THE KENYA POWER & LIGHTING COMPANY LIMITED STAFF RETIREMENT BENEFITS SCHEME 2013 ANNUAL REPORT

2013 ANNUAL REPORT

CONTENTS PAGE Trustees and Professional Advisors 4 About the Fund 6 Fund Highlights 8 Five Year Summary 8 Chairman s Report 11 Trust Secretary s Report 17 Board of Trustees 25 Management 27 Corporate Governance Statement Governance and Management 28 Risk Management 31 Corporate Social Responsibility (CSR) 32 Environment 34 Statutory Information Report of the Board of Trustees 36 Statement of Trustees Responsibilities 36 Report of The Independent Auditors to the Members of the Kenya Power & Lighting Company Limited Staff Retirement Benefits Scheme - Defined Benefit 38 Financial Statements Statement of Changes in Net Assets Available for Benefits 39 Statement of Net Assets Available for Benefits 40 Statement of Changes in Members Funds 41 Statement of Cash Flows 42 Notes to the Financial Statements 43-83

Trustees and Professional Advisors TRUSTEES Sammy A. Oduori - Chairman Dr.Ben K. Chumo Eng. Joseph Njoroge Lawrence K.Yego Ernest N. Nadome Kosgey C. Kolil Laurencia K. Njagi-Resigned on 23rd September, 2013 TRUST SECRETARY Henry Kyanda REGISTERED OFFICE Retirement Benefits Scheme Trustees Stima Plaza Kolobot Road, Parklands P. O. Box 1548-00600 Nairobi INVESTMENT MANAGERS Co-op Trust Investment Services Limited P O Box 48231-00100 Nairobi Stanlib Kenya Limited P O Box 30550-00100 Nairobi CUSTODIANS Standard Chartered Bank Kenya Limited Standard Chartered Securities Services Kenya P. O. Box 40984-00100 Nairobi BANKERS Co-operative Bank of Kenya Limited P. O. Box 48231-00100 Nairobi PRINCIPAL LEGAL ADVISORS Kaplan & Stratton Advocates P. O. Box 40111-00100 Nairobi AUDITORS Ernst & Young Certified Public Accountants Kenya Re Towers, Upperhill Off Ragati Road P.O. Box 44286-00100 Nairobi ACTUARIES Alexander Forbes Financial Services (E.A.) Limited P. O. Box 52439-00100 Nairobi CFC Stanbic Bank Limited P. O. Box 30550-00100 Nairobi 4 2013 ANNUAL REPORT

ABOUT THE FUND 2013 ANNUAL REPORT 5

About the Fund The Kenya Power & Lighting Company Limited Staff Retirement Benefits Scheme ( the Fund ) was established by a Trust Deed dated 1 January 1970. The Fund is a defined benefit occupational pension fund and was formed for the employees of The Kenya Power & Lighting Company Limited ( the Sponsor ), then known as East Africa Power and Lighting Company Limited. The Fund is governed by a Trust Deed and Rules which have been approved by the Retirement Benefits Authority (RBA). The main purpose of the Fund is the provision of cash benefits and pensions to the members upon attainment of the retirement age of sixty years, and where applicable, benefits for dependents of deceased members. The Fund is among the largest Pension Funds in Kenya and is mature. The number of active members above the age of 50 years, pensioners and deferred pensioners is much greater than the number of younger active members. The Fund is approved by Kenya Revenue Authority as a retirement benefits scheme for the purposes of the Income Tax (Retirement Benefits) Rule No. 4 and is treated as an exempt approved scheme for the purposes of that Act (1st Schedule 14). VISION To be among the leading Defined Benefits Pension Fund in the world MISSION To provide decent pension benefits to members in retirement through prudent funds investment CORE VALUES Integrity Accountability Courtesy Efficiency Stewardship Fund Benefits The Fund closed to new members and ceased receiving contributions from existing members with effect from 30 th June 2006. The closed Fund continues being a defined benefit registered Scheme, whereby a member who retires on his normal retirement date receives a pension calculated as 1/400 of his final pensionable emoluments for each complete month of pensionable service to 31 December 1999 and 1/600 of final pensionable emoluments for each month of pensionable service from 1 January 2000 up to closing date. (A member who leaves before normal retirement date can elect to receive 50% of his accrued benefits or transfer the benefits to another pension Fund). Where a member dies, the eligible beneficiaries of the deceased member are entitled to a lump sum and monthly pension benefits. The Fund Structure Board of Trustees Members The members of the Fund comprise of active in service employees who were employees of the Sponsor as at June 2006, deferred members of the Fund and retirees. Fund Structure The Fund is managed by a Board of Trustees that is established under a Trust as required by the Retirement Benefits Act. The day to day running of the Fund is carried out by the Secretariat that supports the Board in meeting its objectives. The Secretariat headed by the Trust Secretary works in liaison with the Fund service providers that include fund managers custodians, actuaries, lawyers and auditors. Custodian Auditors Secretariat Fund Managers Actuary Members (In service members, deferred members, retiree pensioners, beneficiary pensioners) 6 2013 ANNUAL REPORT

FUND HIGHLIGHTS 2013 ANNUAL REPORT 7

Fund Highlights 30% Return on Investments 27.93% % Return 25% 20% 15% 10% 10.00% 23.00% 15.70% The Trustees have adopted an investment policy reflecting their views on the appropriate balance between maximizing the long-term return on investments and minimizing short-term volatility and anticipated liquidity needs while taking cognizance of the nature, size, type, and maturity profile of the Fund. 5% 0% 1.00% 2009 2010 2011 2012 2013 Year The return on investment for 2013 was 15.70%. (2012: 27.93%) Fund Value (KShs. billion) 18 16 14 12 10 8 6 4 2 0 Fund Growth 15,954.57 14,231.23 11,324.39 11,593.42 9,092.55 2009 2010 2011 2012 2013 Year The net asset available for members continues to grow steadily over the years. As at the end of the financial year, the Net assets available for members stood at Kshs. 15.95 Billion (2012: 14.23 Billion). 3,000 2,500 Increase in Net Assets 2,637.81 2,231.84 Assets Value (KShs. million) 2,000 1,500 1,000 500 926.03 269.04 1,723.34 The assets of the Fund grew by Ksh 1.72 billion during the year (2012: 2.64 billion).the decrease in growth as compared to the previous year was attributed to lower return on Invested assets and in particular government securities. 0 2009 2010 2011 2012 2013 Year Total Number 5,000 4,800 4,600 4,400 4,200 4,000 3,800 3,600 3,400 3,200 3,000 Membership 4,454 4,576 4,511 4,325 4,264 2009 2010 2011 2012 2013 Year The Fund membership dropped to 4,264 from 4,325 recorded in the previous year. The Fund was closed to new entrants from 30th June 2006 and hence a continued drop in membership is expected. 8 2013 ANNUAL REPORT

Fund Highlights (Continued) 25% Return on Assets 20% 19.25% 18.17% % Return 15% 10% 5% 10.13% 2.20% 10.65% Return on Assets shows how efficient the assets of the Fund have been invested to generate returns. Though the Fund is not a profit making organization, the assets of the Fund have been well invested over the five year period to generate returns. 0% 2009 2010 2011 2012 2013 Year RBA limit Vs Admin Expenses % 1.20% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.80% 0.60% 0.40% 0.50% 0.49% 0.43% 0.56% 0.54% The Fund administrative expenses have been much lower than the Retirement Benefits Authority recommended limit of 1% of the fund value over the period. 0.20% 0.00% 2009 2010 2011 2012 2013 RBA Limit Admin Expenses Actuarial Valuation Results Funding Level 140% 120% 100% 80% 60% 40% 20% 0% 49.20% 65.10% 77.00% 119.90% 100.20% 2004 2006 2008 2010 2013 The funding level disclosed by the actuarial valuation as at 31st December, 2013 was 119.9% (2010: 100.20%) which is higher than the minimum funding requirement of 100% prescribed in the Retirement Benefits Regulations as amended in 2009. 2013 ANNUAL REPORT 9

