GOVERNMENT EMPLOYEES PROVIDENT FUND (GEPF) ANNUAL OPERATIONS REPORT FOR THE YEAR 2009/2010

Transcription

1 GOVERNMENT EMPLOYEES PROVIDENT FUND (GEPF) ANNUAL OPERATIONS REPORT FOR THE YEAR 2009/2010 April

2 CORPORATE INFORMATION Board of Management Mrs. M.L. Mwamunyange Chairperson Mr. E.N. Nkuku Mr. L.M. Salema Mr. Mrs. J. Shaidi Mr. R.E. Chalamila Dr. M.I. Nchimbi Mr. O. Urasa Mr. C. W. Samanyi Mr. D.M. Msangi Secretary Audit Committee Dr. M.I. Nchimbi Chairperson Mr. L.M. Salema Mr. R.E. Chalamila Mr. O.M. Urasa Registered Office Bankers Ubungo Plaza 1 st Floor, Ubungo Plaza Morogoro Road P O Box Dar -es-salaam National Bank of Commerce Limited P.O. Box 9062 Dar-es-salaam CRDB Bank Plc P.O. Box Dar-es-Salaam National Micro-finance Bank P.O Box.. Dar-es Salaam Auditors Deloitte & Touche Certified Public Accountants 10th Floor, PPF Tower Cnr of Ohio Street & Garden Avenue P O Box 1559 Dar -es-salaam 1

3 Our Vision To be a leading Professional Provident Fund in Tanzania in terms of widest coverage and customer oriented services. Our Mission To provide quality and timely social security benefits under Provident Fund System to non- pension, contractual employees and self employed person in Tanzania through the use of modern information communication technology. Our Core Values Accountability Transparency Behave like owner Result oriented Excellence Integrity 2

4 TABLE OF CONTENTS LETTER OF TRANSMITTAL...4 CHAIRPERSON S STATEMENT...5 THE BOARD OF MANAGEMENT...7 STATEMENT BY THE CHIEF EXECUTIVE OFFICER...8 THE MANAGEMENT TEAM...10 DETAILED PERFORMANCE REVIEW...11 MEMBERSHIP AND BENEFIT PAYMENT Membership Members registration Benefit payment INVESTMENTS AND INVESTMENT INCOMES Investments made Investment Incomes Interest to be Credited to Members SERVICES TO MEMBERS ANNUAL GENERAL MEETING (AGM) Members Recommendations Implementation of Members Recommendations STAFF DEVELOPMENT AND RECRUITMENT Staff Development Staff Recruitment INDUSTRIAL RELATIONS CORPORATE SOCIAL RESPONSIBILITY AWARENESS AND PUBLIC RELATIONS CORPORATE AND INTERNATIONAL RELATIONS BOARD S STATEMENT ON CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE STATEMENT OF BOARD OF MANAGEMENT S RESPONSIBILITIES...24 INDEPENDENT AUDITORS REPORT TO THE CHAIRPERSON OF THE...26 BOARD OF MANAGEMENT OF GOVERNMENT EMPLOYEES PROVIDENT FUND...26 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE STATEMENT OF NET ASSETS AS AT 30 JUNE CASHFLOW STATEMENT FOR THE YEAR ENDED 30 JUNE NOTES TO THE FINANCIAL STATEMENTS

5 LETTER OF TRANSMITTAL Mr. Ramadhan Khijah, Permanent Secretary, Ministry of Finance and Economic Affairs, P.O Box 9111, DAR ES SALAAM. Permanent Secretary, I am pleased to present to you on behalf of the Board of Management an Annual Report of the Government Employees Provident Fund for the financial year ended 30 th June The report was prepared in accordance with Section 3 of the Government Employees Provident Fund Act No 52 of 1942, (RE 2002). The report details a Chairpersons statement, Statement of the Director General, the Annual Accounts and the Auditor s Report. Yours Sincerely, Monica L. Mwamunyange CHAIRPERSON September,

6 CHAIRPERSON S STATEMENT Dear Members, Having successfully accomplished another year s progress, I am delighted to report Fund s Annual Report and Financial Statement for the year ended 30 th June The report will address, economic performance, operational performance of the Fund, Challenges and way forward. In the recovery of the economy, the gross domestic product grew by 6% which is higher than projection of 5% due to communication and financial intermediation activities. However, the inflation moved to single digit on February 2010 from double digit in the previous year in respect to improvement of food supply. The annual inflation decreased to 8.20% by June 2010 from 11.30% in June The interest rate decreased as the treasury bills made a record of 2.90% in June 2010 compared to 6.97% in June The time deposits made a record of declined to 5.78 % in June 2010 from 6.52% in June For the 12 months time deposit made a declining record of 8.67% from 8.98% in the previous year. Financial Performance The Fund made an incredible growth despite the economy being in its recovery process. The Fund s net asset grew to 91, million by June 2010 from TZS 72, million reported in June The growth of 25.79%, this increase was a result of increase in contribution by % and investment income that increase by 40%. 5

