LIST OF ACRONYMS AND ABBREVIATIONS... 3 THE BOARD OF TRUSTEES... 4 ADMINISTRATION AND PROFESSIONAL ADVISORS... 5

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2 LIST OF ACRONYMS AND ABBREVIATIONS... 3 THE BOARD OF TRUSTEES... 4 ADMINISTRATION AND PROFESSIONAL ADVISORS... 5 TRUSTEES REPORT FOR THE YEAR ENDED 31 DECEMBER STATEMENT OF TRUSTEES RESPONSIBILITIES REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF PRIDE MICROFINANCE RETIREMENT BENEFITS SCHEME FUND ACCOUNT FOR THE YEAR ENDED 31 DECEMBER STATEMENT OF NET ASSETS AS AT 31 DECEMBER STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS

3 Founder The Scheme ISAs Board Pride Microfinance Limited (MDI) Pride Microfinance Retirement Benefits Scheme Uganda Shillings International Standards on Auditing Board of Trustees URBRA Act 2011 Uganda Retirement Benefit Regulatory Authority Act, 2011 IFRS KES URA International Financial Reporting Standards Kenya Shillings Uganda Revenue Authority 3

4 The following served as Trustees of Pride Microfinance Retirement Benefits Scheme during the year, and up to 31 December 2016 No. Trustee Position Period of Status appointment 1. Maris Wanyera Chairperson 2014 Founder-nominated 2. Pamela Namono Secretary 2014 Member-nominated 3. Harriet K. Sentomero Member 2014 Founder-nominated 4. Sulaiman Katende Member 2014 Founder-nominated 5. Sylver Kyeyune Member 2014 Member-nominated 6. Rehema N.S Mutazindwa Member 2014 Member-nominated 7. Leonard Muhwezi** Member 2014 Member-nominated 8. Omony Cyrus Odongkara** Member 2014 Member-nominated 9. Apollo Taremwa Member 2014 Member-nominated **Left during the year

5 Scheme Registered Office Pride Microfinance Retirement Benefits Scheme (PMRBS) Victoria Park, Block B, Bukoto, Plot 6-9, Ben Kiwanuka Okot Close, P.O Box 7566, KAMPALA. Administrator Custodian Fund Manager Independent Auditors and Tax Advisors ICEA Life Assurance Company Limited Rwenzori Courts, 2 nd Floor, Plot 2 & 4A, Nakasero Road, P.O Box 33953, KAMPALA. Housing Finance Bank Investment House, Plot 4, Wampewo Avenue, Kololo, P.O Box 1539, KAMPALA. STANLIB Uganda Limited 4 th Floor, Crested Towers (Short tower), 17 Hannington Road, KAMPALA. Tugye Associates, Certified Public Accountant P. O. Box 29913, KAMPALA. Sponsor Pride Microfinance Limited (MDI) Victoria Park, Block B, Bukoto, Plot 6-9, Ben Kiwanuka Okot Close, P.O Box 7566, KAMPALA. 5