Five Year Summary Statement of changes in Net Assets available for Benefits YEAR 2009 2010 2011 2012 2013 KShs 000 KShs 000 KShs 000 KShs 000 KShs 000 Contributions received 607,200 607,200 607,200 - - Benefits paid (491,818) (450,415) (474,474) (527,059) (467,922) Net surplus from dealing with members 115,382 156,785 132,726 (527,059) (467,922) Net returns on investments 846,467 2,113,118 176,699 3,244,697 2,263,605 Other Income 9,457 16,905 9,759 75 14,247 Administrative expenses (45,273) (54,966) (50,148) (79,908) (86,592) Increase in net assets for the year 926,033 2,231,842 269,036 2,637,805 1,723,338 Statement of Net Assets available for Benefits ASSETS Furniture, computers Equipment,& Intangible 2,671 4,874 8,177 26,362 17,594 Investments Assets 9,084,345 11,533,455 12,176,470 13,466,465 15,827,662 Other assets 58,133 56,886 64,247 1,021,430 342,765 Total assets 9,145,149 11,595,215 12,248,894 14,514,257 16,188,021 Liabilities Benefits payable 14,374 40,555 11,450 11,386 5,496 Other Liabilities 38,229 230,273 644,022 271,643 227,960 Total Liabilities 52,603 270,828 655,472 283,029 233,456 Trust fund 9,092,545 11,324,387 11,593,423 14,231,228 15,954,565 10 2013 ANNUAL REPORT

CHAIRMAN S REPORT 2013 ANNUAL REPORT 11

CHAIRMAN S REPORT On behalf of the Board of Trustees, it is my pleasure to present to you the Fund s financial performance for the year ended 31st December 2013. ECONOMIC HIGHLIGHTS Kenya s economy faced various challenges in 2013 but remained extremely resilient hinged on successful monetary and fiscal policy. The Interest rates and the shilling were relatively stable and foreign direct investment remained strong. The economy is estimated to have grown by 4.7% based on Kenya National Bureau of Statistics report. This is in comparison to the 4.6% growth it recorded in 2012. Inflation remained fairly low in 2013, averaging 5.7% as compared to 9.6% in 2012. This is despite a one-off VATinduced rise in prices of several items that were previously tax-exempt. In recognition of the significant growth in real estate sector of the economy and the need to provide a framework for financing real estate investment projects the Government gazetted regulations for real estate investment trusts (REITS). REITs are meant to spur investments in the capital markets by enabling more people to own shares of properties easily by trading on the Nairobi Securities Exchange (NSE). The Hass Composite sales Index which is representative of all property for sale in Kenya Property shows a property prices rose by 0.3% rise in 2013. Short term hurdles to the growth of the sector are new and proposed charges such as; introduction of VAT on sale of commercial property, a Development levy, County Government fees on Land and Property transactions. Equities ended 2013 on a high note. Market performance was to a large extent driven by the increased foreign investor activity and the stable macroeconomic environment which prevailed in most parts of the year. NSE 20 and NSE All Share Index (NASI) rose by 19% and 44% in the year respectively. Treasury bill yields declined in the year. The annual average Treasury bill rates stood at 8.9% for 91-days 12 2013 ANNUAL REPORT

Chairman s Report (Continued) (12.8% in 2012), 9.3% for 182-days (13.6% in 2012) and 10.8% for 364-days (14.3% in 2012). The Kenya shilling appreciated by 0.33% against the US Dollar (USD), 2.43% against the British Pound (GBP) and 4.99% against the Euro to close the year at 86.31 to the USD, 142.40 to the GBP and 119.22 to the Euro. PENSION INDUSTRY AND REGULATORY ENVIRONMENT The Pension industry assets have continued to increase significantly over the years. The industry has played a major role in boosting the financial and capital markets in the country through financing economic development and deepening of our capital market. With assets exceeding Kshs 600billion, the industry has continued to support government infrastructure. The coverage by the existing Schemes has continued to extend to a greater population in the country backed by increased awareness of the importance of saving for retirement. The industry regulator, RBA (Retirement Benefits Authority) has played a major role in creating national awareness of the sector and emphasizing on protection of contributors through enactment of the Retirement Benefits Act and regulations. Through the regulator, various innovative products have been developed to date to help alleviate old age poverty including occupational, individual and umbrella Schemes. With the shift of compliance to Risk Based Supervision of Schemes, the regulator has also played a major role in capacity building of Trustees by advocating that the Trustees appointed to the Scheme Boards have the required skills set to make sound decisions regarding the management of Schemes. Through the Trustee Development Program Kenya (TDPK), Trustees of all Pension Schemes will acquire knowledge on scheme fundamentals, governance, and administration among other skills. All Trustees are required to have undergone the training by the end of year 2014. Indeed this training has gone a long way in ensuring that there is prudent management of Funds and in so doing, safeguarding nationwide confidence in the management of the pension funds. During the year 2013, a major development occurred in the National Social Security Fund (NSSF), with the establishment of the new National Social Security Fund Act, 2013 (NSSF Act). This new Act which was assented by the end of the year 2013 has stirred various debates from stakeholders in the market. The Act lays out a new structure of contributions of a minimum of 6% contributed by employee and employer respectively. However the Act does not affect the members of this Fund as it is a closed Fund. FUNDS S FINANCIAL PERFORMANCE The Fund achieved an annual return of 15.7% for the year ended 2013 which reassures the members that the Fund remains financially sound to meet members promised benefits. The total market value of the Fund s assets as at the end of the year stood at KShs. 15.95 billion up from KShs. 14.23 billion the end of 2012.The Fund s total increase in net assets for the year 2013 was KShs. 1.72 billion down from Kshs. 2.64 billion in 2012. The Fund endeavors to preserve capital, work towards capital growth with the mitigation of excessive risk over the long term, attain the agreed investment performance deliverables against the accepted benchmarks over the investment period, maintain adequate level of liquidity to enable the Fund meet its obligations and diversify to minimize the associated risks across asset classes, sectors and stocks 15.7% The Fund achieved an annual return of 15.7% for the year ended 2013 which reassures the members that the Fund remains financially sound to meet members promised benefits. Actuarial Valuation Result The last actuarial valuation was carried out in 2013. The actuarial valuation has disclosed a past service actuarial surplus of KShs 2.6 billion as compared to Kshs 20 million in 2010. The level of funding (i.e. ratio of the value of assets to the past service liability) has increased to 119.9% as at 31 st December 2013 (2010:100.2%) which has surpassed the minimum funding requirement of 100% prescribed in the Retirement Benefits Regulations as amended in 2009. CORPORATE GOVERNANCE AND AWARD Corporate governance is key in the management of the Fund. The Fund has laid out various policies and guidelines in the implementation of high levels of corporate governance and has trained all the Trustees and senior management team on governance practices. 2013 ANNUAL REPORT 13

Chairman s Report (Continued) In a bid to gauge its level of corporate governance, the Fund participated for the second time in the Champion of Governance (COG) Awards in 2013 organized by ICPSK and emerged the best in the Retirement Benefits Category. The Chair of the Board Mr. Sammy Oduori was also awarded the best chairman in the same awards. The COG Awards aims at promoting good governance practices by organizations through the following, among others: Recognizing the practice of good governance in private and public sector entities Recognizing innovations in organizations that support good governance practices Encouraging private and public sector entities to focus on enhancement of good governance. OUTLOOK We are projecting that the positive performance of the Fund will continue in 2014. The positive performance will be supported by macroeconomic stability. During the year 2014, the Trustees intend to continue focusing on alternative investments and property developments in order to mitigate against the risks associated with market volatility. We are confident we can continue to meet the expectations of our members as our strategies are clear and we have been consistently effective in achieving desired goals and this success will continue through close monitoring. APPRECIATION I would like to thank my fellow Board members for their selfless contribution to the Fund over the past year and for supporting me as Chairman. The Trust Secretary and his team have also worked tirelessly to ensure prudent management of the day to day operations of the Fund. I would not forget the Sponsor and the stakeholders of the Fund who have also played a significant role in the Fund s great performance and most importantly you members for your continued support and feedback. Chairman Sammy Oduori The KPLC Staff Retirement Benefits Scheme 14 2013 ANNUAL REPORT