7 Service to Members Achievement of customer satisfaction has been normal priority of the Fund along the years. The Fund has strengthened customer services by attending at a minimum possible time the customer s enquiries. Information has been updated in the website for customers convenient to assess their information including Fund s operations. Besides that, there is also members statement issued for those customers visiting the Fund physically or through posting. Response to Members Opinion During the previous Annual General Meeting, members raised pertinent issues. A special sub section detailing implementation of such issues is covered under detailed performance review. I wish to point out that as a response to members comments during the AGM the Fund has implemented most of their recommendations which include opening offices to serve customers in the regions. One office has already been opened at Mafinga and another two are expected to be opened on the Northern Zone and Lake Zone. Appreciation Finally, I would like to take this opportunity to place on record our hearty thanks to members, stakeholders and GEPF Staff for the perfect logistic support and guidance that extended to our sustainable growth. It is my sincere expectations the co-operation will be strengthen to over record performance in the near future. I assure to our esteemed members that the Fund will make sure better lives is maintained through quality service and perfect requirement packages for them. MONICA L. MWAMUNYANGE CHAIRPERSON 6

8 THE BOARD OF MANAGEMENT Mr. E. M. Nkuku Vice Chairperson Mrs. M. L. Mwamunyange Chairperson Eng.Ladislaus M. Salema Member He joined the Board in May 2003 as Non Executive Director and became Deputy Chairperson in May He is a lawyer and holder of Post Graduate Diploma in Human Resources Management. Currently he is the Commissioner of Prisons responsible for Finance and Administration Division in Tanzania Prisons Service. She joined the Board in May She is a planner with over 20 years of public service. She is currently serving as Commissioner for Budget, Ministry of Finance and Economic Afairs and Non- Executive Director, Mwalimu Nyerere Memorial Academy. He joined the Board in May A Former Manager of National Engineering Company and Divisional Director in Tanzania Social Action Fund. He has over 30 years of experience in techno-managerial in public service. He is currently the CEO of MKURABITA. Dr. Mariam I. Nchimbi Member She joined the Board in May She is a senior Lecturer and Director of the University of Dar es Salaam Enterpreneurship and also a Non Executive Director of the Governing Boards of the Tanzania Investment Centre (TIC) and Arusha International Conference Centre (AICC) 7

9 STATEMENT BY THE DIRECTOR GENERAL I appreciate the efforts made in in accomplishing the achievement that kept a record of another successful year. The Fund has been performing well despite the economy being in the recovery situation. The annual report of the fund shows the growth in the aspect of membership, members contribution, investments and investment income. The contributions have increased from TZS 14, million in June 2009 to TZS 16, million in June The increase in contribution resulted from increase in salaries, close follow up in contribution collection and increase in membership size. Investment performance made a good record to an increase from TZS 5, million in June 2009 to TZS 7, million in June The increase in investment income was a result from attractive interest rate from fixed deposit, high yields earned from Treasury bond, dividends and interest from loans issued to companies. Members have been paid benefits on time within seven working days with the exception of the some which had problems beyond our control. The benefits paid to members increased from TZS 1, million to TZS 3, million. This increase resulted from increase in members who have graduated to pension terms and retired members. 8

10 Voluntary Saving Retirement Scheme (VSRS) During the year the Fund introduced a new scheme voluntary saving retirement scheme that suits the need of employed and self - employed. In the interest of widening the members coverage to reach all people, the VSRS product is in place to cover selfemployed workers in all sectors of the economy. The scheme has progressed very well; members registered as 30 th June 2010 were 1,451 that contributed a sum of TZS million. Detailed of operations is presented in the following sections. I would like to conclude by extending special appreciation to the Board of the Fund, Employees of the Fund, members, employers, business associates and other stakeholders for their continued support. Contributions made by all parties were key to the success of the Fund during the year. DAUD M. MSANGI DIRECTOR GENERAL 9

