevelopments in theeconomygenerallyandparticularlythebankingsector.

NIC BANK LIMITED



• CommunicationswithfellowDirectors,managementandotherstakeholders.

• AbilitytotakeanindependentviewonmattersbroughtfordiscussionatBoardandCommitteemeetings.

• Declarationofpersonal interestsandensuringthattheyavoidparticipationindecisionmakingwheresuchinterestsarediscussed.

• Awarenessandcompliancewithregulatoryguidelines.

• RegularattendanceatBoardandCommitteemeetings.

Overall,itisconsideredthatin2014theBoardanditsCommittees;

• Carriedouttheirrolesandresponsibilitiessatisfactorily.

• Regularlyreviewed,formulatedandapprovedthestrategicdirectionoftheGroupinlightofthebusinessenvironmentandregulatoryframework.

• DevelopedappropriatepolicyguidelinestoassistManagementindecisionmaking.

• FulfilledtheirroletotheGroup’svariousstakeholders.

• GenerallyguidedandsupportedtheManagement,whichhasbeenresponsivetotheadviceprovided.

AreportontheoverallevaluationassessmentwassubmittedtotheCentralBankofKenyainaccordancewiththePrudentialGuidelinesonCorporateGovernance.

Code of Conduct & Ethics

TheGrouphasaCodeofConduct&EthicsthatbindsboththeDirectorsandemployees.TheNICBankGrouptakescognizanceofthefactthatitssuccessisdependentontheenvironmentandthecommunitiesinwhichitoperates.TheGrouppolicyensuresthatitsactivitiesmeetandexceedthesocial,economicandenvironmentalexpectationsofitsstakeholders.

TheCodeofConduct&EthicsalsoincludesachapteronGovernanceRiskandCompliancethathighlightstheGroup’scommitmenttohavinganintegratedriskmanagementframework.

AllDirectors,ManagementandstaffofNICBankGroupmustsignanacknowledgementtheyhavereadandunderstoodtheCodeofConduct&Ethics.TheCodeofConduct&Ethics,alongwithourVisionStatement:“Toestablishlongterm,profitablecustomerrelationshipsthroughtheprovisionofacompleterangeofbankingandfinancialservices”;ourMissionStatement:“tobetheleadingfinancialservicesprovidertoourtargetmarket;wearecommittedtothehigheststandardsofserviceandtoexceedingourstakeholders’expectations”;andourValues:“Integrity,Passion,Responsiveness,InnovationandProfessionalism”;guideourethicaldecisionmakingandtheconductofourDirectors,officersandemployees.

TheGroupencouragesemployeesandofficerstoraiseconcernsaboutethicalconductandviolationsoftheCodeofConduct&Ethics.SeniorManagementinvestigatescomplaintsandtakesappropriateaction,escalatingtotheBoardHumanResourcesCommittee if necessary. The whistleblower procedures allow employees to report concerns anonymously, without fear ofretaliation.

Relationship with Shareholders

The Group is committed to relating openly with its shareholders by providing regular information on its performance andaddressinganyareasofconcern.ThisisachievedthroughquarterlypublicationofextractsofitsfinancialperformanceinthedailynewspapersinlinewiththeCentralBankofKenyarequirements,publicationofannualauditedaccounts,andholdingoftheAnnualGeneralMeeting.ThemostrecentlypublishedfinancialresultsarealsoavailableontheGroup’swebsite,www.nic-bank.com.TheGrouphasaninteractivewebsitewhichhastherelevantinformationrelatingtothecompanies.

TheGrouphasengagedtheservicesofaregistrar,Custody&RegistrarServices,whotogetherwiththeGroupCompanySecretary,regularlyaddressissuesraisedbytheshareholders.

NIC BANK LIMITED



Internal Control

TheDirectorsacknowledgetheirresponsibilityassetoutonpage54fortheGroup’ssystemofinternalfinancialcontrol,includingtakingreasonablestepstoensurethatadequatesystemsarebeingmaintained.InternalcontrolsystemsaredesignedtomeettheparticularneedsoftheGroup,andtheriskstowhichit isexposedwithproceduresintendedtoprovideeffective internalfinancialcontrol.

The Board has reviewed the Group’s internal control policies and procedures and is satisfied that appropriate controls andproceduresareinplace.

TheBoardhasputinplaceacomprehensiveriskmanagementframeworktoidentifyallkeyrisks,measuretheserisks,managetheriskpositionsanddeterminecapitalallocations.Thepoliciesareintegratedintheoverallmanagementreportingstructure.TheHeadoftheRiskManagementandComplianceDepartmentreportsdirectlytotheBoard’sRiskManagementCommittee.

TheGroup’sperformancetrendisreportedregularlytotheBoardandincludesananalysisofperformanceagainstbudgetandpriorperiods.Thefinancialinformationispreparedusingappropriateaccountingpolicieswhichareappliedconsistently.

TheGrouphasanInternalAuditDepartmentwhichisanindependentfunctionthatreportsdirectlytotheBoardAuditCommitteeandprovidesindependentconfirmationthattheGroup’sbusinessstandards,policiesandproceduresarebeingcompliedwith.Wherefoundnecessary,correctiveactionisrecommended.

TheGroupalsohasaRiskManagementandComplianceDepartmentwhichreportstotheBoardRiskCommitteethatdevelopsandimplementsthecomplianceframeworkwhileensuringadherencetothecompany’spolicyandregulatoryrequirements.

Going Concern

TheBoardconfirmstheFinancialStatementsarepreparedonagoingconcernbasis,astheDirectorsaresatisfiedthat theGrouphasadequateresourcestocontinueinbusinessfortheforeseeablefuture.Inmakingthisassessment,theDirectorshaveconsideredawiderangeof informationrelatingtopresentandfutureconditions, includingfutureprojectionsofprofitability,cashflowsandcapitalresources.Forthisreason,itcontinuestoadoptthegoingconcernbasiswhenpreparingthefinancialstatements.

NIC BANK LIMITED



SHARE HOLDING PROFILES

TheCompany,throughitsRegistrar,filesreturnsregularlyinlinewiththerequirementoftheCapitalMarketsAuthorityandtheNairobiSecuritiesExchangeunderthelistingregulationsontransactionsrelatedtoshareholders.

Thenumberofshareholdersasat31stDecember2014was25,376(2013–25,097).

A. Principal Shareholders

Thetop10majorshareholders,basedontheGroup’sshareregisterasat31stDecember2014areasfollows:

Names Number of Shares

%

FirstCharteredSecuritiesLtd 101,383,047 15.84

ICEAAssetManagementLtdA/C2000 58,603,280 9.16

LivingstoneRegistrarsLtd 55,870,153 8.73

RivelKenyaLtd 53,063,367 8.29

SaimarLtd 26,922,967 4.21

AmwaHoldingsLtd 13,592,676 2.12

MakimwaConsultantsLtd 8,664,740 1.35

MurwokiHoldingsLimited 7,038,541 1.10

StandardCharteredNomineesA/C9230 6,384,094 1.00

ThuthumaLimited 6,375,645 1.00

Total 337,898,510 52.80

B. Distribution Schedule

Category Number of Shareholders

Number of Shares %

1-500shares 8,352 1,546,396 0.24

501-5,000shares 13,163 26,480,841 4.14

5,001-10,000shares 1,623 11,787,120 1.84

10,001-100,000shares 1,811 51,331,331 8.02

100,001-1,000,000shares 363 102,173,036 15.97

1,000,001andover 64 446,626,879 69.79

Total 25,376 639,945,603 100.00

C. Shareholder Profile

Category Number of Shareholders

Number of Shares %

Localindividualinvestors 23,585 110,463,568 17.26

Localinstitutionalinvestors 1,601 518,395,024 81.01

Foreignindividualinvestors 168 3,810,477 0.60

Foreigninstitutionalinvestors 22 7,276,534 1.14

Total 25,376 639,945,603 100.00

NIC BANK LIMITED


STATEMENT ON CORPORATE GOVERNANCE (Continued)2014 BOARD & BOARD COMMITTEES MEMBERSHIP AND ATTENDANCE

Director Classification Designation Board AuditCredit Risk

Risk Management

Human Resources &

Compensation ExecutiveStategy & Training* Nominations

J P M Ndegwa

Non-executive

ChairmanBoard

Membership √ √ √

Attendance6/6 2/2 1/1

F M MbiruNon-executive

ChairmanCredit Risk Committee

Membership √ √ √ √ √ √

Attendance 6/6 4/4 10/11 2/2 2/2 2/2

J Gachora ExecutiveGroup Managing Director

Membership √ √ √ √ √

Attendance 6/6 11/11 2/2 4/4 2/2

G A MainaNon-executive

ChairmanNominations & Risk ManagementCommittees

Membership √ √ √ √

Attendance 6/6 2/2 4/4 2/2 1/1

F N Mwanzia

Non-executive

ChairmanAudit Committee


Attendance 6/6 4/4 11/11 2/2

A S M Ndegwa

Non-executive

ChairmanExecutive Committee

Membership √ √ √ √ √ √

Attendance 4/6 10/11 2/2 4/4 2/2 1/1

I Ochola-Wilson

Non-executive

ChairmanHuman Resources and CompensationCommittee


Attendance 5/6 4/4 2/2 2/2 2/2

M L Somen

Non-executive


Attendance 5/6 8/11 3/4 2/2

A Dodd ExecutiveMembership √ √ √ √

Attendance 6/6 11/11 4/4 2/2

K ThuoNon-Executive

Membership √ √ √

Attendance 5/6 4/4 2/2

P ShahNon-Executive


Attendance 5/6 10/11 4/4 2/2 1/1

E.NgaineNon-Executive

Membership √

Attendance 4/6

* Represents strategy and training sessions held by the Board during the year 2014.

Notes:

√ Member of respective committee

• WhereadirectordidnotattendaBoardorBoardCommitteemeeting,anacceptableapologyhadbeenreceivedbythe Chairmanwellinadvanceofthescheduledmeeting.

• TheGroupManagingDirectorandExecutiveDirectorarenotmembersoftheAuditCommitteeandtheHuman Resources&CompensationCommitteebutattendbyinvitation.

NIC BANK LIMITED


CORPORATE CITIZENSHIP

Today,bringingtogethertheneedsofbusinessandtheneedsofsocietyisadefiningbusinessissueofourtime.

AtNICBank,webelieve that thestrengthandsustainabilityofourbusinessisdirectlyrelatedtooursociallicensetooperate,which we must earn daily by keeping our promises to ourcustomers, employees, shareholders andcommunities.

AsNICBankGrouplookstowardsthe future, we want to remaincommitted to contributingto economic and societaldevelopment, while behavingethically and improving thequality of life in the localcommunities and the societyat large. Our “Roadmap forWinning” calls out CorporateCitizenship as a crucial buildingblocktowardsthecompany’s3yearstrategy.

OUR CITIZENSHIP AGENDA

Rosalind GichuruDirector-Marketing,Communications&Citizenship

Currently,wearesupportingthefollowingprogrammes;

Palmhouse Foundation

This charitable trust focuses on financing secondaryeducation fordeservingstudents,mentoringthemthroughlife, which in turn has a positive impact on the society.The foundation sponsors bright students from financiallychallengedfamilieswhohavegainedadmissiontonationalandprovincialsecondaryschools.

ThepartnershipbetweenNICBankandPalmhousestartedin2008withtheBanksupportingfourstudents.Sevenyearsdowntheline,theannualsponsorshiphasgrownwithatotalof26studentsfromdifferentcountiesbenefiting.

Besidesthemonetarysupport, theBankhasalso investedin a holistic mentorship program where staff volunteerto participate in the competitive countrywide CandidateSelectionPanelsat thebeginningofeveryyear,aswellasperiodicmentorshipsessionsheldduringtheschoolbreaks.

NIC BANK LIMITED


CORPORATE CITIZENSHIP (Continued)

Edumed Trust

Edumed Trust’s strategic approach aims to address secondaryschool education needs. It channels funds to students byobservinghighstandardsof integrityandaccountability.This isachievedthroughthestudents’selectioncriteriaandtheprudentuseoffundsentrustedtoitbyitspartners.

NIC Bank Group is proud to be associated with this Christiancharitable trust due to its achievements. Established in 1996,Edumedstartedsupportingstudents in1997andcurrentlyhasaportfolioof approximately254students.TheBank’sdonationcatersfor15students’fouryearsinsecondaryschool.

JustlikethePalmhouseFoundationsupport,NICBanknotonlyinvests in monetary form but also in its employees skills bysendingrepresentationtothecandidatesselectionpanelsaswellasmentorshipsessionsforthestudents.

Junior Achievement

JuniorAchievement(JA)isthecountry’slargestorganisationdedicated to educating students and youth aboutentrepreneurship, work readiness and financial literacythroughexperiential,hands-onprograms.

Theorganisation’sprogramsprepareyoungpeople for thereal world by showing them how to generate wealth andeffectively manage it, how to create jobs that make theircommunitiesmorerobust,andhowtoapplyentrepreneurialthinkingtotheworkplace.

Duringtheyear,inadditiontotheannualdonation,theBankhosted students for the Job Shadow Week in Nairobi andMombasa.ItalsosupportedthefinalsforJuniorAchievementCompanyprogram.

The NSE Investment Challenge

NICBank(throughNICSecurities)hasco-sponsoredtheNairobiStockExchange (NSE) InvestmentChallengewithNairobiStockExchange and Smart Youth since 2010. The NSE InvestmentChallengetargetingyouthinuniversitiesandtertiaryinstitutionsexposes them to a proprietary online software (Smart Trader)where they have hands on opportunities to simulate trading ofvirtualsharesandbondslistedontheNSE.

The intention of the competition, which is also a form ofentertainmentthroughthisonlinesimulation,istobuildasavingsand investments culture among the youth through trading ofstocksandbonds.Eachparticipatingteamgetsanonlineaccountwith virtual start-up capital of Kes 3M to trade with using realtimedataofsharesandbondpricesstreamedfromtheNSEfor

thedurationofthecompetitionperiod.StudentsarealsomentoredonlinebyselectedmentorsfromNSE,NICSecuritiesandSmartYouthstaff.Thewinningteamisexpectedtomakethemostprofitsaswellasconsistentlyparticipateinonlinediscussionsaswellasdocumenttheinvestmentdecisionsmadeoverthecourseofthecompetition.

NIC BANK LIMITED


Health

Strengthening the health system is at the core ofthe government’s reform agenda. A strong, well-functioningandsustainablehealthsystem–capableof efficiently delivering and managing health careservices is vital to improving the health status ofKenyans.

The transfer of health service delivery to countygovernments requires new capacity-building andtechnical support. NIC Bank Group has prioritisedefforts to strengthen management of medicalproducts and technologies by supporting theMombasa County Government through the MabatiMedicalClinicCentreinMariakani.

TheMabatiMedicalCentrewasfoundedto improvethehealthofthelocalcommunitybyprovidingaffordablemedicalcaretothepoorusingeffectiveandefficientmedicalfacilities.In2014,theGroupfundedthepurchaseofdiagnosticequipment–X-rayandultrasoundmachinesforthecentresaswellasbuildingthelaboratoryrooms.

Besides, the above, the Bank also supported Nairobi Hospital Children’s Heart Fund through their annual 2014fundraisingprogramthemed‘GivingLittleHeartsBigDreams’.Thedonationwenttowardsprovidingsupport to30needychildren.

TheBankalsodonatedtotheannualMaterHeartRunProgramandralliedstaffmemberstoparticipateintheannualwalkthatisaimedatraisingfundstosupportthecostlycardiacsurgeryoperationforneedychildren.

Additionalfinancial support toFarajaCancerSupportTrustand the jiggereradicationkitty support toAhadiTrustinKamahindu,Lari, capped theBank’s initiativeonhealth in2014.AhadiKenyaworks inpartnershipwithseveralcorporatebodiesinKenyainthetreatmentandfumigationofjiggersandfleas,ineducationandawarenesscreationonthejiggerplightandsomeofthewaysofpreventingtheirexistenceandrecurrence.


“Braving the wild waters of Sagana in the fight against cancer”,

NIC staff participate in the white water rafting challenge

organized by Faraja Cancer Support Trust.

“This is how it’s done” NIC Bank Group Managing Director John

Gachora demonstrates how to correctly clean feet during a jigger

eradication campaign held at Kamahindu Primary School.

NIC BANK LIMITED



GOINGFOWARD »

Inthesecondhalfof2014theNIC Bank launched a robustthree-yearCitizenshipstrategyfocusing on four key pillars:Education, Innovation, HealthandHumanitarianassistance/emerging business needs/environment.

With these four pillars,the Bank seeks to shape asustainable future for thecommunitythroughoptimisingon our existing skills set andsynergieswithpartners.

Educationisthemostsignificantindicatorofsocialprogress.Withtheincreasingglobalrealizationofhowthebusinesscommunitycan(andshould)contributetosocialobjectives,supportingeducationisanimportantagendaforNICBankGroup.SupportingeducationespeciallyofbrightstudentsfromdisadvantagedbackgroundsisinlinewiththenationalagendathatsinglesouteducationandtrainingasavehiclethatwilldriveKenyaintoamiddle-incomeeconomy

Weendeavortobethemostinnovativebank.Innovationplaysapivotalroleineconomicdevelopment.InnovationcanmakeadifferenceinaddressingurgentdevelopmentalchallengesinAfricaandotherdevelopingregionsoftheworld.

Social development is a consequence of good health. Unfortunately, healthhas been poorly invested upon by countries with low human development,andthehealthsectorstillremainslargelyuntappedandcontinuestosufferneglect.Asacorporatecitizenwemustaddressthesechallenges.TheBankconductsannualhealthandsafetyaudits.

Asweendeavor tobea top-tierbank inKenya, it is important that in theadventofanynationwidecrisis,westepupandbeseentobesupportingthenation.Additionaly, theBankhasanEnviromentalandSocialPolicy (ESP)manualwhichasuresasystematicandconsistentapproachtoassessingandmitigatingtheenviromentalandsocialrisks.

OURKEYPILLARS

Launch of E-learning portal

The Bank takes cognisance of its vast websavvy staff hence integrating e-learning into theorganisation’sstrategicplan.

In December 2014, the Bank launched itsE-Learning portal to enable staff enhance theirprofessionalskillsaswellasbuild theircapacityin thevariousareasofspecialisation.Thisnewlylaunched knowledge management system isembedded on our virtual network, while thecontentisderivedfromeducationpartnersacrosstheglobe.

Staff Team building

The Bank invests in team-building activities to strengthen therelationships among staff and help develop an atmosphere ofconfidence, trust and mutual respect. Our team-building events,dubbedTouchDownSaturdays,wereheldinOctoberandNovemberthroughaJungleEditiondubbed‘LeaveNoManBehind’.

Thethemeallowedforanevengreaterexplorationandimprovementofthepotentialofallemployees,bygivingthemmorevariedoptionsforworkingtogetherforagreaterlengthoftime.

NICBANKLIMITED

AnnualReport&FinancialStatements•201448

EMPLOYEE WELFARE

At NIC Bank Group, EmployeeWelfare is among the cogs thatmove the strategy wheels of thebusiness. The Group’s prioritiesarefocusedonpromotingefficientmanagement of human resourcesand a continuous increase inemployees’ professional skills,motivation,healthandsafety.

Monicah W. KihiaDirector-HumanResources

NIC BANK LIMITED


Work place wellness programs

TheBankrecognisesthathealthieremployeesmakefor a stronger company. NIC Bank is committedto building a workplace with more staff solidarity,greaterproductivityandlessabsenteeism.

NICBankhasovertheyearsheldWellnessmonthsinallitsofficesandbranches.TogetherwithitspreferredpartnerAON,NIChasorganisedstaffmedicalcampsat its offices and organised with reputable medicalinstitutionstoofferexamsthatneedmoretechnicalanalyses.

With such medical camps, staff are given theopportunity to monitor their health with variouscheck-ups,including:-bloodpressure,bloodsugarandcholesterol,eyecheck-up,dentalassessmentsand body composition among other quick analysisdoneonthespot.

Flu vaccines and cervical cancer screening wereprovided to staff and their families at subsidizedrates.

During the Breast Cancer Month, in October 2014,theBankorganisedworkshopsaimedatgivingstaffabasicunderstandingofbreastcancerrisk,factors,cause,symptoms,diagnosisandtreatmentofbreastcancer.Thestaffarealsotaughtthepropertechniquefordoingabreastexamination.

EMPLOYEE WELFARE (Continued)

NIC staff run to eradicate jiggers during the annual staircase relay

held at the KICC.Funds raised in the event support treatment and

rehabilitation of children infested with jiggers in Kenya.

An NIC Staff prepares to donate blood during a blood drive.

NIC staff and family during the annual team building session at Karura forest.

NIC staff mark the cancer month in style, during the month themed

pinktober.

NIC BANK LIMITED


Over the course of 2014, we maintained progressively good growth, delivering against a balanced scorecard of growth and efficiency supported by a strong governance and control framework.

Annual Growth

John Gachora Group Managing Director

Financial Highlights

NIC BANK LIMITED


27%Increase in Profit

After tax to

Shs 4.1b

20%Increase in Net

Operating Income to

Shs11.2b

10%Increase in Customer

Deposits to

Shs 100.4b

24%Increase in Loans and Advances to

Customers to

Shs 100.6b

20%Increase in Total

Assets to

Shs 145.8b

33%Increase in Total

Equity to

Shs 22.9b

NIC BANK LIMITED


DIRECTORS’ REPORTTheBoardofDirectorshaspleasureinsubmittingtheannualreporttogetherwiththeauditedfinancialstatementsfortheyearended31December2014inaccordancewithSection22oftheBankingActandSection157oftheKenyanCompaniesActwhichdisclosesthestateofaffairsofNICBankLimited(the“Bank”/”Company”)anditssubsidiaries(together,the“Group”).

1. ACTIVITIES

TheprincipalactivitiesoftheGrouparetheprovisionofretailandcorporatebanking,stockbrokerage,bancassurance,investmentbankingservicesandLeasing.

2. RESULTS FOR THE YEAR

TheGroupprofitfortheyearofShs4,116,674,000(2013:Shs3,237,301,000)hasbeenaddedtoretainedearnings.

3. MEDIUM TERM NOTE /BOND

TheBanklaunchedaShs8billionSubordinatedMediumTermNoteProgrammewiththefirsttrancheofShs3billionbeingissuedin2014.ThefirsttranchereceivedoffersinexcessofShs6.5billionandtheBoardofDirectorsapprovedtheallotmentupsizedtoShs5.5billion.ThebalanceoftheMediumTermNotewillbeissuedwithinthenext5years.

4. RIGHTS ISSUE

FollowingShareholders’approvalduringtheExtraordinaryGeneralMeetingheldon6thAugust2014andsubsequentreceiptofthenecessaryregulatoryapprovals,theBankundertookaRightsIssueofoneshareforeveryfourteensharesheldamountingto42,663,040sharesatadiscountedpriceofShs49.25pershare.Theissueregistereda121%oversubscriptionandresultedinanincreaseofsharecapitalbyShs213,315,200(Shs5pershare)andsharepremiumofShs1,887,839,520(Shs44.25pershare).

5. DIVIDENDS

No interimdividendwaspaid toshareholders in theyear.TheBoardhasresolved to recommend to theshareholdersat theforthcomingAnnualGeneralMeeting,scheduledfor20thMay2015,thepaymentofafirstandfinaldividendfortheyearofShs1.00pershare(2013:interimdividendofShs0.25andfinaldividendofShs0.75).ThedividendwillbepayabletotheshareholdersregisteredontheCompany’sregisteratthecloseofbusinesson9thApril,2015andwillbepaidonorabout20thMay2015.Theregisterwillremainclosedforonedayon10thApril,2015.

Thetotaldividendfortheyear,therefore,isShs1.00(2013:Shs1.00)foreveryoneordinaryshareamountingtoShs639,946,000(2013:Shs542,984,000).

6. NIC PROPERTIES LIMITED

InApril2014,theBankacquireda100%shareholdinginCodicoteLimitedforaconsiderationofShs550million.ThesoleassetofCodicoteLimitedisLandknownasLRNO.209/13628,whichisadjacenttotheheadquartersoftheBankinUpperhill,Nairobi.

ThecompanynameofCodicoteLimitedwassubsequentlychangedtoNICPropertiesLimited.ThesoleactivityofNICPropertiesLimitedistheownershipoftheaboveland.

7. NIC BANK TANZANIA LIMITED

InNovember2013,theBoardofDirectorsoftheBankapprovedfullparticipationinthesecondRightsIssueofNICBankTanzaniaLimitedforTZShs8.5billion(Shs714million)andthetake-upofanyRightsthatwerenotexercisedbytheothershareholders.NICBankLimitedinvestedTZShs5.6billion(Shs366million)inDecember2013andanadditionalTZShs302million(Shs16million)in2014relatingtoRightsnottakenupbyminorityshareholders.TheRightsIssuewasconcludedon30thJune2014andtheBank’sshareholdinginNICBankTanzaniaLimitedincreasedfrom68.97%to69.84%.

NIC BANK LIMITED


DIRECTORS’ REPORT (Continued)8. DIRECTORS

Thedirectorswhoheldofficeduringtheyearandtodateareshownonpage2.InaccordancewithArticles97oftheArticlesofAssociation,EstherNkathaNgainewhowasappointedasaDirectoron18thJune2014retiresfromofficeandbeingeligible,offersherselfforre-election.Inaccordancewitharticles108,109and110oftheArticlesofAssociation,MLSomen,GAMainaandFNMwanziaretirebyrotationand,beingeligible,offerthemselvesforre-election.

10. AUDITOR

Theauditor,PricewaterhouseCoopers,hasexpresseditswillingnesstocontinueinofficeinaccordancewithSection159(2)oftheCompaniesAct(Cap.486).

11. APPROVAL OF FINANCIAL STATEMENTS

ThefinancialstatementswereapprovedandauthorisedforissuebytheBoardofDirectorson4thMarch2015.