6 1. Introduction The Board of Trustees of Pride Microfinance Retirement Benefits Scheme ( The Scheme ) presents its annual Trustee Report together with the Independent Auditor s Report and Financial Statements and for the year ended 31 December Structure of the Scheme The Scheme is a defined contribution scheme which has provided contributions for eligible employees of Pride Microfinance Uganda Limited (the Founder) since May The Scheme was established and is governed by a Trust Deed and Rules dated May 2012 which have been approved by the Uganda Retirement Benefits Regulatory Authority (Regulator). It is a provident fund Plan under which lump sum benefits are paid to the staff members upon exit from service of the founder or relief from employment as specified in the rules. The scheme is registered and licensed by the Uganda Retirement Benefits Regulatory Authority. 3. The Trustees The Scheme is managed by the Board of Trustee on behalf of the Members in accordance with the Trust Deed and Rules. The Trustees of the scheme are listed on page 4 above. Under the Trust Deed and Rules of the Scheme, a minimum number of five (5) and maximum of nine (9) Trustees is required, one third (1/3) of whom is appointed and may be removed by the Founder at its discretion (Founder-nominated Trustees) and two thirds of whom are nominated by the members (Member-nominated Trustees). The Founder-nominated Trustees shall (unless prevented by death or resignation) hold office for a period of three (3) years but shall be eligible for re-appointment by the Founder provided that the Founder may in its sole discretion remove any founder-nominated Trustee before expiry of his/her term of office. The Member-nominated Trustees shall (unless prevented by death or resignation) hold office for a period of three (3) years but shall be eligible for re-election if nominated by the members. The Members may revoke the nomination of any Member-nominated Trustee before expiry of his/her term of office in which case the Founder shall remove such Trustee. As at 31 st December, 2016 the Board was comprised of 7 trustees, four (4) of whom are member nominated while the three (3) are Founder nominated, after the exit of two trustees. However, two (2) new members, Masika Yodes and Akampulira Amos, were nominated to the Board but awaiting licensing by URBRA. 6

7 The Trustees meet quarterly and decisions are passed on a simple majority of those voting. The Trustees have set up Investment & Strategy and Risk & Audit committees which have delegated authority to make recommendations concerning investments within its terms of reference and to make recommendations to the full trustee board on other matters. The investment committee also meets quarterly. The trustees attendance at meetings of the Trustee board is summarized below. No. Trustee Total scheduled meetings Meetings attended 1 Maris Wanyera Pamela Namono Harriet Sentomero Sulaiman Katende Sylver Kyeyune Rehema Mutazindwa Leonard Muhwezi Apollo Taremwa Omony Cyrus Odongkara Legislative and regulatory developments The Trustee Board works closely with its core Service providers to ensure that any current or future changes in legislation that may affect the Scheme are adhered to. 5. Trustees training The Regulator and best practice requires that the Trustees are regularly briefed about the Scheme management and governance. This is achieved through training and meetings with the Scheme s specialist advisers on a regular basis. As well as formal development activities, the Trustees keep abreast of developments in the pension field through updates at regular Trustee meetings, international trainings, circulars posted on the Trustee governance system, online newsletters and seminars provided by its advisers. During the year, the trustees attended several trainings in and outside the country and 32,238,694 was incurred on the same. This cost was covered by the Sponsor as part of grant and donation. 7

8 6. Risk management The Board of Trustees through the Risk & Audit Committee has responsibility for internal controls and risk management. The Trustees are committed to identifying, evaluating and managing risk to the Scheme and maintaining control procedures to reduce significant risks to an acceptable level. In order to meet this responsibility a Risk Management committee has been instituted. The purpose of the committee is to: highlight the scope of the risks to which the Scheme is exposed; rank those risks in terms of likelihood and impact; and identify management actions that are either currently being taken, or that it is believed should be taken, in order to mitigate the identified risks to an acceptable level. Ensure compliance to set guidelines, regulations and procedures 7. Administration and other support services Day-to-day administration and management of the Scheme s affairs is delegated by the Trustee to professional organizations. The scheme administration service is contracted to ICEA Life Assurance Company Limited. To date, the outsourcing of the administration has worked well and the services provided to the Founder and Members continue to be well managed and within the contract agreement. The administration of the Scheme includes keeping Members records and the calculation and payment of Members benefits. ICEA Life Assurance Company Limited (the Scheme Administrator) supports the Trustees in carrying out their responsibilities for governance, including relationships with the auditors and other advisers. The administrator also provides secretarial services to the Scheme. The Fund Administrators are remunerated by fees based on 0.4% per annum of the value of investments held by the scheme at year-end. 8. Investment Management The Trustees have delegated management of investments to STANLIB Uganda Limited as the fund manager. STANLIB Uganda which is licensed by The Uganda Retirement Benefits Regulatory Authority and also regulated by the Capital Markets Authority, manage the investments within the restrictions set out in investment management agreements which are designed to ensure that the objectives and policies set out in the Investment Policy are followed. The mandates put in place by the Trustees specify how rights attaching to the Scheme s segregated investments are acted upon. 8