11 THE MANAGEMENT TEAM Philemon P. Minga Manager - Finance and Administration He joined the Fund in April 2004 as Manager responsible for finance and administration. He is a professional accountant who previously worked with TTCL as manager responsible for customer accounting and later responsible for financial accounting. Mr. Daud M. Msangi DIRECTOR GENERAL He joined the Fund in June 2004 as Chief Executive Officer. He is economist with over 15 years in the field and has held various positions in the public sector including the post of Deputy National Authorizing Officer and Coordinator of European Development Fund in Tanzania. Mr. Festo F. Fute Manager Investment and Operations He joined the Fund in June 2004 as Manager responsible for operations and investments. He is economist and has previously worked with the National Social Security Fund (NSSF) as principal planning and finance officer for over ten years before joining the Fund. Mr. Hussein I. Kinduu Chief Internal Auditor He joined the Fund in 2003 as senior accountant and later promoted to Chief Internal Auditor in He is a professional accountant who previously worked with Ministry of Finance and Economic Affairs and Public Services Pensions Fund holding various accounting positions. Mr. Edgar Shumbusho Chief ICT Officer He joined the Fund in September 2004 as Information Technology Officer and later promoted to Chief Information Technology officer in Jan He is a Computer Scientist and has previously worked with the University of DSM Computing Centre as head of Consultancy Unit before joining the Fund. 10

12 DETAILED PERFORMANCE REVIEW MEMBERSHIP AND BENEFIT PAYMENT Membership The membership of the Fund depends upon the type of employment. The Fund has two schemes which are the statutory contributory scheme and Voluntary Saving Retirement Scheme (VSRS). The old Statutory Contributory Scheme is open to all employees of the Central Government, its agencies, independent departments working under contracts or operational service. Other eligible employees are those working in projects and program. While members of VSRS scheme are those who are self employed workers or pensionable members who would like to contribute voluntarily to add into retirement gratuity. As at 30 th June 2010 the Fund had a total of 35,279 members out of which 1,451 members were from new registered product namely VSRS. Voluntary Savings Retirement Scheme (VSRS) During the year 2009/10, the Fund conducted a study on the possibility of including self employed workers to the scheme. The result of the study led to introduction of a Voluntary Saving and Retirement Scheme (VSRS) in January The overall response has been very positive as from January to June 2010 the Fund managed to register 1,451 members and collected TZS million from the scheme. The scheme was officially launched during the second Annual General Meeting held on 21 st May 2010.the table 2 below shows the performance of the scheme since November 2009 to June Members registration The Fund had planned to register 3,352 new members during the year. Providentially, the Fund registered 5,897 members equivalents to % of the set target. The members were registered from the Central Government, agencies, independent departments, projects and self-employed. 11

13 Benefit payment The Fund offers three main types of benefits namely old age, survivors and withdrawals. The later is provided in the form of loans to members while the first two are paid as lump sum including interest gained over the period of membership. The benefit payment to member in the year under review was TZS 3, million that is equivalent to % to the set target. The breakdown of the amount paid is that TZS 1, million was paid to 431 members who were transferred to pension after becoming pensionable. A five years benefit payment trend is shown in chart 1 below. Chart 1: Trend in Benefit Payments 12

14 INVESTMENTS AND INVESTMENT INCOMES Investments made The Fund collects contributions from members and invests in different secured security to increase the growth of the Fund. Growth of the Fund through revenue realised increases the members account value. The investments are made in a highly professional method through the guidance set out in the investment policy. The Fund is faced with limited investment avenue in the country. The Fund is The Fund invested in Government Securities, fixed deposit in commercial bank, corporate bonds, listed shares in the Dar es Salaam stock exchange, corporate loans and Land Plot. The Fund is in process of constructing a commercial office complex in the plot acquired along new Bagamoyo Road. During the year under review, the Fund s investment portfolio increased from TZS 64, million in June 2009 to TZS 83, million in June 2010 which is equivalent to a growth of 29.00%.Table 1 below shows a five year investment portfolio structure, while chart No. 2 presents a percentage distribution of the portfolio structure in year 2008/09. Table 1: GEPF Investments Portfolio Structure as at 30 th June 2010 (TZS Mil.) Type of 2005/ / / / /10 Investment Treasury Bills 9, , , , , Treasury Bond 7, , , , , Govt. Stocks Fixed Deposits 4, , , , , Equity/shares , , , , Corporate Bond 1, , , , Loans , , , UTT 1, Real Estate Total 24, , , , ,

15 From table 1 above it can be seen that the size of investible funds has continued to grow from as low as TZS 24, million in 2005/06 to as high as TZS 81, million in 2009/10. Chart 2: Percentage distribution of Investment Structure (2009/10) From chart 2 which summarizes the investment structure it can be seen that:- Government securities (Bills and Bonds combined) account for 40.81% of the total portfolio; Fixed deposits with commercial banks takes a second position with 46.36% of the total portfolio; Equity takes third position with 4.07% of the total portfolio; and, The remaining lines of investments (UTT Units, real estate, loans and corporation bonds) jointly constitute 8.76% of the portfolio. The Fund is in process of preparing credit manual to expand its loan portfolio to private investors. Investment Income The Fund realised income from investment in the year under review amounting to TZS 7, million which is % compared to the planned target of realising TZS 14

