Annual Report 2019

20
18ANNUAL REPORT
& FINANCIAL STATEMENTS
CENTENARY BANK’S ANNUAL REPORT is a summary of our
performance from 1 January 2018 to 31 December 2018.
It entails comparisons to previous years and plans for 2019 and beyond.
The information is both financial and non financial prepared for our
stakeholders.
CENTENARY BANK l Annual Report & Financial Statements 2018 3

Table Of Contents
OVERVIEW
01
BUSINESS REVIEW
02
CORPORATE GOVERNANCE
ABOUT US 6 CHAIRMANS’ STATEMENT 12 STATEMENT OF CORPORATE
VISION, MISSION, VALUES 6 MANAGING DIRECTOR’S STATEMENT 16 GOVERNANCE 27
BANK CONTACT INFORMATION 8 RISK MANAGEMENT 21
BRANCH AND ATM NETWORK 9
LIST OF ACRONYMS 10
FINANCIAL DEFINITIONS 11
4 CENTENARY BANK l Annual Report & Financial Statements 2018

03
SUSTAINABILITY
04
FINANCIAL REVIEW &
05OTHER INFORMATION
VALUE ADDED STATEMENT 49
FINANCIAL STATEMENTS BRANCH NETWORK 140
FINANCIAL HIGHLIGHTS 68
CUSTOMER EXPERIENCE 51 OFF SITE ATMs 142
REPORT OF INDEPENDENT AUDITOR 77
PRODUCTS AND SERVICES 53 GRI INDICATORS’ REPORT 143
STATEMENT OF COMPREHENSIVE
EMPLOYEE EMPOWERMENT
INCOME 80
AND ENGAGEMENT 55
STATEMENT OF FINANCIAL POSITION 81
CORPORATE SOCIAL RESPONSIBILITY 59
STATEMENT OF CHANGES IN EQUITY 82
STATEMENT OF CASH FLOWS 83
NOTES TO THE FINANCIAL STATEMENTS 84

About Us
Today, we are a leading commercial microfinance bank in Uganda, serving a quarter of the banking
population in the country.
Who We Are
Shareholders
Centenary Bank started in 1983 as a credit trust, an initiative of the Uganda National Lay Apostolate. The Catholic
church officially joined in 1985 to establish a formal financial institution, and in 1993, Our Bank was registered as a fully-
fledged commercial bank. It grew from one branch on Nkrumah road to the current 73 branches country wide. Today,
we are a leading commercial microfinance bank in Uganda, serving a quarter of the banking population in the country
and reaching out to more through several channels.
Our Vision Our Mission Statement

Shareholders
“To be the best provider of Financial “To provide appropriate financial services especially
Services, especially Microfinance.” microfinance to all people, particularly in rural areas, in a
sustainable manner and in accordance with the law.”
INTEGRITY
SU ST VIC
CU SER
RK
PE OM E
O
RI E
W
O R
AM
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TE
Our
LEADERSHIP Values EXCELLENCE
PR
CE
O
FE
N
SS
TE
IO
PE
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Shareholders
Shareholders
• The Catholic Dioceses, which are all independent legal personalities incorporated as
Registered Trusteeships, are: Arua, Fort Portal, Gulu, Hoima, Jinja, Kabale, Kasana-Luwero, Lugazi,
Kampala, Kasese, Kotido, Lira, Masaka, Mbarara, Mityana, Moroto, Nebbi, Soroti, and Tororo.
• Registered Trustees of the Uganda Episcopal Conference.
• SIDI - Solidarite’ Internationale pour le Development et l’Investissement (International

Solidarity for Development and Investment) based in France, invests in developing countries through
institutions to foster financial inclusion, social and economic development.
• STICHTING HIVOS-TRIODOS FONDS. An investment fund, specializing in investing in microfinance

and trade finance, managed by Triodos Investment Management in the Netherlands.
• Individual shareholders (4 individuals).
Ownership
The Registered Trustees of Various Catholic Dioceses in Uganda 38.5%
The Registered Trustees of the Uganda Episcopal Conference 31.3%
SIDI 11.6%
Solidarité Internationale pour le Développement et l’Investissement
(International Solidarity for Development and Investment)
Stichting Hivos-Triodos Fonds 18.3%
Individuals 0.3%
Total 100%

Centenary Bank
Contact Information
1. Principal place of business and registered office
Mapeera House
Plot 44-46, Kampala Road & Plot 2 Burton Street
P. O. Box 1892, Kampala.
Toll-free line: 0800 200 555
E-mail: info@centenarybank.co.ug
Website: http://www.centenarybank.co.ug

2. Company Secretary
Peninnah Tibagwa Kasule

Mapeera House
Plot 44-46, Kampala Road
P. O. Box 1892, Kampala

3. Correspondent Banks
• Citibank NA New York - US

• Bank of China - South Africa
• Ivory Bank - South Sudan
• Sparkase Aachen Bank - Germany

4. Auditor

PricewaterhouseCoopers
Certified Public Accountants
Communications House
Plot 1, Colville Street
P. O. Box 882
Kampala, Uganda
.

Bank Branch Network
A
B
Centenary Bank Head Office: Mapeera House,Plot 44-46, Kampala Road, P. O. Box 1892 Kampala
Toll free line: 0800 200555 E-mail: info@centenarybank.co.ug

List Of Acronyms
aBi Finance Agriculture Business Initiative Finance Limited KCCA Kampala Capital City Authority
aBi Development Agriculture Business Initiative Development LGD Loss Given Default
AC Audit Committee LPO Local Purchase Order
ACF Agricultural Credit Facility MOGLSD Ministry of Gender, Labour and Social
AGM Annual General Meeting Development
ALCO Asset and Liability Committee NIM Net Interest Margin
ATM Automated Teller Machines N.S.S.F National Social Security Fund
BCP Business Continuity Plan NPAT Net Profit After Tax
BCM Business Continuity Management OAIP Onality Assurance and Improvement Program
BCMT Business Continuity Management Team ORC Operational Risk Committee
BOD Board of Directors OSH Occupational Safety and Health
BOU Bank of Uganda P.A.Y.E Pay As You Earn
BSC Balance Score Card POCI Purchased or originated credit-impaired
CBS Core Banking System PwC PricewaterhouseCoopers

Certified Public Accountants
CJF Critical Job Function
QMM Quarterly Management Meeting
COSO Committe of Sponsoring Organizations
REPO Repurchase Agreement Loan
CSI Corporate Social Investment
ROA Return on Assets
CSR Corporate Social Responsibility
ROE Return on Equity
EAD Exposure At Default
RMC Risk Management Committee
EADB East African Development Bank
RSA Rate Sensitive Assets
EaR Earnings at Risk
RSL Rate Sensitive Liabilities
ECL Expected Credit Loss
SAS Statistical Analysis Software
EIB EAC MF Loan European Investment Bank East African
Community Microfinance Loan SICR Significant Increase in Credit Risk
EIB PEFF European Investment Bank Private SIDI Solidarite’ Internationale pour le
Enterprise Finance Facility Development et l’ investissement
EIR Effective Interest Rate SOCE Statement of changes in equity
ESM Environmental and Social Management SOCI Statement of Comprehensive Income
ERM Enterprise Risk Management SOFP Statement of Financial Position
FAMOS Female and Male Operated Small enterprises SPM Social Perfomance Management
FVOCI Fair value through other comprehensive income SPPI Solely payments of principal and interest
FVPL Fair value through profit or loss TOT Trainer of Trainers
HR Human Resource URBRA Uganda Retirement Benefits

Regulatory Authority
HRD Human Resource Division
UECCC Uganda Energy Credit Capitalization Company
IAS International Accounting Standards
UAT User Acceptance Test
ICT Information and Communication Technology
w.e.f With effect from
IFRS International Financial Reporting Standards
WENRECO West Nile Rural Electrification
ILO Intenational Labour Organisation Company
ISO International Organization for Standardization

Financial Definitions
Core capital Permanent equity in the form of issued and fully paid-up shares plus all disclosed
reserves less goodwill or any intangible assets
Cost-to-income ratio (%) Total expenses as a percentage of total income
Credit impairment charge (Shs) The amount by which the period profits are reduced to cater for the effect of
non-performing loans for the period
Credit loss impairment [Statement of The amount by which gross loans in the SOFP are written down to cater for
Financial Position (SOFP)] (Shs) non-performing loans
Credit loss ratio (%) Provision for credit losses per the Statement of Comprehensive Income as a
percentage of average net loans
Dividend cover (times) Earnings Per Share divided by ordinary dividend per share
Dividend per share ( Shs) Total ordinary dividends declared per share with respect to the year
Earnings per share (cents) Earnings attributable to ordinary shareholders divided by the weighted average
number of ordinary shares
Effective tax rate (%) The income tax charge as a percentage of income before tax excluding income
from associates
Lending Ratio Net loans and advances divided by total deposits
Net interest margin (%) Net interest income as a percentage of average earning assets
Non-performing loans [NPL] (Shs) Loans whose servicing is due but the borrower has no money on the account
from which to recover the installment(s)
Percentage change in credit loss ratio (%) Ratio of change in the rate of credit loss impairment between time periods
Percentage change in the impairment

Ratio of change in the rate of impairment charge between time periods
charge (%)
Profit for the year (Shs) Annual profit attributable to ordinary shareholders and preference shareholders
Return on Assets (%) Earnings as a percentage of average total assets
Return on Equity (%) Earnings as a percentage of average equity
SOFP credit impairment as a %

Ratio of SOFP credit impairment to gross loans and advances
of gross loans and advances (%)
Supplementary capital General provisions which are held against future and current unidentified losses
that are freely available to meet losses which subsequently materialize, and re-
valuation reserves on banking premises, and any other form of capital as may be
determined from time to time.
Total capital The sum of core capital and supplementary capital
Total capital adequacy Total capital divided by the sum of total risk weighted assets and total risk
weighted contingent claims

BUSINESS REVIEW STATEMENT OF SUSTAINABILITY FINANCIAL REVIEW & OTHER INFORMATION
CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The bank lived up to

its mission of providing
appropriate financial
services,
reaching more people, and
will continue to do so.
Professor John Ddumba-Ssentamu
Chairman Board of Directors

Chairman’s
Statement
On behalf of the Board of Directors, it is my pleasure, at a time when we are marking 35 years of existence,
to present to you the Annual Report and Financial Statements for the year ended 31 December 2018. It
was a year characterized by challenging market environment, with stiff competition. Despite that, the Bank
remained competitive and responsive to stakeholders.
Strategy In 2018, one of the Directors, Mr. Andrew Obol, retired. We

sincerely thank him for his dedication and contribution to the
Centenary Bank lived up to its mission of growth of the Bank. In the same spirit, on behalf of the Board of
providing appropriate financial services, reaching Directors, I would like to welcome Director Joseph Ssewanyana
more people, and will continue to do so. We Kasumba and Director Bwoch Gustavio Orach Lujwero to the
particularly chose to grow our business through Board. They bring on board, broad knowledge and experience in
technologically driven innovations that deliver IT and accounting respectively, which shall be key in strengthening
excellent customer service in 2018. Our focus was the Board’s effective oversight.
on financial inclusion through agent banking, and
we ended the year with 2,404 agents. Corporate Social Responsibility
Our Bank is customer centric and therefore Our Bank is committed to corporate social responsibility.
continuously generated initiatives on how to take In demonstration of this, we focused on health, education,
its services nearer to our customers geographically environment and supported the social mission of the Catholic
spread across the country. We developed products Church. I am happy to report that in 2018, we continued with
targeting the needs of the people. our policy of devoting up to 1% of the profit after tax to corporate
social responsibility.
Consequently, our Assets grew by 17.2% above
total assets industry growth of 12.0% bringing our We want to thank the Catholic Church for the partnership and
total asset market share to 11.2% from 10.2% in support in giving back to communities. We are grateful to all other
2017. As a result, our Bank has the second biggest partners for the work throughout the year and look forward to
asset base. Our profitability grew from Shs.100.3B doing more in 2019.
in 2017 to Shs.107.6B in 2018, making our Bank
the second most profitable in the country.
Social Performance Management
Corporate Governance Centenary Bank embraced the Social Performance Management
(SPM) system to create more social value for our stakeholders. SPM
The Board of Directors remains fully committed to is the effective translation of an institution’s mission into practice in
upholding high standards of corporate governance line with accepted social values. Its aim is for institutions to pay
in Our Bank. The Board continued to oversee attention to social performance just as financial performance. We
the development and implementation of the have therefore committed to the annual measurement of SPM
Bank’s strategy, as well as focus on risk and control social goals, using the Universal Standards of Social Performance
responsibilities, and ensure that sound and prudent Management (USSPM). The 2018 audit rated Centenary Bank at
practices were adhered to in the conduct of board 71%, which is quite competitive. Our target is to achieve 73%
affairs. During the course of the year, the Bank in 2019. We thank our partners, East African Development
embarked on a review of its Governance manual Bank (EADB), German Development Bank (Kreditanstalt Für
in order to enable the Board enhance effective Wiederaufbau – KFW) and International Project Consult (IPC –
oversight. AYANI) for the support in executing SPM.

2019 Outlook
Looking forward in 2019 and beyond, the Bank is planning to undertake a major reorganisation to enable it
fulfil its social and economic mission. I am therefore pleased to announce that the shareholders of Centenary
Bank resolved to undertake a corporate re-organisation through the establishment of a group structure. The
group will comprise a non-operating holding company which shall become the parent company of the Bank,
together with any other new subsidiaries that the new holding company may form. Shareholders in the Bank
will become shareholders in the new holding company holding the same proportion of shares. In other
words, the share value and share structure will remain the same.
As an essential first step of the re-organization, Centenary Bank changed its name to ‘Centenary Rural
Development Bank Group Limited’ following the approval of Bank of Uganda and the Uganda Registration
Services Bureau. This is a ‘first step’ to achieving the above group structure and is temporary in nature.
It is envisaged that the name of the Bank will revert to Centenary Rural Development Bank Limited after
conclusion of the remaining aspects of the re-organization. The conclusion of the proposed reorganization
will be subject to Centenary Bank receiving all requisite regulatory and corporate approvals, including the final
approval of Bank of Uganda and that of Centenary Bank’s shareholders.
Our shareholder Hivos Trivos Fonds has notified us of their intention to sell their shares, to two affiliated firms
which are Triodos Microfinance Fund (TMF) and Triodos Fair Share Fund (TFSF).
Negotiations are at an advanced stage, and permission to proceed with the transaction has been granted by
Bank of Uganda. The Bank is committed to making sure that this transaction is effectively completed.
Given our new competitors outside the banking sector, it is imperative that we aggressively leverage various
technology platforms as we continue with our financial inclusion drive, to widen our market share and provide
17.2% convenient services.
Appreciation
On behalf of the Board of Directors, I would like to express my heartfelt appreciation to all the stakeholders
TOTAL
who have supported Our Bank. I have every confidence that the Bank will continue to prosper and grow into
ASSETS a smart bank that is relevant to all people.
I sincerely thank our Shareholders, for the support and confidence that have continued to enable Centenary
Bank …Our Bank, to “Love, Serve and Unite.”
I thank our customers, we appreciate you for your trust and business, that have made the Bank a strong
brand.
I would like to thank the Managing Director and his management team, as well as the entire staff for their
continued excellent hard work and dedication. Thank you for living our values of superior customer service,
integrity, teamwork, professionalism, leadership, excellence and competence.
To our business partners, we couldn’t have achieved this without you. Thank you very much for your steadfast
support and cooperation. I am grateful to the Central Bank for the guidance and granting audience from time
to time.
To my collegues, the Board members, I appreciate your diligence, oversight and adherence to good
governance.
We believe that we are focused on the right priorities, and we shall continue strengthening the business.
We look to all our stakeholders to lend us their continuous support. We are committed to upholding high
standards in business integrity in all activities undertaken by the Bank.
Professor John Ddumba-Ssentamu

Chairman of the Board

All true leaders have

learned to say no to
good in order to say
yes to the best.
– John C. Maxwell

Our position in the
banking industry
got better.
This was in terms of
market share, distribution
network and capital.
Fabian Kasi
Managing Director

Managing Director’s
Statement
It is my pleasure to report on Centenary Bank’s 2018 performance. Our position in the banking industry
got better in terms of market share, distribution network and capital. We focused on growth opportunities
while taking positive strides to address challenges in our operating environment. We are pleased with the
bank’s continued progress that led to solid results.
Performance Review
The Bank continued its growth drive on all fronts particularly profitability and total assets. This
growth has been maintained due to our continued focus on strategy execution.
We achieved an after tax profit of Shs.107.6 billion for the period ended 31 December 2018. This
was an improvement compared to Shs.100.3 billion achieved the previous year.
Total income went up by 11.0% to reach Shs.568.2 billion up from Shs.511.9 billion the previous
year, mainly driven by growth in interest on loans and advances to customers and increase in fee
based income.
Notably, the Asset quality of loans improved again with the ratio of Non-Performing Loans (NPL)
dropping to 2.67% for the year ended 31 December 2018 compared to the previous year’s of
4.5%. However, the ratio of NPL was still above the bank’s maximum target of 3.5% but below
the industry average of 4.4%.
Net interest income rose by 12.0% to Shs.371.6 billion from Shs.331.9 billion the previous year.
Total expenses increased by 11.9% to Shs.419.3 billion from Shs.374.6 billion mainly attributed to
the bank’s heavy investment in technology and improvements in staff welfare.
UGX
107.6
Despite the challenging operating environment during the year, the balance sheet expanded with
total assets reaching Shs.3,170.8 billion from Shs.2,706.3 billion the previous year, representing a
17.2% increase and above the Total Assets industry growth of 12.0%. This growth was reflected
in the net loan book that grew to Shs.1,529.2 billion up from Shs.1,335.3 billion the previous year, BILLION
representing a growth of 14.5%.
We sustained robust growth in customer deposits which grew by 19.4% from Shs.1,911.1 billion
to Shs.2,282.2 billion. The Bank continued to attract new customers and closed the year with
1,639,602 deposit accounts compared to 1,493,554 the previous year. AFTER
TAX PROFIT
Other funding sources of the bank are represented by equity which increased by 15.4% to Shs.
643.7 billion, up from Shs.557.8 billion the previous year driven by profit made in the year under
review.

MANAGING DIRECTOR’S STATEMENT (continued...)
In the year under review, the Bank managed to open 308,585 new
deposit accounts and disbursed 263,883 new loan cases compared to
263,873 deposit accounts and 163,179 loan cases the previous year.
We are in a process of completing the enhancement of some of the
2.6% products and channels like SACCOs and CenteMobile.
Collaborations and Partnerships

The Bank continues to respond to some of the challenges that Private
NPL Enterprises and the youth face in accessing credit facilities for their
development. This is done together with partners who include the
European Investment Bank, aBi-Trust, Kampala Capital City Authority
and Government of Uganda. Our focus is on financing the agro industry,
micro credit projects and supporting expansion of business ventures
owned by the youth residents in the country.
Outreach and Innovations
In 2018, Government of Uganda revised the Youth Venture Capital
Our commitment to financial inclusion stands. Fund undertakings and transferred funds from other institutions to
The bank closed 2018 with 73 branches and Centenary Bank making us the sole implementer of the program. This
179 ATMs at 132 locations. We had 2,404 was as a result of our commendable execution of the program.
registered Agents and continue to enroll more.
Our mobile banking platform(centemobile) In order to deliver and improve service experience, we partnered with
had 701,801 registered customers of Mauritius Commercial Bank consulting arm, MTN, Airtel plus Varma for
which 144,192 were active with 1,268,833 support in strengthening our processes and systems. The Bank plans
transactions in December 2018. These to increase the number of partners in 2019 to achieve our Financial
accounted for 30.1% of the Bank’s Inclusion objectives.
transactions. We expanded by an additional
3 branches in Kamwenge, Ssembabule and Our People
Kikuubo. Due to the growing customer
base and to enhance the customer service Our employees represent a very valuable asset in the Bank. We have
experience, the bank will focus on more a deliberate strategy for human capital growth and development,
convenient channels such as internet banking, welfare management and reward, while creating an environment that
improving its Mobile Banking platform and supports productivity. It is in this regard that our staff were able to
increasing agent banking locations. perform as explained above, and made Our Brand get recognized in
the achievements below;
To improve the delivery of our services, the
bank rolled out the Visa enabled Europay, • Outstanding contribution towards Uganda middle income status
MasterCard and Visa ( EMV ) cards. We have aspiration and Vision 2040, by the Visionaries of Uganda.
also started on the road map of rolling out • Digital Brand of the year by Digital Impact Awards Africa.
Master Card and China Union Pay schemes. • Overall winner in Corporate Governance by the Institute of
EMV cards provide a more secure banking Corporate Governance.
experience. The Bank further rolled out the • Best Bank among Banks and Microfinance institutions in
Biometric system that will ease customer Corporate Governance by the Institute of Corporate Governance.
identification. • Overall champions in the Bankers Gala 2018 for the second year
running.
• Corporate league 2018 football and volleyball champions.
• Mbarara corporate league volleyball and football champions.
• Best Digital customer experience Brand by Digital Impact Awards
Africa.
• Best Bank digital product (CenteMobile loans) by
19.4%
Digital Impact Awards Africa.
• Outstanding achievement in communication and presentation of
the annual report by the Financial Reporting Awards.
• Outstanding achievement in corporate governance by the
Financial Reporting Awards.
• Outstanding achievement in sustainability reporting by the
CUSTOMER
DEPOSITS Financial Reporting awards.
GROWTH • Best commercial and development Bank in Uganda by Consumers
Choice Award.

Our Future
The environment we operate in is overwhelmed with opportunities and
risks, and this requires Centenary Bank to strategically position itself in the
market place. Currently, the economy is expected to continue growing
mainly driven by huge investment in infrastructure by the government i.e.
Digital Brand road construction, oil and gas infrastructure, completion of dams and other
of the year projects. At Centenary Bank, we have devised strategies that will enable us
Digital Impact seize opportunities and manage risks that will emerge from this operating
Awards Africa environment.
The bank is presently well capitalized with a strong and healthy balance sheet
to facilitate seizure of the budding business opportunities in the environment
and also manage the risks associated with these opportunities.
Our Communities
The Bank will focus on leveraging technology to improve its processes for
The communities we operate in are effeciency, customer satisfaction and experience.
part of us just as we are part of them
and whatever affects them does affect The Bank will continue to develop employee capabilities in mission critical
us. This is why we take keen interest competencies and create an environment that fosters creativity, innovation
in actively participating in initiatives that and timely execution.
transform lives in communities. In 2018
we participated in 490 activities and Conclusion
grew our investment in Corporate Social
Responsibility by 9.2% from Shs. 1.069 My gratitude goes to all stakeholders including customers, shareholders and
billion to Shs. 1.168 billion. The activities partners; thank you for being part of Centenary Bank and for the confidence
included the cancer run; water sanitation; you have placed in us. I thank the Board of Directors for the good governance
construction projects and financial literacy and Bank of Uganda for the oversight. To management and staff, thank
trainings for church, VSLA’s, school heads you for the hard work, persistence and tireless effort that resulted in good
and micro enterprises. We thank our performance.
partners who made sure the above
initiatives where executed. I believe Centenary Bank is well positioned to leverage on the many
opportunities and soar higher. With our strategy, proper risk management
and right talent, we are poised to achieve our goals and deliver on our
Best
commitments.
commercial &
development
Bank
Consumers
Choice Award
Fabian Kasi
Managing Director

THE EXECUTIVE MANAGEMENT
Executive
Mr. Fabian Kasi Dr. Simon M. S. Kagugube

Managing Director Executive Director
Customer
Facing
Mr. Charles Kabanda Mrs. Beatrice Lugalambi Mr. Joseph Lutwama Mr. Joseph Kimbowa
General Manager General Manager General Manager General Manager
Financial Inclusion Business Development & Marketing Credit Operations
Support
Functions
Mr. Arnold Byansi Mr. Denis Echeru Mrs. Florence Mawejje Mr. Michael Nyago
General Manager General Manager General Manager General Manager
Corporate Services Risk Management Human Resource Audit
Mr. George K. Thogo Mr. Godfrey Byekwaso Mrs. Peninnah Kasule

General Manager General Manager Company Secretary
Business Technology Finance
Composition: The colours below individuals’ photos link to the Executive Management composition data reflected below.
Nationality Tenure Gender
92.3% 7.7% 7.70% 46.15% 46.15% 23.1% 76.9%

Ugandan Kenyan 0 - 5 years 5 - 10 years Over 10 years Female Male

Risk Management
Centenary Bank functions within an environment characterized by continuous change and uncertainty. Financial
transactions are becoming more and more complex mainly due to increasing customers’ expectations, competition,
changes in demography, changes in the financial services market, and structural adjustments in the economy. If there
were to be significant disruptions to Bank operations due to such risks, the Bank will not be able to fulfil its role and
responsibilities and its reputation could be seriously jeopardized.
The Bank views risk management as an integral part and an essential element of good corporate governance and to mitigate such risks,
the Bank has put in a place robust risk management processes for constant monitoring and analysis of, and appropriate response to,
potential and actual risks emanating from such a dynamic environment.
Risk Policy Based on the above, the bank has established its
risk monitoring in the form of a risk assessment
The Bank has established a risk management policy to ensure that risks are matrix to help rank risks and prioritize risk
managed in a coordinated, comprehensive and systematic manner that is management efforts at the strategy level.
consistent with internationally accepted standards and guidelines. Business units are required to adopt the same
risk matrix structure in order to establish their
This policy regulates all risk management initiatives and activities and facilitates own risk profiling, determine consequence and
their alignment with the Bank’s strategic and operational objectives to ensure likelihood of identified risks with reference to
that the risks threatening the achievement of these objectives are adequately their own materiality and circumstances as well
and effectively managed at acceptable levels. The policy governs the full as establishing risk mitigation strategies.
spectrum of strategic, financial (including credit, market and liquidity), reputation
and operational risk management in the Bank. Furthermore, it specifies the risk Risk Governance Structure
management governance structures, general risk management principles, the
Bank’s risk appetite and tolerance, impact and likelihood requirements, risk
management framework and processes, and the roles and responsibilities of
The Board
all stakeholders.
The Bank’s Board is responsible for the oversight
of the entire process of risk management. The
Risk Appetite and Risk Profiling Criteria Board Risk Committee, which is a committee
of the Board, assists the Board to ensure a
The bank’s risk appetite represents the amount of risk the bank is willing to dedicated focus on risk management in the Bank.
undertake in pursuit of its strategic and business objectives.
The Board of Directors acts on behalf of
In line with bank’s Value Framework and expectations of its stakeholders, shareholders to set policy, strategy and objectives,
Centenary Bank will only take reasonable risks that (a) fit its strategy and and to oversee the executive function. It sets
capability, (b) can be understood and managed, and (c) do not expose the bank risk appetite and ensures that it is reflected in
to: business strategy and cascaded throughout the
organization. It establishes and oversees an
• Material financial loss impacting ability to execute the bank’s business effective governance and organization structure
strategy and / or materially compromising the bank’s ongoing financial in accordance with legal, regulatory and fiduciary
viability, responsibilities that would allow it to put in place
• Incidents affecting safety and health of our staff, contractors and the public, effective risk governance.
• Material breach of external regulations leading to loss of critical operational
/ business license and / or substantial fines, The Board performs its risk oversight
• Damage of the Bank’s reputation and brand name, responsibilities through a dedicated group of its
• Business / supply interruption leading to severe impact on the community, members, the Board Risk Committee.
• Severe environmental incidents.

The Committee is responsible, on behalf of the Risk Processes

Board, for:
Centenary Bank important goals of the risk management process include
• making recommendations regarding Risk • to forecast potential losses, to assess whether to take, transfer, mitigate or
Appetite. eliminate them, and to propose ways of doing that
• reviewing strategic decisions, such as • to ensure Bank survival in periods of stress by ensuring that the institution
acquisitions and disposals, as well as entry holds sufficient capital to cover unexpected losses arising in the course of
into new products and markets, from a business and sufficient liquidity to meet its contractual obligations
risk perspective. • to help direct capital and incentives to the most profitable activities,
• reviewing periodically the risk management products, organizational units and staff after their profitability is assessed on
and internal controls framework relative to a long-term, risk-adjusted basis
the risk profile.
• approving risk policies, limits and To achieve those goals, the risk management process goes continuously through a
delegations. cycle of identification, assessment, mitigation/ control, and monitoring / reporting/
• considering any key risk issues brought by evaluation of all risks.
Management, or requesting information
about risk issues that the Committee
identifies independently.
Risk Mitigation & Communication:
• reviewing and recommending for Board
Risks identified through our risk management processes are prioritized and,
approval key policy statements required by
depending on the probability and severity of the risk, escalated as appropriate.
regulators, such as those on concentration
Senior management discusses these risks periodically and assigns responsibility for
and large exposures, liquidity, credit
them to the businesses. The assigned owners continually monitor, evaluate and
impairment and provisioning and others.
report on risks for which they bear responsibility.
• reviewing periodically the organization’s
Risk Profile.
Each business and unit functions are responsible to present risk assessments and
key risks to senior management at least monthly. We have general response
Risk Management Division strategies for managing risks, which categorize risks according to whether the
bank will avoid, transfer, reduce or accept the risk. These response strategies are
A centralized risk management co-ordination tailored to ensure that risk levels are within the risk appetite.
function in the Bank is performed by the Risk
Management Division (RMD). The role of the Depending on the nature of the risk involved and the business or function
RMD is to: affected, we use a wide variety of risk mitigation strategies, including delegations
of authority, standardized processes and strategic planning reviews, operating
Facilitate risk management ownership by reviews, insurance, and hedging. Our service businesses employ a comprehensive
management; effective process leading up to and through the execution of contractual service
agreement to mitigate legal, financial and operational risks.
• Provide a standardized strategic
and operational risk management We manage the risk of fluctuations in economic activity and customer demand by
methodology and process; Validate monitoring industry dynamics and responding accordingly, including by adjusting
that the risk management processes are capacity and implementing cost reductions.
adequate and effective and comply with
internationally accepted risk management
standards; and Handling Significant Specific Risks
• Ensure standardized and integrated
reporting on all risk management activities To enhance the understanding of sources of risk, their possible consequences,
and exposures to the Risk Management and the practical approaches to managing them, Centenary Bank has defined risks
Committee, as well as to the Board Risk into 10 major categories.
Committee.
The RMD is also responsible for the co-

ordination and facilitation of specialised
Strategic Risk Credit Risk Liquidity Risk Market Risk Reputation Risk
operational risk management processes,
including business continuity management,
occupational health and safety management as
well as compliance risk management. Reporting
on these risk management activities to the Operational Risk Compliance Risk Information
Technology Risk
Country Risk Environmental Risk
committees is also coordinated by the RMD.

These risk categories are groupings that help the bank of the IFRS 9 Financial instruments. It will also be used for the recognition of
to consistently identify, assess, measure, monitor interest revenue on impaired assets measured at amortized cost.
and report across on its overall risk exposure and
opportunities. Using consistent risk categories across Under the new standard, the initial measurement of all financial instruments
the bank enables aggregation and determination of is at Fair value and subsequently at either Amortized Cost, Fair value through
overall risk impact. Other Comprehensive Income (FVTOCI) or Fair value through Profit and Loss
(FVTPL). Subsequent measurement is driven by the business model under
This enhances the understanding of particular which they are held whether managed to collect contractual cashflows, sale
sources of risk, their possible consequences, and the or both.
practical approaches to managing them. Below is an
assessment of each for the ten risks of the year ended IFRS 9 introduces a new impairment model based on Expected Credit Losses
31 December 2018. (ECL) rather than incurred losses under IAS 39. It requires financial institutions
to change provisioning from a backward-looking approach to a forward-looking
i) Strategic Risk approach based on expected credit losses. It is therefore not necessary for a
loss event to have occurred before credit losses are recognised. Thus, the
Risk of current and prospective impact on the Bank’s Bank recognises a loss allowance for expected credit losses and is re- measured
earnings and capital arising from poor business at each reporting date for changes in those expected credit losses. The only
decisions, improper implementation of decisions or exception is for purchased or credit-impaired financial assets where a different
lack of response to industry, economic or technological impairment approach applies.
changes.
The bank set up an implementation committee to drive this change and
Strategic risks and opportunities may affect Centenary compliance with regular updates were given to management, Executive
Bank’s strategic ambitions, and these include Management and the Board.
economic and political developments, anticipating
and timely responding to market circumstances. More information on credit risk is under financial risk management pages 98
Centenary Bank is prepared to take considerable to 107.
strategic risks given the necessity to invest in growth &
development and manage the portfolio of businesses, iii) Liquidity Risk
including Partnerships and Collaborations, in a highly
uncertain and dynamic global political and economic Risk resulting from the Bank’s failure to pay its debts and obligations when
environment. Strategic risk was rated medium during due because of its inability to convert assets into cash, or its failure to procure
the year because of strategic financial performance enough funds, or, if it can, that the funds come with an exceptionally high cost
and organizational review and residual risk. The major that may affect the bank’s incomes and capital fund now and in the future.
drivers of strategic risk were technological changes, Liquidity Risk was rated medium and stable. All the key liquidity ratios were
competition and projects. adequately managed, and Regulatory liquidity requirements were satisfied.
ii) Credit Risk More information on liquidity risk is under financial risk management pages 113
to 117.
Potential that a Bank borrower or counterparty will fail
to meet their obligations in accordance with agreed iv) Market Risk
terms. The bank’s credit risk arises mainly from its
lending activities to customers. Thresholds like Non- This is the risk that the value of the Bank’s investments will decrease due
Performing Assets ratios, portfolio at risk, single to unexpected and/or adverse changes in market factors such as stock and
borrower limits, capital adequacy levels had to be commodity prices as well as interest and foreign exchange rates. Key market
checked and where we found out of appetite or not in risks factors for the Bank include Interest Rate Risk and Foreign Exchange Risk
line with regulations, immediate measures were put in which have been described below:
place to remedy and ensure a healthy book. Credit risk
was assessed to be medium and stabilizing. Inherent Interest Rate Risk: The exposure of the Bank’s financial condition to adverse
risk was high and residual risk was medium, residual movements in interest rates. The year was characterized with pressure from
risk trend was stabilizing. The bank’s non-performing Government and demand from the public to reduce interest rates and a volatile
loan rate decreased from 4.53% in December 2017 Net Interest Margin (NIM) regime. Overall Interest rate risk was medium and
to 3.67% in December 2018. stable.
Key development: IFRS 9 Financial instruments. (IFRS Foreign Exchange Risk: Risk associated with doing business in two or more
9) is the new standard that replaces IAS 39 Financial currencies. Foreign exchange price risk relates to possible revaluation losses (or
Instruments: Recognition and Measurement from 1 gains) on long/over bought or short/oversold currency positions in response to
January 2018. movements in exchange rates. Despite the depreciation of the Uganda Shilling
against major currencies, the bank’s foreign exchange risk was adequately
The new standard will be used for the identification managed and rated low as at 31st December 2018.
and measurement of impairment of financial assets
and other instruments whose impairment allowance More information on market risk is under financial risk management pages 107
measurement has been covered within the scope to 112.

v) Reputation Risk The bank is committed to enhance business

continuity plans, improve its links with
This is the risk arising from changes in public opinion that impact the Bank’s telecommunication firms and enforce
earnings or access to capital. This can be mainly thought of as publicity or service level agreements to mitigate
operational inadequacies that would have an adverse effect on the Bank’s information technology risk.
public image.
Information Technology risk was rated
The bank’s reputation risk was rated medium and stable most of the year. medium but increasing as at 31st December
The bank has a good communication and crisis management system, an 2018 due to increasing number of IT
effective Corporate Social Responsibility (CSR) program, good reputation systems used by the Bank.
and sound corporate governance system.
ix) Country Risk
vi) Operational Risk
Refers to the risk resulting from uncertainties
Operational risks include adverse unexpected developments resulting from arising from the economic, social and
internal processes, people and systems, or from external events that are political conditions of that country that
linked to the actual running of each business. The Bank aims to minimize may cause borrowers in that country to be
downside risks due to the need for high quality of its products and services, unable or unwilling to fulfill their obligations
reliable IT systems and sustainability commitments. to the Bank.
The main categories of country risk
Operational risks increase the Bank’s exposure to other risks by impairing comprise sovereign, transfer and contagion
the Bank’s ability to adequately assess, monitor and report on other risks. risk and are described below:
Operational risks cut across all the Bank’s divisions and include, but not
limited to: a) Sovereign risk: Denotes a foreign
government’s capacity and willingness
a) Human Resources Risk: The risk arising from inadequate human to repay its direct and indirect
resources or inappropriate use of available staffing resources. (i.e. guaranteed) foreign currency
b) Business Process Risk: The risk arising from inadequate implementation obligations.
and non-adherence to the Bank’s business processes.
c) Legal Risk: The risk arising from contracts or other arrangements that b) Transfer risk: This is the risk that a
are not enforceable through available means. borrower may not be able to secure
d) Health & Safety Risk: The risk arising from noncompliance with or lack foreign exchange to service its external
of health and safety regulations, policies, or procedures. obligations.
e) Fraud Risk: The risk arising from intentional acts committed to secure
unfair or unlawful gains. c) Contagion risk: This risk arises where
adverse developments in one country
The operational risk was rated high with an increasing trend. Major risks lead to a down- grade of rating or
were processes and systems related. Fraud processes have been simplified, a credit squeeze not only for that
IT systems enhanced, and compliance procedures have been put in place to country but also other countries in the
manage operational risk. region.
vii) Compliance Risk x) Environmental and social risk:
Risk of legal or regulatory sanctions, material financial loss, or loss to This is a new risk introduced into the
reputation. The Bank may suffer these because of its failure to comply with bank risk profile. As a financial institution,
laws, regulations, prudential guidelines, supervisory recommendations and risk is inherent in our business activities.
directives, rules, internal policies and procedural guidelines and codes of At Centenary Bank, managing risk well –
conduct applicable to its banking activities. including environmental and social risk – is
a key part of our responsible and sustainable
Compliance risks cover unanticipated failures to implement, or comply with, growth strategy. It contributes to the
appropriate laws, regulations, policies and procedures. strength and sustainability of our bank for
The bank complied with all existing financial and non-financial laws and the future and supports the work we do
regulations. today to serve our customers, communities,
shareholders, and employees.
viii) Information Technology Risk
The risk arising from inadequate information communication technology

(ICT) resources or inappropriate use of available ICT resources. This can
result in financial loss and lost business opportunities due to unavailability of
the ICT resources, loss of data integrity and confidentiality.

