2017 Annual Report and Financial Statements
Driving Growth through Service & Technology
Making More Possible Our mission
dfcu seeks to grow shareholder value while playing a key role in transforming the economy and enhancing the well- being of the society. Through our dynamic and responsive teams, we will provide innovative financial solutions and maintain the highest level of customer service and professional integrity.
Our vision
To be the preferred financial institution, providing a broad range of quality products to our chosen customer segments.
Culture competencies
1. Focus on staff and customers 2. Courage 3. Transparency 4. Stewardship 5. Collective effort 6. Decisiveness 7. Pride and Passion dfcu Group 2017 Annual Report Table of Contents and Financial Statements
1 Who we are iv Our purpose v 2 Board of directors vi Women business advisory council viii Senior management team ix
3 List of acronyms and financial definitions x Financial highlights of the year xii
4 Business Updates Rights issue xiii Driving growth through service and technology xiv Driving the economic transformation of women xvi Creating opportunities for business success xvii Partnerships transforming agriculture in Uganda xviii Promoting greater financial inclusion xx Other business highlights xxi Blue Thunder Culture update xxiv Empowering and supporting our communities xxvi
5 Reports Financial overview 2017 xxvii Chairman's report xxxii Business risk report xxxvii Corporate governance xliii Sustainability report l Looking ahead lxiii
6 Financial Statements 1-94 iv dfcu Group 2017 Annual Report and Financial Statements Who WeWho Are transformation. financial their support that services and solutions banking relevant offering by customers grow and We nurture commerce and trade transport, construction, mining, estate, real tourism, manufacturing, health, education, communication, agribusiness, sectors: in various Uganda’s economy in stories success many with associated years, the Over institution. finance adevelopment as in 1964 established was Limited dfcu has been been has dfcu Bank) to to Bank) dfcu and Finance businesses (Development (Development businesses operations into our Head Head our into operations create a “one-stop shop” shop” a “one-stop create 2014 2008 2000 1964 Consolidated all our key all our Consolidated dfcu it renamed Bank, commercial banking commercial Office, Office, Bought Gold Trust Gold Bought Bank, and started started and Bank, Limited was was Limited dfcu under under Merged its two two its Merged Towers dfcu established Bank dfcu 2017 2013 2012 2004 1999 § experience in agribusiness with significant Rabobank, – partner strategic a board on bringing shareholders of Realignment Exchange Securities Uganda the on listed was Limited dfcu Leasing dfcu it renamed and Company Leasing Uganda Bought § Business Advisory Council Established
Bank becoming the 2 the becoming Bank Crane of liabilities certain assumed and assets certain acquired Bank dfcu ARISE B.V. ARISE shareholder major one into Limited in dfcu stake their consolidated A.S. Norfinance and Rabobank in Uganda Bank largest Women Women dfcu nd
purpose statement, ‘Making More Possible’, we aim to: Guided by our vision, ‘to the be preferred financial institution’, and driven by our • • • • • u Values Our Purpose Our development sustainable and Responsibility Social Corporate Teamwork Integrity Excellence Customer focus • • • • Personal Banking • • • Banking Institutional and Development Our Business segments Business co-creation with other segments. other with co-creation Business banking. agent and Multiple electronic touch points: branch, borrowing. and transactional Savings, market. personal the for solutions Tailored financial Business co-creation with other segments. other with co-creation Business lending. agricultural and syndications facilities, credit finance, structured banking, in transactional Expertise in key sectors. management Relationship chosen segments our to solutions financial Provide innovative drive our competitive advantage in a changing business environment. business in achanging advantage competitive our drive that aspirations strategic to aligned are values and vision purpose, Our Our Aspirations Our market leader Become a Become to our customers our to standards service of level highest the Maintain a niche player to a to player a niche Transform from from Transform universal Bank universal • • • Treasury • • • • • Banking Business Hedging solutionsHedging for forex clients. Trading in foreign currencies. services. Liquidity management segments. other with co-creation Business management. Relationship expertise. Trade finance support. banking transaction day to Day and small businesses. medium for solutions Tailored financial Bank 3.0/4.0Bank society the and customers our of wellbeing the Enhance Superior financial financial Superior performance
v dfcu Group 2017 Annual Report and Financial Statements vi dfcu Group 2017 Annual Report and Financial Statements dfcu dfcu December, 2012. Board: the to Appointed Director Non-Executive Lule Kironde Appointed to the Board: September, 2005. September, Board: the to Appointed dfcu of Chairman Appointed Director/ChairmanNon-Executive Elly Karuhanga Limited Board of Directors Limited: September, 2013. December, 2007. Board: the to Appointed Director Non-Executive MalikDeepak December, 2010. Board: the to Appointed Director Non-Executive Michael Alan Turner December, 2013. December, Board: the to Appointed Director Non-Executive Albert Jonkergouw Retired: 31 Dec. 2017. 31 Dec. Retired: Appointed: April, 2015, Secretary Company James Mugabi December, 2013. December, Board: the to Appointed Director Non-Executive T.Dr. Winifred Kiryabwire dfcu dfcu 10 7 4 1 Bank Board of Directors of Board Bank 8 5 2 9 6 3 1 10 9 8 7 6 5 4 3 2 August, 2012. August, Board: the to Appointed 2014. September, Bank: dfcu of Chairman Appointed Chairman Non-Executive Director/ D.Jimmy Mugerwa Appointed: March, 2006. Company Secretary Agnes Tibayeita Isharaza Since August, 2016. Executive Director William Sekabembe DirectorManaging since2007. Director.Managing Juma Kisaame June, 2016. Appointed to the Board: Non-Executive Director Willem Cramer June, 2016 Appointed totheBoard: Non-Executive Director Ola Rinnan December, 2013. Appointed totheBoard: Non-Executive Director JonkergouwAlbert June, 2016. Appointed totheBoard: Non-Executive Director Caley Stephen March, 2010. Appointed totheBoard: Non-Executive Director Michael Alan Turner November, 2007. Board: the to Appointed Non-Executive Director Malik Deepak .
vii dfcu Group 2017 Annual Report and Financial Statements viii dfcu Group 2017 Annual Report and Financial Statements Gudie leisure farm in Wakiso. farm leisure Gudie of Proprietor the and Rotarian isa She (EAWEExN). Network Exchange Women Entrepreneurs African Eastern the of delegate aUWEAL and (UWEAL) Limited Entrepreneurs Women Uganda of chairperson isthe Gudula Chairperson Basaza Dr. Naiga Gudula challenges. and needs specific women the of iscognizant that experience banking enriching an of provision the with women supporting through inclusion financial driving to is committed program The the support to continues Council Advisory Business Women The Advisory Council dfcu Women Business advocacy among others. among advocacy policy and SMEs to services advisory business of provision in entrepreneurship, businesses of training businesses; of nurturing and coaching mentoring, SMEs, to solutions business of delivery in the expertise professional has She development. sector private and promotion enterprise small in 18 experience over years’ with Specialist Development Enterprise isan Rosemary Specialist Development Enterprise Mutyabule Rosemary Women in Business (WiB) program. program. (WiB) in Business Women dfcu and delivering company strategy. strategy. company delivering and overseeing developing, as well as abusiness managing and growing in experience on hands years’ 20 over has Ltd. She Interiors Nina at Director Managing the is Patricia Managing Director, Nina Interiors Kyazze Karugaba Patricia Senior Management Team dfcu Bank 10 7 1 4 11 5 8 2
9 6 3 11 10 9 8 7 6 5 4 3 2 1 Head, Internal Audit. Head, Internal Leonard Byambara Investigations. Head, Riskand Chris Sserunkuma Head, HumanResources. MusokeHarriet Head, Legal. Agnes Tibayeita Isharaza Head, Credit. Agnes Mayanja Head, ConsumerBanking. Denis Kibukamusoke Head, Treasury. George Ochom FinancialOfficer. Chief Kate K.Kiiza Transformation Officer.Chief Paul van Apeldoorn Executive Director. Business& of Chief William Sekabembe Director.Managing Juma Kisaame
ix dfcu Group 2017 Annual Report and Financial Statements x dfcu Group 2017 Annual Report and Financial Statements Total capital ratio ratio capital Core Total capital capital Supplementary capital Core share per Dividend ratio income to Cost share per Earnings year the for Profit Definitions Financial FIA FBO ESG DIB CSR CCC CB CAR BOU BPR BIS BCP ATM App AML ALCO AGM ADC ABC List Acronyms: of Financial Institutions Act (2004). Act Institutions Financial Farmer Based Organisations. Governance. and Social Environmental Banking. Institutional and Development Responsibility. Social Corporate Culture Change Champions. Banking. Consumer Ratios. Adequacy Capital Uganda. of Bank Business Process Re-engineering. Bank for International Settlement. Planning. Continuity Business TellerAutomated Machine. Application. Anti-Money Laundering. Committee. Liability and Asset Meeting. General Annual Centre. Development Agribusiness Anti Corruption. Bribery Total capital divided by the total risk weighted assets. weighted risk total the by divided Total capital assets. weighted risk total the by divided capital Core capital. supplementary and capital core of sum The Uganda. of Bank by time to time from determined be may as capital of form other any and materialize subsequently which losses meet to available freely are that losses unidentified current and future against held are which provisions General assets. intangible other any or goodwill less reserves, disclosed all plus shares up paid fully and issued of form in the equity shareholder Permanent year. the of in respect share per declared dividends Total ordinary subsidiaries. from income excluding tax before income of apercentage as expenses Operating in issue. shares ordinary of number average weighted the by divided shareholders ordinary to attributable Earnings shareholders, minorities shareholders. and preference ordinary to attributable profit income comprehensive of statement Annual
WiB USE USD SME M Shs Bn Shs RoE Opex OECD NSSF NPA MMPs KYC KPIs IT IFRS GRI FIs Women in Business. in Women Exchange. Securities Uganda Dollar. States United Enterprise. Medium and Small Millions. in Shillings Billions. in Shillings Equity. on Return Expenditure. Operational Development. and Co-operation Economic for Organisation Fund. Security Social National Non Loans. Performing Mobile Providers. Money Know Your Customer. Key Indicators. Performance Technology.Information International Financial Standards. Reporting Initiative. Reporting Global Institutions. Financial of the year Highlights
xi dfcu Group 2017 Annual Report and Financial Statements xii dfcu Group 2017 Annual Report and Financial Statements Interest income (Shs’ m) income comprehensive of Statement Financial Highlights Non-interest income Net income interest Risk weighed assets (shs’ m) assets weighed Risk Credit impairment charge Profit after tax after Profit Number of shares in issue (in millions) (in in issue shares of Number Share statistics Total ratio capital Profit before tax before Profit Operating expenses Dividends share per share per Earnings ratio capital Core adequacy Capital equity Shareholders’ Borrowings Customer deposits Total assets advances Loans and (shs’ m) position financial of Statement +75% 2016: 1,745.6 Shs Bn Assets Total 3,057.4Shs Bn +136% 2016: Bn 45.3 Shs tax after Profit Bn 106.8 Shs 1,975,505 1,334,611 3,057,476 , 87,118 1,9 +75% 2016: 1,134.7 Shs Bn Customer deposits 1,987.1Shs Bn +60% 2016: 217.1 Shs Bn Interest income 347.0Shs Bn 483,446 532,338 106,892 189,520 215,451 7001 47,0 3 4,816 147, 48,652 39,655 189.33 68.24 2017 23% 19% 784 1,745,640 1,134,731 1,072,574 834,827 328,527 249,652 133,241 217,155 58,363 96,900 29,305 45,325 7 0 3 8 17, 25.19 91.16 2016 20% 27% 497 1,010,866 1,651,629 808,047 108,232 182,974 914,951 215,131 491,914 35,290 46,922 25,002 89,531 11,690 70.98 21.73 2015 23% 16% 497 1,424,742 +113% 2016: 249.6 Shs Bn Shareholders’ equity Bn 532.3 Shs +60% 2016: Bn 834.8 Shs advances and Loans Bn 1,334.6 Shs 384,023 680,679 822,877 103,289 870,035 163,278 191,541 78,309 20,852 56,561 10,490 42,109 84.69 23.53 2014 19% 27% 497 1,226,062 340,489 623,800 700,285 150,604 814,983 161,160 64,381 34,601 45,070 96,163 20,116 13,414 69.59 784 17.8 2013 25% 18% 497 Successful Rights Issue Bolsters dfcu’s Aggressive Growth Agenda
The successful Rights Issue, whose purpose was to raise capital necessary for ensuring that dfcu Limited’s banking subsidiary (dfcu Bank) is adequately capitalized, has delivered a much stronger balance sheet and a strong base for the Company to implement its aggressive growth strategy.
Following the approval by Shareholders in the Rights Issue, in line with its strategy to significantly Annual General Meeting held on 08th June 2017, reduce its stake in dfcu by selling to other, like- and subsequently from the Regulators, dfcu Limited minded investors who could bring in a new phase floated a successful Rights Issue between 04th of growth, did not participate in the Rights Issue. September 2017 and 25th September 2017. A total Accordingly, CDC’s shareholding has reduced to of 263,516,083 shares were offered to current 9.97%. shareholders to take up, making this the largest transaction of its kind on the Uganda Securities dfcu Limited was listed on the Uganda Securities Exchange’s history. Exchange in October 2004. Since then, the number of dfcu shareholders has grown close to 3,800. This dfcu set 70% as the threshold for the Rights Issue to Rights Issue was dfcu Limited’s first public capital be declared successful. Our shareholders responded raising activity. with a resounding 95.23% subscription implying strong confidence in dfcu’s growth prospects. The participation of retail and major institutional investors (including local institutions) was a clear demonstration of confidence in dfcu.
Arise B.V which owned 55% prior to the Rights Issue has now increased its stake in the Company to 58.71%, and National Social Security Fund Uganda (NSSF), which owned 5.93% of the Company has now increased its shareholding to 7.46%. CDC, which held 15% shareholding prior to the Group 2017 AnnualGroup 2017 Report dfcu Financial Statements &
xiii Driving Growth through Service and Technology While people will always need banking and other financial services, how they interact with and access these services has changed significantly with the advent of technology.
Technology is the backbone of business innovation Our aspiration is to transform dfcu to become and all enterprises, big or small, are looking to the ‘Next Generation’ Bank, through leveraging leverage this enabler in order to maintain the technology, including the current and emerging competitive edge in the market. transformational trends, to bring value to our customers. We are exploiting technology to The financial services sector has not been left facilitate faster and convenient processes, and
Group 2017 AnnualGroup 2017 Report behind; the pace of digital adoption has surpassed reduce transaction costs. In addition, the use of expectations in recent years and this trend is technology provides organisational benefits in terms dfcu Financial Statements & likely to accelerate further. The increasing role of of efficiency and our ability to respond to an evolving technology has heightened customer expectations operating environment. xiv while transforming the manner in which customers interact with financial institutions. CHANGING DAY TO DAY A secure and complete payment ...the pace of BANKING solution, Schoolpay allows The exponential growth in mobile parents to make school fees/ digital adoption phone usage and the massive tuition payments online and on has surpassed adoption of the internet is mobile using a unique payment transforming customer habits registration number. expectations in and expectations, including what recent years and customers demand from their banks. NEW CORE BANKING SYSTEM this trend is likely to Customers today want everything We enhanced our operational accelerate further. to be as rapid, close-to-hand and capability with the new upgraded immediate. core banking platform to Finacle • Mobile loans We are responding to these 10. The upgraded core banking • Instant Account opening evolving customer trends by system gives us a firm base • mVisa transforming our digital presence, upon which to expand, innovate providing simpler, seamless and increase automation of our Improving transaction speed interactions across online and end-to-end customer journeys. Our Business process redesign mobile. and automation project is at MANAGING CUSTOMER the fore of our innovations for We rolled out a new e-banking RELATIONSHIPS BETTER one major purpose; simple and platform under the flagship Any technological advancement efficient processes allow us to name of dfcu QuickBanking. The meant to enhance customer deliver financial solutions to our new platform is a robust Omni- experience is never complete customers faster and cheaper. channel that allows the customer without a proportionate focus on Several of our operational, credit to navigate across mobile and customer relationships and how and on boarding processes online effortlessly using the same they are managed. In this regard, are being automated with credentials, and without much we have realigned and introduced the objective of increasing of a fuss. We also introduced a new customer segmentation transaction velocity. the dfcu QuickApp that allows model to better serve and customers to literally do all their innovate new tailored solutions. Partnering with leading banking activities on the go. technology providers As we integrate into our LOOKING AHEAD customers’ digital lives, we are SIMPLIFYING PAYMENTS Looking forward, the ever collaborating with an ever broader Our e-payment platforms allow charging technological advances range of global partners, bringing customers to conveniently settle mean we cannot say we have hit exciting new opportunities to our their bills without going through the ceiling. We will continue to clients across all of our business the hassle of writing cheques focus on the use of technology lines. One such partnership is or visiting the branch. Of major for the benefit of our customers, with FinForward - an acceleration significance is the introduction of delivering what matters to provide program where global Fintech the bulk payments feature on the the best value. companies, Financial Institutions dfcu QuickConnect, the Business (FIs) and Mobile Money Providers Internet Banking platform. In Innovation in new digital services (MMPs) in Africa are matched addition to bulk payments, As part of our digital strategy, a and integrated. By joining customers are also able to number of unique innovations are FinForward, we expect to make transfers, pay taxes and being rolled out across our digital accelerate the process of getting NSSF remittances, among other ecosystem. These include the new and innovative technologies activities. following: AnnualGroup 2017 Report into production. The speed of • Digital branches introduction of new innovative dfcu Financial Statements & With dfcu Schoolpay, we have • Intelligent ATMs products and services will be made school fees and tuition • Agent Banking much faster. payments paperless. • Savings App xv xvi dfcu Group 2017 Annual Report and Financial Statements • • • • include; benefits Other growth. business and keeping record people, managing service, customer including areas of in a number upskilled and exposed been have women several offered, initiatives the of many Through business. in agri- involved awoman or in business engaged awoman professional, it’s ayoung whether women of needs financial unique the meet to solutions provides women banking to approach unique Our Women Transformation of Driving theEconomic Program: dfcu Women inBusiness the ratio of women who have access to financial services. women being over of 50% the population of Uganda, this is not proportionate to The program is premised on several factors including the that fact despite study tours and linkages business international and Local opportunities mentorship and trainings business to Access Preferential on credit rates interest facilities to day banking requirements day support to Manager Relationship A dedicated on the program the on currently registered are members 30,000+ including; milestones several achieved in 2007, inception Since the potential. business their realize and efficiently more businesses their manage entrepreneurs female support isto program the of objective primary The Achievements building sessions building capacity the from benefited have women 20,000+ • • • • • following: the include offered services advisory The cost. year, no at every women of thousands to services (ICPAU), Uganda of Accountants Public Certified of Institute the and (ULS) Society Law Uganda (MUBS), School Business University -Makerere partners our With services Advisory • • Human Resource Human Legal Marketing Branding and Linkage Business to Business Financial WiBdfcu Centre the through provided services advisory Business Clubs Investment dfcu through savings grow to Opportunity 4,000+ WiB loans WiB dfcu the from benefited have women offers business and financial advisory advisory financial and business offers dfcu WiB program has has program WiB dfcu members our to issued loans 1,000+ for BusinessSuccess Creating Opportunities economic environment. environment. economic evolving is aconstantly in what thrive they ensuring to bullet silver isthe in general sector SME the of competiveness the boost to effort A collaborative notwithstanding. constraints growth, economic country’s the further to opportunity tremendous present SMEs world, in the country entrepreneurial most the as Uganda’s ranking with isthat clear is also What economy. Ugandan the of development in the role avital play they that isclear it 2.5 million people, over sector, employing private the of 90% about constituting SMEs With compliance and governance challenges. are not fully formalised, lack sufficient management quality and often face comes to accessing finance. The most significant barriers are that many SMEs Small and Medium Enterprises (SMEs) in Uganda face major hurdles when it
business practices and increased profitability. and increased practices business eventuallycompanies, translating to improved selected the of skillset the in boosting way a long will go initiative This more. much and operations benchmark themselves against other business economy, the to contribution their on policymakers other, engage each from learn to opportunity the had businesses of Hundreds possibilities. infinite create for platform Top SME the The 100 provided Top 100). (SME Survey Topthe Companies Sized 100 Medium sponsored Publications, Monitor the with partnership dfcu that background this It is against , in to to dfcu xvii dfcu Group 2017 Annual Report and Financial Statements Partnerships Transforming Agriculture in Uganda
The dfcu journey to unlocking finance opportunities for small holder farmers is one built on the strength of partnerships.
Farmer based organisations (FBO’s) that have Set up in September 2017, ADC provides potential to contribute to the agricultural value chain management training, governance and financial now have a chance of improving their operations and skills to strengthen farmer-based organizations in ultimately becoming bankable. The organisations efficiency and creating economies of scale. that currently lack technical or structural dfcu provides tailor-made products for the farmers, capacity to operate in a sustainable way are now and with the capacity building delivered through the receiving technical support from the Agribusiness ADC, the small holder farmers will be more eligible Development Centre (ADC) with the backing of for financing to support their transformation. dfcu and the Rabobank Foundation. Both dfcu and Rabobank Foundation have injected a combined dfcu also continues to support The Best Farmer USD 2.8 million (two million eight hundred thousand Competition, which is a great platform to show US dollars) for the next five years to support ADC’s case our ambition and commitment in the sector. activities in Uganda. The learnings and business linkages acquired from the competition are helping farmers to broaden their view on agriculture as a viable and profitable economic activity. Group 2017 AnnualGroup 2017 Report dfcu Financial Statements & xviii $2.8m 2017 Both dfcu and Rabobank Foundation ADC was set up in September, to provides have injected a combined USD 2.8 management training, governance and million for the next five years to support financial skills to strengthen farmer- the ADC’s activities in Uganda. based organizations in efficiency and creating economies of scale. Group 2017 AnnualGroup 2017 Report dfcu Financial Statements &
xix Promoting Greater Financial Inclusion
As part of several initiatives to promote a savings culture in Uganda, dfcu introduced the Investment club program in 2007.
The financial sector in Uganda has one of the lowest savings to GDP ratio in Sub-Saharan Africa, with majority of the population being un-banked. The low savings rate is in part, a result of inadequate financial literacy and limited access to banking services. As part of several initiatives to promote a savings culture in Uganda, dfcu introduced the Investment club program in 2007. The program provides a conducive platform to foster group savings. Under this program, a group of four or more like minded individuals come together to diligently grow their savings and ultimately pool resources to spur investment.
The program has since grown into strong Investment Clubs that cut across all segments including students, the professionals, women and youth. To date, there are over 15,000 such groups with dfcu, with a total savings turnover of over UGX 600 billion.
To support the Investment Club program, dfcu carries out complementary activities like financial literacy trainings, study tours and third party investment advisory to enhance the level of understanding and participation by Ugandans. Currently the focus is on moving deeper to cover the financially excluded segments, through enhancing awareness as well as creating channels to enable participation by the underserved. dfcu In 2017, dfcu sponsored an investment club competition dubbed Group 2017 Annual Report Report 2017 Group Annual ‘The Battle for Cash’ TV show. The top 20 clubs from the & Statements Financial competition were rewarded with a study tour in Nairobi and one year investment advisory facilitated by PricewaterhouseCoopers (PwC).
xx 1 2 3
1. Head, Consumer Banking Denis Kibukamusoke (left) hands over a cheque worth UGX. 7.5 million to the Best Youth Group, Surveyors Investment Club. 2. Top 20 dfcu Investment Clubs attend a workshop facilitated by 4 Kenya Association of Investment Groups (KAIG) during the study tour trip in Nairobi. 3. Geneber Outspan Organic scoops the top prize of UGX.
25 million in Season One of the AnnualGroup 2017 Report Investment Club Challenge. dfcu Financial Statements & 4. Flag off of the Top 20 dfcu Investment Clubs for the study tour in Nairobi. xxi xxii dfcu Group 2017 Annual Report and Financial Statements 6. Mr. Jimmy D. Mugerwa addresses addresses Mr. D. Jimmy 6. Mugerwa exceptional provide to pledge Staff 5. 4 3 2. 1. HIGHLIGHTS BUSINESS OTHER 2 1 staff engage customers during during customers engage staff . dfcu Bank Board Chairman, Jimmy Jimmy Chairman, Board Bank . dfcu Breakfast. 2017 the at Budget guests campaign. service the of launch the during customers to service outstanding performers. staff 2017 the with dines D. Mugerwa the Annual Harvest Money Expo. Money Harvest Annual the Community. Business Asian the Transformation addresses Officer Apeldoorn, van Paul Gold’. for ‘Go dubbed drive mobilisation adeposits during performance trophiesreceive for their Managers Branch Exceptional Chief Chief dfcu 4 3 6 5 xxiii dfcu Group 2017 Annual Report and Financial Statements xxiv dfcu Group 2017 Annual Report and Financial Statements culture for future the and year past the over journey our both illustrates below diagram The culture. performing a high towards change behavior the drive to in order on, focus to outcomes key culture identified Deloitte) and (CCC team transformation culture the staff, and champions culture leadership, Bank’s the with engaging After 4. 3. 2. 1. entailed: that journey Limited, (Uganda) Deloitte with In collaboration culture. performing ahigh creating at 2016,In December High Performing Culture Update: Transforming intoa dfcu BlueThunder Culture employees across the Bank were demonstrating ‘buy-in’ and adopting the Blue Thunder Culture. Thunder Blue the adopting and ‘buy-in’ demonstrating were Bank the across employees many how understand to team the enabled monitoring Continuous impact. program and progress articulate to basis a monthly on them tracked and program transformation culture the for outcomes) culture the as (also known success of measures defined team transition the implementation, effective monitor to In order stick make it plan to culture the of execution Monitoring Monitoring and implementing the roadmap to achieve the five (5) identified desired culture outcomes. culture desired (5) identified five the achieve to roadmap the implementing and Monitoring and roadmap; implementation level ahigh and program change aculture Developing Agents); (Change champions Blue and Champions) Triple Change C(Culture representatives, Management Senior comprising team atransitional Formulating Possible); More (Making statement apurpose Creating Future Desired Culture Culture Future Desired Key Culture Outcomes Key Culture Bank. dfcu Culture Levers Bank launched a new culture transformational journey tagged ‘Blue Thunder’, aimed Thunder’, aimed ‘Blue tagged journey transformational culture anew launched Bank dfcu Purpose Values Thunder Culture The Blue Leadership Transparency Excellence of customerexperience Standardization & Engagement Communication Focus onStaff & Customers Decisiveness Making More CSR Possible Stewardship Integrity Communication Effective Customer focus Pride &Passion Talent Courage Collective Effort Teamwork Staff Highly Motivated Infrastructure System & embarked on this this on embarked dfcu Digitalization KEY ACHIEVEMENTS TO DATE ACHIEVEMENTS KEY 3. 3. 2. 1. include: program change culture the of phase implementation the drive further to necessary areas 2017 the key focus of execution Following activities, Bank? the across transformation culture for hold 2018 does What • • COMMUNICATION EFFECTIVE • • DIGITALIZATION • • • • • BLUE THUNDER Through trainings, empower Blue Champions to support the culture transformation agenda. transformation culture the support to Champions Blue empower trainings, Through and Performance; Financial Superior drive to Management Performance on Focus Management engagements; Senior monthly including team, CCC the for support evaluation and monitoring monthly Continued dipstick survey conducted in November 2017. in November conducted survey dipstick on based all at levels, staff to available channels communication of awareness of level 70% channels. communication available the on staff sensitise to engagements interactive online Run departments. the different with shared requests and issues of around-time turn- resolution the improved has This desk. help service -acentralized plus Service Launched teleconferencing. Friday), (e.g. and Feedback sessions engagement staff meetings, hall town for channels meeting virtual of utilization Increased notice 24-hour least at with meetings to response 75% positive Mondays) (suit code up dress new with compliance 70% ground) (ears the to champions Blue of Presence implementation -post awareness culture thunder Blue Culture Thunder Blue the of Launch • • • • • • STANDARDIZATION OF CUSTOMER • • • HIGHLY MOTIVATED STAFF departmental adherence to SLAs to adherence departmental anDeveloped internal for scorecard challenges and wins focus, of areas service discuss to level branch at weekly held Huddle’ a‘Service out rolled and Conceptualized country the across foundation excellence for internal service a set to pledges Service Departmental and Standards Service rolled-out and Developed Council Service the through standard, experience customer the meet not do who employees to measures disciplinary feedback/ developmental of Provision customers our for possible’ more ‘making the embody who employees of recognition and Reward USSD channel *288*8# the through complaints customer of receipt Timely DNA culture Bank’s the and benefits on focus to newsletter HR staff monthly in the corner” “an EVP Created meetings hall town and induction shows, road conducting through proposition(EVP) Value Employee on staff Sensitized average industry the than islower which 5%, than less of attrition regrettable maintained and Achieved purpose statement of of statement purpose dfcu xxv dfcu Group 2017 Annual Report and Financial Statements Empowering and Supporting Our Communities As a key player in the banking sector, we recognised that we have a responsibility to support and uplift the communities in which we operate.
In addition to fulfilling our mandate of supporting We continued to support the ‘Uganda’s Best Farmer individuals and businesses directly, we also look for Program in collaboration with our partners - the ways to make a positive contribution beyond our Dutch Embassy, Vision Group and KLM Airlines. Over core business. In particular, we are committed to the past four years, we have contributed over Ushs supporting the communities in which we operate 900 million towards this program, which is playing a through a range of education and community key role in improving the quality of farming practices investment focused initiatives. in Uganda through educative farm tours, trainings and farmer exchange programs in the Netherlands. As one of the top tier financial institutions in Uganda, we continued to play a key role in the financial As one of the local community initiatives, we education and inclusion of the community. Our supported the redevelopment of a three class Women in Business program continued to support room block at Nakivubo Blue Primary School, thus the entrepreneurial spirit and enhance the stability providing a decent learning environment to 240 less of families, while our Investment Clubs provided privileged children. a sustainable approach to promoting the savings culture in the community through trainings, peer As dfcu we also recognise the impact and education and provision of relevant solutions. In importance of sport, in particular football, in our 2017, over 3800 groups benefited from financial communities. In 2017, we committed a two year inclusion workshops and trainings. Ushs 300 million sponsorship to a local football club, Vipers SC which has a strong heritage at empowering communities through sports development. We also donated 1000 bags of cement towards the refurbishment of Pece Sports Stadium in Northern Uganda.
BEFORE AFTER dfcu Group 2017 Annual Report Report 2017 Group Annual & Statements Financial
xxvi • • • • • include; year the for results our underpinning Highlights Financial Overview 2017 Shs 1,134Shs the of billion in 2016. isareflection This 75% by 1,987 Shs to billion in 2017widened from 2,525Shs billion in 2017. base Group’s deposit The 1,495 Shs from liabilities billion in 2016in total to increase in a69% year, resulted the which during borrowings to exposure increased and deposits customer by primarily funded was growth Asset Liabilities in 2016.amended as (2004) Act Institutions Financial the of guidelines (IFRS), the and Standards Reporting Financial International the on based are herein disclosures financial All position. financial of statement the and income comprehensive of statement the in movements the of review isabrief Below economic environment for most of the parts year. The financial performance of 2017 was more impressive given the tough streams. income new through base revenue Broadening products finance trade Improved capital in human Investment deposits customer of growth Strong Bank; Crane former of liabilities and assets some of Assumption
Summary composition of assets fixed deposit is in line with the overall industry. industry. overall the with is in line deposit fixed Bank’s the of cost average The results. excellent these behind force driving the was relations, customer existing deepening as well as base, liability the growing of strategy Aclear segments. business the across clients existing the and acquired newly both of aresult as was growth The penetration. customer and franchise deposit Group’s improving 44%. of ashare with base the dominating assets credit with unchanged, relatively remained composition asset 671 billion in 2017 billion in 2016. 489 Shs from The 37% by Shs to increasing securities in government in investments year, the resulting during position Group’s liquidity the B.V Arise from strengthened million facility USD50 the and deposits of inflow healthy The Bank. Crane former from assets the of some of assumption and lines all key business in in 2017, expansion broad-based by supported growth advances and in loans growth a60% realised We securities. in government investments increased and advances and in loans growth strong by upheld 3,057 billion in 2017 1,746 Shs from billion in 2016, 75% by Shs to expanded base Group’s asset The Assets STATEMENT POSITION: FINANCIAL OF Property 1% Investment Equipment & 5% Property Investments Other 8% Investments 1% Equity Advances and Loans 44% Banks from 7% Deposits Securities Government 22% Cash 12% xxvii dfcu Group 2017 Annual Report and Financial Statements xxviii dfcu Group 2017 Annual Report and Financial Statements 1,000,000 1,500,000 2,000,000 2,500,000 their relative risk. risk. relative their reflect to amount weighted at positions risk other and market and commitments position financial of off-statement assets, position financial of statement its with capital Group’s eligible the comparing by adequacy capital measure ratios These Uganda. of Bank by (BIS) approved as Settlement International for Bank the by established ratios the (CAR) using ratios adequacy capital its monitors Group dfcu adequacy Capital mix funding of Summary 2017. million in 328,527 million in 2016 483,446 Shs to 47% by Shs from increased these and borrowings of 2017. in terms funding to access has also Group The in 75% growth registered 2016. deposits Customer in 2017 Group 75% to the in of liabilities compared total the of 65% representing year the for funding of source major the be to continued deposits Customer Funding mix 2016. from constant remained which assets total of 65% funding deposits with unchanged relatively remained composition funding The Bank. Crane former of borrowings assumed the from 47% by resulting increased borrowings Meanwhile 500,000 0 2013 2014 2015 2016 2017 17% Equity 16% Borrowed funds liabilities Other 2% Deposits Customer 65% Borrowed funds liabilities Other Customer Deposits Trend of dividends per share per Trend dividends of (AGM). Meeting General Annual the during shareholders the from approval to issubject payment The share. per 68.24 Shs of dividend atotal recommending are Group the of 2016. directors of board The December shareholdersordinary for 31 the year ended 25.19 Shs of to share dividend per atotal paid stream of dividends to shareholders. consistent maintaining and expansion business for profits additional of back ploughing capitalization, market increase wealth, shareholder maximize to are considerations main The objectives. multiple address to isdesigned policy Group’s dividend dfcu Dividend Total ratio and capital ratio capital Core respectively. capital core and capital total for 12% 8% of and minimums regulatory stipulated the above remains adequacy capital 19% at (2016: capital core with The 20%). assets, 23% (2016: was base 27%) weighted risk the of 2017, 31 at As December capital Group’s total the 10 20 30 40 50 60 70 80 10% 15% 20% 25% 30% 0% 5% 0 2013 2013 Regulatory corecapitalratio Core Capitalration 2014 2014 Dividends pershare 2015 2015 Regulatory totalcapitalratio Total Capitalratio 2016 2016 Group Group dfcu 2017 2017 and advances and loans the against charge impairment Trend credit of term finance. and leases loans, personal lending, mortgage under registered in 2.04% to 2016. were provisions More 2.91% at year the closing ratio in 2017 compared 173% in 2017 2016 to loss credit compared the with by grew charge impairment The impairments. credit in results Shilling lent each of average, on much, how indicates and advances and loans closing of apercentage as charges impairment these expresses ratio loss credit The obligations. debt their repay to clients and customers our of inability the of a result as incurred losses the represents impairment Credit charges impairment Credit base. customer increased of out arising volumes transaction higher by driven was growth million in 2016 39,655 Shs to million in 2017. The 29,305 Shs from 35% by grew income Non-interest income on foreign transactions. and positions currency of revaluation charges, transfer funds fees, transactional activities, financing trading from arises income Group’s non-interest dfcu Non-interest income and customer lending. placements securities, Investment yielding higher into liquidity excess of investment by driven largely was million in 2016. performance income This 133,241 Shs from increase a62% million, registering 215,451 Shs reached Group’s operations the from income of source principal income-the interest Net Net interest income Statement of comprehensive income: 1,200,000 1,400,000 1,600,000 1,00,000 200,000 400,000 600,000 800,000 0 2013 Loans andadvances 2014
2015 Credit impairmentcharge 2016 2017 million in 2017. in million million 330,713 in 2016 Shs of inflow cash anet to 71,544 Shs of flow out cash a net from increased significantly also activities financing from flows Cash expansion. network branch the from arising assets fixed of purchase and upgrade system banking core the of aresult as in software investments increased the to due was increase significant This million in 2017 9,070 Shs from million in 2016. 143,106 Shs to significantly increased activities investing from flows Cash customers. to advances loan and securities in government investments of in terms expansion business increased with coupled taxes of in terms government the and suppliers to outs pay cash increased to due mainly 24,987 Shs to million in 2017. was decrease The million in 2016 56,280 Shs from 56% by decreased activities operating from flow Group’s cash dfcu statement flow cash of Analysis 55% in 2016 in 2017. 49% to from ratio income to cost in the areduction register to able was Management growth. continued for Group the will position that areas right in the spend of investment right ensure to agenda management cost- aclear drive to We continue network. branch of expansion and upgrade system banking core cases, in legal costs key exceptional and solutions inclusion financial in digital investment continued to due largely year 113% at previous the closed from higher however, costs, operating other The roles. critical all defined across process planning success efficient cost- amore of execution the enable to strategy Group’s the key in driving remains capability staff building on focus continued The acquisition. Limited Bank Crane post network branch and count head staff increased the to attributed mainly was increase million in 2016 58,754 million Shs to in 2017. This 35,391 Shs from 66% by grew in 2016. costs Staff million 96,900 Shs to 189,520 million compared Shs at year the closing 96% by grew costs operating Total IT infrastructure. and in branch investments and staff our as such expenses, in operating growth the affect also factors internal Many expenses. in such increase the to contribute that indicators key external are rates exchange foreign and Inflation revenues. future and current support to incurs Group the that costs the represent expenses Operating Operating expenses xxix dfcu Group 2017 Annual Report and Financial Statements xxx dfcu Group 2017 Annual Report and Financial Statements for the future, are listed below; listed are future, the for by undertaken Initiatives snapshot Strategic Bank. Crane former the from assumed borrowings the to due funds in borrowed increase anet also was There year. the during done issue rights share the from arising injection capital increased the of aresult as was This performance financial sustainable through shareholders for value Grow Goals retail operation retail arobust Building -56% 2016: Bn 56.2 Shs operating activities from flows cash Net Bn +Shs 24.9 impairment losses credit of Management cost management through excellence Driving operational position financial the of strength enhancing our and Maintaining objectives Strategic development) housing development, communications information gas, manufacturing, oil & mining, tourism, (Agriculture, Sectors Primary Growth Plan Development Uganda’s National of Government the Supporting market segment. SME in the player akey as position our Consolidate creation Wealth Group during the year against strategic imperatives along with planned activities activities planned with along imperatives strategic against year the during Group dfcu +1,490% 2.9% (2016: 2.04%). in 2017 ratio loss Credit was costs. on optimize to efficiency in management’s improvement (2016:49% 56%) depicting was ratio income to Cost (2016: 62% by grew 23%) income interest 4%) net and (2016: 60% by grew portfolio in 2017 (2016: 6%), loan 75% by grew assets total Our (KPIs) Key Performance Indicators loan book (2016: book loan 54%). our of 56% was sectors growth primary the to lending Our 74%) in 2017 book loan total (2016: the of 64% form SMEs SMEs. to support our Maintained branches. Bank Crane former the of some occupying of aresult as was increase (2016: The 42 branches). 67 to branches increased 76,193). network branch The (2016: 196,468 Shs Shs in 2017 created Wealth was 2016: 9.0 -Shs Bn activities investing from flows cash Net Bn 143.1 -Shs +562% • • • • Future actions • • • • • banking mobile platform. quick the of Stabilization process. disbursement loan and process approval centralized improve Further locations identified at branches and automated banking centres 24/7 more Establish productivity enhance to system banking core upgraded the of Stabilization sectors. targeted for programs building capacity continue to and lending micro-financing and agricultural on Improve deposit products. of range wide the promote communication to platforms improving Continue products. savings Introduce micro- more savings micro and mega on focus special with campaigns local out carry to branches Encourage book. loan aquality maintaining and portfolio lending in the growth substantial managing Maximise while profits 2016: 71.5 -Shs Bn activities financing from flows cash Net +Shs 330.7 Bn effectiveness. and excellence operational of level high Sustainable culture institutional centric customer professional a highly Embedding Operational efficiency their needs to responding and stakeholders our with Engaging transparency management risk Enhanced capability leadership Growing management. in people practice best through choice of employer an Becoming manner.a fair in Treating customers that we do. we that in all efforts Laundering Money Anti- and (KYC) Customer Your Know We prioritise making. decision for board the to reported are These needs. their concerning feedback from them obtain and stakeholders our with We engage industry. services Uganda’s financial of integrity the protects it as in Uganda legislation Laundering Anti-Money the support We fully Uganda. of Bank to regularly reported is progress our and Guidelines Protection Consumer Financial the adopt We fully million). million in 2017 (2016: 410 Shs 875 Shs was Training spend in 2017 5% (2016: was 8%). (2016: turnover 756). Labour 1,156 in 2017 employees staff. our to information relevant all the cascaded and Guidelines Protection Consumer Financial Uganda of Bank the adopted fully We have • • • • • • • • • • • improve decision making. decision improve to out carried efforts related all risk Co-ordinate Group. the across management risk of capabilities and framework the Expand Group. the of plans expansion future support to Ratio Adequacy Capital asound Maintain Group the of profile risk the with consistent levels capital the maintain and Manage Group. the within mechanism governance corporate the strengthen to Continue requirements. voluntary and practices best adopt to encourage and requirements mandatory all with compliance Ensuring on-going conditions. social and economic current and expansion branch consideration into taking well-being, staff enhance to initiatives identify and services welfare existing of evaluation the Continue plan. pay variable the and system appraisal performance the of management effective Maintain competencies. leadership on identified based officers all of executive competencies Enhance the managerial communities. the to impact positive sustained with projects identified with Engage Guidelines. Protection Consumer Financial Uganda of Bank the to adhere to Continue xxxi dfcu Group 2017 Annual Report and Financial Statements Chairman’s Statement
Overview In 2017, dfcu produced significant results that we can all be proud of. In addition to delivering strong financial performance, we also continued to make good progress towards becoming the leading financial institution in our chosen market segments.