16 7, million. This amount is equivalent to 40.52% increase when compared to TZS 5, million realised in the financial year The increase above the target in the investment income was brought about from investing more in fixed deposit, realisation of discount on Treasury bond, dividend received and interest from loan. Table 2 provides the breakdown of income from each line of investment for the past five years. Table 2: Income from Investments Portfolio 2005/ / / / /2010 Treasury bills , , Treasury Bonds , , , Gvt. Stocks Fixed deposits , , , Dividends/C. Gain Corp. Bond UTT Loan Interest Rent Total 2, , , , , Chart 3: Trend of Income from investments 15

17 Interest to be credited to Members During the Financial year , the national financial market kept on declining not only resulted from a relaxed monetary policy stance pursed by the Bank of Tanzania but also resulted from credit crunch that planted fear in credit institutions to discharge loans to agriculturist. This led the interest rates in the financial market to decline to 2.90% in June 2010 from 5.89% recorded in March 2010, the overall time deposit rate decreased to 5.78% in June 2010 from 6.01% in June The unchanged market situation from the financial year affected the Fund investments projections be targeted low. The low interest rate across various instruments in the money market led interest to be low credited to members accounts. For the year 2009/10 members accounts will be credited with 4.90% interest. The same will be used as provisional rate for the year 2009/10. SERVICES TO MEMBERS Quality of the service offered to members have been crucial factor that is most considered. The Fund had maintained the punctuality in benefit payment, information query and conduct Annual General Meeting that serve to give operational information to stakeholders. The Fund participated in different public occasions and site visit to clients that creates close relationships with members and enables members queries be responded. The Fund participated in Sabasaba Exhibition, Nanenane Show, and Public Service week. The participation resulted to fruitful information and suggestion to the Fund.. 16

18 An official of the Fund availing members with their statements of account during the Nane Nane Exhibition in Dodoma in ANNUAL GENERAL MEETING (AGM) Members Recommendations The Fund conducted its third Annual General Meeting on 30 th April The meeting which was attended by 160 participants was graced by the Minister for Finance and Economic Affairs, Honourable Mustapha Mkullo. The occasion saw the Minister launching the Fund s new product of Voluntarily Saving Retirement Scheme that aimed to self employed worker or employed workers who intend to put additional benefits for their future. During the first AGM members raised the following issues for consideration: The Fund should change the name of GEPF to accommodate the meaning of VSRS as the GEPF name has Government employees that contradicts with VSRS Product which accommodates self employed and employed regardless of government employment. The Fund should open a branch in up-countries to ease service to members around the place branch. 17

19 How the Fund has made arrangements in improving welfare of members in informal sector. In death benefit payment, the Fund should prepare cheque to all beneficiaries according to the proportions allocated by the Court than issuing one cheque to the administrator that leads to family problems at the end. Implementation of Members Recommendations Recommendations received from members were given due considerations. All were implemented except for the following two which had specific reasons: The change of the name of GEPF to accommodate the meaning of VSRS will take long time as it involves parliament approval. 18

20 STAFF DEVELOPMENT AND RECRUITMENT Staff Development Training the staff builds the capacity and adds output in the Fund s operations. During the year under review, seven staff participated in short courses covering social security, investment risk analysis, leadership skills, information technology, advanced financial management and enhancement of good labour relations during the year. Further during the same period the Fund conducted in-house training on the labour laws which benefited 28 staff members and a similar approach on computerised financial accounting system for 8 staff. The Fund continued to sponsor two (2) staff to complete studies on advance accounting and social security s on June One more staff was sponsored on full time nine months Certificate Course on Record Management. Staff Recruitment In the view of improving the Fund s strength, three staffs were recruited during the year to fill the position of Director of Marketing and Operation, Supplies and Procurement Officer and Assistant Accountant. The Fund established the procurement unit. INDUSTRIAL RELATIONS During the year under review the Fund continue to conduct normal relationship among staffs. The Fund carried monthly meetings for department and staff meeting in every two months that provide opportunity to staff discuss issues concerning lead in adding Fund s worth and quality. CORPORATE SOCIAL RESPONSIBILITY The Fund continued to carry out its social responsibility to the society. During the year under review the Fund kept supporting the community by donating TZS million in various charitable areas. The donations were channelled during the year to National Youth Anti- HIV/ Aids Committee, Public Procurement Regulatory Authority, Kimara Ophans, AWARENESS AND PUBLIC RELATION As normal custom of the Fund to make sure most members and stakeholder are of complete knowledge relating the Fund issues. The Fund conducted various programme such as seminars, advertisements in news papers and televisions, distribution of promotional materials and physical client visit. Despite these awareness, the Fund also 19