9 The Trustees investment strategy considers the Scheme s investments in the following asset allocation; Asset class Strategic Tactical range Uganda Government Bonds 30% 20%-50% Corporate Bonds 5% 0%-7% Government Bills 20% 10%-30% Fixed Deposits 15% 10%-60% East African Listed Equities 25% 15%-35% Cash 5% 0%-10% Total 100% Investment managers are remunerated at a rate of 17% of all income made by the scheme assets in a given period. This rate has been revised to 14% for the coming year (2017) in line with the growth in performance of the Scheme. 9. Custody of investments Custodian services are provided by Housing Finance Bank Limited. The Trustees review the internal control reports produced by the custodian and regularly reconcile the custodian s records of securities and cash to the investment managers records. The Trustees have implemented mandates ensuring that rights attaching to Scheme investments are acted upon. This includes active voting participation and a requirement to consider social, ethical and environmental issues when formulating the Scheme s investment strategy. Custodians are remunerated by fees based on 0.125% per annum of the value of securities held by the scheme on the last day of the month. 10. Preparation and review of financial statements The Board of Trustees confirms that the Financial Statements have been prepared and audited in accordance with the Uganda Retirement Benefit Regulatory Authority Act, The Independent Auditor s Report on the Financial Statements appears on page 12 while the Financial Statements themselves, and notes thereon, are on pages Membership The membership of the Scheme at the beginning and end of the year and changes during the year are set out below Active members Inactive members Total

10 12. Financial developments and financial statements The financial statements included in this annual report are the accounts required by the Uganda Retirement Benefit Regulatory Authority Act, They have been prepared and audited in compliance with regulations made under the Act. Significant developments affecting the financial position of the Scheme during the year include: As at end of 2016, the Scheme Net assets stood at 2,912,662,493 from 1,756,524,930 in 2015, registering a 66% annual growth. Total contributions and benefits during the period amounted to 944,127, % of which was on account of Employer contributions (881 million) while voluntary contributions for the period were 63 million. Total scheme income increased by 83% to 369,711,539 in 2016 from 201,822,258 in Of this, investment income constituted (74%), amortized grant income & sponsor donations (16%) and change in market value of investments (10%). Investment management expenses increased from 20,827,074 in 2015 to 49,843,491 to The increase is mainly attributed to fund management fees (45 million) since their fees are based on income generated and the income increased considerably compared to the previous year. Administrative expenses during the period increased by 173% from 22,441,686 in 2015 to 61,253,224 in The cost structure was composed of trustee trainings, service providers fees and regulatory costs. Interest amounting to 100,572,435 was declared to members and this has been added to the accumulated member funds account. Benefits paid to exiting members during the year amounted to 47 million. Cash equivalents paid during the year with respect to benefits have been calculated and verified in the manner prescribed by the URBRA Act, Auditors The Trustees who held office as at the date of approval of this report confirm that they have taken steps to make themselves aware of relevant audit information. None of the Trustees is aware of any relevant audit information which has not been disclosed to the auditors. Tugye Associates CPA have expressed their willingness to continue in office as auditors of the Scheme if reappointed by the members.. Chairperson, Board of Trustees /April/

11 Under The Uganda Retirement Benefit Regulatory Authority Act 2011, the Trustees are required to prepare financial statements for each year that give a true and fair view of the state of affairs of the Scheme as at the end of the financial year. The trustees are required to ensure that the scheme keeps proper accounting records of its income, expenditure, liabilities and assets, and that the contributions are remitted to the administrator in accordance with the rules of the Scheme. The trustees accept responsibility for the financial statements which have been prepared using appropriate accounting policies supported by reasonable and prudent judgment and estimates, in conformity with International Financial Reporting Standards and the requirements of the Uganda Retirement Benefit Regulatory Authority Act The trustees are of the opinion that the financial statements give a true and fair view of the Fund Account and the Net assets statement as at 31 December The trustees further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. The trustees have made an assessment of the Scheme s ability to continue as a going concern and have no reason to believe the scheme will not be a going concern for the next twelve months from the date of this statement. The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with the International Financial Reporting Standards and the Uganda Retirement Benefit Regulatory Authority Act, Approval of the Financial Statements The financial statements, as indicated above, were approved by the Board of Trustees on and were signed on its behalf by:.. Trustee Trustee 11