I am pleased to highlight a number of the notable achievements below, which represent a sample of the strides we are making: • Successfully floated the largest Rights Issue in Uganda to date and raised UShs 190 Billion; • Our subsidiary, dfcu Bank successfully integrated the acquired assets and liabilities assumed from Crane Bank Limited ( In Receivership); • Upgraded the Core Banking platform for our subsidiary, dfcu Bank; • Increased the dfcu Bank foot print to 67 branches and 100 ATMs; • By end of 2017, dfcu Bank was in advanced stages of obtaining regulatory approvals to offer Bancassurance and Agent Banking services; • Launched the Agri Business Development Centre, in partnership with Rabo Development; • Invested in and launched a new digital dfcu banking platform - dfcu QuickBanking;
Group 2017 Annual Report Report 2017 Group Annual • Completed IFRS 9 readiness for
& Statements Financial implementation in 2018.
Our subsidiary dfcu Bank is a strong and customer centric company, a good place to work for our over 1100 employees, whilst dfcu limited is a sound place to invest for our shareholders. xxxii acceleration of credit growth in 2018. On the other in 2018. other the On growth credit of acceleration an enable thereby and policies lending their ease to banks encourage should Bank Central the by easing monetary sustained the and loans performing 2017.September in non- trend downward The to year 1.8% in the only by increasing advances and loans gross with subdued remained activity, economic to contribution sector’s financial the of indicator aleading growth, credit sector Private loans. bad of challenge the remedy to banks will help This banks. the by owned jointly corporation, recovery asset an up set has members, its with working Association, 2017. 5.6%to in December Bankers Uganda The 2016 10.5% from in December reduced ratio loan total to loan non-performing The improved. system banking the of indicators soundness financial The The Banking Environment investments. oil related the particularly underway, or planned are works infrastructure public of amount policy. A considerable monetary stimulatory current the and in consumption growth investments, public by boosted pace afaster at accelerate to isprojected growth economic term, medium In the alag. with and sluggishly though stance, policy monetary accommodative the to in response ease, to continued rates interest bank Commercial outlook. term medium apositive with target, Uganda of 5%Bank the within well was and controlled, remained inflation year, the domestic During deficit. account current awidening of account on currencies all major against lower edge to Shilling continued Uganda The subdued. remaining credit sector private and investment private with sectors, all across even been not has However, growth in 2016/17.recorded 2017/18, cent 4per the than higher is which Year Financial in the cent 5per of rate annual an at grow to isprojected economy domestic The economy. global in the strengthening continued and spending in public policy, growth monetary the of easing by year, the supported during improved conditions economic domestic Overall, The Economic and Regulatory environment of the banking sector was maintained. was sector banking the of safety in the confidence public and funds depositors’ of loss no was there Consequently process. said the in bidder 2017, successful the as emerging after in January (In Receivership) Limited Bank Crane of liabilities the of some assuming and assets the of subsidiary, in our resulted Bank Central the by situation this of resolution final The profitability. low and loans performing non- high of weight heavy to its to attributed Bank Central the action which management, statutory into went Bank, Crane in Uganda, banks 2016, of end largest At the the of one customers. to on passed be can which savings, costs significant generate to potential the offers banks by platforms joint of sharing the market, banking the of feature prominent increasingly an become services financial digital As market. mass the for services affordable and convenient offer to Fintechs and telcos Banks, the between collaboration increasing the by driven be to 7.4 2017. June millionat as will continue growth This 2015 June 4.5 millionat as from to increased have banks in commercial accounts of number the result, a As system. financial formal the into customers more funneled have advancements technological these contrary, sector, the to banking the to competition as seen initially was money mobile financial like platforms digital (Fintechs) and companies technology financial of advent the While security. inadequate against guard and IFRS9 under required standards provisioning as they stricter implement loan the of maturity and collateral requirements loan, the of size the including, conditions and terms non-price tighten to expect however, banks hand Bank acquiring some some acquiring Bank dfcu at June 2017. 7.4 as million June 2015 to at as million from 4.5 increased banks have commercial of accounts in the number xxxiii dfcu Group 2017 Annual Report and Financial Statements xxxiv dfcu Group 2017 Annual Report and Financial Statements that hold potential for solid future growth. growth. future solid for potential hold that capabilities strong and position market attractive We an have solutions. innovative leading developing and competence financial deep our on building by businesses and individuals of transformation the supported have we decades, five past the Over agenda Strategic The report. this of pages subsequent in the found be can indicators performance and results financial the of detail The • • of: value fair the account into take and Combinations) IFRS 3(Business with in line prepared were financials the that note to It is important 7% by 49%. to reduced ratio Group’s cost-to-income the business, our of size increased the Despite 91.16 Ushs from year. prior in the Ushs189.33 to surged share in 2016. per Earnings 18% from up 20% was year the for equity on Return shareholders as dividends. to 51.05 Ushs In total, returned Billion isbeing 25.19 Ushs year. from up prior share, the per for 68.24 Ushs of dividend afinal Your proposed Board lines. key income in the growth significant 101% by driven 2016. to partly compared was This 517. Ushs were year the for of Billion, agrowth 54 revenues total performance positive the with line year. prior 106.89 Billion, 136% up InUshs from was tax 2017For the after year, profit net financial results financial and Operating in 2018. out roll scale full for plans their finalised in mid-2017. Bank, dfcu including banks, Several regulations Banking Agent issued Bank Central The 2018. of course the during products insurance made tailored of asuit introduce will accordingly subsidiary Our products. insurance sell to permission them granting banks eight to licences issued far so has (IRA) Authority Regulatory Insurance others), the (amongst services insurance in 2016 Act engage Institutions banks allow to Financial the of amendment the Following customer relationships. and deposits core including benefits Intangible acquisition; Bank Crane the from liabilities and Tangible assets Bank Bank dfcu balance sheet as at 31 at as sheet balance integration post the acquisition, the Following • • • were: transaction the of key highlights The pursue. to decision aconscious made and considered carefully Board your which opportunity agreat was This receivership). (in Limited Bank Crane former the of liabilities some assumed and assets the of some acquired Limited, Bank dfcu 2017,In January subsidiary, owned wholly our value. shareholder grow that opportunities support and evaluate to is Board your of key mandates the of One shareholders our to value Delivering organisation. competitive amore us will make driving are we focus the that believe we because journey our to committed deeply are and agenda, strategic our achieve fully to resilience will it take that We understand • • • • aspirations: strategic following the by driven be to will continue ambitions growth market Our value. shareholder enhanced significantly and performance financial superior with player universal to niche a from it in transforming result and Group the of growth the will accelerate assets, total of in terms market in the banks three top the among Bank dfcu subsidiary our places firmly which acquisition, The liabilities. assumed and assets acquired valued fair the 2017 account into 31 takes December also (2016: 1.13 Ushs at as sheet trillion). balance The 1.99 Ushs of trillion deposits trillion) customer and 1.33 Ushs (2016: of trillion advances 0.84 net Ushs (2016: trillion 3.06 Ushs of assets 1.76 Ushs trillion), of staff integration. staff of aresult as capacity and skills base our enhanced amillion; half over to base customer active grew 100over ATMs; 67 to with 43 from network in branch increase an shareholders. our to performance financial superior Deliver future. the of opportunities the seize to ispositioned Group the that so agenda digital in the investment Continued bank. universal to player subsidiary our Transform leader. market the Become st December 2017 reflects total 2017 total December reflects Bank from a niche aniche from Bank dfcu of work. work. of methods effective and easier, efficient faster, highly leaner, simpler, deliver to automated being are processes critical of Anumber commenced. project (BPR) Re-engineering Process Business ongoing the in identified improvements process business the of implementation agenda, efficiency the To support journeys. customer end-to-end of automation increase and innovate expand, to which upon base afirm provides platform banking core subsidiary its for system banking core upgraded in an invested Group The costs. unit lower and errors, minimise times, turnaround reduce to ways new find and efficiencies, unlock to businesses, our analyse We constantly success. long-term our to critical remains Productivity efficiency and productivity Driving prospects. growth Company’s in the confidence strong implying subscription 95.23% a resounding with responded shareholders Our history. Exchange’s Securities Uganda the on kind its of transaction largest the this up, making take to shareholders current to offered 263,516,083 of were A total shares loan. the repay to Issue, a Rights billion through 200 Ushs raise to resolved capitalised, adequately is Bank the that ensure to objective its with in line 2017, June 08 on held Meeting Board, General the Annual in the Shareholders by approval the Upon B.V. Arise shareholder largest our million from USD 50 of facility loan bridging ashort-term by funded was injection capital The Bank. the by required capital additional the provide to adecision took Company The up. shored be future the for requirements capital Bank dfcu that required receivership), (in Limited Bank Crane former the of liabilities assumed and assets the of some of acquisition The Capital and funding Bank. The upgraded upgraded The Bank. dfcu term success and sustaining shareholder value. value. shareholder sustaining and success term is collectively responsible for delivering this long- Board The vision. strategic our of execution the and Company the of success long-term the for essential is governance corporate effective and Sound changes Board and Governance Corporate program. change culture the of phase implementation the drive further to In will 2018, be focus the • • • • • • • including: introduced were competences cultural of aset journey, this of part As transformation. human without succeed can business no that belief the with journey transformation acultural on embarked dfcu To end, this expectations. and behaviour customer changing to adapt to workforce our We building are Preparing the organisation for long-term success easily accessible. services and products our make to capabilities mobile and digital our up scaling means This community. the within inclusion financial of goal broader the achieve to serves also in technology investment Our future’. the for ‘bank the becoming of aspiration our will we meet whom with partners, innovative several with collaborating 2018. during We are Banking Agent dfcu introduce will and Banking, Quick of name flagship the under platform e-banking anew out We rolled before. ever than bank to ways more with customers subsidiary, our Through years. coming in the network branch physical our of print foot a lower to lead naturally to revolution digital the We expect channels. digital of ease and convenience the prefer customers our increasingly as tapering are transactions branch Bank accordingly. responding are we and years, in many seen have we change of periods significant most the of one through isgoing industry services financial The change technological to Responding Pride and passion and Pride Decisiveness Collective Effort Stewardship Transparency Courage customers and staff on Focus Bank, we are providing providing are we Bank, dfcu xxxv dfcu Group 2017 Annual Report and Financial Statements xxxvi dfcu Group 2017 Annual Report and Financial Statements of the anticipated growth in the Ugandan economy. Ugandan in the growth anticipated the of advantage take and compete effectively to it allows subsidiary, our of size increased The sector. gas oil and in the momentum arenewed and projects infrastructure significant of implementation the by underpinned are prospects whose economy, the about We optimistic are ahead Looking million. 900 Ushs over contributed have we which towards program, Farmer Best the sponsor to We continued also years. five next the for activities ADC towards committed been million has USD 2.8 of sum Acombined organisations. based Farmer of transformation the support to (ADC) launched the Agribusiness Development Centre year, the During trainings. and workshops inclusion financial from benefited groups 3,800 Over programmes. Club Investment and in Business Women Bank’s dfcu through agenda education financial our drive to We continued operate. we where communities the in impact social apositive creating for accountable are we believe we directly, businesses and individuals support to responsibility our fulfilling to In addition community the with involvement Our xliii. page on report this of section Governance Corporate in the out set are affairs its of conduct the and Board the to relating details Further strategy. the on delivering on focused and stable remained Group the ensure to committees board the of organs oversight and framework governance established the with We continued
Bank and Rabo Development Development Rabo and Bank dfcu Bank, Bank, dfcu Chairman, Board of Directors Elly Karuhanga, their hard work as well. for gratitude my extend to Iwant and employees, our of efforts dedicated the without possible been have in 2017 made would progress the of Finally, none success. mutual future in our invest we as first you put to will we continue that commit and dfcu in place customers that confidence the I recognize Company. our of future the about in 2017, commitment have they confidence and their for shareholders our to appreciation my express Ialso months. twelve past the over commitment and dedication their for directors fellow my thank to opportunity this like take to I would Acknowledgment • • • • • isto: years three next the for focus Our enhance staff productivity. staff enhance to programme change culture the implement portfolio; loan quality adiversified grow liabilities; cheap growing on focus with mix deposit the diversify offerings; new other and banking agency platforms, banking mobile and internet our relaunching including strategy channel our implement implement business process re-engineering; Business Risk Report
Successful management of existing and emerging risks is critical to the long- term success of our business and to the achievement of our strategic objectives. In order to seize market opportunities and leverage the potential for success, risk must be accepted to a reasonable degree. Risk management is therefore an integral component of the Group’s Corporate Governance.
The Group’s methodology to risk management, supported by the Group’s Senior Management. This underpinned by our Risk Appetite Framework, is function exists to facilitate and inform the Board’s aimed at embedding a risk-aware culture in all assessment of the risk landscape and development decision-making, and a pledge to managing risk of potential strategies by which it can drive long- in a proactive and effective manner. This includes term shareholder value. On an annual basis the the early identification and evaluation of risks, Group’s Senior Management develops an in-depth the management and mitigation of risks before fact base in a consistent format which outlines they crystalize, and dealing with them effectively the market attractiveness, competitive position in the event they manifest. Accountability for risk and financial performance. These are then used management is clear throughout the Group and is a to facilitate debate as to the level and type of risk key performance area for management and staff. that the Board finds appropriate in the pursuit of its The current financial year has seen further maturity strategic objectives. The strategy, once fully defined, of the risk management framework with emphasis on considered and approved by the Board helps to testing of key controls across the business units. communicate the risk appetite and expectations of the organisation both internally and externally.
RISK GOVERNANCE - The ultimate responsibility for the Group’s (OUR RISK APPETITE FRAMEWORK) risk management rests with the Board. Having Strategic direction and risk appetite determined and communicated the appropriate level The Board of Directors determines the strategic of risk for the business, the Board established and direction of the Group and agrees the nature and maintains a risk management system to identify, extent of the risks it is willing to take to achieve its assess, manage and monitor risks which could strategic objectives. To ensure that the strategic threaten the existence of the company or have a direction chosen by the business represents the significant impact on the achievement of its strategic best of the strategic options open to it, the Board is objectives. Group 2017 AnnualGroup 2017 Report dfcu Financial Statements &
xxxvii xxxviii dfcu Group 2017 Annual Report and Financial Statements continued success. Group’s the to critical most initiatives transformation business and risks principal of a selection over audits of program its through Audit Internal from assurance receives Committee Audit Board The necessary. if team Management Risk the by performed be can it but risk, the to isclosest which function or unit business the by isperformed reporting hoc ad such Ideally appropriate. and is necessary this that dictate events if process quarterly the of outside reported be can risks required, if therefore and continuous is response and assessment identification, risk of process the basis, aquarterly on management risk and risks on Board the to reporting to aligned in place process isaformal there Whilst risk reporting hoc Ad system. management risk the of effectiveness and performance the on Committee Credit and Risk Board the to reports regularly team Risk The System Management Risk the of effectiveness The function. Management Risk the with lies compliance and controls effective ensuring for responsibility However, overall operations. their from originating risk the managing for responsibility primary retain Units Business individual within Officers allat levels. all of staff responsibility isthe risk of Management execution of policies. and implementation those the support to structure effective an with together and procedures and policies through isdone This Board. the of oversight the under management risk for responsible is management Senior goals. defined and appetite risk to in comparison company the of key risks the on updates regular receives it and management, risk of aspects different on focus then which committees to specialized primarily responsibilities risk-related its delegates Board The business. the of fabric in it the embed to management risk for structure aformal provides thing’. policy The right ‘do the and minded control aware, risk be to expected are employees whereby organisation in the culture risk appropriate an instilling by risk, on top the from set tone the reinforce to helps which framework) Appetite (Risk policy management risk published internally- an includes system management risk This interbank lending and investment in securities. investment and lending interbank from also but customers to activities lending its from mainly arises risk credit company’s The due. falls it as acommitment meet or capital repay interest, pay to failure counterparty’s from loss a financial will suffer company the that risk isthe risk Credit Risk Credit Management. Risk to relevant Statements Financial the to Notes the with in conjunction read be should section the and materiality of in order listed not are risks These risks. these mitigate to taking are we actions the and strategy, our and/or deliver customers our serve to ability our impact materially could that risks principal the are below listed risks The appetite. risk overall our with line into risk the bring to in order manage actively to have we which risks principal of anumber to rise gives generally which change constant of process isthis it and environment, changing the to adapt to has always Group the aresult, As economy. dynamic in a operating time, all the evolving preferences and tastes in consumer changes with competitive, and isfast-paced industry banking the Furthermore, case. in each appetite risk our with in line and stable stays score risk the that ensure to landscape risk the and controls the risks, the monitor regularly we and radar risk our on are risks occur. These does and occurring event the / it if impact the minimise or of likelihood the minimise either to risk each mitigate to in place procedures and processes controls, have we risks inherent For these them. to exposed are sector in the all businesses and sector banking the to inherent are which risks principal some are There PRINCIPAL RISKS businesses. the for plans actions management risk on together work to continued have team Risk Group the and Champions Risk the hence, and improvement, for room isalways there course Of identified. weaknesses or failings significant no been have there and year the throughout effectively functioned has system management risk the that is work assurance above all the of from conclusion The Over the past year, past the Over increased riskoperational reliance, system –More agenda Bank’s digital The Safety. Workplace and Practices employment Failures, System and Disruption Business Practices, Business and Products Clients, Fraud, External Fraud, Internal follows: as types event risk operational the categorized has dfcu Risk, Operational of management For effective insurance. as such mechanisms transfer risk by supported isfurther strategy this appropriate, Where same. the enhance to continues and management incident and security information planning, controls including fraud prevention, contingency eliminated, entirely be cannot risk operational that Recognizing orsystems from events. external and people processes, internal failed or inadequate from resulting loss of risk isthe risk Operational RiskOperational The risk and its impact its risk and The portfolio. portfolio. this in this risk inherent the assumed we and book asset our doubled transaction Ltd. This Bank Crane former of liabilities the of some assumed and assets 2017, In the January of some acquired Group the portfolio Credit Inherited implemented risk mitigation mitigation risk implemented dfcu Bank has continued to invest invest to continued has Bank dfcu • • • • it? about we doing are What 3. 3. 2. 1. are; These migration. data amajor and projects IT related major two undergo us saw year The strategy. its IT drive to on leverage to in a bid efficiency operational increase channels, digital more create to space technology/systems in the heavily debentures, personal guarantees, etc. guarantees, personal debentures, equipment, and machine property, like landed collaterals of forms other and payments, advance and/or guarantees bank insurance, credit of means by covered normally are risks credit substantial all history, credit undisputed an with clients creditworthy strong, very of case in the than Other controls. and guidelines risk/return concentrations while maintaining stringent internal risk large avoiding portfolio, adiversified maintain isto policy Group’s credit The counterparties. various the from emanating risks credit mitigate and manage measure, to process appraisal astrong including in place processes and policies of framework arobust has dfcu obligations. their meet clients that ensure and understanding amutual establishing to aview with engaged clients and portfolio the on performed was review A comprehensive book. a healthy ensure and remedy to in place put were measures immediate 2004, Act Institutions Financial the with in line not or appetite of out found were we where and checked be to had levels adequacy Capital limits, borrower Single Risk, at Portfolio ratios, Assets like Non-Performing Thresholds its Core Banking system (Finacle). system Banking Core its to it T24 Bank’s integrated and Crane from data Ltd, Bank Crane former of liabilities the of some assuming and assets of some of 2017,In January dfcu following Bank customers: Crane former of integration and migration Data branch. the visiting without services banking of a range to access (retail corporate) and customers our given has that platform e-banking isan system This QuickBanking 10). (Finacle version higher a to Finacle of version older an from all data of transfer the involving project amajor was This 10: Finacle 7 to Finacle from System Banking Core the of Upgrade ’s acquisition ’s acquisition migrated migrated dfcu xxxix dfcu Group 2017 Annual Report and Financial Statements xl dfcu Group 2017 Annual Report and Financial Statements inflation or other market prices. prices. market other or inflation rates, exchange rates, in interest movements from arising position financial or income company’s in the change adverse apotential of risk isthe risk Market risk Market • • • expenditure/projects. government finance to increase borrowing domestic as run long in the again rise but run, short the in further Rate) reduce Bank could (Central CBR the and further fall to seen are rates Interest impact its risk and The community. broader the and stakeholders these with relationships impact significantly may expect, customers and regulators that in away used and safe iskept information this ensure to A failure firewalls. and systems our of safety the from it remove and data customers’ our access to seek third-parties of numbers greater and sophisticated more becoming are cyber-attacks of threat the evolve, to continues technology As impact its risk and The risk and high yielding government securities. securities. government yielding high and risk in low invest to will prefer banks run long In the run. short in the ration in NPA adecline and book in loan rise Possible securities. in Government investing than more lend to banks encourage changes Such • • • • it? about we doing are What • • • • • it? about we doing are What • • • • • by, driven mainly were but pressure social the and conditions market the on depending volatile be to continued rates Interest risk rate Interest generate to generate additional cash. cash. additional generate to generate NPA and to off written on efforts recovery Increase generate higher return. would that loans short-term on focusing Continue ALCO. management to isreported basis amonthly on and sheet balance the on isdone analysis sensitivity rate Interest further. funds of cost reduce to deposits cheap of Mobilisation response. adequate advise and irregularity any detect timely to order in key systems on activity all user monitoring reviews, assurance risk performing by defense of line first the of activities the skills monitor to IT security with officers with up beefed been has department risk our defense, of line second the As to. access have they data the to in relation obligations their and security data of importance the understand they ensure to modules training mandatory undergo people Our data. our of availability and integrity confidentiality, the secure to controls management access and identity and security in IT system invest We continuously security. and privacy customers’ protect to duty our with data, their of control customers giving of value the balances appropriately in regulation evolution that and space technology the of understanding mutual isappropriate there that ensure to regulators with engage We actively breaches. data for potential the reduce to and expectations, and needs customer evolving meet better to capabilities cyber-security and analytics data, our in significantly invest to continue and We have, Speculative actions by investors investors by actions Speculative deficit budget Widening markets domestic by funded spending in government Increase depreciation. rate Exchange in inflation Rise and enforcing Reviewing Group; the for strategy risk liquidity to: Setting limited not are but include, management liquidity to in relation responsibilities (ALCO), whose Committee Liability and Asset the by centrally monitored is risk Liquidity cost. excessive at resources these secure only can or obligations flow cash contingent and contractual its meet to all times at available equivalents cash and cash sufficient have not does company the that risk isthe risk Liquidity riskLiquidity This refers to the risk of loss that may arise from fluctuations of foreign exchange rates. exchange foreign of fluctuations from arise may that loss of risk the to refers This Risk Exchange Foreign constant creation of adequate borrowing capacity. borrowing adequate of creation constant the and risks liquidity absorb to capacity ample for provide funding of sources diversified of use the and ratios sheet balance Solid position. financial dfcu updates. liquidity regular with Committees Board relevant and Board the providing and analysis; scenario and testing stress Liquidity limits; risk liquidity external and internal Maintaining plan; dfcu monitoring and Reviewing The risk and its impact its risk and The earnings. and/or our customers, serve to ability our impact negatively could this change, regulatory to adapt and for, for, plan advocate foresee, to unable are If we changes. policy and regulatory ongoing to subject remains industry banking The customers. with interact and business, our run to continue we how to critical are discussions policy in evolving involvement and compliance Regulatory The risk and its impact its risk and The could have financial consequences on the Company. the on consequences financial have could this and currencies, all major against movements adverse have to Shilling continues Uganda The ’s funding policy is aimed at maintaining a solid asolid maintaining at isaimed policy ’s funding dfcu ’s funding and liquidity policy; policy; liquidity and ’s funding ’s contingency funding funding ’s contingency • • it? about we doing are What • • • • it? about we doing are What our activities. activities. our to applicable conduct of codes or policies internal rules, directives, and recommendations, supervisory guidelines, prudential regulations, laws, applicable conduct, of rules and standards internal company’s the with failure) comply to (or failure our perceived of aresult as suffer may dfcu reputation to loss or loss, financial material sanctions, regulatory or legal, of risk the as isdefined Risk Compliance Risk Compliance limits and guidelines. to compliance and sources reporting procedures, parameters, risk all of liquidity review a formal involves this and function Risk the of responsibility isthe risk liquidity for oversight Independent relationships with key regulators. proactive and constructive We maintain reform. regulatory appropriate for advocate to communities and makers policy with engage and initiatives, prevention risk and compliance regulatory to budget investment our of proportion amaterial We allocate currencies. applicable the to conversion negotiate or obtain they borrowings the match flows cash main their whether ascertain and borrowers top Review sources. flow cash USD customer with also but USD borrowings with USD loans Match USD Opex. finance USD to generated internally use to management flow Cash Dollar). States USD (United the against appreciates or depreciates Shilling) (Uganda (square) UGX the levels when manageable within are positions short or long the that so positions the monitoring Continue
xli dfcu Group 2017 Annual Report and Financial Statements xlii dfcu Group 2017 Annual Report and Financial Statements created by our / clients’ activities. / clients’ our by created impact the mitigate to clients our with work and program impact asocial implement to clients our ask or implement we relevant, Where project. given a of and/or location type the on dependent highly is clients our through indirectly or directly impact asocial have activities our which to extent The compliant. are projects the that ensure and ESG the to related aspects manage to how on clients and staff the to guidance provides that time to time from updated policy governance) and social (Environmental ESG ecosystems. on vulnerability on impact the include risks Environmental out. ruled be cannot customers our by projects some of execution the during impact negative However, apotential hospitality, health, manufacturing among others. infrastructure, education, example for society to beneficial projects in financing involved are we when example for positive, will be impact this cases many In environment. the and society on impact an have we that means activities our of most of nature The and sustainable development. sound environmentally of principles the and activities, lending and banking its of aspects governance and Social environmental, safety, and health to regard and standards ethical highest the with accordance in business conducting to iscommitted dfcu risk social and Environmental shareholders, investors or regulators. customers, its including public the by held dfcu about perceptions affect adversely can actions own company’s the or event external an of aresult as arise It may organization. to, the of, related or transaction or event an from arising stakeholder any of part the on company the of perception adverse an from emanates risk This Reputational Risk and availability of new business opportunities. opportunities. business new of availability and funding sourcing of cost and capacity profitability, on effects adverse including impacts, ranging wide have may reputation company’s the to Damage impact its risk and The has an an has dfcu • • • • it? about we doing are What action. further management’s for /corruption bribery of acts such any report to channels whistleblowing its use to stakeholders all other and staff encourages dfcu termination. to lead may that management consequence into results and misconduct gross of act an as isregarded employee, an by policies corruption and bribery the of breaches attempted or Breaches processes. and testing independent keeping, record and control financial reporting, confidential relationships, party third for processes preapproval diligence, due reviews, training, and communication processes, management risk governance, and oversight includes program the principle; this embodies program ABC The others. among suppliers and customers staff, the with dealings in all its corruption and bribery of acts to tolerance zero has company The regulations. and (ABC) laws corruption and anti-bribery all applicable with compliance full and standards ethical highest the with in accordance business conducts dfcu CORRUPTION AND BRIBERY to deal with customer complaints. isin place procedure timely and A comprehensive requirements. regulatory and customers to care of duties both with comply and clear, are they transparent that ensure to reviewed critically are products New perspective. ethical and regulatory service, acustomer from duties and responsibilities their of and reputation, company’s the in maintaining role their of aware made are employees and Directors redress. appropriate for damage reputation to lead may that acts any Board and management to reports and monitors regularly department Risk The Corporate Governance Statement
The dfcu Board of Directors ensures that the Company’s corporate operations and structures are governed by clearly defined principles of good corporate governance to ensure proper governance, transparency, full disclosure and accountability to all stakeholders through the existence of effective systems of self-regulation.
The Company promotes a high standard of dfcu is therefore committed to complying with performance from its Board and Management legislation, regulations and best practice codes with in their stewardship responsibility, undertaken the ultimate objective of fostering transparency, on behalf of its shareholders, and the millions of disclosure, accountability and probity in its Ugandans who are directly or indirectly impacted by transactions. Monitoring of regulatory compliance our actions. is a routine board practice. The operations of the Company and its subsidiary comply with all Codes and Regulations applicable laws. dfcu has a corporate governance charter designed to foster a culture of compliance and best practice Shareholders’ Responsibilities within the organization and its subsidiary. This Shareholders are mandated to appoint the Board charter is in line with international corporate of Directors and external auditors. They therefore governance standards (including the Commonwealth hold the Board of Directors responsible and Association of Corporate Governance Principles and accountable for effective corporate governance. the OECD Principles as well as the Capital Markets dfcu is committed to ensuring that its shareholders (Corporate Governance) Guidelines, 2003, the have adequate opportunity to participate in Companies Act 2012, and the Financial Institutions the governance of the company. The Company Act, 2004, among others. therefore has mechanisms in place to ensure that Shareholders are updated on its performance and material events. Group 2017 AnnualGroup 2017 Report dfcu Financial Statements &
xliii xliv dfcu Group 2017 Annual Report and Financial Statements on the Board pending the general meeting. general the pending Board the on fill vacancies may Board The meeting. in a general shareholders by appointed are Directors Association. of Articles and Memorandum Company’s the by isgoverned directors of appointment The others. amongst governance, corporate and digital management, risk operational, financial, including areas various in international) and local (both exposure skills and of balance appropriate an with individuals qualified suitably attract to need the to isgiven attention Further with. isinvolved Company the sectors the about passionate and integrity high of are who individuals seeks Company the directors, In choosing Appointment of Directors • • • • others: among following, the for responsible iscollectively Board The Association. of Articles and Memorandum the and Act Companies the under shareholders the for reserved matters in those except Company, the of body making decision- ultimate the as acts ismulti-skilled, which Board, The shareholders. the of behalf on Company the of affairs and business the of management the overseeing for isresponsible Board The Board of Directors operations. Company’s in the input their providing of purpose the for Directors of Board the by scheduled be may as meeting such any as well as Meetings General Annual attend to encouraged are Shareholders ethical standards; ethical high with in accordance business its conducts it that and requirements regulatory and legal all with complies and integrity with managed is Company the that ensure that systems establish to systems; control internal effective of establishment the ensure and operations Company’s the of management supervise and to oversight provide to objectives; Company’s the of achievement ensure and investments, and policies structures, strategy, plans, business approve and into input provide review, Company, the of aims the determine to Company; the of affairs the in directing account into these take to and Company, the of stakeholders other and shareholders of interests the protect to follows: as was attendance members’ year. Board the The during 4meetings held similarly Limited Bank dfcu subsidiary its of directors of Board The 4 meetings. held Limited dfcu of Directors of Board the review, of year the During quarterly. held are meetings Board consideration, if any. due for meeting each of commencement the to prior interest of conflicts any declare to required are all directors course, of a matter As basis. need a on in attendance be may professionals party third and management senior making, decision efficient To facilitate Association. of Articles Company’s in the for provided as routinely meets Board The Board Meetings vii. Page on listed are Board Bank the on served who those whilst vi Page on listed are review under year the during the on served who Directors The directors. (2) executive two and non-executive are whom of (7) seven directors, (9) nine had Limited dfcu of subsidiary owned fully hand, other the On Chairman. the including directors (6) six non-executive comprised Limited 2017, of end the at dfcu of As Directors of Board the appointment. the to objection no its of issuance to prior test” proper and a “fit including process vetting arigorous conducts which Bank Central the by cleared be to law by required subsidiary, the of directors Nominee Nominations Committee. Board’s the by isconducted process vetting and identification nominee members’ Board The due consideration. for interest of conflicts any declare must directors Nominee others. amongst qualifications director’s nominee the include particulars These decision. its guide to election for due directors about particulars required the with isavailed meeting general The meeting. general next the by election to themselves submit and retire to required are directors Such Bank Limited, which isa which Limited, Bank dfcu Limited Board Board Limited dfcu Bank, are are Bank, dfcu Mr. Elly Karuhanga ( CM ) (CM Mr. Elly Karuhanga Name a). dfcuLimited CM – Chairman CM apologies with A –Absent ) Mr. (CM Lule Kironde Name Name b). dfcuBankLimited – Chairman CM Apologies with A –Absent Mr. Lule Kironde Mr. Turner Michael Mr. Malik Deepak Mr. Malik Deepak (CM) Mr. Mugerwa Jimmy Mr. Turner Michael Mr. Jonkergouw Albert Mr. Malik Deepak Dr. Winifred Tarinyeba Kiryabwire Mr. Turner Michael The Directors’ attendance of Board Meetings for the year 2017 year follows: isas the for Meetings Board of attendance Directors’ The Mr. Jonkergouw Albert Mr. Willem Cramer Mr. Willem Mr. Ola Mørkved Rinnan Mr. Mørkved Ola Mr. Stephen John Caley Mr. John Stephen Mr. Kisaame Juma Mr. William Mr.Sekabembe William during the year 2017 year the during follows: as was The Board. full the at discussed are Committee Audit the by to attended ones the than other matters All constitution. their warrant to grows business as follow to others with Committee, Audit the up set Limited dfcu of Directors of Board The Limited a). dfcu 2017 year the for follows: was Meetings Committee Board of attendance Directors’ The committees. sub to functions its of some delegates Board The COMMITEES BOARD – Chairman CM Apologies with A –Absent Limited Board Audit Committee comprised the following persons, whose attendance of meetings meetings of attendance whose persons, following the comprised Committee Audit Board Limited dfcu 8th March 8th √ √ √ √ √ √ √ √ √ 8th June 8th √ √ √ √ √ √ √ √ √ 31st Aug. Aug. 31st March March √ √ √ √ √ √ √ √ √ A √ √ √ √ √ √ √ √ 1st Sept. Sept. 1st June June A √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ 30th Nov. 30th September September √ √ √ √ √ √ √ √ √ A √ √ A √ √ √ √ √ 1st Dec. 2017 November November √ √ √ √ √ √ √ √ √ √ √ √ A √ √ √ √ √ xlv dfcu Group 2017 Annual Report and Financial Statements xlvi dfcu Group 2017 Annual Report and Financial Statements Mr. Turner (CM) Michael Name Name Mr. Willem Cramer(CM) Mr. Willem Mr. Mugerwa Jimmy Mr. M.Rinnan Ola Mr. Jonkergouw Albert Mr. Malik Deepak Mr. Stephen John Caley Caley Mr. John Stephen the year was as follows: as was year the during meetings of attendance whose persons, following the In 2017, comprised Committee Audit Board the conduct. business of code own its and regulations and laws with compliance monitoring for process Bank’s the and activities, audit internal of effectiveness the risks, legal and financial of management and control internal of system the process, reporting financial the reviews Committee Audit The governance. corporate effective and management risk prudential for responsibilities oversight its in fulfilling Board the assists Committee Audit The AUDIT COMMITTEE BOARD 2. CM – Chairman CM A –Absent Mr. Jonkergouw Albert – Chairman CM – Chairman CM apologies with A –Absent the year 2017 year the follows: as was during meetings of attendance whose persons, following the comprised Committee Credit and Risk Board The to. isexposed Bank the all of risks management oversees Committee The effectively. managed are they that and strategy business Bank’s the inform and support they that ensuring Bank the within risks control and monitors measures, identifies Committee This COMMITTEE CREDIT RISK AND BOARD 3. follows: as was year the during meetings of attendance whose persons, following the In 2017, comprised Committee Nominations Board the matters. board other and review, performance annual Director’s Managing the including board the of evaluation ensure remuneration, board determine and review vacancies, fill to board candidates suitable identifying with charged responsibilities, other amongst is, Committee The 1. NOMINATIONS COMMITTEE The Limited Bank b). dfcu Name Mr. (CM) Caley Steve Mr. Turner Michael Mr. Rinnan Ola Bank Limited Board has delegated its authority to five (5) board Committees as shown below: below: shown as Committees (5) board five to authority its delegated has Board Limited Bank dfcu 8 7 7 th th th March March March √ √ √ √ √ √ √ √ √ √ √ 7 7 7 th th th June June June A √ √ √ √ √ √ √ √ √ √ 31 30 30 st th th August August August A √ √ √ √ √ √ √ √ √ √ 30 29 29 th th th November November November √ √ √ √ √ √ √ √ √ √ √ Mr. Jonkergouw(CM) Albert the year 2017 year the follows: as was during meetings of attendance whose persons, following the comprised Committee Remuneration Board The authority. and power of abalance ensures and interest, of conflict avoids is transparent, that in amanner performance, to reward linking while overpayments, as well as underpayments avoiding successfully, business the run to needed staff motivate and retain attract, practices remuneration Bank’s the that ensure isto objective Committee’s This BOARD4. REMUNERATION COMMITTEE Board - Directors Non-Executive Chairmen Board Name Name Mr. Jonkergouw Albert Mr. Malik (CM) Deepak Mr. Turner Michael Mr. Malik Deepak Annual Retainer Retainer Annual follows: as fees 2017,For year received the directors the approval. for Meeting General Annual the at shareholders the to recommended are allowances, sitting and retainer annual an comprising fees, These Committees. its and Board the on services their for fees fixed receive directors Non-executive BOARD REMUNERATION year. each of beginning the at Boards respective the by set targets against annually evaluated is Company the of Manager General the and subsidiary the of Director Managing the of performance The addressed. being of process in the are and identified were improvement of Areas meetings. quarter fourth the during considered was report evaluation The expert. external an of assistance the with 2017 quarter year the of fourth in evaluation the its conducted Board The effectiveness. its improve to therefrom results and process the uses and performance its of evaluation an conducts annually Board The BOARD EVALUATION Chairman – Acting CM Ag. apologies with A –Absent Cramer Mr. Willem during the year 2017 year the during follows: as was meetings of attendance whose persons, following the comprised Committee’s Liabilities and Assets Board The policy. this with in accordance managed are funds Bank’s the that ensuring for and policy management /liability asset the reviewing and establishing for isresponsible Committee This COMMITTEE LIABILITIES AND ASSETS 5. BOARD – Chairman CM apologies with Absent A- 8 7 th th March March √ √ √ √ √ √ 7 7 USD 12,500 USD 25,000 USD th th June June √ √ √ √ √ √ 30 30 √ (Ag.CM) th th August August A A √ √ √ 30 29 th th November November √ √ √ √ √ √ xlvii dfcu Group 2017 Annual Report and Financial Statements xlviii dfcu Group 2017 Annual Report and Financial Statements Company. the of functions critical for responsible executives senior the of comprising committee executive an by isassisted Director Managing the company, the of operations daily the of oversight his of part As requirements. regulatory the with in line Director Executive an by issupported who director Managing a by isoverseen subsidiary company’s the bank, dfcu of operations The Board. the by appointed Manager aGeneral by conducted is limited dfcu of operations the of management day to day The entity.each of operations the of complexity and volume the of cognizance takes that in amanner structured been has case in each and segregated isclearly subsidiary the and Company the of structure Management The Management Structure COMPANY THE OF MANAGEMENT Isharaza. subsidiary the for Secretary Company the while Advocates for Secretary Company The reviewed. regularly and followed strictly are procedures board the that and requirements statutory the to complies Company the that ensure must Secretary Company The Secretary Company statements. financial the of 42(f) note under is shown directors by received emoluments of amount aggregate The Company. the by met are accommodation) (transport, costs Incidental amounts. in gross are fees All Note: Directors Non-Executive Chairmen meeting): Allowances (per Sitting Bank is Mrs. Agnes Tibayeita Tibayeita Agnes isMrs. Bank dfcu Limited is Ligomarc isLimited Ligomarc dfcu unfettered powers of decision making. decision of powers unfettered has individual one no that such authority and power of abalance ensure as well as responsibilities of division facilitate and accountability promote isto powers of separation The strategy. Company’s the implementing in iseffective Board the that ensure and guide to is role Chairman’s primary The strategy. Board and objectives term long the of execution the ensures and affairs business Company’s the of leadership to-day day- the for isresponsible Director Managing The Bank dfcu mandate. its of execution in the Board the to leadership provides Chairman The basis. aquarterly on Board the to reports and Board the by approved as company, the of Strategy the implementing effectively for isresponsible Manager General Manager. The General the and Chairman the of responsibilities and roles the of separation isaclear There Limited dfcu Officers Executive and Chairman the of role the of Separation USD 700 USD 950 USD CDC Group Plc Group CDC Arise B.VArise Name Investor 2017 31 at as December Limited dfcu of Shareholders Largest 20 the of List Description National Social Security Fund -Pinebridge Security Social National Plc Fund NAS5 Company Investment Russell SSB Kimberlite Frontier Africa Naster Fund, L.P.-RCKM K Fund Security Social National Between 1,001 and 5,000 Shares 1,001 5,000 and Between Shares 1,000 1and Between Distribution of dfcu Limited shareholders as at 31 December 2017 31 at as December shareholders Limited dfcu of Distribution shareholders. individual and institutional both of iscomprised company The ANALYSIS SHAREHOLDER BRIEF Jubilee Investment Company Limited Company Investment Jubilee Others Scheme Pension Parliamentary The Rakesh Gadani Makerere Scheme Retirement University Benefits Limited Co. UAP Insurance Scheme Contributory Defined Staff Bank Centenary Benefits Retirement Staff Authority Revenue Uganda -Stanlib Scheme Benefits Defined Uganda of Bank -Sanlam Scheme Benefits Defined Uganda of Bank Foundation NHilton SSB-Conrad University Vanderbilt Keith Muhakanizi Fund Life Insurance-Gen Bank/UAP Finance Housing Ruparelia Sudhir Between 5,001 10,000 Shares and Between Above 100,001Above Shares 10,001 Shares 100,000 and Between Directors’ interest in the shares of the Company as at 31 December 2017 31 at as December Company the of shares in the interest Directors’ Mary WinifredMary Tarinyeba Name No. of investors of No. 3,000 of Number held shares 3,824 1,277 1,766 206 104 471 No of shares held shares of No 693,419,224.00 693,419,224.00 748,144,033.00 4 39,176,0 97.0 0 0 97.0 39,176,0 4 54,958,626.00 54,958,626.00 12,789,000.00 74,580,276.00 74,580,276.00 55,803,416.00 55,803,416.00 54,724,809.00 2,850,292.00 2,850,292.00 4,443,245.00 4,443,245.00 2,335,330.00 2,335,330.00 2,734,346.00 2,734,346.00 1,488,972.00 1,488,972.00 2,806,087.00 2,806,087.00 7,255,064.00 7,255,064.00 7,359,4 82.0 0 0 82.0 7,359,4 9,328,4 37.0 0 0 37.0 9,328,4 4,481,491.00 1,557,256.00 2,165,575.00 2,165,575.00 1,911,409.00 1,911,409.00 1,977,74 8 .0 0 0 .0 8 1,977,74 3,417,075.00 748,144,033 729,589,093 Shares Held Held Shares 12,994,557 3,295,620 1,524,235 740,528 Percent holding Percentage (%) 100.00% 97.52% 100.00 0.20% 0.44% 0.10% 1.74% 92.69 58.70 0.38 0.38 0.29 0.20 0.46 0.26 0.26 0.60 0.98 0.37 0.59 0.21 1.25 0.31 0.97 9.97 . 6 7.4 7.35 7.31 1.71 xlix dfcu Group 2017 Annual Report and Financial Statements Sustainability Report This report covers the economic, social and environmental performance of dfcu Group for the year ended 31 December 2017.