21 participated Dar es Salaam International Trade Fair and National Agricultural Exhibition (Nane Nane) held in Dar es Salaam and Dodoma respectively. 20

22 CORPORATE AND INTERNATIONAL RELATIONS The Fund cooperates with other social security institution in upgrading different policy governing the sector. The Fund has registered with East and Central African Social Security Association (ECASSA) and International Social Security Association (ISSA). During the year the Fund visited Social Security and National Insurance Trust (SSNIT) of Ghana for learning on the provision of the social protection to the informal sector. Both SSNIT and GEPF are members of the ISSA where it is encouraged to share information. A group picture of GEPF delegation with Management of SISF after brief presentation of the SSNIT Informal Sector Fund 21

23 BOARD S STATEMENT ON CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2009 The Board recognises the importance of good corporate governance in discharging its responsibilities, protecting and enhancing shareholders' value through various policies. The Board adopts and applies the principles and best practices as governed by the Social Security Regulator. A. Directors (i) The Board The Board is primarily responsible for the strategic directions of the Fund and is scheduled to meet at least eight (8) times a year. However, additional meetings may be convened as and when deemed necessary as determined by the members of the Board. The Board make various decisions regarding Fund s operations in the interest of the members. (ii) Board Balance & Composition The current Board has five (7) members comprising six (6) Non-Executive who have been nominated by the Ministry of Finance and Economic Affairs. Together, the Directors bring a wide range of experience relevant to the direction and objectives of the Fund. A brief description of the background of each Director is presented on pages 7 of this Annual Report. AUDIT COMMITTEE The Audit Committee Charter was formed for the purpose of assisting of directors in fulfilling its oversight responsibility relating to the integrity of the performance of internal auditor, the annual independent audit of the company s financial statements, the engagement of the independent auditors and the evaluation of the independent auditors qualifications.in discharging its responsibilities, the Committee is not itself responsible for the planning or conduct of audits or for any determination that the Company s financial statements are complete and accurate or in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditors. Members of the Audit Committee during the year were; 1. Dr. M.I. Nchimbi Chairperson 22

24 2. Mr. L.M. Salema Member 3. Mr. W.G. Gumbu Member The Committee held 2 meetings during the year. The Chief Internal auditor (CIA) is the secretary to the Committee. The Chief Executive Officer and Manager of Finance and Administration attend all meetings. 23

25 STATEMENT OF BOARD OF MANAGEMENT S RESPONSIBILITIES GEPF Act of 1942 and Public Finance Act 2001 (revised 2004) require the Fund to prepare the Financial Statements for each financial year. It is also requires the Management to ensure that the Fund keeps proper accounting records of its income, expenditure, assets and liabilities. The Board of Management is responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards (IFRS). This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. The Board of Management accepts responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards, GEPF Act of 1942 and the Public Finance Act 2001 (revised 2004). The Board of Management are of the opinion that the financial statements give a true and fair view of the financial transactions of the Fund and of the disposition of its assets and liabilities, other than liabilities to pay benefits falling due after the end of the year. The Board of Management further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention of fraud and other irregularities. The Board of Management certify that, to the best of their knowledge and belief, the information furnished to the auditors for the purposes of the audit was correct and complete in every respect. 24

26 M. L. Mwamunyange D. M. Msangi Chairperson Secretary

27 INDEPENDENT AUDITORS REPORT TO THE CHAIRPERSON OF THE BOARD OF MANAGEMENT OF GOVERNMENT EMPLOYEES PROVIDENT FUND Report on the Financial Statements 1. We have audited the accompanying financial statements of the Government Employees Provident Fund, set out on pages 8 to 31 which comprise the statement of net assets as at 30 June 2009, and the statement of changes in net assets and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements 2. The Management are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Public Finance Act No. 6 of 2001 (revised 2004), and Cap. 51 as amended by Cap.52 of This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility 3. Our responsibility is to express an opinion on these financial statements 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 statements are free from 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 our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal controls relevant to the Fund s preparation and fair presentation of the financial statements in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the Fund s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Unqualified Opinion In our opinion, the accompanying financial statements give a true and fair view of the state of financial affairs of the company as at 30 June 2009 and of disposition at that date of its assets and liabilities other than liabilities to pay benefits falling due after the year end, in accordance with International Financial Reporting Standards. 26

28 Report on Other Legal Requirements 4. As required by the Public Finance Act No.6 of 2001, Public Procurement Act No. 21 of 2004 and GEPF Cap.51, as amended by GEPF Cap.52 of 1965, we 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 necessary for the purposes of our audit; ii) in our opinion proper books of account have been kept by the Fund, so far as appears from our examination of those books; iii) the Fund s statement of net assets is in agreement with the books of account and iv) In consideration of the procurement transactions and processes we reviewed as part of the audit, we state that the Fund has generally complied with the Public Procurement Act together with its regulations. Deloitte & Touche Dar es Salaam Signed by: E A Harunani