Ripoti ya Mwenye Kiti Kwa niaba ya Bodi ya Wadhamini, ni furaha yangu kuwawasilishieni ripoti ya namna ya utendaji wa kifedha wa Hazina hii kwa mwaka uliomalizika Desemba 31, 2013. VIDOKEZO KIUCHUMI Uchumi wa Kenya ulikabiliwa na changamoto mbali mbali katika kipindi cha mwaka wa 2013 lakini ukasalia mhimilivu kwa msingi wa mafanikio na sera za kifedha. Viwango vya riba na shilingi vilikuwa dhabiti kwa kiasi nao uwekezaji wa kigeni wa moja kwa moja ukasalia imara. Uchumi unakadiriwa kukuwa kwa asilimia 4.7 (nne nukta saba) kwa mujibu wa report ya Shirika la Kitaifa la Takwimu(National Bureau of Statistics). Hii ni kwa kulinganisha na ukuaji kwa kiwango cha asilimia 4.6(nne nukta sita) katika mwaka wa 2012. Mfumuko wa bei ulisalia kuwa wa kiwango cha chini kwa mwaka wa 2013,ukiwa wa takriban asilimia 5.7(tano nukta saba) ikilinganishwa na 9.6 mwaka wa 2012. Hii ni licha hali ya ghafla ya kuwekwa ushuru wa dhamana ya bidhaa(vat)-ikiwa ni kupanda ghafla kwa bei ya bidhaa ambazo awali hazikutozwa ushuru. Kwa kutambua ukuaji wa haja katika sekta ya uwekezaji katika mali isiyohamishika(real Estate Investment)katika uchumi na haja ya kutoa mfumo wa kufadhili uwekezaji wa mali isiyohamishika, Serikali ilichapisha kanuni za kufwatwa na amana za mali isiyohamishika(real Estate Investment Trusts-REITS). REITS zimenuiwa kuchochea uwekezaji katika masoko ya mitaji kwa kuwawezesha watu kumiliki hisa za mali kwa urahisi na kuuza na kununua katika soko la hisa la Nairobi (NSE). Kiwango maalum cha mauzo cha Hass Composite ambacho huwakilisha mali yote ya kuuzwa kwenye Mali za Kenya(Kenya Property) inaonyesha kuwa bei ya mali ilipanda kwa asilimia sufuri nukta tatu (0.3) mwaka wa 2013. Vikwazo vya muda mfupi vilivyoikumba sekta hii ni vipya na ada zilizopendekezwa ambazo ni; Ushuru wa Dhamana ya Bidhaa(VAT) kwa mauzo ya mali ya kibiashara, ushuru wa miradi ya kimaendeleo, ada inayotozwa na serikali gatuzi( County governments) kwa mauzo ya ardhi na raslimali nyingine. Matokeo ya uwekezaji kimitaji mwishoni mwa 2013 ulikuwa wa kiwango cha juu. Matokeo ya soko kwa kiwango kikubwa yalipata kukua kutokana na kuongezeka kwa uwekezaji wa kigeni na mazingira dhabiti ya uchumimkubwa ambayo yaliendelea katika vipindi vingi vya mwaka. Viwango maalum vya NSE 20 na vile vya NSE Hisa Zote(NSE ALL Share Index-NASI) vilipanda kwa asilimia 19 na 44 mtwalia katika mwaka huo. Mazao ya muswada wa Hazina yalishuka kwenye mwaka huo. Wastani wa viwango vya Muswada wa Hazina vilisimamia asilimia nane nukta tisa(8.9) kwa siku tisini na moja( ikiwa ni ; asilimia kumi na mbili nukta nane mwaka 2012), asilimia tisa nukta tatu kwa siku mia moja themanini na mbili (ikiwa ni asilimia kumi na tatu nukta sita mwaka wa 2012) na asilimia kumi nukta nane kwa siku mia tatu sitini na nne(ikiwa ni asilimia kumi na nne nukta tatu mwaka 2012). Shilingi ya Kenya iliimarika kwa asilimia sufuri nukta tatu tatu (0.33%) ikilinganishwa na Dola ya Marekani, asilimia mbili nukta nne tatu(2.43%) ikilinganishwa na Pauni ya Uingereza na asilimia nne nukta tisa tisa(4.99%) ikilinganishwa na Yuro kufunga mwaka ikiwa ni shilingi themanini na sita na senti thelathini na moja(86.31) kwa Dola ya Marekani, shilingi mia moja arubaini na mbili na senti arubaini kwa Pauni ya Uingereza na shilingi mia moja kumi na tisa na senti ishirini na mbili kwa Yuro. SEKTA YA MALIPO YA UZEENI NA MAZINGIRA YA UDHIBITI Mali katika sekta ya malipo ya uzeeni imeendelea kuongezeka kwa viwango vya haja kwa miaka ya hivi karibuni. Sekta hiyo ilikuwa na nafasi kubwa kuimarisha uchumi na soko la mtaji nchini kupitia kufadhiliwa kwa miradi ya maendeleo ya uchumi na kupanua soko la mtaji. Kwa mali isiyopungua billion mia sita (600 billions), sekta hii imeendelea kusaidia kukuza miundo-msingi ya serikali. Mipango maalum iliyopo imeendelea kupanuka na kufikia watu wengi nchini ikisaidiwa na kuongezeka kwa watu kufahamu umuhimu wa kuweka akiba ya uzeeni. Wadhibiti sekta ya malipo ya uzeeni(retirement Benefits Authority) wamekuwa na nafasi muhimu ya kuendeleza uhamasishaji wa kuwepo kwa sekta hiyo na kuhimiza kulindwa kwa waweka-akiba kupitia kwa kupitishwa na kuidhinishwa kwa Sheria na Kanuni za Malipo ya Uzeeni (Retirement Benefits Act and Regulations). Kupitia mdhibiti,bidhaa mbalimbali bunilizi zimetolewa kufikia sasa ili kusaidia kuepuka umaskini uzeeni ikiwemo ya kikazi, kibinafsi na miradi kimwavuli inayolinda wote kwa kujumlisha. Kutokana na badiliko la kuafiki Hatari za Kiusimamizi za mipango yenyewe, mdhibiti amechukuwa nafasi kubwa katika kuwawezesha wadhamini kwa kusisitiza kwamba wadhamini wanaoteuliwa kwa Bodi za Mipango Maalum wawe na ujuzi wa kufanya maamuzi mwafaka kuhusiana na usimamizi wa Mipango Maalum. Kupitia kwa Mpango wa Kendeleza Udhamini Nchini Kenya (Trustee Development Program Kenya-TDPK), wadhamini wa mipango yote ya malipo ya uzeeni watapata ujuzi muhimu kuhusu Mipango Maalum, utawala na usimamizi miongoni mwa ujuzi mwingineo. Wadhamini wote wanahitajika kuwa wamepitia mafunzo kufikia mwisho wa mwaka wa 2014. Hakika, mafunzo haya yamehakikisha kuwa kuna usimamizi bora wa fedha na kwa kufanya hivyo, kulinda imani katika usimamizi wa malipo ya uzeeni kitaifa. Katika mwaka wa 2013, hatua kubwa kimaendeleo ilipigwa katika Hazina ya Kitaifa ya Malipo ya Uzeeni (National Social Security Fund-NSSF), kukiwepo na kuanzishwa 2013 ANNUAL REPORT 15