REPORT SCOPE Report Quality In reporting both financial and non-financial We take every effort to ensure that our corporate matters, we have acted in compliance with the reporting meets widely accepted quality criteria, provisions stipulated by the Central Bank of Uganda, including: International Financial Reporting Standards, the Companies Act Cap 110 and the Listing Rules of • Completeness: We include key material Uganda Securities Exchange (USE). The report sustainability impacts within and under the direct also adopts the Global Reporting Initiative (GRI) control of statutory regulations, impacts outside Guidelines, version G4 and the GRI’s G4 Financial the organization that are indirectly influenced Services Sector Supplement for sustainability through our engagement with stakeholders; and reporting. broader sustainability initiatives undertaken through the CSR programs and other groups. Inclusivity • Comparability: We provide results from both In preparing this report, we took into account key current and previous reporting periods. aspirations and concerns discovered through our • Accuracy and consistency: Our information- structured stakeholder engagements, in our day-to- gathering process includes verification by internal day interactions and from the community at large. It authorities and external assurance providers. reviews dfcu Group’s direct impact on sustainability, • Clarity: We provide both quantitative and as well as Corporate Social Responsibility (CSR) qualitative information accompanied by tables and initiatives undertaken, which are designed to graphs where applicable. foster greater prosperity in the communities where • Balance: We report all relevant information; we operate and to promote a healthier natural nothing is withheld. environment. • Credibility and Reliability: We seek external confirmation from reputed assurance providers. Materiality This report covers aspects identified as having at Precautionary Approach least a moderate impact on sustainability, either in dfcu Group manages the social and environmental dfcu Group’s view or from the perspective of one or impacts in its products and services through the more stakeholder groups. The aspects identified as Credit Bureau department and also channeling material and the process for determining materiality new product developments through the Products are discussed below. and Pricing Committee. The Group also manages the social and environmental impacts in the supply Reporting Cycle chain through the supplier selection and evaluation dfcu Group’s sustainability impacts have been process. The process includes a technical review
dfcu published in our Annual Report since 2014. The which encompasses social and environmental Annual Report is published within the time frame aspects. Group 2017 Annual Report Report 2017 Group Annual stipulated by the Group’s Articles of Association, the & Statements Financial Companies Act Cap 110, and the Listing Rules of Uganda Securities Exchange.
l The following table shows the levels of significance accorded to various aspects relative to sustainability: to relative aspects various to accorded significance of levels the shows table following The 3. 2. Aspect criteria to measure impacts and boundaries; and impacts measure to criteria following the low. and We applied moderate high, significance; of levels three to according categorized were Aspects operations. and strategy business Group’s dfcu to related sustainability of to, areas contribution and on, impact their to according aspects We evaluated stakeholders. our and Group dfcu to relevant most are that impacts those isolate to ‘boundaries’ established and process engagement stakeholder the via collected significance sustainability broad with aspects We identified have Boundaries Their and Aspects Relevant 1–Identify Step process: atwo-step follows and guidelines G4 GRI the and imperatives strategic the on primarily based is content report determine to used methodology The our stakeholders. by expressed views the also and impacts social and environmental economic, our with along activities, Group’s business dfcu of range full the considers therefore report this of content The enterprise. an as goals overall our and commitment sustainability our between connection strong the given stakeholders, our of expectations the with strategy Group’s business dfcu align to isvital it We believe Boundaries Aspect the and Content Report Defining to Approach Our MATERIAL ASPECTS AND BOUNDARIES 1. Economic Procurement practices Procurement Market presence Economic performance High High Internal High Significance to dfcu
Group’s Operations 2. 1. perspectives: two low) from and medium high, of (again, rankings with relevance its prioritised we importance, direct or ‘materiality’ aspect’s To an establish aspects. significant most its encompassing boundaries identified we aspect, material each for time, same At the regulations. and laws local relevant of applicability the and stakeholders our of expectations the as well as Group’s dfcu to operations, importance their on based aspects’ ‘material ranked and We evaluated Prioritization and Aspects Material 2–Establishing Step • • • • • • relation to each aspect. each to relation in deliver potentially can Group dfcu that value The suppliers. and customers our of activities the of impacts The citizen. corporate a good as Group’s responsibility dfcu expectation. of levels their and interactions stakeholders’ various of degree The operations. in our isused aresource which to extent The aspect. each over has Group dfcu that influence of level The Group. dfcu with relationship their assess they how on have could it influence the and groups, stakeholder specific of aspect the of importance The awhole. as society and environment natural economy, the to plan), responsibilities our fulfill we as strategic the (set in out objectives and Group’s strategies dfcu of pursuit our to aspect the of importance The Aspect Boundary Aspect * * * Staff, Board of Directors, Management External Customers
Communities
Suppliers
Shareholders High High High To dfcu Group Materiality High High High To the Stakeholders
li dfcu Group 2017 Annual Report and Financial Statements lii dfcu Group 2017 Annual Report and Financial Statements iii). iii). ii). i). principles: operating following the meet to arrangements reporting and monitoring, capacity, policy, procedure, of comprises System Governance and Social Group’s environmental, dfcu policy Governance and Social Environmental, 26. TopicsOther 25. 24. 23. Responsibility Social: Product 22. 21. 20. Society Social: 19. 18. 17. 16. 15. Rights Human Social: 14. 13. 12. 11. 10. Social: Labour practices and Work Decent 9. 8. 7. 6. 5. 4. Environment Environmental Act, regulations and standards. standards. and regulations Act, Environmental National Trade Act), the and Unions Act, Compensation Tax Workers’ the Income Act, Act, NSSF the Act, Employment (the laws Uganda’s Employment with aminimum, comply, at lends dfcu which to Companies partners). funding dfcu of Alignment and the principles oflending and sustainableactivities environmentally development. sound and banking its of aspects social and environmental, safety, and health to regard with activities To conduct Corporate Social Responsibility activities Responsibility Social Corporate Customer privacy Product and service labelling service and Product Customer health and safety and health Customer Compliance laundering anti-money and anti-bribery Anti-corruption, Local communities Local Security practices Security Forced Labour or compulsory Child Labour Child bargaining collective and association of Freedom Non-discrimination Labour practice grievance mechanisms Equal remuneration for women and men and women for remuneration Equal Training and education Training and Occupational health and safety and health Occupational Employment Compliance Products and services and Products Effluents and waste and Effluents Emissions Water Energy ’s lending strategy to comply with the exclusion lists (both internal and those of our our of those and internal (both lists exclusion the with comply to strategy ’s lending High High High High High High High High High High High High High High High Moderate High Low Moderate Moderate Low Low High Aspect Boundary Aspect * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * High High High High High High High High High High High High High High High High High High Moderate High Materiality High High High High High High High High High High High High High High High High High High High Moderate iv). on internal approval documents, advisory and and advisory documents, approval internal on recorded and risk environmental of classification initial an given and isprocessed proposal Each regulations. environmental local all applicable with comply all customers that ensure to seeks dfcu stages. operational and implementation planning, in the monitored and assessed are supports it activities the of effects environmental the that process, credit the of part As procedures. assessment risk normal the of part be should risks environmental that recognises dfcu Policy Environmental The origin. social or religion opinion, colour, political gender, disability, of race, irrespective work, of &conditions terms progression, recruitment, of in terms fairly employees its treat to customers its encourage to endeavours dfcu Furthermore, employees. their reward substantially wage; minimum national alegal have not does Uganda present, the at While hazard. physical and moral exploitation, potential from protected are they that and disrupted not is education if and age working right the of children employ only can customers its that emphasizes process. assessment risk normal the of part are risks and issues social that recognises dfcu Policy Social The reviews and monitors its loans and reports reports and loans its monitors and reviews dfcu environmental and social performance. performance. social and environmental safety, and health of areas in the sub-borrowers its of activities the stakeholders its to periodically & Regulators & Government urges its customers to to customers its urges dfcu Staff seeks to ensure ensure to seeks dfcu & the Media the & Suppliers dfcu performance; environmental and social economic, in our interest expressed an have all whom of stakeholders, key our as below listed groups the identify we Accordingly, issue. particular the and group stakeholder the to according varies engagement of frequency The feedback. stakeholder gather to mechanisms and channels of arange employ We environment. business the influence and risk reputational minimise expectations, social manage engagement, proactive enable to stakeholders, of range abroad with relationships strategic maintain We and build organization. our with engagement by affect be to by, expect we that or isaffected that entity or group person, any be to a‘stakeholder’ We consider Stakeholder Engagement laws. Employment national the with comply to and measures Safety & Health appropriate adopt to encouraged are the industrial sectors concerned. Businesses account into taking employees, their of Safety and Health the jeopardize not do that in activities engage visiting customers and workers dfcu both to accidents NIL fatal year, were the there During customers. its and workers both to operations its of risk safety the preventing to committed is Group dfcu Policy Safety and Health The Guidelines. Policy Credit in the required as reports evaluation Communities we support we premises. premises. dfcu Group’s activities or their their or Group’s activities dfcu and Clients and Customers ensures that customers customers that ensures dfcu Investors and Investors Analysts
liii dfcu Group 2017 Annual Report and Financial Statements liv dfcu Group 2017 Annual Report and Financial Statements place (as demonstrated above), so we can better understand their key issues. their understand better above), can we so (asplace demonstrated in are mechanisms engagement appropriate ensure we groups, stakeholder our of For each issues. emerging and current important understanding of method primary isour Group’s stakeholders dfcu with Dialogue Groups Stakeholder with WeHow Connect diagram: following in the isexplained process engagement stakeholder Group’s dfcu stakeholders. our of interest best in the are responses our that ensuring while performance improve and services and products new develop to opportunities recognise issues, emerging and current identify to us helps also conversation on-going an Maintaining improvements. process and innovation risk, manage better can we so expectations their understand us helps stakeholders with dialogue Aconstructive strategy. our achieve to stakeholders with engagement active demands Group dfcu of structure governance The Reporting back to the the to back • Reporting Reporting feedback and Monitor stakeholder • Identify prioritise and • Identify Identification stakeholders groups issues • Allocating necessary resources • Determine engagement mode • Prioritise stakeholders stakeholders specific • Identify and scope objectives, • Establish Planning • Implementation policies, • Communicate Implementation timelines implementation for timelines and procedures concerns during 2017. stakeholder critical any encounter not did Group action. effective prompting Management, Senior and Directors of Board the of attention the to swiftly brought are concerns critical any that ensure and inclusiveness promote to isdesigned process This The Stakeholder Engagement Process below. discussed as engagements structured more out We carry also stakeholders. other and suppliers customers, with interactions day to day in business, of course normal in the conducted are efforts Group’s engagement dfcu of Most • Pre-implementation necessary • Formulate of methods • Identify Designing for findings • Prioritise Prioritisation • Determine the need for of • Evaluate effectiveness • Evaluate results Evaluation • Conduct engagements Engagement testing, if required if testing, policies and procedures issue the addressing action further engagement further process the dfcu 2. Customers www. website: Company analysts and funders shareholders, including Investors, 1. survey satisfaction Customer Annual reports One-on-one discussionsOne-on-one Media advertisements Customer workshops department Customer service customers corporate engagements with Relationship managers’ discussionsOne-on-one Exchange Securities Uganda the on Announcements made Investor presentations releases media and conferences Press statements financial Interim Meeting General Annual Mode of engagement Mode of engagement dfcu limited.com Continuous engagement of Frequency Annually engagement of Frequency Annually As required As required As required As Continuous required As required As required As Annually required As Semi-annually Annually • • Concerns raised: • • • • • discussed: Key topics concerns raised and discussed Key topics • • Concerns raised: • • • • • • discussed: Key topics concerns raised and discussed Key topics disputes. of resolution Amicable Customer lapses service banking online and platforms mobile through available Services openings/relocations Branch charges and Fees conditions and terms securities, trends, rate Interest services and in products Innovation analysis Sensitivity assets of Quality Sustainable growth Group the by offered services enhance further to Proposals Liquidity management plans expansion Business indicators performance key improve to Plans results annual and Interim respond Methodologies employed to respond Methodologies employed to • • • • priorities. top our among are communications regular and Transparency, accountability process. engagement the during secrets) commercial to related not are they (provided addressed are shareholders prospective and existing of Concerns development processes. business in customers’ assisting and products environmentallyand friendly innovative communications, responsible marketing information security, improved include satisfaction customer enhance to measures Other services. in existing improvement potential of areas and levels satisfaction on feedback obtain to surveys customer conducts Group dfcu customer issues. all handling to dedicated department customer service fledged isafully There services. and products new in developing considered are engagement of forms various through gathered customers of expectations multiple and Opinions
lv dfcu Group 2017 Annual Report and Financial Statements lvi dfcu Group 2017 Annual Report and Financial Statements management relationship Supplier circulars and Directives etcevents sports parties, staff as such events Special meetings and visits On-site Partners Business Other and 5. Suppliers On-site reviews Meetings releases Press Consultations Filing of returns Regulators and Legislators including Institutions, Government 4. Town Hall meetings Intranet site (fortress) associations their and employees with Negotiations email via staff to updates Operation Internal newsletter Regional review meetings Employees 3. Mode of engagement Mode of engagement Mode of engagement As required As engagement of Frequency required As engagement of Frequency Annually engagement of Frequency As required As required As required As required As required As deadlines statutory Within Quarterly Continuous required As required As Monthly Monthly • Concerns raised: • discussed: Key topics concerns raised and discussed Key topics • • • • discussed: Key topics concerns raised and discussed Key topics • • Concerns raised: • • • • discussed: Key topics concerns raised and discussed Key topics Contractual performance Group by offered opportunities Responsible procurement rules tax including regulations, government Other requirements (KYC) customer your Know (AML) and laundering anti-money with Compliance governance corporate of practices best of codes with Compliance licensed commercial banks to pertaining regulations Uganda of Bank Central measures welfare Staff performance on based compensation Remuneration, including mechanism Whistle-blowing Future plans regulations with Ugandan Compliance structure corporate with values Aligning dfcu respond Methodologies employed to respond Methodologies employed to respond Methodologies employed to • • • • building relationships. strong key to are trust mutual and Reliability business. own our and suppliers our both for is created value that ensure to dialogue ongoing an We encourage suppliers. of pre-qualified alist maintains Group dfcu institutions. professional and public other with relationship strengthening our compliance, regulatory ensure to procedures and systems in place put have We regulators. with dialogue on-going an has Group dfcu targets. defined of achievement their on based employees Group dfcu of culture driven performance The industry. in the developments latest the of awareness employee increase to circulars via instructions sends and sessions awareness and training conducts Group dfcu delivery channels delivery of network Widespread according to the Group’s overall strategic objectives. strategic Group’s overall the to according allocated resources with unit each for goals specific includes budgeting detailed Our plan. roll-out year afive to according isprepared which budget, annual in the addressed are unit business each of needs The units. service support other as well –as Treasury and (DIB) Banking Institutional and (CB), Development Banking –Consumer units business key strategic all of inputs the reflects plan This plan. corporate acomprehensive with sustainability economic to Group’s dfcu guides approach Directors of Board The governance.good of principles the to adhering while opportunities pursuing and risks manner, managing ethical and in atransparent Group’s business the We conduct aspirations. their achieve them help to suppliers and employees customers, including stakeholders of avariety with work we growth, sustainable for quest in our time, same At the value. maximum returning by in us placed have shareholders trust At Sustainability Economic activities Responsibility Social Corporate releases media and conferences Press Call Centre Public events 6. Society and environment Mode of engagement Group, we always strive to repay the the repay to strive always we Group, dfcu engagement of Frequency Continuous Continuous required As required As Continuous required As • • Concerns raised: • • • • discussed: Key topics concerns raised and discussed Key topics Financial inclusion Financial recruitment Staff parties external various by excellence of Recognition investment Community banking affordable and fair to access Providing initiatives responsibility Corporate • • • Budget; Plan and Strategic in the out set goals towards progress monitor to mechanisms various in place put Group dfcu manage risk, respectively. and business our govern we how in detail discuss ‘Risk Management’ and Governance’ ‘Corporate to devoted Report Annual this of sections The Board. Board. the to communicated duly are Committees Board these of proceedings Director. The Managing the by headed committees management other several by backed in turn are committees These governance. good ensure and efforts in their them support which sub-committees established has Board The performance. improve to plans action recommended discuss units business Group’s strategic main the of heads the which at meetings board quarterly are There (IFRS). Standards Reporting Financial International the of requirements the to according statements financial annual and material variances. of explanations with basis amonthly on Directors of Board the to submitted are data, performance key including accounts, management Detailed respond Methodologies employed to and CSR initiatives. CSR and sponsorships through society under-privileged of members the of some and communities local We support also relevant developments. performance and other sustainable our of informed public the keep we activities, in our transparent being to Committed ATM network. and branches nationwide delivered via the finance, commercial and lending personal to investments and taking deposit from activities, banking of range full the through developmenteconomic local to We contribute Group prepares interim interim prepares Group dfcu Bank’s Bank’s dfcu lvii dfcu Group 2017 Annual Report and Financial Statements lviii dfcu Group 2017 Annual Report and Financial Statements • • Group to to Group dfcu of contribution fundamental most The society. the throughout and stakeholders our of conditions economic the on impact our shows in 2017. in Uganda operations our of print foot It economic the shows below statement added value The challenges. global by posed risks mitigate and development economic stimulate to required investments the to contribute to able were we abusiness, As Uganda. of development in the sector private the by played role the recognises Group dfcu impact: economic Our by Bank of Uganda. of Bank by undertaken are audits statutory Other accountants. chartered of firms reputable by conducted are statements financial of audits external Annual operations. of scope entire covers function audit internal effective An section. Governance Corporate in the disclosed are functions committee each how and mandates their Committees, all of Board composition The Inputs Capital 1,156 Employees Shs Bn 142.6 PlantProperty, & Equipment Bn 532.3 Shs funds Shareholders’ Nature Capital Nature Capital Financial Capital & Relationship Social Capital Human Capital Manufactured Capital Financial during the loan appraisal process appraisal loan the during aspects Management Social and Environmental incorporate We • Commitment • Competence • Thinking • Experience existence) of years (53 brand Strong 51% Female representation 11.1Shs Bn Investment Property 1,987.1Shs Bn Customers Deposits Shs Bn 0.2 CSR in Investment value creation model; creation value is Below government. and investments community shareholders, employees, include who stakeholders the to isdistributed amount resulting The amortization. and materials, depreciation of cost as such payments minus performance Group’s revenue the on iscalculated Value added Value creation model: sustainable. remain to on depends Group dfcu that communities and recipients to difference a measurable make activities responsibility social corporate our addition, In communities. in local development socioeconomic drives and employment provide which businesses local in supporting arole play we services, and goods of abuyer As Uganda. of Government the to tax and employees our to salaries shareholders, our to dividends pay to us allows This business. robust a maintaining isby operate we in which society the Shs Bn 0.8 Staff training Bn 19.0 Shs software in Investment Bn 483.4 Shs Borrowed funds capacity innovation and knowledge tacit values, organizational Our capacity innovation and knowledge tacit values, organizational Our operate. to license social the us provide which stakeholders our with nurtured have we relationship The team. our of attitudes and values dynamism, The business. conduct to framework required the provides that technology digital and infrastructure physical The activities. day to day fund and strategy our drive to used customers and investors from and debtEquity obtained capital
Group’s Group’s dfcu Wealth Creation Wealth Dividends to shareholders Government Employees Distribution of wealth Wealth created Operating expenses Value statement: added below. statement in the shown as million (2016: 76,913 million) in 2017 196,468 Shs was Group by the created wealth total The Group. the of units service and key business representing officers senior of iscomprised which Committee, (BCP) Planning Continuity Business the to guidance overall provides management, senior and corporate of representatives several includes which Committee, Steering Management Continuity Business Our growth. continued and Group’s success dfcu to isvital operations business critical of Continuity Business Continuity Management • • • stakeholders; key some among capital of flow total isthe following in 2017, created wealth total the Of the Uganda. of society the to contributor isapositive Group dfcu that shows above statement added value The Wealth distributed Wealth growth business future support to Retentions responsibility social Corporate Interest expense combination business from arising Gain income other and trading Net Interest income Fees and commission income commission and Fees dividends (2016: million). 10,804 dividends as 12,510Shs shareholders the to paid million was million) 13,038 (2016: taxes of in form Uganda of Government 41,165Shs the to distributed million was 35,391million) (2016: benefits Shs remuneration as employees the to 58,217Shs distributed million was 196,468 7001 47,0 3 (189,520) 39,655 273 273 (131,550) 58,217 11,581 and minimizing the downtime and loss of data. of loss and downtime the minimizing and machines in switching issues identifying at aimed are exercises These situation. disaster any withstand to Group’s ability the test to out carried are exercises swap role periodic and locations remote at sites recovery disaster in place put have we technology, As disasters. natural including events, external as well as systems, and processes internal of failures or shortcomings by posed threats any minimize to strives and risks operational Plan addresses Continuity Business The Board. the by approved formally been has which (BOU), Uganda of Bank of guidelines and requirements the with Plan in line Continuity Business aformal developed Committee BCP The 196,468 119,301 Group relies heavily on information information on heavily relies Group dfcu 84,303 Shs. M Shs. 12,510 41,165 2017 % of wealth wealth % of created 30% 21% 6% 1% 76,913 251 251 (96,900) 29,305 217,155 (83,914) 35,391 10,547 10,804 76,913 13,038 16,709 Shs. M Shs. 2016 - % of wealth wealth % of created 46% 14% 17% 1%
lix dfcu Group 2017 Annual Report and Financial Statements lx dfcu Group 2017 Annual Report and Financial Statements Staff turnover Staff Staff composition (Female :Male) (Female composition Staff Staff training spend (Shs M) (Shs spend training Staff M) (Shs staff per Cost M) (Shs staff per Revenue 856 million and spent a total of Shs 875 Shs of million. a total spent million and 856 Shs of abudget allocated Group The productivity. skills and enhance to year in acalendar once least at train all staff that ensures Group The female. are 1,156 51% which of employed Group dfcu employees employees Our Percentage spent on local suppliers suppliers foreign on spent Amount Amount spent on local suppliers local on spent Amount Total procurement spend Total procurement Total staff costs (Shs M) (Shs costs Total staff (number)Total employees suppliers’ commitment to environmental issues. issues. environmental to commitment suppliers’ considers and environment the of protection encourages strongly Group the all procurements, to conditions and terms procurement standard applies Group the Whereas market. local the on services and goods of purchase the supports In general, ethics. of standard high avery to and governance corporate excellent to iscommitted Group tender. to The opportunity an possible as suppliers many as give to endeavour We practices. best procurement international implement to drive in its fairness and integrity openness, of principles to subscribes Group dfcu Procurement Summary of procurement spend: Group Group dfcu Below are the staff highlights staff the are Below million in 2016 million in 2017. 340 Shs 448 Shs to from increased staff per revenue The increased. 5%into 2017. productivity staff the aresult, As in 2016 8% from reduced over turn employee The viability. viability. commercial and sustainability quality, solution for Group’s standards the to alignment ensuring time same the at while suppliers, local to priority gives policy procurement Our relations. community maintaining and economy local the to contributing in factor important an isalso spending local of proportion The economy. local the to investment additional in attracting arole play we chain, supply in the business local supporting By economy. the in suppliers local supports proactively also Group taxes. and wages of payment and jobs direct beyond goes economy local the on influence Our Shs M Shs Shs M Shs Shs M Shs 51% :49% 58,217 1,156 2017 448 875 5% 50 121,003 112,533 8,470 2017 93% 48% :52% 48% 56,704 dfcu 35,391 51,601 5,103 2016 2016 91% 340 756 410 8% 47 Profile: Guidelines; Reporting (GRI) Initiative Sustainability Reporting Global the from indicators the are Below Report Indicators’ GRI twice ayear. twice isdone measurement performance The aspirations. and needs development personal and requirements, capability future considers and feedback creates that process two-way It’s inclusive, an individuals. all and teams the for reviews performance monitoringperformance conversations and setting, goal involves that a cycle has which tool measurement aperformance developed Group dfcu contribution, employee’s an monitor to In order Performance measurement 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 Performance Indicators 1.1 and 1.2 and 1.1 Performance Indicators services offered services produced/ products employees, of Number organization: reporting the of Scale served markets of Nature ownership of Nature is located organization the in which Counties subsidiaries and joint ventures companies, operating divisions, major of Description organisation the of structure Operational including if applicable brands services, or products Major organization reporting of Name Topic Vision, Mission and Ownership and Mission Vision, Topic incorporated in the training budget and plan. and budget training in the incorporated are staff identified the for interventions Development management. by approved and updated are Managers Operation Branch and Administrators Credit Managers, Credit Managers, Branch including; pools successor Branch growth. its support effectively to pool talent own its build progressively isto philosophy management Group’s people dfcu Talent management and succession planning department. particular in that employees by identified challenges the coordinate help to partner business resource ahuman isallocation department each In addition, risks. and challenges related work employee in identified made progress evaluate and track to isdone This sought. is input adding value and ideas views, staff which through surveys online regular has Group dfcu feedback: Staff lxii 49 li 2 -3 xxvi - xiii xlvix iv i Disclosure pages ii Disclosure pages and services offered. services and products employees, Our financed Sectors shareholders of List information general and Contact updates Business of Directors governance, Board Corporate services and products Financial Limited Group dfcu Description Vision and Mission statement Mission and Vision Description
lxi dfcu Group 2017 Annual Report and Financial Statements lxii dfcu Group 2017 Annual Report and Financial Statements Social Labour performance indicators Economic performance indicators Governance and structure management systems EC8 EC3 EC3 EC1 Performance Indicators 3.1 – 3.6 Performance Indicators LA9 LA8 LA6 LA5 LA4 LA3 LA1 Performance Indicators Total taxes of all types paid all of types Total taxes remuneration employee total purchased, services and all of goods Cost markets of breakdown Geographic earnings retained in increase and sales Net Topic employee per training of hours Average AIDS HIV/ on Program and Policies diseases and accidents Occupational committees safety and Health over changes in operations employees with negotiations Policies/procedures on rates Retention Breakdown of workforce Topic strategy and oversight and strategy for responsible are that directors of board the under committees major including organization, the of structure Governance Topic lxi lxi 95 13 Disclosure pages lxii lxii lxii lxii lxii lxii lxii Disclosure pages xlvi Disclosure pages Value added statement Value added statement Value added network Branch overview financial in equity, changes of statement income, comprehensive of Statement Description Staff highlights Staff issues welfare Staff safety and health Occupational safety and health Occupational Employee engagement highlights Staff highlights Staff Description Corporate governance Corporate Description Looking Ahead
The evolving trends in the market create many opportunities for us to strengthen our position and deliver long-term value for all our shareholders.
