annual report & financial statements 2015 - kenya power … · 2018. 3. 5. · co-op trust...
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Annual Report& FinancialStatements
2015
CON
TEN
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Trustees and Professional Advisors About Kenya Power Pension FundFund Perfomance HighlightsFive Year SummaryChairman’s Report Board of TrusteesSecretary’s Report Corporate Governance
Statutory InformationReport of the Board of TrusteesStatement of Trustees ResponsibilitiesReport of the Independent Auditor
Financial Statements:Statement of Changes in Net Assets Available For BenefitsStatement of Net Assets Available For BenefitsStatement of Changes in Members’ FundsStatement of Cash FlowsNotes to the Financial Statement
45-8
910
12-1618-2
21-2324-27
2829
30-31
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333435
36-67
We at Kenya Power Pension Fund are proud to have been the 1st Runners Up in the Not for profit category at the 2015 FiRe Awards.
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TrusteesLawrence Yego - ChairmanKosgey KolilDavid SongokDr. Ben ChumoErnest NadomeMediatrice WangiraSalim AthmanAbubakar SwalehBeatrice Meso
SecretaryHenry Kyanda
Registered officeRetirement Benefits Scheme TrusteesStima PlazaKolobot Road, ParklandsP.O. Box 1548-00600Nairobi
Investment ManagersCo-op Trust Investment Services LimitedP.O. Box 48231 - 00100Nairobi
Stanlib Kenya LimitedP.O. Box 72866 - 00100Nairobi
CustodianKenya Commercial Bank LimitedP.O. Box 30664 - 00100Nairobi
BankersCo-operative Bank of Kenya LimitedP.O. Box 48231Nairobi
Principal Legal AdvisorsKaplan & Stratton AdvocatesP.O. Box 40111 - 00100Nairobi
AuditorsErnst & YoungCertified Public AccountantsKenya Re Towers, UpperhillOff Ragati Road.P.O. Box 44286 - 00100Nairobi
ActuariesAlexander Forbes Financial Services (E.A) LimitedP.O. Box 52439 - 00100Nairobi
Trustees and Professional Advisors About Kenya Power Pension Fund
The Kenya Power & Lighting Company Limited, Staff Retirement Benefits Scheme 2006 (“the Fund”) was established by a Trust Deed and started operations on 1 July 2006. The Fund was formed for the employees of the Kenya Power & Lighting Company Limited (“Kenya Power”) as a result of the closure of Kenya Power’s Defined Benefit Scheme (“DB Fund”) as per the recommendations of the actuarial report of 31 December 2005. The Fund is governed by a Trust Deed and Rules which have been approved by the Retirement Benefits Authority (RBA).
The main purpose of the Fund is the provision of cash benefits to the members upon attainment of the retirement age of sixty years, and where applicable, benefits for the dependants of deceased members. The Fund is approved by Kenya Revenue Authority as a retirement benefits scheme for the purposes of the Income Tax (Re-tirement Benefits) Rule No. 4 and is treated as an ‘exempt approved scheme’ for the purposes of that Act (1st Schedule 14). However, income generated from contributions in excess of the Kshs 20,000 per month per member statutory limit is subject to tax.
VISIONTo be the best defined contribution Fund in Kenya.
MISSIONTo prudently manage members’ funds and seek to provide superior returns consistently for decent life in retirement
CORE VALUES• Integrity• Accountability• Courteous service• Stewardship
Fund BenefitsThe Fund is a Defined Contributions Scheme. Any member who retires on normal retirement date or before receives an annuity for life of such an amount as shall be then purchased by his Fund Credit according to immediate annuity rates applicable at his/her age available at the time of purchase from an insurance company (which is also a registered Insurer) selected by the member.
MembersThe members of the Fund comprises of active in service employees and deferred members for both Kenya Power and Lighting Company Ltd and Kenya Electricity Transmission Company Ltd. Eligible mem-bers are permanent and pensionable employees.
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The Fund’s objective is to achieve a superior return on invest-ment for its members through prudent investment of member’s fund. The return on investment for 2015 was 6.79%. (2014: 13.46%). The decline in performance was attributable to the volatility in capital markets which adversely affected valua-tions of government bonds and equities.
The asset of the Fund grew by Ksh 1.22 Billion during the year. (2014: 1.88 Billion). The decrease as compared to the previous year was attributed to the volatility in the capital markets.
The net asset available for members continues to grow steadily over the years. At the end of the current financial year, the Net assets available for members stood at 9.83 Billion (2014: 8.61 Billion).
About Kenya Power Pension Fund
The Fund is managed by a Board of Trustees and is established under a Trust as required by the Retirement Benefits Act. The day to day running of the Fund is carried out by the Secretariat of the DB Fund that supports the Board in meeting its objectives. The Secre-
tariat headed by the Trust Secretary works in liaison with the Fund service providers that include fund managers, custodians, actuar-ies, lawyers and auditors.
Fund Structure
Cust
odia
nFu
nd
Man
gers
Auditors
Actu
ary
Members(In service members,deferred members)
Board ofTrustees
SECRETARY
20110%
5%
10%
15%
20%
25%
30%
Return on investments
Year
% R
etur
n
-10%
-5%
5.5%
26.8
%
12.9
%
13.5
%
6.8%
201520142012 2013
20110
500
1,000
1,500
2,000
Increase in Net Assets
Year
Amou
ntKs
hs. M
illio
ns
470.
8
1,70
5.1
1,56
7.5 1,88
1.1
1,22
5.5
201520142012 2013
20110
2
4
6
8
10
12
Fund Growth
Year
Fund
Val
ue( K
shs.
Bill
ions
3.45
5.16
6.73
8.61 9.
83
201520142012 2013
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The Fund membership grew to 6,792 from 6,394 recorded in the previous year which is a 6% growth. This is mainly attributed to the higher number of new entrants compared to exiting mem-bers during the year..
Over the years the Fund has been able to maintain administra-tive expenses to the Fund Value below 1% which indicates pru-dent cost management.
20110.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
Admin Expenses to Fund Value
Year
%
0.70%
0.62
%
0.43
%
0.57
%
0.45
% 0.51
%
201520142012 2013
20115,800
6,000
6,200
6,400
6,600
6,800
Membership Trend
Year
Tota
l Num
ber
5,94
6 6,11
7
6,08
7
6,39
4
6,79
2
201520142012 2013
Fund Perfomance Highlights/KPIs
Net returns on investments
655.08 mKShs
1,005.76 m2014
Kshs
Net Surplus from dealing with members
618.02 mKShs
929.17 m2014
Kshs
Increase in Net Assets
1,225.50 mKShs
20141,881.07 mKshs
Fund Value
9,833.10 mKShs
8,607.60 m2014
Kshs
Deferred Members
328KShs
3182014
Kshs
Active Members
6,464KShs
20146,076Kshs
Contributions Receivable
1,089.40 mKShs
1,031.94 m2014
Kshs
Benefits Payable
471,383 mKShs
2014109.96 mKshs
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Contributions receivable Benefits payable Net surplus from dealing with members Returns on Investments Net returns on investments Other income Administrative expenses Taxation Charge
Increase in Net Assets for the Year
ASSETS Investments & Property Other assets
Total assets
Liabilities Benefits payable Other Liabilities Tax Payable Total Liabilities
Net Assets available for Members
Represented by Members Funds
2011 Kshs ‘000’
678,317 (27,496)650,821
(156,911)940
(21,395)(2,683)
470,772
2011 Kshs ‘000’
3,402,474 3,469,232
6,871,706
412 12,126
2,684 15,222
3,454,010
3,454,010
2012 Kshs ‘000’
820,499 (37,910)782,589
950,795 -
(22,323)(5,990)
1,705,071
2012 Kshs ‘000’
5,114,648
72,488
5,187,136
293 23,572
4,191 28,056
5,159,080
5,159,080
2013 Kshs ‘000’
909,703 (57,870)851,833
755,464 4,023
(38,022)(5,842)
1,567,456
2013 Kshs ‘000’
6,749,189 101,009
6,850,198
84 122,679
899 123,662
6,726,536
6,726,536
2014 Kshs ‘000’
1,031,937 (109,963)
921,974
1,005,762 -
(38,900)(7,769)
1,881,067
2014 Kshs ‘000’
8,476,428 177,717
8,654,145
161 44,179
2,202 46,542
8,607,603
8,607,603
2015 Kshs ‘000’
1,089,401(471,383)
618,018
665,075 -
(50,434 (7,164)
1,225,495
2015 Kshs ‘000’
9,780,838148,342
9.929,180
1,158 92,998
- 94,924
9,833,098
9,833,098
Statement of Net Assets available for Benefits
Five year summary
Statement of changes in Net Assets available for Benefits
The Fund has embarked on elaborate properties development which will provide superior returns as well as a hedge against inflation.
The housing development is currently in progress and is situated along Bogani Road in the leafy suburb of Karen, approximately 20 Kilometers from Nairobi Central Business District. Upon comple-tion, the development shall comprise forty five (45) four and five bedroom town houses each on a half an acre plot.
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II am pleased to present the Kenya Power Pension Fund Annual Report and Financial Statements for the year ended 31 December 2015. In what proved to be a challenging period, the Fund was able to return a solid performance for the year and it is evidence of the Trustee’s commitment to deliver consistent value for our members.
Economic HighlightsThe Kenyan economy expanded by 5.6% in 2015 which was a slight improvement compared to a 5.3% growth in 2014. This growth was mainly supported by a stable macroeconomic environment and improvement in outputs of agriculture; construction; finance and insurance and real estate.
Overall inflation eased from 6.9% in 2014 to 6.6% in 2015 mainly due to lower prices of energy and transport. Monthly inflation rates fluctuated between 5.5% and 8.0% but were largely con-tained within the Central Bank’s target throughout the year.
On the foreign exchange front the Kenya Shilling lost 12.9%, 7.0% and 0.8% against the Dollar, Sterling Pound and Euro respectively. It however gained 18.8% and 7.8% against the Rand and Uganda shilling respectively. The local unit closed the quarter at KES 102.3 to the US Dollar. Global dollar strengthening, rising import demand especially for infrastructure related expendi-tures, a decline in tourism revenues and capital outflows contributed to the depreciation of the Shilling in the year.
The Stock markets declined in 2015, with the NSE 20 index and the NASI declining 21% and 10.6% respectively. This downturn was supported by a host of local and global factors. Monetary policy tightening in response to inflationary pressures and exchange rate volatility amidst a glob-al strengthening of the dollar as well as rising local fixed income yields saw investors avoid the stock market in favor of fixed income and money markets.
Interest rates were volatile in 2015. The 91 day rate averaged 10.9% for the year after rising to levels of 21.4% in October. The 182 day and the 364 Treasury Bills averaged 12.2% and 12.9% respectively after touching levels of 21.4% and 21.5% respectively in October.
Rising value of land continued to pose the biggest challenge to stability in the property market for developers, occupiers/owners and investors as suitable land for development continued to be scarce hence property prices will continue to remain relatively high.
Regionally, Rwanda’s economy registered 6.9% growth in 2015 which was slightly lower than the 7% registered in 2014. The Uganda economy expanded by 4.6% for the financial year 2015 which was lower than the growth of 5.3% recorded the prior year 2014 while Tanzania’s economy grew by 7.1% compared to 7.0% in the previous year.
Pension Industry and Regulatory EnvironmentThe Pension industry assets have continued to increase significantly over the years. The pension industry asset value as at the end of 2015 was over Kshs 0.8 trillion. The coverage by the existing Schemes has continued to extend to a greater population in the country backed by increased awareness of the importance of saving for retirement. The industry regulator Retirement Benefits Authority, (RBA) has played a major role in creating national awareness of the sector. Through the regulator, various innovative products including occupational, individual and umbrella Schemes have been developed to help alleviate old age poverty.
Through the Trustee Development Program Kenya (TDPK), Trustees of all Pension Schemes
acquire knowledge on scheme fundamentals, governance, and administration among other skills. The TDPK training has played an important role in ensuring that there is prudent management of Funds and thereby, safeguarding nationwide confidence in the management of the pension funds. All Trustees of pension schemes in Kenya are required to undergo the training by 30th June 2016.
During the year, legislative and regulatory changes were intro-duced. Effective 1st January 2016, annual reports and accounts should be submitted to the Retirement Benefits Authority within three months after end of the financial year. The regulations were amended to provide that the term of office of Trustees shall not exceed three years but shall be subject to renewal for a further term of three years.
On the investments front, the regulations were amended to allow for ten percent (10%) investment in venture capital and private equity licensed by Capital Markets Authority. Retirement Benefits Schemes shall also not invest more than fifteen (15%) of the pen-sion funds in one issue in any asset class and the total available se-curities issued by a single issuer except for government securities.
The other amendment was on the winding up of defined benefits scheme, where the scheme surplus shall be shared equally be-tween the members and the sponsor. If the total accrued liabilities are being transferred to a different scheme any surplus shall be allocated equally between the members and the sponsor.
Fund’s Financial PerformanceThe Fund achieved an annual net return of 6.79% in 2015 (2014: 13.46%). The total asset market value of the Fund as at the end of the year stood at KShs. 9.83 billion up from KShs. 8.61 billion at the end of 2014.
The Board of Trustees together with the Fund’s investment man-agers endeavor to prudently invest available funds in an optimized portfolio that yield favorable returns. The overall investment policy is geared towards the achievement of superior investment returns relative to the growth of liabilities. The Trustees aim to achieve a long- term return on investments in excess of inflation through strategic asset allocation and continuous performance monitoring.
Corporate Governance and AwardsKenya Power Pension Fund is committed to ensuring that its sys-tems, procedures and practices reflect a high standard of corporate governance. An effective corporate governance system is critical in fostering a culture that values ethical behavior, integrity and re-spect to protect members and other stakeholders’ interests at all times.
CHAIRMAN’S REPORT CHAIRMAN’S REPORT
The Fund participated for the fourth time in the Financial Report-ing (FiRe) awards in year 2015, and emerged the first runners-up in the Not for Profit Organizations category. The FiRe Award is an initiative of the Institute of Certified Public Accountants of Ken-ya (ICPAK) the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) and aims recognising of excellence in financial reporting, fostering sound corporate governance practices and enhancing corporate social responsibility and environmental reporting in East Africa.
Board Composition I would like to report to you that during the period under review, the composition of the Board did not change and it remains compliant with the requirement of the Retirement Benefits Act
Declared Interest The Trustees declared an annual interest rate of 6.79%. The Fund adopted a quarterly interest declaration policy during the year 2015. This policy ensures that the Fund maintains a zero reserve with members exiting the Fund during the year obtaining a prorated rate of return at the point of exit. OutlookIn 2016 the Trustees intend to continue enhancing its investments footprint on alternative assets and property developments in order to mitigate against the risks associated with capital market volatili-ty. The Trustees places member engagement at the center of its ac-tivities and therefore will continue enhancing the member offering and communication through innovations.
AppreciationI would like to thank my fellow Board members for their selfless contribution to the Fund over the past year and for supporting me as the Chairman.
The Secretary to the Board and his team who worked tirelessly to ensure prudent management of the day to day operations of the Fund.
I would not forget the Sponsor and the stakeholders of the Fund who have also played a significant role in the Fund’s great perfor-mance and most importantly you members for your continued sup-port and feedback.