Ripoti ya Mwenye Kiti kwa sheria mpya ya Hazina ya Kitaifa ya Malipo ya Uzeeni mwaka 2013 (NSSF Act 2013). Sheria hii mpya ilikuwa katika hatua ya mwisho ya kukubaliwa kufikia mwisho wa mwaka 2013 na imezua mijadala kadha kutoka kwa washika-dau katika soko husika. Sheria yenyewe inaweka mwongozo wa muundo kwa kimatoleo huku matoleo ya chini kabisa yakiwa ni asilimia sita(6%) kutoka kwa mwajiriwa na mwajiri mtwalia. Hata hivyo, sheria yenyewe haijaathiri wanachama wa hazina hii wa kimatoleo kwani ni hazina inaojitegemea kivyake, iliyobanwa na kutokuwa wazi kuingiliwa kutoka nje. MATOKEO AU HALI YA KIFEDHA YA HAZINA HII Hazina hii imefikia pato la mwaka la asilimia kumi na tano nukta saba(15.7%) kwa mwaka wa 2013 ambayo inawahakikishia wanachama kuwa hazina iko imara kifedha kuweza kutimiza ahadi zilizotolewa kunufaisha wanachama. Kiwango jumla cha mali ya hazina katika soko kufikia mwisho wa mwaka kilikuwa ni shilingi bilioni kumi na tano nukta tisa tano (Kshs 15.95 Billions) kupanda kutoka shilingi bilioni 14.23 mwaka 2012. Kiwango jumla cha kuongezeka kwa mali yote kwa mwaka 2013 ilikuwa ni shilingi Bilioni 1.72 kushuka kutoka shilingi bilioni 2.64 mwaka 2012. Hazina inapania kuhifadhi mtaji,kujibidiisha kukuza mtaji kwa kuziepuka hatari kwa kipindi kirefu, kupata matokeo ya kiuwekezaji kama ilivyokubaliwa kufikiwa sambamba na viwango vilivyokubaliwa kwa kipindi cha uwekezaji, kudumisha kiwango kizuri cha uwezekano wa kusarifika kwa mali ambayo ni hali ya kuweza kubadili kwa pesa taslimu,ili kuwezesha hazina kufikia matakwa yake na kupanuka kimkondo ili kupunguza hasara zinazohusiana na viwango vya mali, sekta na hisa. MATOKEO YA UKADIRIAJI KITAKWIMU Ukadiriaji Kitakwimu wa mwisho ulifanywa mwaka wa 2013, ukadiriaji kitakwimu huo ulionyesha kuongezeka huduma kitakwimu kwa shilimgi bilioni 2.6 ikilinganishwa na shilingi Milioni ishirini mwaka 2010. Kiwango cha kiudhamini (hiyo ni ulinganisho wa dhamana ya mali kwa huduma ya madeni kwa kipindi cha awali) kimeongezekana kufikia asilimia mia moja kumi na tisa nukta tisa(119.9%) kufikia tarehe 31/12/2013 ( 2010:100.2%) ambacho kimezidi kiwango cha chini zaidi cha kudhamini hitaji la asilimia mia moja kama ilivyoelezewa katika kanuni za malipo ya uzeeni kulingana na mabadiliko ya mwaka 2009. UTAWALA WA KIUSHIRIKA NA TUZO Utawala wa kiushirika ni muhimu sana katika usimamizi wa hazina. Hazina imeweka sera na miongozo katika utekelezaji wa viwango vya juu vya utawala kiushirika na imewapa mafunzo wadhamini wote pamoja na usimamizi mkuu kuhusiana na utawala. Katika kujaribu kutathmini kiwango cha utawala kiushirika, hazina imeshiriki kwa mara ya pili kwenye tuzo za Champion of Governance mwaka 2013 iliyoandaliwa na ICPSK na ikaibuka bora katika kitengo cha malipo ya uzeeni. Mwenyekiti wa bodi, bwana Sammy Oduori alitunukiwa tuzo ya Mwenyekiti Bora. Tuzo za COG zinanuia kuendeleza utawala bora wa mashirika kupitia mambo haya miongoni mwa mengine; kutambua utawala bora katika sekta za kibinafsi na zile za Umma kutambua ubunifu katika mashirika yanayoendeleza uongozi bora kuhimiza sekta za kibinafsi na zile za Umma kumakinikia uendelezaji wa utawala bora USAWIRIO Tunabashiri kuwa matokea yakini ya Hazina yataendelea mwaka wa 2014. Matokeo yakini yataendelezwa na uchumi-mkubwa uliodhabiti. Kwa mwaka 2014, wadhamini wananuia kuendelea kumakinikia mbinu mbadala za kiuwekezaji na maendeleo ya mali ili kuzuia hasara zozote zinazohusiana na mabadiliko ghafla katika soko. Tuna imani kuwa tutaendelea kutimiza matarajio ya wanachama wetu kama zilivyo wazi mbinu zetu na tumekuwa tukiendelea kutimiza shabaha zetu. Fanaka hizi zitaendelea kufikiwa kutukana na kufwatiliwa kwa karibu. TANBIHI Ningependa kuwashukuru wanachama wenzangu kwenye bodi kwa mchango wao mkubwa kwa hazina kwa mwaka uliopita kwa kuniunga mkono kama mwenyekiti wenyu, Kisha katibu wa Hazina na kikundi chake wamekuwa pia wakifanya kazi juu chini kuhakikisha usimamizi bora wa shughli za kila siku za Hazina. Sitasahau mfadhili na washika-dau wote wa Hazina ambao wamekuwa na nafasi muhimu kuhakikisha utenda-kazi bora wa Hazina, na muhimu zaidi nyinyi wanachama kwa msaada wenu na maoni yenyu. Mwenyekiti Sammy Oduori Hazina ya Malipo ya Uzeeni Kwa Wafanya-kazi wa KPLC 16 2013 ANNUAL REPORT

TRUST SECRETARY S REPORT 2013 ANNUAL REPORT 17

TRUST SECRETARY S REPORT The Fund has over its life cycle provided security to its members upon retirement. This has been backed by the vision of the Fund To be among the leading defined benefits Scheme in the world. Through close monitoring of performance and investment strategies including keen focus on achieving long term investment objectives, the Trustees have continued to ensure the Fund s performance remains at its optimal peak and continues to provide the best possible benefits to its members. The Fund continued on its upward trend of growth in the year 2013 as we saw the economy register a marginally improved economic performance of 4.7% as compared to 4.6% in GDP in year 2012. STRATEGY & PLANNING The five-year Fund strategy (2011-2015) was formulated to provide a periodic guiding plan towards attaining the Funds mission, vision and value statements. The strategy is centered on Fund Administration, investment risk and returns, customer service, property development, cost management, corporate governance and regulatory compliance. Each year, annual corporate objectives of the Fund are meticulously set and a system put in place to monitor the performance of these objectives closely to ensure their achievement. BENEFITS ADMINISTRATION Benefits administration is one of the core businesses of the Fund. Key to this function is to ensure timely and accurate payment of the member benefits while ensuring customer expectations are met. This involves the processing of benefits in line with the requirements of Trust Deed & Rules. CUSTOMER FOCUS Customer satisfaction remained a key objective of the Fund, with increased channels being provided to the members to give feedback and complaints. Communication to 18 2013 ANNUAL REPORT

