Annual Report and Financial Statements 2016

Transcription

1 1 Annual Report and Financial Statements 2016 M o n e y M a r k e t F O C U S E D O N W E A L T H

2 M o n e y M a r k e t 2 F o c u s e d o n W e a l t h At Sanlam we take the initiative to see opportunities where others perceive none. But that begets the question, why? Well, it s because you trust us with your hard earned money, and that s a responsibility we don t take lightly. So as you keep working tirelessly each day, you can rest assured the Wealthsmiths at Sanlam keep doing the same to create and protect your wealth.

3 M o n e y M a r k e t 3 T r u s t e e s a n d P r o f e s s i o n a l A d v i s o r s Corporate Trustee Stanbic Bank Kenya Limited Stanbic Centre 1 st Floor Chiromo Road, Westlands P.O. Box Nairobi, Kenya Custodian Stanbic Bank Kenya Limited Stanbic Bank Centre, 2 nd Floor, Chiromo Road P.O. Box Nairobi, Kenya Registered Office Sanlam House Kenyatta Avenue P.O. Box Nairobi, Kenya Fund Manager Sanlam Investments Limited 3 rd Floor, Sanlam House, Kenyatta Avenue P.O. Box Nairobi, Kenya Independent Auditor PricewaterhouseCoopers Certified Public Accountants PwC Tower, Waiyaki Way/Chiromo Road, Westlands P.O. Box Nairobi, Kenya

4 4 CONTENTS S a n l a m M o n e y M a r k e t S a n l a m M o n e y M a r k e t Trustee and professional advisors 8 Report of the trustee 9 Statement of trustee s responsibilities Fund manager s report 13 Report of the custodian Independent auditors report Financial statements: 17 Statement of comprehensive income 18 Statement of financial position 19 Statement of changes in equity 20 Statement of cash flows Notes to the financial statements S a n l a m B a l a n c e d Trustee and professional advisers 34 Report of the trustee 35 Statement of trustee s responsibilities Fund manager s report 39 Report of the custodian Independent auditors report Financial statements: 43 Statement of comprehensive income 44 Statement of financial position 45 Statement of changes in equity 46 Statement of cash flows Notes to the financial statements Trustee and professional advisors 60 Report of the trustee 61 Statement of trustee's responsibilities S a n l a m D i v i d e n d P l u s Fund manager's report 65 Report of the custodian Independent auditor's report Financial statements: 69 Statement of comprehensive income 70 Statement of financial position 71 Statement of changes in equity 72 Statement of cash flows Notes to the financial statements D

5 5 CONTENTS S a n l a m M o n e y M a r k e t S a n l a m M o n e y M a r k e t Trustee and professional advisors 6 Report of the trustee 7 Statement of trustee s responsibilities 8-10 Fund manager s report 11 Report of the custodian Independent auditors report Financial statements: 15 Statement of comprehensive income 16 Statement of financial position 17 Statement of changes in equity 18 Statement of cash flows Notes to the financial statements S a n l a m B a l a n c e d Trustee and professional advisers 32 Report of the trustee 33 Statement of trustee s responsibilities Fund manager s report 37 Report of the custodian Independent auditors report Financial statements: 41 Statement of comprehensive income 42 Statement of financial position 43 Statement of changes in equity 44 Statement of cash flows Notes to the financial statements S a n l a m D i v i d e n d P l u s Trustee and professional advisors 58 Report of the trustee 59 Statement of trustee's responsibilities Fund manager's report 63 Report of the custodian Independent auditor's report Financial statements: 67 Statement of profit or loss and other comprehensive income 68 Statement of financial position 69 Statement of changes in equity 70 Statement of cash flows Notes to the financial statements

6 M o n e y M a r k e t 6 S a n l a m M o n e y M a r k e t

7 M o n e y M a r k e t 7

8 M o n e y M a r k e t 8 Report of the Trustee The Trustee has the pleasure in submitting the Sanlam Money Market Fund (the Fund ) report together with the audited financial statements for the year ended 31 December ESTABLISHMENT, NATURE AND STATUS OF THE FUND The Fund was established, and is governed by a Trust Deed, dated 11 September 2014 as a money market fund. The Fund is registered with the Capital Markets Authority and approved under the Income Tax Act. It only suffers withholding tax on interest income and dividends. The primary objective of the Fund is to provide a superior return relative to the average bank deposits while maintaining capital preservation. The Fund is a unit trust and the interest of the individual members is determined by the value of their units. It is administered by the Trustee who is responsible for its affairs. It is an approved collective investment scheme within the meaning of the Capital Markets Act, and the holders are not liable for the debts of the Fund. CHANGES TO INCORPORATION DOCUMENTS There were no changes made to the incorporation documents (Prospectus, Trust Deed and Rules of the Fund) during the year. INCOME DISTRIBUTION The profit for the year of KShs. 155,998,000 (2015: KShs. 16,604,000) has been distributed to the unit holders by reinvestment in the Fund. INVESTMENT Under the terms of their appointment, Sanlam Investments Limited are the Fund managers and support the Trustee in the investment decisions. The overall responsibility for investment and performance lies with the Trustee. FUND PERFOMANCE The highest and lowest absolute yields during the year were 19.84% (2015: 22.7%) and 9.15% (2015: 12.32%) respectively. TOTAL VALUE OF THE FUND The market value of the fund as at 31 December 2016 was KShs. 2,385,695,000 (2015: KShs. 440,134, 000). AUDITOR The Fund s auditor, PricewaterhouseCoopers, has indicated their willingness to continue in office. Signed on behalf of the Trustee 30 March 2017

9 M o n e y M a r k e t 9 Statement of Trustee s Responsibilities The Kenyan Capital Markets Act requires the Trustee to prepare financial statements for each financial year which give a true and fair view of the financial position of the Fund at the end of the financial year and its financial performance for the year then ended. The Trustee is responsible for ensuring that the Fund keeps proper accounting records that are sufficient to show and explain the transactions of the Fund, disclose with reasonable accuracy at any time the financial position of the Fund and that enables them to prepare financial statements of the Fund that comply with prescribed financial reporting standards and the requirements of the Kenyan Capital Markets Act. They are also responsible for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Trustee accepts responsibility for the preparation and presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Capital Markets Act. They also accept responsibility for: i. Designing, implementing and maintaining internal controls as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error; ii. Selecting suitable accounting policies and then apply them consistently; and iii. Making judgements and accounting estimates that are reasonable in the circumstances. In preparing the financial statements, the Trustee has assessed the Fund s ability to continue as a going concern and disclosed, as applicable, matters relating to the use of going concern basis of preparation of the financial statements. Nothing has come to the attention of the Trustee to indicate that the Fund will not remain a going concern for at least the next twelve months from the date of this statement. The Trustee acknowledges that the independent audit of the financial statements does not relieve them of their responsibility. Approved by the board of Trustee on 30 March 2017 and signed on its behalf by: Representing Trustee