Lawrence Yego ChairmanThe KPLC Staff Retirement Benefits Scheme 2006
Lawrence Yego Chairman
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NNinafuraha kuwasilisha ripoti na taarifa za kifedha za kila mwaka za Hazina ya Malipo ya Uzee-ni ya wafanyikazi wa Shirika la Kawi, Kenya (Kenya Power Pension Fund) kwa mwaka uliokami-lika 31 Disemba 2015. Kwa kile kilichojitokeza kama kipindi chenye changamoto kubwa, Hazina iliweza kufikia kiwango imara zaidi cha matokeo kimwaka na ni ushahidi tosha wa kujitolea kwa Hazina katika kurejesha thamani thabiti kwa wanachama wake.
Vidokezo Muhimu vya Kiuchumi
Uchumi wa taifa la Kenya ulipanuka kwa asilimia tano nukta sita (5.6%) kwa mwaka wa 2015 ambao uliashiria kuimarika kiasi ikilinganishwa na ukuaji wa asilimia tano nukta tatu (5.3%) katika mwaka wa 2014. Ukuaji huu ulisaidiwa pakubwa na mazingira dhabiti ya uchumi-jumla na kuimarika kwa mazao katika sekta ya kilimo; ujenzi; fedha na bima pamoja na ile ya mali isiyohamishika (real estate).
Mfumuko jumla wa bei ulipungua kutoka asilimia sita nukta tisa (6.9%) mwaka wa 2014 hadi asilimia sita nukta sita (6.6%) mwaka wa 2015. Hili lilisababishwa pakubwa na bei za chini za kawi na usafiri. Viwango vya mfumuko wa bei kwa kila mwezi vilibadilikabadilika baina ya asili-mia tano nukta tano (5.5%) na asilimia nane nukta sufuri (8.0%). Hata hivyo, vilizidi kudhibitiwa katika mizani iliyoratibiwa na Benki Kuu katika mwaka mzima.
Kwenye upande wa ubadilishaji wa fedha za kigeni, shilingi ya Kenya ilipoteza asilimia kumi na mbili nukta tisa (12.9%), asilimia saba nukta sufuri (7.0%) na asilimia sufuri nukta nane (0.8%) dhidi ya dola ya Marekani, pauni ya Uingereza na Yuro mtawalio. Hata hivyo, iliweza kufaidi kwa asilimia kumi na nane nukta nane (18.8%) na asilimia saba nukta nane (7.8%) dhidi ya randi ya Afrika Kusini na shilingi ya Uganda mtawalio. Kitengo cha ndani kilifunga robo mwaka kwa shilingi mia moja na mbili senti tatu za Kenya (KES 102.3) kwa dola ya Marekani. Kuimarika ngu-vu kwa dola kimataifa, kuongezeka kwa mahitaji ya kuagiza kutoka nje haswa katika matumizi yanayohusiana na miundo-msingi, kuzorota kwa mapato ya utalii na kutimka kwa mtaji kulichan-gia sana kushuka kwa thamani ya shilingi katika mwaka uliopita.
Soko la Hisa lilizorota kwa mwaka 2015, huku kiwango cha NSE 20 na kile cha NASI kikianguka kwa asilimia ishirini na moja (21%) na asilimia kumi nukta sita (10.6%) mtawalio. Kuzoroteka huku kulitokana na sababu kadhaa humu nchini na kimataifa. Kukazwa kwa sera za kifedha kuk-abiliana na shinikizo la mfumuko wa bei na hali tete ya kiwango cha ubadilishanaji fedha kati ya hali ya kuzidi kupata nguvu kwa dola kimataifa; pamoja na kupanda kwa mapato yasiyobadilika ya mavuno ya ndani kulisababisha wawekezaji waliepuke soko la hisa na kupendelea soko la mapato yasiyobadilika na lile la kifedha.
Viwango vya riba vilikuwa tete katika mwaka 2015. Kiwango cha siku ya tisini na moja (91 day rate) kilikuwa katika kiwango wastani cha asilimia kumi nukta tisa (10.9%) kwa mwaka baada ya kupanda kufikia kiwango cha asilimia ishirini na moja nukta nne (21.4%) mwezi Oktoba. Bili za Hazina (Treasury Bills) kwenye siku ya 182 na 364 zilikuwa kiwango wastani cha asilimia kumi na mbili nukta mbili (12.2%) na kumi na mbili nukta tisa (12.9%) mtawalio baada ya kufikia kiwango cha asilimia ishirini na moja nukta nne (21.4%) na asilimia ishirini na moja nukta tano (21.5%) mtawalio katika mwezi wa Oktoba.
Kuendelea kupanda kwa thamani ya ardhi kulizidi kutoa chan-gamoto kubwa kwenye udhabiti wa soko la mali kwa waendeleza-ji, wakaaji au wamiliki na wawekezaji kadri ardhi mwafaka kwa waendelezaji inavyozidi kuwa adimu na hivyo bei za mali zitasalia kuwa juu kwa kiasi fulani.
Kwenye kanda, uchumi wa nchi ya Rwanda ulisajili ukuaji wa asilimia sita nukta tisa (6.9%) katika mwaka wa 2015 ambacho ni kiwango cha chini kidogo ikilinganishwa na asilimia saba (7%) mwaka 2014. Uchumi wa Uganda ulipanuka kwa asilimia nne nukta sita (4.6%) katika mwaka wa kifedha wa 2015, hiki kikiwa kiwan-go chini ya kile cha asilimia tano nukta tatu (5.3%) kilichosajiliwa mwaka uliotangulia wa 2014 nao uchumi wan chi ya Tanzania uli-kua kwa asilimia saba nukta moja (7.1%) ikilinganishwa na asilimia saba nukta sufuri (7.0%) mwaka uliotangulia.
Sekta ya Pensheni/Malipo uzeeni na mazingira ya udhibitiMali ya sekta ya Pensheni imeendelea kuongezeka pakubwa kadri miaka ipitavyo. Thamani ya mali ya sekta kufikia mwishoni mwa 2015 ilikuwa zaidi ya trilioni sufuri nukta nane (0.8 trillion). Mira-di iliyopo imezidi kuwafikia watu wengi nchini ikiungwa mkono na kuongezeka kwa ufahamu kuhusu umuhimu wa kuwekeza kwa ajili ya uzeeni baada ya kustaafu. Mdhibiti wa sekta, Mamlaka Sima-mizi ya Faida za Malipo ya Uzeeni (Retirement Benefits Authority), RBA imetekeleza wajibu muhimu katika kukuza na kuleta ufahamu kuhusu sekta hii kwa kiwango cha kitaifa. Kupitia kwa mdhibiti, bidhaa mbalimbali bunifu zimetengenezwa kufikia sasa ili kusaidia kupunguza umaskini uzeeni ukiwemo ule wa kitaaluma/kikazi, kib-inafsi na ule wa miradi jumla (umbrella schemes).
Kupitia kwa Mpango wa Kukuza Wadhamini, Kenya (Trustee De-velopment Program Kenya-TDPK), wadhamini wa miradi yote ya pensheni hupata maarifa kuhusu misingi, utawala na usimamizi miongoni mwa stadi nyinginezo. Mafunzo yanayotolewa na TDPK yamechukuwa nafasi muhimu sana katika kuhakikisha kuwa kuna usimamizi wa busara wa Mfuko na hivyo kulinda imani ya taifa zima katika usimamizi wa mfuko wa malipo ya uzeeni au pensheni. Wasimamizi wote wa miradi ya malipo ya uzeeni, yaani pensheni, wanatakiwa wawe wamepokea mafunzo haya kufikia tarehe 30 Juni 2016.
Katika mwaka, mabadiliko ya kisheria yalikuwepo kwenye bajeti ya mwaka 2015/2016. Kuanzia Januari Mosi 2016, ripoti za kila mwaka na akaunti zote lazima ziwasilishwe kwenye Mamlaka ya Usimamizi wa Faida za Malipo ya Uzeeni (RBA) katika kipindi cha miezi mitatu baada ya kukamilika kwa mwaka wa kifedha. Sheria za udhibiti zilibadilishwa ili kutoa muongozo kuwa kipindi cha usi-mamizi cha wadhamini ofisini kisizidi miaka mitatu ingawa hili lita-ambatana na uwezekano wa kuchukuwa hatamu upya kwa kipindi kingine cha miaka mitatu.
RIPOTI YA MWENYEKITI RIPOTI YA MWENYEKITI
Ili kutoa nafasi zaidi kwa miradi ya pensheni kuweza kuwanda kwa namna mbalimbali za uwekezaji, shria za udhibiti zilibadilishwa kuwezesha asilimia kumi (10%) ya uwekezaji katika mtaji mradi (venture capital) na mtaji binafsi uliokubaliwa na Mamlaka ya Soko la Mtaji (Capital Markets Authority). Miradi ya faida za malipo ya Uzeeni, haitaruhusiwa kuwekeza zaidi ya asilimia kumi na tano (15%) ya mfuko wa pensheni kwenye toleo moja katika kitengo chochote kile cha mali na jumla dhamana (total securities) iliyopo inayotolewa na mtoaji mmoja ijapokuwa dhamana za kiserikali.
Iwapo hali yoyote ya kuvunjwa kwa mradi wowote wa faida mah-susi, pale ambapo mradi huo una faida iliyozidi, kutakuwepo uga-wanaji wa asilimia hamsini kwa hamsini ya faida yoyote iliyozidi ki-wango rasmi kwa wanachama na mdhamini. Ikiwa jumla ya hasara zilizokusanywa zinahamishwa kwenye miradi mingine, kiwango chochote kilichozidi kitatengwa kwa usawa baina ya wanachama na mdhamini.
Matokeo/Utendaji wa kifedha wa hazinaHazina ilipata faida jumla ya pato la mwaka ya asilimia sita nukta saba tisa (6.79%) kwenye mwaka wa 2015 (mwaka 2014: asilimia kumi na tatu nukta nne sita (13.46%)). Jumla ya thamani ya Hazina kisoko kufikia mwisho wa mwaka ilikuwa shilingi za Kenya bilioni tisa nukta nane tatu (KShs 9.83 billion) hili likiwa ongezeko kutoka bilioni nane nukta sita moja (KShs 8.61 billion) shilingi za Kenya mwaka wa 2014.
Bodi ya Wadhamini pamoja na mameneja wa Hazina wa uwekezaji wanaazimia kuwekeza fedha ziliopo kimakinifu kwa njia pevu zaidi ambayo itaweza kurejesha mapato yakuridhisha. Sera ya jumla ya uwekezaji inalenga kufanikisha kufikiwa kwa maekezo bora sawia na kukua kwa madeni. Wadhamini wanakusudia kufikia mapato ya mda mrefu kwenye maekezo kwa hali iliyozidi ya mfumuko kwa kupitia mgao madhubuti wa mali na uchunguzi wa karibu wa kuf-watilia matokeo kiutendaji.
Usimamizi wa kiushirika na tuzoHazina ya pensheni ya Wafanyikazi wa Shirika la Kawi, Kenya in-ajitolea zaidi kuhakikisha kuwa mfumo, taratibu na vitendo vyake vinadhihirisha kiwango cha juu zaidi cha usimamizi kiushirika. Mfumo wa kiufanisi wa usimamizi kiushirika ni muhimu zaidi katika kujenga utamaduni unaothamini hulka njema, uadilifu, na heshima ili kulinda wanachama na maslahi ya washikadau wengine wakati wote.
Hazina ilishiriki kwa mara ya nne katika Tuzo za Utoaji Ripoti za Kifedha (Financial Reporting- FiRe) mwaka 2015 na kuibuka wa pili katika kitengo cha Isiyo kwa Faida (Not for Profit Category). Tuzo za FiRe ni juhudi ya Taasisi ya Wahasibu wa Umma Wali-oidhinishwa wa Kenya (Institute of Certified Public Accountants
Lawrence Yego Mwenyekiti
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of Kenya-ICPAK), Mamlaka ya Masoko ya Mtaji (Capital Markets Authority-CMA) na Soko la Nairobi la Ubadilishanaji Hisa (Nairo-bi Securities Exchange-NSE) na kutambua ubora wa kutoa ripoti za kifedha, kukuza hulka njema za usimamizi wa mashirika na kui-nua uwajibikaji wa ushirika kijamii wa mashirika na utoaji ripoti kimazingira Afrika Mashariki.
Uwanabodi JumlaNingependa kuwataarifu kuwa kwa kipindi kinachorejelewa, uwa-nachama wa Bodi ya Hazina haukubadilika kwenye mwaka 2015 na inasalia yenye kutimiza matakwa ya sheria ya faida za Malipo ya Uzeeni.
Matangazo ya Riba Wadhamini walitangaza kiwango cha riba cha mwaka cha asilimia sita nukta saba tisa (6.79%). Hazina ilikubali kutumia sera ya kutan-gaza riba ya robo kipindi katika mwaka wa 2015. Sera hii inahaki-kisha kuwa hazina inadumisha kiwango sufuri cha salio ya wana-chama wanaondoka kwenye Hazina katikati mwa mwaka na hivyo kufikia kiwango kilichoidhinishwa cha mazao wakati wa kuondoka.
MtazamoKatika 2016, Wadhamini wananuia kuendelea kuimarisha alama zake kwenye mali yake mbadala na uendelezaji wa mali zake ili kujinasua dhidi ya hatari zinazohusiana na hali tete ya soko. Wad-
hamini wanaweka ushiriki wa wanachama kwenye kitovu cha shu-ghuli zake na hivyo wataendelea kuboresha utoaji na kuwasiliana kupitia njia bunilizi.
ShukraniNingependa kuwashukuru wanabodi wenzangu kwa kujitoa ki-kamilifu kwa Hazina kwa mwaka mzima uliopita na kwa kunipa msaada wenyu kama mwenyeketi. Katibu wa bodi na timu yake pia wamefanya kazi kubwa bila kuchoka kuhakikisha usimamizi busara wa shughuli za kila siku za Hazina.
Kamwe siwezi kumsahau mdhamini na washikadau wengine wa Hazina ambao wametekeleza jukumu muhimu mno katika ufanisi wa Hazina na zaidi ya yote nyinyi wanachama kwa uungaji mkono na utoaji taarifa bila kukoma.
Lawrence YegoMwenyekitiMradi wa Hazina ya Malipo ya Uzeeni ya Wafanyikazi wa Kampuni ya Kawi, Kenya. 2006
RIPOTI YA MWENYEKITI
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Hazina ilipata faida jumla ya pato la mwaka ya asilimia sita nukta saba tisa (6.79%) kwenye mwaka wa 2015 (mwaka 2014: asilimia kumi na tatu nukta nne sita (13.46%)). Jumla ya thamani ya Hazina kisoko kufikia mwisho wa mwaka ilikuwa shilingi za Kenya bilioni tisa nukta nane tatu (KShs 9.83 billion) hili likiwa ongezeko kutoka bilioni nane nukta sita moja (KShs 8.61 billion) shilingi za Kenya mwaka wa 2014.
He was appointed to the Board in 2006 and is the current Chairman of the Board. He is a Certified Public Accountant of Kenya (CPA K) and is a Member of the Institute of Certified Public Accountants of Kenya (ICPAK). He has worked at Kenya Power and Lighting Company Ltd for over 27years. He has wealth of experience in finance. He is a Certified Pension Fund Trustee.