The bank is putting in place the environmental and social risk policy • Each division has an approved Business
framework to provide additional clarity and transparency around how we Continuity Recovery Plan for the recovery of its
approach environmental and social risks. Environmental and social issues critical business processes.
can cross many of the risk types, but most often present reputational risk. • Every year, the BCM unit in consultation with
This has to be proactively managed. the BCP Steering Committee establishes the
BCP Development Plan for the year. The plan
Risk management is fundamental to our culture and critical to our success. sets out the BCP activities to be undertaken for
The principles of sound risk management are embodied in our values, that year, who is responsible for those activities
operating principles and Code of Conduct that all employees are expected and the timeline for such activities. The BCP
to follow. Steering Committee reviews and approves the
BCP Development Plan.
ERM Software The Bank has a robust Data Recovery Plan that is
tested regularly to evaluate and ensure its reliability in
To proactively manage its risks the bank undertook a strategic decision to the event of a risk occurrence.
further automate its systems. In 2018, it procured an ERM software which
among other things include: Pervasive Risk Culture
• A Governance and Compliance Manager (GCM) module to improve Centenary Bank has continuously developed a culture
operational risk management through automation of governance, of understanding risk, recognizing the importance of
risk and compliance management processes within the business risk management, and carrying personal responsibility
operations. and accountability for identifying and managing risks.
• An Anti-Money Laundering (AML) module to enable robust
monitoring transactions for money laundering and terrorist financing Beyond setting the right policies and structure,
activities. management appreciates that risk culture plays a major
• DataGear Sanctions List Management (SLM) solution which is role for the success of the Bank in its risk management.
integrated with SAS Anti-Money Laundering module to enable the Building a risk-aware culture requires recognition at
bank screen its customers and interbank transactions against local and all levels and by all members of an organization of
international watch lists on daily basis. individual responsibility and accountability in identifying
and managing risks. It also requires continuous
Business Continuity Management feedback and realignment of business objectives,
assessment processes, and employee incentives. This
Business Continuity Management (BCM) is a holistic management process is a long and arduous process the Bank has taken and
that identifies potential impacts that threaten an organization and provides a its impact is long-lasting and far-reaching.
framework for building resilience and the capability for an effective response
that safeguards the interests of its key stakeholders, reputation, brand and Whistle-blowing
value creating activities.
The Bank has established a facility that enables whistle-
The Bank has in place an appropriate business continuity management blowers to report wrongdoing related to the business
program. Its ultimate purpose is to minimize the impact on the organization of Centenary Bank. The management of the Bank
and recover from loss of information assets which may result from natural is committed to treating allegations of wrongdoing
disasters, accidents, equipment failures, and deliberate actions to an seriously and will always investigate fully. Hence, the
acceptable level. This is through a combination of preventive and recovery Bank encourages members of the public to provide
controls. The process includes the development, maintenance, and testing their details when reporting wrongdoing in order to
of contingency plans and workaround procedures necessary to sustain the obtain follow-up information when necessary. In such
operational continuity of mission critical processes, information technology cases, the Bank will take all reasonable precautionary
systems and resources. measures to protect an individual’s identity.
The following BCP management process has been established to ensure There is also an anonymous reporting option, and
that the plans are developed, documented, tested, updated and maintained; the Bank’s independent external hotline guarantees
employees and members of the public their
• The Bank’s plans are developed according to the BCP framework anonymity, if they so choose.
and in compliance with the policies.
• BCP is an ongoing process of development, testing, updating and
maintenance, and not just a one-off project. It is a part of every
division head’s normal responsibilities to ensure that the division has
not only planned for the recovery of all critical business processes
of that business unit but has also tested and maintained those plans
annually.


Statement of
Corporate Governance
We are pleased to present our 2018 Corporate Governance Statement Report.
Centenary Bank 2018 Corporate Governance Report describes the Bank’s approach to corporate governance
and the governance practices in place, management commitment to good corporate governance and what
has been achieved during the year. Our governance practices empower and enable our operations. They
provide clarity on the scope of authorities, encourage transparency and accountability, and support compliance.
Good governance allows the timely flow of information to the Board to support it in fulfilling its roles and
responsibilities.
The Board is committed to maintaining a high standard Centenary Bank Board of Directors “the Board” and its committees
of Corporate governance practices within the Bank and have dealt with a number of significant strategic, operational and
devotes considerable effort to identify and formalize best compliance matters during the year. These have included the review
practices. We believe that sound and effective corporate and enhancement of governance structures, compliance and control
practices are fundamental to the smooth, effective and programs and adoption of best practice Corporate Governance
transparent operation of the Bank and its ability to practices now well documented in the Board Manual.
attract investment, protect the rights of shareholders
and stakeholders, and enhance shareholder value.
Corporate Governance Structure

Centenary Bank Corporate Governance structure comprises the following three levels:
1. Shareholders &
representatives of
shareholders.
Shareholder’s meeting Nomination Advisory Committee
2. Board of Directors & Committees

appointed by the Board from
among its members.
Board of Directors
Risk IT Credit Human Resource

Committee Strategy ALCO Audit
Committee & Compensation Committee
Committee Committee Committee
Managing Director and Internal
3. MD, ED and Executive Executive Director Audit

management, and its main
functions are managing
governance, risk, Compliance
and ethics (including security),
Corporate responsibility and
controls. Executive Management Team
Compliance and Business Control Risk Management Corporate Responsibility

Business Ethics

Comprehensive guidelines, policies and procedures have been formulated by the Board in support of the Bank’s corporate governance
framework including the Corporate Governance Manual and the terms of reference for various board committees. These documents
are reviewed regularly by the Board and the relevant board committees and are updated in line with the amendments of applicable
legislations and rules as well as the current market practices.
The Bank has complied with all the applicable corporate governance provisions in the Company’s Act, the Financial Institutions Act,
2004, and its amendments as well as all applicable regulations.
The Board Roles & Responsibilities

The primary role of the Board is to protect and enhance long-term shareholder value. It sets the overall strategy for the Bank and
supervises executive management. It also ensures that good corporate governance policies and practices are implemented within the
Bank. In the course of discharging its duties, the Board acts in good faith, with due diligence and care, and in the best interests of the
Bank and its shareholders. The roles and responsibilities of the Board, including the matters that are specifically reserved to the Board,
are set out in our Board Charter and the key ones are summarized in the table below:
AREA ROLES & RESPONSIBILITIES
Culture And •Overseeing and guiding the culture, reputation and stand- •Monitoring and influencing the Bank’s culture,
Conduct ards of conduct of the Bank including overseeing the implementation of
•Evaluating the effectiveness of policies and strategies, policies and controls that motivate desired be-
processes established to promote the haviors and promote sustainable outcomes for custom-
maintenance of high ethical standards ers, shareholders and other stakeholders
Shareholder •Representing shareholders and enhancing •Maintaining a focus on consistent business

Interests long-term shareholder returns, having regard to the inter- performance, behavior, transparency and
ests of other stakeholders including our customers, our accountability
people and the communities in which we operate •Reviewing and approving corporate governance princi-
ples and policies
Strategy •Considering and approving corporate strategy and plans •Reviewing and approving major investment and strategic
•Making decisions concerning dividend policy commitments
•Reviewing and approving capital management
initiatives
Performance •Overseeing performance against the Bank’s •Reviewing and approving the Bank’s audited
operating budgets, financial plan, strategic plan, risk appetite financial statements
statement, financial business plans, capital management and
funding strategy
Integrity Of •Reviewing with the guidance of the Audit •Reviewing and monitoring our reporting to
External Reporting Committee, the processes, controls and procedures in shareholders and regulators, including the provision of
place to maintain the integrity of accounting and financial objective, comprehensive, factual and timely
records and statements information to all key stakeholders
Risk Management •With the guidance of the Risk Committee, review, over- •Overseeing processes for the maintenance of adequate
seeing and challenge the risk management credit quality
And Compliance
•Maintaining appropriate ongoing dialogue with principal
framework, and its implementation by management
regulators
•Overseeing and approving the Bank’s Risk Appetite
Statement
•Overseeing compliance in all aspects of Bank business
Executive Review •Approving key executive appointments and •Evaluating the performance of the Managing Direc-
And Succession remuneration, and monitoring and reviewing tor, Executive Director, Executive Leadership Team
Planning executive succession planning and diversity and other senior executives

The Board Skills

The Board’s Nomination Advisory Committee undertakes an annual assessment of Board composition using a Board skills matrix, to assess the
skills and experience of each director and the combined capabilities of the Board
The Board currently comprises nine (9) Non-Executive Directors and two (2) Executive Directors whose biographical details are set out in the
Board of Directors section of this annual report.
Day-to-day operation of the businesses of the Bank is delegated to the management who is led by the Managing Director. They are being closely
monitored by the Board and are accountable for the performance of the Bank as measured against the corporate goals and business targets set
by the Board.
Board’s skills assessment collectively is summarized below:
BOARD SKILLS EXPLANATION COLLECTIVE
Banking and Financial services experience Experience outside Centenary Bank in significant components of the Strong
financial services industry, including banking and equity and debt capital
markets. Strong knowledge of the regulatory environment. Includes
advisory roles to the industry.
Leadership and commercial acumen Skills gained whilst performing at a senior executive level for a considerable Strong
length of time. Includes delivering superior results, running complex
businesses, leading complex projects and issues, and leading workplace
culture
Financial acumen Good understanding of financial statements and drivers of financial Strong
performance for a business of significant size, including ability to assess the
effectiveness of financial controls.
Risk management Experience in anticipating and evaluating risks that could impact business. Strong
Recognizing and managing these risks by developing sound risk
management frameworks and providing oversight. Includes experience in
managing compliance risks and regulatory relationships
Strategy Experience in developing, setting and executing strategic direction. Strong

Experience in driving growth and transformation, executing against a clear
strategy.
Governance Publicly listed company experience, extensive experience in and Strong

commitment to the highest standards of governance, experience in the
establishment and oversight of governance frameworks, policies and
processes.
Technology and digital Experience in businesses of a significant size with major technology focus, Moderate
including adaptation to digital change and innovation.
People and remuneration Experience in building workforce capability, setting a remuneration frame- Strong
work that attracts and retains a high calibre of executives, and promotion
of diversity and inclusion.

Board Meetings Board Committees

The Board meets regularly at least four times a year at quarterly The Board delegates its powers and authorities from time to time
intervals and holds additional meetings as and when the Board to committees in order to ensure the operational efficiency and
thinks appropriate. Eight Board meetings were held during 2018. specific issues are being handled with relevant expertise. Seven board
Notice of not less than 14 days was given to directors for the committees have been established and each of them has its specific
regular Board meetings. Draft agenda for Board meetings were duties and authorities set out in its own terms of reference.
prepared by the Company Secretary and were circulated to all
directors for comments before each meeting. Directors were The Audit Committee
given an opportunity to include any other matters in the agenda.
The agenda, together with Board papers, were sent in full to the The Committee is constituted in accordance with the Financial
directors not less than three business days before the intended Institutions Act which requires the Board to appoint at least two Non-
date of the Board meeting. Executive Directors to the Committee. As per the law, the members
appointed on the committee are independent non-executive directors
Minutes of Board meetings were prepared by the Company and have many years of experience in business management, finance
Secretary with details of decisions reached, any concerns raised and legal services
and dissenting views expressed. The draft minutes were sent
to all directors within a reasonable time after each meeting for Member of Audit Committee (AC)
their comment before being formally signed by the chairman of • Dr. Mary Theopista Wenene (Chairperson)
the meeting. Copies of the final version of minutes of the Board • Dr. Peter Ngategize
meetings were sent to the directors for information and record. • Mr. Andrew Obol
To ease communication, an electronic Board portal was secured
for delivery and storage of all Board minutes and documents and The Board also engaged a Certified Public Accountant of long standing
this portal can be accessed by any Director at any time. experience in financial and other related matters as an Advisor to the
Committee and its effectiveness in conducting meetings.
At each regular Board meeting, executive directors of the Bank
made presentations to the Board on various aspects, including The main responsibilities of the AC are to assist the Board in
the business performance, financial performance, corporate discharging its statutory and other responsibilities relating to four main
governance and outlook, among other things. A written report areas:
reviewing all the key operational aspects of the Bank is provided • Overseeing financial reporting;
to the directors before each regular Board meeting to enable • Overseeing internal control and risk management systems;
them to make informed decisions for the benefit of the Bank. • Overseeing internal and external audit processes; and
• Overseeing Interested Party Transactions (IPTs).
Pursuant to the bye-laws of the Bank, a director, whether directly
or indirectly, interested in a contract or proposed contract or The members of the AC carried out their duties in accordance with
arrangement with the Bank shall declare the nature of his interest the terms of reference which include the following:
at the meeting of the Board at which the question of entering • Review the significant financial reporting issues and judgments
into the contract or arrangement is first considered. Furthermore, so as to ensure the integrity of the financial statements of the
a director shall not vote (nor be counted in the quorum) on Bank and any formal announcements relating to the Bank’s
any resolution of the directors in respect of any contract or financial performance before their submission to the Board.
arrangement or proposal in which he or any of his associate(s) • Review and report to the Board at least annually on the
is to his knowledge interested. Matters to be decided at Board adequacy and effectiveness of the Bank’s internal controls,
meetings are decided by consensus. These bye-laws were strictly including financial, operational compliance and information
observed throughout 2018. technology controls and risk management systems.
• Review the adequacy and effectiveness of the Bank’s internal
Directors of the Bank play an active role in participating in the audit function at least annually, including the adequacy of
Bank’s meetings through contribution of their professional internal audit resources and its appropriate standing within the
opinions and active participation in discussion. Bank, as well as the scope and the results of the internal audit
procedures.
Directors’ attendance at Board and board • Review the scope and results of the external audit work, the
committee meetings cost effectiveness of the audit, and the independence and
objectivity of the external auditors.
Name of Board Forum Actual attendance as % • Recommend to the Board on the proposals to the shareholders
on the appointment, re- appointment and removal of the
Board of Directors 96.77%
external auditors.
Board ALCO 100%
Board Audit Committee 100%
The Audit Committee has explicit authority to investigate any
Board Risk Committee 95.83%
matter within its terms of reference and is authorized to obtain
Board Human Resource & Compensation 100%
independent professional advice. It has full access to and co-operation
Board IT Strategy 95%
of management and reasonable resources to enable it to discharge
Board Credit Committee 100%
its duties properly. It also has full discretion to invite any director or
Board Nominations Advisory 95%
executive officer or any other person to attend its meetings.

Summary of the Audit • Considered accounting treatments, significant unusual transactions and
Committee’s Activities accounting judgements
• Considered the appropriateness of the accounting policies adopted and
The AC met four times during the year under changes thereto
review. The Head of Compliance function, Head • Reviewed and discussed the external auditors’ audit report
of Finance, Company Secretary, Head Internal
Audit and external auditors are invited to these External audit processes; The AC manages the relationship with the Bank’s
meetings. Other members of senior management external auditors, on behalf of the Board. During 2018, the AC carried out its
are also invited to attend as appropriate to present annual assessment of the cost effectiveness of the audit process, together with
reports. the auditor’s approach to audit quality and transparency. The AC concluded
that the auditors demonstrated appropriate qualifications and expertise and that
During 2018, the Audit Committee had one the audit process was effective.
meeting with external auditors and several with
internal auditors separately, without the presence Auditor independence; In order to maintain the independence of the external
of management. These meetings enable the auditors, the Bank has specific policy which governs the conduct of non-audit
external auditors and internal auditors to raise work by the external auditors. This policy prohibits the external auditors from:
issues encountered in the course of their work
directly to the Audit Committee. • Performing services which would result in the auditing of their own
work;
The principal activities of the Audit Committee • Participating in activities normally undertaken by management;
during 2018 are summarized below: • Acting as advocate for the Bank; or
Financial reporting; The AC met on a quarterly • Creating a mutuality of interest between the auditors and the Bank, for
basis and reviewed the half and full year financial example being remunerated through a success fee structure.
announcements, and all related disclosures to the
shareholders before submission to the Board for The AC undertook a review of the independence and objectivity of the external
approval. In the process, the AC reviewed the auditors through discussions with the external auditors as well as reviewing the
audit plan and audit committee report presented non-audit fees awarded to them. The AC received a half yearly report setting
by the external auditors. out the non-audit services provided by PWC and the fees charged.
The AC reviewed the annual financial statements Having undertaken a review of the non-audit services provided during the year,
and also discussed with management, the Head the AC remains confident that the objectivity and independence of the external
of Finance and the external auditors the significant auditors are not in any way impaired by reason of the non-audit services which
accounting policies, judgment and estimate applied they provide to the Bank. Moreover, the AC is satisfied that these services
by the management in preparing the annual financial were provided efficiently by the external auditors as a result of their existing
statements. The AC focused particularly on: knowledge of the business.
• Confirmed the going concern principle Internal audit; During 2018, the AC has reviewed and assessed the adequacy
as the basis of preparation of the annual of the Bank’s system of internal controls and regulatory compliance through
financial statements discussion with management, the Head of Internal Audit, and external auditors.
• Examined and reviewed the interim
and annual financial statements prior to The AC considered and reviewed with management and the Head of Internal
submission and approval by the Board Audit on the following:
• Reviewed reports on the adequacy of
the provisions for performing and non- • Annual internal audit plans to ensure that the plans covered sufficiently a
performing loans and impairment of review of the internal controls of the Bank;
other assets, and the formulae applied by • Significant internal audit observations and management’s response
the Bank in determining charges for and thereto; and
levels of impairment of performing loans • Budget and staffing for the internal audit functions.
in compliance with International Financial
Reporting Standards. The AC has reviewed the adequacy of the internal audit function and is satisfied
• Ensured that the annual financial statements that the team is adequately resourced. The AC also reviewed the training costs
fairly present the financial position of the and programs attended by the internal auditors to ensure that staff continued
Bank, as at the end of the financial year and to update their technical knowledge and auditing skills.
the results of operations and cash flows for
the financial year and considered the basis Interested person transactions (IPTs); The AC reviewed the Bank’s IPTs to
on which the Bank determined to be a going ensure that the transactions were carried out on normal commercial terms
concern and are not prejudicial to the interests of the Bank or its non-controlling
• Ensured that the annual financial statements shareholders. On a quarterly basis, management reports to the AC the IPTs
conform with IFRS9 in accordance with the Company’s Shareholders’ Mandate for IPTs. The
Audit Committee is satisfied that the internal controls over the identification,
evaluation, review, approval and reporting of IPTs was effective.

Risk Management Committee

The Board, with the assistance from the Risk Management Committee (RMC) and Audit Committee, is responsible for the governance
of risk by ensuring that management maintains a sound system of risk management and internal controls to safeguard shareholders’
interest and the Bank’s assets. It also determines the nature and extent of the significant risks which the Board is willing to take in
achieving strategic objectives.
The RMC comprises the following members:
• Mr. Sam Kamiti (Chairperson)

• Dr. Peter Ngategize
• Mr. Fabian Kasi
• Dr. Simon Kagugube
• Mr. Andrew Obol
Except for Mr. Fabian Kasi and Dr. Simon Kagugube all the other RMC members are independent non-executive directors.
The RMC is guided by its terms of reference. Specifically, the RMC assists the Board to:
• Determine the Bank’s levels of risk tolerance and risk policies.

• Oversee management in the formulation, update and maintenance of an adequate and effective risk management framework
in addressing material risks including material financial, operational, compliance and information technology risks.
• Review the Bank’s risk profile regularly and the adequacy of any proposed action if necessary.
• Review any material breaches of risk appetite/ tolerances/ limits and the adequacy of any proposed action if necessary.
The terms of reference for RMC were reviewed during the period as documented in the governance manual to improve effectiveness.
The Board has approved a Bank Risk Management Framework for the identification, assessment, monitoring and reporting of significant
risks. The Bank adopts the ISO 31000 Risk Management standards and Committee of Sponsoring Organizations of the Treadway
Commission (COSO) model as the benchmark for assessing the effectiveness of its risk management system.
ERM across the Bank.

ERMC reports to the RMC on a quarterly basis
The Bank maintains a risk register which identifies the material risks facing the Bank and the internal controls in place to manage or
mitigate those risks. Business and corporate executive heads in the Bank review and update the risk register regularly. The risk register
is reviewed annually by the RMC, the AC and the Board. The RMC also reviews the approach of identifying and assessing risks and
internal controls in the risk register.
On an annual basis, the Bank’s internal audit function prepares an audit plan taking into consideration risks identified and assessed from
the risk management system.
The risks are proactively identified and addressed. The ownership of these risks lies with the respective business and corporate
executive heads with stewardship residing with the Board.
The RMC assists the Board to oversee management in the formulation, update and maintenance of an adequate and effective risk
management framework while the Audit Committee reviews the adequacy and effectiveness of the risk management and internal
control systems.
At the management level, an Enterprise Risk Management Committee (ERMC) comprising key management personnel is responsible
for directing and monitoring the development, implementation and practice of Enterprise Risk Management approved by the AC
and audits are conducted to assess the adequacy and effectiveness of the Bank’s system of internal controls in addressing financial,
operational, information technology and compliance risks. In addition, material control weaknesses over financial reporting, if any, are
highlighted by the external auditors in the course of the statutory audit.
All audit findings and recommendations made by the internal and external auditors are reported to the AC and significant findings are
discussed at the AC meetings. The Bank’s internal audit function follows up on all recommendations to ensure timely remediation of
audit issues and reports the status to the AC every quarter.

Activities of other Board Committees are discussed below:
ALCO Committee
Members: Mr. Casper Sprokel

Mr. Richard Thil
Mr. Fabian Kasi
Dr. Simon Kagugube
Major responsibilities
• In conjunction with the Board Risk Management Committee, establishing guidelines on the Bank’s tolerance for risk and
expectations from investment.
• Setting specific financial targets for the Bank and monitoring management’s performance against those targets.
• Monitoring of the Bank’s capital expenses.
• Ensuring that management implements the asset and liability policy of the Bank.
Work performed during 2018:

• Reviewed significant financial risk exposures facing the Bank generally in its investment, and the steps management is taking to
monitor and control such exposure.
• Reviewed reports relating to management of capital and the establishment of, and compliance with, policies relating to balance
sheet management, including management of the Bank’s liquidity, capital adequacy and structural foreign exchange and interest
rate risk
• Reviewed Assets & Liability Manangement reports to ensure effective utilization of Bank resources
• Reviewed Financial performance reports
• Reviewed and considered budget for 2019
• Reviewed substantial procurements
• Reviewed and approved exceptional budgets
Human Resource & Compensation Committee
Members: Dr. Mary T. Wenene,

Mr. Andrew Obol
Archbishop Cyprian K. Lwanga
Mr. Fabian Kasi
Major responsibilities:
• To review and make recommendations to the board on the bank’s policy and structure for remuneration and advise on the
establishment of a formal and transparent procedure for developing policy on such remuneration
• To make recommendations to the board on the remuneration packages, including benefits in kind, pension rights and
compensation payments, of individual executive directors
• To determine the remuneration packages of senior management
• To assess performance of senior management team
• To participate in the selection and recruitment of senior management

• Organizational design and structural review
• General Managers and Chief Managers succession plans review
• Review of staff defined contribution scheme amendments
• Conducted performance assessment of General managers and executives
• Participated in the selection and recruitment process of senior management team

Nomination Advisory Committee
Members: Prof. John Ddumba Ssentamu

Archbishop Cyprian K. Lwanga
Mr. Andrew Obol
• Review the structure, size and composition of the Board and make recommendations to the Board with regard to any changes
for its decision and further recommendations to the Shareholders who nominate and elect the Directors.
• Identify and recommend to the Board appropriate candidates who could serve as director nominees for the next annual
meeting of shareholders;
• Analyze the roles and responsibilities of Board members and the knowledge, experience and competence for purposes of
Board Committee composition

• Reviewing the structure of the Board, Board Composition matrix and job specification of Board Chair.
• Advising on Nominations of new Directors
• Reviewing of Succession plans for Executive Directors
• Reviewing and recommending Director’s retirement plan for the period up to 2021
• Making recommendations in relation to the re-appointment of the retiring directors
Credit Committee
Members: Dr. Peter Ngategize

Dr. Mary T. Wenene
Mr. Richard Thil
Dr. Simon Kagugube
Mr. Fabian Kasi
• Set and review the Bank’s credit policy and ensure it is in line with the credit strategy of the Bank, consistent with regulatory
requirements and market practices.
• Oversee the implementation of the Bank’s Credit Policy, by reviewing compliance by the Bank’s Management with the Credit
Policy as approved by the Board.
• Ensure that the activities of the credit division fully comply with the risk tolerance levels, which were set by the Board and
regulatory authorities;
• Be responsible for setting the tone and monitoring the credit strategy and entire loan portfolio to make sure that all the policy
requirements and prudential ratios as advised by the Central Bank are well complied with, for example Non-performing
ratios, portfolio mix, sector analyses, loan provisioning levels, insider lending, etc.
• Analyze the general condition of the Bank loan portfolio to determine the risk profile of the bank and the margin of tolerance
in respect to the level of Non-performing loans and loan provisioning

• Reviewed credit policies for the Bank
• Established in consultation with management credit portfolio limitations for, without limitation, the following:
• i. Acceptable concentrations of loans;
ii. Acceptable product mix (lines of credit, commercial term loans, factoring, real estate and other loans); and,
iii. Geographic dispersion of the loan portfolio.
• Reviewing credit performance
• Reviewed Bank’s compliance with regulatory requirements and internal polices applicable to credit

Information Technology (IT) Strategy Committee
Members: Dr. Peter Ngategize

Mr. Sam Kamiti
Mr. Fabian Kasi
Dr. Simon Kagugube
Dr. Mary T. Wenene
• Approve the IT Strategy which should be aligned with other Bank-wide strategies and objectives.
• Review proposed IT initiatives and set priority accordingly.
• Balance IT investment risk against potential IT investment opportunities, selecting those IT investments that are in line with
the risk profile of the Bank.
• Monitor the progress of technology projects, services and IT investments at the strategic level.
• Resolve organizational barriers and culture that impede the effective delivery of IT investments.

• Reviewed and approved the IT Strategy 2019. Ensures the IT Strategy is aligned with other Bank-wide strategies and
objectives.
• Reviewed proposed IT initiatives and set priorities accordingly.
• Discussed current IT Trends including Block Chain Technology and how they affect the Bank business
• Reviewed general Data Protection Regulation
• Reviewed implementation of business projects driven by technology i.e. Agency banking, migration to pin and chip card,
e-card implementation, biometrics, loans on phone.
Board Processes
Induction and training of Directors
The Bank conducts a comprehensive orientation programme, which is presented by the Managing Director, Executive Director
and senior management, to familiarize new directors with business and governance policies. The orientation programme gives
directors an understanding of the Bank’s businesses to enable them to assimilate into their new roles. The programme also allows
the new director to get acquainted with senior management, thereby facilitating board interaction and independent access to senior
management. The Board is also given exposure on Corporate Governance issues through trainings outsourced to specialized
external consultants.
Induction material and Board manual containing Board Charter, key corporate governance guidelines on Board roles and
responsibilities, by laws and Board role in risk management are also provided to Board members.
Briefings, updates and trainings provided to Directors

The Nominations Advisory Committee reviews and makes recommendations on the training and professional development
programs to the Board.
On a quarterly basis, the Board is briefed on recent changes to the accounting standards and regulatory updates. The MD updates
the Board at each meeting on business and strategic developments of the Bank
As part of the Bank’s continuing education for directors, the Company Secretary circulates to the Board articles, reports and press
releases relevant to the Bank’s business to keep directors updated on current industry trends and issues. News releases issued by
the Central Bank and the Accounting Bodies which are relevant to directors are also circulated to the Board.
For the period under review, the Board received both local and international training during the year in specialist areas including
strategy and company structures. The members of the Audit Committee received written technical updates from the Bank’s External
Auditors, PricewaterhouseCoopers to keep abreast of latest financial reporting development.

External consultants Deloitte also provided to the Board and • Web portal was developed for all
management on new International Financial Reporting Standard (IFRS9) directors to get timely information even
on loss provisioning when they don’t have meetings.
Board members also received updates on Developments in the tax • The task of assessing the independence of
arena from Bank’s tax consultants PricewaterhouseCoopers, human directors is delegated to the Nominations
capital demography in the work, handling Millennials on top of attending Advisory Committee. The Nominations
various conferences, in-house trainings on corporate governance. Advisory Committee reviews the
independence of each director annually,
The Chairman and the Company Secretary are responsible for and as and when circumstances require.
preparing and coordinating an induction programme when new
directors are appointed to the Board. • Annually, each director is required to
complete a Director’s Independence
Director’s Independence and the Role of the Checklist to confirm his/ her
non-executive directors independence. The Checklist is drawn up
based on the guidelines provided in the
The Board and Shareholders recognize that independent directors Code of Corporate Governance.
bring significant insights in the Bank’s business and operations, and
provide significant and valuable contribution objectively to the Board • Each director must also confirm in the
as a whole. Checklist whether he/ she considers
himself/ herself independent despite not
The Board and management also fully appreciate that an effective having any relationships identified in the
and robust Board whose members engage in open and constructive Code of Corporate Governance.
debate, and challenge management on its assumptions and proposals,
is fundamental to good Corporate governance. • Thereafter, the Nominations Committee
reviews the Checklist completed by each
Three quarters of the Board therefore constitute non-executive director, assess the independence of the
directors (NEDs) and Independent directors who are kept well directors and recommends its assessment
informed of the Bank’s businesses and are knowledgeable about the to the Board.
industry the Bank operates in.
Chairman and Managing
To ensure that NEDs are well supported by accurate, complete and Director (MD)
timely information, NEDs have unrestricted access to management.
The Chairman and MD functions in the Bank are
The Bank has adopted initiatives to put in place processes to ensure that assumed by different individuals. The Chairman,
NEDs have sufficient time and resources to discharge their oversight Professor Ddumba, is an independent non-
function effectively. These initiatives include: executive director, while the MD, Mr. Fabian
Kasi is an Executive Director.
• Regular informal meetings are held by management to brief the There is a clear division of responsibilities
NEDs on key Bank processes and potential developments at an between the Chairman and MD, which ensures
early stage, before formal Board’s approval is sought. a balance of power and authority at the top of
the Company.
• Periodic information papers and board papers on the latest
market developments and trends, and key business initiatives are The Chairman:
circulated to NEDs on a timely basis to afford the directors time
to review them. • Is responsible for leadership of the Board
and is pivotal in creating the conditions for
• To provide an opportunity for the NEDs to familiarize themselves overall effectiveness of the Board, board
with the management team so as to facilitate the Board’s review committees and individual directors.
of the Banks succession planning and leadership development
programme, an annual board strategy meeting is organized for • Takes a leading role in the Bank’s drive
in-depth discussion on strategic issues and direction of the Bank. to achieve and maintain a high standard
of corporate governance with the full
• The Bank has also made available on the Bank’s premises an support of the Directors, Company
office for use by the NEDs at any t time for the NEDs to meet Secretary and management.
regularly without the presence of management.

• Approves the agendas for the Board meeting and ensures Directors’ time commitments and multiple
sufficient allocation of time for thorough discussion of directorships
agenda items.
The Nominations Advisory Committee has adopted internal guidelines
• Promotes an open environment for debates and ensures addressing competing time commitments that are faced when directors
NEDs are able to speak freely and contribute effectively. serve on multiple boards.. The guideline includes the following:
• Exercises control over the quality, quantity and the • Directors must consult the Chairman of the Board and the
timeliness of information flow between the Board and Nominations Committee Chairperson prior to accepting any new
management. appointments as directors and other principal commitments; and
• In support of their candidature for directorship or re-appointment,
• Provides close oversight, guidance, advice and leadership directors are to provide the Nominations Advisory Committee with
to the MD and management. details of the board appointment and other principal commitments
and an indication of the time involved.
• Plays a pivotal role in fostering constructive dialogue
between shareholders, the Board and management at • The Nominations Advisory Committee determines annually
AGMs and other shareholder meetings whether a director with multiple board representations and/ or
other principal commitments is able to and has been adequately
The Central Bank under the “Four Eyes “principle requires carrying out his/ her duties as a director of the Bank.
financial institutions to have at least 2 Executive Directors, resident
in Uganda who are knowledgeable in the institution’s long term The Nominations Committee takes into account the results of the
strategy to direct the business of the company. The Bank therefore assessment of the effectiveness of the individual director, and the respective
has two (2) Executive Directors including the Managing Director directors’ actual conduct on the board, in making this determination.
who is accountable to the Board of Directors and is assigned
overall control of management of the Bank.
Access to information
The MD is the highest ranking executive officer of the Bank and
is responsible for: Management recognizes the importance of ensuring the flow of complete,
adequate and timely information to the directors on an ongoing basis to
• Running the day-to-day business of the Bank, within the enable them to make informed decisions to discharge their duties and
authorities delegated to him by the Board. responsibilities.
• Ensuring implementation policies and strategy across the
Bank as set by the Board. To allow directors sufficient time to prepare for the meetings, all Board and
board committee papers are distributed to directors a week in advance
• Day-to-day management of the executive and senior of the meeting. Any additional material or information requested by the
management team. directors is promptly furnished.
Management’s proposals to the Board for approval provide background
• Leading the development of senior management within the and explanatory information such as facts, resources needed, risk analysis
Bank with the aim of assisting the training and development and mitigation strategies, financial impact, regulatory implications, expected
of suitable individuals to effectively run the business of the outcomes, conclusions and recommendations.
Bank.
Employees who can provide additional insight into matters to be discussed
• Ensuring that the Chairman is kept appraised in a timely will be present at the relevant time during the Board and board committee
manner of issues faced by the Bank and of any important meetings.
events and developments.
To facilitate direct access to the senior management, directors are also
• Leading the development of the Bank’s future strategy provided with the names and contact details of the management team.
including identifying and assessing risks and opportunities for The management also provides the Board with management report. This
the growth of its business and reviewing the performance report includes budgets, forecasts and monthly management accounts. In
of its existing businesses. respect of budgets, any material variances between the projections and
actual results are disclosed and explained to the Board.
On a quarterly basis, the Head of Internal Audit also provides the Board
with internal audit report. This report includes:
• Status of the audits in the annual internal audit plan.

• Key findings arising from completed audits.
• Implementation status of outstanding management action
plans (if any).

The Enterprise Risk Management Committee presents risk assessment to the An Explanatory Note is attached to the Questionnaire
Board on a quarterly basis, which includes movements in risks, risk assessment to clarify the background, rationale and objectives of the
of major investment, capital expenditure, and acquisitions. various performance criteria used in the Questionnaire with
the aim of achieving consistency in the understanding and
Succession Planning for the Board and Senior interpretation of the questions.
Management
The consultant also review Board processes and
Succession planning is an important part of the governance process. The documentation of the Board business including tools Board
Nominations Advisory Committee seeks to refresh the Board membership use to conduct its business.
progressively and in an orderly manner, to avoid losing institutional memory.
Based on the review and returns from each of the director,
The Nominations Advisory Committee reviews the succession and leadership the independent external consultant prepares a consolidated
development plans for senior management, which are subsequently approved report and briefs the Chairman of the Board on the report.
by the Board. As part of this annual review, the successors to key positions are Thereafter, the external independent consultant presents
identified, and development plans instituted for them. the report for discussion at a meeting with all the directors,
chaired by the Chairman. The Chairman then holds a
discussion with all directors to agree on future action plans.
Board Performance Evaluation
The Board has implemented a process for assessing the effectiveness of the Board performance criteria
Board as a whole, effectiveness of its board committees and the contribution The performance criteria for the board evaluation are as
by each individual director to the effectiveness of the Board on an annual follows:
basis.
• Board size and composition.
• Board independence.
During the year, the Board engaged an external consultant specializing in
• Board processes.
board evaluation and human resources to facilitate the evaluation of the • Board information and accountability.
Board, board committees, and each individual director. • Board performance in relation to discharging its
principal functions.
The external consultant does not have any connection with the Bank or any • Board committee performance in relation to
discharging their responsibilities set out in their
of its directors.
respective terms of reference.
The Board believes that the use of an independent external consultant not • Financial targets which include profit before tax,
only encourages directors to be more candid in their evaluation of the Board profit after tax, dividend pay-out ratio, and total
performance but also enhances the objectivity and transparency of the shareholder return (i.e. dividend plus share price
evaluation process. increase over the year).
Evaluation process Individual director’s performance criteria

The individual director’s performance criteria are
The External Consultant supported the Board to conduct an annual
categorized into five segments; namely,
assessment of the effectiveness of the Board as a whole, effectiveness of its
board committees and the contribution by each individual director. There are
• Interactive skills (whether the director works well
three components to this assessment:
with other directors and participate actively).
• Knowledge (the director’s industry and business
A. Self-assessment;
knowledge, functional expertise, whether the
B. Board assessment; and
director provides valuable inputs, the director’s
C. Peer evaluations.
ability to analyze, communicate and contribute to
the productivity of meetings, and understanding of
The performance evaluation process begins with an annual meeting between
finance and accounts, are taken into consideration).
the Chairman and the independent external consultant on the evaluation
• Director’s duties (the director’s board committee
framework to ensure that areas of particular interest and key issues are
work contribution, whether the director takes his/
focused on.
her role as director seriously and works to further
improve his/ her own performance, whether he
The independent external consultant sends out a customized Board Evaluation
listens and discusses objectively and exercises
Questionnaire (Questionnaire) to each director for completion. Each director
independent judgment, and meeting preparation are
is required to complete the Questionnaire and send the Questionnaire
taken into consideration).
directly to the independent external consultant on completion.