10 M o n e y M a r k e t 10 Fund Managers Report Dear Unit Holders, This Fund aims to deliver a higher level of income compared to the average banks fixed deposits with features of capital preservation and liquidity access. Investment guidelines: The Fund invests in a range of money market securities including higher yielding fixed and call deposits, treasury bills and investment grade commercial paper. The investments in money market instruments have a maturity of less than one year. The Money Market Fund has earned an annual return of 16.3% for the year 2016 to record a notably higher return compared to the 364 T-Bill annual average of 11.6%. This outperformance was largely as a result of holding short term deposits and near cash assets for the better part of the year. The private sector credit slowed down in 2016 despite the eased liquidity available in the money market. Short term rates retained at low levels as the Central Bank supported distressed banks through the repo market from liquidity tightening experienced in the 1 st Quarter. Liquidity however eased up as a result of the Banking Act which subsequently led to banks substantial reduction in their lending business and evidently holding cash. Furthermore, the interbank market activity was tepid as the monthly average lending rate touched a year low of 3.1% and volumes declined by 30% relative to This rate however went up to 8.2% as the year came to a close on account of repo maturities and tax payments in December. The average interbank rate was at 5.6% compared to 11.8% in resolved to hike its rate by 0.25%. A stronger Dollar in the coming months will evidently present volatility in emerging market currencies as capital flight action and depleting foreign reserve account takes course. Inflation closed at 6.3% this year marking a lower change from its previous level of 8.0% in The food basket largely contributed to this year s inflation especially in the 2 nd half of 2016 as food produce was depleted on sporadic rainfall. We foresee a hike in inflation going forward as food pressures build up from the adverse climatic change effects felt presently. We also expect a hike from fuel inflation looking ahead as OPEC countries resolve to control its production evidently causing a rise in crude oil prices. Locally, the economy grew by 5.7% during the 3 rd Quarter representing a slower growth compared to the 6.0% achieved over the same period in Growth in the hospitality sector (13.8%) and transport sector (10.3%) contributed significantly to GDP. Furthermore, activity within the tourism sector picked up compared to a similar period in the previous year. Growth in financial services (6.1%), construction (9.3%), manufacturing (1.9%) electricity (7.0%) and agriculture decelerated during this period. We expect that holding shorter term placements as the short term rates are expected to rise will optimise the fund s yield as we look into The Treasury bill rates dropped as liquidity increased in the course of this year. The demand for these short term papers, particularly from the banking sector picked up with banks appetite causing a slight decline in offered rates during the 2 nd half of The average rates on the papers dropped by at least 200 basis points during 2016 from their previous year s level. The 91 day, 182 day and 364 day T-bill rates however closed at 8.6%, 10.5% and 11.0% respectively marking a slight increase as a result of tightened liquidity. The Shilling was stable during 2016 owing to frequent dollar sales from the Central Bank. A stable inflation rate and boost in foreign reserves this year supported the Shilling to hold at KShs. 101 levels this year. Nonetheless, the local unit weakened to KShs against the Dollar at the close of December as the US Fed Reserve

11 M o n e y M a r k e t 11 Fund Managers Report Fund Performance as at 31 December % 15.00% 16.32% 10.00% 12.63% 5.00% 3.40% 2.89% Portfolio Benchmark YTD Fund Performance as at 31 December 2016 Fund Historical Performance Annual Performance Performance for the year end 31 st December Unit: % 2014* PANMMF 1.19% 16.58% 16.32% Annualised Performance Annualised Performance (Calendar Year) Unit: % 2014* PANMMF 10.30% 16.58% 16.32% Cumulative Performance Cumulative Performance (Calendar Year) Unit: % 2014* PANMMF 1.19% 17.96% 37.21% Historical Fund Value Fund Value (Calendar Year) Unit: KShs. 2014* PANMMF 10,674, ,134, 000 2,385,695,000 *Performance captured for month of December The Funds inception was late November 2014.

12 M o n e y M a r k e t 12 Fund Managers Report Historical Value of Funds and Total Number of Units Values as at 31 st December 2014* Number of Number of Number of Price per Unit Price per Unit Units Units Units Price per Unit PANMMF 10,674, % 440,134, % 2,385,695, % *Unit Price of PANMMF is KShs % Cash 28% 23% Call Deposits Fixed Deposits 3% T-Bill 45% Commercial Papers Fund Allocation as at December 2016 Signed on behalf of the Fund Manager 30 March 2017

13 M o n e y M a r k e t 13 Report of the Custodian In accordance with the Capital Markets (Collective Investment Schemes) Regulations, 2001 (the Regulations) and the Custody Agreement between Stanbic Bank Kenya Limited as the Custodians and Sanlam Investments Limited as the Fund Manager, we confirm that: a. we have discharged the duties prescribed for a Custodian under Regulation 35 of the Regulations, to the Sanlam Money Market Fund; b. the issue, sale, redemption and cancellation, and calculation of the price of the Fund s units and the application of the Fund s income have been carried out in accordance with the Regulations; and c. the investment and borrowing powers and restrictions applicable to the Fund in accordance with the Regulations and the documents of incorporation have not been exceeded. For the year ended 31 st December, 2016, we have held the assets of the Sanlam Money Market Fund, which include title deeds, securities and income that accrues thereof, to the order of the Fund Manager and facilitated the transfer, exchange or delivery in accordance with the instructions received from the Fund Manager. In our opinion, the Fund Manager has in all material respects managed the scheme in accordance with the provisions of the Capital Markets (Collective Investment Schemes) Regulations, 2001, Incorporation Documents, the Information Memorandum and the Rules of the Collective Investment Scheme. Signed on behalf of the Custodian 30 March 2017

14 M o n e y M a r k e t 14 Independent Auditor s Report to the Unit Holders of Sanlam Money Market Fund Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of Sanlam Money Market Fund (the Fund ) set out on pages 11 to 24 which comprise the statement of financial position at 31 December 2016 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and the notes to the financial statements, which include a summary of a significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial position of Sanlam Money Market Fund at 31 December 2016, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the financial statements section of our report. We are independent of the Fund in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters There were no key audit matters identified from our audit. Other information The trustee is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

15 M o n e y M a r k e t 15 Independent Auditor s Report to the Unit Holders of Sanlam Money Market Fund Responsibilities of the trustee for the financial statements The Trustee is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of Capital Markets Authority (Collective Investments Schemes) Regulations 2001, and for such internal control as the Trustee determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Trustee is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. The Trustee is responsible for overseeing the Fund s financial reporting process. Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Trustee; Conclude on the appropriateness of the Trustee s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Fund to cease to continue as a going concern; and Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Trustee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

16 M o n e y M a r k e t 16 Report of the Independent Auditor to the Unit Holders of Sanlam Money Market Fund We also provide the trustee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the trustee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal requirements We confirm that the financial statements have been properly prepared in accordance with the Capital Markets Authority (Collective Investment Schemes) Regulations, The Capital Markets Authority (Collective Investment Schemes) Regulations, 2001 also requires that in carrying out our audit we consider and report to you on the following matters: If the auditor is of the opinion that proper accounting records for the collective investment scheme have not been kept or that the accounts are not in agreement with those records; If the auditor has not been given all the information and explanation which, to the best of his knowledge and belief, are necessary for the purpose of his audit; or If the auditor is of the opinion that the information given in the report of the Fund Manager for that period is inconsistent with the accounts. We confirm that there are no matters to report in respect of the foregoing requirements. The engagement partner responsible for the audit resulting in this independent auditor s report is FCPA Richard Njoroge - P/No Certified Public Accountants 30 March 2017 Nairobi

17 M o n e y M a r k e t 17 Financial Statements Statement of comprehensive income Notes KShs 000 KShs 000 Interest income 6(i) 201,627 19,551 Total income 201,627 19,551 Operating expenses 6(ii) (21,365) (1,787) Profit before income tax 180,262 17,764 Income tax expense (24,264) (1,160) Profit for the year 155,998 16,604 Other comprehensive income: - - Total comprehensive income for the year 155,998 16,604 The notes on pages 15 to 24 are an integral part of these financial statements.