Lawrence YegoChairman
BOARD OF TRUSTEES BOARD OF TRUSTEES
She was appointed to the Board in No-vember 2014. She holds a Master of Laws (LL.M), a Bachelor of Laws (LL.B Hons) and a Master of Business Administration (MBA). She also holds Post Graduate Di-ploma in Law and is an advocate of the High Court of Kenya, a Certified Public Secretary, an Arbitrator, a Commissioner for Oaths and a Notary Public. She has proficiency in Public and Private Sector Administration, governance, policy for-mulation and implementation, Company Secretarial practice, legal and regulatory matters and in electricity trade. Currently she is the General Manager, Corporate Affairs and Company Secretary in Kenya Power and Lighting Company Ltd. She is a Certified Pension Fund Trustee.
Beatrice Meso
He was appointed to the Board in 2006. He holds a PhD in Human Resources Manage-ment, a Masters of Business Administra-tion (MBA) and a Bachelors of Arts (B.A) degree. He is the Chief Executive Officer and Managing Director of The Kenya Pow-er and Lighting Company Ltd. He has wide experience in HR and management span-ning over 27 years.
Dr. Ben Chumo
He was appointed to the Board in September, 2003. He holds a Master of Arts (MA) in La-bour Management Relations, Bachelor of Arts (B.A) Degree (Hons). He is the General Sec-retary of the Kenya Electrical Trades & Allied Workers Union (KETAWU) a position he has held for the past 13 years. He is well versed in energy, human resources and labour matters, having worked for The Kenya Power and Light-ing Company Ltd and Kengen for 16 years. He is the Chairman of the Board of Trustees for the Kengen Company Limited Staff Retirement Benefits Scheme (DC Scheme) and a Trustee of Kengen Company Limited Staff Retirement Benefits Scheme (DB Scheme). He is the 1st Assistant Secretary General for Central Or-ganisation of Trade Union (COTU-K) and the Gazetted Vice Chairman of The National In-dustrial Training Authority (NITA). He is also the Chairman of The National Industrial Train-ing Authority Retirement Pension Scheme. In addition he is a member of The Pre-Fea-sibility Study (PFS) Committee of the Kenya Nuclear Energy representing COTU (K) and is The Chairman of Tom Mboya Labour College based in Kisumu. He is a Certified Pension Fund Trustee.
Ernest Nadome
He was appointed to the Board in Novem-ber 2014. He holds a Master of Business Administration (MBA), a Bachelor of Ed-ucation Degree, and a Higher Diploma in Human Resource Management. He has over 15 years corporate experience in the Human Resource Management, FMCG, Manufacturing, Finance and Media. Previ-ously, Mr. Swaleh worked for Gulf African Bank as a Director in Human Resource & Shared Services. He has also served as the Group Senior HR Manager at Nation Media Group. Mr. Swaleh is an associate member of Kenya Institute of Personnel Management. Currently, he is the General Manager, Human Resources & Administra-tion in Kenya Power and Lighting Company Ltd. He is a Certified Pension Fund Trustee.
Abubakar Swaleh
She was appointed to the Board on 27th July, 2013. She holds a Master of Arts -Industrial Relations and Human Resource Management, a Bachelors of Arts in Ad-ministration, Post- graduate Diploma in Human Resource Management and Post- Graduate Diploma in Projects Manage-ment. She is a Member of the Chartered Institute of Personnel Development (CIP-D)-UK and Institute of Human Resource Management. Currently she works as a Human Resources Officer in Kenya Power. She is a Certified Pension Fund Trustee.
Mediatrice Wangira
He was appointed to the Board on 27th July, 2013. He Holds a Master of Business Administration in Information Systems, Bachelor of Arts degree in Maths and Eco-nomics, Diploma Human Resources Man-agement, Higher Diploma (IMIS,UK) and Certified Advanced Business Application Programming (ABAP) consultant. He pre-viously worked with the Fund secretariat since 1999 initiating the computerisation of benefits administration and supporting the ICT division in the scheme, he has a wealth of experience in pension industry. Currently he works as a Chief Systems An-alyst in Kenya Power and Lighting Compa-ny Ltd supporting SAP and workflow man-agement systems. He is a Certified Pension Fund Trustee.
Salim Athman
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TThe Kenya Power and Lighting Company Limited Staff Retirement Benefits Scheme 2006 registered positive growth in the past year despite the poor performance in the capital markets. The positive performance was achieved through close monitoring of performance and investment strategies, including keen focus on achieving long term investment objec-tives. The Trustees have continued to ensure the Fund performance remains favorable and continues to provide the best possible benefits to its members upon retirement in line with its vision “To be the best Defined Contribution Pension Fund in Kenya.
STRATEGY & PLANNINGThe Funds key strategic pillars are Fund administration, investment risk and returns, cus-tomer service, property development, cost management, corporate governance and regu-latory compliance.
In 2015, annual corporate objectives of the Fund were set and performance was monitored through performance targets evaluation to ensure the ultimate achievement of the specific laid out objectives.
FUND ADMINISTRATIONThe Defined Contribution Fund has outsourced administrative functions to the Secretariat of the Defined Benefits Fund. The following functions have been outsourced:
• Scheme Administration• Finance & Investments• Property Management & Development• Risk Management• Customer Service
OUTLOOKThe year 2016 will be the cycle for the review of the strategic plan. In this review the Fund will work towards putting in place strategies to further enhance the return on investments as well as mitigating the effects of the investments risks. The Fund will work towards deepening its exposure in the alternative assets and property development. Members’ en-gagement remains a key pillar in the attainment of the Fund objectives and therefore will also be an area of focus during the review.
APPRECIATIONI would like to thank the Board of Trustees for their continued support and guidance as well as the stakeholders for their contributions in service delivery to the Fund.
SECRETARY’S REPORT
H.K. KyandaSecretaryThe KPLC Staff Retirement Benefits Scheme 2006
He was appointed Trust Secretary and Secretary to the Board in 2006. He holds a Master of Business Administration (MBA) Degree in Strategic Management and Bachelor’s degree in International Business Administration (Finance). He has wide experience in the Pensions industry having previously worked as the Princi-pal Pensions Officer at The Kenya Power and Lighting Company Ltd. Prior to joining Kenya Power and Lighting Company Ltd he worked in the investment management industry. He has a wide experience in pen-sions, banking and investments spanning over 15 years. He is also a Certified Pen-sion Fund Trustee.
Henry Kyanda Secretary
He was appointed to the Board on 30th September, 2008. He holds a Bachelor of Commerce (Finance option) degree, is a Certified Public Accountant of Kenya (CPA K) and is member of the Institute of Cer-tified Public Accountants of Kenya ICPAK. He also holds a Post Graduate Diploma in Labour Policy Studies. He is the Deputy General Secretary of the Kenya Electrical Trades & Allied Workers Union (KETAWU). He sits in the Board of the Productivity Centre of Kenya (PCK) as a nominee of the Central Organization of Trade Union (CO-TU-K). Prior to joining KETAWU he worked with Kenya Power and Lighting Compa-ny Ltd for 16 years in Finance where he gained a wide experience in finance and accounting. He is a Certified Pension Fund Trustee
Kosgey Kolil
He was appointed to the Board on 26th February, 2011. He holds a Bachelor of Arts Political Science and Public Admin-istration (Conflict and Peace Studies) degree, National Diploma in Human Re-source and Personnel Management, Ordi-nary Diploma in Electrical Installation and a Craft Certificate in Electrical Installation. He is the Chairman of the Kenya Electrical Trades & Allied Workers Union (KETAWU). Currently he works in Commercial Services department of The Kenya Power and Light-ing Company Ltd. He has experience in en-ergy and labour matters. He is a Certified Pension Fund Trustee.
David Songok
BOARD OF TRUSTEES
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M
H.K. KyandaKatibuMradi wa Hazina ya Malipo ya Uzeeni ya wafanyikazi wa Kampuni ya Kawa, Kenya 2006
Mradi wa Hazina ya Malipo ya Uzeeni ya Wafanyikazi wa Kampuni ya Kawi, Kenya mwaka 2006 imeendelea kusajili ukuaji yakinifu kwa mwaka uliopita licha ya hali mbovu ya utendaji katika masoko ya mtaji. Ufanisi huu muhimu uliafikiwa kupitia mbinu fwatilizi za kiutendaji karibu kari-bu na mikakati ya kiuwekezaji , ikihusisha malengo kimakini katika kufanikisha malengo ya mda mrefu ya uwekezaji. Wadhamini wameendelea kuhakikisha kuwa utendaji wa Hazina unasalia bora nan a hivyo kuendelea kutoa faida nzuri kubwea zaidi kwa wanachama baada ya kustaafu kama inavyoaiana na ruwaza “Kuwa Hazina bora ya Michango Mahsusi Nchini Kenya
UWEKEZAJI WA HAZINABodi ya Wadhamini inawajibika kufanya maamuzi yote ya kiuwekezaji. Zifwatazo ndizo dhima kuu za bodi kuhusiana na uwekezaji;
Bodi ya Wadhamini inawajibikia jukumu la kufanya maamuzi yote kuhusu uwekezaji. Yafwatayo ni majukumu makuu ya Bodi kuhusiana na uwekezaji;
• Kuratibu na kubadilisha mara kwa mara kwa mfumo wa mikakati na sera za uwekezaji • Kubaini sera za kipindi kirefu kwa kukabili hatari na mchanganyiko mali• Kubaini mali zinazoruhusiwa (kulingana na mipaka ya kisheria)• Kuweka viwango vya kutathmini utendakazi /viwango vya kuigwa na mipaka ya kupotoka
kutoka kwa malengo• Kuchagua na kufanya mapitio ya urekebishaji wa Uwekezaji na Wasimamizi Mali
Sekretarieti ya Faida Mahsusi kwa upande inawajibikia ufuatiliaji wa karibu karibu na kuripoti kuhusu utekelezwaji wa mkakati ya uwekezaji. Tathmini hii ya isiyokoma ni ya kuhakikisha kuwa Hazina inasalia yenye kuzingatia na kulenga kwenye malengo yake ya kiutendaji na endelevu ya kipindi kifupi na kirefu.
Hazina inaendelea kuwanda na kupanua uwekezaji wake katika mali na mitaji. Uwekezaji wote hufanywa huku ikizingatia kufuata kanuni za Mamlaka Simamizi ya Malipo ya Uzeeni (RBA) kwenye maekezo na Kauli ya Sera ya Uwekezaji ya Hazina. Katika mwaka wa 2015, Hazina ilipata kiwango cha asilimia kumi (10%) cha hisa miliki za maekezo kwenye Kampuni ya Nishati ya Gulf (Gulf Power Limited) pamoja na Mfuko wa Michango Mahsusi (Defined Contributions Fund).
MIKAKATI NA MIPANGONguzo za kimsingi za Hazina ni pamoja na Usimamizi wa Mfuko wa Hazina, Faida na Hatari za Maekezo, Huduma kwa Wateja, Uendelezaji wa Mali, Usimamizi wa Gharama, Utawala wa Ki-ushirika na Kuafikiana na Kanuni za Udhibiti.
Mwaka 2015, maazimio kiushirika ya kila mwaka ya hazina yaliwekwa na utendaji kufwatiliwa karibu kupitia kutathminiwa kwa malengo ili kuhakikisha hatimaye yale malengo maalumu yaliy-owekwa yamefanikishwa.
USIMAMIZI WA MFUKO WA HAZINAHazina ya Mfuko wa Michango Mahsusi imeweza kuratibu kwa Sekretariati ya Mfuko wa Faida Mahsusi huduma ya usimamizi ya kutoka nje. Huduma zifwatazo zimeratibiwa kutoka nje;
• Usimamizi Mradi• Fedha na Maekezo
RIPOTI YA KATIBU RIPOTI YA KATIBU
• Usimamizi Mali na Uendelezaji• Usimamizi wa Hatari ibuka• Huduma kwa Wateja
Mwaka 2016 utakuwa wa kipindi kamilifu cha kufanyia mapitia mpamgo-mikakati (strategic plan). Katika mapitio hayo, Hazina itajibidiisha katika kuweka mikakati madhubuti ili kuendelea kukuza mapato yanayotokana na uwekezaji pamoja na kukabili athari za hatari za maekezo. Hazina itaendelea kukuza mali mbadala na uendelezaji wa mali zake. Kushirikisha wanachama kunasalia kuwa nguzo muhimu katika kuafikia malengo ya Hazina na hivyo itakuwa pia sehemu ya kutiliwa mkazo katika shughuli hii ya mapitio yanayolenga kuimarisha mikakati.
SHUKRANINingependa kuishukuru Bodi ya Wadhamini kwa kuendelea kupeana msaada na mwelekeo pamoja na washikadau wengine wote kwa mchango wao katika kutoa huduma kwa Hazina.
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CORPORATE GOVERNANCE
Board of Trustees
The Board of Trustees takes cognizance of the fact that corporate governance is crucial in the management of the Fund. The Board has adopted best practice guidelines to achieve highest standards of compliance with the law, while ensuring the Fund is managed in manner to satisfy the interests of members and Sponsors. One of the Fund’s core principles, integrity, dictates the ethical code and decision making processes of the Trustees to provide effective leadership. Board members are appointed by the Fund’s members and Sponsors on a representative basis, with the necessary capac-ity and skill to drive performance of the Fund. Board Manual
The Board maintains a Board Manual which is a reference guide for the Board of Trustees of The Kenya Power Pension Fund (DC). It seeks to expound and explain the collective and individual powers, duties, obligations, responsibilities and liabilities of the Trustees. It also highlights the requirements of good corporate governance and ethical practice. The Board reviews this manual and the terms of reference of its Committees annually and makes any necessary or desirable amendments to ensure they remain consistent with the Board’s objectives, current law and best practice. Board Responsibilities
The Trustees’ guiding principle in decision making is based on the foundation of good governance and on our core values which are integrity, accountability, courteous service, stewardship and effi-ciency. Due diligence and care is taken by the Trustees in managing affairs of the Fund.
The Board Manual which sets out the Trustee’s roles and responsi-bilities are summarized below:
• Formulation and approval of the Fund’s vision, mission and core values and formulation & approval of the Fund’s strategy, business plan and principles of investments.
• Approval of annual budget and the final financial statements and interest on members’ balances.
• Review and evaluation of Investment Managers Performance and approval of risk management strategy.
• Settlement of major litigation/claims• Appointment of all service providers • Approval of banking/authority levels, policies, procedures and
manuals• Periodic formulation and review of ICT policies, procedures,
strategies and work plans.
Role of Chairman
The Chairman of the Board is elected by the Board of Trustees in accordance with provisions of the Fund’s Trust Deed and Rules. His roles and responsibilities are distinct and separate from those of the Administrator of the Fund.
The Chairman is responsible for the overall Board leadership and its effectiveness. He sets the agenda for Board meetings, chairs all meetings and the Fund’s Annual General Meeting (AGM). He also ensures adequate induction of new Trustees to orient them with Board’s role, key tasks, processes, policies, and awareness of conflict of interest, as well as trainings for all Trustees to keep them abreast with good corporate governance practices and de-velopments in the industry. He ensures key tasks of the Board are achieved satisfactorily and maintains an independent working rela-tionship with the Administrator of the Fund. Board Structure and Composition
The Board’s size and composition is guided by the Retirement Ben-efits (Occupation Retirement Benefits Schemes) Regulations 2000, which states that a defined contributions scheme shall not have less than four (4) and not more than nine (9) Trustees, while, the number of Trustees elected by the members shall be at least 50% of the Board composition.