We remain committed to continuing the execution of Becoming more efficient our strategy and realising our vision of becoming the dfcu is on a transformation journey. The ramp up preferred financial solutions provider in the market phase of this journey was completed at the end of segments where we operate. 2017 and we are now moving into the execution phase. In 2018, the focus will be on implementing Driving sustainable growth the second phase of the Business Process Re- As one of Uganda’s large financial services player, engineering (BPR) project. The ambition is that our we understand the importance of supporting the processes, IT infrastructure, operations, distribution country’s economic transformation. Through channels etc., will be revamped to achieve agile, optimization of our large balance sheet and the simpler and faster operations. range of customer offerings, we will continue to drive sustainable growth and value for all stakeholders. Transforming ways of working Our staff are crucial to the implementation of our Implementing our channel strategy strategic aspirations. Ensuring a high–performing We will continue to build the strength of our organization with the skill set needed to match multichannel model by responding to the evolving increasing customer expectations and the changing ways in which our customers are choosing to environment in which we operate remains a interact with us. As customers increasingly choose key priority. We will continue to implement the digital channels for day to day banking needs, we dfcu culture change programme to drive staff will scale up our investment in the development of productivity. new digital solutions. As part of our strategy, we will also continue to develop mutual partnerships to accelerate our efforts within the digital space. Group 2017 AnnualGroup 2017 Report dfcu Financial Statements &
lxiii dfcu Group Director’s report and Consolidated Financial statements
for the year ended 31 December 2017 Contents
Group information 2 Directors’ report 4 Statement of directors’ responsibilities 6 Independent auditors’ report 7-11
Financial statements: Consolidated statement of comprehensive income 12 Company statement of comprehensive income 13 Consolidated statement of financial position 14 Company statement of financial position 15 Consolidated statement of changes in equity 16 Company statement of changes in equity 17 Consolidated statement of cash flows 18 Company statement of cash flows 19 Notes 20–94 2 dfcu Group 2017 Annual Report and Financial Statements Kampala, Uganda Kampala, P.O. 2767 Box Road Kyadondo Plot 26 REGISTERED OFFICE Uganda Kampala, P.O. 3509 Box Road Nakasero Plot 2&4A, DIRECTORS information Group 3 Public Accountants Certified KPMG AUDITORS Uganda Kampala, P.O. 8230 Box Plot 4, Road Jinja Uadn *uc **rts ****Indian 5 ***British Advocates Ligomarc CORPORATION SECRETARY **Dutch *Ugandan WT. Kiryabwire* Jonkergouw** AJM. Kironde* L. Turner*** M. D. Malik**** Karuhanga* E. th rd Floor Social Security House House Security Social Floor Floor, Rwenzori Courts Building Courts Floor, Rwenzori Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Chairman Main Banks Correspondent Kampala, Uganda Uganda Kampala, P.O. 36362, Box Plot 11, Bugolobi Close, Bandali & Ali Advocates Mugerwa Kavuma, Kabayiza, Uganda Kampala, P.O. 37366, Box Road Plot 52, Bombo House Floor, Esami Ground & Advocates Solicitors TabaroKaruhanga, & Associates Uganda Kampala, P.O. 2658, Box Road Plot 1, Lourdel Ground Floor, Lourdel Towers Oaths for &Commissioner Advocate Kenneth Akampurira Group’s Solicitors Africa South Santon, Road &Rivonia Fredman Corner Place, Floor,6th 1Merchant Bank Rand First E14 London 5LB Wharf, Canary square, Canada Centre, Citigroup London N.A Citibank International Services Citibank London N.A 10043 U.S.A York, New NY Avenue, Park 399 York New N.A Citibank International Services York New N.A Citibank Kampala, Uganda Uganda Kampala, P.O. 2255, Box Nakasero Plot 14, Road, Mackinnon Chambers S&L Consultants &Legal Advocates & Lule Sebalu Uganda Kampala, P.O. 23064, Box Plot 17, Road Hannington Towers 5th Floor, Crested KSMO Advocates Uganda Kampala, P.O. 8230, Box Plot 4, Road Jinja House 5th Floor, Security Social Advocates Ligomarc Uganda Kampala, P.O. 1520, Box Nakasero Road, Kyadondo Plot 26, 4th Floor, Mpanga AF Kampala, Uganda Kampala, P.O. 70, Box Road Kyadondo Plot 26, Limited Bank dfcu Kenya Nairobi, Kencom House, Moi Avenue, Kenya Commercial Bank Shangai, China Yincheng Zhong Road Tower,Zhongyin China of Bank Towers dfcu
3 dfcu Group 2017 Annual Report and Financial Statements 4 dfcu Group 2017 Annual Report and Financial Statements existing products lines. lines. products existing Bank’s dfcu into merged been successfully have lines product These investments. and mortgages cards, credit and VISA debit savings, loans, customer and corporate included Limited’s products Bank Crane • • • were: transaction the of key highlights The performance. financial superior with bank universal a to aniche from it in transforming result and Bank the of growth the will accelerate assets total of in terms market in the banks three top the amongst the placed which acquisition, the that isexpected it and Group the for opportunity subsidiary, its through receivership), (in Limited Bank Crane of liabilities the of some assumed and assets the 2017,In January of some acquired Group the 2016).(as amended 2004 Act, Institutions Financial the under licensed is and services related of provision the and banking commercial of business in the isengaged Group The PRINCIPAL ACTIVITIES sharesordinary of the of 100% owns which Company”), (“the Limited is company Group’s parent The Company. the of and Group the of affairs of state the disclose 2017, 31 December ended year the for Group”) which subsidiary, its and Company”) (“the Limited dfcu of statements financial separate and consolidated audited the with together report their submit directors The Directors’ report dfcu Limited result of staff integration. integration. staff of result a as capacity and skills base staff of enhancing and amillion; half over to numbers customer growing 100over ATMs; with 65 to 43 from network in branch increase an Bank Limited. This was a great agreat was This Limited. Bank dfcu Bank Limited (together “the “the (together Limited Bank dfcu Bank Limited. Bank dfcu Bank Limited Limited Bank dfcu dfcu per share). per (2016: share per billion) 68.24 Ushs or 25.19 Ushs 2017 51.1December Ushs of billion (2016: 12.5 Ushs 31 ended year the for dividends of payment (2016: recommend billion). 45.3 Ushs directors The 106.9 Ushs was billion year the for Group’s profit The RESULTS DIVIDEND AND • • • • • • isto; years three next in the Group’s focus The Future outlook (2016: 2 trillion Ushs to 1.1 Ushs trillion). (2016: grew deposits trillion) 0.8 Ushs customer and 1.3 Ushs to trillion grew advances and loans net 3.1 Ushs to in 2017 trillion (2016: 1.7 Ushs trillion), grew sheet Group’s balance the assets, net acquired the of integration and acquisition the Following • • • year, the Group; the During staff productivity and brand equity. brand and productivity staff enhance to program change cultural the Complete and portfolio; loan quality diversify and Grow liabilities; cheap growing on focus the with mix deposit the Diversify it’s of customers; benefit the to operations our digitize to strategy Bank the pursue Aggressively re-engineering; process business the Complete acquisition; the from benefits Optimise the customers. to flexibility and offerings new deliver to platforms banking mobile and internet the Relaunched 10; Finacle to and 7 Finacle from system banking core its Upgraded operations; its into business acquired the integrated Successfully Kampala, Uganda Kampala, P.O. 10314 Box 3rd Floor House Rwenzori Avenue Plot 1Lumumba below: address the at located Limited (Uganda) isDeloitte Company the of registrar The COMPANY REGISTRAR 1. page on out set are report this of date the to and year the during office held who directors The Group. the of debentures in or shares of acquisition the of means by benefits acquire might directors whereby isaparty Group the which to arrangement any exist there did year the during time any at nor year financial the of end the at Neither statements. financial separate and consolidated the 42of in Note disclosed is year financial in the rendered services directors’ for emoluments of amount aggregate The directors. for under executive employmentreceived contracts amounts and fees directors’ than other benefit any receive to entitled become or received has director no statements, financial separate and consolidated the 42to in Note disclosed as than other report, this of date the to up and year financial the During DIRECTORS Date: 28 March 2018 March 28 Date: SECRETARYCOMPANY Uganda Kampala, 8230 P OBox Plot 4, Road Jinja House Security Social 5th Floor Advocates Ligomarc Board the of order By 2018. March 28 dated directors the of resolution a with in accordance issue for authorised were statements financial separate and consolidated The STATEMENTS FINANCIAL ISSUE OF 2016). (as amended 2004 Act Institutions Financial 62(1) Section the of and Uganda of Act Companies 167(2) Section with the of in accordance in office continue to willingness expressed have appointment re- for eligible being KPMG, auditors, external The AUDITORS
5 dfcu Group 2017 Annual Report and Financial Statements 6 dfcu Group 2017 Annual Report and Financial Statements reasonable and prudent judgments and estimates, estimates, and judgments prudent and reasonable by supported policies accounting appropriate using prepared been have which 94 to 20 pages on out set statements financial separate and consolidated the for responsibility accept directors The Company. and Group the of position financial the accuracy reasonable with disclose that records accounting proper keep Company and Group the ensure to directors the year.that requires It also for Company and Group the of results operating the of and year financial the of end the at as company and Group the of affairs of state the of view fair and atrue give that year each for statements financial separate and consolidated prepare to required are directors the Uganda, of Act Companies the Under circumstances. in the reasonable are that estimates accounting making and policies; error; selecting and applying appropriate accounting or fraud to due whether misstatement, material from free are that statements financial these of presentation fair and preparation the to relevant control internal maintaining and implementing designing, includes: responsibility directors’ The error. or fraud to due whether misstatement, material from free are that statements financial separate and consolidated the of preparation the enable to isnecessary determine directors the as controls 2016) internal such for and (as amended 2004 Act Institutions Financial and Uganda of Act Companies the Standards, Reporting Financial International with in accordance policies, accounting significant of asummary include which statements, financial separate and consolidated the to notes the and ended, then year the for flows cash and in equity changes income, comprehensive of statements separate and consolidated the 2017, 31 at as December position financial and of statement separate and consolidated the comprising statements, financial separate and consolidated the of presentation fair and preparation the for responsible are Group’s directors The Responsibilities Directors’ of Statement Date: 28 March 2018 March 28 Date: Secretary Director Director by: behalf its on 2018 March signed 28 on were and directors of board the by approved were above, indicated as statements, financial separate and consolidated The statements financial separate and consolidated the of Approval statement. this of date the from months twelve next the for concern agoing be will not business the believe to reason no have and concern agoing as continue to ability Company’s Group’s and the of assessment an made have directors The control. financial internal of systems adequate as well as statements, financial separate and consolidated the of preparation in the upon relied be may that records accounting of maintenance the for responsibility 2017. accept further directors The 31 December ended year the for flows cash and profit the and affairs financial the of state the of view fair and atrue give statements financial separate and consolidated the that opinion the of are directors The Uganda. of Act 2016) Companies amended and (as 2004 Act Institutions Financial the Standards, Reporting Financial International with in conformity auditors’ report auditors’ report Independent Institutions Act, 2004 (as amended in 2016). (as amended 2004 Act, Institutions Financial the and Uganda of Act Companies the Standards, Reporting Financial International with in accordance ended then year the for flows cash separate and consolidated and performance financial separate and consolidated its of and 2017, 31 at as December Limited dfcu of position financial separate and consolidated the of view fair and atrue give statements financial separate and consolidated accompanying the opinion, In our information. explanatory other and policies accounting significant of asummary including statements, financial separate and consolidated the to notes and ended, then year the for flows cash and in equity changes income, comprehensive of statements separate and consolidated the and 2017, 31 at as December position financial of statement separate and consolidated the comprise which 94, to 20 pages on out set Company”), and “Group (the Limited dfcu of statements financial separate and consolidated the We audited have OPINION Report on the audit of the consolidated and separate financial statements To the members of dfcu Limited statements. financial consolidated the to applicable are matters key audit These statements. financial separate the for reported matters key audit no are There matters. these on opinion aseparate provide not do we and thereon, opinion our in forming and awhole, as statements financial separate and consolidated the of audit our of context in the addressed were matters These period. current the of statements financial separate and consolidated the of audit our in significance most of were judgment, professional in our that, matters those are matters Key audit AUDIT MATTERS KEY opinion. our for abasis provide to appropriate and sufficient is obtained have we evidence audit the that We believe Code. IESBA the and requirements these with in accordance responsibilities ethical other our fulfilled have we and in Uganda, statements financial separate and consolidated the of audit our to relevant are that requirements ethical the with (IESBA together Code) Accountants Professional for Ethics of Code Accountants’ for Board Standards Ethics International the with in accordance Company and Group the of Statements Financial Separate and Consolidated the of Audit in the described further are standards those under responsibilities (ISAs). Auditing Our on Standards International with in accordance audit our We conducted OPINION FOR BASIS section of our report. We are independent We independent are report. our of section Auditor’s Responsibilities for the the for Responsibilities Auditor’s
7 dfcu Group 2017 Annual Report and Financial Statements 8 dfcu Group 2017 Annual Report and Financial Statements recognised as a bargain purchase. purchase. a bargain as recognised cost acquisition the over liabilities and assets recognised of value fair identified the of difference the with acquisition, of date the at value fair at liabilities and assets identified the recognise to Group IFRS 3: again. of recognition resultant the and values, fair respective their at liabilities contingent liabilities, and intangible assets identified and assets acquired between allocated and recognised was price purchase the which for combinations a business be to acquisition this determined Group The year. the during liabilities its of some assumed also and Limited’s assets Bank Crane of some acquired Group The Key audit matter statements financial separate and consolidated the of 12 and 4(AA) Notes to Refer Valuation arising from business combination significant audit focus. requires impairment the in determining applied assumptions and judgement The impairment. such any of size the of estimation the and impairment of recognition of timing both over judgments subjective and complex make Directors the because matter akey audit isconsidered customers to advances and loans of Impairment date. reporting the at impairment for assessed are and statements financial separate and consolidated in the cost amortised at carried are advances and group’s loans The Key audit matter statements financial separate and consolidated 6(a) 4E(v), 21 the of and Notes to Refer customers to advances and loans of Impairment Business Combinations Business requires the the requires • • • others; amongst included, area in this procedures audit Our audit in our addressed was matter the How • • • • • others; amongst included, area in this procedures audit Our audit in our addressed was matter the How expert’s work as audit evidence for the relevant assertions; relevant the for evidence audit as work expert’s the of appropriateness the evaluating and expert, the of work the of understanding an obtaining expert, management’s the of objectivity and capabilities competence, the Evaluating understand key terms and conditions; to documents key transaction the reading by determined correctly was acquisition of date the whether Determining standard; accounting relevant the with in accordance combination abusiness of criteria the met year the during acquisition the whether Assessing risk. credit to exposure Group’s the reflect appropriately disclosures statement financial separate and consolidated the whether Assessing and portfolio; underlying in the changes quantitative and qualitative the to respect with balance impairment portfolio the of reasonableness overall the Assessing model; impairment the into data underlying of input the over controls key management the on assessments control Performing environments; own understanding of the relevant industries and business our and plans business against progress to assumptions key We compared loans. defaulted for repayment of sources other and collateral, of realisation flows, cash recoverable of forecast the of reasonableness the ascertain to loans of categories various on assessment credit Performing impaired. as basis, atimely on identified, counterparties were appropriate and loans were appropriately to allocated grades credit the if assess to process, monitoring and grading credit the over keyTesting controls the data migration. migration. data of accuracy and completeness the over evidence audit appropriate and sufficient obtain to required were that procedures extensive the to due matter akey audit as upgrade system the We determined have effectively. operating and designed be not may controls manual dependent IT related and procedures accounting automated that risk inherent isan there and system new the on dependent heavily are operations Group’s business The and inaccurate financial reporting. misstatements or errors financial to lead could which transactions, of recording and processes business operations critical within controls IT dependent of monitoring or in operation breakdown the and migrated, being data financial key of integrity of loss of risk inherent an has system anew of implementation The IT environment. the within systems key business other with interfaces has also system The operations. banking supports 10 Finacle to which System Banking Core its upgraded year, the Group the During recognised. was date acquisition 119,301 Ushs to amounting million the at transaction the from gain the and (“PPA”) completed allocation was exercise price purchase The date. acquisition the at liabilities and assets identified the of values fair the on report a valuation issue to expert”) (“management’s valuer Management an engaged independent transaction. in the assumed liabilities and acquired assets identified the of values fair the of determination in the used also are estimates and assumptions Significant transaction. in the assumed liabilities contingent and acquired of anyidentification intangible assets in the isapplied judgement Significant Key audit matter statements financial separate and consolidated the of 5G Note to Refer controls and systems technology Information • • • • • others; amongst included, area in this procedures audit Our How the matter was addressed in our audit in our addressed was matter the How • • • performing walk through to collaborate this. this. collaborate to through walk performing and system, operating new the to legacy the from data key financial of migration and process implementation the over established specifically controls testing and Assessing business processes; and critical within controls IT as dependent well as duties, of segregation and IT access including environment, control IT General the testing and assessing included procedures Our transfer. data the of completeness and accuracy the ensure to interfaces system significant Testing the general ledger; the and system the from those with results our comparing and computations automated selected Re-performing duties; of segregation and management access including systems Group’s IT the of security the of aspects certain of tests direct out carried also we necessary year. the Where during Group’s operations the to relevant were that system new the and old the both of integrity continued the over controls the of effectiveness operating and design the testing and Assessing including controls compensating required; where IT operations, and data and programs to access changes, and development program over controls the and organisation Group’s IT the over framework governance the Examining financial statements. financial consolidated in the made disclosures the of appropriateness and adequacy the corroborating and Assessing and expert; auditors’ the by performed work the of adequacy the and expert, auditors’ the of objectivity and capabilities competence, the Evaluating key of the underlying assumptions; reasonableness the and reports valuation liabilities and assets the review to expert”) (“auditors’ expert valuation our Engaging
9 dfcu Group 2017 Annual Report and Financial Statements 10 dfcu Group 2017 Annual Report and Financial Statements to fraud or error. or fraud to due whether misstatements, material from free are that statements financial separate and consolidated the of preparation the enable to necessary is determine directors the as control internal such for in 2016), (as amended and 2004 Act, Institutions Financial the and Uganda of Act Companies the by required manner in the and Standards Reporting Financial International with in accordance view and atrue give that statements financial separate and consolidated the of preparation the for responsible are directors 6,the page on stated As STATEMENTS CONSOLIDATED SEPARATE AND FINANCIAL THE FOR RESPONSIBILITIES DIRECTOR’S regard. in this report to We nothing have fact. that report to required are we information, other this of misstatement material isa there that conclude we report, auditors’ this of date the to prior obtained information other the on performed have we work the on If, based misstated. materially be to appears otherwise or audit, in the obtained knowledge our or statements financial separate and consolidated the with inconsistent consider whether the other information is materially so, in doing and, information other the read to is responsibility our statements, financial separate and consolidated the of audit our with In connection assurance conclusion thereon. of form any express not do we and information other the cover not does statements financial separate and consolidated the on opinion Our thereon. report auditors’ our and statements financial separate and consolidated the include not does information other The date. that after us to available made be to isexpected which Report, Annual the and report, this of date the to prior obtained we which Information Responsibilities and Supplementary Directors’ of Statement the report, Directors’ the information, in Group included information the information. The other information comprises other the for responsible are directors The INFORMATION OTHER • also: We audit. the throughout scepticism professional maintain and judgment professional exercise we ISAs, with in accordance audit an of part As statements. financial separate and consolidated these of basis the on taken users of decisions economic the influence to expected be reasonably could they aggregate, in the or if, individually material considered are and error or fraud from arise can Misstatements exists. it when misstatement a material detect will always ISAs with in accordance conducted audit an that aguarantee isnot but assurance, of level isahigh assurance Reasonable opinion. our includes that report auditors’ an error, issue to and or fraud to due whether misstatement, material from free are awhole as statements financial separate and consolidated the whether about assurance reasonable obtain to are objectives Our STATEMENTS CONSOLIDATEDTHE SEPARATE AND FINANCIAL AUDIT THE FOR OF AUDITORS’ RESPONSIBILITIES process. reporting financial Company’s Group’s and the overseeing for responsible are directors The so. do to but alternative realistic no have or operations, cease to and/or Company the Group the liquidate to intend either directors the unless accounting of basis concern going the using and concern going to related matters applicable, as disclosing, concern, agoing as continue to ability Company’s Group’s and the assessing for responsible are directors the statements, financial separate and consolidated the In preparing internal control. control. internal of override the or misrepresentations, omissions, intentional forgery, collusion, involve may fraud as error, from resulting one for than ishigher fraud from resulting misstatement amaterial detecting not of risk The opinion. our for abasis provide to appropriate and is sufficient that evidence audit obtain and risks, those to responsive procedures audit perform and error, design or fraud to due whether statements, financial separate and consolidated the of misstatement material of risks the assess and Identify • • • • and where applicable, related safeguards. safeguards. related applicable, where and independence, our on bear to thought be reasonably may that matters other and all relationships them with communicate to and independence, regarding requirements ethical relevant with complied have we that astatement with directors provide We also audit. our during identify we that control in internal deficiencies significant any including findings, audit significant and audit the of timing and scope planned the matters, other among regarding, directors the with We communicate fair presentation. presentation. fair achieves that in amanner events and transactions underlying the represent statements financial separate and consolidated the whether and disclosures, the including statements, financial separate and consolidated the of content and structure presentation, overall Evaluate the concern. agoing as continue to cease to and/or Company the Group the cause may conditions or events However, future report. auditor’s our of date the to up obtained evidence audit the on based are conclusions Our opinion. our modify to inadequate, are or, disclosures such if statements financial separate and consolidated in the disclosures related the to report auditors’ in our attention draw to required are we exists, uncertainty a material that conclude If we concern. a going as continue to ability Company’s Group’s and the on doubt significant cast may that conditions or events to related exists uncertainty a material whether obtained, evidence audit the on based and accounting of basis concern going the of use directors’ the of appropriateness the on Conclude directors. the by made disclosures related and estimates accounting of reasonableness the and used policies accounting of appropriateness Evaluate the control. internal Company’s Group’s and the of effectiveness the on opinion an expressing of purpose the for not but circumstances, in the appropriate are that procedures audit design to in order audit the to relevant control internal of understanding an Obtain 3 Public Accountants Certified KPMG -P0116. Ndung’u Benson isCPA report auditors’ independent in this resulting audit the for responsible partner engagement The iii. ii. i. that: audit, our on based you, to report we Uganda of Act Companies the by required As REQUIREMENTS REGULATORY AND LEGAL OTHER ON REPORT communication. such of benefits interest public the outweigh to expected be reasonably would so doing of consequences adverse the because report in our communicated be not should amatter that determine we circumstances, rare in extremely when, or matter the about disclosure public precludes regulation or law unless report auditors’ in our matters these We describe matters. key audit the therefore are and period current the of statements financial separate and consolidated the of audit in the significance most of were that matters those determine we directors, with communicated From matters the Date: 28 March 2018 March 28 Date: Uganda Kampala, P.O. 3509 Box Road Nakasero Plot 2&4A, rd in agreement with the books of account. of books the with in agreement are income comprehensive and position financial of statements separate and consolidated The and books; those of examination our from appears as far so Group, the by kept been have account of books proper opinion, In our audit; our of purpose the for necessary were belief and knowledge our of best the to which explanations, and information all the We obtained have Floor, Rwenzori courts Floor, Rwenzori 11 dfcu Group 2017 Annual Report and Financial Statements 12 dfcu Group 2017 Annual Report and Financial Statements consolidated financial statements. financial consolidated these of part integral an form 94 to 20 pages on notes and policies accounting The 31 year the for ended December income comprehensive of statement Consolidated Gain arising from business combination business from arising Gain income other and trading Net income commission and Fees Net income interest similar expenses and Interest Other comprehensiveOther income year the for Profit comprehensive Other income year the for tax after Profit expense tax Income tax before Profit advances and loans of Impairment Operating expenses Total operating income similar income and Interest Diluted earnings per share per earnings Diluted share per earnings Basic share: per Earnings Non-controlling interest Company the of holders Equity to: Attributable year the for income Total comprehensive 18 (a) 18 Note 12 21 13 10 11 17 17 9 8 (131,550) (189,520) (40,924) (48,652) 385,988 106,892 106,892 106,892 106,892 106,892 215,451 119,301 4, 01 347,0 147,816 Ushs M Ushs 189.33 189.33 11,581 39,655 2017
- - (96,900) (13,038) (83,914) 1,830) 3 8 (17, 173,093 133,241 133,241 217,155 217,155 Ushs M Ushs 58,363 58,363 29,305 45,325 45,325 45,325 45,325 45,325 10,547 10,547 91.16 91.16 2016
- - - Net income interest Interest expense Fees and commissions and Fees Operating expenses Operating income Other income Dividend income Company statement of comprehensive income for the year ended 31 year the for ended December income comprehensive of statement Company separate financial statements. financial separate these of part integral an form 94 to 20 pages on notes and policies accounting The Interest income Other comprehensive Other income year the for Profit comprehensiveOther income (Loss)/Profit for the year credit Tax (Loss)/Profit before tax advances and -Loans Provisions Total comprehensive income for the year the for income Total comprehensive 18 (a) 18 Note 13 10 11 9 8 (20,277) (20,669) Ushs M Ushs (1,527) (1,025) (1,025) (1,025) (4,163) 18,509 4,064 2,586 2017 290 502 392 50
- (3,786) (2,798) (2,798) (399) (399) Ushs M Ushs (3,143) 14,804 14,804 13,857 13,857 13,857 13,452 13,452 17,637 5,176 5,176 2016 405 405 345 345 455 455
- 13 dfcu Group 2017 Annual Report and Financial Statements 14 dfcu Group 2017 Annual Report and Financial Statements Current income tax payable tax income Current liabilities Other banks other to due Deposits Total liabilities and equity equity Total dividends Proposed Investment property loss and profit through value fair at Investments Equity customers to advances and Loans banks from due balances and Deposits Regulatory credit risk reserve risk credit Regulatory earnings Retained premium Share capital Share liabilities Total funds Special funds Borrowed Customer deposits Liabilities statements. financial consolidated these of part integral an form 94 to 20 pages on notes and policies accounting The Director by: behalf its on 2018 March 28 on signed and Directors of Board the by issue for approved were 94 to 20 pages on statements financial separate and consolidated The financial of statement Consolidated position as at 31 December Government securities Government Uganda of Bank with balances and Cash Assets Intangible assets Intangible assets equipment and Property asset tax income Deferred assets Other Other reserves Other Assets Total Director 18 (c) 18 Note 34 30 36 36 20 22 32 35 26 28 23 25 37 27 24 21 31 19 16 Secretary 2,525,138 1,334,611 1,987,118 3,057,476 3,057,476 142,642 362,263 185,683 532,338 239,545 229,447 481,738 671,592 257,412 Ushs M Ushs 14,963 11,144 52,853 51,054 12,113 50,375 11,113 13,746 1,466 1,708 2,111 2017 255 1,495,988 1,745,640 1,745,640 1,134,731 834,827 489,183 326,819 208,614 249,652 176,565 139,471 Ushs M Ushs 18,429 11,560 11,505 14,812 67,069 12,510 12,113 8,863 3,290 9,464 2,878 2,796 4,073 1,708 2016 - Company statement of financial of statement position as atCompany 31 December statements. financial consolidated these of part integral an form 94 to 20 pages on notes and policies accounting The Director by: behalf its on 2018 March 28 on signed and Directors of Board the by issue for approved were 94 to 20 pages on statements financial separate and consolidated The Amounts due from Group companies Group from due Amounts Current Income tax recoverable tax Income Current assets Other Assets Investment property Total liabilities and equity equity Total asset tax income Deferred in subsidiaries Investment Proposed dividends Proposed premium Share capital Share Equity liabilities Total Other reserves Other earnings Retained funds Borrowed companies Group to due Amounts assets Total Other liabilities Other Liabilities Liabilities equity and Director 42 (b) 42 (a) 18 (c) 18 Note 36 36 29 28 35 32 25 24 16 Secretary (36,197) 185,683 203,293 255,593 255,593 227,616 Ushs M Ushs 14,963 51,054 12,113 27,977 17,321 47,777 1,446 1,546 6,961 3,695 1,519 2017 12 Ushs M Ushs 22,380 15,882 52,847 75,227 75,227 44,762 14,902 14,902 26,793 12,510 12,113 9,464 5,226 5,226 1,609 2,878 2,252 2,252 2016 944 841 278 15 dfcu Group 2017 Annual Report and Financial Statements 16 dfcu Group 2017 Annual Report and Financial Statements
Consolidated statement of changes in equity for the year ended 31 December
Share Share Retained Other Regulatory Proposed Attributable to Total capital premium earnings reserves reserve dividends equity holders of the parent Note Ushs M Ushs M Ushs M Ushs M Ushs M Ushs M Ushs M Ushs M
At 1 January 2016 9,464 2,878 155,669 12,113 24,203 10,804 215,131 215,131 Profit for the year - - 45,325 - - - 45,325 45,325
Transactions with shareholders Transfers from the 37 - - 20,130 - (20,130) - - - regulatory reserve Dividends paid - - - - - (10,804) (10,804) (10,804) Dividends proposed 16 - - (12,510) - - 12,510 - - At 31 December 2016 9,464 2,878 208,614 12,113 4,073 12,510 249,652 249,652
At 1 January 2017 9,464 2,878 208,614 12,113 4,073 12,510 249,652 249,652 Profit for the year - - 106,892 - - - 106,892 106,892
Transactions with shareholders Addition to share capital 5,499 182,805 - - - - 188,304 188,304 Transfers from the 37 - - (7,040) - 7,040 - - - regulatory reserve Dividends paid - - - - - (12,510) (12,510) (12,510) Dividends proposed 16 - - (51,054) - - 51,054 - - At 31 December 2017 14,963 185,683 257,412 12,113 11,113 51,054 532,338 532,338
The accounting policies and notes on pages 20 to 94 form an integral part of these consolidated financial statements. Company statement of changes in equity for the year ended 31 December
Share capital Share Retained Proposed Other Total premium earnings dividends reserves Note Ushs M Ushs M Ushs M Ushs M Ushs M Ushs M
At 1 January 2016 9,464 2,878 14,535 10,804 12,113 49,794
Profit for the year - - 13,857 - - 13,857 Transactions with shareholders Proposed dividends 16 - - (12,510) 12,510 - - Dividends paid - - - (10,804) - (10,804)
At 31 December 2016 9,464 2,878 15,882 12,510 12,113 52,847
At 1 January 2017 9,464 2,878 15,882 12,510 12,113 52,847
Profit for the year - - (1,025) - - (1,025) Transactions with shareholders Addition to share capital 5,499 182,805 - - - 188,304 Proposed dividends 16 - - (51,054) 51,054 - - Dividends paid - - - (12,510) - (12,510)
At 31 December 2017 14,963 185,683 (36,197) 51,054 12,113 227,616
The accounting policies and notes on pages 20 to 94 form an integral part of these financial statement. 17 dfcu Group 2017 Annual Report and Financial Statements 18 dfcu Group 2017 Annual Report and Financial Statements statements. financial separate these of part integral an form 94 to 20 pages on notes and policies accounting The flows cash of 31 year forthe ended December statement Consolidated Fee and commission receipts commission and Fee Interest payments Interest receipts activitiesOperating Income tax paid tax Income suppliers and employees to payments Cash Increase in loans and advances to customers to advances and in loans Increase in shares in investments Increase requirement reserve cash Uganda of in Bank Increase securities other and in government Increase liabilities and assets in operating Changes liabilities and assets in operating changes before activities operating from Cash Recoveries on loans previously written off Net foreign exchange and other income received Increase in other assets in other Increase Increase in customer deposits in customer Increase Increase in share capital in share Increase borrowings in increase Net activities Financing activities in investing used flows cash Net equipment and property of sale from Proceeds Purchase of intangible assets Purchase property of investment Increase in other liabilities other in Increase Increase in share premium in share Increase and equipment Purchase of property activities Investing activities operating from flows cash Net banks other to due in balances (Decrease)/increase Cash and cash equivalents at end of year of end at equivalents cash and Cash year of start at equivalents cash and Cash equivalents cash and in cash increase Net activities financing from generated flows cash Net Dividends paid to shareholders 18 (c) 18 Note 26 25 27 21 41 (182,409) (143,106) (539,282) (131,550) (224,733) (179,220) (93,468) (51,445) (63,080) (11,250) 440,540 (12,510) (13,746) 182,805 (41,165) 158,956 852,387 154,919 212,594 330,713 227,946 172,676 4, 01 347,0 Ushs M Ushs 34,424 24,987 11,581 1,840 5,499 7,073 2017 (33) (92,095) (81,488) (53,050) (24,334) (71,544) (10,804) (16,660) 252,280 (60,740) (86,591) (15,730) (83,914) 2, 6 4 227,9 219,780 219,780 217,155 217,155 Ushs M Ushs (6,627) 56,280 58,028 58,028 (9,070) (2,316) (2,421) 18,577 18,577 24,163 24,163 7,5 4 0 0 4 7,5 2016 (22) 909 909 - - - - Dividend income Interest payments Interest receipts activitiesOperating Net foreign exchange and other income received Income tax paid tax Income suppliers and employees to payments Cash Recoveries on loans previously written off Increase in amounts due to group companies group to due in amounts Increase liabilities and assets in operating Changes liabilities and assets in operating changes before activities operating from Cash Decrease in loans and advances to customers to advances and in loans Decrease Increase in other liabilities other in Increase assets Increase/(decrease) in other Purchase property of investment activities Investing activities operating from flows cash Net Cash and cash equivalents at end of year of end at equivalents cash and Cash year of start at equivalents cash and Cash equivalents cash increase/(decrease) and Net in cash activities in investing used flows cash Net Net cash flows from financing activities financing from flows cash Net Dividends paid to shareholders in subsidiaries in investments Increase premium in share Increase capital in share Increase borrowings in increase Net activities Financing Company statement of cash flows for the year ended 31 December flows cash of 31 year forthe ended December statement Company statements. financial separate these of part integral an form 94 to 20 pages on notes and policies accounting The 18 (c) 18 Note 25 41 (2,339) (20,669) (176,500) (12,510) 182,805 182,805 (1,531) 4,064 4,064 18,509 18,509 5,499 5,499 2,419 2,419 266 266 392 392 4,708 4,708 50 50 575 575 - 7 Ushs M Ushs (2,236) (5,033) (5,033) 1,546 7,974 2017 841 705 (513) 14,693 14,693 (10,804) - - - (11,317) (2,052) (1,035) (1,454) (3,143) 14,804 14,804 Ushs M Ushs (3,976) (3,976) 15,100 2,395 2,395 5,176 5,176 1,034 (193) 2016 345 345 841 (5) 69 69 - 19 dfcu Group 2017 Annual Report and Financial Statements 20 dfcu Group 2017 Annual Report and Financial Statements Note 6. Note in disclosed are statements, financial separate and consolidated the to significant are estimates and assumptions where or complexity, or judgement of degree ahigher involving areas The policies. Group’s accounting the applying of process in the judgement its exercise to management requires It also assumptions. and estimates of use the IFRS requires with in conformity statements financial separate and consolidated of preparation The 4. in Note included policies accounting in the stated otherwise where except basis, cost historical isthe applied basis measurement The indicated. otherwise M), unless million (Ushs nearest the to rounded been have amounts All currency. Group’s functional the (Ushs), Shillings is which in Uganda presented are statements financial separate and consolidated The 4 in Note included are policies Group’s accounting 2018. the of March 28 on Details directors of board Group’s the by issue for authorised were (IFRS). They Standards Reporting Financial International the with comply and with in accordance prepared been have statements financial separate and consolidated The PREPARATION BASIS OF 2. statements. financial separate and consolidated in these income comprehensive of statement separate and consolidated the by represented is account loss and profit the and position financial of statement separate and consolidated the by isrepresented sheet balance the purposes, reporting Uganda of Act Companies For the Uganda. Kampala, P.O. 2767 Box Road Kyadondo Plot 26 is: office registered its of address the and in Uganda It is domiciled (USE. Exchange Securities Uganda the on listed are shares company’s the of Some in Uganda. domiciled is 110) and company liability limited a public as (Cap Uganda of Act Companies the under Uganda in isincorporated Company’) (‘the Limited dfcu INFORMATION GENERAL 1. Committee. Credit and Risk Board the to outcomes and status activities, its on reports team IFRS 9project the oversight, board appropriate ensure to In order assets. financial all its of for tools calculation 9 provision IFRS and framework model the develop to Uganda PwC and Analytics Kin appointed Group The initiatives. Bank other with interdependencies project and interventions required identified and progress, project’s the monitored project, the to direction provided team project IFRS 9implementation The Group. the across IFRS 9requirements the of delivery the enable effectively to as away in such project IFRS 9 implementation its structured Group The Project governance permitted. adoption early 2019, 1January with after or on beginning periods annual for effective are amendments IFRS 9).to The (Amendments Compensation Negative with Features 2017, In October Prepayment issued IASB the permitted. 2018 adoption early with 1January after or on beginning period annual the for iseffective standard The Measurement. and Recognition Instruments: Financial 39 IAS replace to IASB’sthe project of phases accounting hedge and impairment measurement, and classification the together brings which Standard, Instruments IFRS 9Financial of version final 2014,In the July issued IASB the Instruments a). 