Introduction
This booklet provides information on
BANK OF UGANDA
How to Invest in Uganda
Government Treasury Bonds
Questions and Answers
Financial Markets Department
Bank of Uganda
Plot 37/43 Kampala Rd
P O Box 7120 Kampala
Tel: 256-41 234929
Fax: 256-41-344737
BOU E-mail: info@bou.or.ug
BOU Website:www.bou.or.ug
This document is intended to provide the
public information on how to invest in
Uganda Government Treasury Bonds.
THIS PUBLICATION IS NOT FOR SALE
Uganda Government Treasury Bonds
and explains the procedures of how to
invest in them.
What are Treasury Bonds?
Treasury Bonds are long-term debt
instruments with the following tenors:
 2 years
 3 years
 5 years
 10 years
 15 years
They may be issued at par value, at a
discount (below face value) or at a
premium (above face value).
Investors in Treasury Bonds are paid a
fixed coupon interest amount every 6
months based on the face value of the
bond until maturity. The investor could
also earn interest by buying bonds at a
discount.
Who can invest in Treasury Bonds?
 Residents and non-residents who
have opened up CSD account(s).
 The investors may be individuals,
organizations or corporates.
 The investors must have attained the
contractual age of 18 years.


What must I do to invest in Treasury
Bonds?
You must register with the Central
Securities Depository (CSD) system at
Bank of Uganda.
What is Central Securities Depository
System?
The CSD is an electronic register, which
does the following:
 Registration of investors
 Auctioning of Government
Securities
 Creation and storage of investors’
electronic securities
 Redemption of securities at maturity.
How to open an Account on the CSD?
 Complete a CSD Account Opening
Form.
 Provide one passport photograph of
yourself or your signatories.
 Submit the completed from to your
bankers
The CSD Forms are available at Bank of
Uganda Headquarters and all Bank of
Uganda Currency Centres and can also
be obtained from the commercial banks.
How much money do I need to invest
in Government Bonds?
You can invest in Treasury Bonds for a
minimum face value of Shs 100,000.
Treasury Bonds are issued in multiples
of Shs 100,000= (Face Value).
Submission of bids
All bids (competitive and non-
competitive must be submitted through
the investor’s commercial bank of
choice.
Bid application forms are available at
Bank of Uganda and can also be availed
to the investors by the banks.
All bid application forms must be
submitted to the banks latest by 9.00
a.m. on auction day. Investors are
advised to submit their bids to the banks
as early as possible preferably before
auction day.
How can I know the terms of the
Treasury Bond Issue?
Bank of Uganda publicizes details of an
upcoming bond through the local
newspapers as well as on the Bank
website (and also to all commercial
banks).
The invitation to tender spells out all the
terms and conditions of the Bond issue.
How can I compute the cost of my
bid?
The cost of your bid can be computed as
follows:
Cost of bid = Face value (Maturity
value) x price/100
Example of computing cost of bids on
auction day
Treasury bonds priced at a Discount
The cost of a bid for a face value of Shs
11,000,000 priced at 88.852 for every
Shs 100 is calculated as follows:
Cost of bid=11,000,000 x 88.852/100=9,773,720
Treasury bonds priced at Par
The cost of a bid for a maturity value of
Shs 11,000,000 priced at par (100) for
every Shs 100 is calculated as follows:
Cost of bid=11,000,000x100/100=11,000,000
Treasury bonds priced at a Premium
The cost of a bid for a maturity value of
Shs 11,000,000 priced at a premium
111.512 for every Shs 100 is calculated
as follows:
Cost of
bid=11,000,000x111.512/100=12,266,320
How can I determine the yield or rate
of return of my bid?
The yield or rate of return for your bid
(price) can be determined by referring to
the corresponding yield to maturity
(YTM) column in the pricing guide
tables available through commercial
banks.
The yield for the non-competitive bids
can be determined using the pricing
guide tables for the bond being
auctioned, by referring to the yield to
maturity (YTM) of the price that is
closest to the auction’s highest yield
(lowest price per 100) of the successful
bids. The exact Yield to Maturity
(YTM) is availed immediately after
concluding the auction. Contact Bank of
Uganda on telephone numbers 041
4234929 or 0414 258441/9 Ext. 2044 in
the afternoon of the auction day.
Paying for successful competitive bids
and non-competitive bids (All non-
competitive bids succeed
automatically)
Payment for your bids is effected
electronically by debiting your account
with your bankers. Bank of Uganda
debits your commercial bank who will in
turn debit your account with the cost of
your investment.
Bank of Uganda does not receive cash or
cheques for purposes of investments in
government securities.