BY ORDER OF THE BOARD

L MURAGE Group Company Secretary

NIC BANK LIMITED


STATEMENT OF DIRECTORS’ RESPONSIBILITIESTheKenyanCompaniesActrequiresthedirectorstopreparefinancialstatementsforeachfinancialyearthatgiveatrueandfairviewofthestateofaffairsoftheGroupandtheBankasattheendofthefinancialyearandoftheGroup’sprofitorloss.ItalsorequiresthedirectorstoensurethattheBankkeepsproperaccountingrecordsthatdisclose,withreasonableaccuracy,thefinancialpositionoftheBank.TheyarealsoresponsibleforsafeguardingtheassetsoftheBank.Thedirectorsacceptresponsibilityforthepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatementswhetherduetofraudorerror.Theyalsoacceptresponsibilityfor:• Designing,implementingandmaintaininginternalcontrolnecessarytoenablethepreparationoffinancialstatementsthatare

freefrommaterialmisstatements,whetherduetofraudorerror;• Selectingandapplyingappropriateaccountingpolicies;and• Makingaccountingestimatesandjudgementsthatarereasonableinthecircumstances.

ThedirectorsareoftheopinionthatthefinancialstatementsgiveatrueandfairviewofthestateofthefinancialpositionoftheGroupandoftheBankat31December2014andoftheGroup’sfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheKenyanCompaniesAct.

NothinghascometotheattentionofthedirectorstoindicatethattheBankanditssubsidiarieswillnotremainagoingconcernforatleasttwelvemonthsfromthedateofthisstatement.

ApprovedbytheBoardofDirectorson4thMarch2015andsignedonitsbehalfby:

J P M NDEGWA J GACHORA(Chairman) (Group Managing Director)

NIC BANK LIMITED


INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF NIC BANK LIMITED

Report on the consolidated financial statementsWehaveauditedtheaccompanyingfinancialstatementsofNICBankLimited(the“Bank”)anditssubsidiaries(together,the“Group”),setoutonpages56to143.Thesefinancialstatementscomprisetheconsolidatedstatementoffinancialpositionasat31December2014andtheconsolidatedstatementsofprofitorloss,comprehensiveincome,changesinequityandcashflowsfortheyearthenended,togetherwiththestatementoffinancialpositionoftheBankstandingaloneat31December2014andthestatementsofprofitorloss,comprehensiveincome,changesinequityandcashflowsoftheBankfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Directors’ responsibility for the financial statementsThedirectorsareresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheKenyanCompaniesActandforsuchinternalcontrol,asthedirectorsdeterminenecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatements,whetherduetofraudorerror.

Auditor’s Responsibility Ourresponsibilityistoexpressanindependentopiniononthefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformouraudittoobtainreasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatement.Anaudit involvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosures inthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheBank’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

OpinionInouropinion,theaccompanyingfinancialstatementsgiveatrueandfairviewofthefinancialpositionoftheGroupandtheBankat31December2014andofthefinancialperformanceandcashflowsoftheGroupandtheBankfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandtheKenyanCompaniesAct.

Report on other legal requirements AsrequiredbytheKenyanCompaniesActwereporttoyoubasedonourauditthat:• wehaveobtainedall the informationandexplanationswhich to thebestofourknowledgeandbeliefwerenecessary for the

purposesofouraudit;• inouropinionproperbooksofaccounthavebeenkeptbytheBank,sofarasappearsfromourexaminationofthosebooks;• theBank’sstatementsoffinancialpositionandprofitorlossaccountareinagreementwiththebooksofaccount.Theengagementpartnerresponsiblefortheauditresultinginthisindependentauditor’sreportisCPAKang’eSaiti–P/No1652.

Certified Public Accountants Nairobi31stMarch,2015

PricewaterhouseCoopersCPA.PwCTower,WaiyakiWay/ChiromoRoad,WestlandsPOBox43963–00100Nairobi,KenyaT:+254(20)2855000F:+254(20)2855001www.pwc.com/ke

Partners:AErikssonKMuchiruMMugasaFMuriuPNgahuANjeruRNjorogeBOkundiKSaitiRShah

NIC BANK LIMITED


STATEMENT OF PROFIT OR LOSS FORTHEYEARENDED31DECEMBER2014

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Note Shs’000 Shs’000

12,376,325 10,313,258 Interest income 7 13,711,068 11,642,416

(5,096,846) (3,779,478) Interest expense 8 (5,712,949) (4,374,437)

7,279,479 6,533,780 NET INTEREST INCOME 7,998,119 7,267,979

(295,494) (479,185) Credit impairment charges 12(c) (329,133) (1,092,873)

6,983,985 6,054,595 Net interest income after credit impairment charges 7,668,986 6,175,106

1,356,149 1,136,212 Fee and commission income 9 1,532,293 1,303,629

(52,283) (52,323) Fee and commission expense 9 (65,041) (63,111)

1,303,866 1,083,889 NET FEE AND COMMISSION INCOME 1,467,252 1,240,518

1,344,782 1,229,908 Net trading income 10 1,448,056 1,363,033

286,131 253,995 Other operating income 11 592,831 551,656

9,918,764 8,622,387 NET OPERATING INCOME 11,177,125 9,330,313

(2,051,939) (1,896,850) Employee benefits 13 (2,560,942) (2,367,508)

(391,854) (363,966) Depreciation and amortisation 14(a) (504,635) (446,106)

(1,393,690) (1,140,714) Other operating expenses 14(b) (1,880,898) (1,507,128)

(3,837,483) (3,401,530) OPERATING EXPENSES (4,946,475) (4,320,742)

6,081,281 5,220,857 PROFIT BEFORE INCOME TAX 6,230,650 5,009,571

(2,062,114) (1,835,281) Income tax expense 15(a) (2,113,976) (1,772,270)

4,019,167 3,385,576 PROFIT FOR THE YEAR 4,116,674 3,237,301

Profit for the year attributable to:

4,019,167 3,385,576 Equity holders of the Bank 4,120,855 3,323,381

- - Non-controlling interests (4,181) (86,080)

4,019,167 3,385,576 4,116,674 3,237,301

Shs 6.90 Shs 6.24 EARNINGS PER SHARE (SHS) - BASIC 16 Shs 7.07 Shs 6.12

Thenotesonpages62to143areanintegralpartofthesefinancialstatements.

NIC BANK LIMITED


STATEMENT OF COMPREHENSIVE INCOME FORTHEYEARENDED31DECEMBER2014

Bank Group

2014 2013 2014 2013


4,019,167 3,385,576 PROFIT FOR THE YEAR 4,116,674 3,237,301

OTHER COMPREHENSIVE INCOME:

Items that will not be subsequently reclassified to profit or loss

- 39,243 Revaluation surplus on property 36(b) - 39,243

Items that may be subsequently reclassified to profit or loss

7,166 (179,036)Fair value (loss)/ gain on available for sale investments, net of deferred tax 36(c) (79,089) (175,407)

- -Exchange differences on translation of foreign operations 36(d) 42,269 (122,324)

7,166 (139,793) OTHER COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX (36,820) (258,488)

4,026,333 3,245,783 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 4,079,854 2,978,813

Attributable to:

4,026,333 3,245,783 Equity holders of the Bank 4,084,035 3,064,893

- - Non-controlling interests (4,181) (86,080)

4,026,333 3,245,783 4,079,854 2,978,813


NIC BANK LIMITED


STATEMENT OF FINANCIAL POSITION ASAT31DECEMBER2014

Bank Group

2014 2013 2014 2013Shs’000 Shs’000 Note Shs’000 Shs’000

ASSETS

9,106,501 7,044,946 Cash and balances with Central Banks 17 10,539,496 8,743,544

484,521 215,693 Items in the course of collection 18 519,958 243,514 7,843,903 4,189,408 Due from banking institutions 19 8,753,909 5,920,199

16,454,111 15,946,330 Government securities 20 19,223,686 18,093,150 118,781 41,232 Derivative assets 21 118,781 48,049

92,957,230 75,038,910 Loans and advances to customers 22 100,575,330 81,418,136 1,060,332 1,190,474 Other assets 23 1,286,699 1,531,206

56,570 - Current income tax 15(c) 185,185 188,847 2,098,420 2,044,162 Due from group companies 24 - - 5,398,306 5,440,670 Investments 25 1,615,965 2,325,637

843,775 825,910 Property and equipment 27 1,079,110 1,119,264 548,776 629,560 Intangible assets 28 1,045,559 1,095,155

7,125 7,250 Operating lease prepayments 29 523,125 7,250 109,113 302,269 Deferred income tax 26 313,702 328,788

137,087,464 112,916,814 Total assets 145,780,505 121,062,739

LIABILITIES92,791,078 84,236,189 Customer deposits 30 100,434,954 91,565,005

4,625,406 4,910,171 Due to banking institutions 31 5,411,664 5,896,33413,844,209 3,628,169 Borrowings 32 14,358,480 3,628,169

809,452 537,980 Due to group companies 33 - -- 296,595 Current income tax 15(c) 12,613 306,709

1,676,419 1,604,548 Other liabilities 34 2,129,198 2,025,38382,883 72,233 Unclaimed dividends 35 82,883 72,233

113,829,447 95,285,885 Total liabilities 122,429,792 103,493,833

EQUITYCapital and reserves attributable to equity holders of the Bank

3,199,728 2,714,921 Share capital 36(a) 3,199,728 2,714,9212,731,255 1,208,068 Share premium 36(a) 2,731,255 1,208,068

184,764 189,545 Revaluation surplus on property 36(b) 184,764 189,545(202,657) (209,823) Investments revaluation reserve 36(c) (285,283) (206,194)

- - Foreign currency translation reserve 36(d) (494,149) (536,418)919,004 729,104 Regulatory reserve(s) 36(e) 1,041,058 975,617

- - Other reserves 36(f) (157,172) (154,126)15,785,977 12,591,876 Retained earnings 36(g) 16,012,992 12,592,743

639,946 407,238 Proposed dividend 35 639,946 407,238

23,258,017 17,630,929Total capital and reserves attributa-ble to equity holders of the Bank 22,873,139 17,191,394

- - Non-controlling interests 37 477,574 377,512

23,258,017 17,630,929 Total equity 23,350,713 17,568,906

137,087,464 112,916,814 Total liabilities and equity 145,780,505 121,062,739

Thefinancialstatementsonpages56to143wereapprovedandauthorisedforissuebytheBoardofDirectorson4thMarch2015andweresignedonitsbehalfby J P M NDEGWA J GACHORA(Chairman) (Group Managing Director)

F N MWANZIA L MURAGE(Director) (Group Company Secretary)

NIC BANK LIMITED


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NIC BANK LIMITED


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NIC BANK LIMITED


STATEMENT OF CASH FLOWS FORTHEYEARENDED31DECEMBER2014

Bank Group

2014 2013 2014 2013


CASH FLOWS FROM OPERATING ACTIVITIES

4,815,676 (1,072,049) Cash generated from / (used in) operations 39 (a) 3,364,099 (1,164,223)

(2,213,588) (1,940,225) Income tax paid 15 (c) (2,284,718) (2,052,900)

2,602,088 (3,012,274) Net cash from/ (used in) operating activities 1,079,381 (3,217,123)

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in NIC Bank Tanzania:

(16,008) (349,357) - acquisition of interest from non-controlling interest 37 (a) (16,008) (349,357)

- (730,813) - rights issues of shares - -

- - Investment in NIC Securities (683) (17,870)

Investment in NIC Properties:

(550,000) - - Acquisition (Share capital) 25 (a) - -

- - - Leasehold land addition 29 (516,000) -

- - - Goodwill 28 (b) (34,000) -

(233,254) (197,243) Purchase of property and equipment 27 (293,402) (303,434)

(95,658) (148,415) Purchase of intangible assets 28 (a) (105,329) (156,697)

1,245 12,107 Proceeds from sale of motor vehicle and equipment 39 (c) 1,245 12,145

(893,675) (1,413,721) Net cash used in investing activities (964,177) (815,213)

CASH FLOWS FROM FINANCING ACTIVITIES

(396,588) (660,451) Dividends paid 35 (396,588) (660,451)

- -Rights issue of shares to non-controlling interests in NIC Bank Tanzania 37 (a) 117,888 155,157

2,101,154 - Rights issue of shares 2,101,154 -

(93,160) (731) Bonus and rights issue expenses paid 36 (a) (93,160) (731)

1,611,406 (661,182) Net cash generated from/(used in) financing activities 1,729,294 (506,025)

3,319,819 (5,087,177)NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,844,498 (4,538,361)

4,909,299 9,996,476 CASH AND CASH EQUIVALENTS AT 1 JANUARY 7,561,599 12,110,149

- - Effect of foreign exchange rate changes 122,334 (10,189)

8,229,118 4,909,299 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 39 (b) 9,528,431 7,561,599


NIC BANK LIMITED


NOTES TO THE FINANCIAL STATEMENTSFORTHEYEARENDED31DECEMBER2014

1) Reporting EntityNICBankLimited(the“Bank/Parent”)anditssubsidiaries(together,the“Group”)provideretail,corporatebanking,brokerage,bancassurance,leasingandinvestmentbankingservices.NICBankLimitedisincorporatedinKenyaundertheCompaniesActasapubliclimitedliabilitycompanyandisdomiciledinKenya.TheBank’ssharesarelistedontheNairobiSecuritiesExchange(NSE).NICBankLimitedanditssubsidiariesoperateinKenya,TanzaniaandUgandathroughitssubsidiariesNICBankTanzaniaLimitedandNCBankUgandaLimited.

The address of its registered office is as follows:

LR Plot No.8182NIC House, Masaba RoadP O Box 44599-00100Nairobi

FortheKenyaCompaniesActreportingpurposes,thebalancesheetisrepresentedbythestatementoffinancialpositionandprofitandlossaccountbythestatementofprofitorlossinthesefinancialstatements.

2) Standards and interpretations affecting the reported result or financial position

Theprincipalaccountingpoliciesappliedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresented,unlessotherwisestated.

Basis of preparation

Thefinancialstatementshavebeenprepared inaccordancewith InternationalFinancialReportingStandards(IFRS)andIFRSInterpretationsCommittee(IFRIC)applicabletocompaniesreportingunderIFRS.

i) Basis of measurement Themeasurementbasisusedisthehistoricalcostbasisexceptwhereotherwisestatedintheaccountingpoliciesbelow.Forthoseassetsandliabilitiesmeasuredatfairvalue,fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Whenmeasuringthefairvalueofanassetoraliability,theBankusesmarketobservabledataasfaraspossible.Ifthefairvalueofanassetoraliabilityisnotdirectlyobservable,itisestimatedbytheBankusingvaluationtechniquesthatmaximisetheuseofrelevantobservableinputsandminimisetheuseofunobservableinputs(e.g.byuseofthemarketcomparableapproachthatreflectsrecenttransactionpricesforsimilaritemsordiscountedcashflowanalysis).Inputsusedareconsistentwiththecharacteristicsoftheasset/liabilitythatmarketparticipantswouldtakeintoaccount.Fairvaluesarecategorisedintothreelevelsoffairvaluehierarchybasedonthedegreetowhichtheinputstothemeasurementsareobservableandthesignificanceoftheinputstothefairvaluemeasurementinitsentirety:- Level1fairvaluemeasurementsarederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassetsor liabilities.- Level2fairvaluemeasurementsarederivedfrominputsotherthanquotedpricesincludedwithinLevel1thatare observablefortheassetorliability,eitherdirectly(ieasprices)orindirectly(iederivedfromprices).- Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetor liabilitythatarenotbasedonobservablemarketdata(unobservableinputs).TransfersbetweenlevelsofthefairvaluehierarchyarerecognisedbytheBankattheendofthereportingperiodduringwhichthechangeoccurred.

NIC BANK LIMITED


NOTES TO THE FINANCIAL STATEMENTS (Continued)FORTHEYEARENDED31DECEMBER2014

2) Standards and interpretations affecting the reported result or financial position (Continued)

Basis of preparation(Continued)

ii) Use of estimatesThepreparationoffinancialstatementsinconformitywithIFRSrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresthedirectorstoexercisetheirjudgmentintheprocessofapplyingtheGroup’sandBank’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgmentorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedinnote5.

iii) Changes in accounting policy and disclosures

Adoption of new and revised standards Allnewandrevisedstandardsandinterpretationsthathavebecomeeffectiveforthefirsttimeinthefinancialyearbeginning1January2014arenotmaterialtotheBankandGroup.Theseinclude:Amendments to IAS 32, ‘Financial instruments:Presentation’onoffsettingfinancialassetsandfinancial liabilities.Thisamendmentclarifiesthattherightofset-offmustnotbecontingentonafutureevent.Itmustalsobelegallyenforceableforallcounterpartiesinthenormalcourseofbusiness,aswellasintheeventofdefault, insolvencyorbankruptcy.Theamendmentalsoconsiderssettlementmechanisms.TheamendmentdidnothaveasignificanteffectontheGroupfinancialstatements.Amendments to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and thecontinuation of hedge accounting. This amendment considers legislative changes to ‘over-the-counter’ derivatives andtheestablishmentofcentralcounterparties.UnderIAS39novationofderivativestocentralcounterpartieswouldresultindiscontinuanceofhedgeaccounting.Theamendmentprovidesrelieffromdiscontinuingofhedgeaccountingwhennovationofahedginginstrumentmeetsspecifiedcriteria.TheGrouphasappliedtheamendmentandtherehasbeennosignificantimpactontheGroupfinancialstatements.

New and revised standards and interpretations which have been issued but are not yet effectiveTheGrouphasnotappliedthe followingrevisedstandardsand interpretationsthathavebeenpublishedbutarenotyeteffectivefortheyearbeginningafter1January2014.IFRS9,‘Financialinstruments’,addressestheclassification,measurementandrecognitionoffinancialassetsandfinancialliabilities.ThecompleteversionofIFRS9wasissuedonJuly2014.ItreplacestheguidanceinIAS30thatrelatestotheclassificationandmeasurementoffinancialinstruments.IFRS9retainsbutsimplifiesthemixedmeasurementsmodelandestablishesthreeprimarymeasurementcategoriesforfinancialassets:amortisedcost,fairvaluethroughOtherComprehensiveIncome(OCI)andfairvaluethroughprofitorloss.Thebasisofclassificationdependsontheentity’smodelandthecontractualcashflowcharacteristicsofthefinancialasset.InvestmentsinequityinstrumentsarerequiredtobemeasuredatfairvaluethroughprofitorlosswiththeirrevocableoptionatinceptiontochangesinfairvalueinOCInotrecycling.ThereisnowanewexpectedcreditlossesmodelthatreplacestheincurredlossimpairmentmodelusedinIAS39.Forfinancialliabilitiestherewerenochangestotheclassificationandmeasurementexceptfortherecognitionofchangesinowncreditriskinothercomprehensiveincome,forliabilitiesdesignatedatfairvaluethroughprofitorloss.IFRS9relaxestherequirementsforhedgeeffectivenessbyreplacingthebrightlinehedgeeffectivenesstests.Itrequiresaneconomicrelationshipbetweenthehedgeditemandhedginginstrumentandforthe‘hedgedratio’tobethesameastheonemanagementactuallyuseforriskmanagementpurposes.ContemporaneousdocumentationisstillrequiredbutisdifferenttothatcurrentlypreparedunderIAS39.Thestandardiseffectiveforaccountingperiodsbeginningonorafter1January2018.Earlyadoptionispermitted.TheGroupisyettoassessthefullimpactofIFRS9.

NIC BANK LIMITED


NOTES TO THE FINANCIALS STATEMENTS (Continued)FORTHEYEARENDED31DECEMBER2014

2) Standards and interpretations affecting the reported result or financial position (Continued)

Basis of preparation (Continued)

iii) Changes in accounting policy and disclosures (Continued)New and revised standards and interpretations which have been issued but are not yet effective (Continued) IFRS 15, ‘Revenue fromcontractswithcustomers’,dealswithrevenuerecognitionandestablishesprinciplesforreportingusefulinformationtousersoffinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromanentity’scontractswithcustomers.Revenueisrecognisedwhenacustomerobtainscontrolofagoodorserviceandthushastheabilitytodirecttheuseandobtainthebenefitsfromthegoodorservice.Thenewstandardiseffectiveforannualperiodsbeginningonorafter1January2017,andreplacesIAS11andIAS18.TheDirectorsareassessingtheimpactofthestandardsandwillsubsequentlychoosetheadoptiondate.

3. Summary of significant accounting policies

a) Consolidation

i) Subsidiaries

TheconsolidatedfinancialstatementscomprisethefinancialstatementsofNICBankLimitedanditssubsidiarycompaniesmadeupto31December.Subsidiaryundertakingshavebeenfullyconsolidated.Allintercompanytransactions,balancesandunrealisedsurplusesanddeficitsontransactionsbetweenGroupcompanieshavebeeneliminated.

SubsidiariesareallentitiesoverwhichtheGrouphascontrol.Thegroupcontrolsanentitywhenthegroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtothegroup.Theyaredeconsolidatedfromthedatethatcontrolceases.

TheaccountingpoliciesofsubsidiarieshavebeenchangedwhennecessarytoalignthemwiththepoliciesadoptedbytheGroup.

AlistingoftheBank’ssubsidiariesissetoutinNote25(b).

Theacquisitionmethodofaccountingisusedwhensubsidiariesareacquiredbythegroup.Thecostofanacquisitioninabusinesscombinationismeasuredatfairvalue,whichiscalculatedasthesumoftheacquisition-datefairvaluesoftheconsiderationtransferredbytheGroup,liabilitiesassumedbytheGroupfromtheformerownersoftheacquireeandtheequityinterestsissuedbytheGroupinexchangeforcontroloftheacquiree.Acquisition-relatedcostsarerecognisedinprofitorlossasincurred.

Attheacquisitiondate,theacquiredidentifiableassetsandtheliabilitiesassumedaregenerallymeasuredandrecognizedattheirfairvalue.

Goodwill ismeasuredas theexcessof thesumof theconsiderationtransferred, theamountofanynon-controllinginterestsintheacquiree,andthefairvalueoftheGroup’spreviouslyheldequityinterestintheacquiree(ifany)overthenetoftheacquisition-dateamountsoftheidentifiableassetsacquiredandtheliabilitiesassumed.

Intheeventthattheamountsofnetassetsacquiredisinexcessoftheaggregateoftheconsiderationtransferred,theamountofnon-controllinginterestandthefairvalueofGroup’spreviouslyheldequityinterest,thedifferenceisrecognisedimmediatelyinprofitorlossasabargainpurchase.

Inabusinesscombinationachievedinstages,thepreviouslyheldequityinterestisre-measuredattheacquisition-datefairvaluewiththeresultinggainorlossrecognisedinprofitorloss.

Non-controllingintereststhatarepresentownershipinterestsandentitletheirholderstoaproportionateshareoftheentity’snetassetsintheeventofliquidationmaybeinitiallymeasuredeitheratfairvalueoratthenon-controllinginterests’proportionateshareoftherecognisedamountsoftheacquiree’sidentifiablenetassets.Thechoiceofmeasurementbasisismadeonatransaction-by-transactionbasis.Othertypesofnon-controllinginterestsaremeasuredatfairvalueor,whenapplicable,onthebasisspecifiedinanotherIFRS.

Additionalinformationrequiredbytheregulatorybodiesisincludedwhereappropriate.

NIC BANK LIMITED


NOTES TO THE FINANCIALS STATEMENTS (CONTINUED)FORTHEYEARENDED31DECEMBER2014

3) Summary of significant accounting policies (Continued)

a) Consolidation (Continued)

ii) Changes in ownership interest in subsidiaries without change of controlTransactionswithnon-controllingintereststhatdonotresultinlossofcontrolareaccountedforasequitytransactions–thatis,astransactionswiththeownersintheircapacityasowners.Thedifferencebetweenfairvalueofanyconsiderationpaidandtherelevantshareacquiredofthecarryingvalueofnetassetsofthesubsidiaryisrecordedinequity.Gainsorlossesondisposalstonon-controllinginterestsarealsorecordedinequity.

b) Foreign currencies

i) Functional and presentation currencyThefinancialstatementsofeachof theGroup’sentitiesaremeasuredusing thecurrencyof theprimaryeconomicenvironmentinwhichtheentityoperates(the“functionalcurrency”).TheconsolidatedfinancialstatementsarepresentedinKenyaShillings,whichistheBank’sfunctionalandpresentationcurrency.Exceptasindicated,financialinformationpresentedinKenyaShillingshasbeenroundedtothenearestthousand.

ii) Transactions and balancesForeigncurrencytransactionsthataretransactionsdenominated,orthatrequiresettlement,inaforeigncurrencyaretranslatedintotherespectivefunctionalcurrenciesoftheoperationsusingtheexchangeratesprevailingatthedatesofthetransactions.Attheendofeachreportingperiod,monetaryitemsdenominatedinforeigncurrenciesareretranslatedattheratesprevailingatthatdate.Foreigncurrencyexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatyearendexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedinprofitorloss.Translationdifferencesonnon-monetaryfinancialinstruments,suchasequitiesheldatfairvaluethroughprofitorloss,arereportedaspartofthefairvaluegainorloss.Translationdifferencesonnon-monetaryfinancialinstruments,suchasequitiesclassifiedasavailable-for-salefinancialassets,areincludedinothercomprehensiveincome.

iii) Group companiesTheresultsandfinancialpositionofGroupentitiesthathaveafunctionalcurrencydifferentfromthepresentationcurrencyarere-translatedintothepresentationcurrencyasfollows:Forthepurposeofpresentingconsolidatedfinancialstatements,theassetsandliabilitiesoftheGroup’sforeignoperationsareexpressedinKenyanshillingsusingexchangeratesprevailingatthereportingdate.Incomeandexpenseitemsofforeignoperationsareretranslatedataverageexchangeratesfortheperiod.Foreigncurrencyexchangedifferencesarereportedas“exchangedifferencesontranslationsofforeignoperations”andarerecognisedinothercomprehensiveincomeandpresentedintheforeigncurrencytranslationreserveinequity.

NIC BANK LIMITED




c) Income recognition

i) Interest income and expense

Interestincomeandexpenseforallinterestbearingfinancialinstrumentsarerecognisedinprofitorlossonaccrualbasisusingtheeffectiveinterestmethod.Theeffectiveinterestrateistheratethatexactlydiscountstheestimatedfuturecashpaymentsandreceiptsthroughtheexpectedlifeofthefinancialinstruments(or,whereappropriate,ashorterperiod)tothecarryingamountofthefinancialinstruments.Theeffectiveinterestrateisestablishedoninitialrecognitionofthefinancialinstrument.