9Financial IFRS recognition. initial of period in the statements financial separate and Group’s consolidated the on impact material a have to expected are standards following The statements. financial separate and consolidated these preparing in standards amended or new the adopted early not has however, Group the ispermitted; application 2017 1January earlier and after beginning periods annual for effective are standards new of A number STANDARDS EFFECTIVE 3. YET NOT ISSUED BUT • • because: 2018 change may 1January IFRS 9on adopting of impact actual The finalized. been has work transition all not because ispreliminary assessment above The Group. the of liabilities financials and assets financial the of measurement and in classification changes the of impact quantitative no will be There • • Ushs 30.52 billion, representing: 2018 isapproximately 1January at Group’s equity the of balance opening the IFRS 9on of adoption the (net of tax) of adjustment estimated total the date, to undertaken assessment the on Based in equity. recognized 9 will be IFRS of application initial the from amounts carrying in change Any Errors. and Estimates in Accounting Changes Policies, 8Accounting IAS and Disclosures Instruments: IFRS 7Financial of requirements amended the with in accordance disclosures transitional detailed IFRSwill 9,of provide but application initial on comparatives restate will not Group The date. same the IFRS 9on to amendments the 2018 adopt will early and 1January on initially 2014 in July issued IFRS 9as will apply Group The Application Committee. Executive and Board the both to communicated were findings and results the and Group’s readiness the determining in management assist to auditor external the by assessed were exercise the of results IFRS 9. The to transition the for Group’s readiness the test to 2017, September 30 at as exercise used was which assessment impact an included project the of implementation The department. credit the by driven ismainly project Group’s IFRS 9implementation The operational for a more extended period; extended a more for operational been not have in place controls associated 2017, of half second and systems new the in the out carried were runs parallel Although complete; yet not are changes these and control internal and processes accounting its revise to Group the IFRS 9will require impact. tax deferred to related 13.08 Ushs billion approximately of increase an (see (iii)); and requirements impairment to related billion 43.6 Ushs approximately of increase an investment basis. basis. investment investment-by- an on ismade election This in OCI. value in fair changes subsequent present to elect irrevocably may Group the trading, for held not is that investment equity an of recognition initial On • • as at FVTPL: designated isnot and conditions following the of both meets it if only FVOCI at ismeasured asset A financial • • as at FVTPL: designated isnot and conditions following the of both meets it if cost amortised at ismeasured asset A financial sale. for available and receivables and loans maturity, to held of categories 39 IAS existing the It eliminates (FVTPL). loss and profit through value fair and (FVOCI) income comprehensive other through value fair cost, amortised at measured assets: financial for categories classification principal three IFRS 9includes characteristics. flow cash their and managed are assets in which model business the reflects that assets financial for approach measurement and classification anew IFRS 9contains i). Classification and measurement • • • and interest on the principal amount outstanding. amount principal the on interest and principal of payments solely are that flows cash to dates specified on rise give terms contractual its and assets; financial selling and flows cash contractual collecting both by achieved is objective whose model abusiness within isheld it outstanding. amount (SPPI) principal the on interest and principal of payments solely are that flows cash to dates specified on rise give terms contractual its and flows; cash contractual collect to assets hold to is objective whose model abusiness within isheld it application. initial of date the include that statements financial consolidated first its finalizes Group the until change to subject are employed techniques estimation and judgements assumptions, policies, accounting new The ECL calculations; for models the finalizing and isrefining Group The framework; governance its to changes and IT systems news the over controls of assessment and testing the finalized not has Group The 21 dfcu Group 2017 Annual Report and Financial Statements 22 dfcu Group 2017 Annual Report and Financial Statements that it would not meet this condition. condition. this meet not would it that such flows cash contractual of amount or timing the change could that term acontractual contains asset financial the whether assessing will include This instrument. the of terms contractual the will consider Group the interest and principal of payments solely are flows cash contractual the whether In assessing margin. aprofit as well costs) as administrative and risk (e.g. liquidity costs and risks lending basic other for and time of period aparticular during outstanding amount principal the with associated risk credit the money, for of value time the for consideration as defined is ‘Interest’ recognition. initial on asset financial the of value fair the as defined is ‘principal’ assessment, this of purposes For the interest and principal of payments solely are flows cash contractual whether Assessment assets. financial sell to and flows cash contractual collect to both held nor flows cash contractual collect to held neither are they because FVTPL at measured will be basis value afair on evaluated is performance whose and managed are that those and trading for held are that assets Financial classification. for isassessed awhole as instrument financial hybrid the Instead, separated. not IFRS 9 are of scope in the asset isafinancial host the where in contracts embedded IFRS 9, derivatives Under assets. financial of classification to relating requirements transition the (vi) for See recognition. initial on categories these of one into isclassified asset A financial arise. otherwise would that mismatch accounting an reduces significantly or eliminates so doing if FVTPL at as FVOCI at or cost amortised at measured be to requirements the meets otherwise that asset a financial designate irrevocably may Group the recognition initial on In addition, FVTPL. at measured are above described as FVOCI or cost amortised at measured as classified not assets financial All feature is insignificant on initial recognition. initial on isinsignificant feature prepayment the of value fair the and termination), early for compensation reasonable include also may (which interest contractual unpaid) (but accrued plus amount par contractual the represents substantially amount prepayment the amount, par contractual its to discount or apremium at originated or acquired is asset afinancial if criterion this with consistent as istreated feature aprepayment In addition, contract. the of termination early for compensation reasonable include may which outstanding, amount principal the on interest and principal of amounts unpaid represents substantially amount prepayment the if criterion SPPI the with isconsistent feature A prepayment loans features. contain prepayment corporate fixed-rate certain and loans Group’s retail the of All • • • including whether: criterion by considering a number of factors, SPPI the with isconsistent feature discretionary the whether will assess Group the cases, In these spread. adiscretionary include also and jurisdiction in aparticular rate bank acentral on based generally are SVRs Group. the of discretion the at set are that (SVRs) rates variable standard on based are Group the by made loans retail certain on rates Interest • • • • • will consider: Group the assessment, the In making fairly. customers treat to banks requires that inis place framework protection customer or regulatory any banks; and are consistent between rates interest that ensures competition market the penalties; significant without loans the prepay to able are borrowers the rates. interest of reset periodic e.g. money- of value time the for consideration modify that features and arrangements; asset non-recourse -e.g. assets specified from flows Group’s limit cash to claim the that terms terms; extension and prepayment leverage features; flows; cash of timing and amount the change would that events contingent and financial guarantee contracts financialand guarantee commitments loan assets, financial Impairment, ii). • • • • 2018 follows. as 1January at as held assets financial of measurement and classification the will affect standard The Impact assessment date. reporting the after 12 the months within possible are that events default from result that ECLs of portion the 12-month are ECLs whereas instrument, financial a of life expected the over events default all possible from result that ECLs the are ECLs Lifetime ECLs. lifetime 12-month or ECLs either to equal amount an at recognised be to allowance aloss IFRS 9requires investments. equity on isrecognised loss IFRS 9, impairment no Under • • • FVTPL: at measured not are that instruments financial following the to applies model impairment new The basis. aprobability-weighted on determined be will which ECLs, affect factors in economic changes how over judgement considerable will require This model. loss’ credit ‘expected aforward-looking with 39 in IAS model loss’ ‘incurred the IFRS 9replaces FVTPL under IFRS 9. under FVTPL at measured be to continue will in 39 general IAS under FVTPL at as designated are that securities investment and customers to advances and Loans IFRS 9. under cost amortised at measured be also will in 39 general IAS under cost amortised at measured securities investment Held-to-maturity IFRS 9. under cost amortised at measured be also general will in 39 IAS under cost amortised at measured and receivables and loans as classified are that customers to and banks to advances and Loans IFRS 9. under FVTPL at measured be also 39, IAS will under FVTPL at measured and trading held-for- as classified are which Trading assets Liabilities and Contingent Assets). Contingent and Liabilities Contingent 37 IAS Provisions, under measured was impairment (previously, issued contracts guarantee financial and commitments loan and receivables; lease instruments; debt are that assets financial
• • initial recognition; since assets of quality credit in the change the on based is that approach athree-stage contains ECL model The (EAD). default at (LGD), exposure and default (PD), given loss default of probability instrument’s the of product the on primarily based will be ECLs of measurement The instrument. financial the of life expected remaining the over shortfalls cash expected of value present probability-weighted the as measured are ECLs Measurement Credit of Expected Losses (ECLs) • • below: in detail discussed are which areas, following in the particularly assumptions, and estimates judgements, management require and complex IFRS 9are of requirements impairment The • • 12-monthbe ECLs: will recognised amount the which for cases, following in the except ECLs, lifetime to equal amount an at allowances loss will recognise Group The each reporting date, at an amount equal to lifetime lifetime to equal amount an at date, reporting each at ismeasured, that allowance aloss 2, and Stage to migrated are instruments financial impaired non- these recognition, initial since risk credit 2: Stage expected credit losses is recorded. 12-month to equal amount an at date, reporting each at ismeasured, that allowance 1, aloss and in Stage classified are instruments financial these recognition, initial since significantly increased not has instruments financial non-impaired of 1: Stage ECLs. of measurement incorporating information forward-looking into the and recognition; initial since significantly increased has instrument an of risk credit the whether assessing initial recognition. since significantly increased not has risk credit which for receivables) lease (other than instruments financial other and grade’; ‘investment- of definition understood globally the to isequivalent rating risk credit its when risk credit low have to security adebt considers Group The date. reporting the at risk credit low have to determined are that securities investment debt If, at the reporting date, the credit risk risk credit the date, reporting If, the at When there is a significant increase in increase isasignificant there When 23 dfcu Group 2017 Annual Report and Financial Statements 24 dfcu Group 2017 Annual Report and Financial Statements impaired under IAS 39 (see (v)). 4E 39 Note IAS under impaired are that assets financial to IFRS 9 inby asimilar way defined are credit-impaired are that assets Financial • • • • follows: as measured will be and losses credit of estimate aprobability-weighted are ECLs 3. Stage in assets financial the of amount carrying net the on 2and 1and in Stages assets financial the of amount carrying gross the on calculated is income Interest • recover. to expects Group the that amounts any less holder the reimburse to payments expected the of value present the contracts: guarantee financial and receive; to expects Group the that flows cash the and down drawn is commitment the if Group the to due are that flows cash contractual the between difference the of value present the commitments: loan undrawn flows; cash future estimated of value present the and amount carrying gross the between difference the date: reporting the at credit-impaired are that assets financial to receive; expects Group the that flows cash the and contract the with in accordance entity the to due flows cash the between difference -i.e. the shortfalls all of cash value present the date: reporting the at credit-impaired not are that assets financial off. written is asset financial the or recorded be to continues losses expected lifetime to equal allowance an 3, and Stage to ismigrated and credit-impaired considered is asset financial the occurred, have asset financial a of flows cash future estimated the on impact adetrimental have that events more or one When loans of curing on policy Company’s the on based losses credit 12-month of expected recognition to reverting requires ECL model the recognition, initial since risk in credit increase a significant longer isno there that such improves instrument financial the of risk credit the if periods, reporting In subsequent isrecorded. losses credit expected • • if; recognition initial since significantly increased have to exposure aparticular of risk credit the will deem Group The process. management risk credit Group’s internal the with aligns framework The recognition. initial since significantly increased has instrument financial a particular on risk credit the whether determine to information qualitative and quantitative both incorporates that aframework established has Group The significantly increased risk has credit whether Determining • • • of: earlier the at occurring as determined is Default approaches. and definitions management risk credit internal existing its with default of determination the aligned has Group the IFRS 9, by defined specifically isnot default While Definition of default instrument. the of recognition initial of date the identifying requires instrument afinancial of recognition initial since significantly increased has risk credit whether Assessing and information. forward-looking assessment credit expert experience, Group’s historical the on based analysis and information qualitative and quantitative both including effort, or cost undue without available and isrelevant that information supportable and reasonable will consider Group the recognition, initial since significantly increased has instrument afinancial on default) of (i.e. risk risk credit the whether determining IFRS 9, when Under risk in credit increase Significant financial distress reasons; and reasons; distress financial for restructured been has account the Qualitative; days; 30 than more for due is past counterparty the Quantitative; product. lending the of nature the to according set are criteria specific additional cases, In some limit). current the of excess in facilities (or, days 90 overdraft of case in the than more for due ispast counterparty the when or security; of realisation as such actions to recourse without thereafter shortly or date due the on due amounts pay to unlikely be to isconsidered counterparty the evidence, subjective on either, based when value. fair at loan anew as recognised loan renegotiated the and derecognised be may modified been have terms whose loan existing customer. An the of deterioration credit potential or acurrent to related not factors other and retention customer conditions, market changing including reasons, of anumber for modified be may aloan of terms contractual The financial assets Modified • • • • • that: confirm to reviews regular by risk in credit increases significant identify to used criteria the of effectiveness the will monitor Group The received. been not has payment full which of in respect date due elapsed earliest the since days of number the counting by due past days determine will Group The due. past days 30 than ismore asset an when than later no occurs risk in credit increase asignificant that consider will presumptively Group IFRS 9, by the required as and a backstop, As basis. atimely on analysis quantitative its by captured fully be not may indicators those and so indicate factors qualitative particular if risk credit in increase asignificant undergone has exposure an that determine may Group the experience, historical relevant possible, where and, judgement credit expert its using instances, In certain • ECL measurements. 12-month lifetime ECL and between transfers from allowance in loss volatility unwarranted isno there and impaired; credit- to 12-month ECLfrom measurement directly transferred generally not are exposures reasonable; appears default and risk in credit increase a significant of identification the between time average the due; past days 30 becomes asset an when in time point the with align not do criteria the default; isin exposure an before risk in credit increases significant identifying of capable are criteria the information. available relevant other and industry or sector specific the for outlook expected the Qualitative; equal to 12-month to ECLs. equal amount an at measured being to reverts allowance loss the that such decreased have to considered is PD the or in default/credit-impaired be to considered longer isno exposure the before year one over behaviour payment good consistently demonstrate to needs acustomer (vi). forbearance, Following 4E Note risk in credit increase isasignificant there whether assessing to relevant are forbearance of expectations and impairment credit and default of indicator isaqualitative forbearance Generally, indicators. behavioral various consider and terms contractual modified the against performance payment borrower’s the will evaluate Group the process, this of part As action. similar forbearance of experience Group’s previous the and principal and interest collect to Group’s ability the restored or improved has modification the whether PD willof reflect (vi), estimate 4E Note the see policy forbearance Group’s the of part as modified assets For financial activities. on forbearance regularly reviews reports Committee Credit Group policy. The forbearance the to subject are loans corporate and retail Both covenants. loan of terms the amending and payments interest of timing the changing maturity, the extending include usually terms revised The terms. revised the meet to able be to isexpected debtor the and terms contractual original the under pay to thatevidence the debtor made all reasonable efforts is there default, of risk isahigh there if or debt its on in default iscurrently debtor the if basis selective a on isgranted forbearance policy, loan forbearance Group’s the Under default. of risk the minimise and opportunities collection maximise to activities’) ‘forbearance as to (referred difficulties financial in customers to loans renegotiates Group The • • of: comparison reflects significantly increased has risk credit asset’s the whether of determination the in derecognition, result not does modification the and modified are asset afinancial of terms the IFRS 9, when Under terms. contractual original the and recognition initial on data on based PD estimated lifetime remaining the with terms; modified the on based date reporting PD the at lifetime remaining the 25 dfcu Group 2017 Annual Report and Financial Statements 26 dfcu Group 2017 Annual Report and Financial Statements contract, including amortisation, and prepayments. prepayments. and amortisation, including contract, the under allowed amount current the to changes potential and counterparty the to exposure current the from EAD the will derive Group The adefault. of event in the exposure expected the represents EAD factor. discounting the as rate interest effective the using basis flow cash adiscounted on calculated will be They prices. in property changes possible reflect to lending, estate real for and, scenarios economic different for calibrated will be LGD. LGD estimates determining in akey parameter be likely to are ratios (LTV) loan-to-value property, retail by secured For loans asset. financial the to isintegral that collateral any of costs recovery and industry counterparty claim, the of seniority collateral, structure, the will consider LGD models The counterparties. defaulted against claims of rates recovery of history the on based LGD parameters will estimate Group The default. isa there if likely loss the of magnitude LGD isthe rates. prepayment estimated and exposures of maturities contractual the considering estimated willPDs be PD. associated the of estimate in the a change to will this lead then classes, rating between migrates exposure or If a counterparty counterparties. corporate large PD for the derive to used be also may data market isavailable, it Where factors. qualitative and quantitative both comprising data compiled internally on based will be models statistical These exposures. and counterparties of categories various the to tailored tools rating using assessed and models rating statistical on based calculated will be which date, acertain at estimates are PD estimates below.described as information forward-looking reflect to adjusted will be They models. regulatory leverage that data historical other and models statistical developed internally from derived will be parameters These • • • variables: following the of structures term the are ECLs of measurement the into key inputs The I nputs into measurement of ECLs of measurement into nputs exposure at default (EAD). default at exposure (LGD); and default given loss PD; input into measurement of ECLs are as follows. as are ECLs of measurement into input a significant information represents benchmark external which for portfolios The data. available internally the supplement to used will be information benchmark external data, historical limited has Group the which of in respect For portfolios guarantee. or commitment aloan terminate or advance an of repayment require to right the has Group the which at date the to extends period contractual maximum The period. alonger considers Group the purposes, management risk if, for even risk, credit to exposed is it options) which over extension borrower’s any over the maximum contractual period (including default of risk the considering ECLs will measure Group the increased, significantly not has risk credit which for assets a12-monthof financial PD for a maximum using to subject and above, described As techniques. statistical and scenario using in time points various at outcomes exposure possible of range the modelling by EAD determine will Group the assets, financial For some forecasts. forward-looking and observations historical on based estimated will be which contract, the under repaid or drawn be may that amounts future potential as well as drawn, amount the will consider EAD the guarantees, financial and commitments For lending default. at amount carrying gross the will be asset afinancial of EAD The
Securities Government Exposure billion 729.8Ushs benchmarks used benchmarks External PD default study) (Moody’s 2.8% expected lives will be most affected by the new new the by affected most will be lives expected longer with products unsecured on allowances Loss reserves. Group’s in equity the billion reduction 43.6 Ushs approximately will be allowances in loss increase the of 2018, impact the 1January IFRS 9at of adoption the on that, estimated has Group The impairment model. IFRS 9 the of scope in the instruments financial for volatile more become and will increase losses Impairment requirements. impairment new the from result to IFRS 9isexpected of implementation the from statements financial separate and consolidated Group’s the on impact significant most The Impact assessment management judgement. expert as well as expectations, sub-sector-specific and industry expectations, Group’s economic the on based framework macro-economic looking forward weighted aprobability developed has Group The outcomes. pessimistic more and optimistic more will represent scenarios other The budgeting. and planning strategic as such purposes, other for Group the by used information with aligned be and amost-likely outcome will represent case base The forecasters. academic and sector private selected Fund, and Monetary International the and Development and Co-operation Economic for Organisation the as such organisations supranational authorities, monetary and bodies governmental by published forecasts and data economic include may information External outcome. each of probabilities relative the considering and scenarios economic additional more or two developing will involve process This information. forecast and actual external of variety a of consideration and experts economic and Committee Risk Market Group the from advice on based scenarios forecast possible other of range arepresentative and variables economic relevant of direction future the of view case’ a‘base formulate will Group The ECLs. of measurement its and recognition initial since significantly increased has instrument an of risk credit the whether of assessment its both into information looking forward- will incorporate IFRS 9, Group the Under information Forward-looking de-recognition. their to lead not do that assets financial distressed non- and liabilities financial of modifications on loss or in profit loss or gain any recognise not does Group 39, IAS the Under loss. or in profit loss or gain amodification as adjustment resulting any recognise and rate interest effective original the at flows cash contractual modified the discounting by liability) financial the of cost amortised {or the asset financial the of amount carrying gross the will recalculate IFRS 9, Group the Under in derecognition. result not does FVTPL at measured not instrument afinancial of modification the when accounting the for guidance specific However, contains it amendments. substantive without liabilities financial and assets financial of de-recognition the for 39 IAS of requirements the IFRS 9incorporates modification contract and Derecognition iv). • • as follows: presented be will generally changes value fair these IFRS 9 under whereas loss, or in profit recognised are FVTPL at as designated liabilities financial of changes value all fair 39 IAS However, under liabilities. financial of classification the for 39 IAS in requirements existing the retains IFRS 9largely iii). - Financial Classification liabilities billion. 43.6 Ushs of region in the will be provisions impairment 39 IAS on increase the that It isestimated forward. going losses impairment of recognition in the volatility increase as well as 39 IAS of requirements the of in terms recognized previously provisions impairment existing the on impact financial material have to isexpected model impairment revised The prospects. Limited’s growth the foster to sufficient will still be and 1.88% by capital Group’s core the will decrease 32.5 which billion, Ushs approximately by provisions FIA the will exceed provision IFRS 9impairment the that It is estimated requirements. impairment value will be presented in profit or loss. or in profit presented will be value fair in the change the of amount remaining the in OCI; and presented will be liability the of risk credit in the changes to attributable is that value fair in the change the of amount the Bank Bank dfcu 27 dfcu Group 2017 Annual Report and Financial Statements 28 dfcu Group 2017 Annual Report and Financial Statements • • • • • • • below. described as except retrospectively, applied be IFRS 9will of generally adoption the from resulting policies in accounting Changes Transitionvi). ECLs. and risk credit accounting, hedge about particular in disclosures, new extensive IFRS 9will require v). Disclosures adopting new requirements. these from impact immaterial an expects Group The significantly since initial recognition. since significantly increased not has asset the on risk credit the that will determine 2018, Group the then 1January at risk credit low has security investment If adebt profit or loss. in mismatch accounting an enlarge or create would in OCI risk credit liability’s financial in the changes of effects the presenting whether of determination the FVTPL, at as designated liability For afinancial FVOCI. at as trading for held not instruments in equity investments certain of designation The FVTPL. at measured as liabilities financial and assets financial certain of designations previous of revocation and designation The isheld. asset afinancial which within model business the of determination The application. initial of date the at exist that circumstances and facts the of basis the on made be to have assessments following The 2018. 1January at as reserves and earnings retained in recognised be IFRS 9will of generally adoption the from resulting liabilities financial and assets financial of amounts carrying in the Differences changes. impairment) (including measurement and classification to respect with periods prior for information comparative restate to not it allowing exemption the of advantage will take Group The will go on balance sheet. sheet. balance on will go all leases almost isthat lessees on impact main The 17 unchanged. IAS largely will remain predecessor, in IFRS 16’s contained requirements accounting lessor The reformed. issubstantially which for accounting the lessees, affect will predominantly and IFRS 16 under significant are changes The c). 16: IFRS Leases impact. significant any expect not does far, So Group the amendments. the from resulting statements financial separate and consolidated its on impact potential the is assessing Group The permitted. application 2018, early with 1January after or on beginning periods annual for effective are amendments The Standard. new the applies first it when a company for complexity and cost reduce to reliefs additional two include amendments the clarifications, the to In addition • • • to: how clarify amendments The applied. be should principles those how clarify but Standard the of principles in 2014, underlying the issued change was not do which Standard, Revenue the to amendments These Programmes. Loyalty IFRIC 13 and Customer Contracts 11 Construction IAS 18 IAS Revenue, including guidance, recognition revenue existing It replaces recognised. is revenue when and much whether, how determining for framework acomprehensive IFRS 15 establishes Revenue with from Customers Contracts 15: IFRS to b). Clarifications over time. over or in time apoint at recognised be should licence a granting from revenue the whether determine and provided); be to service or good the for arranging for (responsible agent an or service) or agood of provider (the isaprincipal acompany whether determine contract; in a acustomer) to aservice or agood transfer to promise (the obligation aperformance identify resulting from the amendments. the from resulting statements financial separate and consolidated its on impact potential the isassessing Group The Standard. this of application initial of date the before or at Customers with Contracts from Revenue IFRS 15 apply that entities for permitted adoption 2019, 1January early with after or on beginning periods annual for effective are amendments The required. also are quantitative, and qualitative both disclosures, extensive More transactions. lease of and classification measurement identification, the affect that thresholds judgemental and estimates new introduces standard The leases. low-value and short-term are exemptions only The rentals are recognised. pay to liability item) afinancial and leased the use to right IFRS 16, (the under asset an Instead, lessees. for isremoved leases finance and operating between distinction sheet balance the isbecause This Interpretation Standard/ IFRS 2amendments IFRS 4amendments IAS 40 amendment 40 IAS IFRIC 22 IFRIC IFRIC 23 IFRIC IAS 28 amendment 28 IAS IFRS 17 IAS 19 IAS IFRS 10 28 IAS and Description Clarifying share-based payment accounting Insurance Contracts Insurance IFRS 4 with Instruments IFRS 9Financial Applying Transfers of Investment property Investment of Transfers Foreign Transactions Currency Considerations and Advance Uncertainty over Income Tax Income Treatments over Uncertainty Long-term Interests in Associates and Joint Ventures Joint and in Associates Interests Long-term Insurance Contracts Insurance Employee Benefits -amendments Benefits Employee associate or joint venture its and investor and between assets of contribution or Sale financial statements. statements. financial separate and Group’s consolidated the on impact asignificant have to expected not are interpretations and standards amended Following The standards e). Other 41. note at statements financial in these disclosures required the 2017. 1January included has after or Management on beginning periods annual for applied amendments The activities. financing from arising liabilities for balances closing and opening the between areconciliation providing includes This changes. non-cash and flow cash from arising changes both including activities, financing from arising liabilities in changes evaluate to statements financial of users enable that disclosures for provide amendments The 7) IAS to (Amendments Initiative Disclosure d). beginning on or after periods date Effective 01-Jan-18 01-Jan-18 01-Jan-18 01-Jan-18 01-Jan-19 01-Jan-19 01-Jan-21 01-Jan-19 Yet confirmed be to 29 dfcu Group 2017 Annual Report and Financial Statements 30 dfcu Group 2017 Annual Report and Financial Statements recognised in profit or loss. or in profit recognised are remeasurement such from arising losses or gains any date; acquisition the at value fair to remeasured is acquiree in the interest equity held previously acquirer’s the of value carrying date acquisition the in stages, isachieved combination business If the incurred. as expensed are costs Acquisition-related assets. net identifiable acquiree’s of amounts recognised the of share proportionate interest’s non-controlling the at or value fair at either basis, by-acquisition acquisition- an on acquiree in the interest controlling non- any recognises Group The date. acquisition the at values fair their at initially measured are combination in abusiness assumed liabilities contingent and liabilities and acquired assets contingent consideration arrangement. Identifiable a from resulting liability or asset any of value fair the includes transferred consideration The Group. the by issued interests equity the and acquiree the of owners former the to incurred liabilities the transferred, assets the of values fair isthe subsidiary a of acquisition the for transferred consideration The combinations. business for account to accounting of method acquisition the applies Group The ceases. control that date the from deconsolidated are They Group. the to istransferred control which on date the from consolidated fully are Subsidiaries entity. the over power its through returns those affect to ability the has and entity the with involvement its from returns to, variable rights has to, or isexposed Group the when entity an controls Group The control. has Group the which entities) over structured (including all entities are Subsidiaries 2017. subsidiary, its and Limited dfcu of statements financial the comprise statements financial consolidated The CONSOLIDATION A. accounting policies significant of 4.Summary Bank Limited as at 31 December 31 at as December Limited Bank dfcu assets are also eliminated. eliminated. also are assets in recognised are that transactions intercompany from resulting losses and Profits eliminated. are companies group between transactions on expenses and income Inter-company balances, transactions, non-controlling in are equity. interests recorded with all transactions in control, change isno there and subsidiary existing in an interest any disposes or acquires group When interest. minority any of extent the of irrespective date, acquisition the at values fair their at initially measured are combination business in a assumed liabilities contingent and liabilities and acquired assets Identifiable acquisition. the to attributable directly costs plus exchange, of date the at assumed or incurred liabilities and issued instruments equity given, assets the of value fair the as ismeasured acquisition an of cost The Group. the by subsidiaries of acquisition the for account to isused accounting of method purchase The loss. or in profit directly recognised is difference the purchase, abargain of case in the acquired subsidiary the of assets net the of value fair the than isless measured interest held previously and non-controlling recognised interest transferred, consideration of total If the goodwill. as recorded is acquired assets net identifiable the of value fair the over acquiree in the interest equity previous any of value fair acquisition-date the and acquiree in the interest non-controlling any of amount the transferred consideration the of excess The equity. within for isaccounted settlement subsequent its and remeasured, isnot equity as isclassified that consideration income.comprehensive Contingent other to achange as or loss or in profit either 39 IAS with in accordance isrecognised liability or asset an be to isdeemed that consideration contingent the of value fair the to changes Subsequent date. acquisition the at value fair at isrecognised Group the by transferred be to consideration contingent Any actual borrowing costs incurred during the period. period. the during incurred costs borrowing actual of amount the to limited isalways capitalisation for eligible costs borrowing of amount The period. the during outstanding are that entity the of borrowings the to applicable costs borrowing the of average weighted isthe rate capitalisation The assets. qualifying on expenditures the to rate capitalisation a applying by calculated are capitalisation for eligible Costs borrowings. general represent specific not are that borrowings All capitalisation. for eligible costs borrowing the from deducted be should earned income investment funds, some reinvests temporarily entity Ifthe capitalised. are incurred costs actual the borrowings, For specific asset. aqualifying obtaining of purpose the for specifically borrowed funds are borrowings Specific incurred. are they in which period in the loss or in profit recognised are costs borrowing other All capitalisation. for eligible costs borrowing the from isdeducted assets qualifying on expenditure their pending borrowings specific of investment temporary the on earned income Investment sale. or use intended their for ready substantially are assets the as time such until assets, those of cost the to added are sale, or use intended their for ready get to time of period asubstantial take necessarily that assets are which assets, qualifying of production or construction acquisition, the to attributable directly costs borrowing specific and General COSTS BORROWING B. established. is payment receive to right the when recognised is income Dividend of investment. costs attributable direct includes also Cost amendments. consideration changes in consideration arising from contingent reflect to isadjusted Cost impairment. less cost at for accounted are associates and in subsidiaries investments statements, financial separate In the Separate financial statements Group. the by adopted policies the with consistency ensure to necessary where changed been have subsidiaries of policies Accounting loss in the statement of comprehensive income. comprehensive of statement in the loss or profit through value fair at instruments financial other from income in net presented are loss, or profit through value fair at carried liabilities financial and assets financial other and purposes, management risk for held derivatives other on changes Fair value income. trading in net liabilities and assets trading of value fair in the changes all other with together presented are and operations bank’strading the to incidental be to considered are liabilities and assets all trading on expense and income Interest liability. financial or asset afinancial of issue or acquisition the to attributable directly are that costs incremental include costs Transaction discounts. or premiums all other and costs transaction rate, interest effective the of part integral an are that contract the to parties between received or paid all fees includes calculation liability. The financial or asset financial the of amount carrying net the to period ashorter or, appropriate, when instrument financial the of life expected the through receipts or payments cash future estimated discounts exactly that rate isthe rate interest effective The period. relevant the over expense interest or income interest the allocating of and liability afinancial or asset afinancial of cost amortised the calculating of isamethod method interest effective The method. interest effective the using cost amortised at instruments bearing all interest for loss or profit in recognised are expense and income Interest reliably. measured be can revenue the and Group the to will flow benefits economic that probable is it that extent the to isrecognised Revenue expense and income Interest i). C. OPERATING INCOME awhole. as group the of perspective the from financed was asset qualifying the how reflect to isadjusted rate capitalisation the loan, intra-group an using asset aqualifying of construction the finances company parent the Where 31 dfcu Group 2017 Annual Report and Financial Statements 32 dfcu Group 2017 Annual Report and Financial Statements income. comprehensive in other recognised are amount in carrying changes other and loss, or in profit recognised are cost in amortised changes to related Translation differences security. the of amount carrying in the changes other and security the of cost amortised in the changes from resulting differences translation between analysed are available-for-sale denominated in foreign classified currency as securities monetary of value fair in the Changes income’. exchange foreign `net within loss or in profit presented are equivalents cash and cash and borrowings to relate that losses and gains exchange Foreign loss. or in profit recognised are currencies in foreign denominated liabilities and assets monetary of rates exchange year-end at translation the from and transactions such of settlement the from resulting losses and gains exchange Foreign re-measured. are items where valuation or transactions the of dates the at prevailing rates exchange using currency functional the into translated are transactions currency Foreign currency. Group’s functional isthe which Shillings in Uganda presented are statements financial separate and consolidated The currency’). functional (`the operates entity the which in environment economic primary the of currency the using measured are statements financial separate and consolidated in the included Items TRANSLATION CURRENCY D. FOREIGN received. are services the as expensed are which fees, service and transaction to mainly relate expense commission and fees Other period. commitment the over basis a straight-line on recognised are fees commitment loan related the then a loan, of draw-down in the result to expected isnot commitment If aloan performed. are services related the as recognised –are fees syndication and fees placement commission, sales fees, account servicing fees, investment management –including income commission and fees Other above. as rate interest effective the of measurement in the included are liability financial or asset afinancial on rate interest effective the to integral are that expense and income commission and Fees ii.Fees and commission • • their characteristics. and acquired were instruments financial the which for intention management’s the and purpose the on depends recognition initial at instruments financial of classification The classified. appropriately are instruments all financial that ensure to basis regular a on portfolio its re-evaluates and purchase of time the at instruments financial its of classification appropriate the determines Management Classification ii. issue. or acquisition its to attributable directly are that costs transaction loss, or profit through value fair at not item an for plus, value fair at initially ismeasured liability financial or asset A financial instrument. the of provisions contractual the to aparty becomes Group the which on date the is which date, trade the on recognised are assets) financial of sales and purchases way regular- (including instruments financial other All originated. are they which on date the on liabilities subordinated and issued securities debt deposits, advances, and loans recognises initially Group The deposits, derivatives and group balances. banks, with balances securities, in government investments advances, and loans Uganda, of Bank with balances include Group the by held instruments Financial enterprise. another of liability financial a and enterprise one of asset afinancial both to rise gives that isacontract instrument A financial Recognition i. LIABILITIES AND ASSETS FINANCIAL E. loss or available-for-sale. available-for-sale. or loss or profit through value fair at designated not are which and maturity, to hold to ability and intent positive the has Group the that maturity fixed and payments determinable or fixed with assets Held-to-maturity investments are non-derivative taking. position or profit short-term for together ismanaged that a portfolio of part as holds or term, near in the repurchasing or selling of purpose the for principally incurs or acquires Group the that liabilities and assets those are liabilities and assets trading for Held pricing information on an ongoing basis. basis. ongoing an on information pricing provide to volume and frequency sufficient with place take liability or asset the for transactions if active as isregarded Amarket instrument. that for market active in an price quoted the using instrument an of value fair the measures Group the available, When risk. itsreflects non-performance a liability of value fair The date. that at access has Group the which to market advantageous most the or, absence, principal in in the its date measurement the at participants market between transaction orderly in an aliability transfer to paid or asset an sell to received be would that price ‘Fair isthe value’ Fairb. measurement value impairment. for reduction any minus amount, maturity the and recognised amount initial the between difference any of method interest effective the using amortisation cumulative the minus or plus repayments, principal minus recognition, initial at ismeasured liability financial or asset financial the which at amount the is liability financial or asset afinancial of cost’ ‘amortised The a. cost measurement Amortised Subsequent measurement of financial instruments value. fair at recorded are which loss, or profit through value fair at recorded liabilities financial and assets financial of case the in except costs, transaction plus value fair their at initially measured are instruments financial All Initial measurement of financial instruments iii. Measurement • • fair value through profit and loss. and profit through value fair or cost amortised at measured as commitments loan and guarantees than other liabilities financial its classifies Group The liabilities: Financial receivable. the trading of intention no with adebtor to directly services or money, goods provides Group the when arise They market. active in an quoted not are that payments determinable or fixed with assets financial non-derivative are advances and Loans borrowers. to isadvanced cash when recognised are banks from due amounts and advances and Loans period during which the change has occurred. occurred. has change the which during period reporting the of end the of as hierarchy value fair the of levels between transfers recognises Group The paid. be to required be could amount the which on date first the from discounted demand, on payable amount the than less isnot deposit ademand of value fair The portfolio. in the instruments individual the of each of adjustment risk relative the of basis the on liabilities and assets individual the to allocated are adjustments portfolio-level Those exposure. risk aparticular position) for short anet transfer (or to paid position long anet sell to