12 Opinion We have audited the accompanying financial statements of Pride Microfinance Retirement Benefits Scheme ( The Scheme ) set out on pages 10 to 22. These financial statements comprise the Fund Value Account for the year, Statement of Net Assets as at 31 December 2016, Statements of Cash flows and a summary of significant accounting policies and other explanatory notes. In our opinion the accompanying financial statements give a true and fair view of the financial transactions of the Scheme during the year ended 31 December 2016, and of the amount and disposition at that date of its assets and liabilities. They have been prepared in accordance with the International Financial Reporting Standards (IFRSs), the requirements of the Ugandan Companies Act and in compliance to the Uganda Retirement Benefit Regulatory Authority Act, Basis of Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and Guidelines issued by the Institute of Certified Public Accountants of Uganda. 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 Scheme 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 Uganda, and we have fulfilled our other 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 Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Summary of Key Risks Significant Risk 1. Valuation of the Financial Instruments 2. Scheme Contributions 3. Benefits paid to exiting members Area of focus Appropriateness of valuation adjustments Disclosures of the fair value hierarchy Accounting for member contributions Valuation and accounting for payments to exited members 12

13 Key Audit Matter 1. Valuation of the Financial Instruments (Investment Portfolio) (Refer to Note 4(i) and 15 in the financial statements) At year end, the Scheme Investment portfolio had an aggregate carrying value of 2.96 billion. The valuation of these financial instruments (coupled with market volatility) which is determined at Fair Value may be misstated due to the application of valuation techniques which often involve the exercise of judgment and the use of assumptions and estimates. As these financial instruments are more complex to value, we have identified the Scheme s investments as a significant risk. 2. Scheme Contributions (Refer to Note 4(iii) and 5 in the financial statements) Contributions both from members (voluntary) and employer are generally accounted for on an accruals basis in the payroll period to which they relate. By 31 st December 2016, the Cumulative Contributions received stood at 2.47 billion. In view of the complexity arising from the participation of different members within the Scheme, we have included the identification, calculation and payment of contributions as an area of significant risk. Our Response The following procedures were performed to address the significant risk around investments: we have reviewed the design and implementation of controls present at the Scheme for ensuring that investments are valued correctly; we have reconciled the total value of the investments held by the Scheme as reported in the investment reports to the value of investments reported in the Net Assets Statement; we have compared the valuations provided by Bank of Uganda, Custodian to the reports provided by the investment manager; Utilizing our valuation specialists, we assessed the appropriateness of the methodologies and models used in determining key pricing inputs of investments with reference to active markets. We have performed the following testing to address the significant risks around contributions: reviewed the design and implementation of controls present at the Scheme for ensuring for all members are identified and calculated correctly; we have received from officers/management an analysis of contribution rates by employer/members and monthly contribution schedules; we performed tests of details to test whether each material income stream was calculated in accordance with the prescribed rates; 13

14 Key Audit Matter 3. Benefits paid to exiting members (Refer to Note 4(iv) and 7 in the financial statements) Benefits paid to exiting members during the year amounted to 47 million (2015: 60million). Benefits should be accounted for in the period in which they fall due for payment. Where there is a choice, benefits are accounted for in the period in which the member notifies the Trustees of his decision on the type or amount of benefit to be taken or, if there is no member choice, they are accounted for on the date of retirement or leaving. In light of the above, there is a significant risk that benefits may not be properly accounted for in regard to amounts and period. Our Response The following procedures were performed to address the significant risk around benefits: we reviewed the design and implementation of controls present at the Scheme for ensuring the accuracy, completeness and validity of benefits through discussions with the Administration and testing whether controls were in force during the year under review; we obtained a schedule of benefits paid and supporting calculations and tested whether benefits paid were in accordance with the Trustee Deed and Rules; we performed tests of detail, on a sample of benefits paid, by agreement to supporting documentation, to test whether benefits were in all material respects correctly calculated, by reference to their vesting conditions and Scheme rules 14