18 M o n e y M a r k e t 18 Financial Statements Statement of financial position Notes KShs 000 KShs 000 ASSETS Bank balances 8(iii) 17,604 6,396 Call deposits with financial institutions 8(ii) 542, ,342 Fixed deposits 8(ii) 1,077,760 - Treasury bills 8(ii) 69,320 - Commercial papers 8(ii) 672, ,140 Other receivables 45,846 2,514 Total assets 2,425, ,392 Liabilities Current liabilities 10 40,115 1,258 NET ASSETS 2,385, ,134 EQUITY Unit holder balances 2,385, ,134 The notes on pages 15 to 24 are an integral part of these financial statements. The financial statements on Pages 11 to 24 were approved for issue by the Trustee on 30 March 2017 and signed on its behalf by: Representing Trustee Representing Trustee

19 M o n e y M a r k e t 19 Notes to the Financial Statements Statement of changes in equity Unit holder capital balances KShs 000 Balance at 1 January ,675 Profit for the year 16,604 Transactions with unit holders: Additional units purchased 542,335 Units liquidated (129,480) Total transactions with unit holders 412,855 Balance at 31 December ,134 Balance at 1 January ,134 Profit for the year 155,998 Transactions with unit holders: Additional units purchased 2,063,673 Units liquidated (274,110) Total transactions with unit holders 1,789,563 Balance at 31 December ,385,695 The notes on pages 15 to 24 are an integral part of these financial statements.

20 M o n e y M a r k e t 20 Notes to the Financial Statements Statement of Cash Flows Notes KShs 000 KShs 000 Profit before income tax 180,262 17,764 Changes in working capital - fixed deposits (1,077,760) - - commercial paper (530,340) (133,053) - payables and accruals (43,332) 1,217 - receivables 38,857 (885) Cash used in operations (1,432,313) (114,957) Income tax paid (24,264) (1,160) Net cash flows used in operating activities (1,456,557) (116,117) Cash flows from financing activities Net contribution from unit holders 9 2,063, ,335 Liquidations by unit holders 9 (274,110) (129,480) Net cash generated from financing activities 1,789, ,855 Net increase in cash and cash equivalents 332, ,738 Cash and cash equivalents at 1 January 296,738 - Cash and cash equivalents at 31 December 629, ,738 Represented by: Bank balances 17,604 6,396 Call deposits 542, ,342 Treasury bills 69, , ,738 The notes on pages 15 to 24 are an integral part of these financial statements.

21 M o n e y M a r k e t 21 Notes to the Financial Statements 1. General Information The Fund started operations on 1 November 2014 and is governed by a Trust Deed dated 11 September 2014, is registered with the Capital Markets Authority and is domiciled in Kenya. The address of its registered office is: Sanlam Life House Kenyatta Avenue Nairobi The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. 2. Summary of significant accounting policies Initiative, which explores how financial statement disclosures can be improved. The amendments, effective 1 January 2016, provide clarifications on a number of issues, including: Materiality an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes confirmation that the notes do not need to be presented in a particular order. a. Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The measurement basis applied is the historical cost basis, except where otherwise stated in the accounting policies below. The financial statements are presented in Kenya Shillings (KShs), rounded to the nearest thousand. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Fund s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. b. Changes in accounting policy and disclosures The following standards and amendments have been applied by the Fund for the first time for the financial year beginning 1 January 2016: i. New and amended standards adopted by the Fund The following standards and amendments have been applied by the Fund for the first time for the financial year beginning 1 January 2016: Amendments to IAS 1, Presentation of Financial Statements : The amendments are made in the context of the IASB s Disclosure OCI arising from investments accounted for under the equity method the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new standards/accounting policies are not required for these amendments. ii. New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016 and have not been applied in preparing these financial statement. None of these is expected to have a significant effect on the financial statements of the Fund, except the following set out below: IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value

22 M o n e y M a r k e t 22 Notes to the Financial Statements 2 Summary of significant accounting policies (continued) b. Changes in accounting policy and disclosures (continued) through P&L. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January Early adoption is permitted. The Fund is yet to assess IFRS 9 s full impact. Disclosure Initiative Amendments to IAS 7; Effective 1 January 2017, entities will be required to explain changes in their liabilities arising from financing activities. This includes changes arising from cash flows (e.g. drawdowns and repayments of borrowings) and on cash changes such as acquisitions, disposals, accretion of interest and unrealized exchange differences. c. Revenue recognition Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Fund and the amount of income 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 net the carrying amount on initial recognition. d. Income tax expense The Fund is exempt from income tax from its revenues. It is however subject to withholding tax on interest income from bank deposits and commercial paper at a rate of 15% and dividends received at a rate of 5%. Withholding tax on treasury bonds is 10% for bond with tenures longer than 10 years and 15% otherwise. Infrastructure bonds do not attract withholding tax. e. Cash and cash equivalents For the purposes of the statement of cash flows, cash equivalents include short term liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired. Changes in financial assets must be included in this disclosure if the cash flows were, or will be included in cash flows from financing activities. This could be the case, for example, for assets that hedge liabilities arising from financing liabilities. Entities may include changes in other items as part of this disclosure, for example, by providing a, net debt, reconciliation. However, in this case the changes in other items must be disclosed separately from the changes in liabilities arising from financing activities. The information may be disclosed in tabular format as a reconciliation from opening and closing balances, but a specific format is not mandated. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Fund. f. Financial instruments Financial assets Classification A financial asset or liability is recognised when the Fund becomes party to the contractual provisions of the instrument. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Fund has transferred substantially all risks and rewards of ownership.

23 M o n e y M a r k e t 23 Notes to the Financial Statements 2 Summary of significant accounting policies (continued) f. Financial instruments (continued) As at the reporting date, the classification of the Fund s financial assets was as follows: Loans and receivables: Trade receivables, bank balances Held to maturity: Fixed deposits, call deposits, commercial paper Financial assets at fair value through profit or loss The Fund determines the appropriate classification of its financial assets at initial recognition. i. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Fund provides money, goods or services directly to a debtor with no intention of trading the receivable. These assets are carried at amortised cost. ii. Held to maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. Where a sale occurs other than for an insignificant amount of held-to-maturity assets, the entire category would be tainted and classified as available for sale. These assets are carried at amortised cost. iii. 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 in this category if acquired principally for the purpose of selling in the short term or if so designated. These assets are carried at fair value with changes in fair value recognised in profit or loss. Impairment and uncollectability of financial assets The Fund assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed either directly or by adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss. Financial liabilities Financial liabilities are initially recognised at fair value and subsequently measured at amortised cost. Financial liabilities are derecognised when they have been redeemed or otherwise extinguished. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. g. Functional and presentational currency and translation of foreign currencies Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the Functional Currency ). The financial statements are presented in Kenyan Shillings (KShs) rounded to the nearest thousand, which is the Fund s presentation currency.