received be would that aprice of basis the on measured are risk credit or market either to exposure net the of basis the on Group the by managed are that risk credit and risk market to exposed are that liabilities financial and assets financial of Portfolios price. ask an at positions short and liabilities and price abid at positions long and assets measures Group the then price, ask an and price bid a has value fair at measured aliability or asset If an out. closed is transaction the or data market observable by supported iswholly valuation the when than later no but instrument the of life the over basis appropriate an on loss or in profit isrecognised difference that Subsequently, price. transaction the and recognition initial at value fair the between difference the defer to adjusted value, fair at measured initially is instrument financial the then markets, observable from data only uses that technique a valuation on based nor liability or asset identical an for market active in an price aquoted by neither evidenced is value fair the and price transaction the from differs recognition initial at value fair the that determines Group If the received. or given consideration the of value fair –i.e. the price transaction the isnormally recognition initial at instrument afinancial of value fair the of evidence best The transaction. a in pricing account into take would participants market that factors all the of incorporates technique valuation chosen The inputs. unobservable of use the minimise and inputs observable relevant of use the maximise that techniques valuation uses Group the then market, active in an price quoted isno If there 33 dfcu Group 2017 Annual Report and Financial Statements 34 dfcu Group 2017 Annual Report and Financial Statements • • assets) is derecognised when: similar financial of agroup of part or asset financial a of (or, apart asset applicable A financial where assets a.Financial instruments financial of iv. De-recognition profit or loss. in isrecognised amounts carrying respective the in difference the liability, and anew of recognition the and liability original the of a de-recognition as istreated modification or exchange an such modified, substantially are liability existing an of terms the or terms, different substantially on lender same the from another by replaced is liability financial existing an Where expires. or cancelled or isdischarged liability the under obligation the when isderecognised liability A financial b. Financial liabilities repay. to required be could Group the that consideration of amount maximum the and asset the of amount carrying original the of lower the at ismeasured asset transferred the over guarantee a of form the takes that involvement Continuing retained. has Group the that obligations and rights the reflects that abasis on measured are liability associated the and asset transferred The liability. associated an recognises also Group the case, In that asset. in the involvement continuing Group’s the of extent the to isrecognised asset the asset, the of control transferred nor asset the of rewards and risks all the substantially retained nor transferred neither has and arrangement, through apass- into entered has or asset an from flows cash receive to rights its transferred has Group the When ‘pass-through’ arrangement; and either: and ‘pass-through’ arrangement; a under party athird to delay material without in full flows cash received the pay to obligation an assumed has or asset the from flows cash receive to rights its transferred has Group The or expired; have asset the from flows cash receive to rights The ii). ii). i). asset, but has transferred control of the asset. the of control transferred has but asset, the of rewards and risks all the substantially retained nor transferred neither has Group The or asset; the of rewards and risks all the substantially transferred has Group The f. f. e. d. c. b. a. following events: loss the about Group the of attention the to comes that data observable includes isimpaired assets of group or asset afinancial that evidence Objective characteristics. similar risk with cost) amortised at (carried assets financial together grouping by impairment for assessed collectively then are significant individually not are that Assets identified. yet not but incurred have may that impairment any for assessed collectively then are impaired specifically be to not found assets significant All impairment. specific for assessed are assets financial significant individually All level. collective and asset a specific both at impairment of evidence considers Group The reliably. estimated be can that asset the on flows cash future the on impact an has event loss the that and asset, the of recognition initial the after occurred has event aloss that demonstrates evidence objective when impaired are assets Financial impaired. are loss or profit through value fair at carried not assets financial that evidence isobjective there whether assesses Group the date reporting At each v. Identification and measurement of impairment individual financial assets in the group, including: including: group, in the assets financial individual the with identified be yet cannot decrease the although assets, those of recognition initial the since assets financial of a group from flows cash future estimated in the decrease measurable isa there that indicating data observable difficulties. financial of because asset financial that for market active an of disappearance the difficulty; financial other or bankruptcy will enter borrower the that probable becomes it consider;otherwise not would lender the that aconcession difficulty, financial borrower’s the to relating reasons legal or economic borrower, for the to granting Group the repayments; principal or in interest delinquency or default as such contract, of a breach obligor; or issuer the of difficulty financial significant ii). ii). i). group. in the assets the on defaults with correlate that conditions economic local or National or group; in the borrowers of status payment in the changes adverse terms of the assets being evaluated. being assets the of terms contractual the to according due all amounts pay to ability debtors’ the of indicative being by assets such of groups for flows cash future of estimation the to relevant are characteristics Those segments). product and Group’s business the of basis the (i.e. on characteristics risk similar credit of basis the on grouped are assets financial impairment, of evaluation acollective of purposes For the isprobable. foreclosure not or whether collateral, the selling and obtaining for costs less foreclosure from result may that flows cash the reflects asset financial acollateralised of flows cash future estimated the of value present the of calculation The contract. the under determined rate interest effective current the is loss impairment any measuring for rate discount the rate, interest avariable has asset to-maturity held- or If aloan loss. or in profit isrecognised loss the of amount the and account allowance an of use the through is reduced asset the of amount carrying The rate. interest effective original instrument’s financial the at discounted incurred) been not have that losses credit (excluding future flows cash future estimated of value present the and amount carrying asset’s the between difference the as ismeasured loss the of amount the incurred, been has cost amortised at carried assets to-maturity held- or receivables and advances loans, on loss impairment an that evidence isobjective If there of impairment. assessment in acollective included not are recognised be to continues isor loss impairment an which for and impairment for assessed individually are that Assets impairment. for them assesses collectively and characteristics risk credit similar with assets financial of in agroup asset the includes it not, or significant whether asset, financial assessed individually an for exists impairment of evidence objective no determines Group If the assets. all financial for individually exists impairment of evidence objective whether assesses first Group The i. i. follows: as advances and loans on losses estimate to 2004 Act, Institutions Financial the by required isalso Group the above, out set as Standards Reporting Financial International with in accordance advances and loans on losses impairment of measurement the to In addition requirements Uganda of 2004 Act Institutions Financial currently. exist not do that period historical in the conditions of effects the remove to and isbased experience loss historical the which on period the affect not did that conditions current of effects the reflect to data observable current of basis the on isadjusted experience loss Historical group. in the similar those to characteristics risk credit with assets for experience loss historical and group in the assets the of flows cash contractual the of basis the on estimated are impairment for evaluated collectively are that assets financial of in agroup flows Future cash ii. A general provision of at least 1% least total at of their of provision ii. A general retained earnings. earnings. retained of appropriation an as reserve aregulatory to taken is excess the IFRS, with in accordance determined amounts exceed 2004 Act, Institutions Financial the with in accordance determined advances and loans of impairment for provisions Where Classification Regulations, 2005, as follows: 2005, Regulations, Classification Credit Institutions Financial the by established advances and loans such of classification and considered to based on be non-performing criteria advances and loans those for provision A specific provisions. specific of net facilities credit outstanding c. c. b. a. classification attributable to the assets. attributable classification the at in arriving criteria subjective follow must banks period, arrears the to In addition 100%. – days 360 over period arrears with assets loss –50%; 359 days and days 180 between period arrears with assets doubtful 179 and 90 –20%; days between period arrears with assets substandard 35 dfcu Group 2017 Annual Report and Financial Statements 36 dfcu Group 2017 Annual Report and Financial Statements the liability simultaneously. liability the settle and asset the realise or basis, anet on settle to intention isan there and amounts recognised the off set to right enforceable isalegally there when, only and when position financial of statement separate and consolidated in the reported amount net the and offset are liabilities and assets Financial vii. Offsetting rate. interest effective loan’s the original using calculated assessment, impairment collective or individual an to subject be to continue occur.likely to loans The are payments future that and met are all criteria that continuously reviews renegotiated loans to ensure Management due. past considered longer isno loan the and terms of modification the before calculated as rate interest effective original the using measured is impairment any renegotiated been have terms the Once conditions. loan new of agreement the and arrangements payment the extending involve may This collateral. of possession take to than rather loans restructure to seeks Group the possible, Where loans Renegotiated vi. loss. or in profit isrecognized reversal the of amount The account. allowance the adjusting by isreversed loss impairment recognised previously the rating), credit debtor’s in the improvement (such an as recognised was impairment the after occurring event an to objectively related be can decrease the and decreases loss impairment the of amount the period, If, in asubsequent loss. or in profit impairment loan for charge the decrease off written previously amounts of recoveries Subsequent determined. been has loss the of amount the and completed been have procedures necessary all the after off written are loans Such impairment. loan for allowance related the against off iswritten it isuncollectible, a loan When earnings. retained to back taken amount the and 2004 Act, Institutions Financial the with accordance in determined that IFRS exceeds with in accordance determined impairment for provision the that extent the to isreduced reserve regulatory the Otherwise, rendered. are services the in which period in the loss or profit in expensed and aprepayment as is treated value market the and value nominal the between difference the from arising discount the and employees the to benefit term isalong benefit The Group. the leaves employee the if isforfeited benefit interest The periods. in future rendered be to services to relate therefore and employment continued the on dependent are employees to offered term loan favourable The value. fair at initially measured are loans These rate. market below at employees to loans advances Group the business, of course normal In the loans Staff viii. activity. Group’s trading the as such similar transactions of agroup from arising losses and gains from IFRS or under permitted when only basis anet on presented are expense and Income i. i. F. EQUIPMENT AND PROPERTY is restated to the revalued amount of the asset. asset. the of amount revalued the to restated is amount net the and asset the of amount carrying gross the against iseliminated date revaluation the at as depreciation accumulated Additionally, cost. original assets the on based depreciation and assets the of amount carrying revalued the on based depreciation between difference the for ismade earnings retained to reserve revaluation asset the from transfer annual An reserve. revaluation asset in the recognised asset same the on surplus existing an offsets it that extent the to except loss, or profit in the isrecognised deficit A revaluation loss. or in profit isrecognised increase the case in which loss, or in profit recognised previously asset same the of decrease arevaluation reverses it that extent the to except income, comprehensive other through in equity reserve revaluation asset the to iscredited surplus revaluation Any amount. carrying its from materially differ not does asset arevalued of value fair the that ensure to frequently Valuationsrevaluation. are performed the of date the after recognised losses impairment and buildings on depreciation accumulated less value fair at measured are buildings and Land equipment. and property of components) (major items separate as for accounted are they then lives, useful different have equipment or property of item an of parts If significant equipment. that of part as capitalised is equipment related the of functionality the to isintegral that software Purchased located. are they which on site the restoring and items the removing and dismantling of costs the and use, intended its for condition a working to asset the bringing to attributable directly costs labour, other any direct and materials of cost the includes assets self-constructed of cost The asset. the of acquisition the to attributable directly are that expenditures includes Cost any. if losses, impairment and/or accumulated depreciation accumulated of net cost, at isstated Equipment Recognition and measurement property and equipment are as follows: follows: as are equipment and property of items significant of lives useful estimated The depreciated. isnot Land term. lease the of end the by ownership will obtain Group the that certain isreasonably it unless lives useful their and term lease the of shorter the over depreciated are assets Leased loss. or in profit recognised generally is and lives, useful estimated their over method straight-line the using values residual estimated their less equipment and property of items of cost the off write to iscalculated Depreciation iii. Depreciation ii. loss. or profit through recorded isprospectively estimate in accounting appropriate be to considered change any and end year the at asset an of life useful and value residual the review directors and Management term. lease remaining the and improvements, the of life useful estimated the of shorter the over amortised are improvements Leasehold Work-in-progress vehicles Motor equipment Computer equipment and fittings Furniture, Buildings the year the asset is derecognised. isderecognised. asset the year the in loss or in profit isincluded asset) the of amount carrying the and proceeds disposal net the between difference the as (calculated asset the of de-recognition on arising loss or gain Any disposal. or use its from expected are benefits economic future no when or disposal upon derecognised is equipment and property of item An earnings. retained to istransferred sold being asset particular the to relating reserve revaluation any disposal, Upon incurred. incurred. as expensed are maintenance and repairs Ongoing Group. the to will flow expenditure the of benefits economic future the that isprobable it when only iscapitalised expenditure Subsequent cost Subsequent Not depreciated Not 4 years 3 –4years 6 –7years years 40 37 dfcu Group 2017 Annual Report and Financial Statements 38 dfcu Group 2017 Annual Report and Financial Statements adjusted if appropriate. Goodwill is not amortised. isnot Goodwill appropriate. if adjusted and period reporting each at reviewed are lives useful and values residual methods, Amortisation intangible assets. the of function the with consistent category expense in the loss or in profit isrecognised lives finite with assets intangible on expense amortization The estimates. in accounting changes as treated are and appropriate, as method, or period amortization the changing by for isaccounted asset in the embodied benefits economic future of consumption of pattern expected the or life useful expected in the Changes period. reporting each of end the at least at isreviewed life useful a finite with asset intangible an for method amortization the and period amortization The impaired. be may asset intangible the that indication isan there whenever impairment for assessed are and method line straight the using lives economic useful their over amortized are lives finite with assets Intangible iii. Amortisation incurred. as loss or in profit isrecognised brands, and goodwill generated internally on expenditure other All relates. it which to asset specific in the embodied benefits economic future the increases it when only iscapitalized expenditure Subsequent expenditure ii. Subsequent indefinite. or finite either as assessed are assets intangible of lives useful The isincurred. expenditure the in which year in the loss or in profit reflected is expenditure and capitalized not are costs, intangible assets, excluding capitalised development generated any. if Internally losses, impairment accumulated and amortisation accumulated any less cost at carried are assets intangible recognition, initial Following cost. at recognition initial on measured are separately acquired assets Intangible assets intangible Other b. lossess. impairment accumulated less cost at measured is subsidiaries of acquisition the on arising Goodwill a. Goodwill i. Recognition and measurement INTANGIBLEG. ASSETS future taxable profits improves. profits taxable future of probability the when reversed are reductions such realised; will be benefit tax related the that probable longer isno it that extent the to reduced are and date reporting each at reviewed are assets tax Deferred differences. temporary of reversal the and Group the for plans business on based determined are profits Future taxable used. be can they which against available will be profits taxable future that isprobable it that extent the to differences temporary deductible and credits tax unused losses, tax unused for recognised are assets tax Deferred purposes. taxation for used amounts the and purposes reporting financial for liabilities and assets of amounts carrying the between differences temporary of in respect isrecognised tax Deferred tax ii. Deferred dividends. from arising tax any includes also tax Current date. reporting the at enacted substantively or enacted rates tax using any.if It ismeasured taxes, income to related uncertainty reflects that received or paid be to expected amount tax the of estimate best isthe receivable or payable tax current of amount The years. previous of in respect receivable or payable tax the to adjustment any and year the for loss or income taxable the on receivable or payable tax expected the comprises tax Current tax i. Current in OCI. or equity in directly recognised items to relates it that extent the to except loss or in profit It isrecognised tax. deferred and current comprises expense tax Income TAX INCOME H. derecognized. is asset the when loss or profit recognized are and asset the of amount carrying the and proceeds disposal net the between difference the as measured are asset intangible an of derecognition from arising losses or Gains disposal. or use its from expected are benefits economic future no when or disposal upon isderecognized assets intangible of item An iv. Derecognition such a determination ismade. adetermination such in which period in the expense tax impact would liabilities tax to changes such liabilities; tax existing of adequacy the regarding judgment its change to Group the causes that available become may information New events. future about judgments of aseries involve may and assumptions and estimates on relies assessment This due. be may interest and taxes additional whether including exposures, tax of impact the considers Group the tax, deferred and current of amount the In determining Taxiii. exposures loss. or in profit recognised originally were that transactions from arising income to relate generally they because loss or in profit recognised. These amounts are generally recognised is dividend related the pay to liability the as time same the at recognised are Group the by dividends of distribution the from arise that taxes Additional simultaneously. realised will be liabilities and assets tax their or basis anet on assets and liabilities tax current settle to intend they but entities, tax different on or entity, taxable same the on authority tax same the by levied taxes to relate they and assets, and liabilities tax current offset to right enforceable a is legally there if offset are liabilities and assets tax Deferred liabilities. and assets its of amount carrying the settle or recover to date, reporting the at expects, Group the in which manner the follow would that consequences tax the reflects tax deferred of measurement The date. reporting the at enacted substantively or enacted rates tax using reverse, they when differences temporary to applied be to expected are that rates tax the at ismeasured tax Deferred used. be can they which against available will be profits taxable future that probable become has it that extent the to recognised and date reporting each at reassessed are assets tax deferred Unrecognised Group has a present legal or constructive obligation obligation constructive or legal apresent has Group the if only bonus cash a short-term under paid be to expected amount the for isrecognised provision A isprovided. service related the as expensed are and basis undiscounted an on measured are obligations benefit employee Short-term termination benefits. exclude they services; free and contributions aid medical as such benefits non-monetary any and bonuses salaries, of consist benefits Short-term ii). entitlements Other relate. they which to year in the loss or profit to charged are scheme pension contribution defined the contribution scheme. The Group’s contributions to isadefined Fund, which Security Social National the to contribute also employees all its and Group The periods. prior and current in the service employee to relating benefits the employees all pay to assets sufficient hold not does fund the if contributions further pay to obligations constructive or legal no has Group The entity. aseparate into contributions fixed pays Group the which under plan isapension plan contribution Adefined employees. and companies Group the both from contributions from isfunded and Trustees of a Board by is administered scheme The Limited. Bank dfcu and Limited in dfcu employees eligible all its for scheme pension contribution adefined operates Group The i). Retirement benefit obligations J. EMPLOYEE BENEFITS position. financial of statement consolidated in the cost amortised at carried are equivalents cash and Cash Uganda. of Bank with held requirement reserves cash the excludes equivalents cash and Cash bills. eligible other bills and treasury Bank, Central the with balances and cash include: and date acquisition the from maturity to days 90 than less with balances comprise equivalents cash and cash flows, cash of statement consolidated the of purposes For the EQUIVALENTS CASH AND CASH I. 39 dfcu Group 2017 Annual Report and Financial Statements 40 dfcu Group 2017 Annual Report and Financial Statements ii. ii. i. leases. operating as classified are ownership of rewards and risks the of portion asignificant retains lessor the which under assets of leases Similarly leases. finance as classified are ownership to incidental rewards and risks all the substantially assumes lessee the where Leases leases. operating as classified are lessor the by retained are ownership of rewards and risks the of portion asignificant in which Leases LEASES K. accrual. expense an as isrecognised date reporting the at entitlement leave annual accrued employees’ for liability monetary estimated The reliably. measured be can obligation the if and employee the by provided services past of aresult as amount this pay to periodic rate of return. of rate periodic aconstant reflects which tax), income (before method investment net the using lease the of term the over isrecognised income Lease income. finance unearned as isrecognised receivable the of value present the and receivable gross the between difference The a receivable. as recognised is payments lease the of value present the lease, afinance under out leased are assets When lessor as Company Group the With lease. the of term the over expense, lease total the of part integral an as recognised are received incentives Lease lease. the of period the over basis a straight-line on statement income the to charged are leases operating under made Payments leases. operating are Group the by into entered To all leases date, lessee as Company Group the With options granted to employees to granted options dilutive shares ordinary which comprise share all potentially of any effects the for outstanding shares ordinary of number average weighted the and shareholders ordinary to attributable loss or profit the adjusting by isdetermined EPS Diluted period. the during outstanding shares ordinary of number average weighted the by Group the of shareholders ordinary to attributable loss or profit the dividing by iscalculated EPS Basic shares. ordinary its for (EPS) data share per earnings diluted and basic presents Group The P. PER SHARE EARNINGS isestablished. payment receive to right the which in period in the income as recognised are Dividends INCOME O. DIVIDEND declared. until equity of component a separate as shown are dividends Proposed declared. are they in which period in the equity to charged and liability a as recognised are shares ordinary on Dividends N. DIVIDENDS simultaneously. liability the settle and asset the realise or basis, anet on settle to intention isan there and amounts recognised the off set to right enforceable legally isa there when position financial of statement separate and consolidated in the reported amount net the and offset are liabilities and assets Financial OFFSETTING M. Board. Management Executive the as identified been has segments, operating the of performance assessing and resources allocating for isresponsible who CODM, The (CODM). decision-maker operating chief the to provided reporting internal the with consistent in amanner reported are segments Operating REPORTING SEGMENT L. taking. position or profit short-term for together managed is that aportfolio of part as holds or term, near in the repurchasing or selling of purpose the for principally incurs or acquires Group the that liabilities and assets those are liabilities’ and Trading assets LIABILITIES AND ASSETS TRADING S. loss. or profit to ischarged loss expected Any directors. the by issue for approved are statements financial separate and consolidated the date the to up available information the on based management by ismade liabilities contingent of effect financial and outcome the of Estimates liabilities. contingent as disclosed and transactions position financial of statement consolidated off as for accounted are bonds performance and guarantees acceptances, credit, of Letters LIABILITIES CONTINGENT R. liabilities. other within included are commitments loan and guarantees Financial probable. become has guarantee the under apayment when liability the settle to payment expected any of value present the and amount amortised this of higher the at carried subsequently is liability The commitment. or guarantee financial the of life the over isamortised value fair initial the and value, fair their at recognised initially are rate interest market below at aloan provide to commitments loan or liabilities guarantee Financial conditions. and terms pre-specified under credit provide to commitments firm are commitments Loan facilities. other and overdrafts loans, secure to customers of behalf on bodies other and institutions financial banks, to given are guarantees financial Such instrument. adebt of terms the with in accordance due when payment make to fails debtor aspecified because incurs it aloss for holder the reimburse to payments specified make to Group the require that contracts are guarantees Financial COMMITMENTS LOAN AND GUARANTEES Q. FINANCIAL costs to sell. ‘Value in use’ is based on the estimated estimated the on isbased in use’ ‘Value sell. to costs less value fair its and in use value its of greater the is CGU or asset an of amount’ ‘recoverable The combination. the of synergies the from benefit to expected are that CGUs of groups or CGUs to allocated is combination abusiness from arising Goodwill CGUs. or assets other of inflows cash the of independent islargely that use continuing from inflows cash generates that assets of group smallest the into together grouped are assets testing, For impairment isestimated. amount recoverable asset’s the then exists, indication such If any impairment. of indication isany there whether determine to assets) tax deferred than (other assets non-financial its of amounts carrying the reviews Group the date, reporting At each ASSETS T. IMPAIRMENT NON-FINANCIAL OF • • met. are conditions following the and term near in the repurchased or sold being of purpose the for held longer no are they if –category – i.e. trading loss or profit through value fair the of out reclassified be may recognition, initial on loss or profit through value fair at designated those than other assets, trading non-derivative that except recognition, initial their to subsequent reclassified not are liabilities and Trading assets loss. or in profit income trading net of part as recognised are value in fair changes All loss. or in profit recognised costs transaction with position, financial of statement consolidated in the value fair at measured subsequently and recognised initially are liabilities and Trading assets circumstances. in rare only category trading the of out reclassified be may it then receivables, and loans of definition the met have not would asset financial If the maturity. until or future foreseeable the for asset financial the hold to ability and intention the has Group the if reclassified be may it then recognition), for-trading initial at held- as classified be to required been not had asset financial the (if receivables and loans of definition the met have would asset financial If the 41 dfcu Group 2017 Annual Report and Financial Statements 42 dfcu Group 2017 Annual Report and Financial Statements liabilities on the statement of financial position. financial of statement the on liabilities as presented are funds these on balances unutilized The Uganda. of Government the by directed as them disbursing and utilizing funds, these holds Group The organisations. lending international various with agreements borrowing of terms the under created liabilities represent funds Special V. FUNDS SPECIAL in Capital. deficit future any meeting of purpose the for directors the by aside isset reserve non-distributable The reserves. non-distributable to earnings retained from appropriated then and loss or in profit recognised are amounts Group, the by received grants certain of conditions and terms the with In accordance RESERVES U. OTHER recognised. been had loss impairment no if amortisation, or depreciation of net determined, been have would that amount carrying the exceed not does amount carrying asset’s the that extent the to only reversed is loss impairment an assets, For other reversed. isnot goodwill of in respect loss impairment An basis. rata apro on CGU in the assets other the of amounts carrying the reduce to then and CGU, the to allocated goodwill any of amount carrying the reduce to first allocated are They loss. or in profit recognised are losses Impairment allocated. are assets corporate the which to CGUs the of testing the of part as impairment for tested and basis consistent and a reasonable on CGUs to allocated are assets Corporate CGU. one than more by used are and inflows cash separate generate not do assets Group’s corporate The amount. recoverable its exceeds CGU or asset an of amount carrying the if isrecognised loss impairment An CGU. or asset the to specific risks the and money of value time the of assessments market current reflects that rate discount apre-tax using value present their to discounted flows, cash future iii. iii. ii. i. cost. afinance as isrecognised discount the of unwinding liability. The the to specific risks the appropriate, where and, money of value time the of assessments market current reflects that rate apre-tax at flows cash future expected the discounting by determined are Provisions obligation. the settle to required be will benefits economic of outflow an that probable is it reliably, and estimated be can that obligation constructive or legal apresent has Group the event, apast of if, a result as isrecognised A provision PROVISIONS X. assets. managed respective the of value carrying the of net position financial of statement in the ispresented funds such to related liability The funds. lent the to related risk credit the bear not does Group The fund. managed each of conditions and terms the with in accordance parties third specific to on-lending for Uganda of Government the from received amounts represent funds Managed FUNDS W. MANAGED reaching a minimum activity, then a provision is aprovision then activity, aminimum reaching is event obligating the that so threshold activity aminimum to issubject obligation Ifalevy met. is levy the of payment the triggers that condition the when isrecognised levies bank for A provision levies Bank that contract. with associated assets the on loss impairment any recognises Group the isestablished, provision a Before contract. the with continuing of cost net expected the and contract the terminating of cost expected the of lower the of value present the at ismeasured provision The contract. the under obligations its meeting of cost unavoidable the than lower are a contract from Group the by derived be to benefits expected the when isrecognised contracts onerous for A provision contracts Onerous for. provided not are losses Future operating publicly. announced been has or commenced has either restructuring the and plan, restructuring formal and adetailed approved has Group the when isrecognised restructuring for A provision Restructuring recognised in profit or loss. or in profit recognised are consideration contingent the of value fair the in changes subsequent and date reporting each at value fair at isremeasured consideration contingent other Otherwise, equity. within for accounted is settlement and remeasured isnot it then equity, as isclassified instrument afinancial of definition the meets that consideration contingent pay to obligation If an acquisition. of date the at value fair at ismeasured consideration contingent Any loss. or in profit recognised relationships. Such are amounts generally pre-existing of settlement the to related amounts include not does transferred consideration The securities. equity or debt of issue the to related if except incurred, as expensed are costs Transaction immediately. loss or in profit recognised is purchase abargain on gain Any impairment. for annually tested and isrecognised arises that goodwill Any acquired. assets net identifiable the are as value, fair at measured isgenerally acquisition in the transferred consideration The Group. the to istransferred control when method acquisition the using combinations business for accounts Group The Business combinationAA. year. current the in in presentation changes to conform to adjusted been have figures comparative the necessary Where COMPARATIVES Z. due. amount gross the of part as lease finance the onto interest the add to or accrued interest the for cash pay to option the has lessee the delivered, is equipment the Once income. as recognised and payments these on isaccrued borrower. Interest asset(s) the to leased the of delivery to prior agreements lease finance under made are that payments represent disbursements lease Contract DISBURSEMENTS Y. LEASE CONTRACT is reached. threshold activity minimum that when recognised ii. ii. i. available-for-sale. or loss, or profit through value fair maturity, to held either as classification their on depending for accounted subsequently and costs, transaction direct incremental loss, or profit through value fair at not securities investment of case in the plus, value fair at measured initially are securities Investment securities Investment BB. • • • immediately in profit or loss. or in profit immediately recognised changes value fair with value, fair at securities investment some designates Group The trading for Held areclassification: trigger not would circumstances following the of in any reclassifications and sales However, years. financial two following the and current the for held-to-maturity as securities investment classifying from Group the prevent would and available-for-sale, as investments all of held-to-maturity reclassification in the result would investments held-to-maturity of amount insignificant than amore of reclassification or Asale losses. impairment any less method, interest effective the using cost amortised at carried are investments Held-to-maturity available-for-sale. as or loss or profit through value fair at as designated not are which and maturity, to hold to ability and intent positive the has Group the that maturity fixed and payments determinable or fixed with assets Held-to-maturity investments’ are non-derivative Held-to-maturity reasonably anticipated. reasonably been have not could that Group’s control the beyond events isolated non-recurring to attributable are that reclassifications or sales and principal; original asset’s all the of substantially collected has Group the after reclassifications or sales value; fair asset’s financial the on effect asignificant have not would interest of rate market in the changes that maturity to close so are that reclassifications or sales 43 dfcu Group 2017 Annual Report and Financial Statements 44 dfcu Group 2017 Annual Report and Financial Statements depreciation. accumulated less cost at ismeasured property Investment • • than for: rather both, or appreciation capital for or rentals lease) earn to afinance under lessee the by or owner the (by both) or held abuilding of part or building a or (land aproperty as property, Investment 40, IAS under isdefined property investment An property. investment as for isaccounted and yields rental term long for held is portion remaining The statements. financial separate and consolidated in the equipment and plant property, as isclassified and Limited, Bank dfcu subsidiary, Company’s the by isoccupied Kyadondo Plot 26 at property the of A portion property. investment as isclassified Group the by occupied not and yields rental term long for held Property CC. Investment property sale in the ordinary course of business. of course ordinary in the sale or for administrativeservices or purposes; or goods of supply or production in the use 5. Financial risk management risk Financial 5. financial assets and financial liabilities are included in the table below table in the included are liabilities financial and assets financial of class each for amounts carrying The cost. amortised at measured are liabilities all financial and receivables, other and advances loans, or held-to-maturity held-for-trading, as classified are assets Group’s financial The Financial assets Financial Government and other securities other and Government Held-to-maturity: securities Government Held-for-trading: Special Funds Special Balances with Bank of Uganda of Bank with Balances Equity investments at fair value through profit and loss and profit through value fair at investments Equity allowance) (net impairment of customers to advances and Loans assets: receivables/financial other and advances and Loans banks other from due balances and Deposits Other financial liabilities financial Other funds Borrowed Balances due to other banks other to due Balances Customer deposits Measured at cost: amortised Financial liabilities Cash in hand Cash assets financial Other 1,723,498 1,334,611 2,519,173 1,987,118 229,447 481,738 453,766 214,722 2,00 227,60 897,935 147,541 217,826 Ushs M Ushs 48,354 13,746 1,708 2017 255 1,493,004 1,134,731 834,827 386,969 622,267 326,819 102,214 139,471 925,171 Ushs M Ushs 95,827 80,738 18,241 11,505 9,606 1,708 2016 - 45 dfcu Group 2017 Annual Report and Financial Statements 46 dfcu Group 2017 Annual Report and Financial Statements amounts required to liquidate market positions. positions. market liquidate to required amounts cash net in the variability the controlling thereby positions, counterbalancing into entering by hedged economically normally are derivatives associated and exposures rate interest and exchange Foreign similar income. and interest under loss or in profit recognised are instruments financial in trading from arising losses or gains value fair The positions. market intra-day and overnight both to in relation taken be can that exposure of level the on limits trading places Board The instruments. in financial trades also Group The bonds. other and performance and credit, of letters as such commitments other and guarantees into enters also Group the advances; and loans position financial of statement on-consolidated just not involve exposures Such standings. credit of arange with borrowers retail and commercial to lending through allowances, of net margins, above-average obtaining by margins interest its raise to seeks also Group The due. fall might that all claims meet to liquidity sufficient maintaining while rates, higher at periods longer for lending and funds term short- consolidating by margins these increase to seeks Group The assets. in high-quality funds these investing by margins interest above-average earn to seeks and periods, various for and rates, floating and fixed both at customers from deposits accepts Group The instruments. financial of use the to related principally are Group’s activities the nature, their By 5A STRATEGY INSTRUMENTS IN USING FINANCIAL specific terms and conditions, are collateralised collateralised are conditions, and terms specific under amount astipulated to up Group the on drafts draw to party athird authorising a customer of behalf on Group the by undertakings written are which credit, of letters commercial and Documentary borrowing. direct for than isless commitments such from arising risk credit the hence and commitments the of most for cover cash hold isto Group’s policy The parties. third to obligations its meet cannot acustomer that event in the payments will make Group the that assurances irrevocable represent credit of letters standby and Guarantees required. as acustomer to available are funds that ensure isto instruments these of purpose primary The commitments: related Credit obtained. be can facilities such no where lending ispersonal aportion but guarantees, personal and corporate and collateral obtaining by in part managed isalso risk credit to Exposure appropriate. where limits lending changing by and obligations repayment capital and interest meet to borrowers potential and borrowers of ability the of analysis regular through ismanaged risk credit to Exposure review.or more frequent annual to subject and basis a revolving on monitored are risks Such segments. industry to and borrowers, of groups borrower, or one to in relation accepted risk of amount the on limits placing by undertakes it risk credit of levels the structures Group The the Board. and management to regularly reports which team, management risk credit in the iscentralised control and management risk Credit commitments. loan as such instruments, financial position financial of statement in off-consolidated risk credit isalso There activities. investment and in lending principally arise exposures Credit risk. credit to exposure the manages carefully management Therefore business. Group’s the for risk important most isthe risk Credit date. reporting the at incurred been have that losses for provided are allowances Impairment due. when in full amounts pay to failing by Group the to loss afinancial will cause party acounter that risk the is which risk, credit to exposure on takes Group The RISK CREDIT 5B Equity investments at fair value through profit and loss (note loss 23) and profit through value fair at investments Equity - Acceptances and letters of credit of letters and -Acceptances (note items 38) position financial of statement off-consolidated on exposures risk Credit (note 24) assets Other (note 22) securities other and Government (note 21) customers to advances and Loans Loans and advances to banks (note 20) banks to advances and Loans (note 19) Uganda of Bank with Balances Maximum exposure to credit risk before collateral held collateral risk before credit to exposure Maximum commitments. shorter-term than risk credit of degree agreater have generally commitments longer-term because commitments credit of maturity to term the monitors Group The standards. credit specific maintaining customers upon contingent are credit extend to commitments most as commitments, unused total the than isless loss of However, likely amount the commitments. unused total the to equal amount in an loss to exposed ispotentially Group the credit, extend to commitments on risk credit to respect With rates. market at commitments such makes Group The credit. of letters or guarantees loans, of form in the credit extend to authorisations of portions unused represent credit extend to Commitments borrowing. direct for than risk less carry therefore and relate they which to goods of shipments underlying the by • • • • following: the on based securities debt and portfolio advances and loan its both from resulting Group the to risk credit of exposure minimal sustain and control to continue to ability in its is confident Management guarantees. corporate or machinery and plant /or and buildings and land over charges of form in the collateral by secured million are 30 Ushs than more borrowing individuals to and borrowers corporate major to advances and Loans (2016: securities 29%). in government investments (2016:customers represents 23% 58%), whilst and banks to advances and loans from isderived exposure maximum total the of 54% above, shown As position. financial of statement consolidated in the reported as amounts carrying on based are above out set exposures the assets, position financial of statement For on-consolidated attached. enhancements credit other or held collateral 2016, account and taking without 2017 31 at as December exposure risk Group’s credit the of scenario case worst the represents above The lend to -Commitments - Guarantee and performance bonds bond. 1% corporate only and quality in ahigh securities government are securities in debt investments of 99% and collateral; by backed are portfolio advances and loans the of 96% impaired; nor due past neither are portfolio advances and loans the of 85% loans; new of granting the over controls stringent exercises Group The 2,889,730 1,334,611 229,447 671,592 162,973 214,722 2,00 227,60 Ushs M Ushs 34,321 13,746 2017 718 1,688,429 834,827 489,183 139,471 Ushs M Ushs 95,827 92,081 7434 3 27,4 9,606 2016 - - 47 dfcu Group 2017 Annual Report and Financial Statements 48 dfcu Group 2017 Annual Report and Financial Statements Past due 61 due days Past –90 31 due days Past –60 days 30 to up due Past Standard impaired not but due Past impaired nor due past Neither as follows: summarised are advances and Loans impaired were as follows: follows: as were impaired not but due past were that advances and loans of amounts gross The contrary. the indicate to available is information other unless impaired, considered not are due past days 90 than less advances and Loans impaired not but due past advances and Loans Group: the by adopted system rating internal the to reference by analysed be can impaired nor due past neither were that advances and loans of quality credit The impaired nor due past neither advances and Loans impaired. or due past either are assets other No Net amount carrying (note 21) impairment for Allowance Less: Gross Impaired 1,258,250 1,258,250 1,334,611 1,402,761 (68,150) Ushs M Ushs Ushs M Ushs M Ushs 12,224 23,554 12,057 96,676 47,835 47,835 2017 2017 2017 (28,652) 834,827 733,269 733,269 863,479 Ushs M Ushs Ushs M Ushs M Ushs 35,406 58,956 71,254 71,254 19,934 15,914 2016 2016 2016 borrowers exceeding 25% of the core capital of the Group. the of capital core 25% the of exceeding borrowers related of group or borrower 2017 asingle to 31 at 2016,As exposures December and no had Group the Fair value of collateral of Fair value Economic sector credit risk concentrations within the customer loans and advances portfolio were as follows: as were portfolio advances and loans customer the within concentrations risk credit sector Economic ofConcentration credit risk Loans and advances Loans and Agriculture atAs 31 December 2017 Below is a summary of the impaired loans with the respective value of security; of value respective the with loans impaired the of isasummary Below 41.2bn Ushs to (2016: amounted advances and 101.7bn). Ushs loans those (2016: against 58.4bn held Ushs to collateral amounted Ushs71.3bn) identifiable of value the and customers to advances and loans 2017, impaired of At 31 amount December measurement. carrying net the impairment the to input isan collateral the of value current the because collateral of appraisals obtains Group the loans, For closely. impaired more ismonitored loan the and significantly deteriorates aloan of risk credit the when isupdated collateral of Valuation customers. to all loans against held collateral of valuation the update routinely not does Group the worthiness, credit customers’ on Group’s focus the of Because guarantees. and liens other and automobiles equipment, and machinery estate, real over charge afirst of form in the collateral take may Group The it. provide borrowers that requests generally Group the and security additional provides However, it. to collateral extended loan a of quality credit of indicator relevant most the be to tends acustomer of worthiness credit general The impaired individually advances and Loans Transport and communications communications and Transport Trade commerce and Leisure, hotels and accommodation and hotels Leisure, quarrying and Mining Building and construction and Building Manufacturing Non-bank financial institutions loans Home Private individual Real estate Real Schools Other Loans and and Loans advances Ushs M Ushs 90,248 24,247 100% 2017 20% 12% 10% 13% 13% 8% 2% 4% 4% 5% 7% 1% 1% Loans 2017 Commitments Ushs M Ushs 34,212 57,656 Credit Credit 100% 2016 20% 24% 21% 0% 0% 0% 9% 8% 6% 6% 4% 1% 1% Loans and and Loans advances Ushs M Ushs 6,428 3,412 100% 2017 16% Overdrafts 14% 14% 11% 0% 9% 2% 8% 3% 8% 7% 7% 1% 2016 Commitments Ushs M Ushs Credit Credit 1,300 100% 7,000 2016 26% 18% 13% 27% 0% 0% 0% 0% 0% 2% 2% 8% 4% 49 dfcu Group 2017 Annual Report and Financial Statements 50 dfcu Group 2017 Annual Report and Financial Statements Cumulative Gap /Total Gap Assets Cumulative Gap /(short) Cumulative Long /(short) Gap Long Months /Total Gap Assets Cumulative Gap /(short) Cumulative Long /(short) Gap Long Months Net position as at 31 December 2017 contractual maturity. 