Trust Secretary s Report members, both active and inactive is also one of the main tasks of the Fund. The Fund continued to communicate to members through the biannual newsletter, Fund website and the Annual General Meeting (AGM). In pursuit of excellence in service delivery, the Fund continued to seek innovative ways to enhance communication to its members e.g. through SMS messaging service. During the 2013, the Fund undertook a member education programme reaching targeted in-service members and retirees of the Fund. This programme was successfully implemented and a post training evaluation analysis carried out. PROPERTY MANAGEMENT & DEVELOPMENT Property development remains a main investment diversification strategy for the Fund. In 2013 the Fund made major strides towards the construction of the Loresho Ridge Housing Development. The project which is expected to be completed in the fourth quarter of 2014 is expected to achieve an annualized return of 30%. The project boasts 11 blocks of apartments with 6 units each, 94 town houses (four different house types), a commercial facility, a kindergarten, and related facilities. The returns from this project will cushion the Fund from the volatile market associated with other investment asset classes. FUND INVESTMENTS The ultimate responsibility for the investment decisions rests with the Trustees. The Board has however delegated the implementation of the investment policies to the Fund s Investments Managers. The Board has similarly delegated the implementation of its property investment policies to the Project Implementation Committee and the appointed Property Managers. In doing so, the Board maintains a top-down perspective. This means that the Board focuses on high level policy issues, including maintaining the proper fiduciary perspective and time horizon for analysis of the assets and prudently using its time by evaluating/considering material investment issues. In year 2013, the Investment service providers remain unchanged. The current investment managers are Stanlib Kenya Ltd and Co-optrust Investment Services Ltd. Custodial Services are provided by Standard Chartered Bank of Kenya Limited and CFC Stanbic Bank Limited Kenya. The Secretariat on its part is responsible for close monitoring and reporting on implementation of the investment strategy. During the year 2013, investment managers activities were continuously analyzed and their performance measured against the agreed set targets. This continued analysis is to ensure that the Fund remains focused on the short term and long-term performance and sustainability. The Board of Trustees has prepared and maintains a written Statement of Investment Principles (SIP) governing their decisions on investments as required by the Retirement Benefits Investment Guidelines 37. (1). The Fund continues to diversify its investment into property and private equity investments. All investments are undertaken while ensuring compliance with the RBA regulations on investments and the Fund s Investments Policy Statement. INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ICT has been a source of innovation and transformation to the Fund. The Fund has strived to deliver business value by leveraging technology. To increase efficiency of the secretariat functions, the Fund took great strides in the implementation of the newly acquired pension administration system which has Benefits administration is one of the core businesses of the Fund. Key to this function is to ensure timely and accurate payment of the member benefits while ensuring customer expectations are met. streamlined the members register, payroll processing, investments, property and accounting functions in the Fund. We have also improved on the information contained in our website www.kplcpensionfund.co.ke by integrating personalised self-service web portal which is undergoing testing and will be launch later 2014 to enable members to enjoy interactive web based services which include viewing their account balances and statements, projection of benefits. An interactive SMS service is in the pipeline and will be rolled out before end of 2014. We have also utilized social media to keep our members informed through Facebook and twitter accounts. HUMAN RESOURCES AND ADMINISTRATION One of the support functions of the Secretariat is the Human Resources and Administration function which ensures adequate and competent human capital is provided to the Secretariat and these are effectively managed. 2013 ANNUAL REPORT 19

Trust Secretary s Report During the year 2013, corporate and departmental performance targets were formulated and these were cascaded down to all staff. The performance review of these targets was carried out in the year 2013 on a quarterly basis; the ultimate aim being to align the Secretariat functions to the objectives of the Fund and monitor achievement of its overall strategy. At the end of performance appraisal exercise, the employees were rewarded for their performance during the year. With regard to staff development, a training needs analysis for the secretariat staff was carried out and implemented in the course of the year, the employees were able to undertake. The staff also attended a professional team building session whose objective was to enhance the team s effectiveness in the performance of its duties and responsibilities. OUTLOOK In 2014, we will focus on increasing the return on investments and service delivery to members. Both the Board of Trustees and the Secretariat are committed to these objectives to the extent that the two targets will be the key performance indicator upon which performance evaluation will be hinged on at the end of the year. So as to achieve the return on investment objective, careful attention will be given to maintaining an optimized portfolio through enhanced diversification and continuous monitoring ensuring compliance with the Retirement Benefits Authority regulations on investments, the Fund s investment policies as well as with all relevant legal requirements. The Fund will carry out a member and employee satisfaction survey in year 2014 to ensure that the Fund continues to meet customer expectations. APPRECIATION I take this opportunity to thank the Board of Trustees for their continued support, the Secretariat team for their hard work in service delivery to our members and implementation of the Board strategy and the stakeholders for their support towards achievement of our mission. Trust Secretary Henry Kyanda The KPLC Staff Retirement Benefits Scheme 20 2013 ANNUAL REPORT

Ripoti ya Katibu wa Hazina Hazina, katika mfumo wake wa maisha daima imewalinda wanachama baada ya kustaafu kwao. Hii inaungwa mkono na ruwaza ya hazina ambayo ni kuwa miongoni mwa mipango ya hazina inayoongoza duniani. Kupitia kutuatilia matokeo kwa karibu na mipango ya uwekezaji ikiwemo umakinifu zaidi kuhusu kufikia shabaha za uwekezaji kwa kipindi cha muda mrefu, wadhamini wameendelea kuhakikisha kwamba matokeo ya hazina yameendelea kuwa katika kiwango chake cha juu na yanaendelea kutoa faida bora zaidi iwezekenavyo kwa wanachama. Hazina imeendelea na kukua kwa kiwango cha juu katika mwaka wa 2013 kwani tulishuhudia uchumi ukisajili kuimarika kwa kiasi cha haji cha matokeo ya kiuchumi ya asilimia nne nukta saba (4.7%) ikilinganishwa na asilimia nne nukta sita (4.6%) katika mapato ya ndani ya nchi (GDP) ya mwaka 2012. MBINU NA MIPANGO Mpango wa fedha wa miaka mitano (2011-2015) wa hazina, uliundwa ili kutoa mwelekeo wa kipindi maalum kuhakikisha kufikiwa kwa lengo kuu la hazina, ruwaza ya hazina na kauli ya kiutenda-kazi za hazina. Mpango huu umeijikwa kwa usimamizi wa hazina, hatari zilizoko kwenye uwezekaji na mapato, huduma kwa wateja, maendeleo ya kimali kudhibiti gharama ya usimamizi, utawala kiushirika na udhibiti wa uafikiaji kanuni. Kila mwaka, shabaha za kiushirika za hazina huwekwa kwa umakinifu mkubwa na miundo inayowekwa kudhibiti utenda-kazi wa hizi shabaha kwa ukaribu ili kuhakikisha matokeo bora. USIMAMIZI WA MAPATO Usimamizi wa mapato ni mojawapo ya nguzo msingi za shughuli za hazina. Ya muhimu sana kwa jukumu hili ni kuhakikisha malipo sawia na ya uhakika yatolewayo kwa wakati kwa wanachama huku tukihakikisha matarajio ya wateja yamefikiwa. Hii inahusisha utaratibu wa kuchakata mapato ama faida kwa kuzingatia matakwa ya Sheria na Kanuni za Amana ( Trust Deed and Rules). KUMAKINIKIA WATEJA Kuridhishwa kwa wateja wa hazina inasalia kuwa shabaha muhimu ambayo iliongeza namna au njia za wanachama kutoa taarifa maoni na tetesi kuhusu huduma wanazopokea kutoka kwa hazina. Mawasiliano kwa wanachama wanaojihusisha moja kwa moja na wale wasioshirika kikamilifu pia ni miongoni mwa shughuli kuu za hazina. Hazina inaendelea kuwasiliana na wanachama kupitia vijarida vya kila nusu mwaka, wavuti wa hazina na kupitia mikutano mikuu ya kila mwaka ya hazina. Kwa kutafuta ubora katika utoaji wa huduma, hazina imeendelea kuangazia mbinu bora zaidi za kuhakikisha mawasiliano kwa wanachama wake kama vile kupitia jumbe fupi za arafa, kwa mwaka 2013, hazina ilichukuwa mikakati ya kuwaelimisha wanachama ikiwafikia waliondani ya mazingira ya kazi na wale waliostaafu. Mpango huu ulifanikiwa na mafwatiulizi ya baada ya mafunzo yakaweza kufanywa. USIMAMIZI MALI NA MAENDELEO Maendeleo mali imesalia kuwa mbinu kuu ya upanuzi wa uwekezaji wa hazina. Kwa mwaka 2013, hazina ilipiga hatua kubwa ya kujenga vyumba vya Loresho Ridge (Loresho Ridge Housing Development). Mradi huu unatarajiwa kukamilika katika robo ya kwanza ya mwaka 2014 na unatarajiwa kuleta mapato ya asilimia thelathini (30%) kwa mwaka. Mradi huo unajivunia kuwa na vyumba kumi na vimoja ambavyo vina makazi sita kila mojawapo, vyumba tisini na nne vya kimjini (vyumba vine vya aina tofauti), jingo la kibiashara, shule ya chekechea na majengo mengine ya matumizi. Mapato kutokana na mradi huu yatalinda hazina kutokana na mabadiliko ghafula na mifumuko inayohusishwa na soko linalokua pamoja na uwekezaji mali katika ngazi nyinginezo. UWEKEZAJI WA HAZINA Jukumu la maamuzi ya uwekezaji lipo mikononi mwa Wadhamini. Hata hivyo, bodi imewapa wasimamizi wa uwekezaji mamlaka ya utekelezwaji wa sera za uwekezaji za hazina. Aidha, bodi vile vile imeipa Kamati ya Utekelezaji wa Miradi (Project Implementation Committee) na Wasimamizi Mali(property Managers) walioteuliwa jukumu la kutekeleza sera zake za uwekezaji mali. Kwa kufanya hivyo, bodi huhakikisha inadumisha mfumo au mwelekeo wa kutoka juu kwenda chini (top down perspective). Hii ina maana kuwa bodi humakinika kuzingatia viwango vya juu zaidi vya maswala ya kisera, ikiwemo kudumisha mtazamo fidushiari (fiduciary perspective) na upeo wa kiwakati (time horizon) kwa uchanganuzi wa mali milki na kuweza kutumia muda uliopo kwa njia busara kutathmini au kuzingatia vitu vya maswala ya uwekezaji. Katika mwaka wa 2013, watoaji huduma za uwekezaji walisalia kuwa wale wale. Wasimamizi wa sasa wa Uwekezaji ni Stanlib Kenya Ltd na Co-optrust Investment Services Ltd. Huduma za Utunzaji zinatolewa na Benki ya Standard Chartered Kenya na Benki ya CFC Stanbic Kenya. Kamati tekelezi kwa upande wake inawajibika kufuatilia kwa karibu na kuripoti kuhusu utekelezwaji wa mbinu za uwekezaji. Wakati wa Kipindi cha mwaka 2013, juhudi za wasimamizi wa uwekezaji zilichanganuliwa na 2013 ANNUAL REPORT 21