24 M o n e y M a r k e t 24 Notes to the Financial Statements 2 Summary of significant accounting policies (continued) g. Functional and presentational currency and translation of foreign currencies (continued) Transactional balances 4. Financial risk management objectives and policies Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. The Fund generates revenues for the members by investing in various income generating activities which involve trading in the commercial paper. These activities expose the Fund to a variety of financial risks, including credit risk and the effects of changes in market dynamics. The Trust Deed sets out the investment policy and management of the Fund s assets to minimise potential adverse effects on its financial performance. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within finance income or cost. All other foreign exchange gains and losses are presented in profit or loss within other income or other expenses. h. Distribution All income or loss arising from investment is distributed to unit holders after provision of all expenses. All distributions including unclaimed distributions are reinvested in the unit holder s accounts. i. Unit holder balances Unit holders funds are redeemable on demand at an amount equal to a proportionate share of the unit portfolios net asset value. The balances are carried at the redemption amount that is payable at the financial reporting date if the holder exercised their right to redeem the balances 3. Critical judgements in applying the Fund s accounting policies In the process of applying the Fund s accounting policies, management has made estimates and judgements in valuation of financial instruments as discussed in note 2(f). 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. Risk management is carried out by the Fund Manager, Sanlam Investments Limited. The Fund Manager identifies, evaluates and manages financial risks, with emphasis on specific areas such as interest rate risk, credit risk and investing excess liquidity. The Fund s risk management policies include the use of guidelines governing the acceptance of clients and investment policies are in place which help manage liquidity and seek to maximise return within an acceptable level of interest rate risk. The Capital Markets Authority (CMA) sets out that the book value of the Fund s investments should not exceed the following limits: Listed securities on the Nairobi Stock exchange 80% Securities issued by the Government of Kenya 80% Immovable property 25% Other collective investment schemes including umbrella schemes 25% Other securities not listed on a securities exchange in Kenya 25% Off-shore investments 10% The Fund had complied with these requirements as at 31 December 2016 and a. Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Fund. In accordance with the funds policy, the Fund Manager monitors the funds credit position on a daily basis, and it is reviewed on a quarterly basis by the Fund s Investments Committee.

25 M o n e y M a r k e t 25 Notes to the Financial Statements 4. Financial risk management objectives and policies (Continued) a. Credit risk (continued) The amount that best represents the Fund s maximum exposure to credit risk at 31 December 2016 and 2015 is made up as follows: KShs 000 KShs 000 Bank balances 17,604 6,396 Call deposits with financial institutions 542, ,140 Fixed deposit 1,077,760 - Treasury bills 69,320 - Commercial papers 672, ,342 Receivables 45,846 2,514 2,425, ,392 No collateral is held for any of the above assets. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated. All receivables past due by more than 60 days are considered to be impaired, and are carried at their estimated recoverable value. None of the above assets are past due, past due and impaired or impaired. b. Liquidity risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations when they fall due. The Fund s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or at the risk of damaging the Fund s reputation. The Fund is exposed to daily withdrawal of funds by investors. The Fund does maintain cash balances to meet all of these needs as experience shows that a certain amount of withdrawals are requested daily and can be predicted with a high level of certainty. Management closely monitors the proportion of maturing funds available to meet such calls and on the minimum level of funds that should be in place to cover withdrawals at unexpected levels of demand.

26 M o n e y M a r k e t 26 Notes to the Financial Statements 4. Financial risk management objectives and policies (continued) b. Liquidity risk (continued) The table below analyses the Fund s financial liabilities and unit holder balances that will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Due on demand Due within 3 months Total KShs 000 KShs 000 KShs 000 As at December 2016 Unit holders balances 2,385,695-2,385,695 Current liabilities - 40,115 40,115 Total 2,385,695 40,115 2,425,810 As at December 2015 Unit holders balances 440, ,134 Current liabilities - 1,258 1,258 Total 440,134 1, ,392 c. Market risk i. Price risk The Fund is exposed to debt securities price risk because of investments in corporate bonds. In managing this risk, management monitors the performance of key economic indicators to ensure that it continuously maximizes returns to shareholders. There are no assets stated at fair value. ii. Cash flow and fair value interest rate risk The Fund s interest bearing financial assets are corporate bonds, government securities and deposits with financial institutions, which are at fixed rate, and on which it is therefore not exposed to cash flow and interest rate risk. The Fund Manager regularly monitors financing options available to ensure optimum interest rates are obtained.

27 M o n e y M a r k e t 27 Notes to the Financial Statements 4. Financial risk management objectives and policies (continued) c. Market risk (continued) iii. Foreign exchange risk As at 31 December 2016 and 2015, the fund had no exposure to foreign exchange risk. Fair Value Estimation For the money market fund, there are no assets stated at fair value 5. Capital management The capital of the Fund is represented by unit holders balances. The amount of unit holder liabilities can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unit holders. The Fund s objectives when managing capital are to safeguard the Fund s ability to continue as a going concern in order to provide returns for unit holders. 6. (i) Interest income Interest income from: KShs 000 KShs 000 Deposits with financial institutions 16,443 - Fixed deposit 155,675 19,551 Commercial Paper 29, ,627 19,551 6 (ii) Operating expenses Custodial Management fees 20,394 1,487 Audit fees ,365 1, Taxation The unit trust is registered under the Income Tax Act (Collective Investment Scheme Rules 2002), and is exempt from income tax. On 11 September 2009, KRA issued a public notice requiring the Fund to withhold tax on interest and dividend income. The tax charge in 2016 and 2015 relates to tax withheld after the issue of the legal notice at a rate of 15% for interest income.

28 M o n e y M a r k e t 28 Notes to the Financial Statements 8. Investments i. Maturity profile of investments in the money market 6 & 12 months Due within 1 & 5 Up to 3 months years Totals KShs 000 KShs 000 KShs 000 KShs 000 As at 31 December 2016 Deposits with financial institutions 542, ,800 Fixed deposit - 1,077,760-1,077,760 Treasury bills - 69,320-69,320 Commercial Paper 572, , ,480 Total 1,115,280 1,247,080-2,362,360 As at 31 December 2015 Deposits with financial institutions 290, ,342 Corporate bonds 86,543 55, , ,885 55, ,482 ii. Movement in investments Carrying Value Purchases Interest Sales/ Carrying Value at 01/01/2016 at cost Accrued maturities at 31/12/2016 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 Year ended 31 December 2016 Deposits with financial institutions 290, ,370 6, ,800 Fixed deposit (more than 90 days) - 5,439,835 36,391 (4,398,466) 1,077,760 Treasury bills - 66,996 2,324-69,320 Commercial paper 142, ,501 16,077 (15,238) 672,480 Total 432,482 6,282,702 60,880 (4,413,704) 2,362,360