2017 2016 31 at on as 31 December and position based December net the summarises below table The limits. risk set acceptable within profitability maximise to liabilities and assets of mix and structure cost, the to as Group the of philosophy business the monitor and stipulate isto ALCO of purpose The Directors. of Board (ALCO) the and Committee Board Liabilities and Group’s Assets the by approved are policies ALM Group’s reputation. the to damage risking or losses unacceptable incurring without policies (ALM) Management Liabilities and Group’s Assets the with in line conditions stressed and normal both under due fall they when obligations other and liabilities its meet to liquidity sufficient be will always there that ensure isto liquidity managing to Group’s objective The demand. of levels unexpected at withdrawals cover to in place be should that facilities borrowing other inter-bank of and level minimum the on and calls such meet to available funds maturing of proportion minimum the on limits sets Board The certainty. of level ahigh with predicted be can funds maturing of reinvestment of level aminimum that shows experience as needs all these of meet to resources cash maintain not does Group The contingencies. settled cash on calls and deposits, maturing accounts, current deposits, overnight from resources cash available its on calls daily to isexposed Group The withdrawn. are they when funds replace to and due fall they as liabilities financial its with associated obligations payment meet to isunable Group the that risk isthe risk Liquidity RISK LIQUIDITY 5C Net position as at 31 December 2016 (342,674) (342,674) (470,171) (470,171) Up to 1 to Up 1 to Up month month (15%) (11%) (121,380) (591,551) (412,641) (69,968) months months (19%) (13%) 1-3 1-3 (385,190) (292,427) 206,361 120,215 months months (13%) (10%) 3-12 3-12 333,504 125,535 510,725 41,077 years years years 4% 1% >1 >1 Special funds Special funds Borrowed banks other to due Balances liabilities Other Customer deposits Liabilities 2016 of netting agreements. agreements. netting of impact the exclude and payments interest contractual include and undiscounted, and gross are amounts The date. reporting the at liabilities financial maturities contractual remaining the are following The Special funds Special funds Borrowed banks other to due Balances liabilities Other Customer deposits Liabilities 2017 Total liabilities Total Total liabilities Total 1,493,192 2,523,672 1,987,118 1,134,731 Carrying Carrying 481,738 326,819 Amount Amount 52,853 18,429 11,505 1,708 1,708 255
(1,599,451) (2,031,464) (2,660,532) (52,853) (1,708) (255) (574,252) (1,153,140) (414,582) (18,429) (11,592) (1,708) Ushs M Ushs Ushs M Ushs Total Total
Contractual Cash flows Cash Contractual Contractual Cash flows (1,291,080) (1,708) (42,932) (255) (1,337,983) (2,008) (822,509) (768,647) (30,748) (11,592) (1,708) (9,814) Ushs M Ushs Ushs M Ushs Up to 1 to Up Up to 1 to Up month month month
(302,683) (2,292) (288,578) (183,163) (11,813) (173,567) (4,325) months months Ushs M Ushs Ushs M Ushs (5,271) 1-3 1 1-3 1 - - - -
(291,067) (103,628) (2,478) (421,767) (527,873) (191,835) 3 – 12 1 3 –12 3 – 12 1 3 –12 (97,571) (1,661) months months Ushs M Ushs Ushs M Ushs - - - -
(456,803) (302,712) (280,992) (491,993) (5,151) (30,039) (19,091) (2,629) Ushs M Ushs Ushs M Ushs 1 year 1 year 1 year 1 year Over Over Over Over - - - -
51 dfcu Group 2017 Annual Report and Financial Statements 52 dfcu Group 2017 Annual Report and Financial Statements As atAs 31 December 2017 Shillings. Uganda in of millions are 31 at figures All as December. amount carrying the on based groupings maturity relevant into liabilities and assets analyses below table The Bank of Uganda of Bank with balances and Cash Assets banks other to advances and Loans Equity investments Equity customers to advances and Loans assets Other securities other and Government Deferred income tax asset tax income Deferred Property and equipment and Property Investment Property Investment Other liabilities Other Intangible assets Balances due to other banks other to due Balances Customer deposits Liabilities Overall liquidity position position financial of statement off-consolidated Net Total assets Total Current income tax payable tax income Current funds Special funds Borrowed Net liquidity gap Net Total liabilities Total 1,326,928 1,281,644 (409,415) (470,171) 248,850 (60,756) 362,263 229,447 1 month 917,513 Ushs M Ushs 42,932 19,032 44,175 13,746 1,708 Up to to Up 389 255
- - - - - (121,380) (94,684) (26,696) 284,390 295,257 200,573 119,913 months Ushs M Ushs 63,051 17,609 2,292 8,575 1-3
------(46,263) 486,597 206,361 252,624 395,556 739,221 183,024 476,436 months months Ushs M Ushs 88,563 79,761 3 – 12 3 –12 2,478
------(64,297) 414,890 989,912 381,342 575,022 384,211 489,412 510,725 119,158 Ushs M Ushs 25,528 1 year 1 5,151 Over Over
------Ushs M Ushs -liquid 3,985 3,985 3,985 3,985 items Non Non
------financial financial 204,806 204,806 206,272 142,642 Ushs M Ushs 50,375 11,144 1,466 1,466 items 2,111 Non------2,525,138 1,334,611 3,057,476 , 87,118 1,9 (198,012) 334,326 532,338 362,263 239,545 229,447 142,642 481,738 671,592 Ushs M Ushs 52,853 50,375 13,746 11,144 1,466 1,708 2,111 Total 255
of Uganda of Bank with balances and Cash Assets As atAs 31 December 2016 banks other to advances and Loans securities securities other and Government Other assets Other Deferred income tax asset tax income Deferred customers to advances and Loans Property and equipment and Property Intangible assets Property Investment Total assets Total Customer deposits Liabilities Other liabilities Other Balances due to other banks other to due Balances Current income tax payable tax income Current funds Special funds Borrowed Total liabilities Total Overall liquidity position position financial of statement off-consolidated Net liquidity gap Net (308,024) (342,674) 506,848 (34,650) 814,872 1 month 1 month 764,180 176,565 111,600 139,471 Ushs M Ushs 73,364 29,373 11,505 5,848 9,814 Up to to Up
------(44,637) (69,968) 178,408 133,771 (25,331) 171,561 months Ushs M Ushs 01-Mar 81,242 51,276 4,325 2,522 1,253
------446,422 120,215 269,125 182,248 5, 82) (57,0 177,297 251,493 191,210 months Ushs M Ushs 85,216 3 – 12 3 –12 1,661 3,719
------333,504 335,956 230,787 566,743 209,708 450,775 113,050 Ushs M Ushs (2,452) 16,742 1 year 1 year 2,629 1,708 1,708 2,918 Over
------Ushs M Ushs -liquid 1,074 1,074 1,074 items 1,074 Non Non
------financial financial Ushs M Ushs 90,782 90,782 87,986 87,986 11,560 67,069 8,863 3,290 2,796 2,796 items Non------1,495,988 1,745,640 1,134,731 (119,515) 834,827 130,137 249,652 489,183 326,819 176,565 139,471 Ushs M Ushs 18,429 11,560 11,505 14,812 67,069 8,863 3,290 2,796 1,708 Total
53 dfcu Group 2017 Annual Report and Financial Statements 54 dfcu Group 2017 Annual Report and Financial Statements Shillings. Uganda in of millions are figures All currency. by categorized liabilities and Group’s assets the are table in the 2017. 31 at as risk December currency foreign to Included Group’s exposure the summarises below table The Group’s results the on impact amaterial have not EURO would and GBP for rates exchange foreign in the Movements end. year at existing exposures currency foreign to reference by measured is (2016: 20% by in profitability change to variation rate This 20%). exchange foreign million) US$ Ushs: the were million (2016: 4,986 Ushs by increase 43 Ushs decrease/ would equity tax/ income before Group’s profit The (2016: 25,691 31,619Ushs million Ushs million). of 2017, position 31 at exchange As December Group. foreign the of anet had position Group the exchange foreign net the basis amonthly on Group’s reviews ALCO The oversight. management senior with treasury by daily monitored are which limits, loss stop and limits party counter positions, intra-day and overnight both for in total and currency by exposure of level the on limits sets Board The flows. cash and position financial its on rates exchange currency foreign prevailing in the fluctuations of effects the to exposure on takes Group The i). Foreign currency risk of policies. implementation those day to day the for ALCO) by and approval and review to (subject policies management risk detailed the for isresponsible Department Treasury ALCO. The the with rests risks market managing for responsibility Overall risk. on return the optimizing while limits, acceptable within exposures risk market control and manage to is management risk market of objective volatility. The of level in the changes and movements market specific and general to exposed are which of both currencies, foreign and rates in interest positions open from arises risk Market instrument. afinancial of flows cash future or value fair the will affect prices equity and rates interest rates, exchange currency include which prices, in market changes that risk isthe risk Market RISK MARKET 5D Government and other securities other and Government Uganda of Bank with balances and Cash Assets atAs 31 December 2017 Deferred income tax asset tax income Deferred Equity investments Equity banks other to advances and Loans Loans and advances to customers to advances and Loans Property and equipment and Property Balance due to other banks other to due Balance financial position items position financial of statement off-consolidated Net payable tax income Current funds Special funds Borrowed Other assets Other Investment Property Investment Customer deposits Liabilities financial position items of statement consolidated on- Net liabilities Other Overall open position liabilities Total Intangible assets Total assets Total 862,433 (25,691) 275,388 564,027 204,021 (50,621) 629,525 87,363 8 Ushs M Ushs 53,288 24,930 23,018 USD USD 529 ------Ushs M Ushs 4,215 2,556 2,556 4,033 1,239 6,771 5,525 GBP GBP 182 6 1 ------Ushs M Ushs 12,809 13,166 10,456 11,140 EURO EURO 2,344 2,026 (357) (357) 9 ------1,944,261 1,643,858 , 07,918 1,4 (147,391) 300,403 206,350 292,994 153,012 705,071 671,592 239,015 Ushs M Ushs 21,843 13,746 27,627 USHS USHS 1,708 255 - - - - - 204,806 204,806 financial financial 206,272 142,642 50,375 11,144 1,466 1,466 items 2,111 Non------2,525,138 1,334,611 3,057,476 , 87,118 1,9 (198,012) 334,326 532,338 362,263 239,545 229,447 142,642 481,738 671,592 TOTAL 52,853 50,375 13,746 11,144 1,466 1,708 2,111 255 55 dfcu Group 2017 Annual Report and Financial Statements 56 dfcu Group 2017 Annual Report and Financial Statements As atAs 31 December 2016 Deferred income tax asset tax income Deferred customers to advances and Loans Uganda of Bank with balances and Cash Assets of financial position items statement on-consolidated Net liabilities Total payable tax income Current funds Special Borrowed funds funds Borrowed Intangible assets Property Investment equipment and Property Other assets Other securities other and Government banks banks other to advances and Loans Overall open position items position financial of statement off-consolidated Net Other liabilities Other banks other to due Balance assets Total Customer deposits Liabilities 340,688 (31,619) (31,405) 246,463 594,913 595,127 411,387 125,010 Ushs M Ushs 7 8 4 8 57, 7,976 (214) USD 668 ------Ushs M Ushs 3,099 2,000 3,092 3,102 1,098 GBP GBP 4 3 7 3 ------Ushs M Ushs 14,020 13,778 10,624 11,146 EURO 2,872 3,154 242 242 2 ------1,042,823 881,188 423,434 780,327 161,635 489,183 (88,110) 113,845 Ushs M Ushs 80,356 73,525 11,505 14,144 USHS 1,708 ,292 7, 2,217 - - - - - financial financial 90,782 87,986 87,986 11,560 67,069 8,863 3,290 2,796 2,796 items Non------1,495,988 1,745,640 1,134,731 (119,515) 834,827 130,137 249,652 489,183 326,819 176,565 139,471 Ushs M Ushs TOTAL 18,429 11,560 11,505 14,812 67,069 8,863 3,290 2,796 1,708 Fair value interest rate risk rate interest Fair value Cash flow interest rate risk rate interest flow Cash an impact on the profit before income tax of the Group as follows: as Group the of tax income before profit the on impact an (2016: year-end at ruling rates the have 3%). would from 3% This of decrease rate interest amarket assuming 2017 31 at risks December rate interest flow cash and value Group’s fair the summarises below table The companies. group other to due amounts and deposits customer receivable/payable, advances and loans banks, other from due balances and deposits comprise risk rate interest flow cash with instruments Financial securities. Government of for-trading portfolio held- the solely comprise risk rate interest value fair with instruments Financial cost. amortised at measured instruments financial rate variable its on risk rate interest flow cash faces Group the In addition, value. fair at measured are that assets financial interest fixed its on risk rate interest value fair faces Group The monthly. ismonitored which undertaken, be may that re-pricing rate interest of mismatch of level the on limits sets Directors of Board The arise. movements unexpected that event in the losses create or reduce may but changes such of aresult as increase may margins Interest risks. flow cash and value fair its both on rates interest market of levels prevailing in the fluctuations of effects the to exposure on takes Group The risk rate Interest ii) Ushs M Ushs 55,772 57,497 1,725 2017 Ushs M Ushs 19,398 18,816 2016 582 57 dfcu Group 2017 Annual Report and Financial Statements 58 dfcu Group 2017 Annual Report and Financial Statements Interest bearing assets bearing Interest atAs 31 December 2017 Shillings. Uganda in of millions are figures All credit. of letters and guarantees lend, to like commitments items position financial of statement off-consolidated on risk rate interest any bear not does Group The dates. maturity or re-pricing contractual of earlier the by categorised amounts carrying at liabilities and assets bearing Group’s interest isthe 2016. table in the Included December 2017 31 at as risk 31 December and rate interest to Group’s exposure the summarise below tables The Bank of Uganda of Bank with balances and Cash other banks other to advances and Loans customers to advances and Loans securities other and Government Equity investments Equity asset tax income Deferred Property and equipment and Property banks other to due Balances Investment Property Investment Borrowed funds funds Borrowed Customer deposits liabilities bearing Interest Other liabilities Other Intangible assets Interest re-pricing gap re-pricing Interest assets bearing Total interest liabilities bearing Total interest payable tax income Current assets Other Special funds Special (145,955) 462,292 248,850 608,247 1 month 169,267 607,603 Ushs M Ushs 44,175 Up to Up 389 255 ------(110,001) 182,964 284,390 292,965 119,913 months Ushs M Ushs 63,051 8,575 1 –3 ------484,899 476,436 395,556 183,024 293,412 months (8,463) Ushs M Ushs 89,343 3 –12 ------1,121,928 236,853 262,381 740,586 859,547 381,342 Ushs M Ushs 25,528 1 year 1 Over Over ------(267,596) (68,150) 362,263 875,180 239,545 0,84 607,58 146,578 674,041 interest interest bearing Ushs M Ushs 52,853 60,180 13,746 1,708 Non- Non------financial financial 204,806 206,272 142,642 Ushs M Ushs 50,375 11,144 1,466 1,466 items 2,111 Non------2,525,138 1,334,611 3,057,476 , 87,118 1,9 532,338 362,263 239,545 229,447 142,642 481,738 671,592 Ushs M Ushs 52,853 50,375 13,746 11,144 1,466 1,708 2,111 Total 255 Deferred income tax asset tax income Deferred other banks other to advances and Loans Property and equipment and Property customers to advances and Loans Investment Property Investment Bank of Uganda of Bank with balances and Cash assets bearing Interest As atAs 31 December 2016 Intangible assets securities other and Government Other assets Other Other liabilities Other Customer deposits liabilities bearing Interest assets bearing Total interest payable tax income Current banks other to due Balances Borrowed funds funds Borrowed Special funds Special liabilities bearing Total interest Interest re-pricing gap re-pricing Interest (120,933) 398,406 385,372 1 month 277,473 111,600 Ushs M Ushs 73,364 92,509 11,505 1,529 Up to Up ------(41,790) 132,518 174,308 172,306 months Ushs M Ushs 81,242 51,276 2,002 1 –3 ------443,277 264,059 182,248 179,218 251,493 191,784 months Ushs M Ushs 81,811 3 –12 ------360,903 231,000 591,903 478,853 214,258 113,050 Ushs M Ushs 16,742 1 year 1 Over ------(215,732) (28,652) 209,687 425,419 378,063 176,565 interest interest bearing Ushs M Ushs 46,962 18,429 14,812 7 219 27, 1,708 Non- Non------87,986 87,986 financial financial Ushs M Ushs 90,782 11,560 67,069 8,863 3,290 2,796 2,796 items Non------1,495,988 1,745,640 249,652 249,652 1,134,731 834,827 489,183 326,819 176,565 139,471 Ushs M Ushs 18,429 11,560 11,505 14,812 67,069 8,863 3,290 2,796 1,708 Total 59 dfcu Group 2017 Annual Report and Financial Statements 60 dfcu Group 2017 Annual Report and Financial Statements Treasury bills and bonds held-for-trading held-for-trading bonds bills and Treasury loss and profit through value fair at investments Equity held-for-trading bonds bills and Treasury 2016 2017 position. financial of statement in the recognised values the on based are amounts The iscategorised. measurement value fair the which into hierarchy value fair in the level the by date, reporting the at value fair at measured instruments financial the are following The value fair at measured instruments Financial i). • • • technique: valuation by instruments financial of value fair the disclosing and determining for hierarchy following the uses Group The data. market observable from derived are bonds treasury of valuation the for used rates discounting The flows. cash future expected discounting from derived are values fair bonds treasury held-for-trading and prices market quoted from derived are values bills fair treasury Held-for-trading value. fair at measured are and held-for-trading are that bonds 2017, treasury bills 31 at and As December treasury had Group the LIABILITIES AND 5E FAIR ASSETS VALUES FINANCIAL OF based on observable market data. market observable on based not are that value fair recorded the on effect asignificant have which inputs use which 3: techniques Level institutions. similar financial with comparison and Reuters website, Uganda of Group the are risk credit counterparty or curve bills yield treasury like government parameters input of sources The market. the from indirectly or directly either observable, are value fair recorded the on effect asignificant have which all inputs which for techniques 2: other Level liabilities; or assets identical for markets in active prices 1: (unadjusted) Level quoted - M Ushs Level 1 Level Ushs M Ushs 12,608 Level 1 Level - 102,214 M Ushs Level 2 Level Hierarchy Hierarchy 217,826 Ushs M Ushs Level 2 Level - - M Ushs Level 3 Level Ushs M Ushs Level 3 Level 1,138 - 102,214 M Ushs 217,826 Ushs M Ushs 13,746 Total Total 2016 2017 Special funds Special Cash and balances with Bank of Uganda of Bank with balances and Cash Cash and balances with Bank of Uganda of Bank with balances and Cash Loans and advances to other banks other to advances and Loans funds Borrowed liabilities Other Customer deposits iscategorised measurement value fair each which into hierarchy value fair in the level the by them analyses and value fair at measured not liabilities and assets financial of values fair the out sets below tables The value fair at measured not instruments Financial ii). Other assets Other banks other to advances and Loans Balances due to other banks other to due Balances Loans and advances to customers to advances and Loans to maturity held at securities other and Government customers to advances and Loans to maturity held at securities other and Government Other assets Other Balances due to other banks other to due Balances Customer deposits Other liabilities Other Special funds Special funds Borrowed maturity dates. or re-pricing contractual to periods short generally the to due amounts, carrying respective the approximate cost amortised at measured are that liabilities and assets financial Group’s other the of values fair The Ushs M Ushs Ushs M Ushs Level 1 Level Level 1 Level ------(1,987,118) (1,134,731) (481,738) (326,819) 362,263 440,951 229,447 (11,505) 176,565 139,471 9,810 297, Ushs M Ushs (1,708) Ushs M Ushs Level 2 Level Level 2 Level (1,708) (255) - - - - - 1,334,611 (52,853) 239,545 834,827 (18,429) Ushs M Ushs Ushs M Ushs Level 3 Level Level 3 Level 14,812 ------(1,987,118) (1,134,731) 1,334,611 (481,738) Fair value Fair Fair value Fair (326,819) (52,853) 362,263 440,951 239,545 229,447 834,827 (18,429) (11,505) 176,565 139,471 9,810 297, Ushs M Ushs (1,708) Ushs M Ushs (1,708) 14,812 (255) (1,987,118) (1,134,731) 1,334,611 (481,738) (326,819) (52,853) Carrying 362,263 239,545 229,447 Carrying 453,766 834,827 (18,429) 386,969 (11,505) 176,565 139,471 amount Ushs M Ushs (1,708) amount Ushs M Ushs (1,708) 14,812 (255) 61 dfcu Group 2017 Annual Report and Financial Statements 62 dfcu Group 2017 Annual Report and Financial Statements composition of regulatory capital and the ratios of the Group: the of ratios the and capital regulatory of composition the summarises below table The losses. potential the of nature contingent more the reflect to adjustments some with exposure, position financial of statement off-consolidated for isadopted A similar treatment counterparty. and asset -each with associated risk credit the of estimate an reflecting –and of nature the to according classified weights risk four of ahierarchy of means by measured are assets weighted risk The • • tiers: two into isdivided capital regulatory Group’s total The 3. 2. 1. to: bank 2017, each 31 require of As December regulations Uganda of Bank basis. aquarterly on Uganda of Bank with isfiled adequacy capital on information required (FIA). The 2004 Act, Institutions Financial the under purposes supervisory for Uganda of Bank by implemented and adapted as Committee, Basel the by developed guidelines the on based techniques employing management by regularly monitored are capital regulatory of use and adequacy Capital • • • are: positions, financial of statement consolidated the on ‘equity’ the than concept isabroader which capital, managing when Group’s objectives The 5F CAPITAL MANAGEMENT instruments. Qualifying Tier 2 capital is Limited to 100% of Tier 1capital. Tier of 100% to isLimited 2capital Tier Qualifying instruments. capital hybrid and 1capital Tier of 50% exceeding not debt subordinated assets, 1.25% weighted risk of exceeding not losses for provisions general reserves, revaluation capital): (supplementary 2 capital Tier benefits. tax income future and subsidiaries in unconsolidated investments assets, intangible similar and goodwill less earnings retained plus premium, share capital, share (core capital): 1 capital Tier items. position financial of statement off-consolidated weighted risk plus assets 12% weighted risk than of less not of capital total maintain and items; position financial of statement off-consolidated and assets weighted risk of 8% than less not of capital core maintain 25 Ushs billion (2016:Ushs of losses by unimpaired 25 billion); capital up paid aminimum have business. its of development the support to base capital To astrong maintain and stakeholders; other for benefits and shareholders for returns provide to continue can it that so concern, agoing as continue to Group’s ability the To safeguard Uganda; of Bank by set requirements capital To the with comply compliance with the BOU prudential regulations. prudential BOU the with compliance in 2016 20% by in in discounted 2017 DEG was 20% by from debt the discounted and was CDC from debt The below. issummarised regulations prudential (BOU) Uganda of Bank with in accordance Group the of purposes adequacy capital regulatory for 2capital Tier as recognized debt subordinated the of analysis The Tier 1 capital Tier declaration dividend Before Unrealised fair value gain on securities on gain value fair Unrealised reserves and capital Share following; the of comprises 1 capital Tier 2capital 1 +Tier Tier Subordinated debt CDC Group Plc Group CDC Total risk weighted assets Total risk weighted items position financial of statement Off-consolidated items position financial of statement On-consolidated assets weighted Risk 2capital 1+ Tier Tier 1 capital Tier declaration dividend After Total capital Provisions General 1 capital Tier 1capital Tier asset tax income Deferred Intangible assets Deutsche Investitions-Und Entwicklungsgesellschaft mbH (DEG) Investitions-UndDeutsche Entwicklungsgesellschaft 1,975,505 1,795,372 (50,375) 455,448 455,448 506,502 180,134 434,779 436,211 383,725 383,725 383,725 Ushs M Ushs Ushs M Ushs (2,111) 58,192 13,531 58,192 21,822 36,370 2017 2017
- 1,072,574 292,845 292,845 966,207 305,355 233,069 105,798 219,207 219,207 219,207 231,717 Ushs M Ushs (8,863) (3,290) Ushs M Ushs (1,709) 65,070 28,920 65,070 36,150 8,568 2016 2016
63 dfcu Group 2017 Annual Report and Financial Statements 64 dfcu Group 2017 Annual Report and Financial Statements Rated A- and non-rated and A- Rated and loss and profit through value fair at investments Equity securities other and Government A+ A- to Rated AA- to AAA Rated Uganda; outside banks from Due Total capital capital Core declaration) dividend (before Ratio Basel Total Total facilities Undrawn Entwicklungsgesellschanft mbH (DEG) and CDC Group Plc (CDC). Group (DEG) CDC mbH and Entwicklungsgesellschanft Investitions-Und Deutche from debt subordinated isthe computation capital total in the Included in Uganda banks commercial from Due Uganda of Bank with balances and Cash position financial of statement On-consolidated following: the of comprise assets weighted Risk Property, plant and equipment and plant Property, asset tax income Deferred customers to advances and Loans assets Other Total assets Total Intangible assets Property Investment Total capital capital Core declaration) dividend (after Ratio Basel collateral cash by secured credit of Letters items position financial of statement Off-consolidated Guarantees and acceptances and Guarantees Statement of financial financial of Statement 3,046,363 1,323,498 position/Nominal 142,642 362,263 239,545 198,012 671,592 162,973 169,507 Ushs M Ushs Ushs M Ushs 58,089 11,144 34,321 50,375 13,746 1,851 2,111 2017 2017 Amount 718 - 1,795,372 489,183 831,327 176,565 119,515 Ushs M Ushs 92,509 92,081 46,912 11,560 7434 3 27,4 14,812 67,069 8,863 3,290 2016 50 - - - Weight 100% 100% 100% 100% 100% 100% 100% 2017 2017 50% 50% 20% 20% Risk Risk 0% 0% 0% 0% 0% % % 1,323,498 1,975,505 1,742,140 142,642 180,134 239,545 162,973 19.42% 25.64% 23.05% 22.01% Ushs M Ushs Ushs M Ushs 29,045 11,144 33,901 13,746 17,161 Risk weighted weighted Risk 1,851 2017 2017 2017 amount ------1,072,574 966,776 831,327 105,798 20.44% 21.60% 28.47% 730% 0 27.3 Ushs M Ushs 23,456 18,502 92,081 11,560 14,812 67,069 13,717 2016 2016 50 ------iii. iii. ii. i. included; year. the These during migration data amajor and projects IT related major two underwent Group The strategy. its IT drive to on leverage to in abid efficiency operational increase channels, digital more create to in technology/systems heavily invest to continued has year, Group past the the Over insurance. as such mechanisms transfer risk by supported isfurther strategy this appropriate, Where same. the enhance to continues and management incident and security information planning, controls including fraud prevention, contingency mitigation risk implemented Group the eliminated, entirely be cannot risk operational that Recognizing orsystems from events. external and people processes, internal failed or inadequate from resulting loss of risk isthe risk Operational RISK OPERATIONAL MANAGEMENT 5G • • the operational risks as highlighted below; highlighted as risks operational the address to measures in place put has Group The community. broader the and stakeholders these with relationships impact significantly may expect, customers and regulators that in a way used and safe iskept information this ensure to A failure firewalls. and Group’s systems the of safety the from it remove and data Group’s customers’ the access to seek third-parties of numbers greater and sophisticated more isbecoming cyber-attacks of threat the evolve, to continues technology As (Finacle). system Banking Core its to it integrated T24 Bank’s and Crane from data migrated Group the Limited, Bank Crane former of liabilities the of some assuming and assets of some of 2017,In January Group’s acquisition the following customers: Ltd Bank Crane former of integration and migration Data branch. the visiting without services banking of arange to access corporate) (retail and customers the given has that banking) (Quick platform e-banking isan system This EbankIT: 10) (Finacle version higher a to Finacle of version older an from all data of transfer the involving project amajor was This 10: Finacle to 7 Finacle from System Banking Core the of Upgrade The Group actively engages with regulators regulators with engages actively Group The breaches. data for potential the reduce to and expectations, and needs customer evolving meet better to capabilities security cyber- and analytics in data, significantly invest to continues and has Group The circumstances. the under reasonable be to believed are that events future of expectations including factors, other and experience historical on based are and evaluated continually are judgements and year. Estimates financial next the within liabilities and assets of amounts reported the affect materially could that assumptions and estimates makes Group The estimates. these from differ may ultimately results Actual sources. other from apparent readily not are that liabilities and values carrying the about judgments the making of basis the form which of results the experiences, historical on based are assumptions associated and estimates The period. reported the during expenses and revenues of amounts reported and statements financial separate and consolidated of date the at liabilities and assets contingent of disclosure and liabilities, and assets of amounts reported and policies of application the affect that assumptions and estimates judgements, make to management requires Standards Reporting Financial International with in conformity statements financial separate and consolidated the of preparation The ACCOUNTING POLICIES IN APPLYINGESTIMATES JUDGEMENTS AND ACCOUNTING CRITICAL 6. • • • irregularity and advise adequate response. response. adequate advise and irregularity any detect timely to in order key systems on activity all user monitoring reviews, assurance risk performing by defense of line first the of activities the skills monitor to IT security with officers with boosted was department risk Group’s the defense, of line second the As to. access have they data the to in relation obligations their and security data of importance the understand they ensure to modules training mandatory undergo employees The Group’s data. the of availability and integrity confidentiality, the secure to controls management accesses and identifies and security system in IT invests continuously Group The customers’ and security. privacy protect to Group’s duty the with data, their of control customers giving of value the balances appropriately that evolution in regulation and space technology the of understanding mutual isappropriate there that ensure to 65 dfcu Group 2017 Annual Report and Financial Statements 66 dfcu Group 2017 Annual Report and Financial Statements liquidity risk, credit risk and volatility. and risk credit risk, liquidity as such inputs of considerations include judgments The values. fair in establishing isrequired judgment of adegree feasible, isnot this where but possible, where markets observable from taken are models these to inputs The models. flows cash discounted including techniques valuation using determined are they markets, active from determined be cannot position financial of statement separate and consolidated in the recorded liabilities financial and assets financial the of value fair the Where c). Fair instruments financial of value 17 note to information. more Refer for loss. or profit will impact differences such recorded, initially were that amounts the from different is matters these of outcome tax final the Where business. of course ordinary the during uncertain is determination tax ultimate the transactions, these For transactions. certain on taxes for provision the in determining required are judgments and estimates Significant Uganda. of laws tax the under taxes government various to issubject Group The b). Income taxes 21 for more information. note to Refer experience. loss actual and estimates loss between differences any reduce to regularly reviewed are flows cash future of timing and amount the both estimating for used assumptions and methodology The flows. cash future its scheduling when portfolio in the similar those to impairment of evidence objective and characteristics risk credit with assets for experience loss historical on based estimates uses Management group. in the assets on defaults with correlate that conditions economic local or national or in agroup, borrowers of status payment in the change adverse an been has there that indicating data observable include may evidence This portfolio. in that loan individual an with identified be can decrease the before loans of aportfolio from flows cash future estimated in the decrease is a measurable there that indicating data observable isany there whether to as judgements makes Group the loss, or in profit recorded be should loss impairment an whether determining In basis. amonthly on least at impairment assess to portfolios loan its reviews Group The advances and loans on losses a). Impairment • • as follows: segments operating reportable two has and services, and products their on based units business into isorganised Group the purposes, For management 7. INFORMATION SEGMENT basis. concern going the on prepared be to continue statements financial separate and consolidated the Therefore, concern. agoing as continue to Group’s ability the upon doubt significant cast may that uncertainties material any of aware not are directors the Furthermore, future. foreseeable the for in business continue to resources the has Group the that satisfied are and concern agoing as continue to Group’s ability the of assessment an made have Group’s directors The e). Going concern 12. in Note disclosed is value fair the determine to used techniques valuation fair The transactions. the of value fair the determine to expert avaluation used Management estimates. and judgement significant requires combination abusiness of aresult as assumed liabilities and acquired assets net the and transferred consideration the of value fair of determination The d). Valuation of in assets business combination information. more for 4E note to Refer instruments. financial of value fair reported the affect could factors these about in assumptions Changes construction. and tourism industry, hospitality transport, manufacturing, health, education, processing, agro include sectors The in Uganda. sectors private to finance term long and medium provides which segment finance adevelopment of consists It also etc. transfers, market money trading, credit,corporate finance, trade foreign exchange credit, personal accounts, current and personal products, investment and savings of areas in the needs customer for catering levels service superior and products innovative provides which segment banking commercial isthe this Limited; Bank dfcu Exchange. Stock Uganda the on listed is that company holding isthe which Limited, dfcu Interest expense Interest income The segment results for the year ended 31 December 2017 31 follows: as December were ended year the for results segment The statements. financial consolidated in the loss or profit operating the as same the ismeasured which loss or profit operating on based isevaluated performance Segment assessment. performance and allocation resource about decisions making of purpose the for separately units business its of results operating the monitors Management 10% to up Group’s revenue. the of amounting revenue contributes customer external single other No securities. 27.8% year the Government During from (2016: earned was 22.6%) Group’s revenue the of The segment results for the year ended 31 December 2016 31 follows: as were December ended year the for results segment The Profit for the year the for Profit Other operating expenses Income tax credit/ (expense) credit/ tax Income tax income before Profit entity same the of segments operating with transactions from Income income operating other and income commission and Fees income operating other and income commission and Fees the same entity same the of segments operating with transactions from Income (Loss)/ Profit for the year the (Loss)/ for Profit Income tax credit/ (expense) credit/ tax Income tax income before Profit Interest expense Interest income Other operating expenses (20,669) Limited Limited Ushs M Ushs (1,527) (1,025) Ushs M Ushs (4,113) 18,509 (3,143) 14,804 (4,185) 13,857 13,452 4,354 5,631 dfcu dfcu dfcu dfcu 405 345 502 392 dfcu Bank dfcu dfcu Bank dfcu (113,401) (237,420) (114,338) (41,426) (83,272) (13,443) 169,488 350,395 169,062 127,636 219,310 Ushs M Ushs Ushs M Ushs 46,270 38,013 59,713 - - (18,509) segment segment (14,804) (14,802) (14,802) (19,719) (19,719) Ushs M Ushs (3,305) (3,786) Ushs M Ushs (2,500) (3,792) 2,520 3,361 2,501 3,793 items items Intra- Intra- - - (131,550) (238,172) (114,730) (40,924) (13,038) 106,892 (83,914) 170,537 4, 01 347,0 147,816 217,155 Ushs M Ushs Ushs M Ushs 58,363 39,852 45,325 Group Group - - 67 dfcu Group 2017 Annual Report and Financial Statements 68 dfcu Group 2017 Annual Report and Financial Statements 9. INTEREST AND SIMILAR EXPENSES SIMILAR AND 9. INTEREST INCOME SIMILAR AND INTEREST 8. Customer deposits funds Borrowed securities other and Government advances Loans and Other interest income Capital expenditure Capital Total liabilities The table below indicates the Group’s interest income for each group of similar products: of group each for income Group’s interest the indicates below table The domicile. of country Company’s the Uganda, to all attributed are Group’s operations The Year ended 31 December 2016 31Year December ended 2017 31Year December ended Total assets At 31 December 2017 Total assets At 31 December 2016 Capital expenditure Capital Total liabilities 238,758 131,550 255,593 4, 01 347,0 Ushs M Ushs M Ushs Limited Ushs M Ushs 22,380 98,837 43,933 75,227 27,977 87,617 9,406 5,033 3,976 2017 2017 dfcu dfcu Group Group dfcu Bank dfcu 2,521,843 3,030,612 1,494,942 1,718,083 141,797 141,417 141,417 217,155 217,155 Limited 83,914 83,914 Ushs M Ushs M Ushs Ushs M Ushs Ushs M Ushs 72,288 72,288 56,051 56,051 27, 8 6 3 3 6 8 27, 5,094 3,450 2016 2016 dfcu dfcu 345 392 dfcu Bank dfcu (228,729) (24,682) segment (21,334) 350,395 (47,670) Ushs M Ushs M Ushs 219,310 (1,884) Ushs M Ushs Ushs M Ushs 20,669 20,669 items Intra- 2017 2017 392 392 Company Company - - - - 2,525,138 1,495,988 1,745,640 3,057,476 144,946 4, 01 347,0 217,155 Ushs M Ushs M Ushs Ushs M Ushs Ushs M Ushs Group Group 9,070 3,143 3,143 2016 2016 345 327 18 - - Net foreign exchange income income commission and Fees Other Other income Rental of guarantee, telegraphic transfer fees, and other fees and commissions. and fees other and fees, transfer telegraphic guarantee, of letters fees, credit of letters ATM licensing, commissions, URA charges, cheques unpaid fees, statement fees, balance low transfers, money fees, ledger from commissions and fees includes income commission and Fee c. c. b. a. wide. country branches 65 42to from increased network branch Bank’s the aresult, As Limited. Bank Crane of branches formerly were which some includes now which network, branch spread wide the through by operated accounts their have now Limited Bank Crane of customers depositor All Limited’s assets. Bank Crane of some Limited, Bank dfcu to conveyed liabilities of transfer that of in consideration and Limited Bank dfcu to Limited Bank Crane of deposits) the (including liabilities the of some transferred Act Institutions Financial 95(1)(b) the Section of 2017, Receiver, under as 27thOn January powers its of in exercise Uganda of Bank 12. GAINARISINGFROM BUSINESS COMBINATION (GROUP) 11. NETTRADINGANDOTHER INCOME assumed at the date of acquisition. of date the at assumed value fair at liabilities and acquired assets of amounts recognised the summarises table following The liabilities and acquired assumed assets Identifiable comprehensive under income operating and expenses. recorded of statement in the expenses as for accounted are others among costs valuation and costs advisory costs, legal e.g. combination business the effect to 6.6 Ushs billion incurred of costs related acquisition The costs related Acquisition million. 148,905 Ushs was obligation deferred the of value fair the acquisition, of time At the indebtedness. outstanding secure to over rolled and days 90 than less of maturities bills with Treasury in existing provided, 2017. 1October billion was 230 Ushs of starting Security period month a30 over quarter every instalments, in 10 paid be to billion, equal 200 Ushs of obligation adeferred on Uganda of Bank with agreed Bank The Consideration transferred