How much interest will I earn on my
bid?
The interest that you will earn will be
based on the coupon interest rate and
whether your bid was priced at a
discount, par or premium.
Interest = (Face value x Coupon interest
rate x No. of Years for the bond) + (Face
value – Cost).
A discount will reduce the cost of your
bond and therefore (Face value – Cost)
will be positive and will be additional
interest to the coupon interest.
Therefore, the yield (rate of return) on
your bond will be equal to the coupon
interest rate.
For a bond priced at a premium, (Face
value – Cost) will be negative and will
increase the cost of your bond. This will
cause the yield (rate of return) on your
bond to be lower than the coupon
interest rate.
What if I need my money before my
Treasury bond matures?
You can sell your Treasury bond(s) to a
commercial bank, or any other Treasury
bond investor or contact the Uganda
Securities Exchange for a broker to find
a buyer.
Note: Bank of Uganda will only
rediscount bonds at the prevailing
rediscount rate for Treasury bonds with
less than 91 days to maturity. This
should be a last resort option.
How will I know the value of my
bonds in the secondary market?
You are advised to contact commercial
banks or any broker of the Uganda
Securities Exchange who will provide
you with the bid (buy) prices for your
bond.
In the secondary market, you are advised
to sell your bond to the party with the
highest bid (buy) price and buy from the
party with the lowest ask (sell) price.
How will I receive my coupon?
Bank of Uganda will transmit the
coupon interest to your commercial bank
on each coupon interest day.
How will I receive my investment
when the Treasury bond matures?
Bank of Uganda will transmit the
proceeds of your Treasury bond(s)
investments (face value and last coupon
payment) to your commercial bank.
Will I have to pay tax on the interest I
have earned from Treasury bonds?
Bank of Uganda will deduct withholding
tax at the prevailing rate when paying
coupon interest on each coupon interest
day. Bank of Uganda will also deduct
withholding tax on any re-discount
proceeds before the maturity date.
Treasury Bond Invitations to Tender
Bond auctions will be advertised in the
local press during the week preceding
the auction. A general prospectus will
always feature on the Bank of Uganda
Web page at www.bou.or.ug.
Steps to Participate in Treasury
bond Auctions
Step1: Complete CSD Form 2 (Bid
Application Form). If you are placing a
bid in excess of Shs 200,000,000
(Competitive bid), provide the price per
Shs 100 for your bid. If you are placing
a bid of Shs 200,000,000 or less (Non-
competitive bid), your price will be
determined by the auctions lowest price
(that is, highest yield) of the successful
competitive bids and you should leave
the space for price per (shs 100 blank. A
maximum of 4 bids per tenor is allowed.
Note: Bids that do not contain the
required information will be
rejected.
Step 2: Deliver your bid to the
appointed Primary dealer.
Step 3: Bank of Uganda will issue an
advice and statement from the CSD to
acknowledge your investment in
Treasury bonds.
Glossary
Ask price: the price at which an
investor is willing to sell a Treasury
bond.
Bid: a commitment by the investor to
the Bank of Uganda regarding the
amount, price and tenor of the bond.
Competitive Bid: a commitment to buy
Treasury bonds with a face value in
excess of Shs 200,000,000 at a stated
price.
Non Competitive Bid: a commitment
to buy Treasury bonds with a face value
between and including Shs 100,000 and
Shs 200,000,000 at the lowest price
(which is the highest yield) of the
successful competitive bids.
Central Depository System (CSD):
Computerized register at the Bank of
Uganda that maintains accounts for
holders of Government securities.
CSD Id: an identification number that
is issued to a person or organization
when registering on the CSD.
CSD Instrument account: an account
in the name of the holder(s) of
Government securities for recording
investments on the CSD.
Coupon Interest: interest paid at a
fixed rate on the face value every six
months.
Discount: Additional interest income
that is earned over the life of a bond
when the bond is bought at a price lower
than its face value.
Face value the value of a bond on
maturity date.
Premium: Interest expense paid by the
investor when they purchase a bond at a
price in excess of the par or face value.
Maturity Value: The value of a bond
on maturity date.
Par Value: The value of a bond on
maturity date.
Yield to Maturity: It is that discount
rate which causes the future cash flows
from the semi-annual coupon interest
payments and the maturity value to equal
to the price of the bond today. The yield
to maturity assumes that the semi-annual
coupon interest payments will be
reinvested at the same yield to maturity.
Important contact numbers
General Information on Auctions:
+256-41 4258441
Customer Inquiries/Complaints:
+256-41 4234929
Fax: +256-41-4344737
Additional Information can be obtained
on BOU website: www.bou.or.ug