29 M o n e y M a r k e t 29 Notes to the Financial Statements 8. Investments ii. Movement in investments (continued) Carrying Value Purchases at Interest Sales/ Carrying Value at 01/01/2015 cost Accrued maturities at 31/12/2015 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 Year ended 31 December 2015 Deposits with financial institutions 1, ,933 5,473 (219,693) 290,342 Commercial paper 9, ,302 4,830 (145,079) 142,140 Total 10, ,235 10,303 (364,772) 432,482 iii. Cash and cash equivalents KShs 000 KShs 000 Deposits held with financial institutions maturity of up to 3 months from contract date 542, ,342 Cash and bank balance 17,604 6,396 At end of year 560, , Unit holders funds No. of Units 2016 Value No. of Units 2015 Value 000 KShs KShs 000 At start of the year 440, ,134 10,675 10,675 Creations 2,063,673 2,063, , ,335 Liquidations (274,110) (274,110) (129,480) (129,480) Total comprehensive income 155, ,998 16,604 16,604 At end of the year 2,385,695 2,385, , , Current liabilities KShs 000 KShs 000 Service fees payable to Sanlam Investments Limited 2, Audit fees Income distribution payable 20,240 - Other payables 16,537-40,115 1,258

30 M o n e y M a r k e t 30 Notes to the Financial Statements 11. Related party transaction Sanlam Money Market Fund is managed by Sanlam Investments Limited. Sanlam Investments Limited is controlled by Sanlam Kenya Plc incorporated in Kenya. The Fund transacts with other entities and divisions within Sanlam Kenya Plc. Balances due to related companies have been disclosed below. During the year, the following transactions were carried out with related parties. a. Unit holders balances Units purchased by Sanlam Kenya Plc KShs 000 KShs b. Services fees KShs 000 KShs 000 Sanlam Investments Limited 20,934 1,484 Service fees payable are disclosed in Note 10.

31 M o n e y M a r k e t 31

32 M o n e y M a r k e t 32 S a n l a m B a l a n c e d

33 M o n e y M a r k e t 33

34 B a l a n c e d 34 Report of the Trustee The Trustee has the pleasure in submitting the Sanlam Balanced Fund (the Fund ) report together with the audited financial statements for the year ended 31 December ESTABLISHMENT, NATURE AND STATUS OF THE FUND The Fund was established, and is governed by a Trust Deed dated 11 September 2014 as a balanced fund. The Fund is registered with the Capital Markets Authority and approved under the Income Tax Act. It only suffers withholding tax on interest income and dividends. The primary objective of the Fund is to create long term wealth for investors with reinvestment of income cash flows. The Fund is a unit trust and the interest of the individual members is determined by the value of their units. It is administered by the Trustee who is responsible for its affairs. It is an approved collective investment scheme within the meaning of the Capital Markets Act; and the holders are not liable for the debts of the Fund. CHANGES TO INCORPORATION DOCUMENTS There were no changes made to the incorporation documents (Prospectus, Trust Deed and Rules of the Fund) during the year. INCOME DISTRIBUTION The Profit for the year of KShs. 2,216,000 (2015: KShs. 285,000) has been distributed to the unit holders by reinvestment in the Fund. INVESTMENT Under the terms of their appointment, Sanlam Investments Limited are the Fund managers and support the Trustee in the investment decisions. The overall responsibility for investment and performance lies with the Trustees. FUND PERFORMANCE The highest and lowest bid prices during the year were (2015: 10.99) and (2015: 10.17) respectively. TOTAL VALUE OF THE FUND The market value of the fund as at 31 December 2016 was KShs. 19,766,000 (2015: KShs. 13,358,000) AUDITOR The Fund s auditor, PricewaterhouseCoopers, has indicated their willingness to continue in office. Signed on behalf of the Trustee 30 March 2017

35 B a l a n c e d 35 Statement of Trustee s Responsibilities The Kenyan Capital Markets Act requires the Trustee to prepare financial statements for each financial year which give a true and fair view of the financial position of the Fund at the end of the financial year and its financial performance for the year then ended. The Trustee is responsible for ensuring that the Fund keeps proper accounting records that are sufficient to show and explain the transactions of the Fund; disclose with reasonable accuracy at any time the financial position of the Fund; and that enables them to prepare financial statements of the Fund that comply with prescribed financial reporting standards and the requirements of the Kenyan Capital Markets Act. They are also responsible for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Trustee accepts responsibility for the preparation and presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Capital Markets Act. They also accept responsibility for: i. Designing, implementing and maintaining internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error; ii. Selecting suitable accounting policies and then apply them consistently; and iii. Making judgements and accounting estimates that are reasonable in the circumstances. In preparing the financial statements, the Trustee has assessed the Fund s ability to continue as a going concern and disclosed, as applicable, matters relating to the use of going concern basis of preparation of the financial statements. Nothing has come to the attention of the Trustee to indicate that the Fund will not remain a going concern for at least the next twelve months from the date of this statement. The Trustee acknowledges that the independent audit of the financial statements does not relieve them of their responsibility. Approved by the board of Trustee on 30 March 2017 and signed on its behalf by: Representing Trustee

36 B a l a n c e d 36 Fund Managers Report Dear Unit Holder, This Fund aims to deliver moderately aggressive returns while maintaining long term capital growth position with lower volatility relative to an Equity Fund. Investment guidelines; the Fund invests across a broad set of asset classes. Typically this fund will hold a significant weighting in Nairobi Securities Exchange shares with a maximum equity exposure of 45%. Other assets classes would include money market instruments, bonds, listed property and up to 15% in offshore assets. The Fund s risk is lower than that of a pure equity fund. The Balanced Fund returned an annual gain of 21.7% during the year. This marks a superior performance in comparison to the NASI Index which lost 8% and the FTSE Government Index that had flat performance in the 12 months. The equity selection criteria implemented for this Fund largely contributed to return during this period. The year 2016 set the scene for surprising events that proved to be of significant impact to the local and global capital markets alike. The Brexit action in June as well as the historic win of the Republican candidate Donald J. Trump as the US President proved to trigger volatility globally this year. Closer home, the Banking Act that interpreted to decline in net margins led to a knee jerk reaction of a market sell off on the banking counters. The Euro and emerging market currencies in particular suffered headwinds resulting from geo-political and Central Banks actions taken during the year. We foresee the Dollar strengthening brought about by the 2 nd hike rate on the US rate in more than 10 years present a weakening effect on emerging market currencies as foreign funds are directed to the safe haven (Dollar). The Treasury bill rates dropped as liquidity increased in the course of this year. The demand for these short term papers, particularly from the banking sector picked up with banks appetite causing a slight decline in offered rates during the 2 nd half of The average rates on the papers dropped by at least 200 basis points during 2016 from their previous year s level. The 91 day, 182 day and 364 day T-bill rates however closed at 8.6%, 10.5% and 11.0% respectively marking a slight increase as a result of tightened liquidity. The bond performance this year was flat with barely no change in the FTSE Government Index. The secondary market increased in turnover as banks increased on government assets exposure resulting to a downward shift on the shorter end of the yield curve in On the longer end nonetheless, market yields went up slightly as investors expected higher rates on medium and long term bonds during the primary auctions. The Treasury auctioned a 2 year bond this month that led to an upward shift on the short end of the curve compared to the yield curve in September. The local equity market continued its 2 nd year losing streak with the passing of the Banking Bill in September proving to be the market s most significant drawback during The Pine Bridge 27 and NASI indices lost 6.1% and 8.5% respectively. The slowdown in the private sector credit alongside the sluggish growth as reported in the 3 rd Quarter GDP statistics this year translated to dull investor sentiments. With the exception of the Telecommunication and Energy sectors, the market s activity was rather depressed as turnover nearly halved in comparison to Foreign investors were net buyers as the market PE closed times. The market, having reached its lowest multiple since 2012 presents an attractive entry on fundamental valued stocks with potential for strong earnings growth forecast. Inflation closed at 6.3% this year marking a lower change from its previous level of 8.0% in The food basket largely contributed to this year s inflation especially in the 2 nd half of 2016 as food produce was depleted on sporadic rainfall. We foresee a hike in inflation going forward as food pressures build up from the adverse climatic change effects felt presently. We also expect a hike from fuel inflation looking ahead as OPEC countries resolve to control its production evidently causing a rise in crude oil prices. Locally, the economy grew by 5.7% during the 3 rd Quarter representing a slower growth compared to the 6.0% achieved over the same period in Growth in Hospitality sector (13.8%) and transport sector (10.3%) contributed significantly to GDP. Furthermore, activity within the tourism sector picked up compared to a similar period in the previous year. Growth in financial services (6.1%), construction (9.3%), manufacturing (1.9%) electricity (7.0%) and agriculture decelerated during this period.