15 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management 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, management is responsible for assessing the Entity 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 management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the entity 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 judgment and maintain professional skepticism 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 Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management 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 Company s 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 entity to cease to continue as a going concern. 15

16 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 directors 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. We also provide those charged with governance 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 those charged with governance, 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 and Regulatory Requirements The Uganda Retirement Benefit Regulatory Authority Act, 2011 requires that in carrying out our audit we consider and report to you on the following matters. We confirm that: 1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; 2. In our opinion, proper books of account have been kept by the Scheme so far as appears from our examination of those books; and 3. The Scheme s statement of financial position and statement of comprehensive income are in agreement with the books of account. The engagement partner on the audit resulting in this independent auditor s report is CPA Michael Tugyetwena (P02060).. Tugye Associates Certified Public Accountant of Uganda P.O Box 29913, KAMPALA. /

17 Notes Contributions and benefits Contributions received 5 944,127, ,010,818 Benefits paid to and on behalf of Leavers 7 (46,604,795) (59,766,396) Net withdrawals /additions from dealings with members 897,522, ,244,422 Returns on investments Investment income 8 273,253, ,617,805 Change in market value of investments 9 72,913,079 12,388,509 Foreign exchange loss / gain 10 (34,692,772) 4,499,027 Other income 11 58,237,608 76,316,917 Total investments income 369,711, ,822,258 Administrative expenses 12 (61,253,224) (22,441,686) Investment management expenses 13 (49,843,491) (20,827,074) Total operational expenses (111,096,715) (43,268,760) Surplus/(Deficit) before tax 1,156,137, ,797,920 Income tax expenses 14 - (10,182,297) Net increase / decrease in the fund during the year 1,156,137, ,615,623 The accompanying notes on pages 19 to 27 form an integral part of these Financial Statements. 17

18 ASSETS Notes Non-Current Assets Investment Assets Government Bonds 15 1,003,876, ,315,323 Government Bills 15 1,266,826, ,154,039 East African Equities ,840, ,735,381 Fixed Deposits 388,260,534-2,955,804,292 1,736,204,743 Current Assets Contributions receivable Advance tax paid 14 4,001,748 - Cash & bank balances 17 8,373,300 63,714,697 12,375,048 63,714,697 TOTAL ASSETS 2,968,179,340 1,799,919,440 FUNDS AND LIABILITIES Accumulated Members' funds 18 2,566,875,375 1,568,780,200 Reserve Account 19 61,453,083 46,716,697 Retained Earnings ,334, ,028,033 2,912,662,493 1,756,524,930 Non- Current Liabilities Deferred tax 21 11,466,092 5,066,261 Current Liabilities Benefits Payable 6 10,084,839 2,772,429 Current tax payable 14-4,216,037 Other account Payables 22 33,965,916 31,339,783 Total 44,050,755 38,328,249 TOTAL FUNDS AND LIABILITIES 2,968,179,340 1,799,919,440 The financial statements summarise the transactions of the Scheme and deal with the net assets at the date of disposal of the Trustee. They do not deal with obligations to pay benefits. The actuarial position of the scheme is the one that takes account of such obligations. The financial statements which comprise the Fund account, the Net Assets Statement and the related notes on pages 19 to 27 were approved by the Board of Trustees on 2017 and signed on its behalf by:.. Trustee Trustee 18