In compliance with this requirement, and in accordance with the Trust Deed and Rules, the Board is composed of nine (9) Trustees, four (4) of whom are Sponsor-appointed and five (5) are mem-ber-elected as detailed below;
Member elected Trustees serves a 3-year renewable term, while sponsor-appointed Trustees can be re-appointed or maybe removed at any time by the Sponsor. This arrangement will be reviewed in accordance with the legislative and regulatory developments.
Board Remuneration
All Trustees are paid a sitting allowance for the meetings they at-tend as per the Trust Deed and Rules. They also receive monthly stipend. These are detailed in Note 24 of the Financial Report. Board Meetings
The Board and its Committees meet regularly in accordance with an annual board work plan and at least quarterly in a year. It reg-ularly reviews reports on progress against financial objectives and stakeholder relations.
In the endeavor to embrace innovative technology in streamlining and automating tasks, the Fund acquired one of the latest technol-ogy solutions in the market, a system known as eBoard, to assist in management of Board functions. All Board and Committee meet-ings are now managed seamlessly via the eBoard system. Via this system, Trustees can access and preview necessary information on the items to be discussed prior to any meeting of the Board. This has been valuable in enabling Trustees prepare adequately and hold meetings easily and efficiently, saving on time and eliminating the manual paper-based way of reviewing and approving documents. Board Committees
The Board has a structured system of operation made up of commit-tees established to assist it in discharging its responsibilities and obligations. It delegates specific functions to selected Committees with defined formal terms of reference, without abdicating its ulti-mate responsibility. The terms of reference clearly identify matters reserved for the Board and Committees for decisions.
The membership and Chairmanship of these Committees is reg-ularly reviewed by the Board who are responsible for filling any vacancies. The Board is cognizant that members collectively have sufficient qualifications and experience to fulfill the duties of the respective Committees. The Chairman of the committees appraises the full Board of their activities on a quarterly basis through oral and/or written reports.
During the year 2015, the Board had four (4) committees as follows:
Audit CommitteeThe Audit Committee is chaired by Kosgey Kolil. The mandate of this Committee includes but is not limited to:
• Meeting with internal and external auditors on the nature scope and priorities of audits and the major findings of audits
• Monitors and reviews the integrity of the Scheme’s financial statements
• Make recommendations to the Board on business risks, inter-nal controls and compliance.
• Reviewing the effectiveness and reliability of management in-formation systems, risk and internal controls systems and the efficiency and effectiveness of both external and internal audit
• Advise the Board on any issues pertaining to the appointment remuneration resignation and dismissal of auditors
Investment & Custody CommitteeThe Investment & Custody Committee is chaired by Ernest Nadome. The mandate of this Committee includes but is not limited to:
• To meet with investment managers, custodians and with the Administrator’s management.
• To oversee the investment management function of the Scheme.
• To monitor the implementation of the Scheme’s investment strategies
• To make recommendations to the Board on proposed new in-vestments, capital developments
• Advise the Board on appointment of investment managers, custodians and bankers to monitor and evaluate performance of these service providers
Governance, Staff and Administration CommitteeThe Governance, Staff and Administration Committee is chaired by Kosgey Kolil. The mandate of this Committee includes but is not limited to:
• Oversee the governance, compliance and communication func-tion of the Fund.
• Responsible for staff and operational policies in order to align the Fund’s operations with best practice.
• Orientation and induction of new Trustees including training and development of Board of Trustees
Project Implementation Committee – Karen Housing ProjectThe Project Implementation Committee is chaired by Ernest Na-dome. The mandate of this Committee includes but is not limited to:
• To oversee the implementation of the Project in accordance with the directives and approvals from the Board.
Lawrence Yego (Chairman) Sponsor appointedDr. Ben Chumo Sponsor appointedBeatrice Meso Sponsor appointedAbubakar Swaleh Sponsor appointedErnest Nadome Member elected - representing Workers Union membersKoskey Kolil Member elected - representing Workers Union membersDavid Songok Member elected - representing Workers Union membersMediatrice Wangira Member electedSalim Athman Member elected
CORPORATE GOVERNANCE
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• To monitor the progress of implementation for the project. • To ensure that appropriate mechanisms are put in place to
ensure close cooperation amongst the consultants involved in the implementation of the Project.
• To give necessary advice, guidance and support to the Project Manager and the other consultants on all project related mat-ters to ensure that the project is well implemented.
Trustee Name
Total MeetingsLawrence Yego (Chairman)
Dr. Ben K Chumo Ernest Nadome Kosgey KolilDavid SongokSalim AthmanMediatrice WangiraBeatrice MesoAbubakar Swaleh
Full BoardMeetings
98/92/97/96/97/96/99/94/95/9
AuditCommittee
5--
3/54/5
---
4/5-
Investments &Custody Committee
4--
3/4--
4/4-
2/4-
Governance, Staff & Admin Committee
3---
1/3*2/3
-3/3
-1/3**
PICLoresho
15--
14/15-
12/1512/15
---
• To report on monthly basis to the Board of Trustees on matters related to the implementation of the Project.
Meetings AttendanceThe Board of Trustees meets regularly as per the Board calendar. Below is a summary of meeting attendance by Trustees for the year ended 31 December 2015;
Board Elections
The Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations, 2000 requires that election of Trustees is conducted every three years. There was no election during the year since none of the Board members were eligible for retirement.
Statement of Compliance and Conflict of Interest
Conscious of its responsibilities to members, service providers, suppliers, creditors, employees and society, the Board of Trustees issue a compliance statement at the end of every year confirming that they have complied with the law, conducted their affairs in accordance with the best principles and practices of corporate gov-ernance and that to the best of the knowledge of the Board and management, no person, employee or agent acting on behalf of the Fund with the knowledge or authority of the Board or management,
committed any offence under the Prevention of Corruption Act or indulged in any unethical behavior in the conduct of the Fund’s busi-ness, or had been involved in money laundering, or any practice or activity contrary to national laws or international conventions. The Trustees also submit annual declaration of conflict of interest to the Chairman of Board of Trustees.
Code of conduct
Each Trustee derives his or her authority and position from a le-gitimate nomination procedure. However, on becoming a Trustee, each Trustee becomes bound by the overriding fiduciary duty to act in good faith in the pursuit of the best interests of members of the Fund as a whole. In the discharge of their duties, Trustees operate within the framework of a collective Board. In order to enable the Board to operate effectively and in the best interests of the Fund, all Trustees observe rules and regulations governing the Conduct of Trustees as contained in the Board manual.
* Exited the committee** Appointed to the committee mid year
Board Induction programs & Training
Each Trustee on appointment is provided with sufficient informa-tion to enable him/her perform his/her roles. Induction of new-ly-appointed Trustees is organized by the Secretary to the Board. The Board ensures that all Trustees keep abreast of both practical and theoretical developments, and that their expertise is constantly relevant.
Every year the Secretary in liaison with the Board carries out a Trustees training needs analysis and prepares a training calendar which is implemented during the year.
In addition, the Capacity Building of Trustees of Retirement Benefits Schemes Prudential Guideline Number RBA 001, 2013 requires all Trustees of Retirement Benefits Schemes and Directors of Corpo-rate Trustees of any retirement benefits scheme in Kenya are re-quired to undergo training in order to be certified and approved by the Retirement Benefits Authority by 30th June 2016. As at 31st December, 2015 eight out of nine Trustees had been trained. The remaining Trustee will have complied with this requirement by 30th June 2016.
CORPORATE GOVERNANCE CORPORATE GOVERNANCE
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REPORT OF THE BOARD OF TRUSTEES
BackgroundThe Kenya Power & Lighting Company Limited Staff Retirement Benefits Scheme 2006 Trustees are pleased to submit their annual report together with the audited financial statement for the year ended 31st December, 2015 in accordance with section 34 of the Retirement Benefits Act.
Principal ActivitiesThe principal activities of the Scheme are provision of cash benefits and pensions to the members upon attainment of the retirement age of sixty years, and where applicable, benefits for dependants of deceased members. This is achieved through prudent funds investment.
Financial ReviewThe statements of changes in net assets available for benefits shows an increase in the net assets of the scheme for the year of KShs. 1,225,495,201 (2014: increase of KShs 1,881,066,592) and the statement of net assets available for benefits shows the scheme’s total net assets of KShs 9,833,097,890 (2014: KShs 8,607,602,718).
Board of TrusteesThe Trustees of the Fund who held the office during the year are listed on page 1.
AuditorsThe Fund’s auditors Ernst and Young having expressed their willingness will continue to be in office in accordance with Section 34(3) of the Retirements Benefits Act and subject to Rule No. 19 (a) (iv) of the Scheme’s Trust Deed and Rules.
Financial StatementsThe Audited financial statements were approved and authorized by the Board of Trustees on 23 March 2016.
29
StatutoryInformationK E N Y A P O W E R P E N S I O N F U N D
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STATEMENT OF TRUSTEES’ RESPONSIBILITIES
The Kenyan Retirement Benefits Act requires the Trustees to prepare financial statements for each financial year which show a true and fair view of the financial transactions of the Fund for the year and of disposition at year end of its assets and liabilities. It also requires the Trustees to ensure that the Fund keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Fund. They are also responsible for safeguarding the assets of the Fund.
The Trustees are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Retirement Benefits Act, and for such internal control as Trustees determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. They are also obligated to send to the members a summary of its audited financial statements together with the members’ benefit statements.
The Trustees accept responsibility for the annual financial statements, which have been prepared using appropriate ac-counting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and the Fund’s rules. The Trustees are of the opinion that the financial statements give a true and fair view of the financial affairs of the Fund and of its operating results. The Trustees further accept responsibility for the main-tenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
The Trustees certify that, to their best knowledge and belief, the information furnished to the auditors for the purpose of the audit was correct and complete in every respect.
Nothing has come to the attention of the Trustees to indicate that the Scheme will not be able to meet its obligations for at least the next twelve months from the date of this statement and the requirements of Kenyan Retirement Benefits Act.
Trustee
23rd March, 2016
Trustee Trust Secretary
REPORT OF THE INDEPENDENT AUDITORS
Report on the financial statements
We have audited the accompanying financial statements of the Kenya Power and Lighting Company Limited Staff Retirement Ben-efits Scheme 2006 - Defined Contributions, which comprise the statement of net assets available for benefits as at 31 December 2015, the statement of changes in net assets available for ben-efits, statement of changes in members’ funds and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information, as set out on pages 5 to 44.
Trustees’ responsibility for the financial statements
The Trustees are responsible for the preparation and fair presenta-tion of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Kenyan Retirement Benefits Act and for such internal controls as trustees determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial state-ments based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial state-ments are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the finan-cial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the fund’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of the fund’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the trustees, as well as evaluating the overall presentation of the financial state-ments.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Kenya Power and Lighting Com-pany Limited Staff Retirement Benefits Scheme 2006 - Defined Con-tributions as at 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with In-ternational Financial Reporting Standards and the requirements of Kenyan Retirement Benefits Act.
TO THE MEMBERS OF THE KENYA POWER AND LIGHTING COMPANY LIMITEDSTAFF RETIREMENT BENEFITS SCHEME 2006
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REPORT ON OTHER LEGAL MATTERS
We also report to you, based on our audit, that:
i) we have obtained all the information and explanations which, to the best of our knowledge and belief, were nec-essary for the purposes of our audit;
ii) in our opinion, proper books of account have been kept by the scheme so far as appears from our examination of those books; and,
iii) the Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits are in agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditors report is CPA Joseph K Che-boror-Practicing Certificate No. 1145
Nairobi
31st March, 2016
3332
FOR THE YEAR ENDED 31 DECEMBER 2015STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
CONTRIBUTIONS AND BENEFITSContributions receivedNormal contributionExcess contribution/taxable contributionTotal contributions
Benefits payable
Net surplus from dealing with members
RETURNS ON INVESTMENTSTerm depositsCommercial papersGovernment securities at fair value through profit and lossGovernment securities held to maturityQuoted equity investments at fair value through profit and lossCorporate bondsGain on valuation of investment propertyUnquoted investment
Investment incomeInvestment management expenses
Net returns on investments
ADMINISTRATION EXPENSES
INCREASE IN NET ASSETS FOR THE YEAR BEFORE TAXATION
Taxation Charge
INCREASE IN NET ASSETS FOR THE YEAR
Note
44
5
66666666
7
8
12
2015KShs ‘000
969,091 120,3101,089,401
(471,383)
618,018
21,274677
149,3586,254
(191,383)122,004576,245
1,661
686,090 (21,015)
665,075
(50,434)
1,232,659
(7,164)
1,225,495
2014KShs ‘000
915,469 116,4681,031,937
(109,963)
921,974
41,06212,732
375,99221,005
230,820104,734239,085
3,319
1,028,749 (22,987)
1,005,762
(38,900)
1,888,836
(7,769)
1,881,067
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AS AT 31 DECEMBER 2015STATEMENT OF CHANGES ASSETS AVAILABLE FOR BENEFITS
ASSETSInvestment propertyInventory property –work in progress Government securities at fair value through profit and lossGovernment securities held to maturityUnquoted equity investment Quoted equity investments at fair value through profit and lossCorporate bondsCommercial papersTerm deposits
OTHER ASSETSBank and cash balancesOther receivablesTax recoverableDue from related parties
TOTAL ASSETS
LIABILITIESDue to related partiesBenefits payableTax payableOther payables and accrualsTOTAL LIABILITIES
NET ASSETS AVAILABLE FOR BENEFITS
REPRESENTED BY MEMBERS FUNDSFUND BALANCE
Note
131313131313131313
22232624
24252627
2015KShs ‘000
2,034,3721,807,3952,972,145
19,788281,332
1,469,825849,441
- 346,540
9,780,838
140,1373,6241,381
3,200
9.929,180
1,9261,158
- 92,998
96,082
9,833,098
9,833,098
2014KShs ‘000
839,0851,360,9152,857,921
86,98911,949
1,699,0471,020,124
84,829 515,569
8,476,428
177,690--
27
8,654,145
4,889161
2,202 39,290
46,542
8,607,603
8,607,603
The financial statements were approved by the Board of Trustees on 23rd March, 2016 and were signed on its behalf by:
TRUSTEE TRUSTEE TRUST SECRETARY
3534
At 1 January
Increase net assets for the yearAt 31 December
2015KShs ‘000
8,607,603
1,225,4959,833,098
2014KShs ‘000
6,726,536
1,881,0678,607,603
FOR THE YEAR ENDED 31 DECEMBER 2015STATEMENT OF CHANGES IN MEMBERS’ FUNDS
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FOR THE YEAR ENDED 31 DECEMBER 2015STATEMENT OF CASH FLOWS
OPERATING ACTIVITIESContributions receivedBenefits paidTax paidInvestment management expensesAdministrative expenses
Operating gains before working capital changes
Increase in amounts due from related partiesDecrease in other receivablesIncrease in benefits payableIncrease/(Decrease) in other payables and accruals
Net cash inflows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income receivedInvestment propertiesIncrease in inventory properties - work in progressGovernment securities Unquoted equity investmentsQuoted equity investmentsCommercial paperTerm depositsCorporate bonds
Net cash used in investing activities
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
Note
45
2678
24232527
291313131313131313
22
22
2015KShs ‘000
1,089,401(471,383)
(10,747)(21,015)
(50,434)
535,822
210(3,624)52,723
1,983
587,114
577,088(619,042)(446,480)(433,667)(267,722)
(25,987)84,828
- 166,295
(964,687)
(377,573)
968,826
591,253
2014KShs ‘000
1,031,937(109,963)
(6,466)(22,987)
(38,900)
853,621
293-
77 (78,820)
775,171
522,199-
(639,728)16,916(6,140)
(191,898)(15,915)(80,922)
(302,975)
(698,463)
76,708
892,118
968,826
3736
FOR THE YEAR ENDED 31 DECEMBER 2015NOTES TO THE FINANCIAL STATEMENTS
REPORTING ENTITY
The Kenya Power and Lighting Company Limited Staff Retirement Benefits Scheme 2006 (Defined Contributions) was established by The Kenya Power and Lighting Company Limited (the sponsor) under irrevocable trust as a scheme for the purpose of providing pension and other benefits to the members upon attainment of the retirement age of sixty years, and where applicable, benefits for the dependants of deceased members. The scheme is registered by the Kenya Retirement Benefits Authority, and is domiciled in Kenya. The address of its registered office is as follows:
Retirement Benefits Scheme TrusteesStima Plaza, Kolobot Road, ParklandsP.O. Box 1548-00600Nairobi
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation of financial statements
(i) Basis of preparation The financial statements are presented in Kenya Shil-
lings, and are prepared under the historical cost con-vention except for measurement at fair value of certain investments.