• Availability (the director’s attendance at Board and high standards of living and quality of life for the communities the Bank serves
board committee meetings, whether the director to promote sustainable growth. A detailed analysis of Corporate Social
is available when needed, and his/ her informal Responsibility activities is discussed separately in this report.
contribution via email, telephone, written notes etc.
are considered). Accountability and Audit
• Overall contribution, bearing in mind that each
director was appointed for his/ her strength in certain
areas which taken together provides the Board with Accountability
the required mix of skills and competencies.
The Bank recognizes the importance of providing the Board with accurate and
The assessment of the Chairman of the Board is based on relevant information on a timely basis. Hence, Board members receive regular
his ability to lead, whether he has: financial and business reports from management. Such reports keep the Board
members informed of the Bank’s performance, position and prospects and
• Established proper procedures to ensure the consist of the consolidated profit and loss accounts, analysis of sales, operating
effective functioning of the Board. profit compared against budgets, together with explanations for significant
• Ensured that the time devoted to board meetings variances for the month and year-to- date.
were appropriate (in terms of number of meetings
held a year and duration of each board meeting) The Board provides shareholders with annual financial reports. In presenting
for effective discussion and decision-making by the the annual financial statements to shareholders, the Board aims to provide
Board. shareholders with a balanced and clear assessment of the Bank’s position
• Ensured that information provided to the Board and prospects. The Board also ensures timely and full disclosure of material
was adequate (in terms of adequacy and timeliness) corporate developments to shareholders.
for the Board to make informed and considered
decisions. The Board also reviews legislation and regulatory compliance reports from
• Guided discussions effectively so that there was management to ensure that the Bank complies with the relevant regulatory
timely resolution of issues. requirements.
• Ensured that meetings were conducted in a manner
that facilitated open communication and meaningful For the financial year under review, the MD and the Head of Finance have
participation. provided assurance to the Board on the integrity of the financial statements for
• Ensured that board committees were formed the Bank.
where appropriate, with clear terms of reference,
to assist the Board in the discharge of its duties and Internal audit
responsibilities
The Bank has established an in-house internal audit function. The internal audit
The performance of individual directors is taken into is an independent function within the Bank. The Head of Internal Audit reports
account in their re-appointment. Specific needs which directly to the Audit Committee functionally and to the MD administratively.
arise from time to time are taken into account in any
appointment of new directors. The internal audit function adopts the International Standards for the Professional
Practice of Internal Auditing (the IIA Standards) issued by IIA. The Audit
The results of the overall evaluation showed that the Committee approves the hiring, removal, evaluation and compensation of the
Board was committed and complied with key aspects Head of Internal Audit. The scope of authority and responsibility of the internal
of Corporate Governance. Areas identified for further audit function is defined in the Bank Internal Audit Charter, which is approved by
improvement include: the Audit Committee.
• Focusing more on succession planning both at Board
level and management level. The primary role of internal audit function is to assist the Board and senior
• Improving on integrated reporting by the Bank management to meet the strategic and operational objectives of the Bank,
by providing an independent and objective evaluation of the adequacy and
Corporate Citizenship effectiveness of risk management, controls and governance processes. The
Bank’s internal audit approach is aligned with the Bank’s Risk Management
The Board is increasingly promoting strong understanding Framework by focusing on key financial, operational, compliance and information
of community needs and creating a balance between the technology risks. The annual internal audit plan is established in consultation
needs of shareholders and the needs of the community and with, but independent of, management.
environment in the surrounding area. These practices help
bring in consumers and establish brand and Bank loyalty. The internal audit plan is reviewed and approved by the Audit Committee.
All internal audit findings, recommendations and status of remediation, are
The Board also agreed to focus more on putting the circulated to the Audit Committee, the external auditors and relevant senior
customers at the center of Bank’s strategy by ensuring management every quarter.
that there are clear set social goals aimed at contributing

The professional competence of the internal auditors is maintained or upgraded through training programmes, conferences and seminars that
provide updates on auditing techniques, regulations, financial products and services. The internal audit function is staffed with suitably qualified
experienced professionals with diverse operational and financial experience, who are at the level of manager and above.
The Audit Committee is satisfied that the internal audit function has adequate resources to perform its functions effectively. The Head of Internal
Audit presents the internal audit findings to the Board at each quarter. The Audit Committee meets with the Head of Internal Audit quartely,
without the presence of management. The internal auditors have unfettered access to all the Bank’s documents, records, properties and personnel,
including the Audit Committee.
Risk Management and Internal Control

Risk Management
Risk management is an essential part of corporate governance. Effective risk management facilitates the Bank’s business development and operation
by setting the appropriate risk appetite, maintaining an optimal risk level and most importantly, proactively managing risks. It is the responsibility
of all management staff to uphold the Bank’s risk management function by ensuring that all staff members and business units comply with the risk
management practices embedded into our daily operation.
The Board is responsible for ensuring that sound and effective risk management and internal control systems are maintained, while management
ensures the sufficient and effective operational controls over the key business processes are properly implemented with regular review and update.
The Board has put in place an effective and efficient internal control system which will enable the Bank to respond appropriately to significant
business, operational, financial, compliance and other risks in achieving its objectives. This includes the safeguard of assets from inappropriate use
or from loss and fraud, and ensuring that liabilities are identified and managed. Furthermore, it helps ensure the quality of internal and external
reporting within the Bank and the compliance with applicable laws and regulations, and also internal policies with respect to the conduct of
businesses of the Bank. The detailed risk management framework is discussed separately in this report.
Internal Control System

The Bank has in place an integrated framework of internal control which is consistent with COSO Frame work and related International best
practices as summarized below:
Monitoring
• Ongoing assessment of control systems’ performance.
• Continuous risk-based internal audits performed.
Effectiveness
and efficiency of
Information and Communication operations
• Information in sufficient detail is provided to the right person timely.
• Channels of communication across the Bank and with customers, suppliers and external
parties.
• Channels of communication for people to report any suspected improprieties.
Control Activities
• Policies and procedures for ensuring management directives are carried out. Reliability of
• Control activities include performance review, segregation of duties,
financial
authorization, physical count, access control, documentation and records, etc.
reporting
Risk Assessment
• Identification, evaluation and assessment of the key risk factors affecting the achieve-
ment of the Bank’s objectives are performed regularly.
• Undertake proper actions to manage the risks so identified.
Compliance with
Control Environment applicable laws
• Channels to communicate the Company’s commitment to integrity and high ethical and regulatuions
standards to the staff are established.
• Organizational chart and limits of authority are set and communicated to staff con-
cerned.
• Reporting lines in accordance with organizational chart and line of authority are set.

Shareholders Rights and Responsibilities
The Bank recognizes the importance of maintaining transparency and accountability to its shareholders. The Board ensures
that all the Bank’s shareholders are treated equitably and the rights of all investors, including non-controlling shareholders
are protected.
The Bank is committed to providing shareholders with adequate, timely and sufficient information pertaining to changes in
the Bank’s business which could have a material impact on the Bank’s share price.
Company Secretary
Directors have separate and independent access to the Company Secretary. The Company Secretary is responsible for,
among other things, ensuring that Board procedures are observed and that Company’s Memorandum and Articles of
Association, relevant rules and regulations are complied with. The Company Secretary also assists the Chairman and the
Board in implementing and strengthening corporate governance practices and processes, with a view to enhancing long-
term shareholder value.
The Company Secretary assists the Chairman in ensuring good information flows within the Board and its Board committees
and between management and NEDs. The Company Secretary also facilitates the orientation and assists with professional
development as required.
As primary compliance officer for Bank’s compliance with the regulator rules, the Company Secretary is responsible for
designing and implementing a framework for management’s compliance with the regulator, including advising management
to ensure that material information is disclosed promptly.
The Company Secretary attends and prepares minutes for all Board meetings. As secretary for all Board committees,
the Company Secretary assists in ensuring coordination and liaison between the Board, the Board committees and
management. The Company Secretary assists the Chairman of the Board, the Chairman/ Chairperson of board committees
and management in the development of the agendas for the various Board and Board committee meetings.
The appointment and the removal of the Company Secretary are subject to the Board’s approval.

Board Of Directors
Prof. John Ddumba Ssentamu
Board Chairman. (Ugandan) Key Experience
• Formerly Vice Chancellor, Makerere
Committee Chairperson University Uganda and previously
• Nominations Advisory Committee acting Principal, College of Business and
Management Sciences, for several years
Qualifications • He was Chairman, Microfinance African
• Professor of Economics and holds a PhD in Institutions Network (based in Lome,
Economics Togo),
• Holds an honorary fellowship of the
Uganda Institute of Banking and Financial • Prof. Ssentamu has contributed greatly to
Services (FUIB, HONS). the Centre for Research on Environmental
Current Appointments Economics and Policy in Africa as member
• Chairman University of Kisubi and the Vice of its Advisory Board and Committees.
Chairman of the Mutesa 1 Royal University
• He has made a number of publications on
Previous Appointments a spectrum of areas in Economics.
• He has been Chairman, Academic Board,
African Economic Research Consortium
(AERC), Nairobi, Kenya
• He has also previously served as member
of the Finance Committee of CARITAS
International based in the Vatican.
Archbishop Cyprian K. Lwanga Previous Appointments

Non-Executive Director. (Ugandan) • Served on Board of Governors of various
Church founded schools/institutions.
Committee Member
• Human Resource and Compensation Key Experience
• Nominations Advisory Committee • Was the World-wide Vice President of
Caritas International and Continental
Qualifications President of Caritas Africa
• Professor of Canon Law from Ggaba • As an entrepreneur, he has innovated
National Seminary and St. Mbaaga Major and set various programmes including
Seminary Wekembe Corporation Programme
• Doctorate in Canon law from Pontifical (now SACCO), the Uganda Martyrs
Urban University in Rome Development Foundation and Kampala
Archdiocese Pro-life Apostolate

Board Of Directors (continued...)
Mr. Samuel Gachie Kamiti Current Appointments

Non-Executive Director. (Kenyan) • Director Digital Financial Payment Services,
ICT & Strategic Partnerships, Dhamana
Committee Member Africa Limited, Kenya
• HR & Compensation Previous Appointments
• IT Strategy • Innovations and Strategic Partnerships
Advisor, Family Bank Ltd - Kenya
Membership to Professional Bodies • General Manager Alternate Business
• Member of ISACA – Information Systems Channels, Equity Bank Ltd, Kenya
Audit and Control Association • Director of Operations and ICT, CRDB
Bank PLC Tanzania.
Qualifications • Senior Manager Information Technology,
• BSc.(Hons) Mathematics and Computer Central Bank of Kenya.
Science, University of Nairobi • Head of Direct Banking, Standard Chartered
• Postgraduate Diploma in Computer Bank Kenya
Science- University of Nairobi • Systems Development Manager, Standard
• CISM – Certified Information Systems Chartered Bank Kenya
Manager
• CISA – Certified Information Systems
Auditor
Dr. Peter Ngategize Previous Appointments

Non-Executive Director. (Ugandan) • Chairman, Credit and Risk Management
Committee
• Chairman, Board IT Strategy Committee
Committee Chairperson
• National Coordinator, Competitiveness
• Board Credit Committee
and Investment Climate Strategy (CICS)
• Board Risk Management Committee
Secretariat, Ministry of Finance, Planning and
• Board IT & Strategy Committee
Economic Development of Uganda.
• Has spearheaded many initiatives towards
Committee Member the Private Sector competitiveness and
• Board Audit Committee development in Uganda.
• Over 20 years experience in area of
Qualifications: strategy, project management on donor
Hold a PhD (Agricultural Economics) funded projects.
• Senior lecturer, Agricultural Economics
Department, Makerere University
Current Appointments
• Member of Council and Chairman Staff
• Head, Private Sector Development Unit
Appointment Committee, Kabale University.
(PSDU), Ministry of Finance, Planning and
• Director, Coffee Research Centre, Kituza,
Economic Development.
National Agricultural Research Organisation
• Representative of the Government of
(NARO).
Uganda on the multi-donor funded
Agricultural Business Initiative (aBi).
• Chairman, Mbarara Ecclesiastical Province
Kampala Residents Association (MEPA)

Mr. Fabian Kasi Current Appointments

Managing Director. (Ugandan) • Managing Director of Centenary Bank.
• Board member, British American Tobacco
(U),
Committee Member
• Board member, PAX Insurance
• Risk Management
• Chairman of the Advisory Board of
• IT Strategy Microfinance Department of Nkozi
• Credit Committee University
• Assets and Liability
Previous Appointments
Qualifications • Chairman of the Uganda Bankers
• Bachelor’s Degree in Commerce Association.
• Masters of Business Administration • Board Chairman of the Association of
• Fellow of the Association of Chartered Microfinance Institutions of Uganda
Certified Accounts (FCCA), United • Board member, FINCA Uganda and
Kingdom. Kampala Club
• Honorary Fellow of the Institute of
Banking & Financial Services of Uganda.
Dr. Simon Kagugube • Member of Finance and Audit

Executive Director. (Ugandan) Committee, Centenary Bank.
• Board Chairman, Uganda Revenue
Committee Member Authority
• Risk Management • President, East African School of Taxation.
• IT Strategy
• Credit Committee Previous Appointments
• Assets and Liability
• Board Chairman, Centenary Bank in
2002, while also holding the position
Qualifications of Director, Tax and Legal Services
• Doctorate in the Science of Law (JSD), from
PricewaterhouseCoopers.
Yale Law School (USA),
• Certificate in Public Finance from the
University of Bath, (UK). Key Experience
• He worked with the Uganda Revenue
Current Appointments Authority as Commissioner Value
• Advocate of the High Court of Uganda Added Tax and was appointed Deputy
• Board Chairman, Monitor Publications Ltd, Commissioner General
Nation Media Group
• Board Member, Nation Media Group

Assoc. Prof. Ssewanyana Current Appointments

Joseph Kasumba • Associate Professor, Makerere University
Non-Executive Director. (Ugandan) Business School.
• Member, CEO Summit Think Tank
Secretariat
Committee Member
• Risk Management
• IT Strategy Previous Appointments
• He previously served as Council
• Assets and Liabilities
Chairperson Uganda Technology and
Management University
Membership to Professional Bodies • He worked extensively in the Uganda
• Member, British Computer Society Government, parastatal organisations and in
• Member, Microsoft Certified Professional
the private sector outside Uganda
• Member, Association of Computing
Machinery
Key Experience
• Business Information Technology Specialist
Qualifications and Consultant; Academician and
• PhD Researcher
• MBA(UK)
• BA Statistics-MUK
• Diploma in Computer Electronics
Technology (Canada)
Mr. Andrew P.K. Obol Qualifications

Non-Executive Director. (Ugandan) • A qualified professional banker.
Current Appointments
• Chairs the Human Resource &
Committee Chairperson Compensation Committee.
• Human Resource and Compensation
Committee Member Previous Appointments
• Risk and Management • Formerly on the top management of
• Audit Committee Uganda Commercial Bank (now Stanbic
• Credit Committee Bank)
• Nominations advisory committee • Served as the Coordinator of CARITAS
Kitgum under Gulu Diocese. He was
a member of the District Service
Commission.

Mr. Caspar Jan Frits Sprokel Previous Appointments

Non-Executive Director. (Dutch) • Director & Chairperson Risk & Credit
Committee, Micro Deposit-taking
Committee Chairperson organization Arvand, Tajikistan
• Assets and Liability Committee (ALCO • Director Akiba Commercial Bank,
Tanzania
Committee Member • Director Novo Banco, Mozambique
• Nominations Advisory Committee • Director Management company,
Mozambique Private Equity Fund
Qualifications
• Masters of Business Administration Key Experience
• Certificate in Banking & Finance • Has over 25 years of banking and
• Certificate in Corporate Law financial sector experience in financial
institutions across the Netherlands, Asia
Current Appointments and Africa, specifically in commercial and
• Head of Equity – Emerging Markets, corporate banking, SME banking and
Triodos Investment Management BV project finance, inter alia with ING Bank
• Member of the Advisory Board, Financial and FMO, the Netherlands development
Inclusion Equity Council bank. Has wide experience in equity and
debt investments in financial institutions
across over 20 (mostly African) countries
focusing on microfinance and SME
finance, and a track record of adding
strategic value to investee companies.
Dr. Mary Theopista Wenene Qualifications

Non-Executive Director. • PhD in Public Administration &
(Ugandan) Management.
Committee Chairperson Current Appointments

• Audit Committee • Permanent Secretary, Health Service
• Human Resource & Compensation Commission.
Key Experience
Committee Member • Has risen through the ranks from
• Human Resource & Compensation Human Resource Officer to Permanent
• IT and Strategy Secretary.
• She has also made contribution to public
service reforms aimed at improving
performance management and public
service delivery.

Mr. Richard Thil Previous Appointments

Non-Executive Director. • He has served for 18 years as General
(French) Partner and member of the Executive
Committee of an important international
Committee Member investment bank based in Paris and
• Member of the Assets & Liability (ALCO) London.
and Credit Committees
Qualifications
• MS in Public Affairs (Institut d’Etudes
Politiques de Paris)
• Master degree in Law with honors (Paris
Assas)
• Bachelor degree in History with
specialization in international relations
(Paris/Pantheon).
Photo moment:
Board of Directors and Company
Secretary at a recent meeting
Standing (left to right):
• Dr. Simon Kagugube,
• Mr. Caspar Jan Frits Sprokel,
• Assoc. Prof. Ssewanyana Joseph
Kasumba,
• Mr. Bwoch Gustavio Orach
Lujwero
• Mr. Samuel Gachie Kamiti,
• Mr. Richard Thil,
• Mrs. Peninnah Kasule.
Sitting (left to right):
• Dr. Peter Ngategize,
• Dr. Mary Theopista Wenene,
• Prof. John Ddumba Ssentamu,
• Mr. Fabian Kasi


Sustainability Reporting
Statement
Centenary Bank is aware of its role in satisfying short and long term needs of the various stakeholders that it serves
and ensures that they gain outstanding value, through commercial micro finance.
The aim of this report is to provide an objective analysis Value Added Statement
of sustainability issues that are critical to the Bank’s
operations. The report follows guidelines released by As illustrated by the Value Added Statement below, the
the Global Reporting Initiative (GRI), which is a joint Bank is a material contributor in the financial sense to
initiative coalition for Environmentally Responsible various stakeholders. The bank created total wealth of
Economies and the United Nations Environment Shs.351.8billion in 2018 compared to Shs.319.3billion in
Programme. The guidelines have been issued for 2017. This was distributed as follows:
voluntary use by organizations for reporting on the
economic, environment and social diversion of their • Shs 167.6 billion (47.6%) was distributed to
activities, products and services aimed in articulating the employees as remuneration and benefits.
understanding contribution to sustainable developments. • Shs 41.2 billion (11.7%) was allocated to Government
in form of direct and indirect taxes, including charges in
Responsibility for sustainable deferred taxation assets and liabilities.
• Shs 116.3 billion (33.0%) was retained for investment
development in business in order to ensure its profitability and
sustainability contentment into the future.
The Managing Director held the ultimate responsibility
• Shs 25.0 billion (7.7%) is to be distributed to
for sustainability development of the Bank which
shareholders as dividends.
cascaded down to staff through the Executive
Committee (EXCO).
Value Added Statement for the year ended 31 December 2018

2018 2017
Shs’000 % Shs’000 %
Value added
Interest Income 426,844,187 74.9% 382,977,763 74.4%
Trading Income 15,474,427 2.7% 20,320,914 3.9%
Commission,fee income 107,779,495 18.9% 93,139,349 18.1%
Other revenue 18,136,752 3.2% 15,450,623 3.6%
Total Income 568,234,861 511,888,649
Interest paid to depositors 55,258,289 51,117,112
Cost of other services 162,913,825 144,350,062
Wealth Created 351,844,654 319,316,596
Distribution of Wealth
Salaries, wages and other benefits 167,561,119 47.6% 149,827,999 46.9%
Government 41,234,153 11.7% 37,020,976 11.6%
Shareholders - (dividends) 27,024,946 7.7% 25,185,481 7.9%
Retention to support future growth 116,024,436 33.0% 107,282,140 33.6%
Wealth distributed 351,844,654 100% 319,316,596 100%
Retention surplus 80,608,342 75,089,946

Depreciation 35,416,094 32,192,194

Key Stakeholders
We continuously engage with our various stakeholders who are the drivers of our business. Below is a detailed discussion of how the
various stakeholders impact on the value of the company and how relationships with them are managed;
Stakeholder Effect of performance on business Engagement Activities Carried Out

Shareholders
Provide long term capital. The capital base Annual General Meeting (AGM) is held on a yearly basis.
stands at Ushs.643.7 billion making us one of Annual Report is presented at the AGM by the Board of Directors.
most capitalized banks in the Uganda. Audit Opinion is presented to the shareholders by External Auditors.
A consultative meeting is held before the Annual General Meeting
Board of
Directors The Board is responsible for the strategic The Board sits at least four times a year to review company operations and
direction of the company, implementation performance, internal audit and risk management reports and other reports.
of sound internal control systems, approval Training sessions are held for the Board. On an annual basis, strategy review
of company policies, operational and capital sessions attended by the Board of Directors and the management team are held.
expenditure budgets amongst other roles.
Customers
These are the individuals and companies with A call Centre was set up to ensure constant engagement with the customers.
whom the Bank conducts business. CRM Model has been institutionalized with different segments attached to various
staff that visit and follow up customer issues and needs.
Customer days where customers are invited to interact with staff and management
as per detailed customer engagement report below.
Service contact points: 73 Branches, 179 ATMs and 2404 CenteAgents.
A toll free line 08000 200 555 is in place
Employees
The Bank had 2,792 dedicated staff as at 31 The Bank trains its staff to be able to deliver its services. Trainings are provided in
December 2018 who offer services to our a workshop setting and on line training as detailed in the employee empowerment
customers and other stakeholders. The Bank report.
focuses on attracting, recruiting, training The Bank also has team building exercises to engage staff, for example
and developing its staff as well as fairly CenteFusion, aerobics and corporate league.
remunerating and retaining the best talent in
the market.
Regulators
(BOU,NSSF Monitoring of the banks compliance with the Taxes to URA and employee contributions to NSSF were paid as stipulated in the
and URA) applicable laws and regulations. law.
The bank complied with all legal and regulatory The bank provided all bank returns required by Bank of Uganda and complied with
requirements. FIA 2004 (as amended) and prudential regulations.
External
Auditors Ensure that company’s financial results External audits were done by PricewaterhouseCoopers (PWC). Quarterly
reported are a true and fair representation returns were reviewed and submitted to BOU, an interim audit was conducted
of the company operations and that internal in September 2018 and final audit was concluded with an unqualified opinion.
control systems are functioning as designed. A management letter highlighting internal control weaknesses was shared with
management and the board.
Suppliers
Supply inputs for use in business within A list of vetted suppliers is in place. Competitive procurement of goods and
stipulated delivery times. supplies is exercised at all times and fairness is of utmost importance while
awarding supply contract to selected service providers. Cash outflow towards
investing activities during the year 2018 was UGX27.0bn (2017: 26.3bn) whereas
payments to supplier of non-capital goods and services amounted to UGX143.6
bn (2017:140.0bn).
Public
These are our target clients and the Engagement with the public is through all the bank service points. Marketing and
communities in which we operate. Public Relations activities play an engagemnt role too. These include CSR initiatives
(as per detailed CSR report on page 59 to 64), advertisements, talkshows, to
mention but a few.
Customer Experience
Centenary Bank’s strategic theme for 2018 was Leveraging on Technology Driven Solutions for System Optimization
and Efficiency. Under this theme, we focused on enhancing and perfecting alternative channels for our customers.
Our aim was to drive customers to use the Bank’s service channels within their proximity and to reduce the length
of queues in our banking halls. Ultimately, we promoted convenience and increased customer satisfaction.
The Complaints tracking system and escalation matrix was enhanced enabling the Bank to respond to customer
concerns in real-time thereby enhancing their banking experience.
A Queue Management System was introduced, and installed in 33 branches. This innovation not only enabled us to
track the number of customers served vis-a-vis service times but also reduced the average waiting time. In January
2018, we served a total of 117,943 customers with an average wait time of 29 minutes and service time of 2
minutes 18 seconds, whereas in December 2018 we served a total of 373,574 customers with an average wait time
of 36 minutes and service time of 2 minutes 53 seconds. This represents an increase in the number of customers
accessing our services by over 216 %.
Our Main Focus
Enhancing customer experience remains at the core of our service to customers. Through our new and existing
innovative services, we continued to increase convenience and reliability to improve customer satisfaction.
Alternative Channels Summary Performance for New Users
Year Internet Banking (New) School Pay (New) Mobile Banking ATMs Agents
2016 - 92 133,464 172 -
2017 1,381 582 138,571 172 -
2018 2,559 975 701,801 179 2404
Key Milestones.
1. Internet banking: As a result of better internet experience, customer enrolments increased by 85.3% from 1,381 to
2,559.
2. School Pay: The number of schools using our School Pay platform grew by 67% from 582 to 975. Consequently, queues
in our banking halls reduced during school fees period.
3. CenteMobile: Our mobile banking platform grew by 406% resulting into 563,230 new enrolments.
4. ATMs: Our ATM outreach increased by 5% from 172 to181.
5. Agent Banking: Under our Financial Inclusion agenda, the introduction of Agent banking in 2018 registered a growth of
2,404 agents spread out across the country.

Alternative Channels Summary Performance
Trend Analysis of Customer Feedback Received in 2018
Categorization Call Centre Contact Centre Branch Suggestion Boxes Total

Inquiries 229,614 3,336 138 233,088
Complaints 127,062 2,517 8,879 138,458
Compliments 2,413 - 329 2,742
Suggestions - 3 136 139
Total 359,089 5,856 9,482 374,427
Our Customer Satisfaction Index was 87%, while the Loyalty Index closed at 70% and Net promoter score at 69%.
In general, during the year, we recorded a 6% improvement in our scores from the last measurement of our
Customer Service Index.
This is a good indicator of the Bank’s efforts in increasing our customer experience and satisfaction through new and
expanded digital channels that are complimenting physical contact
• Our Customers preferred giving feedback through our digital Call Centre platforms rather than visit our branches like in the
previous years. These platforms include;
1. Bank email info@centenarybank.co.ug

2. Our social media pages @Centenary bank both on twitter and Facebook
3. Toll-free line 0800200555
• 62 % of our customers sought information than complaints in 2018.
Comparative Analysis of Customer Service Feedback engagement from 2015-2018
Year Inquiries Suggestions Complaints Compliments Totals

2015 75,369 CRM system not yet acquired 48,016 530 123,915
2018 233,088 139 138,458 2,742 374,427

Growth in Products and Services

2018 was another game-changing and transformational year for Our Bank and customers. Our focus on using technology
for growth was appropriate and timely.
We launched digital solutions that were aimed at deepening financial inclusion and increasing access to affordable
microfinance services and products in the country. The digital solutions launched during the year include; CenteAgent
Banking, CenteVisa card, and CenteMobile Loans.
2,404
Agents Enrolled
CenteAgent Banking
Reaching the unbanked and making banking more convenient remain key for Centenary Bank. Agent
banking was rolled out countrywide and by 31 December 2018, 2,404 agents had enrolled, been
approved by the Central Bank and given necessary training to execute the service. Customers are able to
self-register using either smart phones or USSD phone platforms.
In addition to carrying out transactions ranging from Cash Deposits, Account Opening and Loan Application
Initiations, School fees collection, Third party payments, and even Customer to non-customer payments
through the Cash Voucher.
By year-end, agent banking was contributing 5% of the Bank’s total transactions and we see more
customers getting familiar with the service.

658,714
Customers Enrolled
CenteVisa Card
Centenary Bank unveiled the CenteVISA Debit Card, to promote convenient access to financial services and enhance
Card security. Customers are currently enjoying the globally accepted card via Automated Teller Machines (ATM’s),
online payment platforms and Points of Sale machines worldwide, wherever Visa services have been enabled. More
confidence is exuded when using the EMV enabled card, because of its Chip and Pin technology, which enhances
security. The service was gladly embraced and as at 31 December 2018, we had 658,714 customers who had
enrolled for Visa, surpassing the year’s target. The Bank has also started on the road map for rolling out Master Card
and China Union Pay schemes.
PAY GET A
UMEME LOAN TRANSFER
PAY MONEY
DSTV
Over
38,000
BUY
PAY GROCERIES
GOTV
Customers Accessed
CenteMobile Loans
PAY DIAL SEND
MONEY
*211#
STARTIMES
PAY
SCHOOL FEES
PAY
WATER
CenteMobile Loans
ACCOUNT
PAY BALANCE
MERCHANTS
In 2018 Our Bank upgraded the CenteMobile platform
to offer instant and flexible CenteMobile loans to
customers. The launch of the CenteMobile loan meant
WITHDRAW
MONEY
MINI that customers can at any time borrow money from
STATEMENT
Shs.5,000 to Shs.2,000,000 using the CenteMobile
platform. The service is quite convenient, fast, with no
need for paperwork hence targeting to solve quick and
urgent needs of customers. By the end of 2018, 94,035
customers had accessed CenteMobile Loans.
Going forward, Centenary Bank shall implement an Omni-channels strategy which aims at optimal utilization of the above services
including Online banking. This will enable us to increase financial inclusion.
More information about all our products and services can be found on www.centenarybank.co.ug.

Human Resource Indicators, 31 December 2018

The Bank is an equal opportunity employer of choice and ensures the business growth is
effectively supported with that right talent, calibre and complement of staff resources.
Total Headcount
Centenary is committed to creating value-adding employment opportunities. As at 31 December
2018 Centenary Bank was the largest employer in Uganda’s Banking Sector with positive socio-
2,792 economic impact. Total headcount was 2,792 staff of whom 334 joined the Bank in 2018
Full time employees compared to 361 staff in 2017.
The average age of staff slightly increased from 34.0 to 34.2 years as at 31 December 2018.
The average period of service across the board improved to 6.5 years in 2018 from 6.4 years in
2017. Female constituted 46.1% while the male comprised 53.9% of the total staff population.
34.2yrs
Average Age
Approximately 92.2% were University graduates with at least a basic degree and above
6.5yrs
Service across
compared to 91.7% (2,240) a year ago.
Employee empowerment and engagement

92.2% University graduates with at
least a basic degree and above Employee Empowerment is a philosophy associated with real mutual, reciprocal benefits for
the Bank. It is the underlying principle of empowering employees with the functional freedom,
flexibility, authority and power to make diligent decisions as well as solve work-related problems
Staff Management in an integrated manner. Clear understanding of and effective response to our majorly youthful
employee dynamic needs and aspirations remain key drivers of the Bank’s human resource
strategic agenda and business success. This philosophy leaves an employee feeling energized,
motivated, and capable and determined to make the organization successful.
Employee Engagement on the other hand, is the extent to which people enjoy and believe
in what they do and feel valued for doing it. People want to be recognized and rewarded for
their efforts and contribution. An engaged employee is one who is emotionally attached; fully
absorbed by and enthusiastic about their work and so voluntarily take positive action to further
70.3%
Male
29.7% Female
the organization’s reputation and interests.
Employee empowerment and engagement in an organization manifests itself in increased staff

satisfaction, high productivity, quality customer service, high talent retention, reduced costs,
overall improved bottom-line, hence Institutional competitive advantage.
Centenary Bank team
celebrates overall Gold
win during the Annual
Bankers Gala, 2018

To attain the goals above, the Bank empowers and engages its employees in Reward and Recognition
several ways as highlighted below: -
Programs
Empirical HR Strategies Reward and recognition is top of mind
at the Bank. An engaged employee
Regular organisation Climate/staff engagement surveys, an online avenue, has wants to feel valued for their relative
helped top management in the bank to promptly analyse and track changes contribution to the Bank’s business.
in staffs’ perception over time. It has further enabled management to assess The Bank has created a ‘sense of
empirically whether the bank is making progress in the satisfaction of its internal worth’ environment in various forms
customers, consolidating the achievements gained over time, and overcoming its through a market based competitive
challenges related to staff motivation, satisfaction and welfare. The information compensation, merit awards, sports
is highly valued and contributes positively towards HR strategic planning in the and team building models and wellness
Bank. Specifically, it is utilised to develop pragmatic and tailored HR strategies programs to mention but a few. The
that help improve the work environment and elicit high levels of staff satisfaction Bank uses one of the best evaluation
and productivity. methods to establish the relative
worth of the Jobs. The market surveys
Periodic Staff Engagement Surveys conducted every two years to deliver
a competitive reward policy and
The 2018 mini climate survey, there was an overall improvement in the appropriately inform strategy. Bonuses
satisfaction levels from 75.6% (2017) to 76.2% rating on a growth path trend are awarded based on both team and
over the last 6 years. These surveys employ diverse climate dimensions namely individual contribution.
Supervision, Knowledge of Bank Core Values, Internal Communication/Feedback,
Performance & Feedback, Learning & Development, Compensation and Benefits Occupational Safety &
and Occupational Health & Safety, among others. Overall satisfaction levels
have progressively improved since 2011, implying that the Bank has maintained
Health (OSH)
high staff satisfaction levels over the period and is intent on consolidating the
Our staff face varying forms of potential
achievement yet further.
occupational and health hazard/risks
while carrying out the Bank business.
The table below shows a comparison of the Climate Surveys results between
The Bank has hence taken steps to
2017 and 2018
proactively mitigate and properly
manage these risks. OSH committees
Climate Dimension 2018 2017 Remarks are functional in line with OSH Act;
Min-survey Ratings other management committees
Supervision 77.0% 77.0% No Change such as Operational Risk Committee
Knowledge of Banks core 82.4% 79.6% Improved effectively compliments their roles. All
values Bank Staff are required to undertake
an online OSH course, which they
Internal communication/ 77.2% 75.2% Improved
feedback had to pass to be certified. This has
ensured that throughout the year
Performance & feedback 73.0% 77.0% Declined
there were no negative incidences
Knowledge Management 74.6% 73.8% Improved reported. Furthermore, to have a
( Learning & Development) healthy and well-nourished team, the
Compensation & Benefits 66.6% Low bank staff enjoy a well-balanced diet of
subsidised lunch daily.
Occupational Health & Safety 81.8% High
Overall Satisfaction 76.2% 75.6 Improved
The Bank further provides engagement avenues to its employees through

which they express their thoughts, feelings, concerns and contribute ideas on
various issues that help to improve bank business and/or enhance the Bank’s
plans, strategies, projects and programmes. These are mainly Email, Newsletter,
meetings, helpdesks, sports, management and staff forums (Cente Fusion) and
Branch visits.

Chaplaincy Activities/Programs Staff Provident Fund

To support building and reinforcement of the moral and The Bank continues to support and encourage staff to plan and save for the
spiritual aspects of the employees, Weekly holy Mass is future under a staff provident fund, besides the monthly NSSF contributions. The
conducted at Mapeera House Chapel and across the 72 Staff Defined Contributory scheme is in place with a Board of Trustees. A new
Centenary Bank Branch network. Independent Board of Trustee Chairperson for the scheme was appointed in the
year. The Trust Deed and Rules were reviewed and aligned to the URBRA Policy
The Chaplaincy organized pilgrimages to Kibeho and guidelines.
(Rwanda) and the 2018 Annual Corporate pilgrimage to
Namugongo shrine on the 25th May 2018. Learning & Development undertakings
The Chaplaincy through its annual out-reach programs, The Bank continues to empower staff through effectively bridging their
Bank staff extended financial and material support to competence gaps on an ongoing basis. In 2018, UGX: 3BN was utilised to
the Good Shepherd Special Needs School in Kabarole train and develop staff through both local and international trainings. The Bank
District. carried out various Bank projects specific trainings, including VISA/ATM Card,
Agent Banking, Biometrics, and other generic courses. The staff enrolment and
Staff Wellness and Team Building completion of e-learning programs was 87%. Staff acquired knowledge, skills to
enable better delivery on their jobs and enabled them to compete effectively for
As part of our Wellness program, the sports team-building higher responsibilities within the Bank.
concept focuses on delivering occupational benefits to
the Bank. Key among them are enhancement of team Talent Management/Succession Planning
working/networking, staff motivation, better health,
improved job performance, enthusiasm for institutional
goals, talent identification, improved organization for The Bank’s people management philosophy is to build its talent pools to support
external engagements and furthering Bank’s visibility. In the dynamic Bank growth. Most staff promotions in the Bank emanate from
2018, we engaged in a number of sports events, some internal sourcing and the succession pool. The Branch leadership capability
are highlighted below: assessment was conducted across all Branches in the Bank for all Supervisory
positions. The capability assessment results are utilized for staff career growth and
• The 2018 Annual Bankers’ Sports Gala; the Bank development within the Bank.
emerged overall winner for a second year in a row
with a trophy in Athletics and a bronze made on Performance management
Basketball.
The Bank is keen on building a high-performance culture across its business.
• The 2018 Corporate League; the Bank emerged Performance management is implemented through two approaches; the Critical
4th out of 46 competing companies. The Bank Job Function (CJF) which in linked to the day to day activities of the staff and the
won trophies in Volleyball, Football and a Bronze Balanced Score Card (BSC) which is aligned to the Bank’s Key Strategic objectives
medal in Pool. for the year. The Bank through its Business Partnering model aims at ensuring
that all staff know promptly what they must deliver and how they were to be
• The Bank also participated and emerged Overall appraised and rewarded for their achievements.
Winners in the Mbarara Corporate league.
The Bank held sessions to sensitize staff on the Balanced Score Card and the
• Aerobics: Head office and various Branches held Performance Management process. Remedial actions were instituted in cases
weekly sessions geared towards enhancing staff where performance was rated poor.
wellness and fitness. Processional Teams were
engaged to run Health talks intended to address Staff Retention statistics and Attrition trend
individual and team health concerns. Health club
memberships is extended to all senior staff; from The Bank registered high levels of staff retention of 93.5% in 2018 compared to
branch Manager level and above. 95.2% in 2017. Management continues to lay greater emphasis on crafting and
implementing appropriate staff retention strategies for both the critical talent as
Staff Management
well as the support job roles particularly through proactive succession planning
initiatives.
76.2
Satisfaction Levels
The annual staff turnover rate slightly increased to 6.5% in 2018 from 4.8% in
2017, which was slightly above the Bank’s annual target threshold of <6% and
below the Banking Sector industry average of approx. 8-10%. During the year
93.5%
Staff Retention
Dismissals/Terminations topped the list of exists as the Bank has zero tolerance
to fraudulent behaviour.

The 6-year picture is highlighted below:
Attrition Trends 2013 - 2018

9.0%
8.0%
7.0%
7.0%
6.0%
5.2% 6.5%
5.0%
4.3% 4.1% 4.8%
4.0%
3.0%
2.0%
1.0%
0.0%
2013 2014 2015 2016 2017 2018
Attrition
As an equal opportunity employer of choice, the Bank continues to enjoy an

Learning & Development outstanding rate of retention of critical talent. Eligibility for various positions/roles is
appropriately aligned to open competitive merit factors.
UGX3
Billion Budget The Bank is committed to maintaining the highest human resource management
Allocation
practice standards for strategic retention and optimal utilisation of its human resource
87%
Staff acquired
factor/asset (critical Talent) for excellent Institutional performance, growth and long-
term sustainability.
knowledge & skills
Senior Management gender diversity ratio stood at 70.3% male and 29.7% female
during the 2018
Table below shows the Senior Management Diversity over the last 3 years.
Position Title 2018 2017 2016

Male Female Total Male Female Total Male Female Total
Executive Directors 2 - 2 2 - 2 2 - 2
General Managers 11 3 14 8 3 11 7 3 10
Chief Managers 15 8 23 16 7 23 15 6 21
Head Office Managers 50 24 74 47 25 72 49 28 77
Branch Managers 51 20 71 51 18 69 52 13 65
Total 129 55 184 124 53 177 125 50 175

Corporate Social
Responsibility (CSR)
Our Corporate Social Responsibility initiatives expanded in 2018 majorly in financial literacy and bridging the cancer gap.
The later spread further around the country while the former introduced a new initiative, ‘anti-fraud campaign.’
CSR outreach Increased our investment

from from
27%
growth in 2018
22M people
in 2017
to 28M people
4%
increase in 2018
Shs. 1.06bn
in 2017
to Shs.1.1bn
in 2018 in 2018
We invested more, in line with our policy of devoting 1% of the previous year’s profit after tax
into Corporate Social Responsibility.
2018 CSR
Objectives Outcomes
01 Increase
awareness
of Centenary Bank’s
Awareness of Centenary Bank’s CSR
activities grew by 20%.
The main channel that supported this was
CSR activities by at television.
least 5%.
02 Grow staff
participation in
CSR activities
Staff participation in CSR activities grew by
18.7% from 1600 in 2017 to 1900. Staff enjoyed
being part of community activities where their
by 10% branches are located and being part of “bridging
the cancer gap” activities
03 Increase reach
by at least 10% CSR reach grew by 28%.
The anti-fraud campaign was key in increasing
reach countrywide.