37 B a l a n c e d 37 Fund Managers Report Going forward, we remain wary of the currency weakening impact and subsequent interest rate rise on the equity market. Nonetheless, we are still keen on picking up potentially undervalued stocks with strong earnings growth forecast as companies release their FY2016 results early We anticipate positive performance from adding exposure to higher yielding bonds as interest rates pick up going into Fund performance as at 31 December % 10.00% 21.77% 15.00% 10.00% 5.00% 0.00% 4.41% 0.13% Portfolio Benchmark -5.00% % Quarter YTD -7.61% Fund Historical Performance Annual performance Performance for the year end 31 st December Unit: % 2014* PANBAF 5.91% 6.57% 21.77% Annualised performance Annualised Performance (Calendar Year) Unit: % 2014* PANBAF 51.33% 6.57% 21.77% Cumulative performance Cumulative Performance (Calendar Year) Unit: % 2014* PANBAF 5.91% 12.87% 37.44% Historical fund value Fund Value (Calendar Year) Unit: KShs. 2014* PANBAF 11,202,000 13,358,000 19,766,000

38 B a l a n c e d 38 Fund Managers Report Historical value of funds and total number of units Values as at 31 st December 2014* Number of units Price per unit Number of units Price per unit Number of units Price per unit PANBAF 1,050, ,258, ,537, Fund Allocation as at 31 December % 11% 29% Bank balance Deposits with financial institutions Commercial paper 30% 28% Government securities Quoted ordinary shares Signed on behalf of the Fund Manager 30 March 2017

39 B a l a n c e d 39 Report of the Custodian In accordance with the Capital Markets (Collective Investment Schemes) Regulations, 2001 (the Regulations) and the Custody Agreement between Stanbic Bank Kenya Limited as the Custodians and Sanlam Investments Limited as the Fund Manager, we confirm that: 1. We have discharged the duties prescribed for a Custodian under Regulation 35 of the Regulations, to the Sanlam Balanced Fund; 2. The issue, sale, redemption and cancellation, and calculation of the price of the Fund s units and the application of the Fund s income have been carried out in accordance with the Regulations; and 3. The investment and borrowing powers and restrictions applicable to the Fund in accordance with the Regulations and the documents of incorporation have not been exceeded. For the year ended 31 December 2016, we have held the assets of the Fund, which include title deeds, securities and income that accrue thereof, to the order of the Fund Manager and facilitated the transfer, exchange or delivery in accordance with the instructions received from the Fund Manager. In our opinion, the Fund Manager has in all material respects managed the scheme in accordance with the provisions of the Capital Markets (Collective Investment Schemes) Regulations, 2001, incorporation documents, the information memorandum and the rules of the collective investment scheme. Signed on behalf of the Custodian 30 March 2017

40 B a l a n c e d 40 Independent Auditor s Report to the Unit Holders of Sanlam Balanced Fund Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of Sanlam Balanced Fund (the Fund ) set out on pages 11 to 25 which comprise the statement of financial position at 31 December 2016 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and the notes to the financial statements, which include a summary of a significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial position of Sanlam Balanced Fund at 31 December 2016, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the financial statements section of our report. We are independent of the Fund in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters There were no key audit matters identified from our audit. Other information The Trustee is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

41 B a l a n c e d 41 Independent Auditor s Report to the Unit Holders of Sanlam Balanced Fund Responsibilities of the trustee for the financial statements The Trustee is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of Capital Markets Authority (Collective Investments Schemes) Regulations 2001, and for such internal control as the Trustee determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Trustee is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. The Trustee is responsible for overseeing the Fund s financial reporting process. Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Trustee; Conclude on the appropriateness of the Trustee s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Fund to cease to continue as a going concern; and Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Trustee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

42 B a l a n c e d 42 Independent Auditor s Report to the Unit Holders of Sanlam Balanced Fund We also provide the Trustee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Trustee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal requirements We confirm that the financial statements have been properly prepared in accordance with the Capital Markets Authority (Collective Investment Schemes) Regulations, The Capital Markets Authority (Collective Investment Schemes) Regulations, 2001 also requires that in carrying out our audit we consider and report to you on the following matters: If the auditor is of the opinion that proper accounting records for the collective investment scheme have not been kept or that the accounts are not in agreement with those records; If the auditor has not been given all the information and explanation which, to the best of his knowledge and belief, are necessary for the purpose of his audit; or If the auditor is of the opinion that the information given in the report of the Fund Manager for that period is inconsistent with the accounts. We confirm that there are no matters to report in respect of the foregoing requirements. The engagement partner responsible for the audit resulting in this independent auditor s report is FCPA Richard Njoroge - P/No Certified Public Accountants Nairobi 30 March 2017

43 B a l a n c e d 43 Financial Statements Statement of comprehensive income Notes KShs 000 KShs 000 Interest and dividend income 5 1,879 2,247 Realised gains/(loss) on investments (851) Fair value gain/(loss) on investments at fair value through profit or loss 9(ii) 20 (551) Total income 2, Operating expenses 7 (345) (341) Profit before income tax 2, Income tax expense 8 - (219) Profit for the year 2, Other comprehensive income: - - Total comprehensive income for the year 2, The notes on pages 15 to 25 are an integral part of these financial statements.

44 B a l a n c e d 44 Financial Statements Statement of financial position Notes KShs 000 KShs 000 ASSETS Bank balances 9(iii) Deposits with financial institutions 9(ii) 5,660 3,653 Commercial paper 9(ii) 5,372 5,054 Government securities 9(ii) 5,845 3,711 Quoted ordinary shares 9(ii) 2,000 - Receivables 2,552 1,014 Total assets 21,822 13,432 Liabilities Other payables 11 2, NET ASSETS 19,766 13,358 EQUITY Unit holder balances 19,766 13,358 The notes on pages 15 to 25 are an integral part of these financial statements. The financial statements on pages 11 to 25 were approved for issue by the Trustee on 30 March 2017 and signed on its behalf by: Representing Trustee Representing Trustee

45 B a l a n c e d 45 Financial Statements Statement of changes in equity Unit holder capital balances KShs 000 Balance at 1 January ,202 Profit for the year 285 Transactions with unit holders: Additional units purchased 11,624 Units liquidated (9,753) Total transactions with unit holders 1,871 Balance at 31 December ,358 Balance at 1 January ,358 Profit for the year 2,216 Transactions with unit holders: Additional units purchased 14,858 Units liquidated (10,666) Total transactions with unit holders 4,192 Balance at 31 December ,766 The notes on pages 15 to 25 are an integral part of these financial statements.