(ii) Statement of compliance The financial statements are prepared in compliance with
International Financial Reporting Standards (IFRS) and in-terpretations of those Standards.
The principal accounting policies applied in the prepara-tion of the financial statements are set out below. These policies have been applied consistently unless otherwise stat
(b) New and amended standards and interpretations
The Fund applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2015. The Fund has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
The nature and the effect of these changes are disclosed be-low. Although these new standards and amendments applied
for the first time in 2015, did not have a material impact on the annual financial statements of the Fund. The nature and the impact of each new standard or amendment are described below:
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
IAS 19 requires an entity to consider contributions from em-ployees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contribu-tions is independent of the number of years of service, an enti-ty is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. It is not expected that this amendment would be relevant to the Fund since the Fund is a defined contribu-tions scheme.
Annual Improvements 2010-2012 Cycle With the exception of the improvement relating to IFRS 2
Share-based Payment applied to share-based payment trans-actions with a grant date on or after 1 July 2014, all other im-provements are effective for accounting periods beginning on or after 1 July 2014. They include:
IFRS 2 Share-based Payment This improvement is applied prospectively and clarifies various
issues relating to the definitions of performance and service conditions which are vesting conditions, including:
• A performance condition must contain a service condition• A performance target must be met while the counterparty
is rendering service• A performance target may relate to the operations or ac-
tivities of an entity, or to those of another entity in the same group
• A performance condition may be a market or non-market condition
• If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service con-dition is not satisfied.
IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all
contingent consideration arrangements classified as liabilities
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(or assets) arising from a business combination should be sub-sequently measured at fair value through profit or loss whether or not they fall within the scope of IAS 39.
IFRS 8 Operating Segments The amendments are applied retrospectively and clarify that:
• An entity must disclose the judgments made by manage-ment in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating seg-ments that have been aggregated and the economic char-acteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’
• The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is re-ported to the chief operating decision maker, similar to the required disclosure for segment liabilities.
IAS 16 Property, Plant and Equipment and IAS 38 Intangi-ble Assets
The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data by either adjusting the gross carrying amount of the asset to market value or by determining the market value of the carrying value and adjusting the gross carrying amount proportionately so that the resulting carrying amount equals the market value. In addition, the accumulated depreciation or amortization is the difference between the gross and carrying amounts of the asset.
IAS 24 Related Party Disclosures The amendment is applied retrospectively and clarifies that a
management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a manage-ment entity is required to disclose the expenses incurred for management services.
Annual Improvements 2011-2013 Cycle These improvements are effective from 1 July 2014 and are not
expected to have a material impact on the Fund. They include:
IFRS 3 Business Combinations The amendment is applied prospectively and clarifies for the
scope exceptions within IFRS 3 that:
• Joint arrangements, not just joint ventures, are outside the scope of IFRS 3
• This scope exception applies only to the accounting in the financial statements of the joint arrangement itself.
IFRS 13 Fair Value Measurement The amendment is applied prospectively and clarifies that the
portfolio exception in IFRS 13 can be applied not only to finan-cial assets and financial liabilities, but also to other contracts within the scope of IAS 39.
IAS 40 Investment Property The description of ancillary services in IAS 40 differentiates
between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the trans-action is the purchase of an asset or a business combination.
(c) Standards issued but not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Fund’s financial statements are disclosed below. The Fund intends to adopt these standards, if applicable, when they become effective.
IFRS 9 Financial Instruments In July 2015, the IASB issued the final version of IFRS 9 Fi-
nancial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classifi-cation and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2014) is permitted if the date of initial applica-tion is before 1 February 2015. The Fund will quantify the effect when the standard becomes effective. Currently, the Fund does not expect this amendment to have material financial impact in future financial statements.
IFRS 14 Regulatory Deferral Accounts IFRS 14 is an optional standard that allows an entity, whose
activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory defer-ral account balances upon its first-time adoption of IFRS. En-tities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
3938
separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate-reg-ulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. Since the Fund is an existing IFRS preparer, this standard would not apply.
IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a five-step
model to account for revenue arising from contracts with cus-tomers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018, when the IASB finalizes their amendments to defer the effective date of IFRS 15 by one year. Early adoption is permitted. The Fund does not expect this amendment to materially impact future financial statements.
Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests
The amendments to IFRS 11 require that a joint operator ac-counting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a busi-ness must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not re-measured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, scope ex-clusion has been added to IFRS 11 to specify that the amend-ments do not apply when the parties sharing joint control, in-cluding the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint opera-tion and are prospectively effective for annual periods begin-ning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Fund.
Amendments to IAS 16 and IAS 38: Clarification of Accept-able Methods of Depreciation and Amortisation
The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are gen-erated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intan-gible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have an impact to the Fund.
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
The amendments change the accounting requirements for bio-logical assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. In-stead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation mod-el (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual pe-riods beginning on or after 1 January 2016, with early adop-tion permitted. These amendments are not expected to have any impact to the Fund as the Fund does not have any bearer plants.
Amendments to IAS 27: Equity Method in Separate Financial Statements
The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities al-ready applying IFRS and electing to change to the equity meth-od in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adop-tion permitted. These amendments will not have any impact on
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the Fund’s financial statements.
Annual Improvements 2012-2014 Cycle These improvements are effective for annual periods begin-
ning on or after 1 January 2016. They include:
IFRS 5 Non-current Assets Held for Sale and Discontin-ued Operations
Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clar-ifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment must be applied prospectively.
IFRS 7 Financial Instruments: Disclosures
(i) Servicing contracts The amendment clarifies that a servicing contract that in-
cludes a fee can constitute continuing involvement in a fi-nancial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the dis-closures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.
(ii) Applicability of the amendments to IFRS 7 to con-densed interim financial statements
The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent an-nual report. This amendment must be applied retrospec-tively.
IAS 19 Employee Benefits The amendment clarifies that market depth of high quality
corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond
rates must be used. This amendment must be applied prospec-tively.
IAS 34 Interim Financial Reporting The amendment clarifies that the required interim disclosures
must either be in the interim financial statements or incorpo-rated by cross-reference between the interim financial state-ments and wherever they are included within the interim finan-cial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively.
These amendments are not expected to have any impact on the Fund.
Amendments to IAS 1 Disclosure Initiative The amendments to IAS 1 Presentation of Financial State-
ments clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:
• The materiality requirements in IAS 1• That specific line items in the statement(s) of profit or loss
and OCI and the statement of financial position may be disaggregated
• That entities have flexibility as to the order in which they present the notes to financial statements
• That the share of OCI of associates and joint ventures ac-counted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassi-fied to profit or loss
Furthermore, the amendments clarify the requirements that ap-ply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods begin-ning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Fund.
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception
The amendments address issues that have arisen in applying the investment entities exception under IFRS 10.
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The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a par-ent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.
Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment en-tity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.
These amendments must be applied retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Fund.
(d) Revenue recognition
The Fund’s revenue is generated from monthly contributions from members, rental income from investment properties, in-terest income from government securities and dividends from quoted and unquoted equities.
Revenue represents the fair value of consideration received or receivable in the course of the Fund’s activities. It is recognised when it is probable that future economic benefits will flow to the Fund and the amount of revenue can be measured reliably. It is stated net of value added tax, rebates and trade discounts.
Investment income Interest income is recognised in the changes in net assets
available for benefit as it accrues and is calculated by using the effective interest rate method. Investment income also in-cludes dividend income which is recognised when the right to receive the payment is established.
Rental income is on a straight-line basis over the lease term. The excess of rental income on a straight-line over cash re-ceived is recognised as an operating lease liability/asset.
Dividends are recognised when the Fund’s right to receive the payment is established.
Contributions are accounted for in the period in which they fall due.
Sale of completed properties A property is regarded as sold when the significant risks and
returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional ex-changes, sales are recognised only when all the significant conditions are satisfied.
Realised / unrealised gains and losses Realised / unrealised gains and losses recorded in the chang-
es in net assets available for benefits on investments include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction.
(e) Benefits payable
Benefits payable are accounted for in the period in which they fall due.
(f) Accounting for leases
Determination The determination of whether an arrangement is, (or contains),
a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfil-ment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Fund as a lessee Finance leases that transfer substantially all the risks and ben-
efits incidental to ownership of the leased item to the Fund, are capitalised at the commencement of the lease at the fair value of the constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the changes in net assets available for benefit. The Fund currently does not have any finance lease.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Fund will
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obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Payments to acquire leasehold interests in land are treated as prepaid operating lease rentals and amortised over the period of the lease. The amortisation is recognised as an operating expense in changes in net assets available for benefit.
Fund as a lessor Leases in which the Fund does not transfer substantially all the
risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
When an operating lease is terminated, any payment required by the lessor by way of penalty is recognised as an expense in the period in which termination took place.
(g) Investment properties Investment property is property held to earn rentals or for capi-
tal appreciation or both. Investment property, including interest in leasehold land, is initially recognised at cost including the transaction costs. Subsequently, investment property is car-ried at fair value representing the open market value at the reporting date determined by annual valuations carried out by external registered valuers/ directors. Gains or losses arising from changes in the fair value are included in determining the profit or loss for the year to which they relate.
(h) Investment properties
The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. The Investment properties are stated at fair val-ue, which has been determined based on valuations performed by Sundown Valuers & Realtors Limited as at 31 December 2015.
When the Fund can reliably determine the fair value of a self-constructed investment property under construction or de-velopment, any difference between the fair value of the prop-erty at that date and its previous carrying amount is recognised in the increase in net assets.
The difference between the carrying value and the fair value of the properties at the date of reclassification to investment properties is recognised in the increase in net assets.
Investment properties are derecognised when either they have been disposed off or when the investment property is perma-nently withdrawn from use and no future economic benefit is expected from its disposal. On disposal of an investment prop-erty, the difference between the disposal proceeds and the carrying amount is charged or credited to the changes in net assets available for benefit.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment proper-ty to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Fund’s accounts for such property in accordance with the pol-icy stated under property and equipment up to the date of the change in use.
(i) Inventory properties Property acquired or being constructed for sale in the or-
dinary course of business, rather than to be held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and net realisable value (NRV).
Cost includes:• Freehold and leasehold rights for land• Amounts paid to contractors for construction• Borrowing costs, planning and design costs, costs
of site preparation, professional fees for legal ser-vices, property transfer taxes, construction over-heads and other related costs
Non-refundable commissions paid to sales or marketing agents on the sale of real estate units are expensed when paid.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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NRV is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date and discounted for the time value of money if mate-rial, less estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventory property recognised in profit or loss on disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold.
(j) Financial instruments
A financial instrument is any contract that gives rise to a fi-nancial asset of one entity and a financial liability or equity instrument of another entity.
Purchases and sales of financial instruments are recognised on trade date – the date on which the Fund commits to purchase or sell the asset.
The Fund classifies its financial assets into the following IAS 39 categories: Financial assets at fair value through profit or loss; loans and receivables; held to maturity financial assets; and available for sale financial assets. Management deter-mines the appropriate classification of its financial instruments at initial recognition.
Financial assets Financial assets are initially recognised at fair value plus, in
the case of all financial assets or financial liabilities not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or where they have been transferred and the Fund has also transferred substantially all risks and rewards of ownership.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Fund establishes fair value by using valuation techniques. These in-clude the use of recent arm’s length transactions and reference to other instruments that are substantially the same.
Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for
trading and those designated at fair value through profit or loss at inception. A financial asset is classified into this category at inception if acquired principally for the purpose of selling it in the short term, if it forms part of a portfolio of financial assets in which there is evidence of short term profit-taking, or if so designated by management. Subsequent to initial recognition, these investments are re-measured at fair value. Fair value ad-justments are recognised in the statement of net assets in the period that they arise.
Financial assets at fair value through profit or loss comprise quoted equity investments, government securities and corpo-rate bonds.
Loans and receivables Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an ac-tive market. They include receivables arising from transactions with third parties
After initial measurement, loans and receivables are measured at amortised cost, using the effective interest rate method (EIR) less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included in changes in net assets avail-able for benefit. Gains and losses are recognised in the chang-es in net assets available for benefit when the investments are derecognised or impaired, as well as through the amortisation process.
Financial assets classified under loans and receivables com-prise commercial papers.
Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial
assets with fixed or determinable payments and fixed matur-ities other than those that meet the definition of loans and receivables that the Fund’s management has the positive in-tention and ability to hold to maturity.
After initial measurement, held-to-maturity financial assets are measured at amortised cost, using the effective interest
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rate method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR gains and loss-es are recognised in changes in net assets available for benefit when the investments are derecognised or impaired, as well as through the amortisation process.
The scheme has term deposits and government securities that are held to maturity financial assets.
Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial
assets that are either designated in this category or not classi-fied in any of the other categories.
Subsequent to initial recognition, these investments are
re-measured at fair value unless their value cannot be reliably measured in which case they are carried at cost less provision for impairment.
Unrealised gains and losses arising from changes in the fair value of available-for-sale are recognised in other comprehen-sive income and accumulated under the heading of fair value reserve in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjust-ments are included in changes in changes in net assets avail-able for benefit for the year as net realised gains/losses on financial assets.
Unquoted investments and government securities (those not under lien) are classified as available-for-sale investments.