8 million
OVER
FINANCIAL LITERACY
s
ed message
people view ti-fraud
from th e an
1,600 SME owners and managers were trained in nine districts.
campaign.
Youth
undergo
Training
In 2018, we introduced a new dimension

to our financial literacy programme. This
was the Anti–fraud campaign which was
supported by our partners aBi Development.
The campaign was run for a period of three
months on three television stations. The
objective of the campaign was to alert
customers and the public about the on-going
fraud in the industry and how they can avoid
financial fraud at transaction touch points
such as ATMs, mobile banking platforms, and Furthermore, we continued our financial literacy classroom training sessions targeting
during the loan acquisition and repayment SMEs, VSLAs, SACCOs and the Catholic dioceses in Uganda. Our investment in
process. Over 8 million people, customers financial literacy grew by 75% to Shs.128 million in 2018 from Shs.73 million in 2017.
and non-customers viewed the messages
which was one of the reasons fraud cases As a result, the following was achieved:
reduced within the bank to 14% by 31
December 2018. • Up to 1,600 SME owners and managers were trained in nine districts namely;
Mbale, Soroti, Lira, Gulu, Arua, Masaka, Mbarara, Pader and Kabale.
• The key areas of training included; financial management, loan utilization,
developing a saving culture, making financial decisions, running family businesses
and usage of bank products.
• 495 clergy were trained in starting up sustainable projects, resource mobilisation,
revenue generation and financial management.
• 712 Village Savings and Loan Associations (VSLA) and SACCO members
where trained in five districts namely; Mukono, Fort portal, Kasese, Rukungiri &
Kampala.
Financial literacy is one of our strategic CSR innitiatives because it equips customers
and the public with proper financial management which is key in managing their
personal finances, credit, banking and businesses. Our appreciation goes to all our
partners with whom we strive to see that change is realised.

36%bridging th
e
BRIDGING THE CANCER GAP
increase in tivities
er ga p ac
canc
Our investment in cancer awareness grew by 19% from
Shs.178 million in 2017 to Shs.212 million in 2018
Mbarara Branch:
We continue to scale
out cancer run across
the regions
This is our flagship Corporate Social

Responsibility initiative because of its great
importance in raising awareness about
cancer. In 2018, our investment in cancer
awareness grew by 19% from Shs.178 • The Rotary Family Health days, which impacted over 500,000 participants.
million in 2017 to Shs.212 million in 2018. • Participation in country-wide sensitisation activities where talks were given and literature
Programme activities increased by 36% shared on how breast and cervical cancer can be prevented and tested.
from 55 activities in 2017 to 75 activities
in 2018 executed in 32 towns. Key among Our sincere gratitude goes to our partners, Rotary District 9211, with whom we have
these, was: implemented this program for the last eight years. We remain steady fast in the fight against
cancer in Uganda and supporting associated initiatives in our quest to impact more people.
• The Rotary District Conference which
attracted over 2,000 participants from
Mbale Branch:
Uganda, East Africa and the rest of the
Participants at the 2018 cancer run.
world.
• We also participated in the annual
Rotary Cancer Run which attracted
over 30,000 participants,

28% cal
LOCAL COMMUNITY ACTIVITIES
growth of lo ities
activ
community
We are passionate about people and our communities.
Donations to Good Sheperd home of vulnerable children and the disabled
Centenary Bank is passionate about people and our communities. They are part of us and we are part of them. Our
synergies in various projects lead to improved lives. In 2018, our investment in community activities grew by 51%
from 214 in 2017 to 324 in 2018. Activities grew by 28% from 189 in 2017 to 243 in 2018.
These activities included; support to orphanages, construction of school blocks, projects for the disabled, proving
hospital equipment, treatment for children, among others. We continue to see many opportunities to impact our
communities and remain committed to embracing them.

137 ities
THE SOCIAL MISSION OF
THE CHURCH
church activ
supported
e.
countrywid
We remain committed to doing more with the church.
5m handed over to develop Wipolo Uganda Martyrs shrine
The church has always been and will always be a major stakeholder in our CSR drive. In 2018, we supported church
programs including; construction, renovation, conferences and various events. In total we supported 137 activities
countrywide. We remain committed to doing more in 2019.

10,000 litrewater tank handed over to Kasese Secondary School for water harvesting
ENVIRONMENT
We believe that when we save the environment,
we save people and the economy.
Centenary Bank adheres to the triple-bottom line principle and inevitably takes strides to preserve the environment. We
reduced the amount of carbon emissions released by generators in our branches by increasing the number of generators
with low capacity (15 – 60kva) by 30% from 20 to 26 and consequently reducing the ones of higher capacity (15-150kva).
Our solar loan grew by over 100% from 41cases worth Shs.137 million to 104 cases worth Shs.996 million. It is
executed with a couple of partners like; Uganda Energy Credit Capitalization Company, USAID, Village Power, Power
Trust & Solar Today. We made a total of 82 new connections to the national grid amounting to Shs.300m through our
power connection loan and supported use of energy saving stoves.
We promoted usage of technology for communication among staff than printing paper. This deliberate stance saw us
reduce paper usage in 2018 by 34.6%. In 2019, we plan to use the print management software to improve paper
management.
Investments in community activities to preserve the environment continued. These included; donation of water harvesting
tanks, tree planting, donation of waste collection bins & environmental management sensitisation.

Social Performance
Management (SPM)
In our quest to enhance sustainability, we adopted a new initiative in 2018, the Social Performance Management (SPM).
Through this initiative, we aim to create more social value for our stakeholders, mainly customers and employees.
SPM refers to the effective translation of an institution’s mission into practice, in line with accepted social values. SPM sits perfectly
with our mission which is: To provide appropriate financial services especially microfinance to all people, particularly in rural areas, in a
sustainable manner and in accordance with the law. Our partners, East African Development Bank (EADB) and AYANI have supported
this exercise from its inception in June 2018.
Centenary Bank has taken strides in embracing strategies that allign our services to the mission and one of them is joining the Global
Alliance for Banking on Values (GABV). As members of GABV, we agree to banking on values principles that focus on delivering
sustainable economis, social and environmental developmnet.
Objectives of the SPM initiative:
To increase To identify areas To stimulate To increase our

Centenary Bank’s of weaker SPM and support the capacity to put in
understanding of practices that need governance and place effective SPM
SPM best practices. to be addressed by management and client protection
the Bank. commitment to practices.
achieve social goals.
2018 Outcomes:
1. An audit was done to assess our current SPM Practices 2. An action plan was drawn to address gaps from the audit,
using the SP14 based on the Universal Standards of Social with the ultimate aim of strengthening the score. The
Performance Management (USSPM). Each standard was action plan will give guidance to which activities need to
score to our performance, and the Bank’s overall score support achievement of the overall SPM objectives.
was 71%.
CLIENT PROTECTION STANDARDS

UNIVERSAL STANDARDS 71% (LIGHT ASSESSMENT)
Appropriate Product
1 Define and monitor social goals 48% Design and Delivery
100%
80%
Mechanism for Prevention of
2 Commitment to social goals 54%
60% Overindebtedness
Complaints Resolution
40%
3 Design products that meet 66% 20%
clients’ needs 0%
Privacy of
Transparency
Client Data
4 Treat clients responsibly 78%
Fair and Respectful

5 Treat employees responsibly 97% Treatment of Clients Responsible Pricing
Balance social and financial

6 perfomance
81% This graph represents scores which does not include the
compliance criteria for a complete Client Protection Certification
Way Forward;
SPM shall remain a fundamental part of how we do what we do at Centenary Bank. In 2019, we plan to have every staff acquire knowledge
and understanding of SPM and appreciate what their roles will be in accomplishing it. Execution of plans for each universal standard will be
a key activity. Today, Centenary Bank is one of the few financial institutions in East Africa implementing SPM. We hope our success story
will inspire others across the Banking Industry to adopt it to improve their social performance in delivering financial services to customers,
stakeholders and employers in the region.

Environmental and Social

Management (ESM)
In 2015, Centenary Bank in partnership with the German Development Bank (KfW) and the East African
Development Bank (EADB) launched the Agrifinance Enhancement Program (AEP) in Uganda. The essential
condition for this partnership was the global objective of improving the access to sustainable and demand driven
financial services for the rural population and micro, small medium enterprises (MSME in Rural Uganda).
This partnership constituted a cocktail of a credit • Have better management of banks/clients facing liability claims.
lines for on-lending to Agriculture clients operating • Fulfill the demand by strategic partners and investors who require
enterprises in rural areas and Technical Assistance (TA). the bank to demonstrate its involvement in preserving social and
The later included consultancy services to support environmental values while extending credit.
successful implementation of the Environmental • To increased value to its stakeholders.
Social management project. • To improve the non-performing loan experience by nipping bad
performance in the bud through more proactive assessments
How ESM related with the Bank’s
This is expected to deliver the following benefits for the Bank:
strategy/ focus area
• Increase brand equity. Create good will in the communities that we
Centenary Bank’s mission is to provide appropriate serve. This leads to better brand value and better brand perception.
financial services especially Microfinance to all • Helps in building consumer loyalty. A social mission creates a good
people. Therefore, enshrining environmental social brand personality that attracts more clients and investors especially
management in its operations will ensure that the among today’s informed customers.
economic development supported through lending • Helps in creating, recruiting and retaining good talent. In a study
activities, contributes to the environmental and done by Deloitte, it was discovered that 70% of the millennials
social advancement of companies, individuals and admitted that they were more loyal to companies that had more
communities. CSR activities.
• In addition, it helps in driving product and service innovation.
As is expected of a Bank that subscribes to Global • Last but not least, it increases opportunities for government tax and
Alliance for Banking on Values, our intention subsidy incentives for companies that are more socially involved in
is to strengthen the Triple Bottom Line (TBL) their communities.
principle in the institution’s DNA. TBL is a concept
which broadens a business’ focus on the financial
bottom line to include; social and environmental Status of implementation
considerations. A TBL measures a company’s degree
of social responsibility, its economic value and its In the year 2018 efforts were made to build assessment forms, an ESM
environmental impact. Policy and an exclusion list, as critical tools for the seamless implementation
of the project. For example, the exclusion list bars us from financing
Since today’s business is no longer about profits only, activities such as;
this concept helps to create better business value by
placing people and planet at the heart of the Bank’s • Production or trade in any product or activity deemed illegal under
lending activities. Ugandan laws or regulations or international conventions and
agreements, or subject to international bans.
• Production or trade in weapons and munitions.
The case for implementing ESM in the • Production or trade in alcoholic beverages (excluding beer and
Bank wine).
• Production or trade in tobacco.
The Bank found it worthwhile to implement • Gambling, casinos and equivalent enterprises.
environmental social management, because of the • Production or trade in radioactive materials (except of medical
reasons below: equipment, quality control equipment).
• Production or trade in unbounded asbestos fibers
• To increase its credibility and emphasize its
known reputation for transforming life for rural This project was piloted in our Mukono and Jinja branches for the two
dwellers. months and will run for six months. Feedback obtained during this phase
• To improve the management of risk and thus will be used to improve the exclusion lists and assessments forms prior to
lessen provisions while improving returns. rolling out ESM to the entire bank.


Financial Highlights
Financial Perfomance Trend 2018 2017 2016 2015 2014 2013

Shs’M Shs’M Shs’M Shs’M Shs’M Shs’M
Total Assets 3,170,832 2,706,280 2,315,749 1,974,400 1,636,923 1,451,040
Loans and Advances to Customers 1,529,200 1,335,305 1,247,703 1,020,227 830,932 672,307
Customer Deposits 2,282,236 1,911,138 1,626,614 1,380,194 1,175,116 965,891
Equity 643,690 557,781 485,017 400,625 317,501 253,337
Total Revenue 568,235 511,889 463,857 393,901 324,299 275,579
Net Results after tax 107,633 100,275 109,909 101,601 73,817 58,006
ROA 3.7% 4.0% 5.1% 5.6% 4.8% 4.5%
ROE 17.9% 19.2% 24.8% 28.3% 25.9% 25.3%
Growth
Total Assets 464,552 390,531 341,349 337,477 185,883 328,744
Loans and Advances to Customers 193,895 87,602 227,475 189,295 158,625 115,347
Customer Deposits 371,098 284,524 246,420 205,078 209,224 147,412
Equity 85,909 72,764 84,392 83,124 64,164 47,753
Total Revenue 56,346 48,032 69,956 69,602 48,720 35,119
Net Results after tax 7,358 (9,633) 8,308 27,785 15,811 1,989

% Growth
Total Assets 17.2% 16.9% 17.3% 20.6% 12.8% 29.3%
Loans and Advances to Customers 14.5% 7.0% 22.3% 22.8% 23.6% 20.7%
Customer Deposits 19.4% 17.5% 17.9% 17.5% 21.7% 18.0%
Equity 15.4% 15.0% 21.1% 26.2% 25.3% 23.2%
Total Revenue 11.0% 10.4% 17.8% 21.5% 17.7% 14.6%
Net Results after tax 7.3% (8.8%) 8.2% 37.6% 27.3% 3.6%
Performance Trend-Key Indicators

3,500,000 30.0%
3,170,892
3,000,000
2,706,280 25.0%
2,500,000 2,315,749
20.0%
1,974,400 Total Assets
2,000,000
1,636,923 Customer Deposits
15.0%
1,451,040 Loans and Advances to Customers
1,500,000
10.0% Equity
1,000,000
ROA
500,000 5.0% ROE
- 0.0%
2013 2014 2015 2016 2017 2018

FINANCIAL REVIEW (continued...)
Budget Performance
Actual 2018 Budget 2018 Actual 2017 Budget 2017 Variance %

Shs.‘000’ Shs.‘000’ Shs.‘000’ Shs.‘000’ +/-
Financial data
Financial data
Total assets 3,170,832,057 3,035,511,008 2,706,280,070 2,698,491,838 4.5
Shareholders’ funds 643,690,454 636,484,415 557,781,145 605,865,126 1.1
Total customer deposit 2,282,235,607 2,150,895,809 1,911,137,891 1,828,751,833 6.1
Net loans and advances 1,529,199,629 1,498,158,876 1,335,304,927 1,470,785,046 2.1
Total income 568,234,861 598,506,895 514,783,770 556,718,377 (5.1)
Total expenses 419,367,420 453,036,231 377,487,367 389,338,151 (7.4)
Profit before income tax 148,867,441 145,470,664 137,296,403 167,380,226 2.3
Profit after income tax 107,633,288 107,818,806 100,275,428 122,191,326 (0.2)
Key performance ratios

Cost to income ratio 73.9% 75.7% 73.3% 69.9% (1.9)
Return on assets 3.7% 3.8% 4.0% 4.8% (0.1)
Return on equity 17.9% 17.4% 19.2% 22.9% 0.5
Lending ratio 67.00% 72.1% 69.9% 72.1% (5.1)
Total expenses to loan ratio 27.54% 26.5% 28.3% 26.5% 0.9
Capital adequacy ratio (Tier 2) 30.40% 24.0% 30.1% 24.0% 6.4
Non-financial data
Number of Accounts 1,639,602 2,050,800 1,493,554 1,997,000 (20.1)
Number of ATMs 179 182 172 176 (1.6)
Number of Branches 73 75 69 69 (2.7)
Agents 2404 3000 - - (19.9)

Statement of Comprehensive Income Analysis Non-interest income:
The Bank’s total income is comprised of interest income, non The Bank’s non-interest income arose from ledger fees, commitment
interest income and trading income. Total income went up by Shs fees, commisions on bank serivces and recovery of written off loan
56.3billion in 2018 (2017:48.0 billion), representing a growth of receivable.
11.0% in comparision to 10.4% in 2017. The growth in 2018 was
mainly attributed to the the growth in business that resulted in a higher Non-interest income rose to Shs 125.9 billion (2017: Shs108.6
growth in interest income. billion) following growth in fee and commission income. This growth
was mainly driven by higher transaction volumes initiated through
customer interactions with the branches, ATM network and Agents.
Net interest income
The trend of the Bank’s non-interest income as per percentage of a
Net interest income, which is the margin between interest income total operating income over the last seven years is presented in the
and interest expense, remained the main source of income for the graph below:
Bank. Net interest income for the year 2018 was Shs 371.6 billion
(2017: Shs 331.9billion) and it represents 64.5% of operating income NON INTEREST INCOME
(2017: 64.8%). 140,000 30.0
130,000
120,000
2018 2017 25.0
110,000
% %
100,000
Growth in net interest income 12.0 6.5 20.0
90,000
Shs Million
80,000
Net interest margin 15.9 17.4
70,000 15.0
60,000
The growth in net interest income was mainly attributed to a higher 50,000 10.0
growth in the loan book and invetment in short-term placements. 40,000
30,000
5.0
The Bank’s net interest margin in 2018 closed at 15.9% (2016: 20,000
10,000
17.4%). The decline in net interest margin was mainly attributed to a
-
drop in yields on government securities 2012 2013 2014 2015 2016 2017 2018
0.0
Years
Non Interest Income Non Interest Income as a %
of Operation Income
NET INTEREST INCOME
400,000 Net Trading income

360,000
320,000
The bank’s net trading income comprises of income from treasury
bills and bonds held for trading plus income from trading in foreign
Shs Million
280,000
currencies. This closed at Shs.15.5 billion in the year 2018 (2017:
240,000
Shs.20.3 billion) recording a decline of growth of 23.8%. The drop
200,000 in the trading income was mainly as a result of drop in yields in the
160,000 trading book and an increase in the fair value loss.
120,000
NET TRADING INCOME
80,000
40,000
20,321
- 20,000
2012 2013 2014 2015 2016 2017 2018
Years
16,293
Net Interest Income 15,474
15,000
12,158
Shs Million
10,000
7,769
6,933 7,021
5,000
-
2012 2013 2014 2015 2016 2017 2018
Years

Total expenses and Total Income Credit impairment charges:

2018 2017
% % 2018 2017
Growth in total operating expense 12.6 20.2
Percentage change in the (79.4) 85.9
Growth in Total Income 11.0 10.4 impairment charge
Cost-to-income ratio 73.2 73.8 Non performing assets as % 2.6 4.5

of gross loans and advances
Total expenses increased by 12.0% against income growth of 11.0%
(2017:18.5% against income growth of 10.4%) as a result the cost Credit impairment as % 1.0 2.0
to income ratio increased from 73.2% to 73.8%. The bank took of gross loans and advances
on a VISA project in order to secure customer data through ATM
and online banking. In addition the bank incurred high start up costs Non-performing loans 39,802 62,230
for Agent banking in order to bring banking services closer to the
people. The operatinal costs of both Agents set up and Visa for the The bank took measures in monitoring the performance of loans
year 2018 were Shs.11.6bn (See note 12). These involved issuing of that resulted to a classification of few loans under stage 3.
free visa cards to all existing clients. This contributed to the increase
in the cost to income ratio.
Statement of Financial Position Analysis
INCOME AND OPERATING EXPENSES
550,000 76.0
The Bank’s total assets grew to Shs.3,171 billion recording a growth
rate of 17.2% in 2018 from Shs.2,706 billion in 2017(16.9%) mainly
500,000
450,000
74.0 as a result of growth in deposits that enabled the bank to increase its
400,000 72.0 investments and loans.
350,000 70.0
Shs Million
300,000 68.0 Investment in government securities accounted for 41% of the

250,000 increase in assets while loans and advances accounted for 41.7%
200,000 66.0 of the increase.
150,000 64.0
100,000
Customer deposits consist of current accounts, savings accounts and
50,000 62.0 time deposits. These deposits grew by 19.4% (2017: 17.5%) to Shs
-
2,282.2 billion in 2018 from Shs 1,911.1 billion in 2017. The bank
60.0
2012 2013 2014 2015 2016 2017 2018 has maintained a strong brand that has led to customer growth.
Years
Total Income Operating expenses Cost/Income Ratio Agent banking was one of the major driver that led to the growth
in deposits.
Credit impairment charges
DEPOSITS AND LOANS
The charge for credit losses for the year 2018 (excluding interest 2,400,000
in suspense) declined by 39.1% to Shs 16.0 billion (2017:27.9 2,200,000
2,000,000
billion). This charge to the statement of comprehensive income
Shs Million
1,800,000
as a percentage of gross loans and advances decreased to 1.0% 1,600,000
(2017: 2.0%). The decline in the impairment charge was mainly as 1,400,000
a result of a drop in the non-performing assets. In addition, during 1,200,000
the year the bank adopted IFRS 9 and ECL approach to impairment 1,000,000
800,000
computation. Non-perfoming assets as a percentange of gross loans 600,000
reduced from 4.5% in 2017 to 2.6% in 2018 (2018: Shs 39.8 400,000
billion; 2017 Shs. 62.2 billion) 200,000
2012 2013 2014 2015 2016 2017 2018

CREDIT LOSS AS A% OF GROSS LOANS AND ADVANCES
Years
5.0 Deposits Loans
4.5
4.0 Loan Composition
3.5
% 3.0 The bank continues to operate as per its mission of providing financial
2.5 services, especially microfinance service to all people in Uganda
2.0 particularly in rural areas. For the year 2018, the microfinance
1.5 segment contributed 55.9% of the loans and advances (2017:
1.0 56.7%). The number of borrowers increased from 193,612 in 2017
0.5 to 217,612 in 2018.
0.0
2012 2013 2014 2015 2016 2017 2018
Years
Bs Imapirment/Total Loans NPL/Total Loans Credit Loss Ratio

Funding mix
LOAN MIX
There was no major change in the funding mix in
2018 compared to the year 2017. Saving deposits
remained the main source of funding. Savings
2018
deposits represented 45.6% of total funding in 2018
compared to 45.4% in 2017.
2017
2016
FUNDING MIX 2018

2015
3.8%
4.0%
2014 20.3%
2013 6.0%
2012
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 20.4%
Finance Leases Staff Loans Commercial Loans Micro finance Loans

45.6%
Deposit composition
Current Assets
The number of depositors increased to 1,639,602 in 2018 from 1,493,554 in 2017. Savings Accounts
This came as a result of increased market efforts to bring in more customers and Time Deposits
agent banking that brought the service closer to the people. Borrowed and managed Funds
Others
Shareholders’ Equity
DEPOSIT MIX
2018
FUNDING MIX 2017

2017
3.5%
2016
5.3% 20.6%
2015
7.8%
2014
17.5%
2013
2012 45.4%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
Current Assets
Time Deposits Current Accounts Savings Accounts
Savings Accounts
Time Deposits
Borrowed and managed Funds
Others
Shareholders’ Equity

TOTAL ASSETS AND SHAREHOLDER’S EQUITY

3,200,000
Total assets and shareholder’s equity
2,800,000
2,400,000 Equity, which comprises share capital, share premium and

retained earnings, finances 20.3% (2017:20.6%) of the
Shs Million
2,000,000
total assets. The level of equity is a function of earnings
1,600,000 which are distributed as dividends and amount of earnings
which are ploughed back into the business. The Bank’s
1,200,000
policy is to maintain a sustainable dividend growth which
800,000 satisfies shareholders. Dividend payable during the year
represents 25% of Net profit after tax.
400,000
2012 2013 2014 2015 2016 2017 2018

Years
Total Assets Shareholders’ Equity
Capital Adequacy
The Bank monitors the adequacy of its capital using ratios established by Financial institutions act 2004, which ratios are broadly
in line with those for the Basel committee for banking supervision. These ratios measure capital adequacy by comparing the
Bank’s eligible capital with its statement of financial position assets, off-statement of financial position commitments and market
and other risk positions at weighted amounts to reflect their relative risk.
At 31st December, 2018, the Bank had a regulatory total capital base of 31% (2017: 30%) of riskweighted assets and core
capital to risk weighted assets of 31% (2017:29%). This compares favorably with the regulatory requirement of 12.0%
and 10% respectively. Risk weighted assets increased by 13.8% (2017:3.1%) whereas total capital (net of intangible assets)
increased by 16.4% (2017:21.1%).
Analysis of Cash Flow Statement

The bank’s cashflow from operating activities decreased to Shs.179.0 billion from Shs.224.1 billion in the year 2017. The
decline was mainly due to an increase in investments and loans and advances that exceeded inflows from interest receipts, fees
and commissions and customer deposits increases.
Cash flows in investing activities increased to Shs.27.0 billion from Shs. 26.3 billion in 2017. There was no major activity in the
year 2018. The assets purchase were mainly to replace old assets.
Cash flows from financing- There was a net cash outflow of Shs.54.7 billion in the year 2018. Major repayments were Shs.
23.7bn to EIB, Shs.6.6bn to EADB and Shs 4.6bn to ABi. Additional funds were mainly from EADB. The Bank only received
Shs. 8.0bn and the funders have been disclosed in notes 24 and 25.
Dividends paid out in 2018 were shs.25.1 billion (2017: 27.6 billion).

Directors’ Report
The directors submit their report together with the audited financial statements for the year ended 31 December 2018, which
disclose the state of financial affairs of Centenary Rural Development Bank Limited (‘‘the Bank’’).
Principal activities
Centenary Rural Development Bank (“the Bank” or “Centenary Bank”) provides a range of banking and related financial services
especially to the economically disadvantaged people in rural areas. The Bank is an approved and licensed financial institution under
the Financial Institutions Act of Uganda and is a member of the Uganda Banker’s Association.
Results
The profit for the year of Shs 107,633 million (2017: Shs 100,275 million) has been transferred to retained earnings.
Dividends
The directors recommend payment of dividends for the year ended 31 December 2018 of Shs 27,024 million (2017: Shs 25,185
million) to preference and ordinary shareholders.
Share capital
During the year, no shares were issued.
Directors
The directors who held office during the year and to the date of this report were:
Prof. John Ddumba Ssentamu Board Chairman (Chairman, Nominations Advisory Committee)
Mr. Fabian Kasi Managing Director
Dr. Simon M.S. Kagugube Executive Director
Dr. Peter Ngategize Member (Chairman, Credit Committee and Risk Management Committee
and Chairman IT Strategy Committee up to July 2018)
Dr. Wenene Mary Theopista Member (Chairperson Audit Committee & Chairperson Human Resource
& Compensation Committee from July 2018)
Assoc. Prof. Joseph K. Ssewanyana Member (Chairman IT Strategy Committee effective October 2018)
Mt. Rev. Dr. Cyprian K. Lwanga Member
Mr. Thil Richard Member
Mr. Sprokel Caspar Jan Frits Member (Chairman ALCO)
Mr. Sam Kamiti Member
Mr. Andrew Obol Member (Chairman, Human Resource and Compensation Committee
up to June 2018)
None of the directors held any beneficial interest in the ordinary share capital of the Bank as at 31 December 2018.

Auditors
The Bank’s auditor, PricewaterhouseCoopers Certified Public Accountants continues in office in accordance with Section
62(3) of the Financial Institutions Act and section 167(2) of the Ugandan Companies Act.
Management by third parties

None of the business of the Bank was managed by a third party or a company in which a director had an interest during
the financial year.
Risk management
Managing risk is an integral part of the Bank’s business. The Board of Directors is ultimately responsible for risk management
and continues to establish new policies and procedures to control and monitor risk throughout the Bank as market risks
continue to change.
Corporate social responsibility statement

The Bank is focused on achieving strong sustainable financial returns while promoting a more decent, dignified and kinder
society. We commit 1% of the previous year’s profit after tax every year to the humanitarian cause, both directly and
indirectly, through our pricing and product mix.
The Bank has adopted the reporting mechanism developed by the Global Reporting Initiatives (GRI) in an attempt to be
transparent about our performance on the triple bottom line of people, property and planet.
Retirement benefits
The Bank contributes to a retirement benefits scheme covering all of its non-executive employees. On attaining the
retirement age or honorably leaving the service of the Bank, all permanent staff are eligible for terminal benefits applicable
to them.
By order of the Board:
Mrs. Peninnah T Kasule

Company Secretary
15 March 2019

Statement of
directors’ responsibilities
The Ugandan Companies Act requires the directors to prepare financial statements for each financial year that give a true and fair
view of the state of financial affairs of the Bank as at the end of the financial year and of the Bank’s profit or loss. It also requires the
directors to ensure that the Bank keeps proper accounting records that disclose, with reasonable accuracy, the financial position of
the Bank. They are also responsible for safeguarding the assets of the Bank.
The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting
policies supported by reasonable estimates, in conformity with International Financial Reporting Standards and in the manner
required by the Ugandan Companies Act and the Financial Institutions Act. The directors are of the opinion that the financial
statements give a true and fair view of the state of the financial affairs of the Bank and of its profit in accordance with International
Financial Reporting Standards and have been prepared in the manner required by the Ugandan Companies Act and the Financial
Institutions Act. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the
preparation of financial statements and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors have also assessed the Bank’s ability to continue as a going concern and hereby do
report that nothing has come to their attention to indicate that the Bank will not remain a going concern for at least twelve months
from the date of this statement.
The financial statements were approved by the Board of Directors on 15 March 2019 and signed on its behalf by:
Prof. John Ddumba-Ssentamu Mr. Fabian Kasi Dr. Wenene Mary Theopista Mrs. Peninnah T. Kasule
CHAIRMAN, BOARD OF DIRECTORS MANAGING DIRECTOR CHAIRPERSON, AUDIT COMMITTEE COMPANY SECRETARY

Report of the independent auditor

to the members of Centenary Rural
Development Bank Limited
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements give a true and fair view of the state of the financial affairs of Centenary Rural
Development Bank Limited (“the Bank”) as at 31 December 2018, and of its profit and its cash flows for the year then
ended in accordance with International Financial Reporting Standards and have been prepared in the manner required
by the Ugandan Companies Act and the Financial Institutions Act.
What we have audited
The financial statements of Centenary Rural Development Bank Limited set on pages 80 to 138 comprise:
• the statement of financial position as at 31 December 2018;

• the statement of comprehensive income for the year then ended;
• the statement of changes in equity for the year then ended;
• the statement of cash flows for the year then ended; and
• notes to the financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of
Ethics for Professional Accountants (“the IESBA Code”). We have fulfilled our other ethical responsibilities in accordance
with the IESBA Code.
Key audit matter
A key audit matter is one that, in our professional judgment, was of most significance in our audit of the financial statements
of the current period. This matter was addressed in the context of our audit of the Bank’s financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on it.

Report of the independent auditor to the members of Centenary Rural Development Bank Limited (continued...)
Key audit matter (continued)
Key audit matter How our audit addressed the key audit matter
Impairment of loans and advances Our audit procedures are summarised as follows:
As disclosed in Notes 4 (a) and 18 of the financial statements, the Directors • We evaluated the appropriateness of the methodology
have estimated provisions for expected credit losses on loans and advances applied by management in the calculation of expected
of Shs 28,878 million at 31 December 2018 (1 January 2018: Shs 36,328 credit losses for consistency with IFRS 9;
million).
• We validated management controls over the staging of
We focused on this area because the process of estimating impairment loans and advances between default (Stage 3), significant
provisions involves the exercise of significant judgment by the Directors increase in credit risk (Stage 2) and others (Stage 1);
to estimate expected credit losses over the remaining lifetime of loans and
• We evaluated the appropriateness of segmentation of the
advances whose credit risk increased significantly since origination, and, loans
Bank’s loan portfolio for purposes of estimation of PDs;
in default; and for the next 12 months for all other loans and advances.
• We tested, on a sample basis, the reasonableness of
The Directors have exercised significant management judgement in:
PDs used by management as well as the accuracy of
• defining both default and significant increase in credit risk, based on the underlying historical data applied by management in
quantitative and qualitative factors; and deriving PDs;
• estimating probabilities of default (“ PD”), loss given default (“LGD”) and • We reviewed the suitability of forward looking data
exposure at default (“EAD”) over the relevant period being either 12 used in estimating PDs together with the accuracy of its
months or remaining lifetime of the relevant loans and advances. application in the PD estimation process;
In addressing the above areas of significant management judgement, we • We tested, on a sample basis the reasonableness of the
focused on the following: EAD for on and off balance sheet items;
• The appropriateness of the methodology used to estimate the
• We tested, on a sample basis, the reasonableness of the
components of expected credit losses, being PD, LGD and EAD for
present values of expected future cashflows of loans and
consistency with IFRS 9;
advances used by management in the calculation of LGD;
• the relevance and application of historical and forward looking data used and
to estimate probabilities of default;
• We recomputed, on a sample basis, expected credit
• the reasonableness of the timing and amount of the present value of losses for loans and advances and assessed the overall
expected future cash flows on loans and advances, which is the key reasonableness of provisions for loans and advances
driver for LGD; and made by management as at 1 January and 31 December
• the estimates made by management in deriving EAD for on and off 2018.
statement of financial position exposures.
Other information a material misstatement of this other information, we are

required to report that fact. We have nothing to report in
The Directors are responsible for the other information. The other this regard. When we read the Bank’s complete annual
information includes corporate information, the directors’ report report,if we conclude that there is a material misstatement
and the statement of directors’ responsibilities but does not include therein, we are required to communicate the matter to
the financial statements and our auditor’s report thereon, which we those charged with governance.
obtained prior to the date of this auditor’s report, and additional
sections of the Bank’s complete annual report, which are expected to Responsibilities of the Directors for the
be made available to us after that date. Our opinion on the financial financial statements
statements does not cover the other information and, we do not,
express any form of assurance conclusion thereon. The Directors are responsible for the preparation of
financial statements that give a true and fair view in
In connection with our audit of the financial statements, our accordance with International Financial Reporting Standards
responsibility is to read the other information identified above and, and in the manner required by the Ugandan Companies
in doing so, consider whether the other information is materially Act and the Financial Institutions Act, and, for such internal
inconsistent with the financial statements or our knowledge obtained control as the Directors determine is necessary to enable
in the audit, or otherwise appears to be materially misstated. If, based the preparation of financial statements that are free from
on the work we have performed on the other information obtained material misstatement, whether due to fraud or error.
prior to the date of this auditor’s report we conclude that there is

Report of the independent auditor to the members of Centenary Rural Development Bank Limited (continued...)
In preparing the financial statements, the Directors • Evaluate the appropriateness of accounting policies used and the
are responsible for assessing the Bank’s ability to reasonableness of accounting estimates and related disclosures made by
continue as a going concern, disclosing, as applicable, management.
matters related to going concern and using the going • Conclude on the appropriateness of the Directors’ use of the going concern
concern basis of accounting unless management basis of accounting and, based on the audit evidence obtained, whether
either intends to liquidate the Bank or to cease a material uncertainty exists related to events or conditions that may cast
operations, or has no realistic alternative but to do significant doubt on the Bank’s ability to continue as a going concern. If we
so. conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or,
The Directors are responsible for overseeing the if such disclosures are inadequate, to modify our opinion. Our conclusions
Bank’s financial reporting process. are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Bank to cease
Auditor’s responsibilities for the audit to continue as a going concern.
of the financial statements • Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
Our objectives are to obtain reasonable assurance represent the underlying transactions and events in a manner that achieves
about whether the financial statements as a whole fair presentation.
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report We communicate with the Directors regarding, among other matters, the planned
that includes our opinion. Reasonable assurance scope and timing of the audit and significant audit findings, including any significant
is a high level of assurance, but is not a guarantee deficiencies in internal control that we identify during our audit.
that an audit conducted in accordance with ISAs
will always detect a material misstatement when it From the matters communicated with the Directors, we determine those matters
exists. Misstatements can arise from fraud or error that were of most significance in the audit of the financial statements of the current
and are considered material if, individually or in the period and are therefore the key audit matters. We describe these matters in our
aggregate, they could reasonably be expected to auditors report unless law or regulation precludes public disclosure about the matter
influence the economic decisions of users taken on or when, in extremely rare circumstances, we determine that a matter should
the basis of the financial statements. not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such
As part of an audit in accordance with ISAs, we communication.
exercise professional judgment and maintain
professional skepticism throughout the audit. We
Report on other legal and regulatory requirements
also:
The Ugandan Companies Act requires that in carrying out our audit we consider and
• Identify and assess the risks of material
report to you on the following matters. We confirm that:
misstatement of the financial statements,
whether due to fraud or error, design and
i) we have obtained all the information and explanations which to the best of
perform audit procedures responsive to
our knowledge and belief were necessary for the purposes of our audit;
those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis ii) in our opinion proper books of account have been kept by the Bank, so far
for our opinion. The risk of not detecting a as appears from our examination of those books; and
material misstatement resulting from fraud iii) the Bank’s statement of financial position and statement of comprehensive
is higher than for one resulting from error, income are in agreement with the books of account.
as fraud may involve collusion, forgery, The engagement partner on the audit resulting in this independent auditor’s report is
intentional omissions, misrepresentations, CPA Uthman Mayanja – P0181.
or the override of internal control.
• Obtain an understanding of internal control
relevant to the audit in order to design
audit procedures that are appropriate in the Certified Public Accountants CPA Uthman Mayanja
circumstances, but not for the purpose of Kampala
expressing an opinion on the effectiveness of 27 April 2019
the Bank’s internal control.
AUDITED FINANCIAL STATEMENTS (continued...)
Statement of comprehensive income
Note 2018 2017

Shs ‘000 Shs ‘000
IInterest income 5 426,844,187 382,977,763

Interest expense 6 (55,258,289) (51,117,112)
Net interest income 371,585,898 331,860,651
Fee and commission income 7 107,779,495 93,139,349
Net interest, fee and commission income 479,365,393 425,000,000
Net trading income 8 15,474,427 20,320,914

Other operating income 9 18,136,752 15,450,623
Operating income 512,976,572 460,771,537

Employee benefits 10 (149,046,903) (133,826,953)
Impairment of financial assets 11 (15,960,979) (27,852,108)
Depreciation expense 19 (24,255,491) (23,198,359)
Amortisation expense 20 (11,160,603) (8,993,835)
Operating expenses 12 (163,685,155) (129,603,879)
Profit before income tax 148,867,441 137,296,403
Income tax expense 13 (41,234,153) (37,020,975)
Profit for the year 107,633,288 100,275,428

Other comprehensive income:
Fair value gain on available for sale financial assets 33 - 82,564
Fair value (loss)/ gain through
other comprehensive income (“ FVOCI”) 33 (186,614) -
Total comprehensive income for the year 107,446,674 100,357,992

Earnings per share
Basic earnings per ordinary share (shilling per share) 30 4.301 4.006