19 Cashflows From Operating Activities Notes 2016 Increase /(decrease) in net assets for the year 1,156,137, ,615, Adjustments for Non-Cash Items Depreciation - Changes in fair value of investment 9 (196,554,880) (61,319,820) Foreign exchange (losses)/gains 10 34,692,772 (4,499,027) Deferred tax movements 21 6,399,831 - Cash flows from Operating Activities before changes in working capital 1,000,675, ,796,776 Adjustments for Changes in working capital Changes in Receivables (4,001,748) 16,807,381 Changes in Payables 5,722,506 (39,089,260) Net Cash flows from Operating Activities 1,002,396, ,514,897 Cash flows from Investing Activities Purchase of investment asset 15 (6,102,018,193) (2,338,867,633) Maturities of investments 15 5,044,280,751 1,671,633,468 Net Cash Used for Investing Activities (1,057,737,442) (667,234,165) Net increase/(decrease) in cash and cash equivalents (55,341,397) 7,280,732 Cash and Cash Equivalents for the year 17 (55,341,397) 7,280,732 Cash and Cash Equivalents at the beginning of the year 63,714,697 56,433,965 Cash and Cash Equivalents at the end of the year 17 8,373,300 63,714,697 The accompanying notes on pages 19 to 27 form an integral part of these Financial Statements. 19

20 1. General information The Scheme is a defined contribution scheme which provides benefits for employees of Pride Microfinance Limited (MDI). The Scheme was established and is governed by a trust deed dated May 2012 which has been approved by the Uganda Retirement Benefits Regulatory Authority (Regulator). The scheme is registered and licensed under the Uganda Retirement Benefits Regulatory Authority Act, Statement of Compliance The individual financial statements of Pride Microfinance Retirement Benefits Scheme have been prepared in accordance with the Uganda Retirement Benefits Regulatory Authority Act, 2011, the Companies Act 2012 and the International Financial Reporting Standards (IFRSs). 3. Basis of preparation The Financial Statements have been prepared on an accruals basis, that is income and expenditure are recognised as they are earned or incurred unless otherwise specified. The financial statements are presented in Uganda shillings () and are prepared under the historical cost convention except stated otherwise. 4. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (i) Investments Quoted equity securities are recorded at market values and unquoted investments are valued at the year-end by the investment manager in accordance with the International Financial Reporting Standards. Transaction costs are included in the costs of purchases and sale proceeds and these include costs charged directly to the Scheme. (ii) Currency The Scheme s functional currency and presentational currency is Uganda Shillings (). Assets and liabilities in foreign currencies are expressed in Uganda Shillings at the rates of exchange ruling at the year end. Foreign currency transactions are translated into shillings at the spot exchange rate at the date of the transaction. Gains and losses arising on conversion or translation are dealt with as part of the change in market value of investments. 20

21 (iii) Contributions Normal contributions, both from members and employer, are generally accounted for on an accruals basis in the payroll period to which they relate. Other contributions made by the employer to reimburse costs and levies payable by the Trustees are accounted for on the same basis as the corresponding expense. Where contributions are paid other than in cash, the assets received are accounted for at fair value on the date of receipt or date of entitlement if earlier. (iv) Payments to members (Benefits) Benefits are accounted for in the period in which they fall due for payment. Where there is a choice, benefits are accounted for in the period in which the member notifies the Trustees of his decision on the type or amount of benefit to be taken or, if there is no member choice, they are accounted for on the date of retirement or leaving. Other benefits are accounted for on an accruals basis on the date of retirement or death as appropriate. Refunds and opt-outs are accounted for when the Trustees are notified of the member s decision to leave the Scheme. Where the Trustees agree or are required to settle tax liabilities on behalf of a member with a consequent reduction in that member s benefits receivable from the Scheme, any taxation due is accounted for on the same basis as the event giving rise to the tax liability and shown separately within Benefits. (v) Administrative and other expenses Expenses are accounted for on an accruals basis. The Scheme bears all the costs of administration. Costs are charged to the expenditure line to which they relate. Investment management expenses are accounted for on an accruals basis and are paid for by the Fund. Transaction costs are included in the cost of purchase and sale proceeds. Transaction costs include costs charged directly to the Fund such as fees, commissions, stamp duty and other fees. (vi) Investment income Income from fixed-interest, index-linked securities, cash and short-term deposits is accounted for on an accruals basis. The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses realized on sales of investments and unrealized changes in market value. In the case of pooled investment vehicles which are accumulation funds, change in market value also includes income, net of irrecoverable withholding tax, which is reinvested in the Fund. 21