kutathminiwa bila kukoma na utendakazi wao kupimwa kwa kurejelea vigezo na malengo yaliyowekwa. Uchanganuzi huu usio-kikomo ulikusudia kuhakikisha kuwa Hazina imesalia ikimakinikia matokeo yake ya kipindi kifupi na pia yale ya kipindi kirefu na namna ya kuhifadhi matokeo hayo. Bodi ya Wadhamini imeandaa na hudumisha katika maandishi Maelezo ya Kanuni za Uwekezaji (Statement of Investment Principles-SIP) zinazotawala maamuzi yao katika uwekezaji kama inavyohitajika na Vielelezo vya Uwekezaji wa Mapato ya Uzeeni ( Retirement Benefits Investment Guidelines) 37.(1) Hazina inaendelea kupanua uwekezaji wake katika mali na uwekezaji binafsi kimitaji. Maekezo yote hufanywa kwa kuhakikisha kuwa matakwa ya RBA kuhusu uwekezaji na maelezo ya sera za uwekezaji ya Hazina yanaafikiwa. TEKNOLOJIA YA HABARI NA MAWASILIANO (TEKNOHAMA) TEKNOHAMA imekuwa chanzo au usuli wa ubunifu na mabadiliko muhimu katika hazina. Hazina imejizatiti kuzalisha thamani ya kibiashara kwa kuhusisha uzingatiaji wa teknolojia. Kwa kuongeza ubora na umaahiri wa shughuli za Kamati tekelezi,hazina ilichukuwa hatua kubwa katika utekelezaji wa mfumo mpya wa kiutawala wa malipo ya uzeeni ambao umelainisha sajili ya wanachama, uundaji wa orodha ya mishahara,uwekezaji, mali na juhudi za uhasibu katika hazina. Tumeimarisha taarifa ipatikanayo kwenye wavuti wetu wenye anwani www.kplcpensionfund.co.ke kwa kuunganisha mkondo-binafsi wa mtandao (personalized self-service web) ambao unafanyiwa majaribio na utazinduliwa rasmi mwakani ili kuwezesha wanachama kufurahia wavuti na mtandao kimtagusano kwa misingi ya huduma zilizopo kama vile kutazama masalio kwenye akaunti zao na maelezo ya hali ya akaunti hizo, makadirio ya mapato. Aidha, huduma ya Arafa (SMS) ya kimtagusano iko mpangoni na itazinduliwa kabla ya mwisho wa mwaka 2014. Tumeweza pia kuhusisha mitandao ya kijamii ili kuwaweka wanachama wetu kwenye ufahamu wa mambo kwa mfano kwa kutumia Kitandazi (Facebook) na mtandao wa Twitter. USIMAMIZI WA WAFANYI KAZI NA UTAWALA Jukumu mojawapo la Kamati tekelezi ni usimamizi wa wafanyikazi na utawala, jukumu ambalo huhakikisha kuwa nguvu kazi toshelezi na mtaji wa kibinadamu wenye umilisi mkubwa umetolewa kwa kamati tekelezi na kusimamiwa kikamilifu.kwa mwaka wa 2013, shabaha za kiushirika na kiidara za utendakazi zimewekwa na kuteremshwa kufikia wafanyikazi wote wa viwango vya chini kutoka juu. Utathmini wa utendakazi wa shabaha hizi ulifanywa mwaka 2013 kwa viwango vya robo mwaka kusudi kuu likiwa kulainisha majukumu ya kamati tekelezi na malengo ya hazina na kufuatilia karibu kiutathmini mafanikio ya mbinu jumla za utendaji. Mwishoni mwa juhudi za utathmini kazi, wafanyikazi walitunukiwa kwa matokeo ya kazi yao ya mwaka. Kwa mujibu wa kukuza wafanyikazi, uchanganuzi wa mahitaji ya kiujuzi ya wafanyikazi wa kamati tekelezi ulifanywa na kutekelezwa kwa kipindi cha mwaka unaorejelewa,waajiriwa waliweza kushiriki. Wafanyikazi pia walihudhuria kipindi cha kukuza umoja wa kitaalamu ambacho lengo lake lilikuwa kuimarisha uwezo wa kutendakazi vema na kutekeleza majukumu yao. SAWIRIO Mwaka 2014, tutamakinikia uongezaji wa mapato ya maekezo na utoaji huduma kwa wanachama. Bodi ya Wadhamini pamoja na Kamati tekelezi wamejitolea mhanga kwa haya malengo kwa kiwango kiasi kwamba malengo haya makuu mawili yatakuwa ishara kubwa ambayo kwayo ukadiriaji wa utendakazi utajikita mwishoni mwa mwaka. Ili kuafikia mapato kutokana na lengo la uwekezaji, kudumisha viwango vya juu zaidi kupitia upanuzi zaidi na kufuatilia kwa karibu kusikokoma kwa utekelezaji wa malengo hayo utazingatiwa kwa njia makinifu kuhakikisha kanuni za Mamlaka ya Mapato ya Uzeeni hazijakiukwa katika uwekezaji, kuzingatia sera za hazina pamoja na mahitaji yote ya kisheria. Hazina itafanya utafiti kutathmini viwango vya kuridhika kwa mwanachama na mfanyikazi wake kwa mwaka wa 2014 kuhakikisha kuwa hazina inaendelea kufikia matarajio ya wateja wake. TANBIHI Nachukuwa fursa hii kushukuru Bodi ya Wadhamini kwa kuendelea uungaji wao, Kamati tekelezi kwa bidiii yao katika utoaji huduma kwa wanachama na kutekeleza mipango ya Bodi na Washika-dau kwa uungaji wao mkono kwa kufikia malengo yetu. Katibu wa Hazina Henry Kyanda Hazina ya Malipo ya Uzeeni ya Wafanyikazi wa KPLC 22 2013 ANNUAL REPORT

BOARD OF TRUSTEES & MANAGEMENT 2013 ANNUAL REPORT 23

3 1 2 4 BOARD OF TRUSTEES 1. Eng. Joseph K. Njoroge, MBA, B.Sc. (Eng.) R. Consulting Eng., Chartered Eng., MIET, FIEK He was appointed to the Board on 16th December, 2009. Eng. Njoroge holds a Master of Business Administration (MBA) and a Bachelor of Science (BSc) degree in Electrical Engineering. He was the Chief Executive Officer and Managing Director of The Kenya Power and Lighting Company Ltd where he had worked for over 31 years. He is currently the Principal Secretary in the Ministry of Energy and Petroleum. He has a wide experience in engineering and management. 2. Dr. Ben Kipsang Chumo He was appointed to the Board in 2006. He holds a PhD in Human Resources Management, a Master of Business Administration (MBA) and a Bachelors of Arts (B.A) degree. He is the Chief Executive Officer and Managing Director of The Kenya Power and Lighting Company Ltd. He has wide experience in HR and Management spanning over 27 years. 3. Kosgey Kolil Mr Kolil was appointed to the Board on 30th September, 2008. He is a Certified Public Accountant of Kenya (CPA K) and is member of the Institute of Certified Public Accountants of Kenya ICPAK. He holds a Post Graduate Diploma in Labour Policy Studies. He is the Deputy General Secretary of the Kenya Electrical Trades & Allied Workers Union (KETAWU) where he has worked since 2008. Prior to joining KETAWU he worked with Kenya Power and Lighting Company Ltd for 16 years in Finance where he gained a wide experience in finance and accounting. He is a Certified Pension Fund Trustee. 4. Sammy Oduori - Chairman He was appointed to the board on 28th February, 2003 and is the current Chairman of the Board. He is a qualified Accountant and worked with The Kenya Power and Lighting Company Ltd for 21 years where he held senior management positions prior to his retirement in the year 2000. He has vast experience in Finance, Customer Service and Marketing. He sits on the Board of Directors of Iberafrica (E.A.) Power Limited. He is also a Certified Pension Fund Trustee.