Statement of financial position
Note 2018 2017

Shs ‘000 Shs ‘000
ASSETS
Cash and balances with Bank of Uganda 14 315,313,160 302,488,484
Deposits and balances due from other banks 15 140,363,606 64,425,658
Government securities 16 939,802,463 751,252,754
Loans and advances to customers 18 1,529,199,629 1,335,304,927
Other assets 17 47,191,453 45,519,971
Property and equipment 19 153,930,392 159,918,804
Intangible assets 20 45,031,355 47,369,472
Total assets 3,170,832,058 2,706,280,070
LIABILITIES
Customer deposits 22 2,282,235,607 1,911,137,891
Deposits and balances due to other banks 23 6,859,521 7,867,281
Other liabilities 26 100,360,737 80,742,564
Managed funds 24 11,742,513 12,069,117
Borrowed funds 25 114,101,703 130,803,258
Current income tax payable 13 8,379,784 3,483,328
Deferred income tax liability 21 1,239,279 822,360
Deferred grants 28 149,808 398,914
Provision for litigation 27 2,072,652 1,174,213
Total liabilities 2,527,141,604 2,148,498,926
EQUITY
Ordinary share capital 30 25,000,000 25,000,000
Preference share capital 30 116,624 116,624
Share premium 30 1,138,927 1,138,927
Regulatory reserve 32 11,701,852 2,928,595
Proposed dividends 31 27,024,946 25,185,481
Fair value reserve (AFS) 33 - 82,564
Fair value reserve (FVOCI) 33 (186,614) -
Retained earnings 578,894,719 503,328,953
Total equity 643,690,454 557,781,144
Total equity and liabilities 3,170,832,058 2,706,280,070
The financial statements on pages 80 to 138 were approved by the Board of Directors on 15 March 2019 and signed on its behalf
by:
Prof. John Ddumba-Ssentamu Mr. Fabian Kasi Dr. Wenene Mary Theopista Mrs. Peninnah T. Kasule
CHAIRMAN, BOARD OF DIRECTORS MANAGING DIRECTOR CHAIRPERSON, AUDIT COMMITTEE COMPANY SECRETARY

Statement of changes in equity
Fair value Fair value

Note ordinary Preference Share reserve reserve Regulatory Retained Proposed TOTAL
Shares Shares premium AFS FVOCI reserve earnings dividends
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
At 1 January 2017 25,000,000 116,624 1,138,927 - - 8,215,937 422,951,664 27,593,817 485,016,969
Comprehensive income:
Profit for the year - - - - - - 100,275,428 - 100,275,428
Fair value gain on government securities 33 - - - 82,564 - - - - 82,564
Total comprehensive income - - - 82,564 - - 100,275,428 - 100,357,992
Transactions with owners:
Transfer to regulatory reserve 32 - - - - - (5,287,352) 5,287,352 - -
Dividend paid 31 - - - - - - - (27,593,817) (27,593,817)
Proposed dividends 31 - - - - - - (25,185,481) 25,185,481 -
At 31 December 2017 25,000,000 116,624 1,138,927 82,564 2,928,595 503,328,963 25,185,481 557,781,144
At 1 January 2018 25,000,000 116,624 1,138,927 82,564 - 2,928,595 503,328,963 25,185,481 557,781,144
IFRS 9 first time adoption adjustment 2b - - - (82,564) 82,564 - 3,648,117 - 3,648,117
Comprehensive income:
Fair value loss on government securities 33 - - - - (186,614) - - - (186,614)
Profit for the year - - - - - - 107,633,288 - 107,633,288
Total comprehensive income - - - - (186,614) - 107,633,288 - 107,446,674
Transfer from fair value reserve 33 - - - - (82,564) - 82,564 - -
Transactions with owners:
Transfer to fair value reserve 32 - - - - - 8,773,257 (8,773,257) - -
Dividends paid 31 - - - - - - -
(25,185,481)
(25,185,481)
Proposed dividends 31 - - - - - -
(27,024,946) 27,024,946 -
At 31 December 2018 25,000,000 116,624 1,138,927 - (186,614) 11,701,852 578,894,729 27,024,946 643,690,454

Statement of cash flows
Note 2018 2017

Shs ‘000 Shs ‘000
Cash flows from operating activities

Interest receipts 5 443,102,533 405,689,953
Interest payments 6 (55,690,061) (54,949,471)
Fee and commission income 7 110,433,709 96,698,431
Other income received 9 16,375,240 17,560,064
Recoveries from loans previously written off 9 10,434,623 7,131,325
Payments to employees 10 (158,221,866) (142,508,884)
Payments to suppliers 12 (147,401,487) (143,609,894)
Grants received 28 - 227,550
Refund of unutilised grant 28 - (103,585)
Income tax paid 13 (35,840,802) (35,098,232)
Cash flows from operating activities before
changes in operating assets and liabilities 183,191,889 151,037,257

Changes in operating assets and liabilities
Increase in cash reserve requirement (30,900,000) (23,200,000)
Government securities 16 (148,805,777) (100,086,523)
Loans and advances to customers 18 (193,894,702) (87,602,143)
Other assets 17 (2,546,861) (2,164,303)
Customer deposits 22 371,097,716 284,523,726
Deposits from other Banks 15 (1,007,760) 4,005,086
Other liabilities 26 1,904,923 (2,374,727)
(4,152,461) 73,101,116
Net cash flows generated from operating activities 179,039,428 224,138,373

Cash flows from investing activities
Purchase of property and equipment 19 (27,089,917) (26,566,435)
Proceeds from sale of property and equipment 19 75,613 315,123
Net cash flows used in investing activities (27,014,304 (26,251,312)

Cash flows from financing activities
Dividends paid 31 (25,185,481) (27,593,817)
Proceeds from borrowed funds 25 6,050,000 54,937,223
Repayments of borrowed funds 25 (35,247,243) (42,858,353)
Proceeds from managed funds 24 1,918,380 2,939,091
Repayments/utilisation of managed funds 24 (2,244,984) (1,301,186)
Net cash flows from financing activities (54,709,328) (13,877,042)
Net increase in cash and cash equivalents 97,315,796 184,010,019
Net foreign exchange difference 290,759 523,931
Cash and cash equivalents at 1 January 530,949,115 346,415,165
Cash and cash equivalents at 31 December 34 628,555,670 530,949,115

Notes to the
Financial statements
1 Reporting entity The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires the directors
Centenary Rural Development Bank Limited is to exercise judgement in the process of applying the Bank’s accounting
incorporated in the Republic of Uganda under the policies. Changes in assumptions may have a significant impact on the
Ugandan Companies Act and is domiciled in the financial statements in the period the assumptions are changed. The areas
Republic of Uganda. The Bank’s registered office involving a higher degree of judgement or complexity, or areas where
address is: assumptions and estimates are significant to the financial statements are
disclosed in Note 3.
Mapeera House
Plot 44-46 Kampala Road b) Changes in accounting policy
P. O. Box 1892 and disclosures
Kampala
(i) New and amended standards adopted by the Bank
For purposes of the Ugandan Companies Act, the
profit and loss statement is represented by the The Bank has adopted IFRS 9 as issued by the IASB in July 2014 with
statement of comprehensive income and the balance a date of transition of 1 January 2018, which resulted in changes in
sheet by the statement of financial position in these accounting policies and adjustments to the amounts previously recognised
financial statements. in the financial statements. The Bank did not early adopt any of IFRS 9 in
previous periods.
2 Summary of significant
accounting policies As permitted by the transitional provisions of IFRS 9, the Bank elected not
to restate comparative figures. Any adjustments to the carrying amounts
The principal accounting policies applied in the of financial assets and liabilities at the date of transition were recognised in
preparation of these financial statements are set out the opening retained earnings and other reserves of the current period.
below. These policies have been consistently applied
to all the years presented, unless otherwise stated. Consequently, for notes disclosures, the consequential amendments to
IFRS 9 disclosures have also only been applied to the current period. The
a) Basis of preparation comparative period notes disclosures repeat those disclosures made in
the prior year.
The Bank’s financial statements are prepared in
compliance with International Financial Reporting Set out below are disclosures relating to the impact of the adoption of IFRS
Standards (IFRS). The financial statements are 9 on the Bank. Further details of the specific IFRS 9 accounting policies
presented in the functional currency, Uganda Shillings adopted in the current period (as well as the previous IAS 39 accounting
(Shs), rounded to the nearest thousand, and prepared policies applied in the comparative period) are described in more detail
on the historical cost basis, except where otherwise in Note 2.
stated in the accounting policies below.


NOTES TO THE FINANCIAL STATEMENTS (continued...)
Classification and measurement of financial instrument
The measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at 1 January 2018
are compared as follows:
IAS 39 IFRS 9
Financial asset Measurement category Carrying Measurement Carrying
amount category amount
Shs’000 Shs’000
Cash and balances with Bank of Uganda Amortised cost 302,488,484 Amortised cost 302,488,484
(Loans and receivables)
Deposits and balances due from other Amortised cost 64,425,658 Amortised cost 64,422,184
Banks (Loans and receivables)
Government securities FVPL (Held for trading) 141,544,714 FVPL 141,544,714
Government securities Fair value (Available for sale) 9,135,473 FVOCI 9,135,473
Government Securities Amortised cost 800,383,379 Amortised cost 800,383,379
(Held to Maturity)
Loans and advances Amortised cost 1,335,304,927 Amortised cost 1,339,222,686
Other assets Amortised cost 45,519,971 Amortised cost 45,517,394
There were no changes to the classification and measurement of financial liabilities. The changes made to financial assets arose only in lieu of
changes to the categories available under IFRS 9.
Reconciliation of statement of financial position balances from IAS 39 to IFRS 9
The following table reconciles the carrying amounts of financial assets, from their previous measurement category in accordance with IAS 39
to their new measurement categories upon transition to IFRS 9 on 1 January 2018:
IAS 39 Remeasurement IFRS 9

Carrying Amount Carrying Amount
31 December 2017 1 January 2018
Shs’000 Shs’000
Cash and balances with Bank of Uganda 302,488,484 - 302,488,484

Deposits and balances due from Other banks 64,425,658 (3,474) 64,422,184
Trading Securities 150,680,187 - 150,680,187
Investment Securities 600,572,567 - 600,572,567
Loans and Advances 1,335,304,927 3,917,759 1,339,222,686
Other Assets 45,519,971 (2,577) 45,517,394
Total 2,498,991,794 3,911,708 2,502,903,502

IFRS 9 requires the assessment of off-balance sheet facilities and the likely impact that these items will crystalise and the likely loss the bank
may incur incase these facilities are not honoured. The table below shows the assessment of projected loss on undrawn loan facilities and
other off-balance sheet items (performance bonds, bid securities, and commitments to extend credit)
IAS 39 Remeasurement IFRS 9

Carrying Amount Carrying Amount
31 December 2017 1 January 2018
Off Balance Sheet Instruments 58,371,959 (202,187) 58,169,772

Undrawn Loan commitments 6,140,385 (61,404) 6,078,981
Total 64,512,344 (263,591) 64,248,753
Reconciliation of impairment allowances from IAS 39 to IFRS 9
The following table reconciles the prior period’s closing impairment allowance measured in accordance with the IAS 39 incurred loss model
to the new impairment allowance measured in accordance with the IFRS 9 expected loss model at 1 January 2018:

Loss Allowance under IAS 39 Remeasurement IFRS 9 Carrying Amount
31-Dec-17 01-Jan-18
Shs’000 Shs’000
Cash and balances with Bank of Uganda - - -

Deposits and balances due from Other banks - 3,474 3,474
Trading Securities - - -
Investment Securities - - -
Loans and Advances 36,328,189 (3,917,759) 32,410,430
Other Assets - 2,577 2,577
Off Balance Sheet Instruments - 202,187 202,187
Undrawn Loan commitments - 61,404 61,404
Total 36,328,189 (3,648,117) 32,680,072
The Bank’s assessment of balances with Bank of Uganda and Government securities gave rise to no ECL at the transition date.
The adoption of IFRS 9 has resulted in changes in the Bank’s accounting policies for recognition, classification and measurement of financial
assets and liabilities and impairment of financial assets. IFRS 9 significantly amends other standards dealing with financial instruments such as
IFRS 7 ‘Financial Instrument: Disclosures’.
Further details of the specific IFRS 9 accounting polices applied in the current period (as well as the previous IAS 39 accounting policies
applied in the comparative period) are described in more detail under Notes 2 (c) and 4.
IFRS 15: Revenue from Contracts with Customers
This standard replaces IAS 11: Construction Contracts, IAS 18: Revenue, IFRIC 13: Customer Loyalty Programmes, IFRIC 15: Agreements
for the Construction of Real Estate, IFRIC 18: Transfer of Assets from Customers and SIC-31: Revenue – Barter Transactions Involving
Advertising Services.
The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in
time or over time. The standard specifies how and when the Bank will recognise revenue as well as requiring such entities to provide users
of financial statements with more informative, relevant disclosures.

The first time adoption of IFRS 15 by the Bank did Right-of- Use Asset
give rise to any changes in the Banks in the Bank’s Shs’000
revenue recognition policies and as such no transitional
adjustment was required. Motor Vehicles 5,267,080
Rented Premises 36,107,406
(ii) Accounting standards not yet Total 41,374,486
adopted by the bank

The Bank will adopt a modified retrospective approach in adoption of IFRS 16. In this
approach.
IFRS 16 – Leases
The Bank does not anticipate any changes to its accounting treatment of assets where it
Annual periods beginning on or after 1 January 2019 acts as lessor given that IFRS 16 does not change the accounting by lessors.
This standard replaces the current guidance in IAS 17 The Directors anticipate that the Bank will adopt a modified retrospective approach
and is a far-reaching change in accounting by lessees in adoption of IFRS 16. In this approach, the Bank will not have to recast comparative
in particular. Under IAS 17, lessees were required to financial information.
make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). IFRS
IFRIC 23, ‘Uncertainty over income tax treatments’
16 now requires lessees to recognise a lease liability
reflecting future lease payments and a ‘right-of-use
IFRIC 23 clarifies the accounting for income tax treatments that have yet to be accepted
asset’ for virtually all lease contracts. The IASB has
by tax authorities, whilst also aiming to enhance transparency. An uncertain tax treatment
included an optional exemption for certain short-term
is any tax treatment applied by an entity where there is uncertainty over whether that
leases and leases of low-value assets; however, this
treatment will be accepted by the tax authority.
exemption can only be applied by lessees. For lessors,
the accounting stays almost the same. However, as the
If an entity concludes that it is probable that the tax authority will accept an uncertain
IASB has updated the guidance on the definition of a
tax treatment that has been taken or is expected to be taken on a tax return, it should
lease (as well as the guidance on the combination and
determine its accounting for income taxes consistently with that tax treatment. If an entity
separation of contracts), lessors will also be affected by
concludes that it is not probable that the treatment will be accepted, it should reflect
the new standard.
the effect of the uncertainty in its income tax accounting in the period in which that
determination is made. Uncertainty is reflected in the overall measurement of tax and
At the very least, the new accounting model for lessees
separate provision is not allowed.
is expected to impact negotiations between lessors and
lessees. Under IFRS 16, a contract is, or contains, a
The entity is required to measure the impact of the uncertainty using the method that best
lease if the contract conveys the right to control the use
predicts the resolution of the uncertainty (that is, the entity should use either the most
of an identified asset for a period of time in exchange
likely amount method or the expected value method when measuring an uncertainty).
for consideration.
The interpretation is effective for annual periods beginning on or after 1 January 2019.
The Bank expects that the adoption of the interpretation will simplify its approach for
IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4,
accounting for uncertain tax positions and enhance related disclosures.
‘Determining whether an Arrangement contains a
Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC
The following are IFRSs or IFRIC interpretations that are not yet effective that are not
27, ‘Evaluating the Substance of Transactions Involving
expected to have a material impact on the Bank:
the Legal Form of a Lease’.
• IFRS 17 Insurance Contracts

Management has commenced IFRS 16 readiness
• IAS 1 and IAS 8 Definition of Material
activities in preparation for the first time adoption of the
• Prepayment features with negative compensation (amendments to IFRS 9)
standard as at 1 January 2019. Information gathered to
• IFRIC Interpretation 22 Foreign Currency Transactions and Advance
date indicates that the net book value of the assets held
Consideration
under leases is as shown below:
• IAS 19 Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
• Annual improvement cycle (2015 – 2017)

- Amendments to IFRS 3:Business Combinations Interest income

regarding Definition of a Business Interest income is calculated by applying the effective interest rate to the
- IAS 12 Income taxes gross carrying amount of financial assets, except for POCI financial assets,
- IAS 23 Borrowing costs for which the original credit-adjusted effective interest rate is applied to the
amortised cost of the financial asset.
C) Financial instruments
(a) POCI financial assets are treated differently because the asset is
i) Financial assets credit-impaired at initial recognition. For these assets, the Bank’s
policy is to recognises all changes in lifetime ECL since initial
recognition as a loss allowance with any changes recognised in profit
a) Measurement methods or loss. A favourable change for such assets creates an impairment
gain.
Amortised cost and effective interest rate
The amortised cost is the amount at which the financial asset (b) Financial assets that are not ‘POCI’ but have subsequently become
or financial liability is measured at initial recognition minus the credit-impaired (“stage 3 “), for which interest revenue is calculated
principal repayments, plus or minus the cumulative amortisation by applying the effective interest rate to their amortised cost (i.e. net
using the effective interest method of any difference between of the expected credit loss provision).
that initial amount and the maturity amount and, for financial
assets, adjusted for any loss allowance. Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Bank
The effective interest rate is the rate that exactly discounts becomes a party to the contractual provisions of the instrument. Regular
estimated future cash payments or receipts through the way purchases and sales of financial assets are recognised on trade-date,
expected life of the financial asset or financial liability to the being the date on which the Bank commits to purchase or sell the asset.
gross carrying amount of a financial asset (i.e. its amortised cost
before any impairment allowance) or to the amortised cost of At initial recognition, the Bank measures a financial asset or financial liability
a financial liability. at its fair value plus or minus, in the case of a financial asset or financial liability
not at fair value through profit or loss, transaction costs that are incremental
The calculation does not consider expected credit losses and and directly attributable to the acquisition or issue of the financial asset or
includes transaction costs, premiums or discounts and fees and financial liability, such as fees and commissions. Transaction costs of financial
points paid or received that are integral to the effective interest assets and financial liabilities carried at fair value through profit or loss are
rate, such as origination fees. For purchased or originated expensed in profit or loss. Immediately after initial recognition, an expected
credit-impaired (`POCI’) financial assets — assets that are credit loss allowance (ECL) is recognised for financial assets measured at
credit-impaired at initial recognition — the Bank calculates the amortised cost and investments in debt instruments measured at FVOCI.
credit-adjusted effective interest rate, which is calculated based
on the amortised cost of the financial asset instead of its gross When the fair value of financial assets and liabilities differs from the transaction
carrying amount and incorporates the impact of expected credit price on initial recognition, the entity recognises the difference as follows:
losses in estimated future cash flows.
(a) When the fair value is evidenced by a quoted price in an active
When the Bank revises the estimates of future cash flows, the market for an identical asset or liability (i.e. a Level 1 input) or
carrying amount of the respective financial assets or financial based on a valuation technique that uses only data from observable
liability is adjusted to reflect the new estimate discounted using markets, the difference is recognised as a gain or loss in the profit
the original effective interest rate. Any changes are recognised and loss.
in profit or loss.

(b) In all other cases, the difference is deferred, and the timing of recognition of deferred day one profit or loss is determined on
an instrument by instrument basis. It is either amortised over the life of the instrument, deferred until the instrument’s fair value
can be determined using market observable inputs, or realised through settlement.
From 1 January 2018, the Bank has applied IFRS 9 and classifies its financial assets in the following measurement categories:
• Fair value through profit or loss (“FVPL”);

• Fair value through other comprehensive income (“FVOCI”); or
• Amortised cost.
The classification requirements for debt and equity instruments are described below:
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans,
government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.
Classification and subsequent measurement of debt instruments depend on:

(a) The Bank’s business model for managing the asset; and
(b) The cash flow characteristics of the asset.
Business model:
The business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank’s objective
is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from
the sale of assets. If neither of these is applicable (for example, financial assets are held for trading purposes), then the financial assets
are classified as part of ‘other’ business model and measured at FVPL.
Factors considered by the Bank in determining the business model for the Bank assets include past experience on how the cash flows
for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are
assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in
the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent
actual pattern of short-term profit-taking. These securities are classified in the ‘other’ business model and measured at FVPL.
SPPI:
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank
assesses whether the financial instruments’ cash flows represent solely payments of principal and interest (the “SPPI test”).
In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement
i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is
consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent
with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.
For the purpose of fair value disclosures, the Bank has determined classes of assets and liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy, as explained above. The table below shows the various asset
classes held by the Bank and the changes in classification from the previous classes under IAS 39 to new classes after adoption of IFRS 9.

Category Class (as defined by IAS 39) Class (as determined by the Bank under IFRS 9) Subclasses
Financial assets at fair value through Financial assets designated at fair value through Government securities
Financial assets profit or loss (FVTPL) profit or loss
Deposits and balances due from other Banks
Loans and receivables Loans and advances to customers
at amortised cost Settlement and clearing accounts
Cash balances with Bank of Uganda
Other assets
Held to Maturity Government securities at amortised cost
Available for sale Government securities at FVOCI
Deposits due to other banks
Financial liabilities Financial liabilities at amortised cost Customer deposits
Other liabilities
Managed funds
Borrowed funds
Deferred grants
Off-balance sheet Loan commitments
financial instruments Guarantees, letters of credit and acceptances, performance bonds, bid securities bond guarantees and
commitments to extend credit.
The Bank classifies its debt instruments into one of the following three measurement categories:
Amortised cost:
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (“SPPI”), and that
are not designated at FVPL, are measured at amortised cost. Interest income from these financial assets is included in ‘Interest and similar income’ using
the effective interest rate method.
Fair value through other comprehensive income (“FVOCI”):

Financial assets that are held for collection of Contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of
principal and interest, and that are not designated at FVPL, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except
for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument’s amortised cost which are
recognised in profit or loss.
Fair value through profit or loss (“FVPL”):

Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment
that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in
the profit or loss statement within Net trading income’ in the period in which it arises, unless it arises from debt instruments that were designated at fair
value or which are not held for trading, in which case they are presented separately in Net investment income’. Interest income from these financial
assets is included in ‘Interest income’ using the effective interest rate method.
As at 31 December 2018, the Bank held government securities classified as at amortised cost, FVPL and FVOCI. Loans and advances to customers,
deposits and balances with other banks and cash and reserves with Bank of Uganda are all classified as financial assets at amortised cost. Customer
deposits and all financial liabilities are classified as financial liabilities at amortised cost.

c) Impairment General provision of 1% of credit facilities less specific provision and suspended
interest.
IFRS 9 replaced the previous ‘incurred loss’ model in IAS
39 with a forward-looking ‘expected credit loss’ model. In the event that provisions computed in accordance with the Financial Institution
The new impairment model applies to the following Act materially exceed provisions determined in accordance with IFRS, the excess
financial instruments that are not measured at FVTP. is accounted for as an appropriation of retained earnings.

The Bank assesses on a forward-looking basis the d) Modification of loans
expected credit loss (‘ECL’) associated with its debt
instrument assets carried at amortised cost and FVOCI The Bank sometimes renegotiates or otherwise modifies the contractual cash
and with the exposure arising from loan commitments. flows of loans to customers. When this happens, the Bank assesses whether or
The Bank recognises a loss allowance for such losses at not the new terms are substantially different to the original terms. The bank does
each reporting date. The measurement of ECL reflects: this by considering, among others, the following factors:
• An unbiased and probability-weighted amount • If the borrower is in financial difficulty, whether the modification merely
that is determined by evaluating a range of reduces the contractual cash flows to amounts the borrower is expected
possible outcomes. to be able to pay.
• The time value of money. • Whether any substantial new terms are introduced, such as a profit share/
• Reasonable and supportable information that equity-based return that substantially affects the risk profile of the loan.
is available without undue cost or effort at • Significant extension of the loan term when the borrower is not in financial
the reporting date about past events, current difficulty.
conditions and forecasts of future economic • Significant change in the interest rate.
conditions. • Change in the currency the loan is denominated in.
• Insertion of collateral, other security or credit enhancements that
See Note 3 and Note 4 for more details on ECL. significantly affect the credit risk associated with the loan.
Specific provision for loans and advances considered to If the terms are substantially different, the Bank derecognises the original financial
be non-performing (impaired) based on the criteria, and asset and recognises a ‘new’ asset at fair value and recalculates a new effective
classification of such loans and advances established by interest rate for the asset. The date of renegotiation is consequently considered
under the FIA are as follows: to be the date of initial recognition for impairment calculation purposes, including
for the purpose of determining whether a significant increase in credit risk has
Commercial, Salary, Home Improvements and Micro occurred. However, the bank also assesses whether the new financial asset
finance loans above Shs 5 million recognised is deemed to be credit-impaired at initial recognition, especially in
• Substandard loans with arrears period between circumstances where the renegotiation was driven by the debtor being unable to
90 to 179 days – 20% make the originally agreed payments. Differences in the carrying amount are also
• Doubtful loans with arrears period between 180 recognised in profit or loss as a gain or loss on derecognition.
to 364 days – 50%
• Loss with arrears period exceeding 364 days – If the terms are not substantially different, the renegotiation or modification does
100% provision not result in derecognition, and the Bank recalculates the gross carrying amount
• General provision of 1% of credit facilities less based on the revised cash flows of the financial asset and recognises a modification
specific provision and suspended interest gain or loss in profit or loss. The new gross carrying amount is recalculated by
discounting the modified cash flows at the original effective interest rate (or
Microfinance loans below Shs 5 million credit-adjusted effective interest rate for purchased or originated credit-impaired
• Substandard loans with arrears period between financial assets).
30 to 59 days – 25%
• Doubtful loans with arrears period between 60
to 89 days – 50%
• Loss with arrears period exceeding 90 days –
100% provision

e) Derecognition other than on • Financial liabilities arising from the transfer

a modification of financial assets which did not qualify for
derecognition, whereby a financial liability is
Financial assets, or a portion thereof, are derecognised when the contractual rights recognised for the consideration received
to receive the cashflows from the assets have expired, or when they have been for the transfer. In subsequent periods, the
transferred and either Bank recognises any expense incurred on
the financial liability; and Financial guarantee
- The Bank transfers substantially all the risks and rewards of ownership, or contracts and loan commitments.
- The Bank neither transfers nor retains substantially all the risks and rewards
of ownership and the Bank has not retained control. a) Derecognition
The Bank enters into transactions where it retains the contractual rights to receive Financial liabilities are derecognised when they are
cash flows from assets extinguished (i.e. when the obligation specified in the
but assumes a contractual obligation to pay those cash flows to other entities and contract is discharged, cancelled or expires).
transfers substantially all of the risks and rewards. These transactions are accounted The exchange between the Bank and its original
for as ‘pass through’ transfers that result in derecognition if the Bank: lenders of debt instruments with substantially different
a) Has no obligation to make payments unless it collects equivalent amounts terms, as well as substantial modifications of the terms
from the assets; of existing financial liabilities, are accounted for as an
b) Is prohibited from selling or pledging the assets; and extinguishment of the original financial liability and the
c) Has an obligation to remit any cash it collects from the assets without material recognition of a new financial liability. The terms are
delay. substantially different if the discounted present value
of the cash flows under the new terms, including any
Collateral (shares and bonds) furnished by the Bank under standard repurchase fees paid net of any fees received and discounted
agreements and securities lending and borrowing transactions are not derecognised using the original effective interest rate, is at least 10%
because the Bank retains substantially all the risks and rewards on the basis of the different from the discounted present value of the
predetermined repurchase price, and the criteria for derecognition are therefore not remaining cash flows of the original financial liability.
met. This also applies to certain securitisation transactions in which the Bank retains
a subordinated residual interest. In addition, other qualitative factors, such as the
currency that the instrument is denominated in,
In both the current and prior period, all of the financial liabilities are classified as changes in the type of interest rate, new conversion
subsequently measured at amortised cost. However, the Bank may also classify and features attached to the instrument and change in
subsequently measure financial liabilities as follows: covenants are also taken into consideration.
ii) Financial Liabilities If an exchange of debt instruments or modification

of terms is accounted for as an extinguishment, any
• Financial liabilities at fair value through profit or loss: this classification is costs or fees incurred are recognised as part of the
applied to derivatives, financial liabilities held for trading (e.g. short positions gain or loss on the extinguishment. If the exchange or
in the trading booking) and other financial liabilities designated as such at modification is not accounted for as an extinguishment,
initial recognition. any costs or fees incurred adjust the carrying amount
of the liability and are amortised over the remaining
Gains or losses on financial liabilities designated at fair value through profit or term of the modified liability.
loss are presented partially in other comprehensive income (the amount of
change in the fair value of the financial liability that is attributable to changes b) Loan commitments
in the credit risk of that liability, which is determined as the amount that is
not attributable to changes in market conditions that give rise to market risk) Loan commitments provided by the Bank are
and partially profit or loss (the remaining amount of change in the fair value measured as the amount of the loss allowance. The
of the liability). This is unless such a presentation would create, or enlarge, Bank has not provided any commitment to provide
an accounting mismatch, in which case the gains and losses attributable to
changes in the credit risk of the liability are also presented in profit or loss;

loans at a below-market interest rate (in exception f) Translation of foreign currencies

of staff loans), or that can be settled net in cash or by
delivering or issuing another financial instrument. The accounting records are maintained in the currency of the primary
economic environment in which the Bank operates, Uganda Shillings (“the
For loan commitments the loss allowance is deducted functional currency”). Transactions in foreign currencies during the year
from loans and advances to customers.For contracts are converted into Uganda shilling using the exchange rates prevailing at
that include both a loan and an undrawn commitment, the dates of the transaction. Foreign exchange gains and losses resulting
the expected credit losses on the undrawn commitment from the settlement of such transactions and from the translation at year-
are recognised together with the loss allowance for the end exchange rates of monetary assets and liabilities denominated in foreign
loan. To the extent that the combined expected credit currencies are recognised in profit or loss. Non–monetary items that are
losses exceed the gross carrying amount of the loan, the measured in terms of historical cost in a foreign currency are translated using
expected credit losses are recognised as a liability. the spot exchange rates as at the date of recognition.
d) Interest income and expense g) Property and equipment

Interest income and expense on all interest-bearing i. Recognition and measurement
instruments are recognised using the effective interest Items of property and equipment are measured at cost less accumulated
method in profit or loss. The effective interest method depreciation and accumulated impairment losses.
is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the Cost includes expenditures that are directly attributable to the acquisition of
interest income or interest expense over the relevant the asset. The cost of self-constructed assets includes the cost of materials
period. The effective interest rate is the rate that and direct labour, any other costs directly attributable to bringing the assets
exactly discounts financial instruments estimated future to a working condition for their intended use, the costs of dismantling
cash payments or receipts through its expected life or, and removing the items and restoring the site on which they are located
where appropriate, a shorter period to the net carrying and capitalised borrowing costs. Purchased software that is integral to the
amount. functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property or equipment have different useful lives,
Once a financial asset or a group of similar financial assets they are accounted for as separate items (major components) of property
has been written down as a result of an impairment and equipment.
loss, interest income is recognised based on the rate of
interest that was used to discount the future cash flows ii. Subsequent costs
for the purpose of measuring the impairment loss. The cost of replacing a part of an item of property or equipment is recognised
in the carrying amount of the item if it is probable that the future economic
e) Fees and commission income benefits embodied within the part will flow to the Bank and its cost can
be measured reliably. The costs of the day-to-day servicing of property and
Fees and commissions are generally recognised on an equipment are recognised in profit or loss as incurred.
accrual basis when the service has been provided. Loan
commitment fees for loans that are likely to be drawn (iii) Depreciation
down are deferred (together with related direct costs) Depreciation is recognised in profit or loss on a straight-line basis over the
and recognised as an adjustment to the effective interest estimated useful lives of each part of an item of property and equipment
rate on the loan. since this most closely reflects the expected pattern of consumption of the
future economic benefits embodied in the asset. Leased assets under finance
Other fees and commissions include; Loan and leases are depreciated over the shorter of the lease term and their useful
lease processing fees, Commitment Fees Overdraft lives. Land is not depreciated.
to Customers, commissions on Advance Payment
Guarantees, bid bonds & Guarantees, drafts Payable,
bills Payable, Inter-branch, RTGS /EFT Transfers,
Cheques, uncleared effects and ledger fees.


The estimated useful lives for the current and comparative periods are as follows: The useful life of the Core Banking System (CBS) is 7
years.
Leasehold land Over life of lease
Buildings Shorter of 50 years or lease period Costs associated with developing or maintaining
Computer hard ware 3 years computer software programs are recognized as an
Core Banking Hardware 7 Years expense as and when incurred. Costs that are directly
Furniture, fixtures and fittings 5 years associated with the production of identifiable and unique
Motor vehicles 5 years software products controlled by the Bank, and that will
Motor cycles 4 Years probably generate economic benefits exceeding costs
Generators & office equipment 8 years beyond one year, are recognized as intangible assets.
Direct costs include software development employee
Depreciation methods, useful lives and residual values are reassessed at each financial costs and an appropriate portion of relevant overheads.
year-end and adjusted if appropriate.
The useful lives of intangible assets are assessed to be
(iv) Derecognition either finite or indefinite. Intangible assets with finite
Property and equipment is derecognised on disposal or when no future economic lives are amortised over the useful economic life. The
benefits are expected from its use. Any gain or loss arising on derecognition or the amortisation period and the amortisation method for an
asset (calculated as the different between the net disposal proceeds and the carrying intangible asset with a finite useful life are reviewed at
amount of the asset) is recognized in other operating income in profit or loss in the least at each financial year-end. Changes in the expected
year the asset is derecognised. useful life, or the expected pattern of consumption of
future economic benefits embodied in the asset, are
h) Intangible assets accounted for by changing the amortisation period
or methodology, as appropriate, which are treated
An intangible asset is recognised only when its cost can be measured reliably, and it as changes in accounting estimates. The amortisation
is probable that the expected future economic benefits that are attributable to it will expense on intangible assets with finite lives is recognised
flow to the bank. in profit or loss.

The useful lives of intangible assets are assessed to be either finite or indefinite. i) Income tax
Intangible assets with finite lives are amortised over the useful economic life. The
amortisation period and the amortisation method for an intangible asset with a finite The Bank is subject to various government taxes under
useful life are reviewed at least at each financial year-end. the Ugandan tax laws. Significant judgement is required
in determining the provision for income taxes. Significant
The useful lives of intangible assets are assessed to be either finite or indefinite. estimates and judgements are required in determining
Intangible assets with finite lives are amortised over the useful economic life. The the provision for taxes on certain transactions. For these
amortisation period and the amortisation method for an intangible asset with a finite transactions, the ultimate tax determination is uncertain
useful life are reviewed at least at each financial year-end. during the ordinary course of business. Where the
final tax outcome of these matters is different from the
Changes in the expected useful life, or the expected pattern of consumption of amounts that were initially recorded, such differences
future economic benefits embodied in the asset, are accounted for by changing the will impact the current and deferred income tax assets
amortisation period or methodology, as appropriate, which are treated as changes in and liabilities in the period in which such determination
accounting estimates. The amortisation expense on intangible assets with finite lives is made. The deferred tax asset /liability is indicated in
is recognised in profit or loss. note 21.

Computer software Current income tax
Acquired computer software licenses are capitalized on the basis of the costs incurred Income tax expense is the aggregate of the charge
to acquire and bring to use the specific software. These costs are amortised on the to profit or loss in respect of current income tax and
basis of the expected useful lives of three years. deferred income tax. Current income tax is the amount
of income tax payable on the taxable profit for the year

determined in accordance with the Ugandan Income Tax Act. Current income tax of deferred tax assets is reviewed at each reporting date
assets and liabilities for the current period are measured at the amount expected and reduced to the extent that it is no longer probable that
to be recovered from or paid to the taxation authorities. sufficient taxable profit will be available to allow all or part
of the deferred tax to be utilised. Unrecognised deferred
Current income tax relating to items recognised directly in equity or other tax assets are reassessed at each reporting date and are
comprehensive income is recognised directly in equity or other comprehensive recognised to the extent that it becomes probable that
income and not in profit or loss. Management periodically evaluates positions future taxable profit will allow the deferred tax asset to be
taken in the tax returns with respect to situations in which the tax regulations are recovered.
subject to interpretation and establishes provisions where appropriate.
Deferred tax assets and liabilities are measured at the tax
Deferred income tax rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (and
Deferred income tax is provided using the liability method on temporary tax laws) that have been enacted or substantively enacted
differences between the tax bases of assets and liabilities and their carrying at the reporting date.
amounts for financial reporting purposes at the reporting date.
Deferred income tax liabilities are recognised for all taxable temporary differences, Deferred income tax assets and deferred income tax
except: liabilities are offset if a legally enforceable right exists to set
off current income tax assets against current income tax
• When the deferred income tax liability arises from the initial recognition liabilities and the deferred income taxes relate to the same
of goodwill or an asset or liability in a transaction that is not a business taxable entity and the same taxation authority.
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss. Withholding tax
• In respect of taxable temporary differences associated with investments
in subsidiaries, associates and interests in joint ventures, when the Withholding tax is deducted at source at 20% on income
timing of the reversal of the temporary differences can be controlled earned on treasury bills and bonds. This amount is included
and it is probable that the temporary differences will not reverse in the under the income tax charge for the year.
foreseeable future.
Value Added tax
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused tax Value added tax is chargeable at a rate of 18%. Output
losses. Deferred tax assets are recognised to the extent that it is probable VAT is the value added tax you calculate and charge on
that taxable profit will be available against which the deductible temporary your own sales of goods and services if you are registered.
differences, and the carry forward of unused tax credits and unused tax Input VAT is the value added tax added to the price when
losses can be utilised, except: you purchase goods or services liable to VAT. VAT payable
• When the deferred tax asset relating to the deductible temporary arises when the output VAT is in excess of input VAT. The
difference arises from the initial recognition of an asset or liability in a net amount of VAT recoverable from, or payable to, the
transaction that is not a business combination and, at the time of the taxation authority is included as part of receivables or
transaction, affects neither the accounting profit nor taxable profit or loss. payables in the statement of financial position.
• In respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures, j) Employee benefits
deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and The Bank and all its employees contribute to the National
taxable profit will be available against which the temporary differences can Social Security Fund, which is a defined contribution
be utilised scheme.
Deferred income tax relating to items recognised outside profit or loss is recognised The Bank also operates a defined contribution benefits
outside profit or loss. Deferred income tax items are recognised in correlation to scheme for its employees. The Bank has no legal or
the underlying transaction either in OCI or directly in equity. The carrying amount constructive obligation to pay further contributions if the

fund does not hold sufficient assets to pay all employees n) Comparatives
the benefits relating to employee service in the current
and prior periods. The assets of the scheme are held in Except for IFRS 9 whose impact on first time adoption has been presented in note
a separate trustee administered fund, which is funded 2b(i), no comparative figures have been adjusted.
by contributions from both the Bank and employees.
The Bank’s contributions to the defined contributions
o) Managed funds and borrowed funds
schemes are charged to profit or loss in the year in

which they relate.
The Bank manages funds on behalf of others in terms of specific agreements. The
funds are recorded as a liability on receipt of the funds and the corresponding
The estimated monetary liability for employees’
investments (as per the agreement) are recorded under cash and cash equivalents or
accrued annual leave entitlement at the reporting date
loans and advances to customers. Details of the funds are included in note 25 and 26.
is recognised as an expense accrual.

p) Leases
k) Contingent liabilities and
commitments The determination of whether an arrangement is a lease, or contains a lease, is based
on the substance of the arrangement and requires an assessment of whether the
Contingent liabilities and commitments comprised fulfillment of the arrangement is dependent on the use of a specific asset or assets and
of letters of credit, acceptances, guarantees and the arrangement conveys a right to use the asset.
commitments to extend credit are included in note
36. They are accounted for as off-statement of financial Leases that do not transfer to the Bank substantially all the risks and benefits incidental
position transactions and are disclosed as contingent to ownership of the leased items are operating leases. Operating lease payments are
liabilities and commitments. recognised as an expense in profit or loss on a straight-line basis over the lease term.
Contingent rental payable is recognised as an expense in the period in which they are
incurred.
l) Share capital
Bank as a lessee
Ordinary shares are classified as ‘share capital’ in equity. Leases that do not transfer to the Bank substantially all the risks and benefits incidental
Any premium received over and above the par value of to ownership of the leased items are operating leases. Operating lease payments are
the shares is classified as ‘share premium’ in equity. recognised as an expense in profit or loss on a straight-line basis over the lease term.
Contingent rental payable is recognised as an expense in the period in which they are
Preference shares (irredeemable) classified as share incurred.
capital in equity.
Bank as a lessor
Dividends on shares are charged to equity in the period When assets are leased out under a finance lease, the present value of the lease
in which they are declared. Proposed dividends are payments is recognised as a receivable. The difference between the gross receivable
shown as a separate component of equity until declared. and the present value of the receivable is recognised as unearned finance income.
Lease income is recognised over the term of the lease using the net investment
m) Cash and cash equivalents method. The Bank has entered into finance lease transactions as a lessor (Note 19).