Impairment of financial assets The Fund assesses at each reporting date whether a financial
asset or group of financial assets is impaired. A financial as-set or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the ini-tial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experi-encing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost- loans and receivables
For financial assets carried at amortized cost, the Fund first as-sesses individually whether objective evidence of impairment exists individually for financial assets that are individually sig-nificant, and individually or collectively for financial assets that are not individually significant. If the Fund determines that no objective evidence of impairment exists for an individually as-sessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The impairment assessment is performed at each reporting date.
If there is objective evidence that an impairment loss on as-sets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimat-ed future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. If a loan has variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in changes in net assets available for benefits.
If, in a subsequent period, the amount of the impairment loss decreases and that decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subse-quent reversal of an impairment loss is recognised in changes in net assets, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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Available-for-sale financial investments For available-for-sale financial investments, the Fund assesses
at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.
In the case of equity investments classified as available-for-sale, objective evidence would include a ‘significant or pro-longed’ decline in the fair value of the investment below its cost. ‘Significant’ is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.
Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that in-vestment previously recognised in changes in net assets avail-able for benefit is removed from other comprehensive income and recognised in changes in net assets available for bene-fit. Impairment losses on equity investments are not reversed through changes in net assets available for benefit; increases in their fair value after impairment are recognised directly in other comprehensive income.
Financial liabilities Financial liabilities comprise benefits payable, clients’ depos-
its, due from related parties, other payables and accruals are recognized initially at cost, and subsequently measured at amortized cost.
Initial recognition and measurement Financial liabilities are classified, at initial recognition, as fi-
nancial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, payables and financial guarantee contracts, net of directly attributable transaction costs. The Fund’s financial liabilities include other payables and due to related parties.
Subsequent measurement The measurement of financial liabilities depends on their clas-
sification, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities des-ignated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the Fund that are not designated as hedging in-struments in hedge relationships as defined by IAS 39. Separat-ed embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of changes in net assets. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39 are satisfied. The Fund has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings and payables This is the category most relevant to the Fund. After initial rec-
ognition, interest-bearing loans and borrowings and payable are subsequently measured at amortised cost using the EIR method. The effective interest method is a method of calculat-ing the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective inter-est rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the carrying amount on initial recognition.
Amortised cost is calculated by taking into account any dis-count or premium on acquisition and fees or costs that are an integral part of the EIR.
Gains and losses are recognised in changes in net assets avail-able for benefit when the liabilities are derecognised as well as through the EIR amortisation process.
This category generally applies to interest-bearing loans and borrowings and payables. The Fund had client deposits and other payables classified as loans and borrowings.
Derecognition A financial liability is derecognised when the obligation un-
der the liability is discharged or cancelled, or expires. When
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net
amount reported in the statement of net assets available for benefits only when there is a current and legally enforceable right to offset the recognised amounts and there is an inten-tion to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income and expenses will not be offset in the changes in net assets available for benefits unless required or permitted by any accounting standard or interpreta-tion, as specifically disclosed in the accounting policies of the scheme.
(k) Foreign currencies translation
Assets and liabilities expressed in foreign currencies are trans-lated to Kenya shillings at the rates of exchange ruling at the end of each reporting period while transactions during the year in foreign currencies are converted at the rates of exchange ruling on the dates of the transactions. Exchange gains or loss-es arising from foreign currency transactions are dealt with in the statement of changes in net assets.
(l) Capital management
The fund does not hold any capital. Each member has an ac-count where contributions and investment returns are credited. When members withdraw benefits are paid out from this ac-count.
(m) The Scheme’s Funding Policy and objectives
When deciding on an appropriate investment strategy and risk profile for the investment of the Scheme assets, the objectives of the Scheme, and the membership profile, by both term and nature are analyzed
Primary Objective of the Scheme is to provide lump sum and pension benefits on a defined contribution benefits basis for
members on their retirement or invalidity as well as benefits to members’ dependents on members’ death before retirement.
Analysis of Liabilities The age liability profile of the members and the ability to pay
benefits and expenses out of monthly contributions and in-vestment income are particularly important in determining the liquidity constraints of the Scheme. The age liability profile of the members has an important influence on the risk tolerance that the Scheme can assume in meeting its long-term per-formance objectives (e.g. the younger the age profile of the Scheme, the greater the level of ‘aggression’ the Scheme can tolerate. The more members close to retirement, or to receiving benefits, the more conservative the risk profile, particularly if the ‘older’ members’ assets represent a significant proportion of the Fund).
The primary investment objectives of the Scheme are as fol-lows:
A medium to long term view towards the investment of the Scheme assets has been adopted, the minimum period being no less than three (3) years with the following primary invest-ment objectives of the Scheme:
(i) To maximize the long term “real” return on the Scheme assets. To do this in a way that minimizes, to the extent practical, the possibility the Scheme assets (at their real-izable value), at any one time, would fail to cover 100% of the total accrued liabilities;
(ii) Subject to i) above, to ensure an optimum level of return within specified risk parameters and to do so effectively, prudently and in a cost efficient manner, in full compliance with applicable laws and regulations
The Trustees have a statutory and fiduciary duty and responsi-bility to invest the Scheme’s assets in a responsible and pru-dent manner.
For the purposes of achieving the funding objectives, the fund-ing position shall be reviewed annually.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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(n) Taxation
Current income tax Current income tax is the amount of income tax payable on
the taxable profit for the year determined in accordance with the Kenyan Income Tax Act. Income tax expense is the aggre-gate amount charged/ (credited) in respect of current tax and deferred tax in determining the profit or loss for the year. Cur-rent income tax assets or liabilities are based on the amount of tax expected to be paid or recovered in respect of the taxation authorities in the future. Tax is recognised in the statement of changes in net assets available for benefit except when it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive in-come, or to items recognised directly in equity, in which case it is also recognised directly in equity.
Contributions received by the scheme up to a limit of KShs 20,000 per employee per month are invested in a registered fund, which is exempt from taxation. Any amount above this limit is invested in an unregistered fund whose investment in-come is taxed at the corporate tax rate of 30%.
(o) Employee entitlements
The estimated monetary liability for employees’ accrued annu-al leave entitlement at the end of the reporting period is rec-ognised as an expense accrual.
Retirement benefit obligations The Fund operates a defined contribution scheme for its em-
ployees. The assets of the scheme are held in separate trustee administered funds, which are funded from contributions from both the Scheme and employees.
The Fund also contributes to a statutory defined contribution pension scheme, the National Social Security Fund (NSSF). Contributions to this scheme are determined by local statute and are currently at KShs 200 per employee per month.
The Fund’s contributions to the defined contribution scheme and NSSF are charged to changes in net assets available for benefits as they fall due.
Bonus An accrual is recognised for the amount expected to be paid
under short-term cash bonus if the Scheme has a present legal and constructive obligation to pay this amount as a result of past service provided by the employee, the obligation can be estimated reliably and it is probable that an outflow of resourc-es embodying economic benefits will be required to settle the obligation.
(p) Impairment of non-financial assets
The Fund assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indica-tion exists, or when annual impairment testing for an asset is required, the Fund estimates the asset’s recoverable amount. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of as-sets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.
Impairment losses of continuing operations are recognised in the changes in net assets available for benefits in those ex-pense categories consistent with the function of the impaired asset, except for property previously revalued where the re-valuation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Fund makes an estimate of recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine the as-set’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been de-termined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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Such reversal is recognised in changes in net assets available for benefit to the amount of an impairment already taken to profit or loss while the remainder will be a revaluation amount through other comprehensive income.
(q) Fair value measurement
The Fund measures financial instruments such as quoted equi-ty investments at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or• In the absence of a principal market, in the most advanta-
geous market for the asset or liability
The principal or the most advantageous market must be acces-sible to by the Fund.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the as-set in its highest and best use.
The Fund uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measure-ment as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Fund determines wheth-er transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
External valuers are involved for valuation of significant as-sets, such as property and investment properties. Involvement of external valuers is decided upon annually by the finance and investment manager after discussion with and approval by the Fund’s trustee committee. Selection criteria include market knowledge, reputation, independence and whether profession-al standards are maintained.
For the purpose of fair value disclosures, the Fund has deter-mined classes of assets and liabilities on the basis of the na-ture, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(s) Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.
(t) Expenses
Expenses are recognised in the statement of changes in net assets available for benefits when a decrease in future eco-nomic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably and is independent from transactions with equity participants.
This means, in effect, that recognition of expenses occurs si-multaneously with the recognition of an increase in liabilities
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
4948
or a decrease in assets (for example, the accrual of employee entitlements or the depreciation of equipment).
i) When economic benefits are expected to arise over sev-eral accounting periods and the association with income can only be broadly or indirectly determined expenses are recognised in the statement of changes in net assets available for benefit on the basis of systematic and ratio-nal allocation procedures. This is often necessary in rec-ognising the equipment associated with the using up of assets such as property and equipment in such cases the expense is referred to as a depreciation or amortisation. These allocation procedures are intended to recognise expenses in the accounting periods in which the econom-ic benefits associated with these items are consumed or expire.
ii) An expense is recognised immediately in the statement of changes in net assets available for benefit when expendi-ture produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify, or cease to qualify, for recognition in the statement of net assets available for benefit as an asset.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the process of applying the accounting policies adopted by the Fund, the Trustees make certain judgements and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such judgements and estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The Trustees evaluate these at each financial re-porting date to ensure that they are still reasonable under the pre-vailing circumstances based on the information available.
The preparation of the Fund’s financial statements requires Man-agement to make judgments, estimates and assumptions that af-fect the reported amounts of revenues, expenses, assets and lia-bilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
Key sources of estimation uncertainty
Operating lease commitments – Fund as lessor The Fund has entered into commercial property leases on its
investment property portfolio. The Fund has determined, based on an evaluation of the terms and conditions of the arrange-ments, such as the lease term not constituting a substantial portion of the economic life of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.
Impairment losses At each reporting date, the Fund reviews the carrying amounts
of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an im-pairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Impairment exists when the carrying amount of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from bind-ing sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for coming years and do not include restructuring activities that the Fund is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested.
In assessing whether there is any indication that the tangible and intangible assets may be impaired, the Fund considers the following indications:
a) there are observable indications that the asset’s value has declined during the period significantly more than would be expected as a result of the passage of time or normal use.
b) significant changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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c) market interest rates or other market rates of return on investments have increased during the period, and those increases are likely to affect the discount rate used in cal-culating an asset’s value in use and decrease the asset’s recoverable amount materially.
d) the carrying amount of the net assets of the entity is more than its market capitalisation.
e) evidence is available of obsolescence or physical damage of an asset.
f) significant changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose of an asset before the previously expected date, and reassessing the useful life of an asset as finite rather than indefinite.
Estimation of net realisable value for inventory property Inventory property is stated at the lower of cost and net real-
isable value (NRV). NRV for completed inventory property is assessed by reference to market conditions and prices existing at the reporting date and is determined by the Scheme, based on comparable transactions identified by the Scheme for prop-erties in the same geographical market serving the same real estate segment.
NRV in respect of inventory property under construction is as-sessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction, estimated costs to complete construction and an estimate of the time value of money to the date of completion.
Valuation of property The fair value of investment property is determined by real es-
tate valuation experts using recognised valuation techniques and the principles of IFRS 13.
Investment property under construction is measured based on estimates prepared by independent real estate valuation experts, except where such values cannot be reliably deter-
mined. In one case, the fair value of the investment property under construction could not be reliably determined because it was in an area in which the surrounding properties were under development and reliable estimates could not be made. This property is recorded at cost.
The Investment properties are stated at fair value, which has been determined based on valuations performed by Sundown Valuers & Realtors Limited as at 31 December 2015 having regard to the foregoing particulars and the present day eco-nomic circumstances. The valuer relied on three methods of valuation. These being; investment approach (capitalization approach), direct market comparison approach (comparable sale approach) and contractor’s approach (depreciated coast approach).
Receivables Critical estimates are made by the trustees in determining the
recoverable amount of receivables.
Income taxes Judgement is required in determining the Fund’s provision for
income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Fund recognises liabilities for anticipated tax audit issues based on estimates of wheth-er additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and de-ferred tax provision in the period in which such determination is made.
Fair value of financial instruments When the fair value of financial assets and financial liabilities
recorded in the statement of financial position cannot be de-rived from active markets, their fair value is determined us-ing valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a de-gree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
5150
3 FINANCIAL RISK MANAGEMENT
The scheme generates revenues for the members by investing in various income generating activities which involve trading in the stock securities, trading in government and other securities and offshore investments.
These activities expose the fund to a variety of financial risks, in-cluding credit risk and the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Fund’s overall risk management programme focuses on the un-predictability of financial markets and seeks to minimise potential adverse effects on its financial performance.
Risk management is carried out by the Trustees together with the investment managers under policies approved by the Trustees. The investment managers review the market trends and information available to evaluate the potential exposures. They then arrive at strategies to mitigate against market risks. The Trustees provide guidelines for overall risk management, as well as policies covering specific areas such as foreign exchange risk, interest rate risk, cred-it risk, use of derivative and non-derivative financial instruments and investing excess liquidity. The scheme also follows guidelines issued by the Retirements Benefits authority in respect of maximum investment in different types of investments.
a) Market risk
(i) Foreign exchange risk The scheme is exposed to the risk that the fair value or
the future cash flows of financial instruments will fluctu-ate due to changes in foreign exchange rates. The scheme invests internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Uganda shilling.
Foreign exchange risk arises from investment in offshore investments and quoted shares on the Uganda Stock Ex-change (USE).
The scheme currency risk is evaluated as low because the foreign investments are long-term and any currency losses are expected to be recouped through interest in-come earned and which comprises the value of the fund. The scheme manages foreign exchange risk by limiting offshore investments to strategic range of 5% of total portfolio as required by the RBA regulations. The quoted investments in the USE are low risk and form an insignifi-cant part of the total portfolio.
(ii) Price risk The scheme is exposed to equity securities price risk be-
cause of investments in quoted shares classified at fair value through profit or loss. The scheme is also exposed to the risk that the value of debt securities will fluctuate due to changes in market value. To manage its price risk arising from investments in equity and debt securities, the scheme diversifies its portfolio invested in bonds of vary-ing maturities. Diversification of the portfolio is done in accordance with trust deed.
For equities, the scheme has invested in companies in dif-ferent sectors of the economy, while for debt securities; the scheme has policy which is reviewed after every three years. All quoted shares held by the scheme are traded on the Nairobi Securities Exchange (NSE) and Uganda Secu-rities Exchange (USE).
If the price of securities were to appreciate/depreciate by 5% it would have the following effect (approximately):
Effect on returns from Investment
Effect on Fund balance
5% Appreciation5% Depreciation5% Appreciation5% Depreciation
2015KShs ‘000
34,304(34,304)34,304
(34,304)
2014KShs ‘000
84,952(84,952)84,952
(84,952)
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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*During the year the Fund placed a deposit of KShs 35 million with Imperial Bank of Kenya which was placed under receivership. The stake-holder’s discussions are on-going on the future of the bank. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss as ’credit loss expense’.
(c) Liquidity risk
The scheme is required to make periodic payment in respect of pen-sion payments when members retire from the scheme, and is there-fore exposed to the risk of difficulty in raising funds to make such payments. It therefore invests a portion of its assets in investments that are readily convertible to cash. The investment managers mon-itor the scheme’s liquidity on a regular basis and the Trustees re-view it on a quarterly basis.