5 7 6 5. Henry Kyanda Trust Secretary He was appointed Trust Secretary and Secretary to the Board in 2006. He holds a Master of Business Administration (MBA) Degree in Strategic Management and Bachelor s degree in International Business Administration (Finance). He has wide experience in the Pensions industry having previously worked as the Principal Pensions Officer at The Kenya Power and Lighting Company Ltd. Prior to joining Kenya Power and Lighting Company Ltd he worked in the investment management industry. He has a wide experience in pensions, banking and investments spanning over 14 years. 6. Lawrence Kipchumba Yego He was appointed to the Board in 2006 and is the current Chairman of the Board. He is a Certified Public Accountant of Kenya (CPA K) and is a Member of the Institute of Certified Public Accountants of Kenya (ICPAK). He currently holds the position of Chief Manager, Finance at The Kenya Power and Lighting Company Ltd where he has worked for 26 years. He has wealth of experience in finance. 7. Ernest Nadome He was appointed to the Board in September, 2003. He holds a Master of Arts (MA) in Labour Management Relations, Bachelor of Arts (B.A) Degree (Hons). He is the General Secretary of the Kenya Electrical Trades & Allied Workers Union (KETAWU) a position he has held for the past 11 years. He is well versed in energy, human resources and labour matters, having worked for The Kenya Power and Lighting Company Ltd and Kengen for 16 years. He is the Chairman of the Boards of Trustees for the Kengen Company Limited Staff Retirement Benefits Schemes (for both DB & DC Schemes), a member of the Central Organisation of Trade Union (COTU) board and is the Gazetted Vice Chairman of The National Industrial Training Authority (NITA). He is also the Chairman of The National Industrial Training Authority Retirement Pension Scheme. In addition he is a member of The Pre-Feasibility Study (PFS) Committee of the Kenya Nuclear Energy representing COTU (K) and is The Chairman of Tom Mboya Labour College based in Kisumu. He is a Certified Pension Fund Trustee.

4 5 6 1. Henry Kyanda Trust Secretary He was appointed Trust Secretary and Secretary to the Board in 2006. He holds a Master of Business Administration (MBA) Degree in Strategic Management and Bachelor s degree in International Business Administration (Finance). He has wide experience in the Pensions industry having previously worked as the Principal Pensions Officer at The Kenya Power and Lighting Company Ltd. Prior to joining Kenya Power he worked in the investment management industry. He has a wide experience in pensions, banking and investments spanning over 14 years. 2. Joseph Mitito Senior Property Officer He joined Kenya Power Pension Fund in March 2012. He has over 9 years experience in Property management, valuation and Project management. He holds a Bachelor of Arts degree in Land Economics and a post graduate diploma from the Institution of Surveyors of Kenya. He is also member of Institution of Surveyors of Kenya (M.I.S.K), Registered and Practicing Valuer and Estate Agent (RV & REA). Prior to his appointment at Kenya Power Pension Fund he worked as an Associate Director at Njihia Muoka Rashid Co. Limited. 3. Nancy Muruthi Senior Pensions Officer She joined Kenya Power Pension Fund in March 2012. She has over 13 years experience in handling Group Life Assurances, Pension Administration and Compliance. She holds a Bachelor of Education (Arts) degree, Higher Diploma in Human Resources and a Diploma from the Chartered Insurance Institute (CII, London). Prior to her appointment at Kenya Power Pension Fund she worked as a Consultant at Alexander Forbes Financial Services. 26 2013 ANNUAL REPORT

MANAGEMENT 3 2 1 4. Steve Mathuka- Head of Pensions Administration He joined Kenya Power Pension Fund in 2006. He has over 19 years experience in human resource management and pensions administration. He holds a Master of Business Administration (Strategic Management), a Bachelor s Degree in Psychology, a Higher Diploma in Human Resource Management and a Diploma in Mechanical Engineering. In addition he is a member of Institute of Human Resource Management (IHRM). 5. Amos Ndung u- Senior Finance and Investments Officer He joined Kenya Power Pension Fund in April 2012. He has over 7 years experience in treasury management. He has a Master of Business Administration (Finance) and a Bachelor of Science in Actuarial Sciences. He is also a Certified Public Accountant of Kenya (CPA K). In addition he is also a member of Institute of Certified Public Accountants of Kenya (ICPAK). Prior to his appointment at Kenya Power Pension Fund, he worked as a Treasury Accountant at Kenya Airways. 6. Martha Simiyu HR & Administration Officer She joined Kenya Power Pension Fund in 2006. She has over 15 years experience in Pension Administration and Human Resources management. She holds a Bachelor s degree in Business Administration (Management), Higher Diploma in Human Resource Management and a Diploma in Business Administration. She is a member of the Institute of Human Resources (IHRM). 2013 ANNUAL REPORT 27

Corporate Governance Statement GOVERNANCE AND MANAGEMENT Introduction The Board of Trustees is accountable at all times to the members for ensuring that the Fund complies with the law and the highest standards of corporate governance and business ethics. The Board believes in embracing corporate governance through creation of the right corporate culture and values. The Board exercises the most reasonable care to ensure that the management of the Fund is carried out in the best interests of the members and the Sponsors of the Fund. Board of Trustees The Board of Trustees considers corporate governance as a key function in the management of the Fund and for its accountability to all members. It has inculcated a value system in the corporate culture, and use of established best practice guidelines to achieve highest standards of compliance with the law, while ensuring the Fund is managed in manner to satisfy the interests of members and Sponsors. One of our core principles, integrity, dictates the ethical code and decision making processes of the Trustees to provide effective leadership. Board members are appointed jointly by the Fund s members and Sponsors on a representative basis, with the necessary capacity and development to drive performance of the Fund. Board Responsibilities Due care is the taken by the Trustees in managing affairs of the Fund. In recognition of their ultimate responsibility, our Trustees focal point to guide their decisions and actions is based on a foundation of good governance, and on our core values which are integrity, accountability, courteous service, stewardship and efficiency. The Board Manual sets out the Trustee s roles and responsibilities which include but are not limited to the following: Formulation & approval of the Fund s Vision, Mission and core values and formulation & approval of the Fund s strategy, business plan and principles of investments. Approval of annual budget and the final financial statements and interest on members balances. Approvals for AGM notices, venues, date and time. Review and evaluation of Investment Managers Performance and approval of risk management strategy. Approval of major restructuring. Settlement of major litigation/claims. Appointment of all service providers Approval of banking/authority levels, policies, procedures and manuals The Board further delegates selected responsibilities to the Fund Secretariat and appointed service providers. Role of the Chairman The Chairman of the Board is appointed by the Board of Trustees in accordance with provisions of the Fund s Trust Deed and Rules. His roles and responsibilities are distinct and separate from those of the Trust Secretary. The Chairman is responsible for the overall Board leadership and its effectiveness, and his decisions are binding on the principles of collective responsibility for Board decisions. He sets the agenda for Board meetings and chairs all meetings and the Fund s AGM. He also ensures adequate induction of new Trustees to orient them with Board s role, key tasks, processes, policies, and awareness of conflict of interest, as well as trainings for all Trustees to keep them abreast with good corporate governance practices and developments in the industry. He ensures key tasks of the Board are properly understood, and maintains a separate independent working relationship with the Trust Secretary. Role of the Trust Secretary The Trust Secretary is the head of the Fund s secretariat and is responsible for the overall leadership and day-today management of the Fund s operations. He is answerable to the Board and is tasked with the effective and efficient running of the secretariat, under the boards direction. He acts as the Secretary to the Board overseeing performance management and ensuring the Fund meets its performance targets, operational controls, ethical conduct, good corporate governance practices and compliance with regulations. In consultation with the Board of Trustees and other stakeholders, he develops and implements the strategic plan, as well as enhancing communication between the Fund and stakeholders. Board Structure and Composition Functions of the Board are carried out under a defined structure made up of Committees that assist it in discharging its mandate. Committees assist the Board in its responsibilities and obligations which help to ensure there s an independent oversight of internal controls and risk management. The Board size and composition is guided by the Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations, 2000 which states that a defined benefit scheme shall not have less than three and not more than nine trustees and the number of trustees nominated by members shall not be less than one third of the Board of trustees. In view of this requirement, and in ac- 28 2013 ANNUAL REPORT