Thecalculationoftheeffectiveinterestrateincludesallfeesandpointspaidorreceivedtransactioncosts,anddiscountsorpremiumsthatareanintegralpartoftheeffectiveinterestrate.Transactioncostsareincrementalcoststhataredirectlyattributabletotheacquisition,issueordisposalofafinancialinstrument.

Onceafinancialassetoragroupofsimilarfinancialassetshasbeenwrittendownasaresultofanimpairmentloss,interestincomeisrecognisedusingtherateofinterestthatwasusedtodiscountthefuturecashflowsforpurposesofmeasuringtheallowanceforimpairment.

InterestincomeandexpenseonalltradingassetsandliabilitiesareconsideredtobeincidentaltotheGroup’stradingoperationsandarepresentedtogetherwithallotherchangesinthefairvalueoftradingassetsandliabilitiesinnettradingincome.

ii) Fee and commission income and expenses

Inthenormalcourseofbusiness,theGroupearnsfeesandcommissionincomefromadiverserangeofservicestoitscustomers.Feesandcommissionincomeandexpensesthatareintegraltotheeffectiveinterestrateonafinancialinstrumentareincludedinthemeasurementoftheeffectiveinterestrate.

Otherfeesandcommissionincome,includingaccountservicingfees,investmentmanagementfees,placementfees,brokeragefees,bancassurancefees,andsyndicationfees,arerecognisedastherelatedservicesareperformed.Whenaloancommitmentisnotexpectedtoresultinthedraw-downofaloan,loancommitmentfeesarerecognisedonastraight-linebasisoverthecommitmentperiod.

Otherfeesandcommissionexpenserelatesmainlytotransactionandservicefees,whichareincurredastheservicesarereceived.

iii) Net trading incomeNettradingincomearisesfromthemarginswhichareachievedthroughmarket-makingandcustomerbusinessandfromchangesinmarketvaluecausedbymovementsininterestandexchangerates,equitypricesandothermarketvariables.Itcomprisesgainslesslossesrelatedtotradingassetsandliabilities,andincludesallrealisedandunrealisedfairvaluechanges,interest,dividendsandforeignexchangedifferences.

d) Financial instruments

i) RecognitionRegularpurchasesandsalesoffinancialassetsarerecognisedonthetrade-date–thedateonwhichtheGroupcommitstopurchaseorselltheasset. Loansandreceivablesareinitiallyrecognisedatfairvalueplustransactioncostsandsubsequentlycarriedatamortisedcostusingtheeffectiveinterestmethod.

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d) Financial instruments (Continued)

ii) Classification

1. Financial assets

TheGroupclassifiesitsfinancialassetsintothefollowingcategories:

• Atfairvaluethroughprofitorloss• Loansandreceivables• Held-to-maturityinvestments• Available-for-saleinvestments

Managementdeterminestheappropriateclassificationofitsinvestmentsatinitialrecognition

a) Financial assets at fair value through profit or loss

Thiscategoryhastwosub-categories:Financialassetsclassifiedasheldfortradingandthosedesignatedatfairvaluethroughprofitorlossatinception.

Afinancialasset isclassifiedasheldfortradingifacquiredprincipallyforthepurposeofsellingintheshortterm.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedandeffectiveashedginginstruments.Financialinstrumentsincludedinthiscategoryarerecognisedinitiallyatfairvalue,transactionscostsaretakendirectlytoprofitorloss.Gainsandlossesarisingfromchangesinfairvalueareincludeddirectlyinprofitorloss.

Thegroupdesignatescertainfinancialassetsuponinitialrecognitionasatfairvaluethroughprofitorloss(fairvalueoption). Thisdesignationcannotsubsequentlybechangedandcanonlybeappliedwhen the followingconditionsaremet:

theapplicationofthefairvalueoptionreducesoreliminatesanaccountingmeasurementmismatchor

thefinancialassetsarepartofaportfoliooffinancialinstrumentswhichisriskmanagedandreportedtokeymanagementpersonnelonafairvaluebasis.

For theGroup, thesecomprisederivativeassets (Note21), certaingovernmentsecuritiesassetout inNote20,quotedsharesandunquotedequity investments(Note25).Fairvaluechangesrelatingtofinancialassetsdesignatedatfairvaluethroughprofitorlossarerecognisedin‘Netgainsonfinancialinstrumentsdesignatedatfairvaluethroughprofitorloss’under‘nettradingincome’(Note10).

b) Loans and receivables

Loans and advances to customers and trade receivables are non-derivative financial assets with fixed ordeterminablepaymentsandfixedmaturitiesthatarenotquotedinanactivemarketandwhichtheGroupdoesnotintendtosellimmediatelyorinthenearterm.Loansandadvancestocustomersarerecognisedwhencashisadvancedtoborrowers.

c) Held-to-maturity investments

Thesearenon-derivativefinancialassetswithfixedordeterminablepaymentsandfixedmaturitiesthattheGrouphasthepositiveintentionandabilitytoholdtomaturity.Whereasaleoccurs,otherthananinsignificantamountofheld-to-maturityassets,theentirecategorywouldbetaintedandclassifiedasavailableforsale.

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II) Classification (Continued)

1. Financial assets (Continued)

d) Available-for-sale investments

Available-for-salefinancialassetsareassetsthatareintendedtobeheldforanindefiniteperiodoftime,whichmaybesoldinresponsetoneedsforliquidityorchangesininterestrates,exchangeratesorequitypricesorthatarenotclassifiedas(a)financialassetsatfairvaluethroughprofitorloss,(b)loansandreceivables,or(c)financialassetsheldtomaturity.

Availableforsalefinancialassetsareinitiallyrecognisedatfairvalueandmeasuredsubsequentlyatfairvaluewithgainsandlossesbeingrecognisedinothercomprehensiveincomeandaccumulatedintheinvestmentsrevaluationreservewiththeexceptionof;• impairmentlosses,• interestcalculatedusingtheeffectiveinterestratemethod,• foreignexchangegainsandlossesonmonetaryassetswhicharerecognisedinprofitorloss.

2. Financial liabilitiesFinancial liabilitiesarerecognisedwhentheGroupenters into thecontractualprovisionsof thearrangementswithcounterparties,whichisgenerallyontradedate,andinitiallymeasuredatfairvalue,whichisnormallytheconsiderationreceived,netofdirectlyattributabletransactioncostsincurred.Subsequentmeasurementoffinancialliabilitiesisatamortisedcostusingeffectiveinterestratemethod.Financialliabilitiesincludedepositsfrombanksorcustomers,tradepayablesinthebrokerageandborrowingsforwhichthefairvalueoptionisnotapplied.

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II) Classification (Continued)

Classes of financial instrumentsTheGroupclassifiesthefinancialinstrumentsintoclassesthatreflectthenatureofinformationandtakeintoaccountthecharacteristicsofthosefinancialinstruments.Theclassificationmadecanbeseeninthetableasfollows:

Category (as defined by IAS 39) Class (as determined by the Group) Subclasses

Financial assets and liabilities

Financial assets at fair value through profit or loss

Financial assets held for trading

Debt securities (Government securities)

Financial assets designated at fair value through profit or loss

Derivative assetsQuoted sharesUnquoted equity investments

Loans and receivables

Cash and balances with Central Banks (excluding mandatory reserves)Items in the course of collectionDue from banking institutions


Loans to individuals (retail)

OverdraftsCredit cardsTerm loansMortgages

Loans to corporate entities

Large corporate customersSMEsOthers

Other assetsDue from group companies

Held-to-maturity investments

Investment securities - debt securities

Government securities

Available-for-sale financial assets

Investment securities - debt securities


Financial liabilities at armortised cost

Due to banking institutionsDue to group companiesBorrowingsOther liabilities

Deposits from customers

Deposits from individuals (retail)

Retail customers

Deposits from corporate entities

Large corporate customersSMEs

Off-balance sheet financial instruments

Loan commitments

Guarantees, acceptances and other financial facilities

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iii) DerecognitionThe Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, orsubstantiallyalltherisksandrewardsofownershipincidentaltothefinancialassetaretransferred.Afinancialliabilityisderecognisedwhenitscontractualobligationsareredeemedorotherwiseextinguished.

iv) MeasurementFinancialinstrumentsareinitiallyrecognisedatfairvalueplustransactioncosts.Financialassetsat‘fairvaluethroughprofitorloss’aresubsequentlycarriedatfairvalue.Gainsandlossesarisingfromchangesinthefairvalueinthoseassetsarerecognisedinprofitorloss.Gainsandlossesarisingfromchangesinthefairvalueof‘available-for-salefinancialassets’arerecognisedinothercomprehensiveincomeintheperiodinwhichtheyariseandaccumulatedintheinvestmentrevaluationreserves.Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentspreviouslyrecognisedintheinvestmentrevaluationreservesarereclassifiedtoprofitorloss.Dividendsonavailable-for-saleequity instrumentsarerecognisedinprofitorlossaspartofotherincomewhentheGroup’srighttoreceivepaymentsisestablished.The fair values of quoted investments are based on the most representative price within the bid-ask spread. If themarketforafinancialassetisnotactive(andforunquotedsecurities),theGroupestablishesfairvaluebyusingvaluationtechniques that include the use of various valuation methodology. The fair value of financial instruments where noactivemarketexistsorwherequotedpricesarenototherwiseavailablearedeterminedbyusingvaluationtechniques.Inthesecases,thefairvaluesareestimatedfromobservabledatainrespectofsimilarfinancialinstrumentsorusingmodels.Wheremarketobservableinputsarenotavailable,theyareestimatedbasedonappropriateassumptions.Wherevaluationtechniques(forexample,models)areusedtodeterminefairvalues,theyarevalidatedandperiodicallyreviewedbyqualifiedpersonnelindependentofthosethatsourcedthem.Loansandreceivablesandheldtomaturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestratemethod.Financialliabilitiesaresubsequentlymeasuredatamortisedcost.

v) Impairment of financial assets

1. Amounts carried at amortised cost

The Group reviews regularly, on a case-by–case basis, whether any objective evidence exists of impairment,individuallyforfinancialassetsthataresignificantandindividuallyorcollectivelyforfinancialassetsthatarenotindividuallysignificant.Financialassetsareimpairedwhenobjectiveevidencedemonstratesthatalosseventhasoccurredaftertheinitialrecognitionoftheassetandthatthelosseventhasanimpactonthefuturecashflowsoftheassetthatcanbeestimatedreliably.

Loansandreceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.AprovisionforimpairmentofloansandreceivablesisestablishedwhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofthereceivables.Theamountofprovisionisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccount,andtheamountofthelossisrecognisedinprofitorlossas‘Creditimpairmentcharges’.Whenaloanorreceivableisuncollectible,itiswrittenoffagainsttherelatedallowanceaccount.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedthroughprofitorloss.

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v) Impairment of financial assets (Continued)

1. Amounts carried at amortised cost (Continued)Objectiveevidencethatloansandreceivablesareimpairedincludessignificantfinancialdifficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpayments(morethan30daysoverdue),thedisappearanceofanactivemarketforasecurity,orotherobservabledatarelatingtoagroupofassetssuchasadversechanges in thepaymentstatusofborrowersor issuers in thegroup,oreconomicconditionsthatcorrelatewithdefaultsintheGroupareconsideredindicatorsthattheloansorreceivableisimpaired.Inassessingimpairmentlosses,theGroupconsidersthefollowingfactors,ineachcategory:

a. Individually assessed loans• TheaggregateexposuretotheGroup.• Theviabilityof thecustomer’sbusinessmodeland itscapacity to tradesuccessfullyoutoffinancial

difficultiesandgeneratesufficientcashflowstomeetitsdebtobligations.• Therealisablevalueofthesecurity(orothermitigants)andlikelihoodofsuccessfulrepossessionnetof

anycostsinvolvedinrecoveryofamounts.• Theamountandtimingofexpectedreceiptsand,incasesofliquidationorbankruptcy,dividendavailable.• TheextentandcomplexityofothercreditorscommitmentrankingparipassuwiththeGroupandthe

likelihoodofothercreditorscontinuingtosupportthecustomer.

b. Collectively assessed Forloansnotsubjecttoindividualassessment,tocoverlosseswhichhavebeenincurredbuthavenotyetbeenidentified.Forhomogeneousgroupsofloansthatarenotconsideredindividuallysignificant,wherethereisobjectiveevidenceofimpairment.

Homogeneous groups of loansForhomogeneousgroupsof loans thatarenotconsidered individuallysignificant,or inothercases,whentheportfoliosize issmallorwhen information is insufficientornotreliableenough,theGroupadoptsa formulaicapproachwhichallocatesprogressivelyhigherpercentagelossratesinlinewiththeperiodoftimeforwhichacustomer’sloanisoverdue.Lossratesarecalculatedfromthediscountedexpectedfuturecashflowsfromaportfolio. These rates and the expected timing of future recoveries are regularly benchmarked against actualoutcomestoensuretheyremainappropriate.

Loan write – offs Anuncollectibleloaniswrittenoffagainsttherelevantprovisionforimpairment,eitherpartiallyorinfull,whenthereisnorealisticprospectofrecoveryandtheproceedsfromrealisingthesecurityhavebeensubstantiallyorfullyrecovered.

Restructured loans Restructuredloans,whosetermshavebeenrenegotiatedarenolongerconsideredtobepastduebutaretreatedasnewloansaftertheminimumrequirednumberofpaymentsunderthenewarrangementhavebeenreceived.

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v) Impairment of financial assets (continued)

2. Amounts classified as available for saleInthecaseofequitysecuritiesclassifiedasavailable-for-sale,asignificantorprolongeddeclineinthefairvalueofthesecuritybelowitscostisconsideredasanindicatorthatthesecuritiesareimpaired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativelossmeasuredasthedifferencebetweentheacquisitioncostandthecurrentfairvalue,lessanyimpairmentlossonthatfinancialassetpreviouslyrecognisedinprofitorloss–isremovedfromothercomprehensiveincomeandrecognisedinprofitorloss.Impairmentlossesrecognisedinprofitorlossonequityinstrumentsarenotreversedthroughprofitorloss.

vi) Impairment of non-financial assets

At theendof each reportingperiod, theGroup reviews thecarryingamountof its tangibleand intangibleassets todeterminewhetherthereisanyindicationthattheseassetshavesufferedanimpairmentloss.

Ifobjectiveevidenceonimpairmentlossesexists,therecoverableamountoftheassetisestimatedinordertodeterminetheextentoftheimpairmentloss.Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccountandtheamountofthelossisrecognisedinprofitorloss.Incaseswheretheassetiscarriedatrevaluedamount,theimpairmentlossistreatedasarevaluationdecrease.

Indeterminingtherecoverableamount,theGroupconsidersthehigherofthefairvalueoftheassetlesscoststosell,andvalueinuse.Inestimatingvalueinuse,theGroupiscognisantoftheestimatedfuturecashflowsdiscountedtothepresentvalueusingapre-taxdiscountratethatisreflectiveofthecurrentmarketassessmentoftimevalueofmoneyandtherisksspecifictotheassetitself.

Intangibleassetswithindefiniteusefullifearetestedforimpairmentannually,andwhenthereisindicationthattheassetmaybeimpaired.

Whereimpairmentlosssubsequentlyreverses,thecarryingamountoftheasset(orcash-generatingunit)isincreasedtotherevisedestimateofitsrecoverableamount,butsothattheincreasedcarryingamountdoesnotexceedthecarryingamount thatwouldhavebeendeterminedhadno impairment lossbeenrecognised,unlesssuchasset iscarriedatrevaluedamount,inwhichcasethereversaloftheimpairmentlossistreatedasrevaluationincome.

Impairmentlossongoodwillisnotreversed.

e) Offsetting Financialinstrumentsareoffsetandthenetamountreportedinthestatementoffinancialpositionwhenthereisalegalrighttosetofftheamountsandthereisanintentiontosettleonanetbasisortorealisetheassetandsettletheliabilitysimultaneously.

f) Employee expenses

i) Retirement benefit obligations TheGroupoperatesadefinedcontributionplanunderwhichtheGrouppaysfixedcontributionsintoaseparateentity.TheGrouphasnoobligation,legalorconstructive,topayfurthercontributionsiftheschemedoesnothavesufficientassetstopayallemployeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.Theassetsoftheschemeareheldinaseparatetrusteeadministeredfund,whichisfundedbycontributionsfromboththeGroupandtheemployees.Inaddition,theGroupalsocontributestotheNationalSocialSecurityFundinKenya,ParastatalPensionFundinTanzaniaandNationalSocialSecurityFundinUganda,whicharedefinedcontributionschemeregisteredunderrespectiveActsofParliamentintherespectivecountries.

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f) Employee expenses (Continued)

i) Retirement benefit obligation (Continued)TheGroup’scontributionstothedefinedcontributionschemesarechargedtotheprofitorlossintheyearinwhichtheyrelate.Contractstaffareentitledtogratuitypaymentatthecompletionofthecontract.Provisionismadeforgratuityinlinewiththecontracts.

ii) Short-term benefitsShort-termemployeebenefitobligations(e.gmedicalreimbursementsandinsurance)aremeasuredonanundiscountedbasisandareexpensedastheemployeerendersservice.Themonetarybenefitsforemployeeaccruedleaveentitlementatthereportingdatearerecognisedasanexpenseaccrual.

g) Leasehold landPaymentstoacquireleaseholdinterestinlandaretreatedasprepaidoperatingleaserentalsandamortisedonstraightlinebasisovertheperiodofthelease.Whenaleaseincludeslandandbuildingselements,thebankassessestheclassificationofeachelementaseitherafinanceleaseoranoperatinglease.Indeterminingclassificationofthelandelement,animportantconsiderationisthatlandnormallyhasanindefiniteeconomiclife.Thereforethefinanceleaseoroperatingleaseclassificationofthelandisconsideredacriticalareaofjudgment.Seenote5tothesefinancialstatements.

h) Income tax expense

Incometaxexpensecomprisescurrentanddeferredtax.Currenttaxistheexpectedtaxpayableonthetaxableprofitfortheyearusingcurrentlyenactedtaxrates,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Thecurrentincometaxchargeiscalculatedonthebasisoftaxlawsenactedorsubstantivelyenactedatthereportingdate.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespecttosituationsinwhichapplicabletaxregulationissubjecttointerpretation.

Managementestablishesprovisionswhereappropriateonthebasisofamountsexpectedtobepaidtothetaxauthorities.

Deferredtaxisprovidedusingtheliabilitymethod,fortemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtothetemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedbythereportingdate.Currentlyenactedtaxratesareusedtodeterminedeferredtax.

Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassetcanbeutilised.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Thetaxeffectsofcarry-forwardsofunusedlossesorunusedtaxcreditsarerecognisedasanassetwhenitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheselossescanbeutilised.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in othercomprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in othercomprehensiveincomeordirectlyinequityrespectively.Wherecurrenttaxordeferredtaxarisesfromtheinitialaccountingforabusinesscombination,thetaxeffectisincludedintheaccountingforthebusinesscombination.

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i) Earnings per share TheGrouppresentsbasicanddilutedearningspershare(EPS)dataforitsordinarysharesinthefinancialstatements.BasicEPSiscalculatedbydividingtheprofitorlossattributabletoordinaryshareholdersoftheBankbytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinaryshareholdersandtheweightedaveragenumberofordinarysharesoutstandingadjustedfortheeffectsofallpotentiallydilutiveordinaryshares.

j) Dividends on ordinary shares

Dividendsarechargedtoequityintheperiodinwhichtheyaredeclared.ProposeddividendsarenotaccrueduntiltheyhavebeenratifiedattheAnnualGeneralMeeting.

k) Leases

When theGroup is the lessor ina leaseagreement that transferssubstantiallyallof therisksandrewards incidental toownershipofanassettothelessee,thearrangementisclassifiedasafinanceleasewithinloansandreceivables.Allotherlesseesareclassifiedasoperatingleases.

Minimumleasepaymentsmadeunderfinanceleasesareapportionedbetweenthefinanceincomeandthereductionoftheoutstandingprincipal.Thefinanceincomeisallocatedtoeachperiodduringtheleasetermsoastoproduceaconstantperiodicrateofinterestontheremainingbalanceoftheasset.

Rentalincomefromoperatingleasesisrecognisedonastraight-linebasisoverthetermoftherelevantlease.Rentalspayableunderoperatingleasesarechargedtoprofitorlossoverthetermsoftherelevantlease.

l) Repurchase agreements

WhentheGrouppurchasesafinancialassetandsimultaneouslyentersintoanagreementtore-selltheasset(orasubstantiallysimilarasset)atafixedpriceonafuturedate(“reverserepoorstockborrowing”),thearrangementisaccountedforasaloanorreceivable,andtheunderlyingassetisnotrecognisedintheGroup’sfinancialstatements.

m) Property and equipment

i. Recognition and measurement

Itemsoffixturesandequipmentarestatedathistoricalcostlessaccumulateddepreciation.Buildingscomprisingmainlyoftheheadofficearestatedinthestatementoffinancialpositionattheirrevaluedamounts,beingthefairvalueatthedateofrevaluation,lessanysubsequentaccumulateddepreciation.Valuationsareperformedwithsufficientregularitytoensurethatthefairvalueofarevaluedassetdoesnotdiffermateriallyfromitscarryingamount.Anyaccumulateddepreciationatthedateofrevaluationiseliminatedagainstthegrosscarryingamountoftheasset,andthenetamountisrestatedtotherevaluedamountoftheasset.

Costincludesexpendituresthataredirectlyattributabletotheacquisitionoftheasset.Thecostofself-constructedassetsincludesthecostofmaterials,directlabourandanyothercostsdirectlyattributabletobringingtheassettoaworkingconditionforitsintendeduse.Purchasedsoftwarethatisintegraltothefunctionalityoftherelatedequipmentiscapitalisedaspartofthatequipment.

Whenpartsofanitemofpropertyorequipmenthavedifferentusefullives,theyareaccountedforasseparateitemsofpropertyandequipment.

Thegainorlossarisingonthedisposalorretirementofanitemofpropertyorequipmentisdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountoftheassetandisrecognisedinprofitorlossfortheyear.

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m) Property and equipment (Continued)

ii. Subsequent costs

ThecostofreplacingpartofanitemofpropertyorequipmentisrecognisedinthecarryingamountoftheitemifitisprobablethatthefutureeconomicbenefitsembodiedwithinthepartwillflowtotheGroupanditscostcanbemeasuredreliably.Thecostsoftheday-to-dayservicingofpropertyandequipmentarechargedtoprofitorlossfortheyearasincurred.

Inrelationtobuildings,revaluationsareperformedwithsufficientregularitysuchthatthecarryingamountsdonotdiffermateriallyfromthosethatwouldbedeterminedusingfairvalueatthereportingdate.Anyincreasearisingontherevaluationisrecognisedinothercomprehensiveincomeandaccumulatedintherevaluationsurplusonproperty.Decreasesthatoffsetpreviousincreasesofthesameassetarerecognisedinothercomprehensiveincomeandchargedagainsttherevaluationsurplusonproperty;allotherdecreasesarechargedtotheprofitorlossfortheyear.

iii. Depreciation

Depreciationwhichisrecognisedinprofitorlossiscalculatedonastraight-linebasistoallocatethecostsorrevaluedamountsovertheirestimatedusefullivesasfollows:

Building 2.5%

Furniture,fittingsandequipment 20.0%

Motorvehicles 20.0%

Computers 33.3%

Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,attheendofeachreportingperiod.Assetsarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.

Excessdepreciation, representing theadditionaldepreciationbasedon revaluedamountsoverdepreciationbasedonhistoricalcosts,istransferredannuallyfromrevaluationsurplusonpropertytoretainedearnings,netofdeferredtax.

n) Intangible assets

i. Goodwill

GoodwillarisesonbusinesscombinationsthroughacquisitionofsubsidiarieswhenthecostofacquisitionexceedsthefairvalueoftheGroup’sshareoftheidentifiableassets,liabilitiesandcontingentliabilitiesacquired.IftheGroup’sinterestinthefairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesofanacquiredbusinessisgreaterthanthecosttoacquire,theexcessisrecognisedimmediatelyinprofitorloss.

Goodwillisallocatedtocash-generatingunitsforthepurposeofimpairmenttesting,whichisundertakenatthelowestlevelatwhichgoodwillismonitoredforinternalmanagementpurposes.Impairmenttestingisperformedatleastannually,andwheneverthereisanindicationthatthecash-generatingunitmaybeimpaired,bycomparingthepresentvalueoftheexpectedfuturecashflowsfromabusinesswiththecarryingvalueofitsnetassets,includingattributablegoodwill.Goodwillisstatedatcostlessaccumulatedimpairmentlosseswhicharechargedtoprofitorloss.

NIC BANK LIMITED




n) Intangible assets (Continued)

ii. Computer software Costsassociatedwithmaintainingcomputersoftwareprogramsarerecognisedasanexpenseasincurred.DevelopmentcoststhataredirectlyattributabletothedesignandtestingofidentifiableanduniquesoftwareproductscontrolledbytheGrouparerecognisedasintangibleassetswhenthefollowingcriteriaaremet:

• itistechnicallyfeasibletocompletethesoftwareproductsothatitwillbeavailableforuse;

• managementintendstocompletethesoftwareproductanduseorsellit;

• thereisanabilitytouseorsellthesoftwareproduct;

• itcanbedemonstratedhowthesoftwareproductwillgenerateprobablefutureeconomicbenefits;

• adequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorsellthesoftware productareavailable;and

• theexpenditureattributabletothesoftwareproductduringitsdevelopmentcanbereliablymeasured.