46 B a l a n c e d 46 Financial Statements Statement of cash flows Notes KShs 000 KShs 000 Profit before income tax 2, Changes in working capital - quoted ordinary shares (2,000) 4,542 - commercial paper (318) (2,002) - government securities (2,134) payables and accruals 1,982 (290) - receivables (1,538) (963) Cash used in operations (1,792) 1,917 Income tax paid - (219) Net cash flows used in operating activities (1,792) 1,698 Cash flows from financing activities Net contribution from unit holders 14,858 11,624 Liquidations by unit holders (10,666) (9,753) Net cash generated from financing activities 4,192 1,871 Net increase in cash and cash equivalents 2,400 3,569 Cash and cash equivalents at 1 January 3, Cash and cash equivalents at 31 December 6,053 3,653 Represented by: Bank balances Call deposits 5,660 3,653 The notes on pages 15 to 25 are an integral part of these financial statements.

47 B a l a n c e d 47 Notes to the Financial Statementt 1. General information The Fund started operations on 1 November 2014 and is governed by a Trust Deed dated 11 September 2014, is registered with the Capital Markets Authority and is domiciled in Kenya. The address of its registered office is: Sanlam Life House Kenyatta Avenue Nairobi The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. 2. Summary of significant accounting policies a. Basis of preparation Amendments to IAS 1, Presentation of Financial Statements : The amendments are made in the context of the IASB s Disclosure Initiative, which explores how financial statement disclosures can be improved. The amendments, effective 1 January 2016, provide clarifications on a number of issues, including: Materiality an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes confirmation that the notes do not need to be presented in a particular order. The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The measurement basis applied is the historical cost basis, except where otherwise stated in the accounting policies below. The financial statements are presented in Kenya Shillings (KShs), rounded to the nearest thousand. OCI arising from investments accounted for under the equity method the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. b. Changes in accounting policy and disclosures The following standards and amendments have been applied by the Fund for the first time for the financial year beginning 1 January 2016: i. New and amended standards adopted by the Fund The following standards and amendments have been applied by the Fund for the first time for the financial year beginning 1 January 2016: According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new standards/accounting policies are not required for these amendments. ii. New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statement. None of these is expected to have a significant effect on the financial statements of the Fund, except the following set out below: IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and

48 B a l a n c e d 48 Notes to the Financial Statements 2 Summary Of Significant Accounting Policies (continued) b. Changes in accounting policy and disclosures (continued) establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January Early adoption is permitted. The Fund is yet to assess IFRS 9 s full impact. Disclosure Initiative Amendments to IAS 7; Effective 1 January 2017, entities will be required to explain changes in their liabilities arising from financing activities. This includes changes arising from cash flows (e.g. drawdowns and repayments of borrowings) and on cash changes such as acquisitions, disposals, accretion of interest and unrealized exchange differences. c. Revenue recognition Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Fund and the amount of income 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 net the carrying amount on initial recognition. d. Income tax expense The Fund is exempt from income tax from its revenues. It is however subject to withholding tax on interest income from bank deposits and commercial paper at a rate of 15% and dividends received at a rate of 5%. Withholding tax on treasury bonds is 10% for bond with tenures longer than 10 years and 15% otherwise. Infrastructure bonds do not attract withholding tax. e. Cash and cash equivalents For the purposes of the statement of cash flows, cash equivalents include short term liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired. f. Financial instruments Changes in financial assets must be included in this disclosure if the cash flows were, or will be included in cash flows from financing activities. This could be the case, for example, for assets that hedge liabilities arising from financing liabilities. Entities may include changes in other items as part of this disclosure, for example, by providing a, net debt, reconciliation. However, in this case the changes in other items must be disclosed separately from the changes in liabilities arising from financing activities. The information may be disclosed in tabular format as a reconciliation from opening and closing balances, but a specific format is not mandated. Financial assets Classification A financial asset or liability is recognised when the Fund becomes party to the contractual provisions of the instrument. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Fund has transferred substantially all risks and rewards of ownership There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Fund.

49 B a l a n c e d 49 Notes to the Financial Statements 2 Summary of significant accounting policies (continued) b. Financial instruments (continued) As at the reporting date, the classification of the Fund s financial assets was as follows: Loans and receivables: Trade receivables, bank balances Held to maturity: Fixed deposits, call deposits, commercial paper Financial assets at fair value through profit or loss Corporate bonds The Fund determines the appropriate classification of its financial assets at initial recognition. i. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Fund provides money, goods or services directly to a debtor with no intention of trading the receivable. These assets are carried at amortised cost. the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed either directly or by adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss. Financial liabilities ii. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. Where a sale occurs other than for an insignificant amount of heldto-maturity assets, the entire category would be tainted and classified as available for sale. These assets are carried at amortised cost. iii. 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 in this category if acquired principally for the purpose of selling in the short term or if so designated. These assets are carried at fair value with changes in fair value recognised in profit or loss. Financial liabilities are initially recognised at fair value and subsequently measured at amortised cost. Financial liabilities are derecognised when they have been redeemed or otherwise extinguished. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. g. Functional and presentational currency and translation of foreign currencies Functional and presentation currency Impairment and uncollectability of financial assets The Fund assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the Functional Currency ). The financial statements are presented in Kenyan Shillings (KShs) rounded to the nearest thousand, which is the Fund s presentation currency.

50 B a l a n c e d 50 Notes to the Financial Statements 2 Summary of significant accounting policies (continued) g. Functional and presentational currency and translation of foreign currencie (continued) Transactional balances 4. Financial risk management objectives and policies Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within finance income or cost. All other foreign exchange gains and losses are presented in profit or loss within other income or other expenses. h. Distribution All income or loss arising from investment is distributed to unit holders after provision of all expenses. All distributions including unclaimed distributions are reinvested in the unit holder s accounts. i. Unit holder balances Unit holders funds are redeemable on demand at an amount equal to a proportionate share of the unit portfolios net asset value. The balances are carried at the redemption amount that is payable at the financial reporting date if the holder exercised their right to redeem the balances 3. Critical judgements in applying the Fund s accounting policies In the process of applying the Fund s accounting policies, management has made estimates and judgements in valuation of financial instruments as discussed in note 2(f). 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. The Fund generates revenues for the members by investing in various income generating activities which involve trading in the commercial paper. These activities expose the Fund to a variety of financial risks, including credit risk and the effects of changes in market dynamics. The Trust Deed sets out the investment policy and management of the Fund s assets to minimise potential adverse effects on its financial performance. There is no concentration of risk at year end. Risk management is carried out by the Fund Manager, Sanlam Investments Limited. The Fund Manager identifies, evaluates and manages financial risks, with emphasis on specific areas such as interest rate risk, credit risk and investing excess liquidity. The Fund s risk management policies include the use of guidelines governing the acceptance of clients and investment policies are in place which help manage liquidity and seek to maximise return within an acceptable level of interest rate risk. The Capital Markets Authority (CMA) sets out that the book value of the Fund s investments should not exceed the following limits: Listed securities on the Nairobi Stock exchange 80% Securities issued by the Government of Kenya 80% Immovable property 25% Other collective investment schemes including umbrella schemes 25% Other securities not listed on a securities exchange in Kenya 25% Off-shore investments 10% The Fund had complied with these requirements as at 31 December 2016 and 2015 a. Credit Risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Fund. In accordance with the Fund s policy, the fund manager monitors the Fund s credit position on a daily basis, and it is reviewed on a quarterly basis by the Fund s Investments Committee. The amount that best represents the Fund s maximum exposure to credit risk at 31 December 2016 and 2015 is made up as follows:

51 B a l a n c e d 51 Notes to the Financial Statements 4. Financial risk management objectives and policies (continued) KShs 000 KShs 000 Bank balances Commercial paper 5,372 5,054 Government securities 5,845 3,711 Deposits with financial institutions 5,660 3,653 Receivables 2,552 1,014 19,822 13,432 No collateral is held for any of the above assets. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated. All receivables past due by more than 60 days are considered to be impaired, and are carried at their estimated recoverable value. None of the above assets are past due, past due and impaired or impaired. b. Liquidity risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations when they fall due. The Fund s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or at the risk of damaging the Fund s reputation. The Fund is exposed to daily withdrawal of funds by investors. The Fund does maintain cash balances to meet all of these needs as experience shows that a certain amount of withdrawals are requested daily and can be predicted with a high level of certainty. Management closely monitors the proportion of maturing funds available to meet such calls and on the minimum level of funds that should be in place to cover withdrawals at unexpected levels of demand. The table below analyses the Fund s financial liabilities and unit holder balances that will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. c. Market risk i. Price risk The Fund is exposed to debt securities price risk because of investments in corporate bonds. In managing this risk, management monitors the performance of key economic indicators to ensure that it continuously maximises returns to shareholders. As at 31 December 2016, an increase/(decrease) of 5% on the prices of bonds would result in an increase/(decrease) in profit or loss of approximately KShs. 3,548 (2015: Nil). ii. Cash flow and fair value interest rate risk The Fund s interest bearing financial assets are corporate bonds, government securities and deposits with financial institutions, which are at fixed rate, and on which it is therefore not exposed to cash flow interest rate risk.

52 B a l a n c e d 52 Notes to the Financial Statements 4. Financial risk management objectives and policies (continued) c. Market risk (continued) The fund manager regularly monitors financing options available to ensure optimum interest rates are obtained. iii. Foreign exchange risk As at 31 December 2016 and 2015, the Fund had no exposure to foreign exchange risk. Fair value estimation Determination of fair value and fair value hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Fund s market assumptions. These two types of inputs have created the following fair value hierarchy: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes debt instruments on exchanges. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Fund considers relevant and observable market prices in its valuations where possible. There were no transfers between the levels in the period. The following table presents the Fund s assets and liabilities that are measured at fair value at 31 December 2016 and Level 1 Level 2 Level 3 Total KShs 000 KShs 000 KShs 000 KShs December 2016 Investment in government securities 5, ,845 Commercial paper - 5,372-5,372 Investment in quoted shares 2, ,000 Total assets 7,845 5,372-13, December 2015 Investment in government securities 3, ,711 Investment in commercial paper - 5,054-5,054 Total assets 3,711 5,054-8,765 The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,

53 B a l a n c e d 53 Notes to the Financial Statements 4. Financial risk management objectives and policies (continued) c. Market risk (continued) pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Fund is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily NSE equity investments classified as trading securities or at fair value through comprehensive income. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Capital management The capital of the Fund is represented by unit holders balances. The amount of unit holder liabilities can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unit holders. The Funds objectives when managing capital are to safeguard the Funds ability to continue as a going concern in order to provide returns for unit-holders. 5. Interest and dividend income KShs 000 KShs 000 Interest income 1,754 1,978 Dividend income ,879 2, Realised gain/(loss) on investment Government securities 73 (26) Quoted ordinary shares 589 (825) 662 (851) 7. Operating expenses Custodial - - Management fees

54 B a l a n c e d 54 Notes to the Financial Statements 8. Taxation The unit trust is registered not under the Income Tax Act (Collective Investment Scheme Rules 2002), and is exempt from income tax. The tax charge in 2016 and 2015 relates to tax withheld at a rate of 15% for interest income and 5% for dividend income. On 11 September 2009, KRA issued a public notice requiring the Fund to withhold tax on distributions. 9. Investments i. Maturity profile of investments in the money market Up to 3 months 6 & 12 months Due within 1 & 5 years Due after 5 years Totals KShs 000 KShs 000 KShs 000 KShs 000 As at 31 December 2016 Deposits with financial institutions 5,660-5,660 Commercial paper 5,372-5,372 Quoted ordinary shares - 2,000 2,000 Government securities - 5,845 5,845 Total 5,660 5,372-7,845 18,877 As at 31 December 2015 Deposits with financial institutions 3, ,653 Corporate bonds 5, ,054 Government securities ,711 3,711 Total 8, ,711 12,418 ii. Movement in investments Year ended 31 December 2016 Carrying Value at 01/01/2016 Purchases at cost Interest accrued Change in fair value Sales/ maturities Carrying Value at 31/12/2016 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 Deposits with financial institutions 3,653 1, ,660 Quoted ordinary Shares - 13, (11,345) 2,000 Government securities 3,711 24, (23,035) 5,845 Commercial paper 5,054 3, (3,005) 5,372 Total 12,418 43, (37,385) 18,877

55 B a l a n c e d 55 Notes to the Financial Statements Carrying Value Carrying Value Purchases Interest Change in Sales/ at 01/01/2015 at 31/12/2015 at cost Accrued fair value maturities KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 Year ended 31 December 2015 Deposits with financial institutions - 24, (20,479) 3,653 Quoted ordinary Shares 4,542 14,936 (19,478) - Government securities 3,837 9, (551) (9,429) 3,711 Commercial paper 3,052 14, (12,493) 5,054 Total 11,431 63, (551) (61,879) 12,418 iii. Cash and cash equivalents KShs 000 KShs 000 Deposits held with financial institutions maturity of up to 3 months from contract date 5,660 3,653 Cash and bank balance At end of year 6,053 3, Unit holders funds No of Units 2016 Value No of Units 2015 Value 000 KShs KShs 000 At start of the year 1,259 13,358 1,051 11,202 Creations ,858 1,089 11,624 Liquidations (200) (10,666) (881) (9,753) Total comprehensive income - 2, At end of the year 1,537 19,766 1,259 13, Other payables KShs 000 KShs 000 Service fees payable Sanlam Investments Limited 2, Unsettled investment transaction - - Other payables - - 2,056 74

56 B a l a n c e d 56 Notes to the Financial Statements 12. Related party transaction Sanlam Balanced Fund is managed by Sanlam Investments Limited. Sanlam Investments Limited is controlled by Sanlam Kenya PLC incorporated in Kenya. The Fund transacts with other entities and divisions within Sanlam Kenya PLC. Balances due to related companies have been disclosed under note 11. During the year, the following transactions were carried out with related parties. a. Unit holders investment KShs 000 KShs 000 Units purchased by Sanlam Kenya PLC - - b. Unit holders balances KShs 000 KShs 000 Sanlam Kenya PLC 11,911 10,573 c. Service fees KShs 000 KShs 000 Sanlam Investments Limited

57 M o n e y M a r k e t 57