(iii) Interest rate risk The scheme’s interest bearing assets are investments in
treasury bonds, corporate bonds, commercial paper and fixed deposits. All of these instruments are at fixed inter-est rates.
The nature of financial instruments held, that is, fixed in-terest instruments mitigates risk exposure of the scheme. Fluctuations in interest rates will not have a significant effect on the scheme.
(b) Credit risk
Credit risk arises from receivables, short term deposits, and interest bearing investments, deposits with banks, and cash and cash equivalents. As part of the credit risk management
system, the investment managers and the Trustees monitor and review information on significant investments. The Trust-ees have approved a larger portfolio investment with the Gov-ernment of Kenya debt securities which have a low credit risk and no default record.
The Fund has an elaborate vetting process before a fixed de-posit is made in a financial institution. The deposits are also spread to mitigate against concentration risks. The vetting process is continuously reviewed to take into consideration of new developments.
The amount that best represents the scheme’s maximum expo-sure to credit risk as at reporting period is made up as follows:
Term depositsCorporate bondsCommercial paperUnquoted equity investmentDue from related party
Interest receivablesContributions receivableBank and cash balances
2015KShs ‘000
346,540849,441
-281,332
1,926
3,53292
140,137
1,623,000
2014KShs ‘000
515,5691,020,124
84,82911,949
4,889
--
177,690
1,815,050
The Fund’s primary long – term risk is that its financial assets will fall short of its financial liabilities (promised benefit payable to members). Therefore, the aim of investments risk management is to minimize the risk of overall reduction in the value of the fund and to maximize the opportunity for gains across the whole fund portfolio. The scheme achieves this through asset diversification to reduce exposure to market risk (price risk, currency risk and interest risk) and credit risk to an acceptable level. In addition, the scheme manages liquidity risk to ensure there is sufficient liquidity to meet
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
5352
its forecast cash flows. The scheme manages this investment risk as per part of its overall pension fund risk management program.
The table below analyses the scheme’s financial assets and fi-nancial liabilities as at the end of the reporting period that will be
settled on a net basis. The amounts disclosed in the table below are the undiscounted cash flows. Balances due equal their carrying balances, as the impact of discounting is not significant.
The table below summarizes the maturity profile of the fund’s assets and liabilities as at 31 December 2015
Financial assets
Government securities held at fair value through profit or lossGovernment securities held to maturityTerm depositsCorporate bonds Unquoted equity investmentQuoted equity investmentsBank and cash balances
Total financial assets
Financial liabilitiesDue to related partiesBenefits payableTax payableOther payables and accruals
Total financial liabilities
Liquidity gap as at 31 December 2015
Less Than3 monthsKShs ‘000
146,46519,788
346,540---
140,137
652,930
1,9261,158
- 87,942
91,026
561,904
1 to 5 yearsKShs ‘000
833,294--
849,441--
-
1,682,735
---
-
-
1,682,735
TotalKShs ‘000
3,111,09419,788
346,540849,441281,332
1,469,825 140,137
6,218,157
1,9261,158
53 92,942
96,079
6,122,078
More than 5 Years
KShs ‘000
2,052,891---
281,3321,469,825
-
3,804,048
---
-
-
3,804,048
3 to12 months
KShs ‘000
78,444-----
-
78,444
--
53 5,000
5,053
73,391
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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The table below summarizes the maturity profile of the fund’s assets and liabilities as at 31 December 2014
Financial assets
Government securities held at fair value through profit or lossGovernment securities held to maturityTerm depositsCorporate bonds – held for tradingUnquoted equity investmentQuoted equity investmentsCommercial PaperBank and cash balances
Total financial assets
Financial liabilities Due to related partiesBenefits payableTax payableOther payables and accruals
Total financial liabilities
Liquidity gap as at 31 December 2014
Less Than3 months
KShs ‘000
-86,989
515,569----
177,690
780,248
4,889161
- 34,290
39,340
740,908
1 to 5 yearsKShs ‘000
2,786,279--
1,020,12411,949
--
-
3,818,352
---
-
-
3,818,352
TotalKShs ‘000
2,786,27986,989
515,5691,020,124
11,9491,699,047
84,829 177,690
6,382,476
4,889161
2,20239,290
46,542
6,335,934
More than 5 Years
KShs ‘000
-----
1,699,047-
-
1,699,047
---
-
-
1,699,047
3 to12 months
KShs ‘000
------
84,829 -
84,829
--
2,202 5,000
7,202
77,627
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
5554
(d ) Fair Value measurement
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped in levels 1 to 3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly ( i.e. as prices) or indirectly (i.e. as derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the assets or liability that are not based on observable market data.
31December 2015Unquoted investmentInvestment in quoted equities at fair value through profit or lossInvestment propertiesCorporate bondsGovernment securities held at fair value through profit or lossGovernment securities held to maturity
31 December 2014Unquoted investmentInvestment in quoted equities at fair value through profit or lossInvestment propertiesCorporate bondsGovernment securities held at fair value through profit or lossGovernment securities held to maturity
Level 1KShs ‘000
-
1,469,825-
849,4412,972,145
19,788
5,311,199
-1,699,047
-1,020,1242,857,921
86,989
Level 3KShs ‘000
-
-2,034,372
--
-
2,034,372
--
895,085--
-
TotalKShs ‘000
281,332
1,469,8252,034,372
849,4412,972,145
19,788
7,626,903
11,9491,699,047
895,0851,020,1242,857,921
86,989
Level 2KShs ‘000
281,332
----
-
281,332
11,949----
-
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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Normal ContributionsEmployer Employees Excess contributions/ taxable ContributionsEmployees
RegisteredUnregistered
Total Benefits Paid
2014KShs’000
678,135 237,334 915,469
116,468
1,031,937
2014KShs’000
96,098 13,865
109,963
2015KShs’000
603,377 365,714 969,091
120,310
1,089,401
2015KShs’000
350,147121,236
471,383
4. CONTRIBUTIONS RECEIVED
5. BENEFITS PAYABLE
Each member of the fund has an account into which contributions are received and investment interest credited when declared. Benefits payable purely depends on contributions and return on investments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
5756
6. RETURN ON INVESTMENT
Interest on term depositsCredit loss expense (note 21)
Discount on commercial paperGovernment securitiesInterest on treasury bonds(Loss)/ gain on disposal of treasury bonds(Loss)/ gain in fair value through profit or lossCommission on treasury bonds
Gain on disposal of treasury billsDiscount on treasury bills
Quoted equity investments(Loss)/gain in fair value through profit or loss(Loss)/gain on sale of quoted equitiesDividends received
Corporate bonds Interest on corporate bondsLoss on disposalFair value (loss)/gain through profit or loss
Investment propertyGain on valuation of investment property
Unquoted equity investments
Total
2015KShs ‘000
23,391 (2,117) 21,274 677
388,435(25,045)
(214,814) 782 149,358
4,490 1,764 6,254
(228,233)(26,977)
63,827(191,383)
124,812(2,164)
(644)
122,004
576,245
1,661
686,090
2014KShs ‘000
41,062 -
41,062 12,732
321,6961,811
51,854 631375,99215,689 5,31621,005
170,6499,007
51,164230,820
82,202(1,142)
23,674
104,734
239,085
3,319
1,028,749
Investment management expenses include investment managers’ fees, custodial fees and brokerage fees paid by the scheme. Investment managers are paid a fee of 0.125% of the net asset value held by the investment managers and a performance fee of 1% of returns higher than the performance hurdle rate of average 91-day Treasury bill rate plus 4% charged once at the end of the year. Custodian banks on the other hand are paid a maximum fee of 0.07% of the net asset value. Applicable transaction costs and bank charges are also payable to the custodian
Investment managers feesCustodial fees
2014KShs’000
17,488 5,499
22,987
2015KShs’000
15,730 5,285
21,015
7. INVESTMENT MANAGEMENT EXPENSES
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
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These are expenses relating to the scheme administration and management. This is carried out by the secretariat of The Kenya Power and Lighting Company Limited Staff Retirement Benefit Scheme (Defined Benefit) and reimbursed during the year.
Governance expenses are incurred by the Trustees to fulfill their mandate as is required of them by the Trust Deed & Rules and by the Retirement Benefits Act. Trustee’s remuneration includes their sitting allowances for meetings attended and the chairman’s honoraria. The Trustee allowances are short term in nature and the fund does not have: post tenure benefits, other long term benefits and termination benefits.
Administrative expenses are incurred by the scheme in the course of carrying out its duties which include; benefits processing and administration, accounting, performance measurement and cash management of the scheme. The net administrative expense to the total fund value is 0.51%.
Auditor’s remunerationProfessional feesActuarial feesStationeryBank chargesLand ratesRBA LevySecretariat expensesGovernance expensesMembers expenses
Fund administration
Trustees’ training Trustees’ allowances
2014KShs’000
8712,443
6961,064
148427
5,00019,349
4,806 4,096
38,900
2014KShs’000
19,349
2014KShs’000
2,5392,267
4,806
Note
91011
2015KShs’000
9742,170
9181,510
277427
5,00020,01814,684
4,456
50,434
2015KShs’000
20,018
2015KShs’000
4,34810,336
14,684
8. ADMINISTRATION EXPENSES
9. SECRETARIAT EXPENSES
10. TRUSTEES’ FEES AND EXPENSES
Members expense comprise of annual general meeting expenses and cost of sensitizing and educating members about the scheme and their benefits.
Annual general meeting Members education
2014KShs’000
5033,593
4,096
2015KShs’000
8203,636
4,456
11. MEMBERS EXPENSES
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
5958Contributions received by the scheme up to a limit of KShs 20,000 per employee per month are invested in a registered fund, which is exempt from taxation. Any amount above this limit is invested in an unregistered fund whose investment income is taxed at the corporate tax rate of 30%.
2015Percentage of registered portion
Investment IncomeDividends receivedInterest on term depositsInterest on treasury bondsCorporate Bond incomeCommission IncomeRealised gain on equitiesRealised loss on bonds
DeductionsInvestment expenseAdministration expenses
Taxable income
Tax expense on unregistered fund @ 30%
2014Percentage of registered portionInvestment IncomeDividends receivedInterest on term depositsInterest on treasury bondsCorporate bond incomeCommission IncomeRealised gains on equities
DeductionsInvestment expenseAdministration expenses
Taxable income
Tax expense on unregistered fund @ 30%
100.00%Total
63,82721,273
356,373124,812
782(26,977)(22,719)
517,371
(21,014)(50,434)
445,923
TotalKShs ‘000
51,16441,062
322,68281,060
631 9,007
505,606
(22,986)(38,835)
443,785
94.64%Registered Fund
60,40920,134
337,289118,128
740(25,532)(21,502)
489,666
(19,889)(47,733)
422,044
94.16%Registered Fund
KShs ‘000
48,17838,666
303,85376,330
594 8,481
476,102
(21,645)(36,569)
417,888
5.36%Unregistered Fund
3,4181,139
19,0846,684
42(1,445)(1,217)
27,705
(1,125)(2,701)
23,879
7,164
5.84%Unregistered Fund
KShs ‘000
2,9862,396
18,8294,730
37 526
29,504
(1,341) (2,266)
25,897
7,769
12 TAXATION
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The
Keny
a Po
wer
& L
ight
ing
Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
06 |
Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
The
Keny
a Po
wer
& L
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Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
13.
INVE
STM
ENTS
2015
Inve
stm
ent p
rope
rty (
note
14)
Inve
ntor
y pr
oper
ty- w
ork
in p
rogr
ess
( not
e 15
)
Gove
rnm
ent s
ecur
ities
at f
air v
alue
thro
ugh
profi
t or
loss
(not
e 16
)
Gove
rnm
ent s
ecur
ities
hel
d to
mat
urity
(not
e 16
)
Unqu
oted
equ
ities
(not
e 17
)
Quot
ed e
quiti
es (n
ote
18)
Corp
orat
e bo
nds
(not
e 19
)
Com
mer
cial
pap
er (
note
20)
Term
dep
osits
(not
e 21
)
Valu
e at
01.0
1.20
15KS
hs ‘0
0083
9,08
5
1,36
0,91
5
2,85
7,92
1
86,9
89
11,9
49
1,69
9,04
7
1,02
0,12
4
84,8
29
51
5,56
9
8,47
6,42
8
Purc
hase
sKS
hs ‘0
00
619,
042
446,
480
969,
254
46,5
46
273,
195
192,
158
156,
952 -
2,93
9,98
5
5,64
3,61
2
Sale
sKS
hs ‘0
00 - -
(615
,171
)
(120
,000
)
(5,4
73)
(166
,171
)
(324
,827
)
(85,
506)
(3,1
04,2
00)
(4,4
21,3
48)
Chan
ge in
m
arke
tKS
hs ‘0
0057
6,24
5 -
(214
,814
)
1,76
3
1,66
1
(228
,232
)
(644
) -
13,
657
149,
636
Allo
wan
ce fo
r cr
edit
loss
esKS
hs ‘0
00 - - - - - - - -
(37,
117)
(37,
117)
Valu
e as
at
31.1
2.20
15KS
hs ‘0
002,
034,
372
1,80
7,39
5
2,97
2,14
5
19,7
88
281,
332
1,46
9,82
5
849,
441 -
34
6,54
0
9,78
0,83
8
Profi
t/(lo
ss)
on d
ispo
sal
KShs
‘000 - -
(25,
045)
4,49
0 -
(26,
977)
(2,1
64)
677
18,
646
(30,
373)
The
chan
ge in
mar
ket v
alue
of i
nves
tmen
ts co
mpr
ises
chan
ge in
carry
ing
amou
nt o
f the
inve
stm
ents
as a
resu
lt of
fair
valu
atio
n at
the
repo
rting
dat
e. T
he tr
ansa
ctio
n co
sts
are
incl
uded
in th
e co
st o
f pur
chas
es a
nd s
ales
pro
ceed
s. O
ther
than
com
mer
cial
pap
er, t
reas
ury
bills
and
priv
ate
equi
ty, a
ll th
e ot
her a
sset
cla
sses
exc
eed
5%
of th
e ne
t ass
ets
avai
labl
e fo
r ben
efits
.
NO
TES
TO T
HE
FIN
AN
CIA
L ST
ATEM
ENTS
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2015
6160
13.