Cash and cash equivalents include cash at hand, deposits 3 Critical accounting estimates and judgments in
held at call with banks, float money, other short term applying accounting policies
highly liquid investments with original maturities of three
months or less, including: cash and unrestricted balances The Bank makes estimates and assumptions that affect the reported amounts of
with the Bank of Uganda, Treasury and other eligible revenues, expenses, assets and liabilities and accompanying disclosures, as well as
bills, and amounts due from other banks. the disclosure of contingent liabilities within the next financial year. Estimates and
judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable
under the circumstances.

Determining fair values The Bank makes estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities
The determination of fair value for financial assets and liabilities for and accompanying disclosures, as well as the disclosure of
which there is no observable market price requires the use of valuation contingent liabilities within the next financial year. Estimates
techniques. For financial instruments that trade infrequently and have and judgements are continually evaluated and are based on
little price transparency, fair value is less objective, and requires historical experience and other factors, including expectations
varying degrees of judgement depending on liquidity, concentration, of future events that are believed to be reasonable under the
uncertainty of market factors, pricing assumptions and other risks circumstances.
affecting the specific instrument.
This evidence may include observable and forward looking
The Bank measures fair values using the following fair value hierarchy data indicating that there has been an adverse change in
that reflects the significance of the inputs used in making the the payment status of borrowers in a group, or national or
measurements: local economic conditions that correlate with defaults on
assets. Management uses estimates based on historical loss
Level 1: Quoted market price (unadjusted) in an active market for an experience for assets with credit risk characteristics and
identical instrument. objective evidence of impairment similar to those in the
portfolio when scheduling its future cash flows.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e., as prices) or indirectly (i.e., derived from prices). The methodology and assumptions used for estimating both
This category includes instruments valued using quoted the amount and timing of future cash flows are reviewed
market prices in active markets for similar instruments; quoted regularly to reduce any differences between loss estimates
prices for identical or similar instruments in markets that are and actual loss experience. The carrying amount of loans and
considered less than active; or other valuation techniques advances is disclosed in Note 18.
where all significant inputs are directly or indirectly observable
from market data. Key sources of estimation uncertainty
Level 3: Valuation techniques using significant unobservable inputs; The following are key estimations that the directors have
This category includes all instruments where the valuation used in the process of applying the Bank’s accounting policies
technique includes inputs not based on observable data and that have the most significant effect on the amounts
and the unobservable inputs have a significant effect on the recognised in financial statements:
instrument’s valuation. This category includes instruments
that are valued based on quoted prices for similar instruments a) Establishing the number and relative
where significant unobservable adjustments or assumptions weightings of forward-looking scenarios for each
are required to reflect differences between the instruments. type of product/market and determining the forward-
looking information relevant to each scenario.
The fair value disclosures are included in note 4. When measuring ECL the Bank uses reasonable and
supportable forward-looking information, which is
Impairment losses on loans and advances based on assumptions for the future movement of
different economic drivers and how these drivers will
The Bank reviews its loan portfolio to assess impairment at least on a affect each other.
quarterly basis. In determining whether an ECL should be recorded
in profit or loss, the Bank makes judgments as to whether there is The Directors are of the view that reasonably
any observable data indicating that there is a measurable decrease in expected changes in macroeconomic variables
the estimated future cash flows from a portfolio of loans before the included in the ECL computations over the next 12
decrease can be identified with an individual loan in that portfolio. months would not bring about significant change to
the estimated ECL in view of largely stable economic
factors and average age of outstanding loans of 3
years.

b) Probability of default: PD constitutes a key The standards form an integral part of the Bank’s governance infrastructure
input in measuring ECL. PD is an estimate of the reflecting the expectations and requirement of the Board in respect of key areas
likelihood of default over a given time horizon, control across the Bank. The standards ensure alignment and consistency in the
the calculation of which includes historical data, manner major risk types across the Bank are identified, measured, managed,
assumptions and expectations of future conditions. controlled and are reported.
c) Loss Given Default: LGD is an estimate of the The standards underpin the Bank’s governance principles, which are:
loss arising on default. It is based on the difference
between the contractual cash flows due and those • Shareholder value:
that the lender would expect to receive, taking The Bank’s primary objective is to protect and enhance shareholder
into account cash flows from collateral and integral value. As such the risks to this objective drive the Bank’s system of internal
credit enhancements. control.
d) Fair value measurement and valuation • Embedded:

process: In estimating the fair value of a financial The Bank’s culture reflects its appetite for risk. Risk management is
asset or a liability, the Company uses market- achieved at all levels of the business through a suitable organisational
observable data to the extent it is available. Where structure, policies, and procedure, and appropriate staff training.
such Level 1 inputs are not available the Company Responsibility for risk management resides at all levels of management
uses valuation models to determine the fair value of from the Board down through the organisation to individuals in office.
its financial instruments. Each business manager is accountable for managing risk in his or her
business area.
The Bank’s activities expose it to variety of financial and
non-financial risks. These activities involve the analysis, • Supported and assured:
evaluation, acceptance and management of some degree The system of governance and internal control provide management
of risk or combination of risks. Taking risk is core to the and Board with assurance that risks are being managed appropriately.
Bank’s business, and the operational risks are inevitable The designated executives and Board Committees regularly receive and
consequences of being in business. review reports on risks, compliance, governance and control process.

4 Financial risk management • Reviewed:
The Board of Directors considers the effectiveness of the internal control
The effective management of risk is critical to earnings system and risk management processes, at least annually. The major
and balance sheet growth within Centenary Bank where risks to which the Bank is exposed, including non – financial risks are:
the culture encourages sound commercial decision credit risk, operational risk, compliance risk, reputation risk, business risk,
making, which adequately balances risk and reward. The strategic risk, market risk, liquidity risk and taxation risk.
identification and management of risk remains a high priority
and underpins all business activities. A combination of these risks occurring concurrently would be the most likely
cause of significant loss. The Bank’s approach to managing risk on a holistic basis
The Bank’s approach to risk management is based on a therefore ensures that risk types are not managed in isolation.
well-established risk, compliance and governance process
and relies both on individual responsibility and collective a) Credit risk
oversight supported by comprehensive reporting. This
approach balances strong corporate oversight at Head Credit risk is the risk of suffering financial loss, should any of the Bank’s customers,
Office level with risk management structures within the clients or counterparties fail to fulfil their contractual obligations to the Bank.
business units.The Bank has governance standards for all Credit risk arises mainly from interbank, commercial and consumer loans and
major risk types. All standards are applied consistently advances, and loan commitments arising from such lending activities but can also
across the Bank and are approved by the Board through arise from credit enhancement provided, such as acceptances and letters of credit,
either Bank’s Board Risk Management Committee or Board performance bonds and guarantees.
ALCO Committee.

The Bank is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its trading
activities (‘trading exposures’) including settlement balances with market counterparties and reverse repurchase agreements.
Credit risk is the single largest risk for the Bank’s business; management therefore carefully manages its exposure to credit risk.
Credit risk management and control are centralised in a credit risk management team which reports regularly to the Management
Credit Risk Committee, which in turn reports to the Board of Directors through the Board Credit Risk Committee. At the lowest
level, credit risk is managed by Branch Credit Risk Committees, reporting to the central credit risk team at Head Office.

Credit risk measurement
The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure
varies with changes in market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio
of assets entails further estimations as to the likelihood of defaults occurring, of the associated loss ratios and of default correlations
between counterparties. The Bank measures credit risk using Probability of Default (PD), Exposure at Default (EAD) and Loss
Given Default (LGD). This is consistent with the approach for measuring Expected Credit Loss under IFRS 9.
Internal risk ratings

The Bank uses internal credit risk classifications that reflect its assessment of the credit status and likelihood of loss of individual
counterparties. Driven primarily by days past due analysis of borrowers, the system also relies on borrower and loan specific
information collected at the time of application (such as disposable income, and level of collateral for retail exposures; and
turnover and industry type for wholesale exposures). The classification process also benefits from expert judgement from the
Credit Department to cater for considerations which may not be captured as part of the other data inputs into the model.
The table below provides a mapping of the Bank’s credit risk grades in line with the Financial Institution Act (“FIA”).
Items that are fully current and the full repayment of the contractual principal and interest amounts
Standard are expected. It also includes items past due between 1 and 30 days
Items past due between 31 and 90 days; or items for which the borrower is experiencing difficulties.
Watchlist Ultimate loss is not expected but could occur if adverse conditions persist.
Items between 91- 180 days past due or items that show underlying well-defined weaknesses that
Substandard could lead to probable loss if not corrected. The risk that these items may be impaired is probable
and the Bank relies to a large extent on the available security.
Items that are 181 – 365 days past due, or items considered to be impaired but are not yet
Doubtful considered final losses because of pending factors, which may strengthen the quality of the items.
Items past due by more than 365 days or items that are considered to be uncollectible and where
Loss the realization of collateral and institution of legal proceedings have been unsuccessful.
Micro finance loans below Shs 5 million are classified as Standard if past due between 1 to 7 days;
Watchlist if past due between 8 and 30 days; Substandard for days past due of 31 and 59 days ,
Doubtful for 61-89 days past due; and, Loss if overdue by more than 90 days.

In assessing whether the credit risk on a financial instrument has increased

Expected credit loss measurement
significantly since initial recognition, the Bank compares the risk of a default
occurring on the financial instrument at the reporting date based on the
IFRS 9 outlines a ‘three-stage’ model for impairment
remaining maturity of the instrument with the risk of a default occurring that was
based on changes in credit quality since initial recognition
anticipated for the remaining maturity at the current reporting date when the
as summarised below:
financial instrument was first recognised. In making this assessment, the Bank
considers both quantitative and qualitative information that is reasonable and
• A financial instrument that is not credit-impaired
supportable, including historical experience and forward-looking information
on initial recognition is classified in ‘Stage 1’ and
that is available without undue cost or effort, based on the historical experience
has its credit risk continuously monitored by the
and expert credit assessment.
Bank.
• If a significant increase in credit risk (‘SICR’)
Multiple economic scenarios applied in various segments form the basis of
since initial recognition is identified, the financial
determining the probability of default at initial recognition and at subsequent
instrument is moved to ‘Stage 2’ but is not yet
reporting dates. Different economic scenarios will lead to a different probability
deemed to be credit-impaired.
of default. It is the weighting of these different scenarios that forms the basis of a
• If the financial instrument is credit-impaired, the
weighted average probability of default that is used to determine whether credit
financial instrument is then moved to ‘Stage 3’.
risk has significantly increased.
• Financial instruments in Stage 1 have their ECL
measured at an amount equal to the portion
Forward-looking information includes economic forecasts with local economic
of lifetime expected credit losses that result
indicators and concentration to certain industries.
from default events possible within the next 12
months. Instruments in Stages 2 or 3 have their
The quantitative information is a primary indicator of significant increase in credit
ECL measured based on expected credit losses
risk and is based on days past due for a particular exposure.
on a lifetime basis.

• A pervasive concept in measuring ECL in
The qualitative factors that indicate significant increase in credit risk are reflected
accordance with IFRS 9 is that it should consider
in PD models on a timely basis. However, the Bank still considers separately
forward-looking information.
some qualitative factors to assess if credit risk has increased significantly. For all
• Purchased or originated credit-impaired financial
loans there is particular focus on assets that are included on a ‘watch list’ given an
assets are those financial assets that are credit-
exposure is on a watch list once there is a concern that the creditworthiness of
impaired on initial recognition. Their ECL is
the specific counterparty has deteriorated. For retail lending the Bank considers
always measured on a lifetime basis (Stage 3).
events such as unemployment or death.
The key judgments and assumptions adopted by the Bank
As a back-stop when an asset becomes 30 days past due, the Bank considers
in addressing the requirements of IFRS 9 are discussed
that a significant increase in credit risk has occurred and the asset is in stage 2
below:
of the impairment model, i.e. the loss allowance is measured as the lifetime
ECL. The 30 day back-stop is pointer to the regulatory quantitative definition
Significant increase in credit risk (“SICR”)
of watch list facilities. In addition, any other loans that are individually assessed

and are included on a watch list are in stage 2 of the impairment model. As
The Bank monitors all financial assets, issued loan
noted if there is evidence of credit-impairment the assets are at stage 3 of the
commitments and financial guarantee contracts that are
impairment model.
subject to the impairment requirements to assess whether
there has been a significant increase in credit risk since
initial recognition. If there has been a significant increase in
Definition of default

credit risk the Bank will measure the loss allowance based
Critical to the determination of ECL is the definition of default. The definition
on lifetime rather than 12-month ECL. The Bank’s applies
of default is used in measuring the amount of ECL and in the determination
the practical expedient that financial assets with ‘low’ credit
of whether the loss allowance is based on 12-month or lifetime ECL, as
risk at the reporting date are deemed not to have had
default is a component of the probability of default (PD) which affects both the
a significant increase in credit risk. In respect of financial
measurement of ECLs and the identification of a significant increase in credit risk
assets other than loans and advances to customers.
as noted above.


The Bank considers the following as constituting an event • the lender of the borrower, for economic or contractual reasons relating
of default: to the borrower’s financial difficulty, having granted to the borrower a
concession that the lender would not otherwise consider; or
• the borrower is past due more than 90 days on • the disappearance of an active market for a security because of financial
any material credit obligation to the Bank; difficulties.
• the borrower is unlikely to pay its credit obligations
to the Bank in full; and It may not be possible to identify a single discrete event—instead, the combined
• borrowers with more than one credit facilities and effect of several events may have caused financial assets to become credit-
same source of payment, if one defaults, all other impaired. The Bank assesses whether debt instruments that are financial assets
facilities are subjectively classified under default. measured at amortised cost or FVOCI are credit-impaired at each reporting date.
To assess if sovereign and other Bank debt instruments are credit impaired, the
This definition of default is used by the Bank for accounting Bank considers factors such as bond yields, credit ratings and the ability of the
purposes as well as for internal credit risk management borrower to raise funding.
purposes and is broadly aligned to the regulatory definition
of default. A loan is considered credit-impaired when a concession is granted to the
The definition of default is appropriately tailored to reflect borrower due to a deterioration in the borrower’s financial condition. For
different characteristics of different types of assets. financial assets where concessions are contemplated but not granted the asset is
deemed credit impaired when there is observable evidence of credit-impairment
When assessing if the borrower is unlikely to pay its credit including meeting the definition of default. The definition of default (see below)
obligation, the Bank takes into account both qualitative includes unlikeliness to pay indicators and a back- stop if amounts are overdue for
and quantitative indicators. The information assessed 90 days or more.
depends on the type of the asset, for example in corporate
lending a qualitative indicator used is the economic sector ECL measurement – explanation of inputs, assumptions
performance, which is not relevant for retail lending. and estimation techniques
Quantitative indicators, such as overdue status and non-
payment on another obligation of the same counterparty The key inputs used for measuring ECL are:
are key inputs in this analysis. • probability of default (“PD”);
• loss given default (“LGD”); and
The Bank uses a variety of sources of information to assess • exposure at default (“EAD”).
default. As noted in the definition of credit impaired financial
assets below, default is evidence that an asset is credit These figures are generally derived from internally developed statistical models
impaired. Therefore credit impaired assets will include and other historical data and they are adjusted to reflect probability-weighted
defaulted assets, but will also include other non-defaulted forward-looking information.
given the definition of credit impaired is broader than the
definition of default. PD is an estimate of the likelihood of default over a given time horizon, 12
months or lifetime. The calculation is based on statistical rating models, and
Credit impaired assets assessed using rating tools tailored to the various categories of counterparties and
exposures. These statistical models are based on market data (where available),
A financial asset is ‘credit-impaired’ when one or more as well as internal data comprising both quantitative and qualitative factors. PDs
events that have a detrimental impact on the estimated are estimated considering the contractual maturities of exposures. The estimation
future cash flows of the financial asset have occurred. is based on current conditions, adjusted to take into account estimates of future
Credit-impaired financial assets are referred to as Stage 3 conditions that will impact PD.
assets.
Evidence of credit-impairment includes observable data LGD is an estimate of the loss arising on default. It is based on the difference
about the following events: between the contractual cash flows due and those that the lender would expect
to receive, taking into account cash flows from any collateral. The LGD models for
• significant financial difficulty of the borrower or secured assets consider forecasts of future collateral valuation taking into account
issuer; sale discounts, time to realisation of collateral, cost of realisation of collateral and
• a breach of contract such as a default or past due cure rates (i.e. exit from non-performing status). LGD models for unsecured
event; assets consider time of recovery and recovery rates.

The calculation is on a discounted cash flow basis, where These vary by product type.
the cash flows are discounted by the original EIR of the loan.
• For secured products, this is primarily based on collateral type and projected
EAD is an estimate of the exposure at a future default date, collateral values, historical discounts to market/book values due to forced
taking into account expected changes in the exposure after the sales, time to repossession and recovery costs observed.
reporting date, including repayments of principal and interest,
and expected drawdowns on committed facilities. The Bank’s • For unsecured products, LGD’s are typically set at product level due to the
modelling approach for EAD reflects expected changes in the limited differentiation in recoveries achieved across different borrowers and
balance outstanding over the lifetime of the loan exposure is based on historical recovery patterns.
that are permitted by the current contractual terms, such
as amortisation profiles, early repayment or overpayment, The Bank measures ECL considering the risk of default over the maximum
changes in utilisation of undrawn commitments and credit contractual period over which the entity is exposed to credit risk and not a longer
mitigation actions taken before default. The Bank uses EAD period, even if contract extension or renewal is common business practice.
models that reflect the characteristics of the portfolios.
However, for financial instruments such as revolving credit facilities and overdraft
ECL is determined by projecting PD, LGD and EAD for facilities that include both a drawn and an undrawn commitment component,
each future month and for each individual exposure or the Bank’s contractual ability to demand repayment and cancel the undrawn
collective segment. These three components are multiplied commitment does not limit the Bank’s exposure to credit losses to the contractual
together and adjusted for the likelihood of survival. This notice period.
effectively calculates an ECL for each future month, which
is then discounted back to the reporting date and summed. The measurement of ECL is based on probability weighted average credit loss. As
The discount rate used in the ECL calculation is the original a result, the measurement of the loss allowance should be the same regardless
effective interest rate. of whether it is measured on an individual basis or a collective basis (although
measurement on a collective basis is more practical for large portfolios of items).
Lifetime PD is developed by applying a maturity profile to the
current 12M PD. The maturity profile looks at how defaults For such financial instruments the Bank measures ECL over the period that it is
develop on a portfolio from the point of initial recognition exposed to credit risk and ECL would not be mitigated by credit risk management
throughout the lifetime of the loans. The maturity profile actions, even if that period extends beyond the maximum contractual period. These
is based on historical observed data and is assumed to be financial instruments do not have a fixed term or repayment structure and have a
the same across all assets within a portfolio and credit grade short contractual cancellation period.
band. This is supported by historical analysis.
However, the Bank does not enforce in the normal day-to-day management the
For revolving products, the exposure at default is predicted by contractual right to cancel these financial instruments. This is because these financial
taking current drawn balance and adding a “credit conversion instruments are managed on a collective basis and are cancelled only when the Bank
factor” which allows for the expected drawdown of the becomes aware of an increase in credit risk at the facility level. This longer period
remaining limit by the time of default. These assumptions is estimated taking into account the credit risk management actions that the Bank
vary by product type and current limit utilisation band, based expects to take to mitigate ECL, e.g. reduction in limits or cancellation of the loan
on analysis of the Bank’s recent default data. commitment.
The 12-month and lifetime LGDs are determined based on Forward looking information incorporated in ECL models
the factors which impact the recoveries made post default.
Under IFRS 9, the Bank incorporates forward-looking information in its measurement
of ECLs. The Bank formulates a ‘base case’ view of the future direction of
relevant economic variables and a representative range of other possible forecast

scenarios based on advice from the Bank’s experts and impairment as a result of one or more events that occurred after initial recognition
consideration of a variety of external actual and forecast of the asset (a “loss event”) and that loss event (or events) has an impact on the
information. This process involves developing two or estimated future cash flows of the financial asset or group of financial assets that
more additional economic scenarios and considering can be reliably estimated.
the relative probabilities of each outcome.
Objective evidence that a financial asset or group of assets is impaired includes
As with any economic forecasts, the projections and observable data that comes to the attention of the Bank about the following loss
likelihoods of occurrence are subject to a high degree of events:
inherent uncertainty and therefore the actual outcomes
may be significantly different to those projected. The • Significant financial difficulty of the borrower
Bank considers these forecasts to represent its best
estimate of the possible outcomes and has analysed • A breach of contract, such as default or delinquency in interest or principal
the non-linearities and asymmetries within the Bank’s repayments;
different portfolios to establish that the chosen scenarios
are appropriately representative of the range of possible • The granting to the borrower, for economic or legal reasons relating to
scenarios. External information may include economic the borrower’s financial difficulty, a concession that the lender would not
data and forecasts published by governmental bodies otherwise consider;
and monetary authorities. The base case will represent
a most-likely outcome and be aligned with information • It becoming probable that the borrower will enter bankruptcy or other
used by the Bank for other purposes, such as strategic financial reorganization;
planning and budgeting.
• The disappearance of an active market for that financial asset because of
The other scenarios will represent more optimistic and financial difficulties;
more pessimistic outcomes. The Bank has identified
and documented key drivers of credit risk and credit • Observable data indicating that there is a measurable decrease in the
losses for each portfolio of financial instruments and, estimated future cash flows from a group of financial assets since the initial
using an analysis of historical data, has estimated recognition of those assets, although the decrease cannot yet be identified
relationships between macro-economic variables and with the individual financial assets in the group, including:
credit risk and credit losses. These key drivers include,
among others, inflation rates, GDP forecasts, balance of • Adverse changes in the payment status of borrowers in the group; or
trade, unemployment rates and interest rates. Predicted
relationships between the key indicators and default and • National or local economic conditions that correlate with defaults on the
loss rates on various portfolios of financial assets are assets in the group.
developed based on analysis of historical data.
The estimated period between a loss occurring and its identification is determined
Accounting for impairment of financial by management for each identified portfolio. In general, the periods used vary
assets under IAS 39 for 2017 and 2016 between 3 months and 6 months.

Impairment of financial assets Assets carried at amortised cost

The Bank first assesses whether objective evidence of impairment exists individually
The Bank assesses at each reporting date whether there
for financial assets that are individually significant, and individually or collectively for
is objective evidence that a financial asset or a group of
financial assets that are not individually significant.
financial assets is impaired. A financial asset or a group
of financial assets is impaired and impairment losses are
If the Bank determines no objective evidence of impairment exists for an individually
incurred if, and only if, there is objective evidence of
assessed financial asset, whether significant or not, it includes the asset in a group

of financial assets with similar credit risk characteristics and collectively reversed by adjusting the allowance account. The amount of
assesses them for impairment. Assets that are individually assessed the reversal is recognised in profit or loss.
for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment. In addition to the measurement of impairment losses on
If there is objective evidence that an impairment loss on loans or held- loans and advances in accordance with IFRS as set out above,
to-maturity investments carried at amortised cost has been incurred, the Bank is required by the Financial Institutions Act 2004 to
the amount of the loss is measured as the difference between the estimate losses on loans and advances as follows:
asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) If, in a subsequent period, the amount of the impairment loss
discounted at the financial instrument’s original effective interest rate. decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as
The carrying amount of the asset is reduced through the use of an improvement in the debtor’s credit rating), the previously
an allowance account and the amount of the loss is recognised in recognised impairment loss is reversed by adjusting the
profit or loss. If a loan or held-to-maturity investment has a variable allowance account. The amount of the reversal is recognised
interest rate, the discount rate for measuring any impairment loss is in profit or loss.
the current effective interest rate determined under the contract. As
a practical expedient, the Bank may measure impairment on the basis c) Impairment of non-financial assets
of an instrument’s fair value using an observable market price.
At the end of each reporting period, the Bank assesses
The calculation of the present value of the estimated future cash flows whether there is any indication that an asset is impaired, that
of a collateralised financial asset reflects the cash flows that may result is, whether its carrying amount is higher than its recoverable
from foreclosure less costs for obtaining and selling the collateral, amount. If there is an indication that an asset is impaired,
whether or not foreclosure is probable. then the asset’s recoverable amount is calculated. The
recoverable amount is determined by assessing;
For the purposes of a collective evaluation of impairment, financial
assets are grouped on the basis of similar credit risk characteristics. • If the fair value less costs of disposal or value in use is
Those characteristics are relevant to the estimation of future cash more than carrying amount, then it is not necessary
flows for groups of such assets by being indicative of the debtors’ to calculate the other amount since the asset is not
ability to pay all amounts due according to the contractual terms of impaired. If an impairment loss is determined, the
the assets being evaluated. loss is recognised through profit or loss.
Provisions for impairment on assets assessed individually are referred • If fair value less costs of disposal cannot be
to as specific provisions, whilst provisions for such losses on assets determined, then recoverable amount is value in
assessed collectively are referred to as general provisions. use.
When a loan is uncollectible, it is written off against the related • For assets to be disposed of, recoverable amount is
provision for loan impairment. Such loans are written off after all fair value less costs of disposal.
the necessary procedures have been completed and the amount of
the loss has been determined. Subsequent recoveries of amounts In assessing value in use, the estimated future cash flows are
previously written off are included in other operating income in the discounted to their present value using a pre–tax discount rate
statement of comprehensive income. that reflects current market assessments of the time value of
money and the risks specific to the asset. In determining fair
If, in a subsequent period, the amount of the impairment loss decreases value less costs of disposal, an appropriate valuation model
and the decrease can be related objectively to an event occurring is used. These calculations are corroborated by valuation
after the impairment was recognised (such as an improvement in the multiples, quoted share prices for publicly traded subsidiaries
debtor’s credit rating), the previously recognised impairment loss is or other available fair value indicators.

Maximum exposure to credit risk before collateral held:

2018 2017
Shs ‘000 Shs ‘000
Credit risk exposure relating to statement of financial position items:

Mobile money 28,312,986 11,690,851
Balances with Bank of Uganda (Note 14) 120,508,785 175,628,018
Deposits and balances due from other banks (Note 15) 140,363,660 64,425,658
Investment securities (Note 16) 939,802,463 751,252,754
Loans and advances (Note 18) 1,529,199,629 1,371,633,116
Other assets (Note 17) 23,791,413 22,643,003
2,781,978,936 2,397,273,400
Credit risk exposures relating to off-statement of financial position items:

- Letters of credit, guarantees and performance bonds (Note 35) 38,103,779 38,236,790
- Commitment to extend credit (Note 35) 18,186,477 20,135,169
56,290,256 58,371,959
2,838,269,192 2,455,645,359
The above table represents the worst-case scenario of credit risk exposure to the Bank at 31 December 2018 and 31 December 2017;
without taking into account any collateral held or other credit enhancements attached. For the financial assets, the exposures set out above are
based on carrying amounts as reported in the statement of financial position. As shown above, 53.9% (2017: 55.8%) of the total maximum
exposure is derived from loans and advances to banks and customers. Investment in debt securities represents 33.1% (2017: 30.6%) of the
total maximum exposure.

The maximum exposure to credit risk on loans and advances to customers may be further analysed by economic sector and business segment as
follows:
As at 31 December 2018 2017

Stage1 Stage 2 Stage3 Total
12-Month ECL Life time ECL Life time ECL
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Economic Sector
Agriculture, Fishing & Forestry 228,178,306 8,754,731 11,484,183 248,417,220 218,080,770
Building, mortgage, construction, real estate 306,465,634 3,660,252 4,792,194 314,918,080 285,244,549
Community, Social, Other Services 135,132,742 3,043,199 2,777,232 140,953,173 147,859,123
Other Activities 10,688,424 118,544 444,537 11,251,505 5,817,562
Personal Loans and Household Loans 549,667,879 4,083,851 11,528,052 565,279,782 473,154,451
Trade 238,182,830 4,987,822 7,457,223 250,627,875 219,732,887
Transport and Communication 24,533,155 779,030 1,318,384 26,630,569 21,743,774
Gross Carrying Amount 1,492,848,970 25,427,429 39,801,805 1,558,078,204 1,371,633,116
Loss Allowance (17,535,613) (662,897) (10,680,065) (28,878,575) (36,328,189)
Carrying Amount 1,475,313,357 24,764,532 29,121,740 1,529,199,629 1,335,304,927
As at 31 December 2018 2017

Stage1 Stage 2 Stage3 Total
12-Month ECL Life time ECL Life time ECL
Loan Products
Corporate 221,680,718 2,599,911 2,290,189 226,570,818 198,739,946
Education Loans 9,062,017 83,730 299,646 9,445,393 9,837,026
Micro Business- Less than Shs.5m 85,159,690 11,750,320 9,492,287 106,402,297 96,532,209
Micro Business- greater than Shs.5m 221,439,054 2,546,317 8,160,308 232,145,679 227,368,126
Micro Housing Loans 84,342,767 599,277 1,646,173 86,588,217 59,797,987
Mortgage Loans 51,922,836 1,351,604 1,804,564 55,079,004 49,973,367
Salary Loans 492,521,768 2,744,341 9,738,504 505,004,613 440,363,999
SME 213,798,144 3,126,176 4,146,353 221,070,673 188,208,586
Staff Loans 48,930,209 363,924 745,340 50,039,473 42,010,423
Overdrafts 37,650,380 261,829 633,898 38,546,107 34,412,326
Leases 26,341,387 - 844,543 27,185,930 24,389,121
Gross Carrying Amount 1,492,848,970 25,427,429 39,801,805 1,558,078,204 1,371,633,116
Loss Allowance (17,535,613) (662,897) (10,680,065) (28,878,575) (36,328,189)
Carrying Amount 1,475,313,357 24,764,532 29,121,740 1,529,199,629 1,335,304,927
The movement in the loss allowance is set out in Note 18.
Collateral and other credit enhancements
The Bank employs a range of policies and practices to mitigate credit risk. The most common of these is accepting collateral for funds advanced.
The Bank has internal policies on the acceptability of specific classes of collateral or credit risk mitigation.

Collateral held
The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property such as land and buildings and
plant and machinery, other registered securities over assets e.g. chattels for micro loans, and corporate guarantees. Estimates of fair value are
based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as
impaired. Collateral generally is not held over loans and advances to Banks within the board approved risk tolerance limit, except when securities
are held as part of reverse repurchase and securities borrowing activity.
Collateral usually is not held against government securities and deposits with other banks and no such collateral was held at 31 December 2018
or 31 December 2017.
The Bank closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that the Bank will take
possession of collateral to mitigate potential credit losses. Financial assets that are credit-impaired and related collateral held in order to mitigate
potential losses as at 31 December 2018 are shown below:
Gross Exposure Impairment Allowance Carrying Amount Fair Value of Collateral held
Shs’000 Shs’000 Shs’000 Shs’000
Corporate 2,290,189 824,582 1,465,607 1,656,944
Education Loans 299,646 80,303 219,343 235,991
Micro Business- Less than Shs.5m 9,492,288 1,506,670 7,985,618 16,039,976
Micro Business- greater than Shs.5m 8,160,308 1,327,343 6,832,965 10,454,190
Micro Housing Loans 1,646,173 204,026 1,442,147 2,061,876
Mortgage Loans 1,804,565 355,733 1,448,830 2,261,829
Salary Loans 9,738,504 5,253,253 4,485,251 447,768
SME 4,146,353 630,550 3,515,803 4,121,086
Staff Loans 745,340 199,434 545,906 93,993
Overdrafts 633,898 239,327 394,571 239,724
Leases 844,544 58,843 785,699 520,756
Total 39,801,808 10,680,064 29,121,740 38,134,133
As at 31 December 2018, the Bank had no loans and advances to a single borrower or group of related borrowers exceeding 25 % of core
capital (2017: Nil).
b) Market risk

Market risk arises from decrease in the market value of a portfolio of financial instruments caused by adverse movements in the market variables
such as currency exchange rates, interest rates, credit spreads and implied volatilities on all the above. The objective of market risk management is
to manage and control market risk exposures within acceptable limits, while optimizing the return on risk. The Board grants the general authority
to take on market risk exposures to the Board Asset and Liability Committee (ALCO). The ALCO sets market risk standards and policies to
ensure that the measurement, reporting, monitoring and management of market risk is maintained. The day to day implementation of these
policies rests with the Treasury Department.
The Bank manages risk through a range of market risk and capital risk limits. Stress testing and basic risk management measures (permissible
instruments, concentration of exposures, gap limits and maximum tenor) are used to facilitate this process.

i) Interest rate risk
Methods of measuring and managing the interest rate risk
The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position
and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that
unexpected movements arise. The Asset and Liability Committee sets limits on the level of mismatch of interest rate repricing
that may be undertaken, which is monitored monthly.
Gap analysis
Under this, interest sensitive assets and liabilities are classified into various time bands according to their maturity in the case
of fixed interest rates, and residual maturity towards next repricing date in the case of floating interest rates. The size of the
gap in a given time band is analyzed to study the interest rate exposure and the possible effects on the Bank’s earnings. Items
in assets and liabilities are captured into various buckets, using judgmental factors by studying behavioral patterns, customer
segmentation, and roll over history, etc., on a continuous basis which eventually leads to a dynamic gap analysis. In order to
evaluate the earnings exposure, interest Rate Sensitive Assets (RSA) in each time band are netted off against the interest Rate
Sensitive Liabilities (RSL) to produce a repricing “Gap” for that time band.
A positive gap indicates that the Bank has more RSA than RSL. A positive or asset sensitive gap means that an increase in
market interest rates could cause an increase in the net interest margin and vice versa. Conversely, a negative or liability
sensitive gap implies that the Bank’s net interest margin could decline as a result of increase in market rates and vice versa.
The positive or negative gap is multiplied by the assumed interest rate changes to derive the Earnings at Risk (EaR). The EaR
method helps to estimate how much the earnings might be impacted by an adverse movement in interest rates. The assumed
changes in interest rate are estimated on basis of past trends, forecasting of interest rates, etc. The off-statement of financial
position items are excluded from the gap report because the Bank does not bear any interest rate risk on these items.
The table on the following page summarises the Bank’s exposure to interest rate risks. Included in the table are the Bank’s
assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. The carrying
amounts of derivative financial instruments which are principally used to reduce the exposure to interest rate movements
are included in ‘Other Assets’ and ‘Other Liabilities” under the heading ‘Non-interest Bearing’. The off-statement of financial
position gap represents the net notional amounts of all interest-sensitive derivative financial instruments.

Over 5 Non interest

31 December 2018 <1 mth 1-12 mth 1-5 Years Years bearing TOTAL
Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000
Financial assets
Cash and short-term funds - - - - 315,313,160 315,313,160
Due from other banks 109,582,142 - - - 30,784,970 140,367,112
Investments 30,799,170 732,150,691 176,852,602 - - 939,802,463
Loans and advances to customers 16,683,581 479,770,203 897,697,399 135,048,446 1,529,199,629
Other financial assets - - - - 23,791,413 23,791,413
Total financial assets 157,064,893 1,211,920,894 1,074,550,001 135,048,446 369,889,543 2,948,473,777

Non-financial assets
Property & equipment and intangible assets - - - - 193,716,263 193,716,263
Other assets - - - - 28,645,524 28,645,524
Total non-financial assets - - - - 222,361,787 222,361,787
Total assets 157,064,893 1,211,920,894 1,074,550,001 135,048,446 592,251,330 3,170,835,564

Financial liabilities
Due to customers and other banks 668,012,566 1,620,618,866 463,696 - - 2,289,095,128
Managed/ borrowed funds - - 114,101,703 - 11,742,513 125,844,216
Other liabilities - - - - 24,216,649 24,216,649
Total Financial Liabilities 668,012,566 1,620,618,866 114,565,399 - 35,959,162 2,439,155,993

Other non-financial liabilities - - - - 86,907,365 86,907,365
Total liabilities 668,012,566 1,620,618,866 114,565,399 - 122,866,527 2,526,063,358
Net on-SOFP gap (510,947,673) (408,697,972) 959,984,602 135,048,446 469,384,803 644,772,206
Net off-SOFP gap - - 56,290,256 - - 56,290,256
Total interest sensitivity gap (510,947,673) (408,697,972) 1,016,274,858 135,048,446 469,384,803 701,062,462

Interest rate risk (continued)
Over 5 Non interest

31 December 2017 <1 mth 1-12 mth 1-5 Years Years bearing TOTAL
Shs’000 Shs ‘000 Shs’000 Shs’000 Shs’000 Shs’000
Financial assets
Cash and short-term funds 60,060,837 - - - 242,427,647 302,488,484
Due from other banks 56,580,223 - - - 7,845,435 64,425,658
Investments - 511,738,412 7,113,861 - 232,400,481 751,252,754
Loans and advances to customers 21,957,341 404,086,188 785,350,836 123,910,562 - 1,335,304,927
Other financial assets - - - - 23,905,799 23,905,799
Total financial assets 138,598,401 915,824,600 792,464,697 123,910,562 506,579,362 2,477,377,622

Non-financial assets
Property & equipment and intangible assets - - - - 207,288,276 207,288,276
Other assets - - - - 21,614,172 21,614,172
Total non-financial assets - - - - 228,902,448 228,902,448

Total assets 138,598,401 915,824,600 792,465,697 123,910,562 735,481,810 2,706,280,070

Financial liabilities
Due to customers and other banks 490,516,679 1,427,480,448 1,002,997 5,048 - 1,919,005,172
Managed/ borrowed funds - - 130,803,258 12,069,117 142,872,375
Other liabilities 24,216,649 24,216,649
Cap & Reserves
Total financial liabilities 490,516,679 1,427,480,448 131,806,255 5,048 36,285,766 2,086,094,196
Non-financial liabilities
Other non-financial liabilities - - - - 62,404,727 62,404,727
Total liabilities 490,516,679 1,427,480,448 131,806,255 5,048 98,690,493 2,148,498,926
Net on-SOFP gap (351,918,278) (511,655,848) 660,659,442 123,905,514 636,791,317 557,781,144

Interest Sensitivity Analysis
Interest sensitivity analysis is a measure of how much the price of a fixed-income asset will fluctuate as a result of changes in the interest rate
environment. Financial assets that are more sensitive have greater price fluctuation than those with less sensitivity.