29 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2009 CONTRIBUTIONS AND BENEFITS Note TZS 000 TZS 000 Members contributions 5 13,792,522 10,395,887 Benefit payments 6 (1,575,964) (1,359,027) Net surplus from dealing with members 12,216,558 9,036,860 RETURNS ON INVESTMENTS Dividend income 171, ,020 Interest income 7 5,444,649 4,973,008 Discount income on treasury bonds 546, ,384 Net appreciation in share value , ,293 Gain on sale of quoted shares - 44,548 6,220,966 6,652,253 Other income 8 7, ,445,174 15,689,813 Administrative expenses 9 (1,794,515) (1,383,817) INCREASE IN NET ASSETS FOR THE YEAR 16,650,659 14,305,996 BALANCE AT THE BEGINNING OF YEAR 55,863,540 41,438,114 ERRONEOUS CONTRIBUTIONS RECEIVED 10 35, ,430 BALANCE AT THE END OF THE YEAR 72,549,570 55,863,540

30 STATEMENT OF NET ASSETS AS AT 30 JUNE 2009 NON CURRENT ASSETS Note TZS 000 TZS 000 Property and equipment 11 1,162,322 55,970 Intangible assets , ,179 Members and staff loans , ,524 INVESTMENTS 2,177, ,673 TANESCO Loan 14 2,000,000 2,000,000 Corporate bond 15 1,600, ,000 Treasury bonds 16 22,919,554 17,380,833 Treasury Bills 14,556,605 11,845,499 Government stocks 4,409 4,409 Quoted shares ,134,953 3,208,742 Unit Trust of Tanzania ,776,138 1,638,922 Short term deposits 18 20,040,000 15,790,000 CURRENT ASSETS 67,031,659 52,668,405 Members and staff loans , ,677 Prepayments and other receivables 19 10, ,568 Interest receivable 20 1,538,134 1,294,302 Contributions receivable 687, ,025 Cash and bank balances , ,895 3,415,739 2,468,467 TOTAL ASSETS 72,625,203 55,910,545 CURRENT LIABILITIES Benefits and other payables 22 75,633 47,005 NET ASSETS 72,549,570 55,863,540 REPRESENTED BY: FUND BALANCE 23 72,549,570 55,863,540 The financial statements on pages 12 to 31 were approved by the Board of Management on.2010 and signed on its behalf by: M. L. Mwamunyange D. M. Msangi Chairperson Secretary

31 CASHFLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2009 Cash flows from operating activities TZS 000 TZS 000 Contributions received 13,530,989 10,180,399 Other income 7, Benefits paid (1,561,495) (1,399,130) Payment for administrative expenses (1,515,011) (1,197,929) Net cash generated from operating activities 10,462,133 7,584,040 Cash flows from investing activities Dividend income 171, ,020 Interest income 5,200,817 3,994,216 Purchase of quoted investments (1,005,975) (653,365) Sale of quoted investments - 345,548 Purchase of treasury bonds (5,780,820) (6,174,898) Receipts from matured treasury bonds 789, ,000 (Increase)/decrease in treasury bills (2,711,106) 495,128 Purchase of corporate bonds (1,000,000) - Receipts from matured part of corporate bonds 200, ,000 Loan issued to TANESCO - (2,000,000) Refund from Dar es Salaam Community bank 198,000 - Increase in fixed deposits (4,250,000) (5,562,000) Acquisition of property and equipment (1,292,228) (39,763) Increase in members and staff loans and advances (446,469) - Net cash used in investing activities (9,926,818) (8,733,114) Increase/(decrease) in cash and cash equivalents 535,315 (1,149,074) Cash and cash equivalents at start of the year 385,895 1,534,969 Cash and cash equivalents at end of the year 921, ,895