Directlyattributablecoststhatarecapitalizedaspartofthesoftwareproductincludethesoftwaredevelopmentemployeecostsandanappropriateportionofrelevantoverheads.Computersoftwaredevelopmentcostsrecognisedasassetsareamortisedovertheirestimatedusefullives,whichisthreetofiveyears.Acquiredcomputersoftwarelicencesarecapitalizedonthebasisofthecostsincurredtoacquireandbringtousethespecificsoftware.Thesecostsareamortisedonthebasisoftheexpectedusefullives.Softwarehasamaximumexpectedusefullifeof5years.

iii. License Separatelyacquiredlicencesinbusinesscombinationare initiallyrecognisedattheirfairvalueattheacquisitiondate.Licenceswithanindefiniteusefullifearenotamortisedandarereviewedateachreportingdatetodeterminewhethereventsandcircumstancescontinuetosupportanindefiniteusefullifeassessmentoftheasset.WheretheGroupre-assessestheusefullifeofanintangibleassetasfiniteratherthanindefinite,theassetmaybeconsideredtobeimpaired.TheGroupteststheassetforimpairmentannuallyandwheneverthereisanindicationthattheintangibleassetmaybeimpairedbycomparingit’srecoverableamount,withthecarryingamountandrecognisinganyexcessofthecarryingamountovertherecoverableamountasanimpairment.

o) Legal and other claims

ProvisionsforlegalclaimsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents;itisprobablethatanoutflowofresourceswillberequiredtosettletheobligation;andtheamounthasbeenreliablyestimated.Provisionsarenotrecognisedforfutureoperatinglosses.

Wherethereareanumberofsimilarobligations,thelikelihoodthatanoutflowwillberequiredinsettlementisdeterminedbyconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.

p) Cash and cash equivalents

Cashandcashequivalentscomprisebalanceswith less than threemonths’maturity from thedateofacquisition.Theseincludesnotesandcoinsonhand,unrestrictedbalancesheldwithCentralBanks,itemsinthecourseofcollectionfromotherbanks,depositsheldatcallwithbanks,netofdepositsandbalancesduetobankinginstitutionsandtreasurybillswithoriginalmaturitiesoflessthanthreemonths.Suchassetsaregenerallysubjecttoinsignificantriskofchangesintheirfairvalue,andareusedbytheGroupinthemanagementofitsshort-termcommitments.

NIC BANK LIMITED




q) Share capital and share premiumOrdinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax,fromtheproceeds.

r) Regulatory reservesIAS39requirestheGrouptorecogniseanimpairmentlosswhenthereisobjectiveevidencethatloansandreceivablesareimpaired.However,prudentialguidelinesissuedbybankingregulatorsrequiretheGrouptosetasideamountsforimpairmentlossesonloansandreceivablesbasedontheirguidelines.ExtralossesoverandabovethosealreadyrecognisedunderIAS39areaccumulatedunderregulatoryreservesthroughappropriationsofretainedearnings.

s) Contingent liabilitiesLettersofcredit,acceptances,guaranteesandperformancebonds,whicharecredit-relatedinstruments,aregenerallygivenbytheGrouptosupportperformancebyacustomertothirdparties.NominalprincipalamountsrepresentamountsatriskshouldtheGroupberequiredtomeettheseobligationsintheeventthecustomerdefaults.Theseobligationsareaccountedforasoffbalancesheettransactionsanddisclosedascontingentliabilities.

t) Fiduciary activitiesTheGroupprovidescustody,trustee,corporateadministration,investmentmanagementandadvisoryservicestothirdparties,whichinvolvetheGroupmakingallocationandpurchaseandsaledecisionsinrelationtoawiderangeoffinancialinstruments.Thoseassetsthatareheldinafiduciarycapacityarenotincludedinthesefinancialstatements.

u) Derivative financial instruments Derivativesarefinancialinstrumentsthatderivetheirvaluefromthepriceofunderlyingitemssuchasequities,bonds,interestrates,foreignexchange,creditspreads,commoditiesandequityorotherindices.Derivativesareintendedtoacquire,increase,reduceoralterexposuretomarketrisks.Thegroupusesderivativesforitscustomersandonitsownaccounttomanageexposuretomarketrisks.Derivativeassetsandliabilitiesondifferenttransactionsareonlysetoffifthetransactionsarewiththesamecounterparty,alegalrightofset-offexistsandthecashflowsareintendedtobesettledonanetbasis.

v) Segmental reporting Operatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecisionmaker(Groupmanagement).ThemanagementthenallocatesresourcestoeachoperatingsegmentoftheGroupandassessestheirperformance.TheoperatingsegmentsarebasedontheGroup’smanagementandinternalreportingstructure.InaccordancewithIFRS8,OperatingSegments,theGrouphasthefollowingbusinesssegments;corporateandinstitutionalbanking,treasurydealingandbrokerage,retailbanking,assetfinanceandinvestmentbankingandothers(seenote6).

w) ComparativesExceptotherwiserequired,allamountsarereportedordisclosedwithcomparativeinformation.Wherenecessary,comparativefigureshavebeenadjustedtoconformtochangesinpresentationinthecurrentyear.

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4) Financial risk management objectives

Group risk management framework and governance structures

Risk management overview

Inthefinancialservicessector,sustainablegrowthinprofitabilityinvolvesselectivelytakingandmanagingrisks.TheGroup’sgoalistoearn,onbehalfofthestakeholders,anoptimal,stableandsustainablerateofreturnforeveryshillingofriskwetake,whilecontinuallyinvestinginourbusinesstomeetourfuturegrowthobjectives.Theriskmanagementresourcesandprocessesaredesignedtoidentify,understand,measureandreportrisksthattheGroup’sbusinessesareexposedto,anddevelopgovernance,controls,andriskmanagementframeworksnecessarytomitigatetheserisksasappropriate.TheseresourcesandprocessesarestrengthenedbytheGroup’sculturewhichemphasisestransparency,accountabilityandresponsibilityformanagingtherisksweareexposedto.

TheGroupdefinesriskasaneventoreventsofuncertaintywhichcanbecausedbyinternalorexternalfactorsresultinginthepossibilityoflosses(downsiderisk).However,theGroupappreciatesthatsomeriskeventsmayresultintoopportunities(upsiderisk)andshouldthereforebeactivelysoughtandexploited.

TheGroupoperatesinanenvironmentofnumerousrisksasshownbelowthatmaycausefinancialandnon-financialresultstodiffersignificantlyfromtheexpectedoutcomes.TheGrouphasanenterprise-wideapproachtotheidentification,measurement,monitoringandmanagementofrisksfacedacrosstheregion.Theserisksareclassifiedasfollows:

Financial risks: • Credit&counterpartyrisk• Liquidity&fundingrisk• Marketriskthatfallwithin:

- Interestraterisk- Foreignexchangerisk- Pricerisk

a) Credit and counterparty risk

CreditandcounterpartyriskisthepotentialforlossduetotheGroup’scustomers’orcounterparties’failureorunwillingnesstomeettheircontractualcreditobligations.ItisthesinglelargestfinancialriskthattheGroupfaces.Itarisesprincipallyfrom,butisnotlimitedto,commercialandretailloansandadvances,commitmentsfromforwardforeignexchangecontracts,financialguarantees,lettersofcreditandacceptances,investmentsindebtsecuritiesandotherexposuresarisingfromtradingandsettlementactivitieswithmarketcounterparties.

Theamountspresentedinthesefinancialstatementsarenetofimpairmentallowancesbasedonprudentassessmentofthecustomers’orcounterparties’abilitiestomeettheircontractualobligations.

TheGroup’slendingprinciplesarelaidoutinanelaborateseriesofcorporatestrategies,policies,standards,guidelines,directivesandprocedures,allofwhicharedeveloped,approvedandreviewedregularlybytheBoardCreditRiskCommitteeandrespectiveRiskManagementCommittees.ThisistoensurepoliciesarecurrentandconsistentwiththeGroup’sriskappetite.Thestructure,limits,collateralrequirements,ongoingmanagement,monitoringandreportingofcreditexposuresareallgovernedbytheseprinciples.

Who manages credit & counterparty risk

TheBoardofDirectorsandSeniorManagementpayspecialattentiontocreditriskexposureatalltimes.TheBoardretainstheresponsibility forunder-writingand independentreviewofthecreditriskexposuresthroughspecificallyconstitutedBoardsub-committees:theBoardCreditRiskCommitteeandtheBoardRiskManagementCommitteerespectively.Tofacilitatethedaytodaymanagementofcreditriski.e.under-writingfunctions,monitoringandcontrol,thereisaspecialised,independentandcentralisedcreditreview/approvalteamheadedbytheDirectofCreditwhoreportstotheGroupManagingDirector.TheBoardofDirectorsretainstheauthoritytoapprovecreditfacilitiesthataresignificantinsizeorcomplexity.

EffectivecreditriskmanagementbeginswithexperiencedandprofessionallendingofficerswhohavebeenformallymandatedtoauthorisecreditexposuresfortheGroup.Theseindividualsaresubjectedtoarigorouslenderqualificationprocessandoperatewithinadisciplinedenvironmentwithcleardelegationofmanagementdiscretionarylimitsatboththeindividualandjointlevelsdependingonthesizeandcomplexitiesofthecreditdecisionstheymake.

Tofacilitatequickcreditdecisions,theBoardCreditRiskCommitteehasgrantedformaldiscretionarylimitstoseveralSeniorManagers(atindividualandcommitteelevels),inlinewiththeirskills,experienceandabilitytomakesoundcreditdecisions.

NIC BANK LIMITED



4) Financial risk management objectives (Continued)

Group risk management framework and governance structures (Continued)

a) Credit and counterparty risk (Continued)

Who manages credit & counterparty risk (Continued)

Toseparatethesalesandcreditunder-writingfunctionsfromcreditoperations,acreditadministrationunitthatreportsdirectlytotheHeadofTechnologyandOperations,handlespost-approvalcreditadministrationaswellasthedailymonitoringofcreditexposuresagainstapprovedlimits.Thistogetherwiththecompletesegregationofsalesactivitiesfromtheunderwritingprocess,maintainsanadequategovernancestructurethateliminatesconflictsofinterestthatmayoccurinthecourseofbusiness.

Creditriskmanagementkeyperformanceindicators,includingthequalityofourcreditportfolios,portfolioconcentrations,amongstothers,areindependentlyreviewedbytheHeadofRiskManagement&CompliancewithoversightfromtheBoardRiskManagementCommittee.

RegularindependentauditsoftheapprovalprocessandadherencetocreditriskmanagementprogramsarecarriedoutbytheInternalAuditDepartment.AdversefindingsaresubmittedtoSeniorManagementandtheBoardAuditCommitteeforinformationandcorrectiveactionsimplementation.Furthermore,auditprogramsarecarriedoutusingariskbasedapproachtoconcentrateactivitieswherehighprobabilityand/orhighimpactriskeventsareenvisaged.

How credit and counterparty risk is managed

Credit and counterparty risk measurement & assessment

Theestimationofcreditexposuresattheindividualandportfoliolevelsiscomplexandrequirestheuseofspecialmodels,asthevalueofproductsorportfoliosvarieswithchangesinmarketvariables,expectedcash-flowsandthepassageoftime.Theassessmentofaportfolioofassets’creditexposuresentailsfurtherestimationofthelikelihoodofdefaultsoccurring,ofassociatedlosses,andofdefaultcorrelationsbetweenborrowersorcounterparties,thefacilitiesgranted,andtheirindustries.Thisisachievedusingacreditratingmodeldevelopedinternallyforuseinthebusiness.

Credit & counterparty risk limit control and mitigation policies

TheBoardCreditRiskCommitteeregularlysets,reviewsandapprovesexposurelimitsforthelargercounterpartiesaswellastolerancelimitsonaportfoliobasis.Inturn,theGroupmanagesthelimitsandcontrolsconcentrationsofcreditriskexposuresagainstinternalandregulatoryrequirementswithrespecttoindividualcounterpartiesorrelatedgroupsofcounterparties,industrysectors,amongstothers.

Exposurestoanyoneborrower(includingbankcounterparties)arefurtherrestrictedbysub-allocatinglimitscoveringseparateonandoff–balancesheetexposures,aswellasdailydeliveryexposures inrelationtotrading itemse.g. forwardforeignexchangecontracts.

Lendinglimitsarereviewedregularlyinlinewiththechangingbusiness/financialrisksoftheborrowers,inadditiontoindustryandgeneraleconomicconditionsinwhichtheyoperate.Toenableprudentandconsistentcreditassessmentsattheindividuallevel, theGrouphasrobustapprovalprocessesandmodelscoveringdifferentbusinesssegments.Thisprocessbasicallycapturestheborrower’sfinancialviability,industry/economicperformance,geopoliticalrisksanditsmanagements’abilitytosteertheorganisation.Thesemodelsaresuitedtocounterpartieswhoarehomogeneousinnatureforeaseoftheiruse.

Limitsforcommercialandcorporateclientsarereviewedatleastonceannually.Thecreditreviewprocessensuresthatanappropriatefacilitystructure,includingcovenantmonitoring,isinplaceforeachclient.Thefrequencyofreviewsisincreasedinaccordancewiththelikelihoodandsize/complexityofpotentialcreditlosses,withdeterioratinghigher-risksituationsreferredtoindependentdebtrecoveryunitsforcloserattentionandremediationwhereappropriate.

Therisksinindustrysectorsaremanagedthroughlimitsandlendingcriteria/guidelinesrelevanttoeachparticularindustry.Borrower limits are set within the context of established guidelines for individual borrowers and particular industries toensuretheGroupdoesnothaveexcessiveconcentrationinanyrelatedgroupofborrowersorindustry.Throughthisportfoliomanagementprocess,loansmaybesyndicatedtoreduceoverallexposuretoasinglenameand/orindustry.

Exposuresagainsttolerancelimitsinrelationtocreditriskcategoriesaremeasuredandmonitoredperiodicallyonanaggregatedbasis. Actual exposures against limits are monitored daily through the well-established credit management informationsystemsthatareinplace.

NIC BANK LIMITED






Other specific control and mitigation measures are outlined belowAlthoughtheGrouponlylendstocounterpartiesthatprimarilydemonstrateadequatecapacitytorepayloans,italsoemploysarangeofpolicies,guidelinesandmodelstomitigatecreditriskasfollows:

i. Collateral

ThisisonlyconsideredinthosecaseswheretheGroupwouldwanttotakeacreditriskmitigant.TheGrouphasdevelopedspecificpoliciesandguidelinesfortheacceptanceofdifferentclassesofcollateralwhoseestimatedfairvaluesarewellunderstood.

Estimatesofthecollateral’sfairvaluesarebasedonthevalueofcollateralindependentlyandprofessionallyassessedatthetimeofborrowing,andre-valuedwithafrequencycommensuratewithnatureandtypeofthecollateralandcreditadvanced.CollateralstructuresandcovenantsaresubjectedtoregularreviewtoensuretheycontinuetofulfiltheintendedpurposetotheGroup.

Collateralisgenerallynotheldinrespectofdepositsandbalancesduefrombankinginstitutions,itemsinthecourseofcollection,andGovernmentsecurities,exceptwhensecuritiesareheldforreversepurchaseandsecuritiesborrowingactivity.

ii. Credit rating

The Group uses an internal rating system for its borrowing clients. The system sets maximum exposure limits forindividualsorgroupsofclientsusingtheratingattainedbytheborrowers.Theratingsystemwillalsoinformthebasisofdeterminingthevalueandclassesofcollateralacceptablefortheborrower(s).

iii. Settlement risk

Thisistheriskoflossduetothefailurebycounterpartytohonouritsobligationstodelivercash,securitiesorotherassetsascontractuallyagreed.Itarisesinsituationswhereapaymentincashismadeinanticipationofcorrespondingreceiptofcashsecuritiesorotherassets.Dailysettlementlimitsareapprovedbytherelevantauthoritylevelsandestablishedforeachcounterpartytocovertheaggregateofallsettlementrisksarisingfromthecounterparty’smarkettransactionsonasingleday.Acceptanceofthecounterparty’ssettlementriskisdeterminedonthebasisoffinancialstrengthsandothernon-financialconsiderationssubjecttoBoardCreditRiskCommittee’sapprovals.

Impairment policies

Acrossall itsloanportfolios,theGroupemploysadisciplinedapproachtoimpairmentallowancesevaluation,withpromptidentification of problem loans being a key risk management objective. The Group maintains both collective and specificimpairmentallowances forcredit losses, thesumofwhich issufficient to reduce thebookvalueofcreditassets to theirestimatedrealisablevalue.Specificimpairmentallowancesreducetheaggregatecarryingvalueofcreditassetswherethereisspecificevidenceofdeteriorationincreditquality.Inlinewithregulatoryguidelines,acollectiveallowanceismaintainedtocoverpotentialimpairmentintheexistingportfoliothatcannotbeassociatedwithspecificcredit.Theseallowancesarereviewedandupdatedonaregularbasis.

Write-off policy

TheGroupwritesoffloansandadvancesnetofanyrelatedallowancesforimpairmentlosseswhenitdeterminesthattheloansareuncollectableandsecuritiesunrealisable.Thisdeterminationisreachedafteraccessingobjectiveevidenceoroccurrenceofsignificantchangesintheborrowerorissuer’sfinancialpositionsuchthattheyarenolongerabletorepaytheobligation,orthatproceedsfromthesaleofcollateralwillnotbesufficienttopaybacktheentireexposures.Thisisdoneafterexhaustingallothermeansincludinglitigation.ForRetailandAssetFinanceloans,chargeoffdecisionsaregenerallybasedonproductspecificdayspastduestatusandthesizeofbalancesowedperborrower.

NIC BANK LIMITED





a) Credit and counterparty risk (continued)

I. Maximum exposure to credit risk before collateral held

GROUP 2014 2013Shs’000 % Shs’000 %

Credit exposures On – balance sheet itemsBalances with Central Banks 9,066,532 7 7,273,400 7Items in the course of collection 519,958 - 243,514 -Due from banking institutions 8,753,909 6 5,920,199 4Loans and advances to customers 100,575,330 64 81,418,136 63Government securities 19,223,686 12 18,093,150 14Other assets – trade receivables 154,122 - 196,622 -Derivative assets 118,781 - 48,049 -

138,412,318 89 113,193,070 88Off-balance sheet itemsLetters of credit 3,490,696 2 5,177,622 4Guarantees and performance bonds 13,793,897 9 10,557,519 8

17,284,593 11 15,735,141 12155,696,911 100 128,928,211 100

BANK 2014 2013Shs’000 % Shs’000 %

Credit exposures

On – balance sheet items

Balances with Central Bank 8,079,859 6 5,950,797 6Items in the course of collection 484,521 - 215,693 -Due from banking institutions 7,843,903 5 4,189,408 4Loans and advances to customers 92,957,230 66 75,038,910 65Government securities 16,454,111 11 15,946,330 13Derivative assets 118,781 - 41,232 -

125,938,405 88 101,382,370 88Off-balance sheet itemsLetters of credit 3,374,438 2 4,763,734 4Guarantees and performance bonds 13,633,024 10 10,168,363 8

17,007,462 12 14,932,097 12142,945,867 100 116,314,467 100

Theaboverepresentstheworstcasescenarioofcreditexposureforbothyears,withouttakingintoaccountcollateralheldorothercreditenhancements/mitigants.

TheGroupLoansandadvancestocustomersandothertraderelateditems(off-balancesheetitems)compriseof75%(2013:75%)ofthetotalcreditexposure.

NIC BANK LIMITED






Collateral

Whilecollateralisanimportantmitiganttocreditrisk,theGroup’sunderwritingpolicyensuresthatloansarestrictlygrantedonagoingconcernbasiswithupfrontadequatedemonstrationofrepaymentcapacity.OtherthanexposuresamountingtoShs3,634,944,000(2013:Shs2,354,572,000)thatareunsecured,allotherfacilitiesaresecuredbycollateralintheformofchargesovercash,landandbuildings,marketablesecurities,plantandmachinery,amongstothers.ThefairvalueofcollateralheldforimpairedloansandadvancesisShs1,351,648,000(2013:Shs1,928,893,000).

Collateral and other credit enhancements obtained

ThefairvalueofassetsheldbytheGroupasat31Decemberascollateralwasasfollows:

Carrying amount

Bank Group

2014 2013 2014 2013

Shs `000 Shs `000 Shs `000 Shs`000

Nature of assets

942,381 1,142,393Charges over cash, land and buildings, marketable securities, plant and machinery 1,351,648 1,928,893

Collateral repossessed

ItistheGroup’spolicytodisposeofrepossessedpropertiesontheopenmarket,atfairmarketvalue.Theproceedsareusedtoreduceorrepaytheoutstandingclaim.Ingeneral,theGroupdoesnotoccupyorforecloserepossessedpropertiesforitsownbusinessuse.

TheGroupisconfidentthatitscreditpoliciesandprogramsprovidesufficientsafeguardsagainstthecreditriskexposureshowninthetablesoverleaf:

NIC BANK LIMITED






ii. Classification of loans & advances to customers

Group

Kenya Tanzania Uganda Total

At 31 December 2014 Shs `000 Shs `000 Shs `000 Shs `000

Gross loans and advances

Neither past due nor impaired 90,433,598 3,724,419 3,047,388 97,205,406

Past due but not impaired

Past due 30 to 90 days 1,643,408 408,083 31,879 2,083,370

Individually impaired 3,244,092 644,815 143,101 4,032,008

Total gross loans advanced 95,321,098 4,777,317 3,222,368 103,320,784

Impairment allowances

Neither past due nor impaired - - - -


Past due 30 to 90 days (62,157) - (2,937) (65,094)

Individually impaired (2,301,711) (372,450) (6,162) (2,680,360)

Impairment allowances (2,363,868) (372,450) (9,099) (2,745,454)

Net loans and advances 92,957,230 4,404,867 3,213,269 100,575,330

Coverage ratio of the individually impaired 71% 58% 43% 67%

At 31 December 2013

Gross loans and advances

Neither past due nor impaired 70,835,258 2,910,900 2,199,220 75,945,378


Past due 30 to 90 days 3,204,280 509,687 - 3,713,967

Individually impaired 3,138,721 1,382,205 - 4,520,926

Total gross loans advanced 77,178,259 4,802,792 2,199,220 84,180,271

Impairment allowances

Neither past due nor impaired - - - -


Past due 30 to 90 days (143,021) (25,404) (1,677) (170,102)

Individually impaired (1,996,328) (595,705) - (2,592,033)

Impairment allowances (2,139,349) (621,109) (1,677) (2,762,135)

Net loans and advances 75,038,910 4,181,683 2,197,543 81,418,136

Coverage ratio of the individually impaired 64% 43% 0% 57%

NIC BANK LIMITED






Credit quality of loans and advances

Allloansandadvancesarecategorisedasneitherpastduenorimpaired,pastduebutnotimpaired,orimpaired.Impairedloansincluderestructuredloans.Forthepurposesofthesedisclosures:

• Aloanisconsideredpastduewhentheborrowerhasfailedtomakeapaymentwhendueunderthetermsoftheexistingloancontract;

• Theimpairmentallowanceincludesallowancesbothagainstfinancialassetsthathavebeenindividually impairedandthosesubjecttocollectiveimpairment;

• Loansneitherpastduenorimpairedconsistpredominantlyofcorporateandretailloansthatareperforming.Theseloans,althoughunimpaired,maycarryanunidentifiedimpairmentallowance;and

• ImpairedloansthatarecollectivelyassessedforimpairmentconsistpredominantlyofRetailloansthatare1dayormorepastdueforwhichacollectiveimpairmentallowanceisraised.

Loans and advances that are neither past due nor impaired

TheGroupclassifiesloansandadvancesunderthiscategoryiftheyareuptodateandinlinewiththeircontractualagreements(within 0-30 days). Such loans would have demonstrated the meeting of their financial and non-financial conditions plusobligationsandtheborrowerswouldhaveprovenforwardlookingcapacitytorepaytheloans.Theseexposureswillnormallybemaintainedlargelywithinapprovedfacilityprogramsandwithnodepictionofimpairmentordistresssigns.Theseexposuresarecategorisedasnormalaccounts(category1)inlinewithinternalguidelinesandthoseissuedbyregulatorswhereapplicable.Acollectiveprovisiononthetotaloutstandingbalancesismadeandappropriatedfromrevenuereservestostatutorycreditriskreserves.


Thiscategoryincludesexposuresthatarebetween31–90dayspastdue,wherelossesmayhavebeenincurredbuthavenotbeenclearlyidentified.Theseexposuresaregradedascategory2inlinewithourinternalguidelinesandthoseissuedbybankingregulators.Acollectiveimpairmentallowanceismadeasdescribedabovetocoverlosseswhichhavebeenincurredbuthavenotyetbeenidentified.

Individually Impaired loans and advances

ImpairedloansandadvancesarethosewhichtheGroupdeterminesthatitishighlyprobablethatitwillbeunabletocollectallprincipalandinterestdueaccordingtothecontractualtermsoftheloansecuritiesagreement(s).Theseloansaregradedbetweencategories3(91-180days),4(181-360days)and5(over360days)usingtheGroup’sinternalcreditratingsystem.Theseclients,underguidelinesissuedbytheCentralBanksintheregionsweoperatein,aretermedasnon-performingloans.TheGroupestablishesaspecificallowanceforimpairmentlossesforeachloanthatrepresentstheestimateoflossesthatwillbeincurredinitsloanportfolio.

Concentrations of risk

TheGroupmonitorsconcentrationofriskexposuresinitslendingandotherassetportfoliosbyindividualsorgroupsofrelatedborrowersandindustrysectorconcentrationsinlinewithBoardofDirectors’approvedlimits.Theselimitsarereviewedregularlyusingeconomicriskindicatorsidentifiedinparticularindustrialsectors.Ananalysisofconcentrationswithintheloansandadvancestocustomersandoffbalancesheetitemsareasshowninthenextpage.

NIC BANK LIMITED







Bank Group

2014 2013 2014 2013

% % % %

25 24 Manufacturing 26 25

24 18 Social community and personal services 24 18

17 12 Transport and communication 16 11

10 10 Wholesale and retail 10 10

6 7 Agriculture 6 7

2 4 Electricity 2 4

2 5 Financial 2 5

14 20 Other 14 20

100 100 100 100

Contingent liabilities

Bank Group

2014 2013 2014 2013

% % % %

9 27 Agriculture 9 27

11 5 Business services 11 5

10 6 Wholesale and retail 10 6

5 4 Real estate and construction 5 4

20 10 Transport and communication 20 10

33 19 Manufacturing 33 19

12 29 Other 12 29

100 100 100 100

b) Liquidity and funding risk

Liquidityriskisthepotentialforlosstoaninstitutionarisingfromeitheritsinabilitytomeetitsobligationswhentheyfalldueortofundincreasesinassetwithoutincurringunacceptablecostsorlosses.Effectiveliquidityriskmanagementisessentialinordertomaintaintheconfidenceofdepositorsandcounterparties,andtoenableourcorebusinesstocontinueoperatingevenunderadverseliquiditycircumstances.