The table below shows the increase / (decline) in 12-month earnings for upward and downward instantaneous parallel rate shocks.

Impact on profit before tax: 2018 2017
Shs million Shs million

+ 500 bps rate shock 21,342 17,166
- 500 bps rate shock (21,342) (17,166)
+ 100 bps rate shock 4,268 3,433
- 100 bps rate shock (4,268) (3,433)

Assuming no management intervention, a parallel 500bps increase in all yield curves would increase the forecast net interest income for the
next financial year by Shs 21,342 million whilst a parallel decrease in all yield curves would decrease the forecast net interest income for the
next financial year by Shs 21,342 million. A parallel 100bps increase in all yield curves would increase the forecast net interest income for
the next financial year by Shs 4,268 million whilst a parallel decrease in all yield curves would decrease the forecast net interest income for
the next financial year by Shs 3,433 million.

Impact on equity: 2018 2017
+ 500 bps rate shock 11,205 4,291

- 500 bps rate shock (11,205) (4,291)
+ 100 bps rate shock 2,241 858
- 100 bps rate shock (2,241) (858)
Assuming no management intervention, a parallel 500bps increase in all yield curves would increase the equity for the next financial year by
Shs 11,205 million whilst a parallel decrease in all yield curves would decrease the equity for the next financial year by Shs 11,205 million. A
parallel 100bps increase in all yield curves would increase the equity for the next financial year by Shs 2,241 million whilst a parallel decrease
in all yield curves would decrease the equity for the next financial year by Shs 2,241 million.

ii) Currency risk

The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
The Asset and Liability Committee sets limits on the level of exposure by currency and in total for both overnight and intra-day positions,
which are monitored daily. The table below summaries the Bank’s exposure to foreign currency exchange rate risk at 31 December 2018
and 31 December 2017. Included in the table are the Bank’s assets and liabilities at carrying amounts, categorized by currency.

31 December 2018 GBP USD Euro, TZ, & Kshs Total

Shs’000 Shs’000 Shs’000 Shs’000
Assets
Cash and balances at the Central Bank 1,337,848 20,235,083 1,158,102 22,731,033
Due from other banks 341,757 7,585,561 22,857,652 30,784,970
Investments - 37,120,688 424,700 37,545,388
Loans and advances to customers - 41,184,205 - 41,184,205
Other accounts receivable - 3,294,810 77 3,294,887
Total assets 1,679,605 109,420,347 24,440,531 135,540,483

Liabilities
Customer deposits and balances due to other banks 1,143,425 102,629,795 24,834,058 128,607,278
Other accounts payable 22,897 10,461,818 5,459 10,490,174

Total liabilities 1,166,322 113,091,613 24,839,517 139,097,452

Net on-SOFP position 513,283 (3,671,266) (398,986) (3,556,969)
Net off-SOFP position - 6,854,785 - 6,854,785
Overall net position 513,283 3,183,519 (398,986) 3,297,816
% of Net position over core capital 0.09 0.57 (0.07) 0.59
GBP USD Euro, TZ, & Kshs Total

31 December 2017 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Total assets 1,986,695 106,717,154 19,978,419 128,682,268

Total liabilities 1,062,450 106,142,698 19,845,410 127,050,558
Net on-SOFP position 924,245 574,456 133,009 1,631,710
Net off-SOFP position - 12,394,595 - -
Overall net position 924,245 12,969,051 133,009 14,026,305
% of Net position over core capital 0.20 2.78 0.03 3.00
The table below shows the increase (decline) in 12-month earnings for upward (appreciation) and downward (depreciation) of the shilling
on all foreign currencies on instantaneous parallel rate changes over the next 12 months.
2018 2017

+500bps exchange rate change 199 719
-500bps exchange rate change (199) (719)
+100bps exchange rate change 40 144
-100bps exchange rate change (40) (144)
Assuming no management intervention, a parallel appreciation of the shilling by 500bps on all foreign currencies would increase the
forecast earnings by Shs 199million whilst a fall or depreciation would reduce forecast earnings by Shs 199 million.
A 100bps appreciation of the shilling on all currencies would increase the forecast earnings for the next financial year by Shs 40 million
whilst a full or depreciation shall reduce forecast earnings by Shs 40 million.


c) Liquidity risk
Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace
funds when they are withdrawn.
The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, and calls on
cash settled contingencies. The Bank does not maintain cash resources to meet all of these needs as experience shows that a minimum level of
reinvestment of maturing funds can be predicted with a high level of certainty. Bank of Uganda requires that the Bank maintain a cash reserve ratio
of 8.0% of total deposits. In addition, Bank of Uganda sets limits on the minimum proportion of liquid funds available to meet such calls at 20%
and other borrowing facilities that should be in place to cover withdraws at unexpected levels of demand. The Treasury Department monitors
liquidity ratios on a daily basis.
The Bank incorporates the following elements as part of a cohesive liquidity management process:
• Short term and long-term cash flow managements

• Maintaining a structurally sound financial position
• Foreign currency liquidity management
• Preserving a diversified funding base
• Undertaking regular liquidity stress testing
• Maintaining adequate liquidity contingency plan.
The table below presents the undiscounted cash flows of the bank’s financial assets and liabilities by remaining contractual maturities at the
reporting date.
2018 <1month 1-12 months 1-5 years over 5 years Total

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Assets
Cash and short-term funds 315,313,160 - - - 315,313,160
Due from other Banks 140,363,606 - - - 140,363,606
Government securities 31,738,972 732,150,691 175,912,800 - 939,802,463
Loans and advances at amortised cost 16,683,581 479,770,203 897,697,399 135,048,446 1,529,199,629
Other Financial assets 2,027,284 - 23,781,880 - 25,809,164
506,126,603 1,211,920,894 1,097,392,079 135,048,446 2,950,488,022
Liabilities
Due to customers and other Banks 668,012,566 1,620,618,866 463,696 - 2,289,095,128
Managed funds - - 11,742,513 - 11,742,513
Borrowed funds 10,944,808 11,377,399 64,801,860 26,977,636 114,101,703
Other liabilities 21,080,699 78,300,801 11,742,514 - 111,124,014
700,038,073 1,710,297,066 88,750,583 26,977,636 2,526,063,358
Net liquidity gap-on balance sheet (193,911,470) (498,376,172) 1,008,641,496 108,070,810 424,424,664
Off balance sheet 21,666,217 32,764,250 1,859,788 56,290,255
Net liquidity gap (172,245,253) (465,611,922) 1,010,501,284 108,070,810 480,714,919


Assets
Due from other banks 64,425,658 - - - 64,425,658
Investments 232,399,481 511,738,412 7,114,861 - 751,252,754
Loans and advances at amortised cost 21,957,341 404,086,188 1,014,876,301 206,922,221 1,647,842,051
Other Financial assets 1,275,903 - 29,243,676 - 30,519,579
622,546,867 915,824,600 1,051,234,838 206,922,221 2,796,528,526
Liabilities
Due to customers and other banks 490,516,679 1,427,480,448 1,296,131 8,430 1,919,301,688
Managed funds - - 15,596,419 - 15,596,419
Borrowed funds 27,646,364 11,377,398 83,740,755 6,308,698 129,073,215
Other liabilities - 25,359,263 - - 25,359,263
518,163,043 1,464,217,109 100,633,305 6,317,128 2,089,330,585
Net liquidity gap 104,383,824 (548,392,509) 950,601,533 200,605,093 707,197,941
Off balance sheet 25,160,513 33,011,447 258,452 - 58,430,412
The table below presents the cash flows of the bank’s financial assets and liabilities at the net carrying amounts by remaining contractual maturities.

Assets
Investments 31,738,972 732,150,691 175,912,800 - 939,802,463
Other assets 2,027,284 - 23,781,880 - 25,809,164
506,126,603 1,211,920,894 1,097,392,079 135,048,446 2,950,488,022
Liabilities
Due to customers and other banks 668,012,566 1,620,618,866 463,696 - 2,289,095,128
Managed funds - - 11,742,513 - 11,742,513
Borrowed funds 10,944,809 11,377,399 64,801,860 26,977,636 114,101,703
Other liabilities 21,080,699 78,300,801 11,742,514 - 111,124,014
700,038,074 1,710,297,066 88,750,583 26,977,636 2,526,063,358
Off balance sheet gap 21,666,217 32,764,250 1,859,788 - 56,290,255


Assets
Investments 232,399,481 511,738,412 7,114,861 - 751,252,754
Other assets 1,262,796 1,720,270 181,532,976 68,292,205 252,808,247
622,533,759 917,544,870 973,998,673 192,202,768 2,706,280,070
Liabilities
Due to customers and other banks 490,516,679 1,427,480,448 1,002,997 5,048 1,919,005,172
Managed funds - - 12,069,117 12,069,117
Borrowed funds 27,646,363 11,377,399 64,801,860 26,977,636 130,803,258
Other liabilities 16,176,345 69,714,523 - 86,621,379
534,339,387 1,508,572,370 77,873,974 26,982,684 2,148,498,926
Off balance sheet gap 25,160,512 33,011,447 200,000 58,371,959
d) Fair value measurement
i) Fair value versus carrying amounts of financial assets and liabilities carried at amortised cost
The fair values of financial assets and liabilities together with the carrying value shown in the statement of financial position are analysed as follows:
31 December 2018 3
1 December 2017
Carrying Amount Fair Value Carrying Amount Fair Value
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Assets
Loans and receivables
Cash and short-term funds 315,313,160 315,313,160 302,488,484 302,488,484
Due from other banks 140,363,606 140,363,606 64,425,658 64,425,658
Loans and advances at amortised cost 1,529,199,629 2,025,486,628 1,335,304,927 1,647,842,051
Other financial assets 25,809,164 35,462,777 23,905,799 30,519,579
Financial assets at fair value
Financial assets at fair value through profit or loss 124,948,814 124,948,814 141,544,714 141,544,714
Financial assets at fair value through OCI 14,470,271 14,470,271 9,135,473 9,135,473
Financial assets-amortised cost
Government securities and other investments 800,383,379 800,383,379 600,572,567 600,572,567
2,950,488,023 3,456,428,635 2,477,377,622 2,796,528,526

31 December 2018 3
1 December 2017
Carrying Amount Fair Value Carrying Amount Fair Value
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Liabilities
Financial liabilities measured at amortised cost
Due to customers and other banks 2,289,095,128 2,289,283,353 1,919,005,172 1,919,301,688
Managed funds 11,742,513 16,509,069 12,069,117 15,596,419
Borrowed funds 107,603,439 166,753,157 130,803,258 167,815,336
Other Financial liabilities 111,124,014 115,890,570 25,359,263 25,359,263
2,519,565,094 2,588,436,149 2,087,36,810 2,128,072,706
ii) Fair value hierarchy
At 31 December 2018 Level 1 Level 2 Level 3 Total

Shs‘000 Shs‘000 Shs‘000 Shs‘000
Assets measured at fair value

Government securities at fair value - 139,419,084 - 139,419,084
Assets and liabilities not measured at fair value

for which fair values have been disclosed:
Loans and advances - - 2,025,486,628 2,025,486,628
Government securities and other investments - 800,383,379 - 800,383,379
Other Assets - - 35,462,777 35,462,777
Managed funds - - 16,509,069 16,509,069
Borrowed funds - - 166,753,157 166,753,157
Other liabilities - - 115,890,570 115,890,570
At 31 December 2017 Level 1 Level 2 Level 3 Total

Shs‘000 Shs‘000 Shs‘000 Shs‘000
Government securities at fair value - 150,680,187 - 150,680,187
Assets and liabilities not measured at fair value

for which fair values have been disclosed:
Loans and advances - - 1,647,842,051 1,647,842,051
Government securities at armotised cost - 600,572,567 - 600,572,567
Other Assets - - 42,210,430 42,210,430
Managed funds - - 15,596,419 15,596,419
Borrowed funds - - 167,815,336 167,815,336
Other liabilities - - 25,359,263 25,359,263
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:
• Long-term fixed-rate and variable-rate receivables are evaluated by the Bank based on parameters such as interest rates, individual
creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken
into account for the expected losses of these receivables.
• Fair value of the government securities is estimated by discounting future cash flows using observable market rates currently
available for securities on similar terms, and remaining maturities.
• Fair values of the Bank’s interest-bearing borrowings and loans are determined by using DCF method using discount rate that
reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 December 2018
was assessed to be insignificant.
Financial instruments not measured at fair value

i) Loans and advances
The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received.
Expected cash flows are discounted at current market rates to determine fair value.
(ii) Government securities and investments held-to-maturity
The fair value for these held-to-maturity assets is based on market prices. Where this information is not available, fair value is estimated using
quoted market prices for securities with similar credit, maturity and yield characteristics. The carrying amount of investment securities is a
reasonable approximation of fair value.
(iii) Deposits due to customers and other banks
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand
and this is the carrying amount. The estimated fair value of interest-bearing deposits not quoted in an active market is based on discounted
cash flows using interest rates for new debts with similar remaining maturity. The carrying amounts are a reasonable approximation of this.
(iv) Borrowings and managed funds
The interest rates charged on borrowings held by the bank based on WACC or other bases for determining market interest rates. The
interest rates are variable and in line with market rates for similar facilities. The fair values of such interest-bearing borrowings not quoted in
an active market is based on discounted cash flows using interest rates for similar facilities.

f) Capital management

The Bank monitors the adequacy of its capital using ratios established by Financial institutions act 2004, which ratios are broadly in line with those
for the Basel committee for banking supervision. These ratios measure capital adequacy by comparing the Bank’s eligible capital with its statement
of financial position assets, off-statement of financial position commitments and market and other risk positions at weighted amounts to reflect their
relative risk.
The market risk approach covers the general market risk and the risk of open positions in currencies and debt and equity securities. Assets are
weighted according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50%, 100%)
are applied; for example, cash and money market instruments have a zero-risk weighting which means that no capital is required to support the
holding of these assets. Property and equipment carries a 100% risk weighting, meaning that it must be supported by capital equal to 100% of
the carrying amount. Certain asset categories have intermediate weightings. Off-statement of financial position credit related commitments and
forwards are taken into account by applying different categories of credit conversion factors, designed to convert these items into balance sheet
equivalents. The resulting credit equivalent amounts are then weighted for credit risk using the same percentages as for statement of financial
position assets.

The Bank’s objectives when managing capital, which is broader than the equity on the face of the statement of financial position, are:
• To comply with the capital requirements set by Bank of Uganda;

• To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns to the shareholders; and
• To maintain a strong capital base to support the development of the Bank’s business.

Capital adequacy and the use of regulatory capital are monitored monthly by management, employing techniques based on guidelines developed
by Basel committee as implemented by Bank of Uganda, for supervisory purposes. The required information is filed with Bank of Uganda on a
quarterly basis.
Bank of Uganda requires each bank to:
• Hold the minimum level of the regulatory capital of Shs 25,000,000,000 (Shs Twenty-five billion);
• Maintain a ratio of total regulatory capital to the risk weighted assets of not less than 12.0%; and
• Maintain core capital of not less than 10.0% of risk weighted assets.

The Bank’s regulatory capital is divided into two tiers:
Tier 1 capital (core capital): Share capital, share premium, retained earnings and reserves created by appropriations of retained earnings.
The book value of goodwill, current year losses, prohibited loans to insiders; investments in unconsolidated financial statements, deficiencies in
provisions for losses and other deductions determined by BOU are deducted in arriving at tier 1 capital.
Tier 2 capital (Supplementary Capital): Revaluation reserves, unidentified impairment allowance, statutory regulatory reserves (reserves
created by appropriations of retained earnings), subordinated debt and hybrid capital instruments.

The table below summaries the composition of regulatory capital and the ratios of the Bank, for the years ended 31 December 2018 and 31
December 2017. During those two years, the Bank complied with all of the externally imposed capital requirements to which it is subject.
2018 2017
Shs ‘000 Shs ‘000
Core Capital (Tier 1)

Permanent equity 25,116,624 25,116,624
Share premium 1,138,927 1,138,927
Retained earnings 578,894,719 503,328,953
605,150,270 529,584,504

Computer software (45,031,355) (47,369,472)
Deferred income tax asset - -
Fair value gain on held for trading securities - (1,240,095)
Unrealised foreign exchange gains - (13,684)
Tier 1 Capital 560,118,915 480,961,253

Supplementary Capital (Tier 2)
Unencumbered general provisions for losses 16,087,143 14,193,229
Tier 2 Capital 16,087,143 14,193,229
Total Capital (Tier 1+Tier 2) 576,206,058 495,154,482
The increase of the regulatory capital in the year 2018 is mainly due to the contribution of the current year profit. The risk–weighted assets are
measured by means of hierarchy of five risk weights classified according to the nature of portfolio holding and reflecting an estimate of credit and
market risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted
for off-statement of financial position exposure, with some adjustments to reflect the more contingent nature of potential losses.
For purposes of the risk weighted assets calculation, the analysis of loans and advances to customers (net of those secured by cash) is as below:
2018 2017
Shs ‘000 Shs ‘000
Loans and advances to customers

Overdrafts 38,546,108 34,454,148
Commercial loans 577,820,379 496,417,264
Micro finance loans 870,447,086 778,352,551
Finance leases 27,185,930 24,389,120
Staff loans 44,078,701 38,020,033
Gross loans and advances 1,558,078,204 1,371,633,116
Add/(Less):
Off-market loan discount 23,231,740 20,922,733
Cash secured loans (890,231) (663,694)
Specific provisions (24,493,284) (25,063,555)
Interest in suspense (4,996,346) (6,541,433)

Net loans and advances 1,550,930,083 1,360,287,167

The table below summarizes the composition of the risk weighted assets of the Bank for the years ended 31 December 2018 and
31 December 2017.
Nominal amounts Risk weighted amounts

2018 2017 2018 2017
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Assets
Notes, coins & other cash assets 148,821,771 128,123,261 0% - -
Balances with Bank of Uganda 166,491,389 175,628,018 0% - -
Due from commercial banks in Uganda 109,157,442 56,132,710 20% 21,831,488 11,226,542
Due from commercial banks outside Uganda

(1) Rated AAA to AA (-) - - 20% - -
(2) Rated A (+) to A (-) 31,015,411 8,102,588 50% 15,507,705 4,051,294
(3) Rated A (-) and non-rated 190,753 190,359 100% 190,753 190,359
Investment securities 939,802,463 751,252,754 0% - -
Loans and advances to customers 1,550,930,084 1,360,287,167 100% 1,550,930,084 1,360,287,167
(net of those secured by cash)
Other accounts receivable 52,436,937 55,250,391 100% 52,436,937 55,250,391
Property and equipment 148,684,908 148,925,588 100% 148,684,908 148,925,588
Off-statement of financial position items

Contingencies secured by cash collateral 2,564,781 4,794,959 0% - -
Guarantees & acceptances 23,062,064 17,329,380 100% 23,062,064 17,329,380
Performance bonds 7,194,640 6,018,142 50% 3,597,320 3,009,071
Documentary credits (trade related) 5,282,294 10,094,310 20% 1,056,459 2,018,862
Other commitments 18,186,477 20,135,169 50% 9,093,239 10,067,585
Weighted items for market risk 1,091,166 - 8.33 9,089,411 -
Total risk-weighted assets 3,204,912,580 2,742,264,796 1,835,480,368 1,612,356,239
2018 Ratio 2017 Ratio

Shs ’000 Shs ‘000
Capital ratios
Tier 1 Capital (Core) 560,118,915 31% 480,961,253 30%
Tier 1 + Tier 2 Capital (Total) 576,206,058 31% 495,154,482 31%

FIA 2004 minimum ratio capital requirement
Core capital 10% 8%
Total capital 12% 12%


5. Interest income
2018 2017
Shs ‘000 Shs ‘000

Interest on loans and advances 341,738,452 311,859,031
Interest on treasury bills at amortised cost 48,283,647 44,417,866
Interest on treasury bills at FVOCI 1,241,064 2,317,443
Interest on inter-bank placements 35,581,024 24,383,423
426,844,187 382,977,763
6. Interest expense
2018 2017
Shs ‘000 Shs ‘000
Savings accounts 24,590,114 21,448,366

Current accounts 1,786,250 1,038,695
Fixed deposit accounts 16,214,626 17,103,072
Managed/borrowed funds 12,379,196 11,055,006
Inter-bank borrowings 288,103 471,973
55,258,289 51,117,112

7. Fee and commission income
2018 2017
Shs ‘000 Shs ‘000
Loan processing fees and commitment fees on overdrafts 24,791,683 23,459,167

Ledger fees 33,831,968 31,047,378
Other commissions and fees 49,155,844 38,632,804
107,779,495 93,139,349
8. Net trading income

2018 2017
Shs ‘000 Shs ‘000
Interest on treasury bills FVPL 1,768,670 5,994,644

Interest on treasury bonds- FVPL 10,550,296 5,492,850
Fair value loss/(gain) on FVPL (4,847,792) 1,240,095
Loss/(gain) on sale of securities (307,506) 1,771,388
Foreign currency trading commission 8,997,830 7,834,526
Realised revaluation (loss)/gain on foreign exchange trading (687,071) (2,046,108)
Unrealised revaluation (loss)/gain on foreign exchange trading - 13,684
Charges on T-bills/Bonds secondary market - 19,835
15,474,427 20,320,914
9. Other operating income

2018 2017
Shs ‘000 Shs ‘000
Recovery of written off loans 10,434,623 7,131,325

Sale of ATM cards & banking stationery 6,302,243 5,135,330
Grant income 249,155 116,783
Uncollected ATM cards 8,069 43,604
Other income 1,142,662 3,023,581
18,136,752 15,450,623


10. Employee benefits expense
2018 2017
Shs ‘000 Shs ‘000
Staff salaries 105,332,810 91,894,086

Staff bonuses 23,586,028 23,924,996
NSSF contributions 11,946,378 10,709,115
Retirement plan contributions 8,181,687 7,298,756
149,046,903 133,826,953

11. Impairment of financial Assets
2018 2017
Shs ‘000 Shs ‘000
Balances with other banks (Note 15) 33 -

Credit losses impairment (Note 18) 15,711,815 27,852,108
Other assets (Note 17) 249,131 -
15,960,979 27,852,108

12. Operating expenses
2018 2017
Shs ‘000 Shs ‘000

Office expenses 22,522,848 20,281,151
Software maintenance and license costs 21,719,811 19,967,459
Premises costs (rent, maintenance and utilities) 21,028,187 19,568,283
Insurance 14,012,027 9,997,191
Visa and Agent Banking Expenses 11,564,052 -
Transport & travel 9,577,803 8,263,148
Advertising and marketing 8,282,760 6,070,467
Telephone, telex, internet and postage 7,700,416 7,167,396
Equipment lease expenses 7,052,023 5,586,493
SMS alert and Bank charges 6,200,323 5,423,925
Stationery 6,017,474 5,056,812
Directors’ fees and other expenses 4,901,744 3,938,038
Consultancy and legal fees 4,414,755 2,514,212
Security 4,204,926 4,132,141
Recruitment and training 4,034,669 3,799,860
Motor vehicle & cycle expenses 3,751,176 2,935,003
Other operating expenses 2,349,188 2,111,273
Cash shortages and other losses 1,990,853 1,899,109
Staff transfer 1,457,260 1,555,058
Corporate Social Responsibility (CSR) 1,167,630 1,069,286
Subscription 966,927 858,500
Auditors’ remuneration 550,210 304,195
Release of unutilized accruals (1,781,907) (2,895,121)
163,685,155 129,603,879
13 Income tax expense

2018 2017
Shs ‘000 Shs ‘000

Current income tax 40,423,918 32,353,760
Deferred income tax credit/(charge) (Note 21) 869,697 4,875,642
Prior year under provision (59,462) (208,427)
41,234,153 37,020,975

The income tax on the Bank’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:
2018 2017
Shs ‘000 Shs ‘000
Profit before income tax 148,867,441 137,296,403

Tax calculated at 30.0% (2017: 30.0%) 44,660,232 41,188,920
Tax effect of:
- Expenses not deductible for tax 2,817,752 1,512,316
- Income not subject to tax: interest on government securities (18,553,103) (16,736,330)
- Prior year adjustment under provision- deferred tax (372,801) (208,427)
- Prior year adjustment under/(over) provision- current tax 313,339 (380,064)
- 20% final tax on government securities 12,368,734 11,644,560
Income tax expense 41,234,153 37,020,975
The movement in current income tax payable was as follows:

2018 2017
Shs ‘000 Shs ‘000
At start of year 3,483,328 6,607,864

Prior year tax under/(over) provision 313,339 (380,064)
Current income tax expense 40,423,919 32,353,760
Income tax paid during year (35,840,802) (35,098,232)
At end of year 8,379,784 3,483,328
14. Cash and balances with Bank of Uganda

2018 2017
Shs ‘000 Shs ‘000
Coins and notes 120,508,785 115,169,615

Balances with Bank of Uganda 166,491,389 115,581,169
Bank of Uganda repurchase agreements (repos) - 60,046,849
Mobile Money Float 28,312,986 11,690,851
315,313,160 302,488,484
Balances on hand and with the Central Bank are non-interest bearing and include the minimum cash reserve requirement. The Bank of Uganda
deposit auction amounting to Shs 176.8 billion has been disclosed under government securities (Note 16).
15. Deposits and balances due from other banks

2018 2017
Shs ‘000 Shs ‘000
Balances with foreign banks 30,784,970 7,845,435

Placements with local banks 109,157,443 56,132,710
Placements with foreign banks 424,700 447,513
140,367,113 64,425,658
Less provision (3,507) -
140,363,606 64,425,658
Movement in impairment of balances with other banks

Opening balance 3,474 -
Charge to proft and loss (Note 11) 33 -
Provision at year end 3,507 -
The weighted average effective interest rate on placement with other banks was 9.3% (2017:10.7%).
16. Government securities

2018 2017
Shs ‘000 Shs ‘000
Financial assets – FVPL:

- Treasury bills 35,940,149 12,772,011
- Treasury bonds 89,008,664 128,772,703
124,948,813 141,544,714
Financial assets – Amortised cost:

- Treasury bills 623,530,776 368,187,074
Financial assets – FVOCI:
- Treasury bills 14,470,271 9,135,473
Other securities
- Bank of Uganda Deposit Auction 176,852,603 232,385,493
939,802,463 751,252,754
Treasury bills are debt securities issued by the Central Bank for a term of three months, six months and twelve months, whilst bonds are
also issued for a term of two years, three years, five years and ten years. The weighted average effective interest rate on treasury bills and
bonds was 10.2% (2017: 8.9%) and 12.2% (2017: 13.6%) respectively.
Maturities Profile
2018 2017
Shs ‘000 Shs ‘000
Securities less than 90 days to Maturity 355,908,904 316,164,973

Securities Greater than 90 days to Maturity 583,893,559 435,087,781
Total 939,802,463 751,252,754
17. Other assets

2018 2017
Shs ‘000 Shs ‘000
Cheques in transit 860 116,596

Staff advances 9,533 13,107
Accrued late fee payment 1,471,051 1,707,163
Accounts receivable 157,838 1,231,736
Prepayments 12,789,650 13,372,619
Sundry stationery stock 2,393,093 1,381,511
Western Union receivable 912,293 716,975
Inward/Outward clearing 2,136,411 1,819,174
Deferred staff expenses 23,231,740 20,922,733
Value added tax input 421,092 324,806
Sundry assets 1,901,849 2,650,755
Visa and Interswitch 2,017,751 1,262,796
47,443,161 45,519,971
Less IFRS 9 impairment provision (251,708) -
47,191,453 45,519,971
Movement in impairment of other assets

Opening balance 2,577 -
Charge to proft and loss (Note 11) 249,131 -
Provision at year end 251,708 -

18. Loans and advances to customers
2018 2017
Shs ‘000 Shs ‘000

Overdrafts 38,546,108 34,454,148
Commercial loans 577,820,379 496,417,264
Micro finance loans 870,447,086 778,352,551
Finance leases 27,185,930 24,389,120
Staff loans 44,078,701 38,020,033
Gross loans and advances 1,558,078,204 1,371,633,116
Provision for loan impairment – Stage 1 and 2 (18,198,510) (8,584,857)
Provision for loan impairment – Stage 3 (10,680,065) (27,743,332)
Net loans and advances 1,529,199,629 1,335,304,927
Finance Leases
2018 2017
Shs ‘000 Shs ‘000
Gross investments in finance leases

No later than 1 year 5,041,252 3,829,363
Later than 1 year but no later than 5 years 27,223,784 25,656970
Later than 5 years - -
Gross loans and advances 32,265,036 29,486,333
Unearned future finance income on finance leases (5,079,106) (2,097,213)
Net investment in finance leases 27,185,930 24,389,120
Analysis of net investment in finance lease

No later than 1 year 4,812,555 3,433,565
Later than 1 year but no later than 5 years 22,373,375 20,955,555
Later than 5 years - -
27,185,930 24,389,120

This is a form of financing an asset where the asset serves as the main security. The leases are offered for a period between 1 to 7 years
depending on the type of equipment financed and the anticipated cash flows. The average interest rate on these facilities for 2018 was 20.2%
for Ushs facilities and 8.0% for USD facilities (2017: 20.6% and 9.6 % respectively).
Movement in the provision for impairment of loans and advances:

2018 2017
Shs ‘000 Shs ‘000

At start of year 36,328,189 23,923,555
IFRS 9 first time adoption adjustment (3,917,759) -
Revised Opening Balance 32,410,430 23,923,555
Movement in profit and loss

Additional impairment 46,411,230 34,827,586
Provisions released (30,544,425) (6,975,478)
Impairment charge to the SOCI (Note 11) 15,866,805 27,852,108
Impaired accounts written off (17,853,552) (18,017,375)

Movement in interest suspended during the year (1,545,108) 2,569,901
At end of year 28,878,575 36,328,189


Off balance Sheet provisions
2018 2017
Shs ‘000 Shs ‘000
Start of year 263,591 -

Additions through profit and loss - -
Reversals through profit and loss (Note 11) (154,990) -
Provisions at year end 108,601 -
The following tables explain the changes in the loss allowance between the beginning and the end of the annual period due to these
factors:
12-Month Life time Life
ECL ECL ECL
Shs’000 Shs’000 Shs’000 Shs’000
Loss Allowance at start of year 15,044,270 2,055,025 15,311,135 32,410,430
Movements with P&L Impact

Additional provisions required 2017 loans 6,366,488 92,499 5,450,505 11,909,491
Reversals of provisions to 2017 Loans (648,277) (275,466) (4,496,717) (5,420,459)
Financial Assets derecognised during the period (15,219,815) (20,924,790) 11,020,661 (25,123,943)
New Loans 2018 10,292,901 21,415,675 2,793,141 34,501,717
P&L charge 791,297 307,918 14,767,590 15,866,806

Movements with no P&L Impact
Improvements
Stage 2-1 517,117 (517,117) - -
Stage3-2 - 175,812 (175,812) -
Stage 3-1 1,521,158 - (1,521,158) -

Declines
Stage 1-3 (238,226) - 238,226 -
Stage 1-2 (100,004) 100,004 - -
Stage 2-3 - (279,255) 279,255 -
Net Movements 1,700,046 (520,556) (1,179,489) -

Changes in Interest Accrual - (1,179,489) (365,619) (1,545,108)
Write off - - (17,853,552) (17,853,552)
Loss Allowance as at 31 December 2018 17,535,613 662,897 10,680,065 28,878,575
Loss Allowance
The loss allowance recognised in the period is impacted by a variety of factors, as described below:
• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of credit
risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and Lifetime
ECL;
• Additional allowances for new financial instruments recognised during the period, as well as releases for financial instruments de-
recognised in the period;
• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising
• from regular refreshing of inputs to models;
• Impacts on the measurement of ECL due to changes made to models and assumptions;
Financial assets derecognised during the period and write-offs of allowances related to assets that were written off during the
period. As at 31 December 2018, there were no loans and advances to a single borrower above 25% of core capital.

19 Property and equipment

Motor Computer Furniture Work In
Finance Vehicles & Equipment & Fixtures & Progress
Lease Buildings Cycles Accessories Equipment (WIP) Total
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Cost
At 1 Jan 2018 2,536,543 102,041,199 11,421,028 65,475,292 99,644,594 8,903,917 290,022,573
Additions - - - - - 27,089,917 27,089,917
Disposals - - (161,849) (150,430) (376,421) - (688,700)
Transfer from WIP - 2,128,664 505,847 16,644,741 4,690,379 (23,969,631) -
Transfer from WIP to software (8,822,486) (8,822,486)
At 31 Dec 2018 2,536,543 104,169,863 11,765,026 81,969,603 103,958,552 3,201,717 307,601,304
Depreciation
At 1 January 2018 447,244 9,886,015 9,056,968 48,702,915 62,010,626 - 130,103,768
Charge for the Period 45,531 2,050,658 743,130 10,917,549 10,498,621 - 24,255,489
On disposals - - (161,849) (150,430) (376,066) - (688,345)
At 31 Dec 2018 492,775 11,936,673 9,638,249 59,470,034 72,133,181 - 153,670,912

Net carrying amount
At 31 Dec 2018 2,043,768 92,233,190 2,126,777 22,499,570 31,825,370 3,201,717 153,930,392
Leashold land relates to a 99 year lease for Plot 2 Burton Street, Kampala starting November 2009.

Motor Computer Furniture Work In
Finance Vehicles & Equipment & Fixtures & Progress
Lease Buildings Cycles Accessories Equipment (WIP) Total
Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Cost
At 1 Jan 2017 2,536,543 102,043,516 11,026,405 61,155,547 95,019,723 44,916,002 316,697,735
Additions - - - - - 26,566,435 26,566,435
Disposals - (44,545) (1,350,343) (421,869) (969,870) - (2,786,627)
Transfer from WIP - 42,228 1,744,966 4,741,613 5,594,741 (62,578,519) (50,454,970)
At 31 Dec 2017 2,536,543 102,041,199 11,421,028 65,475,292 99,644,594 8,903,917 290,022,573

Depreciation
At 1 January 2017 401,712 7,876,098 9,573,087 40,377,418 51,443,774 - 109,672,089
Charge for the Period 45,532 2,054,462 818,822 8,746,762 11,532,780 - 23,198,359
On disposals - (44,545) (1,334,940) (421,265) (965,928) - (2,766,678)
At 31 Dec 2017 447,244 9,886,015 9,056,969 48,702,915 62,010,626 - 130,103,769
Net carrying amount
At 31 Dec 2017 2,089,299 92,155,184 2,364,059 16,772,377 37,633,968 8,903,917 159,918,804


20 Intangible assets
2018 2017
Shs ‘000 Shs ‘000

Cost
At 1 January 65,770,033 13,660,350
Additions - -
Disposals - (33,365)
Transfer from WIP 8,822,486 52,143,048
At 31 December 74,592,519 65,770,033
Amortisation
At 1 January 18,400,561 9,440,361
Charge for the year 11,160,603 8,993,835
Disposal - (33,635)
At 31 December 29,561,164 18,400,561
Net carrying amount At 31 December 45,031,355 47,369,472
21. Deferred income tax

Deferred income taxes are calculated on all temporary differences under the liability method at the applicable rate of 30.0%. The move-
ment on the deferred income tax account is as follows:
2018 2017
Shs ‘000 Shs ‘000

At 1 January 822,360 (3,880,239)
Prior year under provision (372,801) (208,427)
Charge/ (credit) to statement of comprehensive income (Note 13) 869,698 4,875,642
Charge to other comprehensive income (79,978) 35,384
At 31 December 1,239,279 822,360
1 Jan 2018 Charge to SCI Charge to OCI 31 Dec 2018

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Deferred income tax liability

Accelerated tax depreciation 9,571,506 1,601,535 - 11,173,041
Fair value adjustments 888,550 (1,534,314) (79,978) (725,742)
10,460,056 67,221 (79,978) 10,447,299
Deferred income tax asset
Provisions (3,355,520) 1,346,728 - (2,008,792)
Deferred income (6,282,176) (917,052) - (7,199,228)
(9,637,696) 429,676 - (9,208,020)
Net deferred tax asset 822,360 496,897 (79,978) 1,239,279
1 Jan 2017 Charge to SCI Charge to OCI 31 Dec 2017

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000
Deferred income tax liability

Accelerated tax depreciation 5,321,412 4,250,094 - 9,571,506
Fair value adjustments 158,040 695,126 35,384 888,550

5,479,452 4,945,220 35,384 10,460,056
Deferred income tax asset
Provisions (3,343,698) (11,822) - (3,355,520)
Deferred income (6,015,993) (266,183) - (6,282,176)
(9,359,691) (278,005) - (9,637,696)
Net deferred tax asset (3,880,239 4,667,215 35,384 822,360
22. Customer deposits

2018 2017
Shs ‘000 Shs ‘000
Current accounts 646,211,714 473,944,838

Savings accounts 1,446,217,156 1,227,375,000
Time deposits 189,806,737 209,818,053
2,282,235,607 1,911,137,891
The weighted average effective interest rate on customer deposits was 2.0% (2017: 2.0%). Customer deposit balances are due within one year.
23. Deposits and balances due to other banks

2018 2017
Shs ‘000 Shs ‘000

Balances from local banks 4,400,502 5,709,127
Other finance institutions 2,459,019 2,158,154
6,859,521 7,867,281

24. Managed funds

2018 2017
Shs ‘000 Shs ‘000
Bank of Uganda- Agricultural Credit Facility 414,037 346,471

Government of Uganda - Youth Venture Capital Fund 8,282,883 8,309,614
KCCA Youth Venture Capital Fund 2,844,525 3,010,896
Uganda Energy Credit Capitalisation Company 201,068 402,136
11,742,513 12,069,117

Bank of Uganda – Agricultural Credit Facility (‘‘BOU-ACF’’)
The Government of Uganda through the central bank in partnership with commercial banks, Uganda Development Bank Ltd and micro-deposit
taking institutions (MDIs) created the Agricultural Credit Facility. The facility was created for the provision of medium-term credit facilities to agriculture
and agro-processing projects on more favorable terms as opposed to the open market. The credit facilities are advanced to customers at an interest
rate of 12%. The other objectives of the facility include the promotion of commercial agriculture, increasing access to finance by agribusinesses,
increased agricultural production thus food security as well as boosting the confidence of financial institution in lending to agriculture.
Government of Uganda Youth Venture Capital Fund
The Bank is a Participating Partner in the Government of Uganda (GoU) revolving Youth Venture Capital Fund (YVCF) established in Financial Year
2011/12 to facilitate job creation and employment generation by supporting financially viable start-up micro, Small and Medium Enterprises operated
by youth entrepreneurs. Under the scheme the Bank makes an equal contribution to the revolving fund and as at 31 December 2018 the fund stood
at Shs 8.3 billion (2017; Shs.8.3billion).
KCCA Youth Venture Capital Fund
The Bank in collaboration with Kampala Capital City Authority signed a Memorandum of Understanding on 30 October 2012 to take custody and
on-lend the authority’s Youth Venture Capital funds worth Shs 3.3 billion to eligible youth as per criteria set out and agreed upon. The fund is for 5
years subject to renewal terms and conditions acceptable to both parties. The funds are to support expansion of business ventures owned by the
youth residing and working in Kampala District.