32 NOTES TO THE FINANCIAL STATEMENTS 1. STATEMENT OF COMPLIANCE The financial statements have been prepared in accordance with the International Financial Reporting Standards. The principal accounting policies adopted in the preparation of these financial statements are stated below: Adoption of new and revised standards and interpretations Standards and Interpretations effective in the current period The following new interpretations issued by the International Financial Reporting Interpretations Committee and revised standard are effective for the current period: IFRIC 12, Service Concession Arrangements (effective 1 January 2008); IFRIC 13, Customer Loyalty Programmes (effective 1 July 2008); IFRIC 14, IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction (effective 1 January 2008); IFRIC 16, Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008). The adoption of these Interpretations and a revised standard has not led to any changes in the Company s accounting policies. Standards and Interpretations in issue not yet effective At the date of authorization of these financial statements, the following amendments to Standards and new Interpretations were in issue but not yet effective: IFRIC 15, Agreements for the construction of Real Estate (effective for accounting periods beginning on or after 1 January 2009); IFRIC 17, Distributions of Non-cash Assets to Owners (effective for accounting periods on or after 1 January 2009); IFRIC 18, Transfers of Assets from Customers (effective for accounting periods on or after 1 July 2009); IFRS 1, First-Time Adoption of International Financial Reporting Standards Amendment relating to cost of an investment on first-time adoption (effective for accounting periods beginning on or after 1 January 2009); IFRS2, Share-based Payment Amendment relating to vesting conditions and cancellations (effective for accounting periods beginning on or after 1 January 2009); IFRS 3, Business Combinations Comprehension revision on applying the acquisition method (effective for accounting periods beginning on or after 1 July 2009); IFRS 7, Financial Instruments: Disclosures, Amendments enhancing disclosures about fair value and liquidity risk (effective for annual periods beginning on or after 1 January 2009); IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009); IAS 1, Presentation of financial Statements - Comprehensive revision including requiring a statement of comprehensive income and Amendments relating to disclosure of puttable instruments and obligations arising on liquidation (effective for accounting periods on or after 1 January 2009); IAS 23, Borrowing Costs - Comprehensive revision to prohibit immediate expensing (effective for accounting periods on or after 1 January 2009); IAS 27, Consolidated and Separate Financial Statements Amendment relating to cost of an investment on first-time adoption (effective for accounting periods beginning on or after 1 January 2009);

33 Adoption of new and revised International Financial Reporting Standards (IFRSs) (Continued) IAS 27, Consolidated and Separate Financial Statements: Consequential amendments arising from amendments to IFRS 3 (effective for accounting periods beginning on or after 1 July 2009); IAS 28, Investments in Associates: Consequential amendments arising from amendments to IFRS 3 (effective for accounting periods beginning on or after 1 July 2009); IAS 31, Interests in Joint Ventures: Consequential amendments arising from amendments to IFRS 3 (effective for accounting periods beginning on or after 1 July 2009); IAS 32, Financial Instruments: Presentation: Amendments relating to puttable instruments and obligations arising on liquidation (effective for accounting periods beginning on or after 1 January 2009); IAS 39, Financial Instruments: Recognition and Measurement: Amendments for embedded derivatives when reclassifying financial instruments (effective for accounting periods beginning on or after 30 June 2009); IAS 39, Financial Instruments: Recognition and Measurement: Amendments for eligible hedged items (effective for accounting periods beginning on or after 1 July 2009); Improvements to IFRSs were issued in May 2008 and April 2009 and their requirements are effective over a range of dates, with the earliest effective date being for annual periods beginning on or after 1 January This comprises a number of amendments to IFRSs, which resulted from the IASB s annual improvements project. The directors are currently assessing the impact and expected timing of adoption of these amendments on the Company s results and financial position. Adoption of other Standards and Interpretations, when effective, is not expected to have material impact on the financial statements of the company. 2. ACCOUNTING POLICIES Basis of preparation The financial statements have been prepared on the historical cost basis except for the revaluation of certain non-current assets and financial instruments. A historical cost is generally based on the fair value of the consideration given in exchange for assets. The principal accounting policies are set out below. Taxation The Fund is not an approved fund as per Income Tax Act Management has sought clarification on the fund s tax status from Tanzania Revenue Authority and Treasury and is waiting for final decision. No provision for tax liabilities have been made due to the tax status uncertainty. Property and equipments Property and equipments are held for administration purposes stated in the statement of net assets at cost less accumulated depreciation. Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

34 The useful lives of assets under different categories are as follows: Useful life (years) Motor vehicles 4 Machines and equipment 5 Furniture and fittings 10 Computer hardware 4 Computer software 4 The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of changes in net assets. Impairment At each balance sheet date, the Fund reviews the carrying amounts of its financial assets, tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the asset s recoverable amount is estimated and an impairment loss is recognized in the income statement whenever the carrying amount of the asset exceeds its recoverable amount. Contribution income Contributions from members are recorded on the accrual basis. Contribution income is recognized based on the salary actually paid by the member employer to employee. Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established. Interest income Interest revenue is recognized when it is probable that the economic benefits will flow to the fund and amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Benefits payable Benefits payable are accounted for in the period in which they fall due. Financial instruments Receivables Receivables are financial assets with fixed or determinable payments and are not quoted in an active market. After initial measurement at cost, receivables are subsequently remeasured at amortized cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate.