NIC BANK LIMITED





b) Liquidity and funding risk (Continued)

Who manages liquidity and funding risk

TheAssetsandLiabilitiesCommittee(ALCO),amanagementcommittee,istaskedwiththeresponsibilityofensuringthatallforeseeablefundingcommitmentsanddepositswithdrawalscanbemetasandwhentheyfalldue,andthattheGroupwillnotencounterdifficultiesinmeetingitscurrentandfuturefinancialobligationsorfinancialliabilitiesastheyfalldue.

ALCOreliessubstantiallyon theGroup’sTreasuryDepartment tocoordinateandensuredisciplineacross theGroupandbusinessunits,certifysufficientliquidityunderbothnormalandstressedconditions,withoutincurringunacceptablelossesand/orriskingdamagetotheGroup’sreputation.

TheBoardExecutiveCommitteehasoversightoverALCOsactivities throughregular reviewof itsminutesandsignificantreportsoutliningtheGroup’scurrentexposuresagainstapprovedrisklimits.ThesereportsarealsoreviewedbytheBoardRiskManagementCommitteeonaregularquarterlybasis.

Liquiditypolicies/guidelinesandlimitsarereviewedperiodically,orastheneedarises.

How liquidity and funding risk is managed

i. Liquidity and funding management

TheGroup’sliquidityandfundingpoliciesrequirethatit:

• Entersintolendingcontractssubjecttoavailabilityoffunds.

• Projectscashflowsbymajorcurrenciesandconsiderthelevelofliquidassetsnecessaryinrelationthereto.

• Monitorsliquidityratiosagainstinternalandregulatoryrequirementsandguidelines.

• Maintainsanarrayofadiverserangeoffundingsourcesascontingencyback–upfacilities.

• Monitorsdepositorconcentrationtoavoidunduerelianceonlargeindividualdepositorsandensureasatisfactory fundingmixisattained.

• Investsinshorttermliquidinstruments,whichcaneasilybesoldinthemarketwhentheneedarises.

• Ensureinvestmentsinlargecashoutlayprojectse.gpropertyandequipmentpurchasesarebudgetedforand carriedoutonlywhentheGrouphassufficientlyliquidcashflows.

• Maintainsliquidityandfundingcontingencyplans.Theseplansandkeyriskindicatorsclearlyidentifyearlystress conditionsanddescribeactionstobetakenintheeventofdifficultiesarisingfromsystemicorothercrisiswhile minimisingadverselong-termimplications.

ii Sources of funding

TheGroup’smajorsourceoffundingiscustomerdeposits.Tothisend,theGroupmaintainsadiversifiedandstablefundingbasecomprisingofthecoreretailandcorporatecustomersandwholesalebankingclientele.TheGroupplacesconsiderableimportanceon thestabilityof thesedeposits,which isachieved through theGroup’scorporate, institutionalandretailbankingactivitiesandbymaintainingdepositorconfidenceintheGroup’sbusinessstrategiesandfinancialstrength.Ananalysisofconcentrationswithinthecustomerdepositsisasfollows:

Customer deposits

Bank Group2014 2013 2014 2013

% % % %

- - Co-operative societies - -5 4 Insurance companies 5 4

15 15 Non-profit institutions and individuals 16 1680 81 Private enterprises 79 80

100 100 100 100

NIC BANK LIMITED





b) Liquidity and funding risk (Continued)

How liquidity and funding risk is managed (Continued)

II. Sources of funding (Continued)

TheGroupalsoborrowsfromtheinter-bankandwholesalemarketssuchaspensionfundsandinsurancecompaniestomeetitsshorttermliquidityandotherinvestmentobjectives.

TheGroupdoesnotmaintaincashreservestomeetallitsobligationsasexperienceovertimehasshownthataminimumlevelofreinvestmentofmaturingcustomerfundscanbepredictedwithahighlevelofcertainty.Althoughthecontractualrepaymentsofmanycustomeraccountsareondemandorshortnotice,inpracticefromabehavioralperspective,short-termdepositbalancesremainstableasinflowsandoutflowsbroadlymatch.

III Exposure to liquidity risk

ThekeymeasuresusedbytheGroupformanagingliquidityriskare;

• Theratioofnetliquidassetstodepositsfromcustomers(liquidityratio).Forthispurpose,netliquidassetsincludecashandcashequivalentsandinvestmentsinsecuritiesforwhichthereisanactiveandliquidmarketlessanydepositsfrombanks,aswellasotherborrowingsandcommitmentsmaturingwithinthenextmonth.ThebankingregulatorsalsorequirethattheGroupmaintainsacashreserveratiocomputedaspercentageofeligiblecustomerdeposits.

ThebankingregulationsrequirethattheGroupmaintainsaminimumliquidityratioof20%.TheGroupcompliedwiththeliquidityrequirementsduringtheyear.

Theaverageliquidityratiofortheyearwas29%(2013:32%).

• Thematurityanalysisofassetsandliabilitiesreportispresentedinthenextpages.TheGroupusesthematuritymismatchladderstocomparecashinflowsandoutflowseachmonthandoveraseriesoftime-bands.ThematuritymismatchladdershowsthenetcashflowsoftheGroupinvarioustimebands.TheGroupnetfundingrequirementsaredeterminedbyanalysingpresentandfuturecashflowsoftheentirestatementoffinancialpositionatselectedmaturitydates,basedonassumptionsofthebehaviourofassets,liabilitiesandoff-balancesheetitems.Calculationswillincludethecumulativenetexcessorshortfalloverthetimeframeoftheliquidityassessment.

TheGroupalsomonitorsitsliquidityexposuresthroughanarrayofinternallydevelopedriskindicatorssuchasseveraltypesofadvancestodepositratios,proportionoflargestdepositorstototaldeposits,liquiditygapanalysisratios,inter-bankborrowingsasaproportionoftotaldeposits,amongstothers.Attheendof2014,theGroupbeguntousetheBaselAccordpreferredLiquidityCoverageratioandNetStableFundingratiotoassessitsshortandlongtermliquiditystability.Thisenablesthegrouptoarrestanyearlywarningsignsandtaketimelycorrectiveaction.

Aspartof theALCOfunction,Treasuryreceives informationfrombusinessunitsregardingtheliquidityprofileoftheirfinancialassetsandliabilitiesplusdetailsofotherprojectedcashflowsarisingfromprojectedfuturebusiness.Treasurythenmaintainsaportfolioofshort-termliquidassets,largelymadeupofshort-termliquidinvestmentgradesecurities,loansandadvancestobanksandotherinter-bankfacilities,toensurethatsufficientliquidityismaintainedwithintheGroupasawhole.Theliquidityrequirementsofbusinessunitsandsubsidiariesaremetthroughvariousfundingoptions tocoveranyshort-termfluctuationsand longer term funding toaddressanystructural liquidityrequirements.

Theamountsdisclosedinthetablesonpages88to91arethecontractualundiscountedcashflows,whereastheGroupmanagestheliquidityriskbasedonadifferentbasis,notresultinginasignificantlydifferentanalysis.

NIC BANK LIMITED


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NIC BANK LIMITED





c) Market risk

Marketriskistheriskthatthevaluesofassetsandliabilitiesorrevenueswillbeadverselyaffectedbychangesinmarketconditionsormarketmovements.MarketrisksintheGrouparisefrommovementsinmarketpricesparticularlychangesininterestrates,foreigncurrencyexchangerates,fixedratesecuritiesandequitypriceswhichweareexposedto.Itisoftenpropagatedbyotherformsoffinancialriskssuchascreditandmarketliquidityriskevents.Theobjectiveofmarketriskmanagementprogramsistomanageandcontrolmarketriskexposuresinordertooptimisereturnonrisktakenwhilemaintainingagoodmarketprofileasaprovideroffinancialproductsandservices.

Who manages market risk?

TheBoardRiskManagementCommitteereviewsandapprovesmarketriskpoliciesandlimitsperiodicallyorastheneedarises.TheTreasuryDepartmentinconsultationwiththeRiskManagementDepartmentareresponsibleforthedevelopmentofdetailedmarketriskmanagementpolicies,subjecttoreviewandsupportbyALCOandapprovalbytheBoardRiskManagementCommittee.

TheBoardreceivesquarterlyreportsofmarketriskexposuresoractivitiesthroughrelevantALCOminutes,andTreasuryreportsoutliningcurrentriskexposuresagainstapprovedrisklimitsorappetite.

How market risk is managed

TheGroup’sAsset&LiabilityCommittee(ALCO)overseestheapplicationoftheframeworksetbytheBoardofDirectorsandmonitorstheGroup’smarketriskexposuresaswellasactivitiesthatgiverisetotheseexposures.OverallresponsibilityforthemanagementofmarketrisksrestswithALCOwhichreviewsmarketriskactivityreportsmonthly.Treasuryisresponsibleforthedaytodayimplementationofthosepoliciesorprogramsandlimits.

Inviewofthefactthatourmarketriskoperationsarenotverycomplex,webasicallyuseinterestratesvarianceanalysismodels(againstbudgetandpriormonth),interestrategapanalysis,proportionofinterestsensitivedepositstototaldeposits,amongstothermethodologiesandkeyperformanceindicators,appropriateforourGroup’soperations.Themanagementofmarketriskissupplementedbythemonitoringofkeymarketriskandeconomicperformancevariables.

The distinct market risk exposures faced by the Group are:

• Interestraterisk.

• Foreignexchangerisk.

• Pricerisk.

I. Interest rate risk

Interestrateriskrepresentsexposurestoinstrumentswhosevaluesvarywiththelevelorvolatilityofinterestrates.Theseinstrumentsinclude,butarenotlimitedtoloans,debtsecurities,certaintradedassetsandliabilities,deposits,borrowingsandderivativeinstruments.Generally,hedginginstrumentsusedbybankstomitigatesuchrisksincluderelatedderivativessuchasoptionsandswaps.

TheGroupisexposedtotheriskthatthevalueofafinancialinstrumentwillfluctuateduetochangesinmarketinterestrates,asfundsaresourcedandinvestedatbothfixedandfloatingrates.Thematuritiesofassetsandliabilities,plustheabilitytoreplaceinterestbearingliabilitiesatanacceptablecostastheymature,areimportantfactorsinassessingtheGroup’sexposuretochangesininterestrates.

Inadditiontomaintaininganappropriatemixbetweenfixedandfloatingratesdepositbase,interestratesonadvancestocustomersandotherriskassetsaremainlypeggedtotheKenyaBankersReferenceRate(KBRR)-forfloatingrateloans.TheKBRRisadjustedevery6monthsorwhennecessary(ifearlier)toreflectprevailingmarketcostsofTreasurybillratesandtheCentralBankReferencerate.

NIC BANK LIMITED





c) Market risk (Continued)

I. Interest rate risk (Continued) InterestratesoncustomerdepositsarenegotiatedbetweentheGroupanditscustomers,withtheGroupretainingthediscretiontore-negotiatetheratesatmaturityinlinewithchangesinmarkettrends.Theinterestratesgivenorchargedtoclientsthereforefluctuatedependingonthemovementsinthemarketinterestrates.TheGroupalsoinvestsinfixedinterestrateinstrumentsissuedbytheGovernmentofKenya,TanzaniaandUgandathroughtheirrespectiveCentralBanks.Theinterestrateriskassessmenttablesarefoundunderpages94to97.

ThematchingandcontrolledmismatchingofthematuritiesandinterestratesofassetsandliabilitiesisfundamentaltothemanagementoftheGroup’sinterestraterisk.Itisunusualforabankevertocompletelybematchedduetothenatureofbusinesstermsandtypesofproductsoffered.

Interest rate risk – stress testsTheGroupmonitors the impactof risksassociatedwith theeffectsoffluctuations inprevailing interestrates.At31stDecember2014,thefollowingtablesummarisestheestimatedimpactofanimmediatehypotheticalincreaseordecreaseininterestratesof125basispointsonconsolidatedprofitbeforeincometaxexpense,andcurrentinterestrateriskprofile.

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

265,635 292,011 125 basis points increases in interest rates 375,861 366,042

(424,318) (360,624) 125 basis points decrease in interest rates (508,168) (468,331)

Themodeldoesnottakeintoaccountanycorrectiveactioninresponsetointerestratemovements,particularlyinadversesituations.

NIC BANK LIMITED


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Tota

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7.83

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Tota

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Tota

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225

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FIN

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Tota

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Inte

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04,3

54

NIC BANK LIMITED


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ATE

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Der

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Tota

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Inte

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399,

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364

7,51

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42,

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732,

188)

11,7

77,1

66

NIC BANK LIMITED





c) Market Risk (Continued)

II. Foreign exchange riskForeigncurrencyexchangeriskrefers to thepotentialchanges incurrentand futureearningsorcapitalarising frommovements in foreign exchange market rates. The Group, through stringent intra-day and overnight exposure limits,ensuresthatthepotentialriskoflossarisingfromforeignexchangefluctuationstotheGroup’searningsandcapitaliswithinprudentialguidelinesandinternalpolicies.Anymaterialovernightpositioniscoveredbystoplossorderswithourinternationalcounter-parties.

TheGroupisexposedtotheriskthatthevalueofforeigncurrencydenominatedfinancialinstrumentsitholdswillfluctuateduetochangesinmarketforeignexchangerates.TheBoardofDirectorsperiodicallyapprovespoliciesandlimitsonthemaximumlevelofexposuresbycurrencyandintotalforbothovernightandintra-daypositions.Foreigncurrencyriskisaddressedthroughthefollowingmeasures:• Onadailybasis,theoverallforeignexchangeriskexposureismeasuredusingspotmid-ratesanddoesnotexceed10%

oftheGroup’scorecapital.• Anysinglecurrencyexposure,irrespectiveofshortorlongpositionsdoesnotexceedthelimitof10%ofcorecapital.• Intra-dayandovernightforeignexchangepositionsarelimitedwithinstrictlydefinedexposureandstoplosslimits

approvedperiodicallybytheBoardRiskManagementCommittee.

Thetablesonpages99to102summarisetheGroup’sandBank’sexposuretoforeigncurrencyexchangeraterisks.

At31December2014,ifthefunctionalcurrenciesintheeconomicenvironmentinwhichtheGroupoperatesi.e.theKenyaShillinghadweakenedorstrengthenedby10%againsttheworld’smajorcurrencies,withallothervariablesheldconstant,consolidatedprofitbeforeincometaxexpensewouldhavebeenhigherorlowerasdepictedinbelowtable:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

10% depreciation/appreciation

4,189 5,477 USD 8,769 9,466

72 75 GBP 9,456 10,686

201 168 EUR 6,278 5,225

36 185 Others 16,665 20,146

4,498 5,905 Total 41,168 45,523

NIC BANK LIMITED


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Tota

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Tota

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Tota

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NIC BANK LIMITED





c) Market Risk (Continued)

III. Price risk

SharesquotedintheNairobiSecuritiesExchange(“NSE”)i.e“listedshares’’arestatedattheirfairvalueonthelastdayofbusinessintheyear.Thesevaluesaresubjecttofrequentvariationsduetochangesintheirmarketprices.

At31December2014,ifthepricesattheNSEhadappreciated/depreciatedby5%withallothervariablesheldconstant,theimpactonthestatementofprofitorloss,andshareholders’equitywouldhavebeenShs3,076,000(2013:Shs2,150,000)higher/lower.

TheGroup’scarriesitsunquotedequityinvestmentinTanzaniaMortgageRefinanceCompanyatfairvalue(Note25).ThefairvalueoftheGroup’sinvestmentinTanzaniaMortgageRefinanceCompanyisequaltothecostofsharespurchasedinthecompany.Thevariabilityintherangeofreasonablefairvalueestimatesforthisinvestmentisnotsignificant.

d) Capital management

The Group’s objectives when managing capital are:

• TosafeguardtheGroup’sabilitytocontinueasagoingconcerninordertoprovideacceptablereturnstotheshareholdersandbenefitsforotherstakeholderswhilemaintaininganoptimalcapitalstructure.

• TocomplywithcapitalrequirementssetbyourregulatorswithinthemarketsthattheGroupoperatesin.

• Tomaintainastrongcapitalbasetosupportcontinuedbusinessdevelopment.

• TocreateanacceptablebuffercateringforunexpectedlossesthattheGroupmayincurinadversemarketscenariosduringthecourseofitsbusiness.

• Tomanageitscapitalstructureandmakeadjustmentstoitaccordingtochangesineconomicconditionsandtheriskcharacteristicsofitsactivities.Inordertomaintainoradjustthecapitalstructure,theGroupmayadjusttheamountofdividendpaymenttoshareholders,returncapitaltoshareholdersorissuecapitalsecurities.

TheGroup’sobjectiveswhenmanagingcapitalarebroadlycoveredasfollows:

I Banking

Inlinewithourindustry,thebroaderconceptofcapitalanditsadequacyisbasedonguidelinesdevelopedbytheBaselCommittee’sAccordsandimplementedforsupervisorypurposesbythecentralbanks.

CentralBankofKenya(CBK),BankofTanzania(BOT)andBankofUganda(BOU)largelysegregatethetotalregulatorycapitalintotwotiers;

• Tier 1 Capital (Core Capital), which includes ordinary share capital, share premium and retained earnings. Theinvestmentinsubsidiariesorotherfinancialinstitutionsisdeductedinarrivingattier1capital.

• Tier 2 Capital (Supplementary Capital) includes among others, 25% of property revaluation reserves (subject toregulatoryapproval),unsecuredsubordinateddebtinstruments(bondsandlongtermborrowings)havinganoriginalmaturityofatleastfiveyearsandcollectiveimpairmentallowances.

Theriskweightedassetsaremeasuredbymeansofahierarchyoffourriskweightsclassifiedaccordingtothenatureof,andreflectinganestimateof,thecreditriskassociatedwitheachassetandcounterparty.Asimilartreatmentisadoptedforoff-balancesheetexposure,withsomeadjustmentstoreflectthemorecontingentnatureofthepotentiallosses.

Duringtheyear,thebankswithinthegrouphadcompliedinfullwithallitsexternallyimposedcapitalrequirements(2013:thesame).

NIC BANK LIMITED





d) Capital management (Continued)

I Banking (Continued)

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

18,826,499 14,108,111 Tier 1 capital 20,722,594 15,972,003

8,513,693 767,875 Tier 2 capital 8,630,471 880,590

27,340,192 14,875,986 Total capital 29,353,065 16,852,593

Risk–weighted assets

119,900,142 82,368,553 On-balance sheet 127,704,854 89,314,748

11,144,400 12,851,033 Off-balance sheet 11,791,780 13,587,927

131,044,542 95,219,586 Total risk-weighted assets 139,496,634 102,902,675

Minimum requirements

Regulatory ratios 2014 2013

14.37% 14.82% Core capital/risk assets 10.5% 8.0%

20.47% 16.79% Core capital/deposits 8.0% 8.0%20.86% 15.62% Total capital/risk assets 14.5% 12.0%

II Investment banking & stock brokerage businesses

TheCapitalMarketsAuthority,whichregulatestheGroup’sInvestmentBankingandStockBrokeragebusinessesi.eNICCapitalLimitedandNICSecuritiesLimitedrespectively,prescribesminimumcapitalisationrequirementsandaworkingcapitalofnotbelow20%oftheprescribedminimumshareholders’fundsorthreetimestheaveragemonthlyoperatingcostswhicheverishigher.Thesubsidiariesmaintainedtheircapitaltogetherwiththeotherrequirementswellabovetheminimumrequirementsasoutlinedbelow;

NIC Capital NIC Securities

Shs’000 Shs 000

Minimum capital 250,000 50,000

Capital held as at;

31 December 2014 518,764 349,230

31 December 2013 509,899 377,120

NIC BANK LIMITED





e) Fair value of financial assets and liabilities (Continued)

IFRS7specifiesahierarchyofvaluationtechniquesbasedonwhetherinputsusedinthevaluationtechniquesoffinancialinstrumentsareobservableorunobservable.Financialinstrumentsaregroupedinto3levelsbasedonthedegreetowhichfairvaluedata/inputisobservable.

i. Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivetradingmarketsforidenticalassetsorliabilities.ThislevelincludeslisteddebtandequityinstrumentstradedmainlyontheNairobiSecuritiesExchange(“NSE”).

ii. Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesthatareobservablefortheassetorliability,eitherdirectly(i.e.asaprice)orindirectly(i.e.derivedfromprices).InputdataforthiscategoryissourcedmainlyfromReutersandtheNairobiSecuritiesExchange.Theexternalvaluationofbuildingshasbeenperformedusingasalescomparisonapproach.

iii. Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsthatarenotbasedonobservablemarketdata(unobservableinputs).ThefairvalueoftheGroup’sinvestmentinTanzaniaMortgageRefinanceCompanyisequaltothecostofsharespurchasedinthecompany.Thevariabilityintherangeofreasonablefairvalueestimatesforthisinvestmentisnotsignificant.

Thetablebelowshowsananalysisoffinancialinstrumentsatfairvaluebylevelofthefairvaluehierarchy.

Bank Group

2014 2013 2014 2013


Level 1

- -Treasury bonds - fair value through profit and loss 20 126,762 155,335

13,256,988 11,974,223 Treasury bonds – available for sale 20 13,580,526 12,393,099

- - Quoted shares at fair value 25 123,780 33,990

13,256,988 11,974,223 13,831,068 12,582,424

Level 2

118,781 41,232 Derivative assets 21 118,781 48,049

370,000 370,000 Buildings 370,000 370,000

488,781 411,232 488,781 448,049

Level 3

- -Unquoted equity security in Tanzania Mortgage Refinance Company 25,380 25,470

- - Unquoted equity investment in the NSE 25 - 191,000

- - 25,380 216,470

TherewasatransferfromLevel3tolevel1,followingthelistingoftheNSEsharesinthestockexchangewhichwere previouslyunquoted.

NIC BANK LIMITED





e) Fair value of financial assets and liabilities (Continued)

Thetablebelowshowsananalysisofthefairvalueoffinancialinstrumentsthatarenotcarriedatfairvaluebylevelofthefairvaluehierarchy;

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

Level 1

3,197,123 3,972,106 Government securities – held to maturity 5,515,795 5,544,716

Level 2

Financial assets

9,106,501 7,044,946 Cash and balances with central banks 10,539,496 8,743,544

484,521 215,693 Items in the course of collection 519,958 243,514

7,843,903 4,189,408 Due from banking institutions 8,753,909 5,920,199

92,957,230 75,038,910 Loans and advances to customers 100,575,330 81,418,136

2,098,420 2,044,162 Due from group companies - -

1,466,805 2,075,177 Investments 1,615,965 2,325,637

113,957,380 90,608,296 122,004,658 98,651,030

Financial liabilities

92,791,078 84,236,189 Customer deposits 100,434,954 91,565,005

4,625,406 4,910,171 Due to banking institutions 5,411,664 5,896,334

13,844,209 3,628,169 Borrowings 14,358,480 3,628,169

809,452 537,980 Due to group companies - -

112,070,145 93,312,509 120,205,098 101,089,508

Therewerenotransfersbetweenlevels1,2and3intheperiodandforlevel3,therewasnomovement.

Level1–Wehavedeterminedthefairvalueusingquotedprices(unadjusted)fromtheNairobiSecuritiesExchange.

Level2–Thefairvalueofthesebalancesisequaltotheiramortisedcost.

NIC BANK LIMITED



5) Critical accounting estimates and judgments in applying the Group’s accounting policies

I Impairment losses on loans and advances

TheGroupreviewsitsloanportfoliostoassessimpairmentregularly.Indeterminingwhetheranimpairmentlossshouldberecordedintheincomestatement,theGroupmakesjudgementsastowhetherthereisanyobservabledataindicatingthatthereisameasurabledecreaseintheestimatedfuturecashflowsfromaportfolioofloans,beforeadecreasecanbeidentifiedwithanindividualloaninthatportfolio.ThisevidencemayincludeobservabledataindicatingthattherehasbeenanadversechangeinthepaymentstatusofborrowersinaGroup,ornationalorlocaleconomicconditionsthatcorrelatewithdefaultsonassetsintheGroup.Managementusesestimatesbasedonhistoricallossexperienceforassetswithcreditriskcharacteristicsandobjectiveevidenceofimpairmentsimilartothoseintheportfoliowhenschedulingitsfuturecashflows.Themethodologyandassumptionsusedforestimatingboththeamountandtimingoffuturecashflowsarereviewedregularlytoreduceanydifferencesbetweenlossestimatesandactuallossexperience.

II Held -to-maturity investments

TheGroupfollowstheguidanceofIAS39onclassifyingnon-derivativefinancialassetswithfixedordeterminablepaymentsandfixedmaturityasheld-to-maturity.Thisclassificationrequiressignificantjudgement.Inmakingthisjudgement,theGroupevaluatesitsintentionandabilitytoholdsuchinvestmentstomaturity.IftheGroupfailstokeeptheseinvestmentstomaturityotherthanforthespecificcircumstances–forexample,sellinganinsignificantamountclosetomaturity–itwillberequiredtoreclassifytheentireclassasavailable-for-sale.Theinvestmentswouldthereforebemeasuredatfairvalueandnotamortisedcost.

III Goodwill impairment

TheGroup’saccountingpolicyforgoodwillisdescribedinNote3(n)I.Goodwillisallocatedtocash-generatingunits(‘CGU’)forthepurposeofimpairmenttesting.WhentheprocessofidentifyingandevaluatinggoodwillimpairmentdemonstratesthattheexpectedcashflowsofaCGUhavedeclinedand/orthatitscostofcapitalhasincreased,theeffectistoreducetheCGU’sestimatedfairvalue.IfthisresultsinanestimatedrecoverableamountthatislowerthanthecarryingamountoftheCGU,achargeforimpairmentofgoodwillwillberecorded,therebyreducingbyacorrespondingamounttheGroup’sprofitfortheyear.Goodwillisstatedatcostlessaccumulatedimpairmentlosses.SignificantmanagementjudgementisinvolvedindeterminingthecostofcapitalassignedtoanindividualCGUandinestimatingitsfuturecashflows.