Ushs M Ushs M Ushs 10,461 11,581 39,655 1,119 2017 2017 Group Group 1 Ushs M Ushs M Ushs 29,305 10,547 1,267 , 0 4 7,5 1,740 2016 2016 Bank Limited Limited Bank dfcu Ushs M Ushs M Ushs 4,064 4,424 (361) 2017 2017 290 Company Company 1 Ushs M Ushs M Ushs 5,058 5,176 5,176 2016 2016 455 86 32 69 dfcu Group 2017 Annual Report and Financial Statements 70 dfcu Group 2017 Annual Report and Financial Statements Total identifiable net assets acquired assets net Total identifiable costs Restoration BOU/ liabilities Other deposits Customers bonds corporate and in shares Investment assets Other customers to advances Net banks other from due balances and Deposits securities Government Uganda of Bank with balances and Cash in subsidiaries Investment Intangible assets equipment and plant Property, the operating expenses (note 13) and are summarized below; (note 13) summarized are and expenses operating the in included are combination business the to relating date acquisition the to subsequent incurred expenses The combination business the to relating f. Expenses Receivership). (in Limited Bank Crane with remained mentioned not liabilities and assets other Any combination business the of part not Transaction e. income. comprehensive of statement in the recorded been has amount This obligation. deferred the of excess in was value fair the and valued fair were assets identifiable net the because in again resulted transaction The purchase bargain on Gain (note 12 c) assets net identifiable of Fair value (note 12 obligation a) deferred of Fair value Total expenses effect Tax advances and loans of Fair value liabilities other for Accrual of intangible assets Amortisation obligation deferred of Amortisation (note 12 fees b) consultancy and Professional combination business the to related Costs Less: follows. as recognised been has acquisition the from arising purchase Bargain purchase d. Bargain reconciliationdfcu account (39,405) (2,126) 7,56 0 0 7,56 (180,429) 34,982 34,982 56,355 56,355 148,905 148,905 (674,958) 14,395 14,395 771,230 771,230 158,931 158,931 89,164 89,164 11,960 11,960 (268,206) (119,301) 20,547 268,206 268,206 16,060 59,311 25,531 Ushs M Ushs (3,750) Ushs M Ushs Ushs M Ushs 6,599 7668 6 7,6 7 203 7, 13. OPERATING13. EXPENSES follows. as were acquired assets material of value fair the measuring for used techniques valuation The g. Measurement of fair values Operating lease expenses expenses administrative Other Travel expenses Amortisation of intangible assets (note 27) assets intangible of Amortisation (note 26) equipment and property of Depreciation expenses Communication Auditors’ remuneration Office and residential occupancy expenses occupancy residential and Office Advertising and marketing services Professional (note 14) expenses benefits Employee Financial liabilities Financial assets Financial Intangible assets equipment and Property acquired Assets • • • • • • • options. expensive more to compared deposits customer from arising funding of source acheaper of benefit the quantifies approach savings cost the and assets contributory or supporting to attributed flows cash any excluding by relationships, customer the by generated be to expected flows cash net of value present the MPEEM considers terms. agreement purchase sales interest reversionary the of aresult as flows cash expected of value present and approach, savings (MPEEM), Cost method earnings excess Multi-period obsolescence. economic and functional as well as deterioration physical for adjustments reflects cost replacement Depreciated appropriate. when cost replacement depreciated and available are they when similar items for prices market considers valuation The report. valuation fair independent and value Carrying Valuation technique guarantees and letters of credit of letters and guarantees financial for approach default of probability and liabilities legal for amount weighted probability on based estimate best –Management’s liabilities Contingent borrowings) overnight (for value carrying and approach flow cash –Discounted refinance and borrowings Interbank value –Carrying cheques bank deposits, Customer proceeds. sale anticipated using –Valued investments Unlisted Reuters from sourced prices –Market shares in listed Investments methodology flow cash –Discounted advances and Loans securities non-traded the for approach flow cash discounted and securities traded for Reuters from sourced price -Market bonds corporate and securities Government 189,520 Ushs M Ushs 29,240 13,887 20,854 11,958 58,754 19,781 17,468 2,228 4,507 9,933 2017 910 Group Ushs M Ushs 96,900 96,900 35,391 35,391 11,405 10,728 75 0 17,50 8,664 1,349 2,476 1,182 7,597 2016 608 - Ushs M Ushs 4,163 2,018 1,376 2017 200 128 414 Company 20 7 - - - - Ushs M Ushs 3,786 1,876 1,171 2016 399 124 191 16 9 - - - - 71 dfcu Group 2017 Annual Report and Financial Statements 72 dfcu Group 2017 Annual Report and Financial Statements The following items have been charged in arriving at the profit before tax: before profit the at in arriving charged been have items following The TAX BEFORE PROFIT 15. 870 was (2016: year the during company 680) the of employees of number average The National Social Security Fund contributions Security Social National costs Retirement benefit salaries and Wages expenses: benefits in employee included are following The Directors remuneration (note 42) remuneration Directors (note 27) assets intangible of Amortisation (note 26) 25 and equipment and property of Depreciation (note 14) expenses benefits Employee Payment of dividends is subject to withholding tax at rates depending on the tax residence of the shareholder. the of residence tax the on depending rates at tax withholding to issubject dividends of Payment 31 by paid 2018. will July be which dividend this to entitlement to 2018 June 28 on respect with closed will be 25.19 register share). shareholder’s per The (2016: applicable where Ushs tax withholding of deduction after payable share per 68.24 Ushs of dividend acash isrecommending 2018, 7June on Board the held be to Limited dfcu of meeting general annual At the 16. DIVIDENDS EMPLOYEE EXPENSES BENEFITS 14. Proposed dividends Proposed Per share Per Ushs M Ushs Ushs M Ushs 58,754 58,754 17,468 52,217 68.24 1,207 4,850 9,933 1,687 2017 Ushs 2017 Group Group 2017 Ushs M Ushs Ushs M Ushs Ushs M Ushs 51,054 35,391 35,391 30,951 30,951 8,664 1,349 3,027 3,027 1,413 1,413 1,117 2016 Total 2016 Per share Per Ushs M Ushs Ushs M Ushs 25.19 2017 Ushs 2017 128 348 414 414 Company Company 29 37 2016 - - Ushs M Ushs Ushs M Ushs Ushs M Ushs 12,510 2016 2016 Total 399 340 399 201 34 25 - - Net profit attributable to equity holders of the Company (Ushs M) (Ushs Company the of holders equity to attributable profit Net Issued Ordinary shares as at 1January at as shares Ordinary Issued M) (Ushs Company the of holders equity to attributable profit Net Dividends on non-redeemable preference shares preference onDividends non-redeemable a). Income tax expense tax a). Income TAX INCOME 18. 2017 31 at 2016. December and outstanding shares dilutive potentially no were There year the during issued shares new of Effect shareholders ordinary to attributable Profit i). Shs) (U share per earnings Diluted Shs) (U share per earnings Basic in issue shares ordinary of number average Weighted year. the during in issue shares ordinary of number average weighted the by shareholders to attributable year the for profit the dividing by iscalculated share per earnings Basic 17. (GROUP) PER SHARE EARNINGS Weighted average number of ordinary shares at 31 at December shares ordinary of number average Weighted ii). Weighted average number of ordinary shares ordinary of number average Weighted ii). M) (Ushs shareholders ordinary to Total attributable profit Income tax expense tax Income Current income tax Deferred income tax charge/(credit) tax (note 28) income Deferred Ushs M Ushs 40,924 39,745 1,179 2017 Group Ushs M Ushs (1,640) 13,038 14,678 564,578,087 564,578,087 497,201,822 2016 67,376,265 106,892 106,892 106,892 189.33 189.33 2017 2017 2017 Ushs M Ushs - (502) (502) 2017 Company - 497,201,822 497,201,822 497,201,822 Ushs M Ushs 45,325 45,325 45,324 91.16 91.16 (405) (405) 2016 2016 2016 2016 - - - 73 dfcu Group 2017 Annual Report and Financial Statements 74 dfcu Group 2017 Annual Report and Financial Statements - Income taxed at other rates other at taxed - Income - Expenses not deductible for tax purposes tax for deductible not - Expenses of: Tax effect - Income taxed at other rates other at taxed - Income Income tax expense tax Income Income tax expense tax Income tax corporation of provision over year Prior (2016: 30% of rate atax at 30%) Tax calculated tax income before Profit - Expenses not deductible for tax purposes tax for deductible not - Expenses of: Tax effect Current income tax charge for the year the for charge tax income Current At 1January At 31 December year during paid tax Income The movements in current tax payable during the year are as follows: as are year the during payable tax in current movements The payable/ (recoverable) tax income c). Current 28 in Note ispresented tax income deferred on information Further (2016: 30% of rate atax at 30%) Tax calculated tax income before Profit Company deductions. (2016: appropriate 20% of making tax isafinal after 20%) which tax, withholding million (2016: 98,837 Ushs of to million) 72,288 Ushs issubject securities government on income Interest Group follows: as 30% of rate tax basic the using arise would that amount theoretical the from differs tax income before Group’s profit the on tax The rate tax effective of b). Reconciliation (431.9%) Effective Effective Effective Effective (41,165) (10.3%) 434.8% tax rate tax tax rate tax Ushs M Ushs 39,835 30.0% 32.9% 30.0% 27.7% 1,466 2,796 2.4% 5.6% 2017 Group Group 2017 2017 (15,195) (15,730) 147,816 Ushs M Ushs Ushs M Ushs Ushs M Ushs 44,345 (1,527) 40,924 (6,639) 14,678 3,487 8,287 3,848 6,595 2,796 (502) (458) 2016 Effective Effective Effective Effective (10.2%) (33.4%) tax rate tax tax rate tax Ushs M Ushs (1,609) (1,519) (3.0%) 30.0% 22.3% 30.0% 0.3% 2.3% 0.4% 2017 Company 90 2016 2016 - Ushs M Ushs Ushs M Ushs Ushs M Ushs (5,954) 58,363 (1,609) (1,035) 13,038 (4,494) 13,452 75 9 17,50 4,036 1,324 (405) 2016 (574) 159 53 - Overdrafts by type customers to advances Gross Commercial loans Commercial Gross loans and advances advances and loans Gross Individually assessed advances and loans of impairment for Allowance Less: Collectively assessed Collectively Balances with Bank of Uganda of Bank with Balances Cash at hand at Cash 19. CASH AT HAND AND BALANCES WITH BANK OF UGANDA (GROUP) UGANDA OF BANK WITH 19. AT CASH BALANCES AND HAND The weighted average effective interest rate on loans and advances was 23.64% (2016: 23.64% was advances 23.17%). and loans on rate interest effective average weighted The ADVANCES TO CUSTOMER 21. LOANS AND value fair its to equal isapproximately Uganda of Bank with balances and cash of value carrying The Deposits with other banks other with Deposits The carrying value of deposits and balances due from banks is approximately equal to its fair value. value. fair its to equal isapproximately banks from due balances and deposits of value carrying The (2016: 9.80% was banks 1.85%).other to advances and loans on rate interest effective average weighted The rates. deposit short-term respective the at interest earn and Group, the of requirements cash immediate the on depending months, three and day one between of periods varying for made deposits short-term are banks other to advances and Loans banks other with Placements (GROUP) BANKS FROM DUE BALANCES AND DEPOSITS 20. Net loans and advances and loans Net 1,271,415 1,402,761 1,334,611 (55,296) (12,854) 131,346 Ushs M Ushs 2017 Group 834,827 (21,492) 863,479 808,191 Ushs M Ushs 55,288 ,60) 7,16 ( 2016 362,263 214,722 229,447 169,507 147,541 Ushs M Ushs Ushs M Ushs 59,940 2017 2017 Ushs M Ushs 2017 Company ------176,565 139,471 Ushs M Ushs Ushs M Ushs Ushs M Ushs 95,827 80,738 46,962 92,509 (575) 2016 2016 2016 575 575 - - - 75 dfcu Group 2017 Annual Report and Financial Statements 76 dfcu Group 2017 Annual Report and Financial Statements At 1 January 2016 At 1January Recoveries and allowances no longer required longer no allowances and Recoveries impairment for in allowances Increase Group (Group) follows: as are advances and loans of impairment for in allowance Movements -Group customers to advances and loans of Analysis Net charge to profit or loss or profit to charge Net required longer no allowances and Recoveries impairment for in allowances Increase comprehensive income (2016) of statement consolidated to Charge At 31 December 2017 year the during off written Debts required longer no allowances and Recoveries impairment for in allowances Increase Limited Bank Crane from transferred Provisions 2017 At 1January At 31 December 2016 Debts written off during the year the during off written Debts Recoveries of amounts previously written off written previously amounts of Recoveries Net charge to profit or loss or profit to charge Net off written previously amounts of Recoveries required longer no allowances and Recoveries impairment for in allowances Increase comprehensive income (2017) of statement consolidated to Charge Individually Individually (20,158) (20,158) (909) (987) (987) (5,007) (7,073) (27,789) 55,296 55,296 54,519 54,519 21,493 21,493 21,493 8,615 8,615 16,976 16,976 81,750 81,750 18,872 18,872 assessed assessed Ushs M Ushs Collectively Collectively (5,867) (5,867) (5,867) 12,854 12,854 6,306 6,306 854 854 854 854 854 854 11,561 11,561 7,160 7,160 7,160 assessed assessed Ushs M Ushs ------(909) (987) (987) (26,025) (26,025) (5,007) 68,150 68,150 48,652 48,652 14,921 14,921 28,653 28,653 28,653 (7,073) 11,561 11,561 (27,789) 81,750 81,750 17,830 19,726 19,726 19,726 19,726 Ushs M Ushs Total Total Unearned future finance income on finance leases finance on income finance future Unearned Later than 5years than Later Net investment in finance leases in finance investment Net Later than 1 year and not later than 5years than later not and 1year than Later 1year than later Not leases: in finance investment Gross The carrying value of loans and advances to customers is approximately equal to its fair value. fair its to equal isapproximately customers to advances and loans of value carrying The receivables. lease (2016: finance of impairment to 8,391 Ushs million) attributable 2017 31 at as million December 1,864 isUshs advances and loans of impairment for allowance in the Included Loans and advances to customers include finance lease receivables, which may be analysed as follows: as analysed be may which receivables, lease finance include customers to advances and Loans (continued) –Group customers to advances and loans of Analysis The net investment in finance leases may be analysed as follows: as analysed be may leases in finance investment net The Not later than 1year than later Not Later than 1 year and not later than 5years than later not and 1year than Later Later than 5years than Later (11,029) Ushs M Ushs Ushs M Ushs 25,342 62,628 51,599 30,279 20,879 36,751 51,599 2017 2017 535 441 (12,213) Ushs M Ushs Ushs M Ushs 54,586 29,866 30,004 54,586 66,799 24,406 36,717 2016 2016 216 176 77 dfcu Group 2017 Annual Report and Financial Statements 78 dfcu Group 2017 Annual Report and Financial Statements Stanbic Bank Uganda Limited. Uganda Bank Stanbic million (2016: 394 Ushs to amounting by million) 481 Ushs bonds issued corporate include bonds Other (2016: 15.00%. was securities 17.09%) government on rate interest effective average weighted The years. fifteen and years ten years, five years, three years, two of terms for Uganda, of Bank the by administered and Uganda of Government the by issued securities debt are ayear. or bonds Treasury months nine months, six months, three of aterm for Uganda, of Group the by administered and Uganda, of Government the by issued securities debt bills are Treasury (GROUP) SECURITIES OTHER AND GOVERNMENT 22. Maturing after 90 days from the date of reporting of date the from days 90 after Maturing Total treasury and other bonds other and Total treasury bills Total treasury reporting of date the from days 90 within Maturing Held-to-maturity reporting of date the from days 90 after Maturing reporting of date the from days 90 within Maturing Held-for-trading Treasury bills: Other bonds Other reporting of date the from days 90 after Maturing reporting of date the from days 90 within Maturing Held-to-maturity reporting of date the from days 90 after Maturing reporting of date the from days 90 within Maturing Held-for-trading : bonds other Treasury and 284,898 118,282 461,041 460,647 671,592 210,551 Ushs M Ushs 41,290 90,871 69,921 57,263 8,469 2017 204 394 318,389 489,183 100,734 138,775 146,977 170,794 170,313 170,313 Ushs M Ushs 52,508 31,536 18,170 2016 481 2 - The carrying value of other assets is approximately equal to its fair value. fair its to equal isapproximately assets other of value carrying The Limited. Bank Crane from acquired advances and loans performing non- and off written of valuation fair the to relate loss and profit through value fair at assets financial Other OTHER24. ASSETS AT INVESTMENTS FAIR (GROUP) LOSS AND EQUITY PROFIT 23. VALUE THROUGH Other assets Other loss and profit through value fair at assets financial Other Sundry receivables receivables Sundry Prepaid expenses Stanbic Bank (U) Limited Limited Vision New National Insurance Corporation Insurance National Limited (U) Baroda of Bank Kenya Commercial Bank Limited Bank Commercial Kenya Crane Financial Services 239,545 215,993 Ushs M Ushs 11,945 6,949 4,658 2017 Group Ushs M Ushs 14,812 5,206 2,982 6,624 2016 - Ushs M Ushs 13,746 1,189 4,156 1,138 7,063 2017 185 15 Ushs M Ushs 2017 Company 12 12 - - - Ushs M Ushs Ushs M Ushs 2016 2016 278 278 ------79 dfcu Group 2017 Annual Report and Financial Statements 80 dfcu Group 2017 Annual Report and Financial Statements Accumulated depreciation Accumulated At 31 December 2017At 31 December Additions at cost at Additions At 1January Company is Ushs 55,820 (2016: 55,820 isUshs Company 55,091). Ushs 12,829 (2016: isUshs Group the for the 14,204) Ushs for and property Investment the of value fair The equipment and Total property equipment and property to allocated Amount property investment to allocated Amount statements. financial in those property investment as retained istherefore and purposes rental for isheld property entire the Company, the of statements financial alone stand In below. the shown as statements financial consolidated in the property investment to reclassified been by utilised not is that property the of part that parties, third to rent for available make to 2016, resolved During Company the basis. cost historical the on stated been has property investment The appreciation. capital and rental its for isheld property This Kampala. Road, Kyadondo Plot 26 at buildings and land comprises property Investment PROPERTY INVESTMENT 25. Bank Limited. Consequently, that part of the property is held for rental purposes and has has and purposes rental for isheld property the of part that Consequently, Limited. Bank dfcu Ushs M Ushs 11,144 11,144 11,560 36,633 47,777 (449) 2017 33 Group Ushs M Ushs 33,202 12,086 44,762 11,560 11,560 (548) 2016 22 Ushs M Ushs (2,018) 44,762 47,777 5,033 2017 Company Ushs M Ushs (1,876) 42,662 44,762 3,976 2016 Additions 2016At 1January Cost: At 1 January 2016At 1January Depreciation: As at 31 December 2016 31 at As December Disposals Disposals Transfers from WIP from Transfers Net carrying amount carrying Net Charge for the year the for Charge 26. PROPERTY AND EQUIPMENT (GROUP) EQUIPMENT AND PROPERTY 26. (2016: nil). year the during equipment and plant of acquisition the to related costs borrowing capitalized no were There isundertaking. Group the projects various of in respect works ongoing to relates (WIP) Work-In-Progress Disposals year the for Charge As at 31 December 2016 31 at As December Write offs Write As atAs 31 December 2017 Limited Bank Crane from Transfers atAs 31 December 2017 Disposals Bank Limited Bank Crane from Transfers Net carrying amount carrying Net At 1 January 2017At 1January Depreciation: Transfers from WIP from Transfers Additions At 1 January 2017At 1January Cost: Freehold (806) land and and land building building Ushs M Ushs - 66,883 66,883 38,433 38,433 28,856 28,856 64,397 64,397 28,856 27,734 27,734 2,486 2,486 1,386 1,386 1,122 1,122 1,122 (22) 400 400 841 841 281 281 - - - - - 12,804 12,804 12,804 12,804 - - - - 283 283 12,521 ------283 283 ------prepayment Operating Operating Ushs M Ushs lease lease Ushs M Ushs (1,678) (1,635) vehicle vehicle Motor Motor 1,099 1,099 2,452 1,663 1,641 1,641 2,373 2,373 2,369 2,369 2,452 2,452 1,663 1,663 1,241 1,241 704 704 789 789 226 226 732 425 274 274 (3) (3) 86 86 - -
equipment equipment Furniture Ushs M Ushs (2,246) (2,381) 19,400 19,400 32,249 32,249 42,567 42,567 22,852 22,852 53,825 53,825 22,852 22,852 18,042 75,314 75,314 55,101 55,101 32,747 55,101 55,101 3,509 3,509 9,931 9,931 7,056 7,056 (36) (54) 584 584 283 283 148 148 & - (779) (85) (779) (115) 14,060 14,060 8,466 8,466 16,994 16,994 1,227 1,227 609 902 902 399 399 8,550 8,550 8,550 8,550 11,953 11,953 26,013 26,013 4,715 4,715 equipment equipment 7,323 7,323 7,323 - Computer Computer Ushs M Ushs
7, 20 0 0 20 7, 185 185 254 254
progress Work in Work (1,443) (3,849) Ushs M Ushs - 3,395 3,395 5,070 5,070 5,070 5,070 5,870 5,870 7,456 7,456 7,456 7,456 5,070 3,109 3,109 (60) 434 434 ------190,843 190,843 142,642 100,029 100,029 100,029 100,029 Ushs M Ushs (3,327) (3,223) (1,778) (3,028) 48,201 48,201 32,960 32,960 32,960 32,960 89,164 89,164 96,625 96,625 67,069 67,069 17,019 17,019 27,324 27,324 8,664 8,664 4,303 4,303 6,627 6,627 Total - - - 81 dfcu Group 2017 Annual Report and Financial Statements 82 dfcu Group 2017 Annual Report and Financial Statements Work In-Progress (WIP) relates to ongoing works in respect of the software upgrade. software the of in respect works ongoing to relates (WIP) In-Progress Work rent. ground and deposits customer of valuations fair and Limited Bank Crane Trust and Bank Global to relating Uganda of Bank from acquired relationships customer of valuations fair of comprises assets intangible Other systems. banking core Bank’s the for software of comprises software Computer in 2017 identified (2016: goodwill of impairment no nil). was There occurred. have may impairment that indications are there when frequently more or impairment, for annually isreviewed Goodwill 27. INTANGIBLE ASSETS Net amount carrying At 31 December 2017At 31 December year the for Charge At 31 December 2017At 31 December At 1 January 2017At 1January Amortisation Transfers from WIP from Transfers Additions 2017At 1January Cost Net amount carrying 2016At 31 December year the for Charge 2016At 1January Amortisation At 31 December 2016At 31 December WIP from Transfers Additions At 1 January 2016At 1January Cost Goodwill Ushs M Ushs 463 463 463 463 463 463 ------Computer Computer software Ushs M Ushs 18,264 14,239 12,363 33,277 11,807 18,264 19,038 12,363 13,784 11,402 3,206 1,876 5,901 3,910 961 570 intangible intangible Ushs M Ushs 34,982 36,921 27,926 assets 8,995 1,939 8,057 Other Other 1,939 1,939 1,001 388 938 550 938 - - - Progress (11,807) Work-In- Ushs M Ushs 13,257 (3,910) 2,948 2,948 1,498 3,557 3,557 1,498 1,498 1,851 1,851 ------Ushs M Ushs 23,234 51,445 22,164 73,609 13,301 50,375 13,301 22,164 11,952 19,743 8,863 9,933 1,349 2,421 Total - - At 1January following items: following the to 2017 31 at as attributed December are credit tax deferred the and liabilities and assets tax Deferred is15% rate (2016: enacted the where 15%). bonds bills and treasury on receivable interest for except 30%), of rate tax principal the using method liability the under differences all temporary on iscalculated tax Deferred TAX INCOME DEFERRED 28. Deferred tax asset tax Deferred charge/(credit) tax (note 18 (a))Deferred and advances and loans of impairment for Allowance equipment and Property Tax losses carried forward carried Tax losses 2017 bonds bills and treasury of Fair value income commissions and fees Deferred (loss) Unrealised foreign exchange gain/ relationships customer of Fair value Net deferred tax asset tax deferred Net January January (3,290) Ushs M Ushs (2,260) (2,738) (2,148) 3,025 3,025 2017 At 1 301 514 16 16 Charge to to Charge (Credit)/ Group Ushs M Ushs (2,786) (1,708) 3,321 1,972 1,179 (125) SOCI 381 124 December Ushs M Ushs (3,290) Ushs M Ushs (3,856) (1,879) (2,272) (2,111) (2,614) (2,111) 4,997 1,179 3,622 (109) At 31 2017 2017 2017 Group Ushs M Ushs January January (3,290) (1,640) Ushs M Ushs (1,650) (2,037) (2,037) 1,077 (944) 2016 16 16 2017 At 1 - - - - Company Charge to to Charge Ushs M Ushs (Credit)/ (1,542) Ushs M Ushs (944) (598) (502) (577) (125) 2017 SOCI 200 Company - - - - December Ushs M Ushs (1,446) Ushs M Ushs (2,614) 1,277 (944) (539) (405) (109) At 31 2016 2017 2017 - - - - 83 dfcu Group 2017 Annual Report and Financial Statements 84 dfcu Group 2017 Annual Report and Financial Statements relationships customer of Fair value bonds bills and treasury of Fair value income commissions and fees Deferred (loss) Unrealised foreign exchange gain/ 2016 Financial Institutions Act. Institutions Financial the under islicensed and services related of provision the and banking of business in the isengaged Bank The Uganda. Kampala P.O. 70 Box Road Kyadondo Plot 26 is: office registered its of address the and in Uganda It isdomiciled bank. acommercial as operate to Uganda of Bank by licensed and company liability alimited as Uganda of Act Companies the under in Uganda isincorporated Limited Bank dfcu 29. INVESTMENT IN SUBSIDIARIES 29. INVESTMENT Net deferred tax assets tax deferred Net Tax losses carried forward carried Tax losses advances and loans of impairment for Allowance equipment and Property As at 31 at As December year the during Additions At 1January Limited Bank dfcu January January Ushs M Ushs (1,650) (1,276) (1,821) (1,891) 2,566 2,566 2016 At 1 (25) 380 417 Charge to to Charge (Credit)/ (Credit)/ Group Ushs M Ushs (1,640) (1,462) (257) (439) (116) SOCI 459 459 134 41 41 December Shareholding Ushs M Ushs (3,290) (2,260) (2,738) (2,148) 3,025 3,025 At 31 2016 301 514 16 16 100% January January Ushs M Ushs (1,276) (539) 2016 At 1 (25) 762 - - - - 203,293 176,500 Ushs M Ushs 26,793 Company Charge to to Charge 2017 (Credit)/ (Credit)/ Company Ushs M Ushs (405) (761) SOCI 315 41 - - - - December 16 16 Ushs M Ushs Ushs M Ushs (2,037) (2,037) 26,793 26,793 1,077 (944) At 31 2016 2016 - - - - - The carrying value of customer deposits is approximately equal to its fair value. fair its to equal isapproximately deposits customer of value carrying The Deferred rental income rental Deferred liabilities Other Accrued expenses and payables and expenses Accrued Managed funds (Note 33) (Note funds Managed balances Unclaimed payable Bills 32. OTHER LIABILITIES OTHER 32. Demand deposits Fixed deposits Fixed deposits Savings 30. CUSTOMER DEPOSITS (GROUP) DEPOSITS CUSTOMER 30. in respect to these payables. The carrying value of other liabilities is approximately equal to its fair value. fair its to equal isapproximately liabilities other of value carrying The payables. these to in respect collateral no gives Group The days. 30-90 within settled normally and bearing non-interest are liabilities Other (GROUP) BANKS TO OTHER DUE 31. DEPOSITS Balances due to other banks within 90 days 90 within banks other to due Balances deposits due to other banks is approximately equal to its fair value. fair its to equal isapproximately banks other to due deposits of value carrying The rates. deposit short-term respective the at interest earn and months, three and day one between of periods varying for banks other by made deposits short-term are banks other to due Balances Ushs M Ushs 26,042 52,853 18,631 4,499 2,525 2017 197 959 Group Ushs M Ushs 18,429 8,281 ,293 7, 2,152 2016 1,987,118 188 197 318 883,226 430,066 673,826 Ushs M Ushs Ushs M Ushs 2017 2017 255 Ushs M Ushs 4,499 6,961 2,152 2017 197 Company 32 81 - 1,134,731 238,029 365,293 531,409 Ushs M Ushs Ushs M Ushs Ushs M Ushs 11,505 1,342 2,252 2016 2016 2016 596 197 36 81 - 85 dfcu Group 2017 Annual Report and Financial Statements 86 dfcu Group 2017 Annual Report and Financial Statements There was no movement in special funds during the year. the during funds in special movement no was There businesses. microfinance and SME of financing the support to Uganda of Government the by controlled fund a special into borrowings these of proceeds the of out issued loans on due interest and principal of repayments remit to Group the require agreements These (KFW). Wiederaufbau Fur Kreditanstalt with agreements borrowing of terms the under created liabilities represent funds Special (GROUP) FUNDS SPECIAL 34. b). a). follows: as are funds these on balances un-disbursed The management. under Fund (GDF) Daals Gomba and Fund (CFF) Flower GoU/CDO the Fund, Commercial had year, the Group the During demand. on due are funds These funds. the of agreements management the under benefits economic transfer to obligations nor fees management beyond benefits economic future to rights neither has Group the that fact the reflect to Limited dfcu of position financial of statement the on maintained not are advances and loans related The fund. each of conditions and terms the under beneficiaries party third specified to on-lending for financing provides GoU which under (“GoU”) Uganda of Government the of behalf on funds of anumber manages Limited dfcu FUNDS MANAGED 33. At 31 December No time limit was set for the fund under the terms of the agreement. the of terms the under fund the for set limit was time No fund. the to iscredited 4% at and charged is facility the on Interest facility. lease the of 2% to up of respect in this fees receives and only services management and administration leasing provides Limited dfcu agreement, the of terms the 221 Ushs of million. Under fund arevolving up set to Limited (U) Spices Daals 2007,During Daals Fund Gomba agreement. the of terms the under fund the for set limit was time No fund. the to 10% iscredited and of amaximum to is chargeable facilities the on Interest facility. lease 4% to up each of of respect in this agreement, the of terms the Under in Uganda. farmers cotton for leases finance to 300,000 US$ and tractors of worth 720 Ushs million 2.5 billion Ushs in cash, of fund arevolving (CDO) up set to Organisation Development 2004, During CDO/ GOU Fund Limited provides leasing administration and management services only and receives fees fees receives and only services management and administration leasing provides Limited dfcu Limited entered into a tripartite agreement with the Government of Uganda and Gomba Gomba and Uganda of Government the with agreement atripartite into entered Limited dfcu Limited entered into a tripartite agreement with the Government of Uganda and Cotton Cotton and Uganda of Government the with agreement atripartite into entered Limited dfcu Ushs M Ushs 1,708 2017 Ushs M Ushs 1,708 2016 Uganda Government (KFW II loan) (KFW Government Uganda Uganda Government (KFW III loan) (KFW Government Uganda Uganda Government (KFW Vloan) (KFW Government Uganda 35. BORROWED FUNDS BORROWED 35. Bank of Uganda (ACF loan) Uganda of Bank Bank of Uganda (Other borrowings) (Other Uganda of Bank Abi-Finance EconomiqueCooperation (PROPARCO) Pour La Participation Et De Promotion De Societe Ontwikkelingslanden N.V. (FMO) Ontwikkelingslanden Nederlandse Financierings-Maatschappij Voor European Investment Bank –PEFF Bank Investment European European Investment Bank –Microfinance Bank Investment European (NORFUND) Countries Developing Fund for Investment Norwegian (DEG) Senior loan (DEG) Senior mbH Investitions-UndDeutsche Entwicklungsgesellschaft Bank Development African East (DEG) mbH Investitions-UndDeutsche Entwicklungsgesellschaft CDC Group Plc Subordinated debt Plc Subordinated Group CDC Jubilee Insurance UN Habitat ordinary liabilities of the Group and recognized by the Group as Tier 2Capital. Tier as Group the by recognized and Group the of liabilities ordinary to subordinated are debts The 4.5%. plus 6months Libor at isvariable debt this on rate interest The in 2020. mature to isdue and is7years tenure Plc (CDC) whose Group CDC isfrom debt subordinated other The date. determination interest the at prevailing rate USD swap the plus annum 6.6% per of rate interest aggregate an at isvariable debt this on rate interest The in 2022. mature to isdue and is7years tenure (DEG) whose EntwicklungsgesellschaftmbH Investitions-Und Deutsche from debt isasubordinated in borrowings Included 5C. in Note disclosed been has funds borrowed for analysis maturity The 126,040 481,738 Ushs M Ushs 54,226 36,560 20,902 29,096 90,936 11,878 36,370 36,370 10,059 16,611 1,642 8,052 2,376 2017 620 - - 326,819 Ushs M Ushs 43,380 66,339 24,663 36,150 36,150 20,724 10,785 50,610 7 255 17, Group 2,852 1,984 9,256 5,272 2016 696 703 - - Ushs M Ushs 3,695 1,319 2,376 2017 Company ------Ushs M Ushs 2,853 5,226 2,373 2016 ------87 dfcu Group 2017 Annual Report and Financial Statements 88 dfcu Group 2017 Annual Report and Financial Statements CDC Group Plc Group CDC loan (DEG) Senior mbH Investitions-UndDeutsche Entwicklungsgesellschaft (DEG) Subordinated debt mbH Investitions-UndDeutsche Entwicklungsgesellschaft UN Habitat East African Development Bank Development African East Bank-PEFF Investment USDEuropean -USD FMO Cooperation EconomiqueCooperation (PROPARCO) Pour La Participation Et De Promotion De Societe NORFUND Senior loan 1 loan Senior NORFUND Bank-Microfinance Investment European Bank-PEFF Investment UGX European N.V. (FMO) Ontwikkelingslanden Nederlandse Financierings-Maatschappij Voor Bank of Uganda (Other borrowings) (Other Uganda of Bank Abi-Finance Limited Abi-Finance Bank of Uganda (ACF loan) Uganda of Bank The terms and conditions relating to borrowings are tabulated below: tabulated are borrowings to relating conditions and terms The (CONTINUED) FUNDS BORROWED 35. Jubilee Insurance Uganda Government (KFW Vloan) (KFW Government Uganda III loan) (KFW Government Uganda II loan) (KFW Government Uganda The carrying value of borrowed funds is approximately equal to its fair value. fair its to equal isapproximately funds borrowed of value carrying The unsecured. are funds borrowed the All Bank Development African East Company (years) Tenure Tenure (years) Tenure Tenure 15 15 15 10 10 10 7 5 7 7 7 7 7 7 3 7 8 6 5 7 Interest Interest Interest Interest 12.00% 12.50% 10.26% 12.67% 18.77% 19.50% 11.93% 2.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.85% 3.58% 5.23% 6.38% 8.57% 3.70% 3.75% rate rate variable Variable Variable Variable Variable Variable Variable Variable variable Fixed / Fixed Fixed / Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Currency Currency Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs Ushs USD USD USD USD USD USD USD At 1 January and 31 December 2016 31 and December At 1January At 1 January At 1January At 31 December Group CAPITAL PREMIUM SHARE SHARE 36. AND earnings in accordance with accounting policy 4E (v). The reserve is not distributable. isnot (v). 4E reserve policy The accounting with in accordance earnings retained from appropriated are amounts These Standards. Reporting Financial International with accordance in determined those exceed 2004 Act, Institutions Financial the with in accordance determined advances and loans of impairment for allowances which by amounts represents reserve risk credit regulatory The 37. (GROUP) REGULATORY RESERVE 2017At 1January At 31 December At 31 December year the during earnings (to)/fromTransfer retained Unidentified impairment (note 21) impairment Unidentified (note 21) impairment Identified IFRS per as advances and loans of impairment for Provision provisions Specific FIA 2004: per as advances and loans of impairment for Provision follows; as isanalysed reserve risk Credit regulatory The from prior year bonus shares issue shares bonus year prior from arising capital share of Reclassification Add: General provisions General Net Net additions year the during up paid and issued Shares 5.5 billion and share premium of Ushs 182.8 Ushs of billion. premium share 5.5 billion and Ushs of capital share ordinary additional to rise giving shares 250.9 into million ordinary converted was capital year. the The during done issue arights through shareholders its from capital additional received Group The value Ushs 20 Ushs value –per capital share Ordinary Authorized 2017At 31 December Number of issued ordinary shares 1,250,000,000 497,201,822 250,942,211 748,144,033 497,201,822 250,942,211 Ushs M Ushs 25,000 14,963 Capital 9,464 5,499 9,464 Share 5,019 480 (12,854) (55,296) Ushs M Ushs 79,263 13,531 11,113 11,113 65,732 4,074 7,039 2017 premium 182,805 185,683 183,285 Ushs M Ushs 2,878 Share 2,878 (480) 200,646 182,805 188,304 (20,130) (20,918) Ushs M Ushs Ushs M Ushs 12,342 23,584 24,204 12,342 ,60) 7,16 ( 32,152 8,568 4,074 4,074 2016 Total - 89 dfcu Group 2017 Annual Report and Financial Statements 90 dfcu Group 2017 Annual Report and Financial Statements Over 5years Over 5years and 2years Between Not later than one year one than later Not these cases. from arise to expected are losses additional significant no advice, legal appropriate taking after and directors of opinion In the statements. financial consolidated in the made been has billion) aprovision which for billion (2016: 3.3 Ushs are Group the to 1.8 Ushs losses expected total that determined has management 2.9 isUshs billion (2016: cases advice these 0.9 from Ushs legal arising billion). liability Through contingent estimated total The business. of course normal in the actions legal in various is adefendant Group The (GROUP) LIABILITIES CONTINGENT OTHER 40. follows: as payable were leases non-cancelable under payments lease minimum future At 31 the December, values. rental market on based are payments lease The date. that after lease the renew to option an with periods varying for run leases The leases. operating under located are branches the where property of anumber leases Group The (GROUP) COMMITMENTS 39. OPERATING LEASE parties. third of obligations corresponding by offset are facilities these of majority The indemnities. and bonds performance guarantees, credit, of letters acceptances, involving Company, the of subsidiary the banks, other with In common (GROUP) COMMITMENTS AND LIABILITIES CONTINGENT INSTRUMENTS, FINANCIAL OFF-CONSOLIDATED STATEMENT38. POSITION FINANCIAL OF Between 1 year and 2years and 1year Between credit of letters and Acceptances commitments and liabilities Contingent commitments to lend to commitments other and lines credit facilities, stand-by formal Undrawn Guarantee and performance bonds Bank Limited (the Bank), conducts business business Bank), conducts (the Limited Bank dfcu 198,012 162,973 Ushs M Ushs Ushs M Ushs 14,978 34,321 2,050 6,576 5,744 2017 2017 608 718 119,515 Ushs M Ushs Ushs M Ushs 92,081 7434 3 27,4 2,600 5,922 2,271 2016 2016 240 811 - Balance as at 31 December 2017 Total changes from financing cash flows cash financing from Total changes paid Interest (equity -related) (equity changes other from Total changes Proposed Dividends 2017 Dividends Proposed -related) (equity changes Other Interest expense Proceeds from issue of share capital share of issue from Proceeds flows cash financing from Changes Borrowed funds paid funds Borrowed Borrowings acquired Borrowings Dividends paid premium share from Proceeds 2017 1January at as Balance Analysis of cash and cash equivalents as shown in the consolidated statement of cash flows. cash of statement consolidated in the shown as equivalents cash and cash of Analysis EQUIVALENTS CASH AND CASH 41. Group activities. financing from arising flows cash to liabilities of movements of areconciliation shows below table The days. fourteen of period cycle reserve acash over Limited Bank dfcu by held deposits customer outstanding average the of apercentage as isdetermined amount The compliance. non- for sanctions and use its to as restrictions are there however activities; Group’s day-to-day the finance to isavailable balance This balance. cash minimum aprescribed maintain to banks requires Uganda of Bank on demand. due are which Limited Bank in dfcu held deposits cash to relate parties related from due Amounts acquisition. of date the from maturity to days 90 than less with and cash of amounts known into convertible readily are which investments liquid term short- include equivalents cash flows, cash of statement the of For purposes Cash in hand (note in hand 19)Cash Balances with Bank of Uganda (note 19) Uganda of Bank with Balances Less: Cash reserve requirement Cash reserve Less: Deposits and balances due from banks (note 20) banks from due balances and Deposits (note 42(b)) companies related from due Amounts (179,000) - - - - - Liabilities Borrowed (45,050) 481,738 481,738 481,738 481,738 335,036 335,036 326,819 326,819 Ushs M Ushs 43,933 43,933 funds (151,170) 14,963 14,963 9,464 9,464 5,499 5,499 Ushs M Ushs 440,540 229,447 214,722 147,541 ------Group Ushs M Ushs 2017 capital Share - Equity ------(88,090) 2, 6 4 227,9 139,471 premium Ushs M Ushs 185,683 185,683 185,683 185,683 95,827 80,738 182,805 182,805 Ushs M Ushs 2017 Share 2,878 2,878 - 51,054 51,054 51,054 51,054 51,054 51,054 12,510 12,510 (12,510) Company dividends Proposed Ushs M Ushs ------Ushs M Ushs 1,546 1,546 2017 - - - - (179,000) (45,050) (12,510) 682,384 682,384 182,805 182,805 733,438 733,438 335,036 351,671 351,671 Ushs M Ushs Ushs M Ushs 43,933 43,933 51,054 51,054 51,054 51,054 5,499 5,499 2017 Total 841 841 - - - - 91 dfcu Group 2017 Annual Report and Financial Statements 92 dfcu Group 2017 Annual Report and Financial Statements Balance as at 31 December 2017 - related) (equity changes other from Total changes Proposed Dividends 2017 Dividends Proposed -related) (equity changes Other Total changes from financing cash flows cash financing from Total changes Umeme Limited – Demand deposits –Demand Limited Umeme finance term and –Overdraft Limited Bank dfcu Demand deposits and –Fixed Limited Company Insurance Jubilee Interest paid paid Interest Interest expense paid funds Borrowed b). Amounts due from related companies related from due b). Amounts rates. market prevailing the at interest accrue both which Limited Bank dfcu and Limited dfcu with held deposits and borrowings include companies related other to due Amounts rates. market prevailing the at interest earns which overdraft an to relate Limited Bank dfcu to due Amounts deposits Fund –Fixed Security Social National Bank Limited Bank dfcu a). Amounts due to related companies related to due a). Amounts below: shown are parties related with balances and Transactions directorships. common or shareholdings common through Limited dfcu to related are that companies other are There RELATED DISCLOSURES PARTY 42. acquired Borrowings Dividends paid premium share from Proceeds capital share of issue from Proceeds flows cash financing from Changes 2017 1January at as Balance Company (182,000) (21,770) 181,500 181,500 20,669 5,226 3,625 3,625 - - - - - 9,464 9,464 5,499 5,499 14,963 14,963 Ushs M Ushs 23,154 20,361 ------8,345 14,963 2017 Group ------Ushs M Ushs 185,683 185,683 185,683 182,805 182,805 6,649 2,738 2016 2,878 2,878 108 - 51,054 51,054 51,054 51,054 12,510 12,510 (12,510) ------Ushs M Ushs Ushs M Ushs 17,321 51,054 1,546 2,376 2017 2017 Company - (182,000) (12,510) (21,770) 182,805 182,805 204,271 204,271 181,500 255,325 Ushs M Ushs Ushs M Ushs 20,669 51,054 51,054 51,054 51,054 30,078 14,902 5,499 5,499 2,853 2016 2016 841 - Post-employment benefits benefits employment short-term other and Salaries The interest expense there on is Ushs 0.5 million isUshs (2016: on there expense 0.4 Ushs million). interest The At 31 December market rates. market prevailing the at interest earn and demand on due are which Limited Bank in dfcu held deposits include These e). Key management compensation (Group) by directors Deposits d). Plc (CDC) Group CDC shareholders to due c). Borrowings • • follows: as employees to loans and directors to loans include customers to Advances companies connected to directors connected companies / directors and employees to advances on earned income Interest incurred Interest expense incurred expense Interest Net increase/(decrease) At 1January outstanding borrowings due to CDC. to due borrowings outstanding 2017, 31 at As December Limited. in dfcu were shareholding there a9.80% Plc (CDC) holds Group CDC connected persons (2016: persons Nil). Ushs connected closely or directors by controlled companies and 2017, directors to At 31 December advances no were there 16,753 Ushs to 2017, amounted At 31 million December (2016: employees to 15,072 advances Ushs million). Ushs M Ushs 5,196 5,817 2017 621 Group Ushs M Ushs 5,339 5,918 5,918 2016 579 Ushs M Ushs M Ushs Ushs M Ushs 36,370 2,396 (665) 2017 2017 2017 392 734 69 Ushs M Ushs 2017 242 207 Company 35 Ushs M Ushs Ushs M Ushs Ushs M Ushs Ushs M Ushs 36,150 1,916 2016 2016 2016 2016 260 260 734 327 121 613 - 93 dfcu Group 2017 Annual Report and Financial Statements 94 dfcu Group 2017 Annual Report and Financial Statements key management compensation) in (included benefits short-term emoluments: Other directors as services for Fees nearest millions (Ushs M). (Ushs millions nearest the to off rounded shillings in Uganda presented are statements financial separate and consolidated These PRESENTATION46. CURRENCY disclosure. or recognition required that events subsequent any identify not did Group the evaluation, the on Based issued. be to available was position financial of 2018, statement March the 28 date the through events subsequent evaluated has Management EVENTS SUBSEQUENT 45. were; 31 at as December commitments Capital Centre. Financial Namanve of construction ongoing the and upgrades software to relate mainly commitments Capital CAPITAL COMMITMENTS 44. loss. or profit to charged been has million 5,036 (2016: Ushs 2017 contributed 31 3,027 Group Ushs December million), the ended year which the For employee. and employer the between shared are and statute local by determined are Fund. Contributions Security Social National the scheme, benefit retirement statutory the to contributions makes also Group The 1,687 Ushs to million (2016: amounted scheme the 1,413 Ushs under million). loss or profit to charged 2017, cost 31 December benefit ended year the retirement Group During the scheme. this under contributions annual the beyond benefits retirement of payment the for obligation material other no has 7.5% Group 7.5% The of arate salary. at contribute basic pay. their of scheme basic Employees of the to contributions annual make to isrequired Group The scheme. in this participate to eligible are employees Group’s all the of substantially and scheme benefit retirement contribution in adefined participates Group The OBLIGATIONS BENEFIT RETIREMENT 43. Directors’f). remuneration Authorised and contracted contracted not but Authorised Ushs M Ushs Ushs M Ushs 10,404 10,404 Group Group 1,207 1,207 2017 2017 - - Company Ushs M Ushs Ushs M Ushs 6,589 6,589 1,117 2016 2016 889 228 - Ushs M Ushs Company Ushs M Ushs 8,712 8,712 2017 2017 128 128 - - Ushs M Ushs Ushs M Ushs 3,674 3,674 2016 2016 201 201 - - branches andover100ATMs Bigger andStrongerwith67 Ishaka Rushere Amuru Kyengera Gulu University Abayita Ababiri IUIU 95 dfcu Group 2017 Annual Report and Financial Statements 96 dfcu Group 2017 Annual Report and Financial Statements Notes 2 dfcu Group 2017 Annual Report and Financial Statements www.dfculimited.com +256 312 152 300 TEL: +256 414 351 000 P.O. Box 2767 Kampala Uganda Plot 26, Kyadondo Road