INVE
STM
ENTS
2014
Inve
stm
ent p
rope
rty (
note
14)
Inve
stm
ent p
rope
rty- w
ork
in p
rogr
ess
( not
e 15
)
Gove
rnm
ent s
ecur
ities
at f
air v
alue
thro
ugh
profi
t or
loss
(not
e 16
)
Gove
rnm
ent s
ecur
ities
hel
d to
mat
urity
(not
e 16
)Un
quot
ed e
quity
(not
e 17
)Qu
oted
equ
ity (n
ote
18)
Corp
orat
e bo
nds
(not
e 19
)Co
mm
erci
al p
aper
( no
te 2
0)Te
rm d
epos
its (n
ote
21)
Valu
e at
01.0
1.20
15KS
hs ‘0
0060
0,00
072
1,18
7
2,60
4,37
3
300,
281
2,49
01,
336,
500
693,
530
56,1
82
434
,646
6,74
9,18
9
Purc
hase
sKS
hs ‘0
00 -63
9,72
8
925,
601
100,
702
6,14
020
5,56
646
4,97
211
5,41
62,
289,
900
4,74
8,02
5
Sale
sKS
hs ‘0
00 - -
(722
,096
)
(334
,999
) -(2
2,67
6)(1
53,0
11)
(94,
167)
(2,2
45,6
34)
(3,5
72,5
83)
Chan
ge in
m
arke
tKS
hs ‘0
0023
9,08
5 -
51,8
54
5,31
6 -17
0,64
915
,775
3,57
4
6,0
69
492,
322
Valu
e as
at
31.1
2.20
14 K
Shs
‘000
83
9,08
51,
360,
915
2,85
7,92
1
86,9
8911
,949
1,69
9,04
71,
020,
124
84,8
29
515
,569
8,47
6,42
8
Profi
t/(lo
ss)
on d
ispo
sal
KShs
‘000 - -
(1,8
11)
15,6
893,
319
9,00
8(1
,142
)3,
824
30,5
88
59,4
75
The
chan
ge in
mar
ket v
alue
of i
nves
tmen
ts co
mpr
ises
chan
ge in
carry
ing
amou
nt o
f the
inve
stm
ents
as a
resu
lt of
fair
valu
atio
n at
the
repo
rting
dat
e. T
he tr
ansa
ctio
n co
sts
are
incl
uded
in th
e co
st o
f pur
chas
es a
nd s
ales
pro
ceed
s.
NO
TES
TO T
HE
FIN
AN
CIA
L ST
ATEM
ENTS
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2015
The
Keny
a Po
wer
& L
ight
ing
Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
06 |
Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
The
Keny
a Po
wer
& L
ight
ing
Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
*In October 2015, the company purchased additional investment property under LR No. 2/31/3.
Work in progress (WIP) relates to contractors’ and subcontractors’ costs incurred in relation to development of Karen Bogani property.
The weighted average interest rate realised on the investment in treasury bonds during the year was 11.83% (2014:11.84%).
* In the current year the unquoted equity investment constitutes investment in Ascent Rift Valley and investment in Gulf Power Limited which has been carried at cost and the Trustees are of the opinion that this approximates its fair value. The Fund, together with The KPLC Staff Retirement Benefit Scheme (Defined Benefits), jointly acquired a 10% interest in the equity shares of Gulf Power Ltd, an independent power producer.
1 JanuaryFair value gainAdditions*
31 December
1 JanuaryAdditions during the year
31 December
Treasury bonds at fair value through profit and lossTreasury bills held to maturity
Weighted average interest rate
At cost1 JanuaryAdditions Refunds Fair value gain
31 December
2014KShs’000
600,000 239,085
-
839,085
2014KShs’000
721,187 639,728
1,360,915
2014KShs’0002,857,921 86,989
2,944,910
11.84%
2014KShs’000
2,4906,140
- 3,319
11,949
2015KShs’000 839,085
576,245 619,042
2,034,372
2015KShs’000
1,360,915 446,480
1,807,395
2015KShs’000
2,972,145 19,788
2,991,933
11.83%
2015KShs’000
11,949
273,195(5,473)
1,661
281,332
14. INVESTMENT PROPERTY
15. INVENTORY PROPERTY – WORK IN PROGRESS
16. GOVERNMENT SECURITIES
17. UNQUOTED EQUITY INVESTMENTS
The revalued investment property comprises a leasehold land acquired in 2010 under LR No. 2259/708. The land was revalued by Sundown Val-uers & Realtors Limited, registered valuers as at 31 December 2015. The valuer relied on three methods of valuation. These being; investment approach (capitalization approach), direct market comparison approach (comparable sale approach) and contractor’s approach (depreciated coast approach). Sundown Valuers & Realtors Limited are industry specialists in valuing these types of investment properties.
There was no rental income earned from the investment property during the year. There were no direct operating expenses arising from in-vestment property.
6362
* The fund has invested in 1,481,279 (2014: 4,252,754) units of the sponsor (Kenya Power & Lighting Company Limited) quoted shares which were valued at KShs 57,852,353 (2014: 61,452,295) as at reporting date.
Security
Athi River Mining Company LtdBamburi Cement Company LtdBarclays Bank of Kenya LtdBank of KigaliBRALIWABritish American Tobacco LtdCentum Investments LtdCMC Motors LtdCo-operative Bank of Kenya LtdDiamond Trust Bank LtdEast African Breweries LtdEast African Cables LtdEquity Bank LtdHousing Finance Corporation of KenyaInvestments & MortgagesKenya Commercial Bank LtdKenya Electricity Generating Company LtdKenol KobilKenya Power & Lighting Company Limited*Nation Media Group LtdNational Industrial Credit Bank LtdSafaricom LtdScangroup LtdStandard Chartered Bank of Kenya LtdUmeme LtdBritish American Investments LtdCIC Insurance Group LtdCrystal Ventures
2015Units’000
1,233256
4,11212
-97
3293,471
-381266
1,3872,200
8041,7423,2441,9923,6801,481
2516,606
11,958512123801800
2,000 1,200
50,938
2015Units’000
31,960126,63049,12019,187
29675,91015,295
-62,48331,491
120,420398
143,44017,89029,964
150,2018,901
26,60357,85228,84355,986
288,6939,529
61,86917,81310,40012,400
16,251
1,469,825
2014Units’000
766724
3,612500
1297
329-
4,121342421
383,736
403300
4,4331,2542,1144,253
151853
15,261318417300
--
-
44,755
2014Units’000
65,833100,58060,31719,465
61187,80420,064
-82,42580,482
129,699608
186,80018,42436,856
252,69012,91318,38761,45339,71649,039
214,42014,373
139,7886,300
--
-
1,699,047
18. QUOTED EQUITY INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The
Keny
a Po
wer
& L
ight
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Com
pany
Lim
ited
Staf
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irem
ent B
enefi
ts S
chem
e 20
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
The
Keny
a Po
wer
& L
ight
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Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
ABC BANK BONDATHI RIVER MINING LTD FXDBARCLAYS BANK LTD TR2 FXDBARCLAYS BANK LTD TRN II FXDBRITAM LTD CENTUM LTD NOTES FXDCFC STANBIC BANK TRN I FXDCIC BANK LTDCOMMERCIAL BANK OF AFRICA TR1CONSOLIDATED BANK LTD FXDHOUSING FINANCE CO LTD T1 FXDHOUSING FINANCE CO.LTD TRII FXDI & M BANK LTD FXDKENGEN LTD FXDMABATI ROLLING MILLS FLRMABATI ROLLING MILLS FXDNIC BANK LTD FXDSAFARICOM LTD TRN II FXDSHELTER AFRIQUE TR1 FXDCENTUM EQL NOTESEAST AFRICAN BREWERIES LTD
2015Units’000
21,374---
43,39531,09816,90286,03365,22852,85032,242
-16,047
110,5321,1571,136
103,322-
139,43892,703
35,983
849,441
12.60%12.00%11.50%12.50%13.00%13.50%12.95%13.00%12.75%13.25%
8.50%13.00%12.80%12.50%12.24%13.00%12.50%
7.75%12.75%
13%12%
2014Units’000
20,38021,490
4,0124,030
104,15431,11316,89685,83365,20552,83932,23248,10675,416
144,0332,2672,272
155,24715,208
139,391-
-
1,020,124
19. CORPORATE BONDS
Held to maturity: maturing within 90 days
CAR & GENERAL (Interest 12.25%)ATHI RIVER MINING LTD (Interest 12.25%)EAST AFRICAN BREWERIES LTD (Interest 11.06%)
2014KShs’000
-15,38469,445
84,829
2015KShs’000
---
-
20. COMMERCIAL PAPERS
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
6564* During the year the Fund placed a deposit of KShs 35 million with Imperial Bank of Kenya which was placed under receivership. Interest accrued amount-ed to KShs 2,117,260 (also included in the allowance for credit loss).
Diamond Trust Bank Ltd Housing Finance Ltd Commercial Bank Of AfricaCo-Operative Bank LtdEquity Bank LtdNIC Bank LtdBank Of Africa LtdBank Of Africa LtdCommercial Bank Of AfricaFamily Bank LtdHousing Finance Co. LtdImperial Bank LtdCo-Operative Bank LtdHousing Finance Company of Kenya LtdFamily Bank LimitedCo-operative Bank LimitedHousing Finance Company of Kenya LtdCommercial Bank Of Africa LtdDiamond Trust Bank Kenya LtdHousing Finance Co.LtdEquity Bank LtdCooperative BankKenya Commercial bankKenya Commercial bankBarclays Bank LtdDiamond Trust Bank Kenya LtdEquity Bank LtdBank Of Africa LtdChase Bank LtdCooperative BankCommercial Bank Of Africa Housing Finance Co.LtdEquity Bank Ltd
Add: Accrued Interest
Less: Allowance for credit loss*
Maturity date
On Call On Call On Call On Call On Call On Call On Call On Call On Call On Call On Call
22-Oct-15 On Call On CallOn Call
21-Jan-1528-Jan-15
On CallOn CallOn CallOn CallOn Call
9-Feb-159-Feb-15
23-Feb-14On CallOn Call
6-Apr-156-Apr-15
On CallOn Call
12-Jan-15On Call
2015Units’000
23,00015,00038,000
143,0004,000
10,0002,5009,0008,000
37,00015,00035,00030,498
--------------------
13,657
383,657 (37,117)
346,540
Interest rate
14%17%19%23%19%
8%8%8%8%
19%16%24%16%10%10%13%13%10%
9%9%
10%9%
12%12%12%
9%9%
12%12%10%
8%13%
8%
2014Units’000
-------------
23,0002,500
17,00019,0009,0001,000
11,0007,000
35,00050,0008,000
100,0005,0004,000
60,00046,00023,00013,00047,00029,000
6,069
515,569 -
515,569
21. TERM DEPOSITS
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The
Keny
a Po
wer
& L
ight
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Com
pany
Lim
ited
Staf
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irem
ent B
enefi
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
The
Keny
a Po
wer
& L
ight
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Com
pany
Lim
ited
Staf
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irem
ent B
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chem
e 20
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Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
22. CASH AND CASH EQUIVALENTS
23. OTHER RECEIVABLES
24. RELATED PARTIES
Bank balancesTerm depositsGovernment bondsTreasury BillsCorporate BondsCommercial paper
Total
Interest receivableContributions receivable*
Amount due to related party
Amount due from related party
Face valueKShs ‘000
140,137334,999
62,50020,00019,400
-
577,036
2015KShs ‘000
13,532 92
3,624
2015KShs ‘000
1,926
2015KShs ‘000 3,200
2015 Market Value KShs ‘000
140,137346,540
64,62519,78720,164
-
591,253
2014KShs ‘000
--
-
2014KShs ‘000
4,889
2014KShs ‘000
27
Face valueKShs ‘000
177,690509,502195,000
--
75,000
957,192
2014 Market ValueKShs ‘000
177,690515,569200,151
-
75,416
968,826
For the purpose of the cash flow statement, cash equivalents include short term liquid investments which are readily convertible to known amounts of cash and which were within three months to maturity when acquired. Short term deposits held are available for use.
*These relate to contributions from one of the Fund’s sponsors, Kenya Nuclear Electricity Board (KNEB).
(i) Amount Due to Related Party Amount due to related party relates to members training costs and Trustees’ allowances paid by the KPLC Staff Retirement Benefits
Scheme - Defined Benefits. The Fund also provides group life assurance to its employee at a sum assured of fours time annual salary. The sponsor pays the premium for the cover. The group life is a guaranteed benefit as provided in the Fund Trust Deeds and Rules. There were no provisions for bad and doubtful debts in relation to related party balances.
(ii) Amount Due from Related Party Amount due from related party relates to payments made on behalf of the KPLC Staff Retirement Benefits Scheme - Defined Benefits
recoverable as of year end.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
6766
Trustees’ allowances
2015KShs ‘000
10,336
2014KShs ‘000
2,266
(iii) Key management compensation Key management includes the board of Trustees who are entitled to a sitting allowance for Board meetings attendance. The Board
of Trustees have no post-employment benefits, share based payments, termination benefits or any other long term benefits the short term compensation to key management personnel is shown below.
There were no provisions for impairment losses for any related party during the year.
25. BENEFITS PAYABLE
26. TAX (RECOVERABLE)/PAYABLE
27. OTHER PAYABLES
28. SCHEME BALANCE
Withdrawals payable
At 1 January Charge for the year (note 12)Tax paid
Other payables/accrualsDeath claims payable Bogani property clients’ deposits
At 1 January 2015Increase in net assets for the year
At 31 December 2015
2015KShs ‘000
1,158
2015KShs ‘000
2,2027,164
(10,747)
(1,381)
2015KShs ‘000
21,17651,72220,100
92,998
Registered FundKShs ‘000
94.64%1,786,7591,159,868
2,946,627
2014KShs ‘000
161
2014KShs ‘000
8997,769
(6,466)
2,202
2014KShs ‘000 22,566
16,724 -
39,290
Unregistered schemeKShs ‘000 5.36%
101,03465,627
166,661
TotalKShs ‘000
100.00%8,607,6031,225,495
9,833,098
*These relate to contributions from one of the Fund’s sponsors, Kenya Nuclear Electricity Board (KNEB).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The
Keny
a Po
wer
& L
ight
ing
Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
ts S
chem
e 20
06 |
Annu
al R
epor
ts a
nd F
inan
cial
Sta
tem
ents
The
Keny
a Po
wer
& L
ight
ing
Com
pany
Lim
ited
Staf
f Ret
irem
ent B
enefi
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30. CARRYING AMOUNT Unless stated otherwise, carrying amount approximates fair value of financial instruments.
31. CONTINGENT LIABILITY Other than the liability to pay future benefits there were no contingent liabilities of the Fund as at close of the period.
32. REGISTRATION The scheme is registered in Kenya under the Retirement Benefits Act.
33. The Trustees are not aware of events after the reporting date that require disclosure in or adjustments to the financial statements as at the date of this report.
34. CURRENCY The financial statements are presented in Kenya Shillings (KShs ‘000)
The scheme is a registered pension scheme under the Kenyan Income Tax Act and is therefore tax exempt. However, income generated from contributions in excess of the KShs 20,000 per month per member statutory limit is subject to tax.
28. SCHEME BALANCE
29. INCOME AND EXPENDITURE ACCOUNT
At 1 January 2014Increase in net assets for the year
At 31 December 2014
INVESTMENT INCOME
EXPENDITUREInvestment management feesAdministration expensesOther administrative expensesTaxation
Total
Net income for the year ended 31 December
Registered FundKShs ‘000
94.64%
6,426,1511,771,213
8,197,364
2015KShs ‘000
577,088
(21,015)(50,434)
- (7,164)
(78,613)
498,475
Unregistered schemeKShs ‘000 5.36%
300,385 109,854
410,239
2014KShs ‘000
522,199
(22,987)(38,835)
- (7,769)
(69,591)
452,608
TotalKShs ‘000
100.00%
6,726,536 1,881,067
8,607,603
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
6968
Notes
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71
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The
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Stima Plaza,Kolobot Road, Parklands.P.O. Box 1548–00600Nairobi, Kenya
Telephone +254 20 3201020Mobile +254 711 031 020SMS 30305Email [email protected]
www.kplcpensionfund.co.ke
HEAD OFFICE