IV Property and equipment

Criticalestimatesaremadebythedirectorsindeterminingdepreciationratesforpropertyandequipment.

V Fair value of trade receivables and payables

Thecarryingvaluelessimpairmentprovisionoftradereceivablesandpayablesareassumedtoapproximatetheirfairvalues.ThefairvalueoffinancialliabilitiesfordisclosurepurposesisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletotheGroupforsimilarfinancialinstruments.

VI Taxes

TheGroupissubjectedtonumeroustaxesandleviesbyvariousgovernmentandquasi-governmentregulatorybodies.Asaruleofthumb,theGrouprecognisesliabilitiesfortheanticipatedtax/leviespayablewithutmostcareanddiligence.However,significantjudgmentisusuallyrequiredintheinterpretationandapplicabilityofthosetaxes/levies.Shoulditcometotheattentionofmanagement,inonewayortheother,thattheinitiallyrecordedliabilitywaserroneous,suchdifferenceswillimpactontheincomeandliabilitiesintheperiodinwhichsuchdifferencesaredetermined.

NIC BANK LIMITED



5) Critical accounting estimates and judgments in applying the Group’s accounting policies ( Continued)

VII Valuation of financial instruments

Thefairvalueoffinancialinstrumentswherenoactivemarketexistsorwherequotedpricesarenototherwiseavailablearedeterminedbyusingvaluation techniques. In thesecases, the fair valuesareestimated fromobservabledata inrespectofsimilarfinancialinstrumentsorusingmodels.Wheremarketobservableinputsarenotavailable,theyareestimatedbasedonappropriateassumptions.Wherevaluationtechniques(forexample,models)areusedtodeterminefairvalues,theyarevalidatedandperiodicallyreviewedbyqualifiedpersonnelindependentofthosethatsourcedthem.ThedirectorsbelievethatthechosenvaluationtechniquesandassumptionsusedinthevaluationofitsinvestmentsinNSEsharesareappropriateindeterminingthefairvalueoffinancialinstruments.

VIII Classification of leases of land and buildings as finance or operating leases

Attheinceptionofeachleaseoflandorbuilding,theGroupconsidersthesubstanceratherthantheformoftheleasecontract.Examplesofsituationsthatindividuallyorincombinationwouldnormallyleadtoaleasebeingclassifiedasafinanceleaseare:

• Theleasetransfersownershipoftheassettothelesseebytheendoftheleaseterm;

• Thelesseehastheoptiontopurchasetheassetatapricethatisexpectedtobesufficientlylowerthanthefairvalueatthedatetheoptionbecomesexercisableforittobereasonablycertain,attheinceptionofthelease,thattheoptionwillbeexercised;

• Theleasetermisforthemajorpartoftheeconomiclifeoftheasseteveniftitleisnottransferred;

• Attheinceptionoftheleasethepresentvalueoftheminimumleasepaymentsamountstoatleastsubstantiallyallofthefairvalueoftheleasedasset;and

• Theleasedassetsareofsuchaspecialisednaturethatonlythelesseecanusethemwithoutmajormodifications.

• TheGroupalsoconsidersindicatorsofsituationsthatindividuallyorincombinationcouldalsoleadtoaleasebeingclassifiedasafinancelease.Examplesofsuchindicatorsinclude:

• Ifthelesseecancancelthelease,thelessor’slossesassociatedwiththecancellationarebornebythelessee;

• gainsorlossesfromthefluctuationinthefairvalueoftheresidualaccruetothelessee(forexample,intheformofarentrebateequallingmostofthesalesproceedsattheendofthelease);andthelesseehastheabilitytocontinuetheleaseforasecondaryperiodatarentthatissubstantiallylowerthanmarketrent.

NIC BANK LIMITED



6) Operating segments

a) Geographical segments

The Group operations are within three geographical segments, Kenya, Tanzania and Uganda. The table below containssegmentalinformationprovidedtotheChiefOperatingDecisionMaker(theGroupExecutiveCommitteeofmanagement)fortheyearended31December2014.

2014 Kenya Tanzania Uganda Total

Shs `000 Shs `000 Shs `000 Shs `000

Interest income 12,376,325 927,740 407,003 13,711,068

Interest expense (5,074,013) (489,165) (149,771) (5,712,949)

Net interest income 7,302,312 438,575 257,232 7,998,119

Credit impairment charges (295,494) (26,171) (7,467) (329,133)

Net interest income after credit impairment charges 7,006,818 412,404 249,765 7,668,98

Net fee, commission, trading and other income 3,231,560 238,784 37,795 3,508,138

Operating income 10,238,378 651,188 287,560 11,177,125

Depreciation and amortisation (393,019) (81,660) (29,956) (504,635)

Other operating expenses (3,686,149) (513,701) (241,991) (4,441,841)

Profit before income tax 6,159,210 55,827 15,612 6,230,650

Income tax (expense)/credit (2,104,050) (15,011) 5,068 (2,113,976)

Profit / (loss) for the year 4,055,160 40,816 20,698 4,116,674

Loans and advances to customers 92,957,230 4,404,867 3,213,233 100,575,330

Customer deposits 92,791,078 6,194,331 1,449,545 100,434,954

Additions to non-current assets (71,458) (50,460) 13,205 (108,713)

Non-current assets 1,402,525 238,391 103,864 1,744,780

NIC BANK LIMITED



6) Operating segments (Continued)

a) Geographical segments (Continued)

2013 Kenya Tanzania Uganda Total

Shs `000 Shs `000 Shs `000 Shs `000

Interest income 10,313,259 1,087,040 242,117 11,642,416

Interest expense (3,760,140) (532,412) (81,885) (4,374,437)

Net interest income 6,553,119 554,628 160,232 7,267,979

Credit impairment charges (479,185) (612,074) (1,614) (1,092,873)

Net interest income after credit impairment charges 6,073,934 (57,446) 158,618 6,175,106

Net fee, commission, trading and other income 2,861,056 249,329 44,822 3,155,207

Operating income 8,934,990 191,883 203,440 9,330,313

Depreciation and amortisation (365,025) (57,090) (23,991) (446,106)

Other operating expenses (3,167,578) (530,016) (177,042) (3,874,636)

Profit before income tax 5,402,387 (395,223) 2,407 5,009,571

Income tax (expense)/credit (1,887,043) 117,735 (2,962) (1,772,270)

Profit after income tax 3,515,344 (277,488) (555) 3,237,301

Loans and advances to customers 75,038,910 4,181,683 2,197,543 81,418,136

Customer deposits 84,236,189 6,040,852 1,287,964 91,565,005

Additions to non-current assets 27,128 59,967 (10,309) 76,786

Non-current assets 1,473,983 288,851 90,659 1,853,493

b) Business segments TheGroupmaintainsthefollowingbusinesssegmentsforallocationofresourcesandassessmentofperformance.

I. Corporate and Institutional Banking

Targetsmediumtolargecorporateclienteleandinstitutions,withafocusonliabilitymobilizationandassetgrowth.

II. Treasury dealing and brokerage Treasurydealingtargetscorporateclienteleandinstitutions,withafocusonthosewithaforeignexchangecomponentintheirbusiness,whereasthestockbrokeragefocusesontheexecutionoftransactionsattheNairobiSecuritiesExchangeonbehalfofhighnetworthandinstitutionalclients.

III. Retail banking TargetsthemassaffluenttohighnetworthandSMEbankingclientele,withafocusonbecomingthecustomers’coredeposit,transactionalbankerandfinancier.Thisalsoincludesourassetfinanceproduct.

IV. Investment bankingTargetslargeandmediumsizedcompaniesforresearch,advisoryandcapitalrestructuringrequirements.ThesegmentinformationprovidedtotheExecutiveCommitteeofmanagementforthereportedsegmentsiscontainedonthenextpage.Therewerenochangesinthereportablesegmentsduringtheyear.

NIC BANK LIMITED


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NIC BANK LIMITED



7) Interest income

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

From customers

2,977,065 2,715,229 - Finance leases 2,982,837 2,844,617

7,402,830 5,876,851 - Loans and advances 8,386,187 6,759,582

10,379,895 8,592,080 11,369,024 9,604,199


380,435 440,315 - Held to maturity 647,777 588,590

- - - At fair value through profit or loss 24,033 68,160

1,404,156 1,127,882 - Available for sale 1,407,945 1,135,706

1,784,591 1,568,197 2,079,755 1,792,456

211,839 152,981 Due from banking institutions 262,289 245,761

12,376,325 10,313,258 13,711,068 11,642,416

30,879 45,637 Interest income earned on impaired financial assets 30,879 45,637

InterestincomeearnedonimpairedfinancialassetsrepresentstheunwindingofdiscountinginaccordancewithIAS39.

8) Interest expense

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

4,567,464 3,535,051 Customer deposits 5,062,509 4,001,167

366,093 121,497 Due to banking institutions 440,751 156,776

163,289 122,930 Borrowings 209,689 216,494

5,096,846 3,779,478 5,712,949 4,374,437

9) Net fee and commission income

a) Fee and commission income

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

983,368 799,318 Credit related fees and commissions 1,060,521 880,990

372,781 336,894 Service / transaction fees 471,772 422,639

1,356,149 1,136,212 1,532,293 1,303,629

NIC BANK LIMITED



9) Net fee and commission income (Continued)

b) Fee and commission expense

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

23,739 20,171 Credit card related expenses 23,739 20,171

28,544 32,152 Transactional expenses 41,302 42,940

52,283 52,323 65,041 63,111

10) Net trading income

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

1,039,583 1,018,443 Foreign exchange income 1,142,181 1,146,510

305,199 211,465 Bond trading income 305,886 211,465

- -Fair value gain on investment in quoted shares (note 25 (a)) (11) 5,058

1,344,782 1,229,908 1,448,056 1,363,033

11) Other operating income

Thefollowingitemsareincludedinotheroperatingincome;

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

8,592 8,519 Rental income 5,050 4,979

1,151 1,749Gain on disposal of motor vehicle and equipment (note 39 (c)) 1,151 1,749

656 6,872 Bad debt recoveries 8,337 8,459

104,753 89,044 Trust and other fiduciary fees 104,753 89,044

12) Credit impairment charges

a) Specific allowance for impairment

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

1,996,326 1,583,147 At 1 January 2,592,033 1,652,986

- - Exchange difference on translation (5,996) (42,900)

376,358 435,628 Charge for the year 408,718 1,030,279

(70,973) (22,449) Write-offs (314,395) (48,332)

2,301,711 1,996,326 At 31 December 2,680,360 2,592,033

NIC BANK LIMITED



12) Credit impairment charges (Continued)

b) Collective allowance for impairment

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

143,021 99,464 At1January 170,102 107,508

- - Exchange difference on translation (25,423) -

(80,864) 43,557 Charge for the year (79,585) 62,594

62,157 143,021 At 31 December 65,094 170,102

c) Total allowance for impairment

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

2,139,347 1,682,611 At1January 2,762,135 1,760,494

- - Exchangedifferenceontranslation (31,419) (42,900)

295,494 479,185 Chargefortheyear 329,133 1,092,873

(70,973) (22,449) Write-offs (314,395) (48,332)

2,363,868 2,139,347 At 31 December 2,745,454 2,762,135

13) Employee benefits

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

1,771,191 1,635,487 Salariesandwages 2,174,346 2,015,066

5,032 296 Gratuityprovision 5,032 296

14,551 13,570 Directors’emoluments–fees 31,562 23,512

133,908 138,712 –other 188,836 193,119

2,395 1,659 Pension costs - statutory contributions 25,285 21,878

124,862 107,126 Pension costs – defined contribution 135,881 113,637

2,051,939 1,896,850 At 31 December 2,560,942 2,367,508

Thetotalnumberofemployeesasat31December2014fortheGroupwas1,001(2013:909).

14) (a) Depreciation and amortisation

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

215,287 202,648 Depreciation(note27) 297,153 249,108

176,442 161,193 Amortisationofcomputersoftware(note28(a)) 207,357 196,873

125 125 Amortisation of operating lease (note 29) 125 125

391,854 363,966 At 31 December 504,635 446,106

NIC BANK LIMITED



14) (b) Other operating expenses

The following items are included under this category:

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’0004,500 3,956 Auditor’s remuneration 13,108 9,046

173,819 138,420 Rental charges 290,441 252,66724,092 21,785 Share registrations costs 24,092 21,785

135,172 92,344 Publicity and advertising 144,555 98,04793,585 75,254 Other premises costs 108,263 88,212

116,067 101,801 Deposit protection fund 129,823 109,488149,611 108,816 IT expenses 168,347 123,154

15) Income tax

(a) Income tax expense

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Current tax Shs’000 Shs’0001,992,665 1,854,682 Income tax based on taxable profit for the year at 30% 2,044,527 1,803,410

(19,102) - Prior year under provision - current tax (20,071) -1,973,563 1,854,682 2,025,425 1,803,410

Deferred tax (note 26)

94,962 (82,252) Current year 95,931 (93,991)(6,411) 62,851 Prior year under provision (6,411) 62,851

2,062,114 1,835,281 2,113,976 1,772,270

b) Reconciliation of tax expense to expected tax base based on accounting profit

Thetaxontheprofitbeforetaxdiffersfromthetaxchargethatwouldapplyifallprofithadbeentaxedusingthestatutoryincometaxrate:

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’0006,081,281 5,220,857 Profit before tax 6,230,650 5,009,571

1,824,384 1,566,257 Income tax - at the statutory rate of 30 % (2013: 30%) 1,869,195 1,502,871816,245 705,540 Tax effect of expenses not deductible for tax 816,133 705,540

(553,002) (499,367) Tax effect of revenues that are not taxable (544,870) (498,992)Prior year under provision:

(19,102) - - Current tax (20,071) -(6,411) 62,851 - Deferred tax (6,411) 62,851

2,062,114 1,835,281 2,113,976 1,772,270

NIC BANK LIMITED



15) Income tax (Continued)

c) Current income tax payable/(recoverable) movement

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

296,595 382,138 At 1 January 117,862 365,465

- - Exchange difference on translation (30,172) 1,887

1,992,665 1,854,682 Tax charge (note 15 (a)) - current year 2,044,527 1,803,410

(19,102) - Tax charge (note 15 (a)) - prior year (20,071) -

(2,213,588) (1,940,225) Income taxation paid (2,284,718) (2,052,900)

56,570 296,595 At 31 December (172,572) 117,862

Comprising;

56,570 - Current income tax recoverable (185,185) (188,847)

- 296,595 Current income tax payable 12,613 306,709

56,570 296,595 At 31 December (172,572) 117,862

16) Earnings per share

Earningspershareiscalculatedbydividingtheprofitattributabletoequityholdersoftheparentcompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheyear.

Bank Group

2014 2013 2014 2013

4,019,167 3,385,576Profit attributable to equity holders of the Bank (Shs’000) 4,120,855 3,323,381

Weighted average number of shares for purposes of basic and diluted earnings per share:

542,984,148 542,984,148 Issued ordinary shares at 1 January 542,984,148 542,984,148

3,555,253 - Effects of rights issue exercised 3,555,253 -

36,198,943 - Effects of bonus shares issued 36,198,943 -

582,738,344 542,984,148 At 31 December 582,738,344 542,984,148

6.90 6.24 Earnings Per Share (Shs) 7.07 6.12

Thecalculationofbasicanddilutedearningspershareisbasedoncontinuingoperationsattributabletotheordinaryequityholdersoftheparentcompany.Therewerenodiscontinuedoperationsduringtheyear.

NIC BANK LIMITED



17) Cash and balances with Central Banks

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

1,026,642 1,094,149 Cash on hand 1,472,964 1,470,144

Balances with central banks:

2,996,571 - - Reverse purchase agreement 2,996,571 -

300,367 1,640,932 - Other (available for use by the Group) 560,394 2,238,206

4,323,580 2,735,081 Included in cash and cash equivalents (note 39 (b)) 5,029,929 3,708,350

4,782,921 4,309,865 Mandatory reserve deposits 5,509,567 5,035,194

9,106,501 7,044,946 10,539,496 8,743,544

ThemandatoryreservedepositsmainlyrepresentsregulatorycashratiorequirementsbasedonthecustomerdepositswiththeGroup.Asat31December2014,thecashratiorequirementwas5.25%(2013:5.25%)inKenya,10.0%(2013–10.0%)inTanzaniaand8.5%(2013–8.5%)inUgandaofeligibledeposits.ThesefundsarenotavailableforthedaytodayoperationsoftheGroupandarenoninterestearning.

Amountsincludedincashandcashequivalentsarecurrent.Mandatoryreservedepositsarenon-current.

Cashandbalanceswithcentralbanksareclassifiedas‘loansandreceivables’..

18) Items in the course of collection

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

484,521 215,693 Clearing account balances 519,958 243,514

Itemsinthecourseofcollectionarecurrentandareclassifiedas‘loansandreceivables’.

19) Due from banking institutions

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

889,249 732,225 Deposits due from banking institutions 1,799,255 1,422,915

6,954,654 3,457,183 Balances due from banking institutions 6,954,654 4,497,284

7,843,903 4,189,408 8,753,909 5,920,199

2.70% 3.65% Weighted average effective interest rate as at year end 3.0% 4.16%

Balancesduesfrombankinginstitutionsarecurrentandareclassifiedas‘loansandreceivables’.

NIC BANK LIMITED



20) Government securities

Securitiesheldtomaturityarestatedatamortisedcostwhilethoseclassifiedas“Fairvaluethroughprofitorloss”and“AvailableforSale”arestatedatfairvalue.

a) Government securities are categorised as follows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

13,256,988 11,974,224 Availableforsale 13,581,129 12,393,099

3,197,123 3,972,106 Heldtomaturity 5,515,795 5,544,716

Fair value through profit or loss

- - Held for trading 126,762 155,335

16,454,111 15,946,330 19,223,686 18,093,150

Thetablebelowsummarisestheweightedaverageeffectiveinterestrateforgovernmentsecuritiesasatyearend.

Bank Group

2014 2013 2014 2013

% % % %

10,42 11.55 Availableforsale 11.76 12.78

11.09 11.09 Heldtomaturity 10.89 10.62

- - Fair value through profit or loss 9.92 9.16

b) The maturity profile of Government securities is a follows:

GroupAvailable

for saleHeld to

maturity

Designated at fair value

through profit or

loss Total Shs `000 Shs `000 Shs `000 Shs `000

2014

Included in cash and cash equivalents - 696,965 - 696,965

Lessthan1year 1,881,810 1,518,813 126,762 3,527,385

1-5years 7,064,823 3,194,357 - 10,259,180

Over5years 4,634,496 105,660 - 4,740,156

13,581,129 5,515,795 126,762 19,223,686

2013

Included in cash and cash equivalents - 3,585,870 - 3,585,870

Lessthan1year 1,617,616 914,011 155,335 2,686,962

1-5years 7,422,145 783,385 - 8,205,530

Over5years 3,353,338 261,450 - 3,614,788

12,393,099 5,544,716 155,335 18,093,150

NIC BANK LIMITED



20) Government securities (Continued)

b) The maturity profile of Government securities is a follows: (Continued)

Bank Available for sale

Held to maturity Total

2014 Shs `000 Shs `000 Shs `000

Included in cash and cash equivalents - 202,520 202,520

Less than 1 year 1,881,810 2,094,653 3,976,463

1-5 years 6,766,282 794,290 7,560,572

Over 5 years 4,608,896 105,660 4,714,55613,256,988 3,197,123 16,454,111

2013Included in cash and cash equivalents - 2,679,288 2,679,288

Less than 1 year 1,198,740 247,983 1,446,723

1-5 years 7,422,145 783,385 8,205,530

Over 5 years 3,353,338 261,450 3,614,78811,974,223 3,972,106 15,946,329

21) Derivative assets

Theamountrepresentsthefairvalueofforwardforeignexchangecontracts.Thesederivativeassetsandliabilitiesaremeasuredatfairvaluethroughprofitorloss.Notionalprincipalamountsaretheamountsunderlyingthecontractatthereportingdate.

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

118,781 41,232 Fair value of forward contracts 118,781 48,04930,381,438 24,858,686 Notional value of forward contracts 32,567,890 34,630,655

Derivativeassetsarecurrent.

22) Loans and advances to customers

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

22,463,366 19,963,644 Finance lease receivables 23,071,819 20,516,783

64,021,727 50,198,767 Commercial loans 71,412,960 56,647,640

8,836,005 7,015,848 Bills discounted 8,836,005 7,015,848

95,321,098 77,178,259 Gross loans and advances to customers 103,320,784 84,180,271Provisions for impairment

2,301,711 1,996,328 Specific allowance 2,680,360 2,592,033

62,157 143,021 Collective allowance 65,094 170,102

2,363,868 2,139,349 Total impairment 2,745,454 2,762,135

92,957,230 75,038,910 Net loans and advances to customers 100,575,330 81,418,136

942,381 1,142,393Net non performing loans and advances to customers 1,351,648 1,928,893

NIC BANK LIMITED



22) Loans and advances to customers (Continued)

Financeleasereceivables,maybeanalysedasfollows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

3,286,614 2,632,611 Notlaterthan1year 3,302,462 2,646,665

19,176,752 17,331,033 Later than 1 year and not later than 5 years 19,769,357 17,870,118

22,436,366 19,963,644 Present value of minimum lease payments receivable 23,071,819 20,516,783

1,239,449 994,447Accumulatedallowanceforuncollectibleminimumleasepaymentsreceivable 1,239,449 994,447

TheGroupandBankenterintofinanceleasingarrangementsforcertainplant,equipment,motorvehiclesandaircraft.Theaveragetermoffinanceleasesenteredintois3years.Unguaranteedresidualvaluesofassetsleasedunderfinanceleasesareestimatedatnil(2013:nil).

Therearenocontingentrentsrecognisedasincomein2013and2014. Theweightedaverageeffectiveinterestratesonloansandadvancestocustomersatyearendwereasfollows:

Bank Group

2014 2013 2013 2013

% % % %

14.08 14.51 Financeleasereceivables 14.08 14.51

11.54 11.81 Commercialloans 11.58 11.28

8.69 9.62 Billsdiscounted 8.69 9.62

Loansandadvancestocustomersareclassifiedascurrentandnoncurrentasfollows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

45,403,980 35,924,094 Current 49,944,378 39,899,499

47,553,250 39,114,816 Non-current 50,630,952 41,518,637

92,957,230 75,038,910 100,575,330 81,418,136

23) Other assets

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

165,176 128,500 Prepayments 205,071 193,277

895,156 1,061,974 Other receivables 927,506 1,141,307

- - Trade receivables 154,122 196,622

1,060,332 1,190,474 1,286,699 1,531,206

Otherassetsarecurrent.Otherassets,excludingprepayments,areclassifiedas‘loansandreceivables’.

NIC BANK LIMITED



24) Due from group companies

Group Bank

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

8,510 6,848 NICCapital - -

9,882 7,398 NICSecurities - -

166,239 352,722 NICBankTanzania - -

1,913,789 1,677,194 NCBankUganda - -

2,098,420 2,044,162 - -

Servicesareprovidedbasedonthepricelistsinforceandtermsthatwouldbeavailabletothirdparties.

Balancesduefromgroupcompaniesarecurrentandareclassifiedas‘loansandreceivables’.

25) Investments

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

3,931,501 3,365,493 Investmentinsubsidiaries - -

- - Availableforsaleinvestments 15,155 33,990

- -UnquotedequitysecurityinTanzaniaMortgageRefinanceCompany 25,380 25,470

1,466,805 2,075,177 CorporateBonds 1,466,805 2,075,177

- - EquityinvestmentinNSE 108,625 191,000

5,398,306 5,440,670 1,615,965 2,325,637

TheGroup’sequityinvestmentintheNairobiSecuritiesExchange(NSE)wasconvertedtosharesintheyearfollowingthelistingofthecompany’sstockonitsownexchange.Thevaluationasat31December2014wasbasedonthequotedshareprice.

Investmentinsubsidiariesisnon-current.Theotherinvestmentsarecurrent.

a) The movement in investments is as follows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

5,440,670 2,285,324 At start of year 2,325,637 243,931

- - Exchangedifferencesontranslation 90 1,471

550,000 - AcquisitionofNICProperties - -

- - Availableforsaleinvestments (18,835) 5,058

(608,372) 2,075,177 Corporatebonds (608,372) 2,075,177

16,008 1,080,169 InvestmentinNICBankTanzania - -

- - Changesinfairvalue–EquityinvestmentinNSE (82,375) -

5,398,306 5,440,670 At end of year 1,615,965 2,325,637

Investments,excludinginvestmentsinsubsidiaries,areclassifiedas‘assetsatfairvaluethroughprofitandloss’.Noneofthefinancialassetsareimpaired.

NIC BANK LIMITED



25) Investments (Continued)

b) Investment in subsidiaries (at cost)

BANK

Name Principal Holding 2014 2013

activity % Shs’000 Shs’000

NC Bank Uganda Banking 100 1,137,538 1,137,538

NIC Bank Tanzania Banking 69.84 1,692,462 1,676,454

NIC Capital Financial advisory 100 500,000 500,000

NIC Insurance Agents Insurance agency 100 1,000 1,000

National Industrial Credit Trustees Dormant 100 500 500

Mercantile Finance Company Dormant 100 50,000 50,000

The African Mercantile Banking Company Dormant 100 1 1

NIC Properties Property 100 550,000 -

3,931,501 3,365,493

NICCapitalLimitedhasasubsidiary,NICSecuritiesLimitedwhoseresultshavebeen incorporated in thesefinancialstatements.DetailsofNICSecuritiesLimitedatcostareasfollows:

Principal Holding 2014 2013 Name activity % Shs `000 Shs `000 NICSecuritiesLimited Brokerageservices 100% 456,923 456,240

All the subsidiary companies have their financial year ended 31 December and are incorporated as limited liabilitycompanies.ExceptforNICBankTanzaniaLimitedandNCBankUgandaLimitedwhichareincorporatedanddomiciledinTanzaniaandUgandarespectively,allothersubsidiariesareincorporatedanddomiciledinKenya.