22 (vii) Valuation and classification of investments Investment assets and liabilities are included in the financial statements at fair value. Where separate bid and offer prices are available, the bid price is used for investment assets and the offer price for investment liabilities. (viii) Transfers from and to other plans Transfer values represent the capital sums either receivable in respect of members from other pension plans of previous employers or payable to the pension plans of new employers for members who have left the Scheme. They are accounted for on an accruals basis on the date the trustees of the receiving plan accept the liability. In the case of individual transfers, this is normally when the payment of the transfer value is made. (ix) Vesting All retirement benefits accrued from membership of the Pride Microfinance Retirement Benefits Scheme derived from contributions made by the Employer and Employee shall vest to that member (depending on the years of service) provided that the member is not dismissed as a result of dishonesty resulting in financial loss to the Employer. Vesting of members accounts is based on contributions plus actual earnings derived from investing the contributions as declared by the Trustees. The current scheme vesting scales are as below; Period of continuous membership (Years) %age of Founder's portion of accumulated credit included in benefit 0 to < 3 0% 3 to < 6 50% 6 to < 10 75% 10 and above 100% (x) Taxation As per Section 8 of the Income Tax Act Cap 340, the scheme is required to pay income tax on its chargeable income at a rate of 30%. 22

23 5 Contributions receivable (i) Employer contribution Normal Contributions 880,902, ,260,836 Sub-Total 880,902, ,260,836 The employer makes contributions of 5% of the members' monthly salary (ii) Member contribution Normal Contributions - - Sub-Total - - No compulsory member contributions have been made (iii) Voluntary contributions Contributions 63,225,300 28,749,982 Sub-Total 63,225,300 28,749,982 Grand Total 944,127, ,010,818 6 Benefits payable Balance 10,084,839 2,772,429 Total 10,084,839 2,772,429 7 Benefits paid to and on behalf of Leavers Withdrawn benefits paid 46,604,795 59,766,396 Lumpsum death benefits paid - - Pensions paid - - Lumpsum retirement benefits paid - - Total 46,604,795 59,766,396 8 Investment Income Interest income on Fixed deposits 8,424,294 31,910,785 Interest income on Treasury Bills and Bonds 311,984,785 92,052,349 Dividend income 15,241,502 3,065,141 Less: WHT expense on Treasury Bills & Bonds (62,396,957) (18,410,470) Total 273,253, ,617,805 23

24 9 Change in market value of investments Balance as at 31 December (Note 15) 161,862,108 65,818,847 FX loss/(gain) on E.A equities 34,692,772 (4,499,027) Realized change in market value** (123,641,802) (48,931,311) Unrealized change in market value 72,913,079 12,388,509 **Refers to the actual amounts of cash collected on the investments 10 Foreign exchange loss/gain FX loss/(gain) on East African equities (Note 15) (34,692,772) 4,499,027 (34,692,772) 4,499, Other incomes Amounts Retained due to Vesting (paid benefits) 14,736,386 15,446,454 Amounts Retained due to Vesting (deferred members) - 35,524,174 Grant income 20,000,000 25,346,289 Sponsor donation (Trustee trainings) 23,501,222 - Total 58,237,608 76,316, Administrative expenses Insurance premiums 4,322,029 4,322,029 Audit fees 4,720,000 4,720,000 AGM Expenses 1,988,300 3,500,000 Trustee trainings 32,238,694 - Legal and professional 469,833 - URBRA Levy 738, ,980 License fees 4,952,200 2,250,000 Administration fees 11,823,217 7,199,678 Total 61,253,224 22,441,686 24