Uganda Energy Credit Capitalisation Company (UECCC)

In 2016, the Bank received funding of USD 650,000 from Uganda Energy Credit Capitalisation Company (UECCC). The facility is a
line of credit to commercial enterprises and household (sub-borrowers) interested in connecting to any electricity distribution network
anywhere in Uganda. The principle was to be refunded back to UECC in five equal instalments. The facility was effectively utilized and as
per the agreement, in 2017 the Bank made 3 installments and by close of year 2018, there was Shs 201 million outstanding.
In the table below is a movement analysis of managed funds for the year 2018:
UECCC BOU - ACF KCCA Youth Venture Total

At start of year 402,136 346,471 3,010,896 8,309,614 12,069,117

Additions - 329,031 176,660 1,412,689 1,918,380
Repayments (201,068) (261,465) - - (462,533)
Amount utilised - - (343,031) (1,439,420) (1,782,451)
At end of year 201,068 414,037 2,844,525 8,282,883 11,742,513
In the table below is a movement analysis of managed funds for the year 2017:
UECCC BOU - ACF KCCA Youth Venture Total


At start of year 1,004,271 612,187 3,126,505 5,688,249 10,431,213
Additions - - - 2,939,091 2,939,091
Repayments (602,136) (265,717) - - (867,852)
Amount utilised - - (115,609) (317,726) (433,334)
At end of year 402,136 346,471 3,010,896 8,309,614 12,069,117
25. Borrowed funds

2018 2017
Shs ‘000 Shs ‘000
European Investment Bank (EIB) ECA PEFF I 58,050,611 67,314,970

European Investment Bank (EIB PEFF II) 1,884,871 3,733,143
EAC MF Loan (European Investment Bank) 9,674,094 15,379,529
aBi Finance Limited 22,382,944 23,549,189
UECCC Solar loan 705,677 366,400
East African Development Bank 21,403,506 20,460,027
114,101,703 130,803,258
EIB ECA PEFF

(European Investment Bank, East and Central Africa Private Enterprise Finance Facility)
The loan agreement was signed in December 2014 for an agreed maximum amount of the Shs equivalent of EURO 20M. The loan
agreement allows for minimum and maximum tenures of 4 years and 7 years respectively. Rates vary by tenure but not exceeding 10%.
By close of year 2016, EURO 9.1 million had been drawn down. EIB disbursed the remaining funds in December 2017.
EIB PEFF (Private Enterprise Finance Facility) I & II
This was a global loan facility extended to a group of financial institutions in Uganda from Cotonuo Investment facility resources. The
facility was used to finance private enterprises in agro industry, fishing, construction, food processing, and manufacturing, tourism, health

and education sectors and services provided to these sectors. Repayments are made semiannually, and interest is computed on reducing
balance. The interest rate charged on this facility was not fixed or uniform but was dependent on the tenure of the loan for which it was
disbursed.
EIB EAC (European Investment Bank, East African Community) Microfinance facility
This is a Global Facility from the Cotonou Investment Facility which is used by East African Community banks for the financing of micro credit
projects. This was a bullet disbursement (in 2014) of the UGX equivalent of EURO 8M. The loan tenure is 7 years at a fixed interest rate of
10.008%.
Agricultural Business Initiative (aBi) Finance Limited
As at close of year 2017, the Bank had 4 lines of credit from aBi Finance Limited totaling to Shs 23.5 billion (gross with accrued interest) with
the latest maturity date in 2022. These lines target mainly the agribusiness sector and SMEs. Interest rate on these facilities range between
11.25% - 12.5%. In the year 2018, the Bank paid capital plus interest worth Shs.4.7bn and received additional funds worth Shs.2.0bn.
UECCC Solar loan
Centenary Bank signed a Solar Refinance facility of USD 250,000 with Uganda Energy Credit Capitalisation Company on 12 July 2012. The
refinance facility is denominated in Uganda Shillings and the Shilling liability is determined at the exchange rate applicable on every release of
funds. The Bank drew down Shs 128.8 million in October 2012.
The refinance interest rate is 8.15% per annum fixed. The repayment of the principal borrowed is in 18 equal half yearly installments
commencing 12 months after draw down. The funds are applied exclusively for the purpose of provision of solar loans to rural households.
The loans are secured by promissory notes. There was an additional funding of Shs 255.9 million in 2014 and Shs.550 million in the year 2018.

East African Development Bank (EADB)
The Bank entered into an agreement with EADB for a line of credit worth the UGX equivalent of Euros. 5 million. This facility is majorly
targeted for on lending to agri-business and other rural based medium, small and micro enterprises in Uganda. The tenure of the facility is 5
years starting from the date of disbursement in 2017 with an interest rate of 13.5% fixed for the life of the loan.
In the table below is a movement analysis of borrowed funds 2018:
EIB aBi EADB UECC Total

At start of year 86,427,642 23,549,189 20,460,027 366,400 130,803,258

Additions - 2,000,000 3,500,000 550,000 6,050,000
Interest accrued 6,938,972 1,487,466 4,023,472 45,778 12,495,688
Repayments (23,757,038) (4,653,710) (6,579,994) (256,501) (35,247,243)
At end of year 69,609,576 22,382,945 21,403,505 705,677 114,101,703
In the table below is a movement analysis of borrowed funds 2017:
EIB aBi EADB UECC Total

At start of year 79,668,427 27,495,332 - 439,680 107,603,439

Additions 22,169,737 13,000,000 19,767,486 - 54,937,223
Interest accrued 6,501,490 2,842,989 1,742,189 34,281 11,120,949
Repayments (21,912,012) (19,789,132) (1,049,648) (107,561) (42,858,353)
At end of year 86,427,642 23,549,189 20,460,027 366,400 130,803,258

26. Other liabilities
2018 2017
Shs ‘000 Shs ‘000
Bills payable 1,040,980 1,128,962

Unearned fees 23,983,750 20,940,586
Unearned late fees payments - 1,172,850
Guarantees - Cash collateral 1,079,938 2,103,213
Contract staff (Terminal benefits) 1,271,858 999,646
Accrued expenses 15,997,886 12,696,351
Centemobile service charge 815,452 2,265,033
Accounts payable 9,419,286 4,809,076
Uganda Revenue Authority collections clearing 19,072,666 16,659,195
Excise duty on bank charges 1,136,211 579,080
Real Time Gross Settlement clearing 130,340 1,851,502
Mortgage fees payable 702,255 1,117,978
Interswitch funds payable 2,425,401 1,568,236
Agent banking payables 6,455,857 -
Other taxes payable 10,779,422 8,149,348
Other payables 5,940,834 4,701,508
Provision for off-Balance Sheet facilities 108,601 -
100,360,737 80,742,564

27. Provisions
2018 2017
Shs ‘000 Shs ‘000

Outstanding legal cases 1,038,624 929,524
Defalcations and expected losses 1,034,028 244,689
2,072,652 1,174,213
The Bank is a defendant in various legal actions arising from normal day-to-day banking activities. In the opinion of the directors, after taking
appropriate legal advice, the provisions made are sufficient to cover any loss that may arise from such actions
28. Deferred grants
2018 2017
Shs ‘000 Shs ‘000
At start of year 398,914 391,732

Additions - 227,550
Refund of unutilised funds - (103,585
Transfers to statement of comprehensive income (249,106) (116,783)
At end of year 149,808 398,914

In the table below is a movement analysis of deferred grants:

aBi Super woman GIZ aBi Adjumani Total
Shs’000 Shs’000 Shs’000 Shs’000
At start of year 227,550 6,359 165,005 398,914
Additions - - - -
Refunds - - - -
Amount utilised (199,779) (6,359) (42,968) (249,106)
At end of year 27,771 - 122,037 149,808
GIZ Financial Systems Development Program
GIZ Financial Systems Development Programme (FSD), through the support of the German Development Cooperation of the German
Government, supported the Bank in financing a baseline survey on SACCOs, Village Savings and Loan Association (VSLAs) and farming
groups based in Karamoja to inform whether the groups are bankable and investigate the most effective, impactful financial products and
appropriate channels of delivering such products to the sub-region. The Bank, under the same programme, was supported to install solar
systems in the service outlets located in Moroto and Kotido. There is no unfulfilled condition as at the year end.
aBi Development
In July 2015, the Bank partnered with aBi Development (formerly aBi Trust) to set up a service centre in Adjumani. The aim of this was to
transform the social and economic livelihoods of Adjumani district through offering affordable financial services to the people in the West Nile
and the surrounding areas. The agreement was to support the Bank with a total contribution of Shs 404 million. This was 47% of the total
budget cost of Shs 852 million. In 2017, the Bank received an additional grant of Shs 228 million from aBi Trust for the purpose of boosting
the Bank’s superwoman product.
29 Earnings per ordinary share

Basic earnings per share are calculated by dividing the profit attributable to the ordinary equity holders of the Bank by the weighted average
number of ordinary shares in issue during the year
2018 2017
Shs ‘000 Shs ‘000
Net income (Shs’000) 107,888,989 100,275,428
Dividends to preference shareholders (Shs’000) (116,624) (116,624)
Net income attributable to ordinary shareholders 107,772,365 100,158,804
Weighted average number of ordinary shares (No.) 25,000,000 25,000,000
Basic earnings per ordinary share (Shs’000 per share) 4.301 4.006
30. Share capital

2018 2017
Shs ‘000 Shs ‘000
Authorized
28,825,356 ordinary shares (2017: 28,825,356) of Shs 1,000 each 28,825,356 28,825,356
150,000 non-redeemable preference shares of Shs 1,000 each 150,000 150,000
At end of year 28,975,356 28,975,356

2018 2017
Shs ‘000 Shs ‘000
Issued and fully paid

25,000,000 ordinary shares (2017:25,000,000) of Shs 1,000 each 25,000,000 25,000,000
116,624 preference shares (2017: 116,624) of Shs 1,000 each 116,624 116,624
25,116,624 25,116,624
The issued number of shares as at year end was 25,000,000 ordinary shares and 116,624 preference shares (2017: 25,000,000 ordinary
shares and 116,624 preference shares). All issued shares are fully paid. Share premium as at the start and end of year amounted to Shs 1,139
million.
The holders of ordinary shares are entitled to receive dividend from time to time and are entitled to one vote per share at meetings of the
Bank. Holders of preference shares receive a non-cumulative coupon of 100.0% and they do not carry the right to vote. All shares rank
equally with regard to the Bank’s residual assets except that the preference shareholders have prior.

31. Proposed dividends
2018 2017
Shs ‘000 Shs ‘000
Preference – 100.0% 116,624 116,624

Ordinary – 25% of net profit after tax (2017: 25%) 26,908,322 25,068,857
27,024,946 25,185,481
Dividend per ordinary share (Shs) 1,076.33 1,002.75
The directors recommend the payment of a dividend of Shs 1,104.21 per share (2017: 1,002.75 per share) totaling Shs 27.7 billion (2017:
Shs 25.2 billion). Dividends are subject to withholding tax at rates which vary depending on the tax residence status of the recipient.
32. Regulatory reserve

2018 2017
Shs ‘000 Shs ‘000
At start of year 2,928,575 8,215,937

Transfer from retained earnings 8,773,257 (5,287,352)
At end of year 11,701,852 2,928,595
FIA loan provisions

General provisions 16,087,143 14,193,229
Specific provisions 24,493,284 25,063,555
Total FIA 40,580,427 39,256,784
IFRS loan provisions (Note 18) (28,878,575) (36,328,189)
CRR (Difference between FIA provisions and IFRS loan provisions) 11,701,852 2,928,595

33 Revaluation reserve
2018 2017
Shs ‘000 Shs ‘000
At start of year 82,564 -

Disposal of financial asset (82,564) -
Fair value gain on government securities (AFS) - 117,948
Fair value loss on government securities (FVOCI) (266,592) -
Deferred income tax thereon 79,978 (35,384)
At end of year (186,614) 82,564
34 Cash and cash equivalents

2018 2017
Shs ‘000 Shs ‘00

Cash and balances with Bank of Uganda (Note 14) 315,313,160 302,488,484
Cash reserve requirement (183,030,000) (152,130,000)
Balances with other financial institutions (Note 15) 140,363,606 64,425,658
Government securities maturing within 90 days (Note 16) 355,908,904 316,164,973
628,555,670 530,949,115
For purposes of the statement of cash flows, cash and cash equivalents comprises; cash and balances with Bank of Uganda, treasury bills
with maturity of less than 90 days, and other eligible bills, and amounts due from other banks. Cash and cash equivalents exclude the
cash reserve requirement held with Bank of Uganda.
The minimum cash reserve requirement as at 31 December 2018 was Shs 183,031 million (2017: Shs 152,130million). The mandatory
reserve is based on the value of deposits as adjusted in accordance with Bank of Uganda Regulations.

Banks are required to maintain a prescribed minimum cash reserve comprising cash in hand and balances with Bank of Uganda.
This reserve is available to finance the Bank’s day-to-day activities. However, there are restrictions as to its use and sanctions for
noncompliance. The amount is determined as a percentage of the average outstanding customer deposits over a cash reserve cycle
period of fourteen
35 Off-statement of financial position financial instruments and capital commitments

2018 2017
Shs ‘000 Shs ‘000
Guarantees and performance bonds

Acceptances and letters of credit 5,282,294 10,094,310
Performance bonds 8,198,868 7,270,790
Bid securities bond guarantees 24,622,617 20,871,690
Commitments to extend credit 18,186,477 20,135,169
56,290,256 58,371,959
Commitments
Undrawn loan commitments 4,157,800 6,140,385
4,129,751 6,140,385

Operating lease commitments - Bank as a lessee
The Bank entered into commercial leases for motor vehicles and photo copiers. These leases have an average life of two years with a renewal
option included in the contracts. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments
under operating leases as at 31 December 2018 are Shs 7,052 million within one year (2017: Shs 5,863 million).
36. Related party transactions and balances

2018 2017
Shs ‘000 Shs ‘000

(i) Directors’ remuneration
Fees to non-executive directors 1,086,462 823,050
Emoluments to executive directors:
-Short-term employee benefits 2,065,004 1,911,978
-NSSF contribution 229,873 214,397
-Gratuity 358,111 347,953
3,739,450 3,297,378

Other expenses – non-executive directors 1,162,293 640,660
Other expenses - executive directors 156,002 63,647
5,057,745 4,001,685
(ii) Loans and advances to related parties

At start of year 41,997,937 39,750,177
Advanced during the year 27,310,028 16,331,549
Repaid during the year (25,309,357) (14,083,789)
At end of year 43,998,608 41,997,937
The loans and advances to related parties are credit facilities issued to shareholders and key management personnel of the bank
(iii) Key management compensation

Directors’ emoluments 5,057,745 4,001,685
Short-term employee benefits 6,848,634 6,610,764
NSSF contributions 926,768 798,063
Gratuity 1,500,775 1,302,229
14,333,922 12,712,741
(iii) Substantial shareholders (>5% of shareholding)

% %
Catholic Archdiocese of Kampala 5.3 5.3
Registered Trustees of the Uganda Episcopal Conference 31.3 31.3
SIDI (France) 11.6 11.6
Stiching Hivos Triodos 18.3 18.3
66.5 66.5

(iv)Loans to shareholders and guarantees by shareholders

2018 2017
Shs ‘000 Shs ‘000

Catholic Archdiocese of Kampala 19,867,072 18,191,076
Masaka Catholic Diocese 5,256,581 5,558,504
Catholic Diocese of Fortportal 3,624,002 3,840,522
Hoima Catholic Diocese 3,166,143 2,463,172
Catholic Diocese of Lugazi 3,053,763 2,041,557
Catholic diocese of Mbarara 2,233,552 1,526,316
Catholic Diocese of Kabale 1,368,869 1,354,237
Catholic Diocese of Kasana Luweero 1,144,610 967,996
Catholic Diocese of Arua 1,040,450 510,963
Catholic Archdiocese of Lira 195,885 378,208
Catholic Diocese of Nebbi 174,892 240,887
Catholic Diocese of Soroti 121,718 218,040
Catholic Diocese of Mityana 48,540 116,088
Catholic Diocese of Gulu 26,354 93,088
Catholic Diocese of Jinja 4,423 79,204
Catholic Diocese of Kasese - 13,000
Catholic Diocese of Tororo - 24,970
Total 41,326,854 37,617,828
Executive directors 66,013 172,031

Non-executive directors 1,332,766 3,266,625
Other key management personnel 1,272,973 941,453
2,671,752 4,380,108
43,998,608 41,997,937
Below is a table showing the collateral, interest income, average tenor and provisions for bad and doubtful debts as at 31 December 2018
and 31 December 2017 for:
(i) Loans and advances to shareholders

2018 2017
Shs ‘000 Shs ‘000

Average interest rates (%) 19.2 19.4
Collateral (Shs’000) 218,466,813 172,165,739
Interest income (Shs’000) 11,013,905 8,414,366
Average tenor (months) 63 58

Provisions for bad and doubtful debts
- At year end 25,937 318,205
- (Credit)/ charge for the year (292,268) (230,552)
Executive directors 66,013 172,031

Non-executive directors 1,332,766 3,266,625
Other key management personnel 1,272,973 941,453
2,671,752 4,380,108

(ii) Loans and advances to key management personnel

2018 2017
Shs ‘000 Shs ‘000

Average interest rates (%) 8.0 8.0
Collateral (Shs’000) 3,814,000 3,772,000
Interest income (Shs’000) 153,360 172,562
Average tenor (months) 36 35
No provision for bad and doubtful debts was made with regard to loans and advances to key management personnel (2017: Nil).
37 Events after the balance sheet date

By a Shareholders’ Resolution dated 26th March 2019, the shareholders of Centenary Bank resolved to undertake a corporate re-
organization through the establishment of a group structure. The group will comprise a non-operating holding company which shall
become the parent company of the Bank together with any other new subsidiaries that the new holding company may form. Shareholders
in the Bank will become shareholders in the new holding company holding the same proportion of shares. In otherwords, the share value
and share structure will remain the same.
As an essential first step of the re-organization, Centenary Bank changed its name to ‘Centenary Rural Development Bank Group Limited’
following the approval of Bank of Uganda and the Uganda Registration Services Bureau. This is a ‘first step’ to achieving the above group
structure and is temporary in nature. It is envisaged that the name of the Bank will revert to Centenary Rural Development Bank Limited
after conclusion of the remaining aspects of the re-organization. The conclusion of the proposed reorganization will be subject to Cente-
nary Bank receiving all requisite regulatory and corporate approvals, including the final approval of Bank of Uganda and that of Centenary
Bank’s shareholders.


Branch Network Gulu Branch Kamwenge Branch,

Plot 426, Gulu Street Plot 29, Kitonzi,
Mapeera House Branch P. O. Box 957 Gulu Kibale, Kamwenge.
Plot 44/46, Kampala Road Tel: +256 471-432572
Plot 2, Burton Street Kanungu Branch
P. O. Box 1892 Kampala Gulu Market Branch Busingye Road
Tel: +256 317 202287 Plot 2 Oliya Road Kanungu Town Council
Gulu Town Kanungu
Apac Branch P.o Box 1892
Plot 22 Akokoro Road Kasese Branch
Apac Town Hoima Branch Plot 213, Portal Street
Tel: +256 414 663211 Plot 17 Right Road P. O. Box 87 Kasese
P.o Box 427 Hoima Tel: +256 483 444041
Arua Branch Tel: 4654 40375/0392 751733
Plot 3, Avenue Road Kapchorwa Branch
P. O. Box 246 Arua Ibanda Branch Plot 1, Market Street
Tel: +256 476-420013 Plot 4, Main Street P. O. Box 286 Kapchorwa
+256 372-260001 P. O. Box 395Ibanda Tel: +256 414 663208
Tel: +256 485-426998
Adjumani Branch Kawuku Branch
Lrv 3176 Folio 18 Iganga Branch Plot 309, Immaculate Heart Of
Plot 20 Manyi Road Plot 43 Main Street, Iganga Town Mary Reparatrix Building
Adjumani Po Box 101 Iganga Tel: +256 417 206281
Tel: +256 434242143
Bugiri Branch Kawempe Branch
Plot 117, Grant Street Isingiro Branch Plot 125, Block 204
Iganga-Tororo Highway Plot 5A High Street Kawempe Town
P. O. Box 137 Bugiri Isingiro Town Council P.o Box 1892 Kampala
Tel: +256 434-250074 Isingiro Tel. +256 31720
Tel.: +256 317-205701
Bundibugyo Branch Kayabwe Branch
Plot Ii, Block D, Ishaka Branch Plot 69, Kayabwe, Masaka
Bundibujyo Town Council, Plot 9, Cell C – Ward Iv, P.o Box 1892
Fort Portal Road Highway Rukungiri Road, Tel.: +256 317-204021
Ishaka Town
Bwaise Branch Kayunga Branch
Plot 526 Bwaise- Kawempe Jinja Branch Block 123, Plot 300,
Bombo Road Plot 6, Nizam West Road Main Street, Kayunga Central
P .O. Box 1982 Kampala (Opp. Uganda Telecom Office) P.o Box 18257, Kayunga
Tel: +256 414-566096 P. O. Box 1767 Jinja Tel: +256 414 663207
Tel: +256 434-122007
Bwera Branch Kiboga Branch
Plot 102, Bukonjo Block 26 Kabalagala Branch Plot 101, Hoima Road
Bwera Town Council Plot 2530 LRV 4159, Tirupati Mazima P. O. Box 28 Kiboga
Kasese District Mall, Ggaba Road, Kabalagala, Kampala. Tel: +256 414 663224
Tel: +256 317-201521 Tel.: +256 317-206251
Kikuubo Branch
Entebbe Road Branch Kabale Branch Plot 26/27, Nakivubo road, Nabugabo
Plot 7, Entebbe Road Plot 129, Kabale Road P. O. Box 1892 Kampala
P.o Box 1892 P. O. Box 385Kabale Tel: +256 414 258795/91
Kampala Tel: +256 486 423671
Tel: +256 414 232456 Kireka Branch
Kagadi Branch Plot 1653, Kireka
Entebbe Road Annex Plot 69 Prime House Tel: +256 414 663193
Plot 18/20 Entebbe Road Fort Portal- Kyenjojo Road
P.o Box 1892 Kagadi Town Council Kitgum Branch
Kampala P.o. Box 35 Kagadi Plot 7/8, Ogwok Road
Tel: +256 414 233456 Tel: +256 392 892372 P. O. Box 147 Kitgum
Tel: +256 414 663200
Fort Portal Branch Kamuli Branch
Plot 8-10 Kyebambe Road Plot 4, Kitimbo Road Kisoro Branch
Fort Portal Town Kamuli Town Council Block 29 Plot 79 Karumena
Tel: +256 4834 22791/0772 751730 P. O. Box 168 Tel: +256 486 430026
Tel:+256 414 663226 Kisoro

BRANCH AND ATM NETWORK (continued...)
Koboko Branch Mbarara Corporate Branch Ntinda Branch

Plot 19, Central Road, Koboko Town Plot 28 Masaka Road Plot 36 - 38
P. O. Box 194 Kampala P.O Box 662, Mbarara Municipality Ntinda Capital Shoppers Building
Tel: +256 414598648 Tel: +256 4854 20624 Ntinda-Nakawa Road
Tel: +256 414289844
Kotido Branch Masindi Branch
Block 20, Moroto Road, Kotido Town Plot 48, Commercial Street Ntungamo Branch
P.o Box 88 Kotido Masindi Town, Masindi Plot 4C,
Tel: +256 392751796 Tel: +256 317-207101 New Mbarara-Kabale Road
P. O. Box 136 Ntungamo
Kumi Branch Mityana Branch Tel: +256 485 424012
Ngora Road, Kumi Plot 50, Corner House
Po Box 1892, Kampala P. O. Box 156 Mityana Nebbi Branch
Tel: +256 414 663222 Tel: +256 464-442791 Plot 1/3/5, Bishop Orombi Road
P. O. Box 179 Nebbi
Kyenjojo Branch Moroto Branch Tel: +256 414598643
Fort Portal Road, Plot 25, Lira Street.
P. O. Box 1077 Kyenjojo Moroto Town Paidha Branch
Tel: +256 414 663196 Tel: +256 414 663202 Plot 6 Arua Road
Paidha Town Council
Kyotera Branch Mpigi Branch
Plot 6, Kyotera Road Plot 106, Butambala Road Pallisa Branch
P. O. Box 116 Kyotera Mpigi Town Plot 38, Outa Road,
Tel: +256 481-432676 Tel: +256 414 664508 Paliisa Town Council
Lira Branch Mubende Branch Rubaga Branch

Obote Avenue Plot 20, Main Street, Rubaga CathedralAdmission Block
Plot 4-7 Obote Avenue, Soroti Rd. Mubende Town Po Box 1892 Kampala
P.o Box 81 Lira P. O. Box 332 Mubende Tel:+256 414 271453
Tel: +256 4734 20125/0772 422695 Tel: +256 464-444059
Rukungiri Branch
Lugogo Branch Mukono Branch Plot 32 Rukungiri Rd
Plot 3A2 & 3A3 Sports Lane Jinja – Kampala Highway P.o Box 353 Rukungiri
Forest Mall, Ground Floor, P. O. Box 790 Mukono Tel: 04864 42177
Unit G3 Lugogo Tel: +256 414-291618/9
P. O. Box 1892 Kampala Sembabule Branch
Tel: +256 414 663220 Najjanankumbi Branch Plots 159, 155 & 142, Parish Road
Plot 1032, Entebbe Road Sembabule
Lyantonde Branch Freedom City Mall,
Block 76, Plot 990, Main Street Entebbe Road Soroti Branch
Lyantonde Town Council P. O. Box 1892 Kampala Plot 36, Gweri Road
Tel.: 0317-206051 Tel: +256 414 501222 P. O. Box 420 Soroti
Tel: +256 414 663205
Makerere Branch Nakivubo Road Branch
St. Augatine’s Student Centre Mukwano Arcade Tororo Branch
P. O. Box 1892 Kampala (Opposite St. Balikudembe Market) Plot 3, Uhuru Drive
Tel: +256 (0) 414 535750 P. O. Box 6171Kampala P. O. Box 1146 Tororo
Tel: +256 414-507047/6 Tel: +256 454-445018
Masaka Branch
7 Mawogola Road Namirembe Road Branch Wakiso Branch
P.o Box 1063 Masaka Plot 16 Namirembe Road Plot 249, Wakiso District
Tel: 4814 20406 P.o Box 1892, Kampala Headquaters Road
Tel: 0414 258221 P. O. Box 69 Wakiso
Mbale Branch Tel: +256 414-380501
Plot 54, Republic Street Nansana Branch
P. O. Box 818 Mbale Plot 2536, Nansana Town Wobulenzi Branch
Tel: +256 454-434002 Wakiso District Kasana Luweero Diocese
(Kaludo) House
Mbarara Branch Nateete Branch Plot 249, Gulu Road
Plot 25/27, High Street Plot 1147 Block 20 & Plot 1396, P. O. Box 186 Wobulenzi
P. O. Box 1352 Mbarara Nateete Tel: +256 414 620006
Tel: +256 485 421540 P.o Box 1892
Tel: +256 317203801

BRANCH AND ATM NETWORK (continued...)
OFF SITE ATMs Kasubi Kyaliwajala – Namugongo Road,Mukono Municipality

Petrol Fuel Station after Kasubi Junction Mukwano Shopping Mall (3
Arua Market, Kasubi Town ATMs)
Catholic Center Building, Kyengera Mukwano Arcade Buiding
Near Christ the King Church, Kabalagala Devine Mercy Arcade,
Avenue Road Shell Petrol Station, Masaka Road Najeera
Kabalagala, Kampala Najeera II Stage
Bugolobi Lira
Spring Road, Kabwohe Gapco Petrol station Nakawa
Middle East Hospital & Sheema Kabwohe, Olwol Roads Jinja Road Shell Petrol station
shopping complex building Bushenyi district
Bugolobi Lugazi Nakawa MUBS
Kajjansi Jinja Road. Lugazi Quality Supermarket
Bugembe Opp. Kajjansi market
Bugembe Town Council Lukaya Nakulabye
Kakiri Mutuba IIBuddu, Lukaya Road Master Hotel,
Bulenga Kakiri Town Balintuma Road
Bulenga Trading Centre Bu- Luzira
siro, Mengo Kalerwe Next to Bishop Cyprian Nalumunye
Gayaza Road next to Kihangire SS, Port Bell Road Lebron Supermarket
Busia Pearl Micro Finance
Customs Road, Busia town Makindye Namugongo (2 ATMs)
Kalisizo SIM Towers, Namugongo Road towards
Bweyogerere Ziladamu building, Makindye opposite the Uganda Martyrs Catholic
UPET Petrol station New Masaka Road Makindye Military Barracks Shrine
Bweyogerere town,
Kampala-Mukono highway Kamwokya Makerere Hill Ndeeba
Near Vine Pharmacy, Old Ham Towers, Nsike at Christine Motel
Dokolo Kamwokya Road, Kamyokya Tuskys Shopping Mall
Angwenchibange Parish Near Wandegeya Trading Ntinda
Akaidebe Zone, Parcel Kasana Luweero Centre Ntinda Road Trading
Dokolo Town Gulu highway next to Centre, Opposite the mosque
Diocesan Cathedral Matugga
Entebbe –Kitooro St. Francis of Assis Catholic Nyendo
Kitooro Trading Centre Katwe Parish JOBASCA Building,
Kibuga Next to St. Joseph’s
Ggaba Opposite Total Petrol Mbale (2 ATMs) Nyendo Catholic Church
Ggaba Trading Centre Station, Katwe Canos Guest House, Kitovu Road, Nyendo Masaka
Naboa Road
Gulu Kikuubo Oasis Mall
Lacor Hospital, Juba Road Nakivubo Road, next to Mbarara Nakumatt Shopping Mall,
Senana Supermarket, Masaka Road, Mbarara Town Yusuf Lule Road, Kampala
Gulu Nabugabo
Gulu University Mengo Masengere Rushere
Kirinya Mengo, Kampala Plot 18 Rushere, Kiruhura
Gulu Kirinya Trading Centre
Andrea Olal Road Mpigi Rwebikona
Opposite Shell petrol Station Kisenyi Mpigi Town Council Fort Portal Road
Mwanga II Road, Kisenyi, Butabala Road
Gayaza Kampala. Park village, Mpigi Seeta
Near Mirembe Seeta Trading Centre,
Supermarket, Kitooro Mini Price (2 ATMs) Mukono District.
Gayaza Road Airport Stage, Next to the Taxi Ben Kiwanuka Street
Park, Entebbe-Kitoro Road, Sironko
Iganga Wakiso Mulago Kapchorwa Road
Main Street, Business Centre near Sironko town
Iganga town Kyabakuza Hospital Chapel,
Kyabakuza Trading Centre Mulago Hospital Wandegeya (2 ATMs)
Jinja Road Next to Hotel
Coffee Development Kyaliwajala Mukono Catherine Wandegeya.
building, Kampala Mogas Petrol Station, Sion Hard building, Kayunga Kampala

GRI Indicators’ report
The index below comprises indicators from the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines.
The index has been abridged to relate it to the Bank’s disclosure status.
PERFORMANCE TOPIC DISCLOSURE DESCRIPTION

INDICATORS PAGES
1.1 & 1.2 About us 6,7 Who we are, Vision, Mission and Ownership
PROFILE
INDICATORS PAGES
2.1 Name of reporting organisation 8, 84 Centenary Rural Development Bank Limited

2.2 Major products or services, including brands 53 -54 Products and services
if appropriate
2.3 Operational structure of the organisation 18 Excecutive Management, Board
20, 27 Corporate governance
2.4 Description of major divisions, operating com- 20 Excecutive Management,
panies, subsidiaries and joint ventures 27 Corporate governance
2.5 Countries in which the organisation’s located 9, 140-142 Bank contact information, general information
2.6 Nature of ownership 7 Ownership
2.7 Nature of markets served 109 Sectors financed / Industry analysis
2.8 Scale of the reporting organization’s:
Number of employees 58 Staffing
Products produced/services offered 53 - 54 Products and services
GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS

INDICATORS PAGES
3.1-3.6 Governance structure of the organisation, in- 27 - 47 Corporate governance

cluding major committees under the board of
directors that are responsible for strategy and
oversight
ECONOMIC PERFORMANCE INDICATORS

INDICATORS PAGES
EC1 Net sales and Increase in retained earnings 80 Statement of Comprehensive Income
81 Statement of Financial Position
82 Statement of changes in Equity
EC3 Geographic breakdown of markets 9, 140-142 Branch and ATM Network
EC3 Cost of all goods and services purchased 49 Value added statement
Total employee remuneration 49, 80 & 126 Value added statement,
Statement of Comprehensive Income
EC8 Total taxes of all types paid 49, 80 & 126 Value added statement/ income statement/
note 10 of the financial statement

SOCIAL LABOUR PERFORMANCE INDICATORS
INDICATORS PAGES
LA1 Breakdown of workforce 58 Staffing highlights

LA3 Retention rates 57 Staffing highlights
LA4 Policies/procedures on negotiations with 55 -57 Employee empowerment and engagement
employees over changes in operations
LA5 Health and safety committees 56 Occupational safety and health
LA6 Occupational accidents and diseases 56 Occupational safety and health
LA6 Injury, lost days and absentee rates and 56 Occupational safety and health
work-related fatalities
HUMAN RIGHTS
INDICATORS PAGES
HR1 Policies and guidelines dealing with human

rights
HR2 Consideration of human rights impacts in mak-
ing business decisions
HR3 Policies/procedures to evaluate human rights Human rights recognized, observed and
performance within supply chain embedded in the Ugandan’s Constitution. No
HR4 Global policy/procedures preventing discrimi- evidence of transgressions but Bank’s Policies
nation of any form not formally codified.
HR5 Policy on freedom of association independent

of local laws
HR6 Policy excluding child labour
HR7 Description of policy to prevent forced and
compulsory labour

Your Notes
Your Notes
Centenary Rural Development Bank Limited.

Head Office: Mapeera House,Plot 44-46, Kampala Road, P. O. Box 1892 Kampala
Toll free line: 0800 200555 E-mail: info@centenarybank.co.ug

Annual Report 2019

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Annual Report 2019

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20

CENTENARY BANK l Annual Report & Financial Statements 2018 3

VISION, MISSION, VALUES 6 MANAGING DIRECTOR’S STATEMENT 16 GOVERNANCE 27

BANK CONTACT INFORMATION 8 RISK MANAGEMENT 21

BRANCH AND ATM NETWORK 9

4 CENTENARY BANK l Annual Report & Financial Statements 2018

STATEMENT OF CASH FLOWS 83

NOTES TO THE FINANCIAL STATEMENTS 84

CENTENARY BANK l Annual Report & Financial Statements 2018 5

Our Vision Our Mission Statement

6 CENTENARY BANK l Annual Report & Financial Statements 2018

• Registered Trustees of the Uganda Episcopal Conference.

• SIDI - Solidarite’ Internationale pour le Development et l’Investissement (International

• STICHTING HIVOS-TRIODOS FONDS. An investment fund, specializing in investing in microfinance

• Individual shareholders (4 individuals).

The Registered Trustees of Various Catholic Dioceses in Uganda 38.5%

The Registered Trustees of the Uganda Episcopal Conference 31.3%

Stichting Hivos-Triodos Fonds 18.3%

CENTENARY BANK l Annual Report & Financial Statements 2018 7

Peninnah Tibagwa Kasule

• Citibank NA New York - US

8 CENTENARY BANK l Annual Report & Financial Statements 2018

CENTENARY BANK l Annual Report & Financial Statements 2018 9

ALCO Asset and Liability Committee NIM Net Interest Margin

ATM Automated Teller Machines N.S.S.F National Social Security Fund

BCP Business Continuity Plan NPAT Net Profit After Tax

BCMT Business Continuity Management Team ORC Operational Risk Committee

BOD Board of Directors OSH Occupational Safety and Health

BOU Bank of Uganda P.A.Y.E Pay As You Earn

BSC Balance Score Card POCI Purchased or originated credit-impaired

CBS Core Banking System PwC PricewaterhouseCoopers

EIR Effective Interest Rate SOCE Statement of changes in equity

ESM Environmental and Social Management SOCI Statement of Comprehensive Income

ERM Enterprise Risk Management SOFP Statement of Financial Position

FVPL Fair value through profit or loss TOT Trainer of Trainers

HR Human Resource URBRA Uganda Retirement Benefits

10 CENTENARY BANK l Annual Report & Financial Statements 2018

Cost-to-income ratio (%) Total expenses as a percentage of total income

Lending Ratio Net loans and advances divided by total deposits

Percentage change in the impairment

Return on Assets (%) Earnings as a percentage of average total assets

Return on Equity (%) Earnings as a percentage of average equity

SOFP credit impairment as a %

Total capital The sum of core capital and supplementary capital

CENTENARY BANK l Annual Report & Financial Statements 2018 11

The bank lived up to

Professor John Ddumba-Ssentamu

Chairman Board of Directors

12 CENTENARY BANK l Annual Report & Financial Statements 2018

Strategy In 2018, one of the Directors, Mr. Andrew Obol, retired. We

CENTENARY BANK l Annual Report & Financial Statements 2018 13

Professor John Ddumba-Ssentamu

14 CENTENARY BANK l Annual Report & Financial Statements 2018

All true leaders have

CENTENARY BANK l Annual Report & Financial Statements 2018 15

16 CENTENARY BANK l Annual Report & Financial Statements 2018

CENTENARY BANK l Annual Report & Financial Statements 2018 17

MANAGING DIRECTOR’S STATEMENT (continued...)

Collaborations and Partnerships

18 CENTENARY BANK l Annual Report & Financial Statements 2018

CENTENARY BANK l Annual Report & Financial Statements 2018 19

THE EXECUTIVE MANAGEMENT

Mr. Fabian Kasi Dr. Simon M. S. Kagugube

Mr. George K. Thogo Mr. Godfrey Byekwaso Mrs. Peninnah Kasule