NCBankUgandaLimitedwasestablishedin2012toofferbankingservicesforourcustomersinUganda.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadeaprofitequivalenttoShs20,698,000(2013:alossofShs555,000).

NICBankLimitedacquired51%ofSavings&FinanceCommercialBankLimitednowrenamedNICBankTanzaniaLtdwitheffectivecontrolbeingpassedon1May2009.AsatDecember2014,theBankholds69.84%ofNICBankTanzania.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadeaprofitequivalenttoShs40,816,000(2013:alossofShs277,488,000).

NICCapitalLimitedwasestablishedin2005toofferinvestmentbankingservices.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadeaprofitofShs8,865,000(2013:Shs72,794,000).

NICCapitalLimited(NICCL)acquiredNICSecuritiesLtd(NICSL)witheffectivecontrolbeingpassedon1January2008.Subsequently,substantiallythroughrightsissues,theshareholdingofNICCLinNICSLhasincreasedto100%.NICSLoffersbrokerageservicesandisaregisteredbrokerwiththeNairobiSecuritiesExchange.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadeaprofitofShs55,485,000(2013:Shs35,162,000).TheresultsofNICSecuritiesLimitedareconsolidatedinthesefinancialstatements.

NIC Insurance Agents Limited was a 68% subsidiary of Mercantile Finance Company Limited (MFC). In 2010, NICBankLimitedacquiredthenon-controlling interestandnowdirectlyowns100%of thecompany.ThecompanyoffersBancassuranceservices.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadeaprofitofShs26,326,000(2013:Shs21,799,000).

NationalIndustrialCreditTrusteesLimitedfunctionsinatrusteecapacity.Theauditedfinancialstatementsshowthatthecompanymadenoprofitorlossfortheyear(2013:Shsnil).

NIC BANK LIMITED



25) Investments (Continued)

b) Investment in subsidiaries (at cost) (Continued)

MercantileFinanceCompanyLimiteddidnottradeduringtheyearended31December2014.Itsactivitiesarelimitedtotherecoveryofitsnonperformingdebts.Theauditedfinancialstatementsshowthatthecompanymadenoprofitorlossfortheyear(2013:Shsnil).

TheAfricanMercantileBankingCompanyLimiteddidnottradeduringtheyearended31December2014.Theauditedfinancialstatementsshowthatthecompanymadenoprofitorlossfortheyear(2013:Shsnil).

InApril2014,theBankacquireda100%shareholdinginCodicoteLimitedforaconsiderationofShs550million.ThesoleassetofCodicoteLimitedisLandLRNO.209/13628adjacenttotheheadquartersoftheBankinUpperhill,Nairobi.TheCompanynamewassubsequentlychangedtoNICPropertieswhosesoleactivityistheownershipoftheLand.Theauditedfinancialstatementsfortheyearended31December2014showthatthecompanymadenoprofitorlossfortheyear(2013:Shsnil).

TheeffectofacquisitiontotheownersoftheBankissummarisedasfollows:

2014

Shs’000

Consideration paid 550,000

Less fair value of net assets acquired 516,000

Excess of consideration paid recognised as goodwill 34,000

NIC BANK LIMITED



26) Deferred income tax Thenetdeferredtaxmovementcomputedattheenactedrateof30%,isattributabletothefollowingitems:

Group

Year ended 31 December 2014 1 Jan 2014(Credit)/ Charge to profit or loss

Charge/ (Credit) to OCI 31 Dec 2014

Shs’000 Shs’000 Shs’000 Shs’000

Assets: -

Leave pay accrual (10,153) (837) - (10,990)

Gratuity Provision - (2,034) - (2,034)

Excess depreciation over capital allowances:

- Current year (223,432) (83,249) - (306,681)

- Prior year 62,851 (62,851) - -

Collective allowance for impairment (313,149) 59,451 - (253,698)

Tax losses (38,469) - - (38,469)

(522,352) 89,520 - (611,872)

Liabilities:

Available for sale financial assets:

- Current year (75,174) - 291,963 216,789

- Prior year 187,357 - (187,357) -

Revaluation surplus 76,237 - - 76,237

Exchange differences on translation 5,144 - - 5,144

Deferred income tax asset (328,788) 89,520 104,606 (313,702)

Year ended 31 December 2013 1 Jan 2013(Credit)/ Charge to profit or loss

Charge/ (Credit) to OCI 31 Dec 2013

Shs’000 Shs’000 Shs’000 Shs’000

Assets:

Leavepayaccrual (9,854) (299) - (10,153)

Excessdepreciationovercapitalallowances:

-Currentyear (272,756) 49,324 - (223,432)

-Prioryear - 62,851 - 62,851

Collectiveallowanceforimpairment (185,785) (127,364) - (313,149)

Otherprovisions (214) 214 - -

Taxlosses (22,603) (15,866) - (38,469)

(491,212) (31,140) - (522,352)

Liabilities:

Availableforsalefinancialassets:

-Currentyear 174,161 - (249,335) (75,174)

-Prioryear - - 187,357 187,357

Revaluationsurplus 59,419 - 16,818 76,237

Exchangedifferencesontranslation - - 5,144 5,144

Deferred income tax asset (257,632) (31,140) (40,016) (328,788)

NIC BANK LIMITED



26) Deferred income tax (Continued)

Bank

1 Jan 2014Charge/ (Credit) to

profit or loss(Credit)/

charge to OCI 31 Dec 2014

Year ended 31 December 2014 Shs’000 Shs’000 Shs’000 Shs’000

Assets:

Leave pay accrual (9,435) (503) - (9,938)

Gratuity provision - (1,509) - (1,509)

Excess depreciation over capital allowances:

-Currentyear (273,522) 48,042 - (225,480)

-Prioryear 62,851 (62,851) - -

Collective allowance for impairment (274,684) 105,373 - (169,311)

(494,790) 88,551 - (406,239)

Liabilities:

Available for sale financial assets:

-Currentyear (71,074) - 104,606 33,532

-Prioryear 187,357 - - 187,357

Revaluation surplus 76,238 - - 76,238

Deferred income tax asset (302,269) 88,551 104,606 (109,113)

Year ended 31 December 2013 1 Jan 2013Credit to profit or

lossCharge/

(Credit) to OCI 31 Dec 2013

Shs’000 Shs’000 Shs’000 Shs’000

Assets:

Leavepayaccrual (9,688) 253 - (9,435)

Excessdepreciationovercapitalallowances:

-Currentyear (281,661) 8,139 - (273,522)

-Prioryear - 62,851 - 62,851

Collectiveallowanceforimpairment (184,040) (90,644) - (274,684)

(475,389) (19,401) - (494,790)

Liabilities:

Availableforsalefinancialassets:

-Currentyear 174,161 - (245,235) (71,074)

-Prioryear - - 187,357 187,357

Revaluationsurplus 59,420 - 16,818 76,238

Deferred income tax asset (241,808) (19,401) (41,060) (302,269)

NIC BANK LIMITED



26) Deferred tax asset (Continued)Asat31December2014,theGrouphadaccumulatedtaxlossesavailableforfuturereliefofShs(2013:Shs122,519,000)relatingtoNCBankUgandaLimited.

UndertheKenyanlegislation,witheffectfrom1January2011,taxlossescanonlybecarriedforwardtoamaximumoffouryears.InUganda,however,thetaxlossescanbecarriedforwardforanindefiniteperiod.

NIC BANK LIMITED



27) Property and equipment

GroupBuildings

Furniture, fittings and equipment

Motor vehicles

Work in progress Total

Shs `000 Shs `000 Shs `000 Shs `000 Shs `000

COST OR VALUATION

At 1 January 2013 370,000 1,520,525 60,647 80,456 2,031,628Additions - 210,268 4,604 88,562 303,434Transfers - WIP - 110,751 - (110,751) -Disposals - (10,973) (11,978) - (22,951)Translation adjustments - (7,903) 5,814 5,528 3,439At 31 December 2013 370,000 1,822,668 59,087 63,795 2,315,550

At 1 January 2014 370,000 1,822,668 59,087 63,795 2,315,550Additions - 211,206 26,299 55,896 293,402Transfers - WIP - 53,472 - (53,472) -Disposals - (73,722) (3,452) - (77,174)

Translation adjustments - (7,136) 849 371 (5,916)

At 31 December 2014 370,000 2,006,488 82,783 66,590 2,525,861Comprising:Cost 144,617 2,006,488 82,783 66,590 2,300,478Valuation – 2013 225,383 - - - 225,383

370,000 2,006,488 82,783 66,590 2,525,861

DEPRECIATIONAt 1 January 2013 44,848 953,972 22,917 - 1,021,737Charge for the year 11,213 225,883 12,012 - 249,108Eliminated on disposals - (10,767) (1,788) - (12,555)Revaluation (56,061) - - - (56,061)Translation adjustments - (5,209) (734) - (5,943)At 31 December 2013 - 1,163,879 32,407 - 1,196,286

At 1 January 2014 - 1,163,879 32,407 - 1,196,286Charge for the year 13,214 271,247 12,692 - 297,153Eliminated on disposals - (51,724) (3,452) - (55,176)Translation adjustments - 6,051 2,437 - 8,488

At 31 December 2014 13,214 1,389,453 44,084 - 1,446,751

NET BOOK VALUE

At 31 December 2014 356,786 617,035 38,699 66,590 1,079,110At 31 December 2013 370,000 658,789 26,680 63,795 1,119,264

BuildingswererevaluedatShs370millionasat31December2013byregisteredprofessionalvaluers,KnightFrankValuers,onanopenmarketvaluebasisbyreferencetomarketevidenceofrecenttransactionsforsimilarproperties.Buildingsarerevaluedevery3-5years.At31December2014,thenetbookvalueofbuildingsbasedonoriginalcostwasShs118,323,000(2013–Shs122,706,000).Therewerenocapitalisedborrowingcostsrelatedtotheacquisitionofpropertyandequipmentduringtheyear(2013:Shsnil).

Includedinmotorvehiclesandfurniture,fittingsandequipmentareassetswithacostofShs681,333,000(2013:Shs692,934,000)whichwerefullydepreciated.ThenotionaldepreciationchargeontheseassetswouldhavebeenShs148,275,000(2013:Shs168,875,000).Computerequipmentisincludedunderfurniture,fittingsandequipment.

NIC BANK LIMITED



27) Property and equipment (Continued)

Bank Buildings

Furniture, fittings and equipment

Motor vehicles

Work In progress Total

Shs `000 Shs `000 Shs `000 Shs `000 Shs `000COST OR VALUATIONAt 1 January 2013 370,000 1,318,132 37,866 7,770 1,733,768

Additions - 106,111 2,570 88,562 197,243

Transfers - 93,056 - (93,056) -

Disposals - (10,913) (11,978) - (22,891)

At 31 December 2013 370,000 1,506,386 28,458 3,276 1,908,120

At 1 January 2014 370,000 1,506,386 28,458 3,276 1,908,120

Additions - 158,919 23,540 50,795 233,254

Transfers - 43,128 - (43,128) -

Disposals - (27,700) (3,452) - (31,152)

At 31 December 2014 370,000 1,680,733 48,546 10,943 2,110,222

Comprising:Cost 144,617 1,680,733 48,546 10,943 1,884,839

Valuation – 2013 225,383 - - - 225,383

370,000 1,680,733 48,546 10,943 2,110,222

DEPRECIATIONAt 1 January 2013 44,848 889,409 13,899 - 948,156

Charge for the year 11,213 185,833 5,602 - 202,648

Eliminated on disposals - (10,745) (1,788) - (12,533)

Revaluation (56,061) - - - (56,061)

At 31 December 2013 - 1,064,497 17,713 - 1,082,210

At 1 January 2014 - 1,064,497 17,713 - 1,082,210

Charge for the year 13,214 195,153 6,920 - 215,287

Eliminated on disposals - (27,598) (3,452) - (31,050)

Revaluation - - - - -

At 31 December 2014 13,214 1,232,052 21,181 - 1,266,447

NET BOOK VALUEAt 31 December 2014 356,786 448,681 27,365 10,943 843,775

At 31 December 2013 370,000 441,889 10,745 3,276 825,910

BuildingswererevaluedatShs370millionasat31December2013byregistered,professionalvaluers,KnightFrankValuers,onanopenmarketvaluebasisbyreferencetomarketevidenceofrecenttransactionsforsimilarproperties.At31December2014,thenetbookvalueofbuildingsbasedonoriginalcostwasShs118,323,000(2013:Shs122,706,000).

Included in motor vehicles and furniture, fittings and equipment are assets with a cost of Shs 676,472,000 (2013:Shs676,947,000)whichwerefullydepreciated.ThenotionaldepreciationchargeontheseassetswouldhavebeenShs139,857,000(2013:Shs148,890,000).Computersareincludedunderfurniture,fittingsandequipment.

NIC BANK LIMITED



28) Intangible assets

Bank Group

2014 2013 2014 2013Shs’000 Shs’000 Note Shs’000 Shs’000

548,776 629,560 Computer software 28(a) 636,133 719,729- - Goodwill 28(b) 409,426 375,426

548,776 629,560 At 31 December 1,045,559 1,095,155

Detailsoftheintangibleassetsareasfollows:

a) Computer software

Bank Group

CapitalisedWork-in

Progress Total CapitalisedWork-in

Progress Total Shs `000 Shs `000 Shs `000 Shs `000 Shs `000 Shs`000

COST 958,343 - 958,343 At 1 January 2013 1,089,115 2,903 1,092,018

- - - Translation adjustment 6,056 - 6,056103,717 44,698 148,415 Additions 111,999 44,698 156,697

32,601 (32,601) - Transfers 35,504 (35,504) -1,094,661 12,097 1,106,758 At 31 December 2013 1,242,674 12,097 1,254,771

1,094,661 12,097 1,106,758 At 1 January 2014 1,242,674 12,097 1,254,771- - - Translation adjustment 20,372 - 20,372

31,793 63,865 95,658 Additions 41,464 63,865 105,329

6,117 (6,117) - Transfers 6,117 (6,117) -

1,132,571 69,845 1,202,416 At 31 December 2014 1,310,627 69,845 1,380,472

AMORTISATION316,005 - 316,005 At 1 January 2013 339,953 - 339,953

- - - Translation adjustments (1,784) - (1,784)161,193 - 161,193 Charge for the year 196,873 - 196,873

477,198 - 477,198 At 31 December 2013 535,042 - 535,042

477,198 - 477,198 At 1 January 2014 535,042 - 535,042- - - Translation adjustments 1,940 - 1,940

176,442 - 176,442 Charge for the year 207,357 - 207,357653,640 - 653,640 At 31 December 2014 744,339 - 744,339

Net Book Value478,931 69,845 548,776 At 31 December 2014 566,288 69,845 636,133617,463 12,097 629,560 At 31 December 2013 707,632 12,097 719,729

AssetsoftheGroupwithagrossvalueofShs236,419,000(2013:Shs222,294,000)arefullyamortisedbutstillinuse.The notionalamortisationchargeontheassetswouldhavebeenShs47,299,000(2013:Shs44,459,000). Theweightedaverageremainingusefullifeofintangibleassets2.9years(2013:3.5years).

NIC BANK LIMITED



28) Intangible assets (Continued)

b) Goodwill

ThegoodwillconsistsofequityinterestheldbytheGroupin;

2014 2013Ownership

%Amount Shs’000

Ownership%

Amount Shs’000

NIC Bank Tanzania 69.84 251,996 68.97 251,996NIC Securities 99.93 123,430 99.93 123,430NIC Properties 100.00 34,000 - -At 31 December 409,426 375,426

GoodwillarisingonconsolidationrepresentsthegrowthpotentialofNICBankTanzania,NICSecuritiesandNICProperties.

Impairment tests for goodwill

Managementreviewsthebusinessperformanceoftheabovesubsidiaries.ThesubsidiariesaredeemedCashGenerat-ingUnits(CGU)bytheGroup.TherecoverableamountofallCGUshasbeendeterminedbasedonvalue-in-usecalcula-tionswhicharebasedonkeyassumptionsaboutbudgetedperformance.Thebudgetassumptionsreflectcurrenttrends,anticipatedgrowthdrivenbytheGroup’sstrategyandmanagementexperience.Inparticular,thebudgetforNICBankTanzaniatakesintoaccountexpectedrecoveryinthebusinessfollowingsuccessfulrightsissues.

Basedontheresultsoftheimpairmenttestsperformed,managementbelievesthatthereisnoimpairmentofthecarryingvalueof thegoodwill inanyCGU. Inaddition,no impairmentof theBank’s investments insubsidiaryundertakingsasreferredtoinnote25wasconsiderednecessary..

29) Operating lease prepayments – Leasehold land

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000Cost

10,000 10,000 At 1 January 10,000 10,000

- - Additions 516,000 -10,000 10,000 At 31 December 526,000 10,000

Amortisation 2,750 2,625 At 1 January 2,750 2,625

125 125 Chargefortheyear 125 1252,875 2,750 At 31 December 2,875 2,750

7,125 7,250 Net book value 523,125 7,250

NIC BANK LIMITED



30) Customer deposits

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’00037,028,373 37,034,059 Current 39,578,288 39,717,425

1,351,419 1,141,127 Savings 2,113,683 1,717,71653,606,130 45,859,648 Term 57,869,924 49,820,455

805,156 201,355 Other 873,059 309,40992,791,078 84,236,189 At 31 December 100,434,954 91,565,005

5.16% 4.71% Weightedaverageeffectiveinterestasatyearend 5.04% 4.37%

Customerdepositsarefinancialinstrumentsclassifiedasliabilitiesatamortisedcost.Includedintermdepositsaredepositswhichareatfixedinterestrateswhereasallotherdepositsareatvariablerates.Otherdepositsarethoseheld

ascollateralforirrevocablecommitmentsmainlyunderimportlettersofcreditandperformancebonds.Theirfairvalue approximatesthecarryingamount.:

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’00092,791,078 84,152,901 100,276,320 91,422,491

- 83,288 Current 158,634 142,51492,791,078 84,236,189 Non-current 100,434,954 91,565,005

31) Due to banking institutions

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000Maturing within 90 days:

4,625,406 4,910,171 Due to banking institutions 5,411,664 5,896,3342.97% 8.43% Weightedaverageeffectiveinterestrateasatyearend 2.87% 3.67%

Depositsduetobankinginstitutionsarefinancialinstrumentsclassifiedasliabilitiesatamortisedcost. Balancesduetobankinginstitutionsarecurrent.

NIC BANK LIMITED



32) Borrowings

TheBankhasanunsecuredrevolvingmediumtermlinesofcreditforonwardlendingwith;

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’0001,595,883 1,887,941 Agence Francaise De Development (PROPARCO) 2,110,154 1,887,9414,991,461 - The International Finance Corporation (IFC) 4,991,461 -1,521,373 1,740,228 The Dutch Development Finance Institution, FMO 1,521,373 1,740,2285,735,492 - Medium term note 5,735,492 -

13,844,209 3,628,169 14,358,480 3,628,169

Maturity Profile:788,692 28,766 Payable within one year 837,146 28,766

1,661,953 1,248,035 Payable after one year and within three years 2,127,769 1,248,03511,393,564 2,351,368 Payable after three years 11,393,565 2,351,36813,844,209 3,628,169 14,358,480 3,628,169

4.71% 3.34% Weighted average effective interest as at year end 4.72% 3.34% Borrowingsarefinancialinstrumentsclassifiedasaliabilityatamortisedcost.

33) Due to group companies

Bank

2014 2013

Shs `000 Shs `000

Deposits held - NIC Capital 178,038 101,903

- Mercantile Finance Company 5,210 5,210

- NIC Securities 381,109 312,725

- NIC Insurance Agents 34,982 28,381

Other payables - Mercantile Finance Company 42,020 42,020

- NIC Bank Tanzania 681 7,555

- NC Bank Uganda 167,412 40,186

809,452 537,980

Balancesduetogroupcompaniesarecurrent.

NIC BANK LIMITED



34) Other liabilities

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

413,915 294,561 Bills payable 415,942 306,567

1,229,374 1,278,536 Other payables and accruals 1,506,348 1,512,355

- - Preference shares 32,994 31,811

- - Legal and other claims 11,695 11,695

- - Trade payables 125,586 129,111

33,130 31,451 Leave pay provision 36,633 33,844

1,676,419 1,604,548 At 31 December 2,129,198 2,025,383

Otherliabilitiesarecurrent.Otherliabilities,excludingnon-financialassets,areclassifiedasliabilitiesatamortisedcost.

LegalandotherclaimsrelatesubstantiallytoaprovisionforchargesbroughtagainsttheGroupbycustomersofthestockbrokeragesubsidiary,NICSecuritiesLimited.Inthedirectors’opinion,aftertakingappropriatelegaladvice,theoutcomeoftheselegalclaimswillnotgiverisetoanysignificantlossbeyondtheamountsprovidedat31December2014.

Thepreferenceshares relate toEastAfricanDevelopmentBank (EADB)which investedTShs650million in8%non-redeemableandnon-cumulativepreferenceshares issuedbyNICBankTanzania inNovember2004.Thepreferenceshareholdershavethediscretiontotransfertotheexistingshareholdersormayconverttheirsharesintoordinarysharesuponattainmentofcertaincovenants.Dividendsonthepreferencesharesarepayablewhentherearesufficientcashresourcesatthedateofdeclaration,subjecttothebusinessandindustryrequirementsofthecompany,makingofprudentreservesandprovisionsingeneralandcomplyingwithallapplicablelegislation.

35) Dividends

AttheAnnualGeneralMeetingscheduledfor20May2015,afirstandfinaldividendinrespectof2014ofShs1.00pershare(2013:finaldividendofShs0.75pershare)amountingtoatotalofShs639,946,000(2013:Shs407,238,000)istobeproposedbythedirectors.

ThetotalestimateddividendfortheyeartobepaidisthereforeShs1pershare(2013:Shs1pershare)amountingtoatotalofShs639,946,000(2013:Shs542,984,000).ThefinalproposeddividendfortheyearissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingandhasnotbeenincludedasaliabilityinthesefinancialstatements.

Group and Bank

The movement in unclaimed dividends is as follows:

2014 2013

Shs`000 Shs`000

At 1 January 72,233 53,954

Final dividend declared 407,238 542,984

Interim dividend declared - 135,746

Dividends paid (396,588) (660,451)

At 31 December 82,883 72,233

Paymentofdividendstomemberswithshareholdingofupto12.5%issubjecttowithholdingtaxattherateof5.0%for residentsand10.0%fornon-residents.

NIC BANK LIMITED



36) Share capital and reserves a) Share capital and share premium

Group and BankNumber of

sharesShare

capital Share

premium

Shs `000 Shs `000 Shs `000

Balance at 1 January 2013 542,984,148 2,714,921 1,208,799

Bonus and Rights issue expenses - - (731)

Balance at 31 December 2013 542,984,148 2,714,921 1,208,068

Balance at 1 January 2014 542,984,148 2,714,921 1,208,068

Bonus Issue 54,298,415 271,492 (271,492)

Rights Issue 42,663,040 213,315 1,887,839

Bonus and Rights issue expenses - - (93,160)

Balance at 31 December 2014 639,945,603 3,199,728 2,731,255

Asat31December2014theauthorisedsharecapitaloftheBankcomprisedof800,000,000(2013:800,000,000)ordinaryshareswithaparvalueofShs5.Theissuedsharesasat31December2014are639,945,603(2013:542,984,148)andarefullypaid.Issuedandfullypaidordinaryshares,whichhaveaparvalueofShs5,carryonevotepershareandcarryarighttodividend.

TheholdersofordinarysharesareentitledtoreceivedividendsasdeclaredfromtimetotimeandareentitledtoonevotepershareatGeneralMeetingsoftheBank.

Premiumsfromtheissueofsharesarereportedassharepremiums.Duringtheyear,aportionofthiswasutilisedtocaterfortheRightsIssueandrelatedRightsIssueexpenses.

b) Revaluation surplus on property

Revaluationreserveismadeupoftheperiodicadjustmentarisingfromthevaluationofbuildings,netoftherelateddeferredtaxation.Thereserveisnotavailablefordistributiontotheshareholders.

Group and Bank

Themovementinrevaluationsurplusonpropertyisasfollows:

2014 2013Shs`000 Shs`000

At 1 January 189,545 155,083Revaluation surplus on building net of deferred tax - 39,243Transfer of excess depreciation (6,830) (6,830)Deferred tax on excess depreciation 2,049 2,049At 31 December 184,764 189,545

NIC BANK LIMITED



36) Share capital and reserves (Continued)

c) Investments revaluation reserve

Thisrepresentstheunrealizedincreaseordecreaseinthefairvalueofavailable-for-saleinvestmentsafterdeductionofdeferredincometaxes,excludingimpairmentlosses.Thereserveisnotavailablefordistributiontotheshareholders.

d) Foreign currency translation reserve

ThereservesrepresentexchangedifferencesarisingfromtranslationofthenetassetsoftheGroup’sforeignoperationswhichareNICBankTanzaniaLimitedandNCBankUgandaLimitedfromtheirfunctionalcurrency(TanzaniaShillingsand Uganda Shillings respectively), to the Group’s presentation currency (Kenya Shillings). These differences arerecogniseddirectlythroughothercomprehensiveincomeandaccumulatedintheforeigncurrencytranslationreserveinequity.Thereserveisnotavailablefordistributiontotheshareholders.

e) Regulatory reserve(s)

Whereimpairmentlossesrequiredbyprudentialguidelinesissuedbythebankingregulatorsexceedthosecomputedunder the International Financial Reporting Standards (IFRS), the excess is recognised as a regulatory reserveandaccounted forasanappropriation fromretainedearnings.Thereserve isnotavailable fordistribution to the

shareholders.

f) Other reserves

Thereserverelatestotransactionswithnon-controllingintereststhatdonotresultinlossofcontrol.Itisthedifferencebetweenfairvalueofanyconsiderationpaidandtherelevantshareacquiredofthecarryingvalueofnetassetsofthesubsidiary.TheGroupincreasedit’sshareholdinginNICTanzaniaLimitedandNICSecuritiesLimitedduringtheyear.Seetherespectivedisclosuresundernotes37(a)and(b).

g) Retained earnings

Thisrepresentsundistributedprofitsfromcurrentandpreviousyears.