25 13 Investment management expenses Tax Consultation fees 236, ,000 Fund management fees 44,846,291 18,465,027 Custody fees 4,759,000 2,074,687 Bank charges 2,200 51,360 Total 49,843,491 20,827, Taxation Investment Income 273,253, ,617,805 Change in market value of investments 72,913,079 12,388,509 Foreign exchange (losses)/gains (34,692,772) 4,499,027 Grant Income Amortized 20,000,000 25,346,289 Sponsor donation 23,501,222 - Total income 354,975, ,851,630 Less: Operational Expenses (61,253,224) (22,441,686) Investment management expenses (49,843,491) (20,827,074) Net Income 243,878, ,582,870 Less: Net income on Treasury bills and bonds (final tax paid) (249,587,828) (73,641,879) Chargeable income (5,709,390) 33,940,991 Income Tax expense (@30%) - 10,182,297 Add: Opening balance 4,216,037 1,947,263 Deferred Tax on Unrealized gains (11,466,092) (5,066,261) Less: Provisional Income Tax paid (8,217,785) (2,847,262) Tax Payable at 31 December (15,467,840) 4,216,037 25

26 15 Investment assets Government Bonds Government Bills East African Equities Fixed Deposits Total Market value at 1 January ,288, ,971,583 43,891,843-1,003,151,731 Purchases at cost 468,343, ,119, ,344, ,060,000 2,338,867,633 Sales proceeds and receipts (123,719,596) (549,853,872) - (998,060,000) (1,671,633,468) Change in Value (7,597,357) 68,917,177 4,499,027-65,818,847 Market value at 31 December ,315, ,154, ,735,381-1,736,204,743 Market value at 1 January ,315, ,154, ,735,381-1,736,204,743 Purchases at cost 920,026,513 1,323,210,699 98,797,992 3,759,982,989 6,102,018,193 Sales proceeds and receipts (813,966,560) (858,143,203) - (3,372,170,989) (5,044,280,752) Change in Market value 123,501,004 72,605,342 (34,692,772) 448, ,862,108 Market value at 31 December ,003,876,280 1,266,826, ,840, ,260,534 2,955,804, Contributions receivable Balance Cash and bank balances Housing Finance Bank ,696,879 Cooperative Bank 8,372,512 17,818 8,373,300 63,714, Accumulated Members' funds Opening balance at 1 January 1,568,780,200 1,019,584,039 Adjustments for: Normal Contributions 880,902, ,260,836 Voluntary contributions 63,225,300 28,749,982 Declared interest 100,572,435 - Withdrawals** (46,604,795) (124,814,657) Closing balance at 31 December 2,566,875,375 1,568,780,200 **This includes payment to exiting members and member funds transferred to reserves due to vesting. 26

27 19 Reserve Account Opening balance 46,716,697 31,270,243 Increase/(decrease) during the year 14,736,386 15,446,454 Closing balance 61,453,083 46,716,697 Refers to amounts retained by the Scheme due to vesting 20 Retained Earnings Opening balance at 1 January 141,028,033 43,627,460 Adjustments for: - - Declared interest to members (100,572,435) - Investment income 273,253, ,617,805 Change in market value of investments 72,913,079 12,388,509 Foreign exchange (losses)/gains (34,692,772) 4,499,027 Grant income 20,000,000 25,346,289 Sponsor donation 23,501,222 - Fund expenses (111,096,715) (53,451,057) Closing balance at 31 December 284,334, ,028, Deferred tax liability Opening balance 5,066,261 10,185,651 Increase/(decrease) during the year 6,399,831 (5,119,390) Closing balance 11,466,092 5,066,261 This related to unrealized gains on market value of investments 22 Others accounts payable Audit fees payable 4,720,000 4,720,000 Tax consultancy fees payable 472, ,000 Fund Management fees 3,950,559 18,465,027 Payable to Administrator** 6,829,280 - Administrative fees payable 11,823,217 7,199,678 Custody Fees payable 5,431,909 - URBRA Levy 738, ,078 33,965,916 31,339,783 **Refers to benefits paid out to members by the Fund Administrator 27