35 Financial assets at fair value through profit or loss Financial assets through profit or loss are those which were either acquired for generating a profit from short-term fluctuations in price or dealer's margin, or are securities included in a portfolio in which a pattern of short-term profit-taking exists. Investments held for trading are initially recognised at cost and subsequently re-measured to fair value based on quoted bid prices or dealer price quotations, without any deduction for transaction costs. All related realised and unrealised gains and losses are included in the income statement. Interest earned whilst holding held for trading investments is reported as interest income. Held to maturity investments Held to maturity financial investments are those which carry fixed or determinable payments and have fixed maturities and which the Fund has the intention and ability to hold to maturity. After initial measurement, held to maturity financial investments are subsequently measured at amortised cost using the effective interest rate method, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortisation and losses arising from impairment of such investments are recognised in the income statement. Available for sale financial assets Investment securities intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity, or changes in interest rates, exchange rates or equity prices are classified as available for sale and are initially recognised at cost. Available for sale investments are subsequently re-measured at fair value, based on quoted bid prices or amount derived from cash flow models. Unrealised gains and losses arising from changes in the fair value of securities classified as available for sale are recognised directly in statement of net assets until the asset is de-recognised, at which time the cumulative gains or losses previously recognised in statement of net assets shall be recognised in the income statement. Investment in Quoted equity Investment in Quoted investments are classified as fair value through profit or loss and investment properties are stated at market values as estimated at the balance sheet date. Investments in quoted stocks and shares are stated at market value and any surplus arising there from is recognized at investment income in the statement of change in net assets. Investments in Unquoted companies Investments in Unquoted companies are measured at cost less any impairment. Government securities Government securities comprise Treasury bills and Treasury bonds, the debt securities of which are issued by the Government of Tanzania. These are investments with fixed maturity that the fund have the intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortised cost. Corporate bonds Corporate bonds are classified as financial instruments fair value through profit or loss and are stated at fair value. Loan to corporate Loan to corporate are classified as financial instruments, the Loan is stated in the balance sheet at fair value.

36 Fair value For financial instruments traded in an organized financial market, fair value is determined by reference to quoted market prices. For unquoted equity investments fair value is determined by reference to the market value of similar investment in the market where applicable. Foreign currency translation In preparing the financial statements of the fund, transactions in currencies other than Tanzania shilling (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Cash and cash equivalents Cash and cash equivalents comprise balances with maturities of less than 91 days from the date of acquisition and include cash balances held at banks, fixed deposits and government securities. Comparatives Where necessary, the comparative figures have been adjusted to conform with changes in presentation in the current year.

37 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING THE FUND S ACCOUNTING POLICIES In the process of applying the Fund s accounting policies, Management has made estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. These are dealt with below: Held -to-maturity investments The Fund follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the bank evaluates its intention and ability to hold such investments to maturity. If the Fund fails to keep these investments to maturity other than for the specific circumstances for example, selling an insignificant amount close to maturity it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value not amortised cost. Impairment losses on financial assets At each balance sheet date, the Fund reviews the carrying amounts of its financial assets to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated and an impairment loss is recognised in the income statement whenever the carrying amount of the asset exceeds its recoverable amount.

38 4. FINANCIAL RISK MANAGEMENT The Fund s operations expose it to a variety of financial risks; including credit risk and market risk (price risk, foreign currency exchange rates and interest rates). The Fund s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. Risk management is carried out by management on behalf of the Board of Management under the approved policies. The Management reviews the market trends and information available to evaluate the potential exposures and in the final analysis come up with the strategies to mitigate the market risks. The Board of Management provide guidelines for overall risk management, as well as policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investing excess liquidity. Market risk (i) Price risk The Fund is exposed to equity securities price risk because of investments in quoted shares classified at fair value through profit and loss. Further the Fund is exposed to the risk that the value of debt securities will fluctuate due to changes in market value. To manage the price risk arising from investing in equity and debt securities, the Fund diversifies its portfolio. For equities, the Fund has invested in companies in different sectors of the economy, while for debt securities; the Fund has invested in bonds of varying maturities. Diversification of the portfolio is done in accordance with statement of investment policy. All quoted shares held by the Fund are traded on the Dar es Salaam Stock Exchange (DSE). At 30 June 2009, if the price of shares had weakened/strengthened by 5%, all other variables held constant, the impact on pre-tax profit for the year would have been TZS 295,555,000 (2008: TZS 242,383,000) higher/lower. The carrying amounts of the company's investment in shares that will have an impact on profit or loss when price of shares change as at 30 September 2009 are as follows: 2009 TZS TZS 000 Investment in quoted shares 4,134,953 3,208,742 Investment in Unit Trust of Tanzania 1,776,138 1,638,922 5,911,091 4,847,664