37) Non-controlling interests

Thetotalnon-controllinginterestconsistsofequityinterestinsubsidiaries;

2014 2013

Ownership%

Amount Shs’000

Ownership%

Amount Shs’000

NIC Bank Tanzania 30.16 477,574 31.03 377,206

NIC Securities - - 0.07 306

At 31 December 477,574 377,512

NIC BANK LIMITED



37) Non-controlling interests (Continued)

a) NIC Bank Tanzania

On1May2009,theGroupacquireda51%stakeinoneofTanzania’smid-sizedcommercialbank,Savings&FinanceCommercialBankLtd,laterrenamedNICBankTanzaniaLimited.NICBankTanzaniaLtdwasfoundedasanon-bankfinancialinstitutionin1994,convertedtoafully-fledgedcommercialbankin2005andhasbranchesinDaresSalaam(3),Mwanza(1),Arusha(1)andKahama(1).Throughdirectbuy-outsandadditionalrightsissues,NICBankLimitedincreaseditsshareholdingfrom51%to68.97%in2013.Thishasbeenfurtherincreasedin2014to69.84%throughthetakingupofrightsnotexercisedbyminorityshareholders.

TheeffectofchangesinownershipinterestofNICBankTanzaniainequityattributabletotheownersofthebankissummarisedasfollows:

2014

Shs’000

Carryingamountofnon-controllinginterestacquired 13,339

Considerationpaidfortheinterests (16,008)

Excess of consideration paid recognised in parent’s equity (2,669)

Movement in non-controlling interests

2014 2013

Shs’000 Shs’000

At1January 377,206 486,558

Carryingamountofnon-controllinginterestacquiredbytheGroup (13,339) (178,404)

Additionalsharesacquiredthroughrightsissue 117,888 155,157

Shareoflossfortheyear (4,181) (86,105)

At 31 December 477,574 377,206

b) NIC Securities

On 31 December 2007, the Bank acquired 57.7% of NIC Securities Limited (formerly Solid Investment SecuritiesLimited) through its wholly owned subsidiary NIC Capital Limited. Through combinations of direct buy-outs andadditionalrightsissues,theGroupincreaseditsshareholdinginthesubsidiaryto91.34%in2009.

Throughdirectbuy-out,theGroupfurtherincreaseditsshareholdinginthesubsidiaryto100%in2014.

NIC BANK LIMITED



37) Non-controlling interests (Continued)

b) NIC Securities (Continued)

TheeffectofchangesinownershipinterestofNICSecuritiesinequityattributabletotheownersofthebankissummarisedasfollows:

2014

Shs’000

Carryingamountofnon-controllinginterestacquired 306

Considerationpaidfortheinterests (683)

Excess of carrying amount recognised in parent’s equity (377)

Movement in non-controlling interests

2014 2013

Shs’000 Shs’000

At 1 January 306 34,976

Carrying amount of non-controlling interest acquired by the Group (306) (34,695)

Share of profit for the year - 25

At 31 December - 306

38) Off balance sheet financial instruments, contingent liabilities and commitments

a) Contingent liabilities

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

3,374,438 4,763,734 Letters of credit 3,490,696 5,177,622

13,633,024 10,168,363 Letters of guarantee & performance bonds 13,793,897 10,557,519

17,007,462 14,932,097 At 31 December 17,284,593 15,735,141

Intheordinarycourseofbusiness,theGroupconductsbusinessinvolvingacceptances,lettersofcredit,guarantees,performancebondsandindemnities.Themajorityofthesefacilitiesareoffsetbycorrespondingobligationsofthirdparties.Inaddition,thereareotheroff-balancesheetfinancialinstrumentsincludingforwardcontractsforpurchaseandsaleofforeigncurrencies,thenominalamountsofwhicharenotreflectedinthestatementoffinancialposition.

LettersofcreditarecommitmentsbytheGrouptomakepaymentstothirdparties,onproductionofdocuments,onbehalfofcustomersandarereimbursedbycustomers.LettersofguaranteeandperformancebondsareissuedbytheGroup,onbehalfofcustomers,toguaranteeperformancebycustomerstothirdparties.TheGroupwillonlyberequiredtomeettheseobligationsintheeventofdefaultbythecustomers.

NIC BANK LIMITED



38) Off balance sheet financial instruments, contingent liabilities and commitments (Continued)

b) Operating lease prepayments

i) The group as a lessor

Attheendofthereportingperiod,theGrouphadcontractedwithtenantsforthefollowingfutureleasereceivables:

Group and Bank

2014 2013

Shs’000 Shs’000

Within one year 2,750 2,788

In the second to fifth year inclusive 10,013 12,763

At 31 December 12,763 15,551

Leasesarenegotiatedforanaveragetermof6yearsandrentalsarereviewedeverytwoyears.Theleasesarecancellablewithapenaltywhenthetenantsdonotgivethreemonths’noticetovacatethepremises.

ii) The group as a lessee

Attheendofthereportingperiod,theGrouphadnon-cancellableoperatingleaseswhichfalldueasfollows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

Premises

167,948 127,051 Within one year 244,437 139,940

425,490 337,385 In the second to fifth year inclusive 686,365 408,570

593,438 464,436 At 31 December 930,802 548,510

Office equipment

2,615 2,422 Within one year 2,615 2,422

113 119 In the second to fifth year inclusive 113 119

2,728 2,541 At 31 December 2,728 2,541

OperatingleasepaymentsrepresentrentalspayablebytheGroupfor itsbusinesspremisesandofficeequipment.Premisesleases are negotiated for an average term of 6 years, while office equipment is for an average term of 3 years. For thesecontingentliabilities,noreimbursementisexpected.

NIC BANK LIMITED



38) Off balance sheet financial instruments, contingent liabilities and commitments (Continued)

C) Capital commitments

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

- 38,000 Authorisedandcontractedfor - 70,866

680,640 453,940 Authorised but not contracted for 680,640 534,956

680,640 491,940 At 31 December 680,640 605,822

The capital commitments largely relate to branch expansion activities and software acquisition. The Group’smanagementisconfidentthatfuturenetrevenuesandfundingwillbesufficienttocoverthiscommitment.

d) Legal proceedings

Besidesoftheprovisionmade(seenote34),variousclaimsagainsttheGroupareconsideredwithoutmerit,andtheBankisdefendingthemvigorously.ItisnotpossibletoestimatetheBank’spossiblelossinrelationtothesematters,northeeffectthattheymighthaveuponoperatingresultsinanyparticularfinancialperiod.Nocontingentliabilityassociatedwithlegalactionshasbeendisclosedasprofessionaladviceindicatesthatitisunlikelythatanysignificantlosswillarise

e) Other credit commitments

Commitmentstolendareagreementstolendtocustomersinfuturesubjecttocertainconditions.Suchcommitmentsarenormallymadeforfixedperiods.TheGroupmaywithdrawfromitscontractualobligationstoextendcreditbygivingreasonablenoticetothecustomers

NIC BANK LIMITED



39) Notes to the consolidated statement of cashflows

a) Cash used in operations

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000Reconciliation of profit before income tax to cash used in operations

6,081,281 5,220,857 Profitbeforeincometax 6,230,650 5,009,571

Adjustments for:215,288 202,648 Depreciation(note27) 297,153 249,108

125 125 Amortisationofoperatingleaseprepayments 125 125

176,442 161,193 Amortisationofintangibleassets(note28) 207,357 196,873

(1,151) (1,749)(Gain)/Lossonsaleofmotorvehicleandequipment(note39(c)) 23,243 (1,749)

6,471,984 5,583,074 Profit before working capital changes 6,758,528 5,453,929(473,056) (397,685) Increaseinbalanceswithcentralbanks

–Mandatoryreservedeposits(535,039) (536,373)

(16,961,541) (10,732,872) Increaseinloansandadvancestocustomers (18,548,822) (11,953,221)

- -Outflowsonpurchaseofquotedshares -held fortrading - (6,529)

(2,985,918) (1,268,789)Increase in Government securities maturing after90days (4,203,136) (1,777,460)

(77,549) 37,492(Increase)/Decrease in derivatives held for riskmanagement (70,649) 35,074

(130,142) (575,318) Decreaseinotherassets (423,753) (617,464)271,472 (513,292) Due(from)/togroupcompanies - -

8,554,889 6,770,147 Increaseincustomerdeposits 8,869,949 8,185,429(71,871) 110,317 Decreaseinotherliabilities 786,710 79,637

10,216,040 (27,245) (Decrease)/increaseinborrowings 10,730,311 (27,245)4,815,676 (1,072,049) Cash used in operations 3,364,099 (1,164,223)

b) Cash and cash equivalents

Analysisofbalancesofcashandcashequivalentsasshownintheconsolidatedstatementoffinancialpositionandnotes;

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Note Shs’000 Shs’0004,323,580 2,735,081 Cash and balances with central banks 17 4,969,263 3,708,350

484,521 215,693 Items in course of collection 18 519,958 243,5147,843,903 4,189,408 Due from banking institutions 19 8,753,909 5,920,199

202,520 2,679,288 Government securities 20 696,965 3,585,870(4,625,406) (4,910,171) Due to banking institutions 31 (5,411,664) (5,896,334) 8,229,118 4,909,299 At 31 December 9,528,431 7,561,599

NIC BANK LIMITED



39) Notes to the consolidated statement of cashflows

c) Proceeds from sale of motor vehicle and equipment

Bank Group2014 2013 2014 2013


31,152 22,891 Disposal at cost 27 77,174 22,951(31,050) (12,533) Depreciation eliminated on disposal 27 (55,176) (12,555)

1,151 1,749Gain on disposal of motor vehicle and equipment 11 1,151 1,749

- -Loss on disposal of motor vehicle and equipment 11 (24,394) -

1,245 12,107Proceeds from sale of motor vehicle and equipment 1,245 12,145

40) Related party transactions

Partiesareconsideredtoberelatedifonepartyhastheabilitytocontroltheotherpartyorexercisesignificantinfluenceovertheotherpartyinmakingfinancialoroperationdecisions,oroneotherpartycontrolsboth.

There are other companies which are related to NIC Bank Limited through common shareholdings or commondirectorships.

In the normal course of business, a number of banking transactions are entered into with related parties i.e. staff,directors,theirassociatesandcompaniesassociatedwithdirectors.Theseincludeloans,depositsandforeigncurrencytransactions.Loansandadvancestocustomersat31Decemberincludeloansandadvancestostaffandtocompaniesassociatedwithdirectors.Contingentliabilitiesat31Decemberincludeguaranteesandlettersofcreditforcompaniesassociatedwithdirectors..

a) Loans and advances to customers:

Companies associated with directors

Bank Group2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

703,950 973,236 At 1 January 703,950 989,364333,014 (269,286) Net movement during the year 376,010 (285,414)

1,036,964 703,950 At 31 December 1,079,960 703,950

76,431 67,141 Interest earned 78,456 67,141

627,989 429,303Guarantees and letters of credit to companies associated with directors 627,989 429,303

Theaboveoutstandingbalancesarosefromtheordinarycourseofbusinessandaresubstantiallyonthesameterms,includinginterestratesandsecurity,asforcomparabletransactionswiththird-partycounterparties.

NIC BANK LIMITED



40) Related party transactions (Continued)

a) Loans and advances to customers (Continued)

Directors

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

4,263 23,871 At 1 January 14,072 23,871

63,971 (19,608) Net movement during the year 78,298 (19,608)

68,234 4,263 At 31 December 92,370 4,263

4,567 358 Interest earned 6,785 358

Theseloansandadvancesareperformingandareadequatelysecured.

b) Customer deposits

Companies associated with directors

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

4,864,462 3,249,503 At 1 January 4,957,594 3,400,490

(657,140) 1,614,959 Net movement during the year (741,485) 1,557,104

4,207,322 4,864,462 At 31 December 4,216,109 4,957,594

197,567 219,658 Interest paid 198,574 221,573

Theaboveoutstandingbalancesarosefromtheordinarycourseofbusinessandaresubstantiallyonthesameterms,includinginterestratesandsecurity,asforcomparabletransactionswiththird-partycounterparties.

Directors

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

116,713 118,981 At 1 January 120,442 133,038

(111,705) (2,268) Net movement during the year (93,414) (12,596)

5,008 116,713 At 31 December 27,028 120,442

2,378 4,867 Interest paid 2,478 4,867

Otheramountsoutstandingattheendofthereportingperiodaredisclosedinnotes24and33.

NIC BANK LIMITED



40) Related party transactions (Continued)

c) Key management compensation

Theremunerationofdirectorsandothermembersofkeymanagementduringtheyearwasasfollows:

Bank Group

2014 2013 2014 2013

Shs’000 Shs’000 Shs’000 Shs’000

290,351 284,065 Salaries and other benefits 392,612 374,679

Directors’ remuneration

14,551 13,570 Fees for services as directors 31,562 23,512

133,908 138,712 Other emoluments (included in key management compensation above)

188,836 193,119

148,459 152,282 220,398 216,631

Inlinewithpolicy,theabovecompensationisaconsolidatedsalarypackageencompassingallemploymentbenefitsandpension.

41) Assets pledged as security

Asat31December2014,therewerenoassetspledgedbytheGrouptosecureliabilitiesandtherewerenosecuredGroupliabilities(2013:nil)).

42) Fiduciary activities

The Group holds asset security documents on behalf of customers with a value of Shs 60,254,564,000 (2013: Shs50,555,796,000). These securities are held by the custody services department and comprise deposits with financialinstitutions,governmentsecuritiesandquotedandunquotedsecurities,amongothers.

NIC BANK LIMITED


NoticeisherebygiventhatthefiftyfifthAnnualGeneralMeetingoftheshareholdersofNICBankLimitedwillbeheldattheKenyattaInternationalConferenceCentre(KICC),NairobionWednesday20thMay2015,at11.00amforthefollowingpurposes:-

1. ToreadtheNoticeconveningtheMeeting.

2. Toreceive,considerandifthoughtfit,adopttheFinancialStatementsfortheyearended31stDecember2014andtheDirectors’andAuditors’Reportsthereon.

3. ToapprovethepaymentofafirstandfinaldividendfortheyearofShs1.00pershare(2013:interimdividendofShs0.25andfinaldividendofShs0.75)onthepaidupcapitalofShs3,199,728,000.

4. ToapprovethepaymentoffeestotheDirectorsfortheyearended31stDecember2014.

5. ToelectDirectors:

i) InaccordancewithArticles97oftheCompany’sArticlesofAssociation,EstherNgaine,whowasappointedtotheBoardsincethelastAnnualGeneralMeeting,retiresfromofficeand,beingeligible,offersherselfforre-election.

ii) InaccordancewithArticles108,109and110oftheCompany’sArticlesofAssociation,GAMainaretiresbyrotationandbeingeligible,offershimselfforre-election.

iii) Specialbusiness:

MLSomenandFNMwanziawhohaveattainedtheageof70years,retireinaccordancewithSection186(2)oftheCompaniesAct(Cap486).SpecialNoticehasbeenreceivedbytheCompanypursuanttoSection142oftheCompaniesAct,thatthefollowingresolutionbeproposedinaccordancewithSection186(5)ofthesaidAct,and,ifthoughtfit,passedbythemembers:

“ThatMLSomen,aDirectorwhohasattainedtheageof70years,beandisherebyre-electedasadirectoroftheCompany”

And

“ThatFNMwanzia,aDirectorwhohasattainedtheageof70years,beandisherebyre-electedasadirectoroftheCompany”.

6. TonotethatPricewaterhouseCooperswillcontinueinofficeastheAuditorsbyvirtueofSection159(2)oftheCompaniesAct(Cap.486)subjecttoCentralBankofKenyaapprovalinaccordancewithsection24(1)oftheBankingAct(Cap.488)andtoauthorizetheDirectorstofixtheirremuneration.

7. TotransactanyotherbusinessoftheAnnualGeneralMeetingofwhichduenoticehasbeenreceived.

BY ORDER OF THE BOARD

Livingstone Murage

Group Company Secretary

Nairobi

23rd March 2015

1. “AMemberentitledtoattendandvoteatthemeetingandwhoisunabletoattendisentitledtoappointaproxytoattendandvoteonhis,heroritsbehalf.AproxyneednotbeaMemberoftheCompany.TobevalidaproxymustbedulycompletedbytheMemberandlodgedwiththeGroupCompanySecretaryattheCompany’sregisteredofficesituatedatNICBankLimited,NICHouse,MasabaRoad,Nairobi,Kenya,before11amonMonday18thMay2015,failingwhichitwillbeinvalid.InthecaseofaMemberwhichisacorporatebodythentheproxymustbegivenunderitscommonseal.”

2. Acopyofthisnotice,proxyformandfullcopyoftheGroupfinancialstatementsincludingexplanatorynotesareavailablefromourwebsitewww.nic-bank.comoraprintedcopymaybeobtainedfromtheCompany’sshareregistrars,Custody&RegistrarServicesLimiteduponrequestandalsowillbemadeavailableatthevenueandonthedayoftheAnnualGeneralMeeting.

NOTICE OF THE ANNUAL GENERAL MEETING

NIC BANK LIMITED


TangazolinatolewakwambaMkutanoMkuuwaMwakawawenyehisawaBenkiyaNICutafanyikakatikajumbalaMikutanoyaKimataifalaKenyatta(KICC),NairobisikuyaJumatanotarehe20Meimwaka2015,saatanoasubuhiambapoajendazifuatazozitaangaziwa:-

1. KusomailaniinayotangazamaandaliziyaMkutanohuo.

2. Kupokea,kuzingatianazikiidhinishwakuwasawa,kuzikubaliTaarifazaKifedhazamwakauliokamilikaDesemba31,2014pamojanaRipotizaWakurugenziWakuunaWakaguziwaMahesabuyaFedha.

3. KuidhinishamalipoyamgaowakwanzanamwishowamwakaambaoniSh1.00kwakilahisa(mwaka2013:mgaowamwanzowaSh0.25nawamwishowaSh0.75)kwenyemtajiuliolipiwawaSh3,199,728,000.

4. KuidhinishamalipoyaadakwaWakurugenziWakuukwamwakaulioishiaDesemba31,2014.

5. KuchaguaWakurugenziWakuu:

i) KulingananaKifungucha97chaSheriayaUshirikianowaKampuni,EstherNgaine,aliyechaguliwakwenyeBoditanguMkutanoMkuuwaMwakauliopita,anastaafuna,kwasababuanastahili,anajitokezailikuchaguliwatena.

i). KulingananaKifungucha108,109na110chaSheriayaUshirikianowaKampuni,GAMainaanastaafukwazamunakwasababuanastahili,anajitokezailikuchaguliwatena.

iii) ShughuliMaalum:

MLSomennaFNMwanziaambaowamefikishaumriwamiaka70,wanastaafukulingananaSehemuya186 (2)yaSheriayaKampuni(Kifungucha486).IlaniMaalumimepokelewanaKampunihiikulingananaSehemuya142yaSheriayaKampuni,kwambamaazimioyafuatayoyapendekezwekulingananaSehemuya186(5)yaSheriahiyo,nayakionekanakuwasawa,yapitishwenawanachama:

“KwambaMLSomen,MkurugenziMkuuambayeamefikishaumriwamiaka70,awe,nahivyobasianachaguliwatenakamaMkurugenziMkuuwaKampunihii”

Na

“KwambaFNMwanzia,MkurugenziMkuuambayeamefikishaumriwamiaka70,awe,nahivyobasianachaguliwakamaMkurugenziMkuuwaKampunihii”.

6. Kukufahamisheni kwamba kampuni ya PricewaterhouseCoopers itaendelea kushikilia afisi ya Mkaguzi wa MahesabukulingananaSehemuya159(2)yaSheriazaKampuni(Kifungucha486)lakinibaadayakuidhinishwanaBenkiKuuyaKenya(CBK)kwamujibuwasehemuya24(1)yaSheriazaBenki(Kifungucha488),nakuwaamrishaWakurugenziWakuukujipangiamishaharayao.

7. KutekelezashughulinyinginezozotezaMkutanoMkuuwaMwakaambazozimeelezwakwenyeilaniiliyopokelewa.

KWA AMRI YA BODI

Livingstone Murage

Katibu Mkuu wa Kampuni

Nairobi

Tarehe 23 Machi 2015

1. “Mwanachamaanayestahilikuhudhurianakupigakurakatikamkutanohuonaambayehawezikuhudhuriaanakubaliwakuteuamwakilishiiliahudhurienakupigakurakwaniabayake.SilazimamwakilishihuyoaweMwanachamawaKampuni.NailikufuzulazimafomuyauwakilishiijazwenaMwanachamaanayehusikanakuwasilishwakwaKatibuwaKampunihiikwenyeafisiiliyosajiliwayaKampunikatikamakaoyakeyaNICBankLimited,jumbalaNICHouse,barabarayaMasabaRoad,Nairobi,KenyakablayasaatanoasubuhiJumatatutarehe18Meimwaka2015,naiwapoyeyoteatakosakufanyahivyohataruhusiwakushiriki.NaiwapoMwanachamahuyonishirika,lazimafomuyauwakilishi iwasilishweikiwanamhuriwakerasmi.”

2. Nakalayailanihii,fomuyauwakilishipamojananakalakamiliyataarifazakifedhazaKampunihiizikijumuishamaelezozinapatikanakatikawavutiwetuwawww.nic-bank.comaunakalailiyopigwachapainawezakupatikanakatikaafisizahisazaKampunihii,Custody&RegistrarServicesLimited,baadayakutumamaombinapiazitapatikanakwenyeukumbiwaMkutanoMkuuwaMwakasikuyamkutanohuo.

TANGAZO LA MKUTANO MKUU WA MWAKA

NIC BANK LIMITED


NOTES

NIC BANK LIMITED


PROXY FORM

The Group Company Secretary,

NIC Bank Limited

NIC House

Masaba Road,

P. O. Box 44599,

00100,GPO Nairobi

I/We_____________________________________________________________________________________________________________

of_______________________________________________________________________________________________________________

beingamember/membersofNICBankLimitedandentitledto___________________________________________________________

votesherebyappoint________________________________________________________________________________________________

of_______________________________________________________________________________________________________________

orfailinghim______________________________________________________________________________________________________

of_______________________________________________________________________________________________________________

asmy/ourProxytovoteforme/usonmy/ourbehalfattheAnnualGeneralmeetingofthecompanytobeheldon20May2015andatanyadjournmentthereof.

Aswitnessmy/ourhandthis________________________dayof_____________2015

Signature(s)of____________________________________________________________________________________________________

Note: In case of a Corporation, the Proxy must be made under its Common Seal.

NIC BANK LIMITED


FOMU YA UWAKILISHI Katibu wa Kampuni,

NIC Bank Limited

NIC House

Masaba Road,

P. O. Box 44599,

00100,GPO Nairobi

Mimi/Sisi________________________________________________________________________________________________________

waanuanihii______________________________________________________________________________________________________

nikiwamwanachama/tukiwawanachamawaNICBankLimitedna

nikiwa/tukiwanahakiyakura_______________________________________________________________________________________

namchagua/tunamchagua_________________________________________________________________________________________

wasandukulaposta_______________________________________________________________________________________________

naakiwahatapatanafasinimechagua/tumechagua____________________________________________________________________

wasandukulaposta_______________________________________________________________________________________________

akiwamwakilishiwangu/wetukunipigia/kutupigiakurakwaniabayangu/yetukatikaMkutanowaMwakawaKampuniutakaofanyikatarehe20Mei2015autareheyoyoteiwapomkutanoutahairishwa.Nashuhudiakwamkono/mikonoyangu/yetusikuhiiya

Tarehe______________________________________mweziwa_____________2015

Sahihi____________________________________________________________________________________________________________

Elewa: Mwakala akiwa anawakilisha kampuni yoyote au shirika nilazima atumie muhuri rasmi wa kampuni hiyo (common seal).

NIC BANK GROUP BRANCHES

KENYA TANZANIA

UGANDA

SUBSIDIARIES

Head Office and BranchNIC House, Masaba Road Nairobi

City Centre BranchPrudential BuildingKaunda Street

The Junction BranchDagoretti/Ngong Road

Prestige BranchPrestige PlazaNgong Road

The Mall BranchWestlands

Harambee Avenue Branch Jeevan Bharat Building Harambee Avenue

Galleria (Bomas) BranchGalleria Shopping MallLangata Road

Village Market BranchVillage MarketLimuru Road

Taj Mall BranchThe Junction of North Airport Road & Outering Road

Sameer Park BranchSameer Park BuildingMombasa Road

ABC, Westlands BranchABC Place, New BuildingWaiyaki Way

Karen BranchKaren Business ParkThe Junction of Langata Road and Ndege Road

Kenyatta Avenue Branch680 Hotel, Kenyatta Avenue

Thika Road Mall BranchThika Road

Riverside DriveICEA Lion Center - Riverside

MOMBASA BRANCHES

Nkurumah BranchNSSF BuildingNkurumah Road

Harbour House BranchMoi Avenue

Changamwe BranchRefinery Place Refinery Road, Changamwe

Nyali BranchCity Mall, Nyali

UP COUNTRY BRANCHES

Nakuru BranchVickers HouseKenyatta Avenue

Meru BranchNjuri Ncheke Street

Kisumu BranchOginga Odinga Street

Eldoret BranchZion Mall, Uganda Road

Thika BranchThika Arcade

Machakos BranchMbolu Malu Road

NIC Bank Tanzania LimitedHead Office and BranchGolden Jubilee Towers Ohio Street

Samora BranchHarbour View TowersSamora Avenue

Kariakoo BranchAggrey/Sikukuu Street

Mwanza BranchPlot 5, Nyerere Road

Arusha BranchCentral PlazaSokoine Road

Kahama BranchIsaka Road

NC Bank Uganda Head Office and BranchRwenzori TowersNakasero Road

NIC Capital LimitedNIC House Masaba Road

NIC Securities LimitedNIC House Masaba Road

NIC Insurance Agents LimitedNIC House Masaba Road

annual report - nic bank tanzania the company’s name was originally national ... (assets)...

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