Corporate Governance Statement (Continued) cordance with the Trust Deed and Rules, the Fund Board comprised of six (6) Trustees three (3) of whom are appointed by the sponsor as here below: Sammy Oduori (Chairman) Member elected representing pensioners Eng. Joseph Njoroge Sponsor appointed Dr. Ben K Chumo Sponsor appointed Lawrence K Yego Sponsor appointed Ernest Nadome Member elected representing Workers Union members Koskey Kolil Member elected representing Workers Union members The Board Chairman, a retiree of the Fund, is nominated to represent pensioners and their interests, whose liabilities constitute 31.36 % of Fund s total liabilities. Trustees have a 3-year renewable term. Member elected Trustees are elected every three years while the sponsor appointed Trustees are reappointed or maybe removed at any time by the sponsor. Board Remuneration All Trustees are paid a sitting allowance for the meetings they attend as per the Trust deed and rules. The Chairman of the Board also receives monthly stipend. These are detailed in Note 12 of the Financial Report. Board Meetings The Board and its Committees meet regularly in accordance with an annual calendar, and at least once after each quarter elapses, in order to review matters of a previous quarter. It regularly reviews reports on progress against financial objectives and stakeholder relations. In the endeavor to embrace innovative technology in streamlining and automating tasks, the Fund acquired eboard which is one of the latest technology solutions in the market to assist in management of Board functions using ICT. All Board and Committee meetings are now managed seamlessly via the eboard system which has an interactive and easy to navigate interface, accessible via a webpage. Via this system, Trustees can access and preview necessary information on the items to be discussed prior to any meeting of the Board. The system has features to upload agenda(s), board papers, previous meetings minutes, and any other documents relevant to a specific agenda and/or meeting. This has been beneficial in enabling Trustees prepare adequately and hold meetings easily and efficiently, saving on time and eliminating the manual paper-based way of reviewing and approving documents. Board Committees The Board has a structured system of operation made up of committees established to assist it in discharging its responsibilities and obligations. It delegates specific functions to selected Committees with defined formal terms of reference, without abdicating its ultimate responsibility. The terms of reference clearly identify matters reserved for the Board and Committees for decisions. The membership and Chairmanship of these Committees is regularly reviewed by the Board who are responsible for filling any vacancies. The Board is cognizant that members collectively have sufficient qualifications and experience to fulfill the duties of the respective Committees. The elected Chairman appraises the full Board of their activities on a quarterly basis through oral and/or written reports. The Chairman of the committees participates in setting and agreeing the agenda for meetings. During the year 2013, the Board had four (4) committees as follows: Audit Committee The Audit Committee is an independent committee and was chaired by Lawrence Yego during the year 2013. Other members were Dr. Ben Chumo, Kosgey Kolil and Laurencia Njagi who resigned during the year. The committee met three (3) times in the year. The mandate of this Committee includes but is not limited to: Meeting with internal and external auditors on the nature scope and priorities of audits and the major findings of audits Monitors and reviews the integrity of the Fund s financial statements Make recommendations to the Board on business risks, internal controls and compliance. Reviewing the effectiveness and reliability of management information systems, risk and internal controls systems and the efficiency and effectiveness of both external and internal audit Advise the Board on any issues pertaining to the appointment remuneration resignation and dismissal of auditors 2013 ANNUAL REPORT 29

Corporate Governance Statement (Continued) Investment & Custody Committee The Investment & Custody Committee was chaired by Ernest Nadome during the year 2013. Other members were Eng. Joseph Njoroge, Lawrence Yego and Laurencia Njagi who resigned during the year. The committee met four (4) times in the year. The mandate of this Committee includes but is not limited to: To meet with investment managers, custodians and with the Administrator s management. To oversee the investment management function of the Fund. To monitor the implementation of the Fund s investment strategies To make recommendations to the Board on proposed new investments, capital developments Advise the Board on appointment of investment managers, custodians and bankers to monitor and evaluate performance of these service providers Governance, Staff and Administration Committee The Governance, Staff and Administration Committee was chaired by Dr. Ben Chumo during the year 2013. Other members were Kosgey Kolil, Lawrence Yego and Ernest Nadome. The committee met six (6) times in the year. The mandate of this Committee includes but is not limited to: Oversee the governance, compliance and communication function of the Fund. Responsible for staff and operational policies in order to align the Fund s operations with best practice Orientation and induction of new Trustees including training and development of Board of Trustees Project Implementation Committee (PIC) Loresho Housing Project The Project Implemention Committee for the Loresho project was chaired by Ernest Nadome during the year 2013. Other members in this committee are Dr. Ben Chumo, Lawrence Yego, and Kosgey Kolil. The committee is responsible for overseeing and directing the management and implementation of the Loresho housing project which is still in progress. The committee met eleven (11) times in the year. The mandate of this committee includes but is not limited to: To oversee the implementation of the Project in accordance with the directives and approvals from the Board. To monitor the progress of implementation for the project. To ensure that appropriate mechanisms are put in place to ensure close cooperation amongst the consultants involved in the implementation of the Project. To give necessary advice, guidance and support to the Project Manager and the other consultants on all project related matters to ensure that the project is well implemented. To report on monthly basis to the Board of Trustees on matters related to the implementation of the Project. Meetings Attendance The Board of Trustees meets regularly as per the Board calendar. Below is a summary of meeting attendance by Trustees for the year ended 31 December, 2013. Trustee Name Full Board Meetings Audit Committee Investments & Custody Committee Governance, Staff & Admin Committee PIC Loresho Total Meetings 6 3 4 6 11 Sammy Oduori 6/6 - - - - Eng. Joseph Njoroge 3/6-1/4 - - Lawrence Yego 6/6 3/3 1/4 5/6 10/11 Dr. Ben Chumo 4/6 2/3-5/6 6/11 *Laurencia Njagi 4/6 2/3 2/4 - - Ernest Nadome 4/6-4/4 2/6 10/11 Kosgey Kolil 6/6 3/3-5/6 10/11 *Laurencia Njagi resigned from the Board on 25 th September 2013. 30 2013 ANNUAL REPORT

Corporate Governance Statement (Continued) Board Elections The Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations, 2000 requires that election of Trustees is conducted every three years. There was no election during the year since none of the Board members were eligible for retirement. Statement of Compliance and Conflict of Interest Conscious of its responsibilities to members, service providers, suppliers, creditors, employees and society, the Board of Trustees issued a statement at the end of the year confirming that they have complied with the law, conducted their affairs in accordance with the best principles and practices of corporate governance and that to the best of the knowledge of the Board and management, no person, employee or agent acting on behalf of the Fund with the knowledge or authority of the Board or management, committed any offence under the Prevention of Corruption Act or indulged in any unethical behavior in the conduct of the Fund s business, or been involved in money laundering, or any practice or activity contrary to national laws or international conventions. The Trustees also submitted annual declaration of conflict of interest to the Chairman of the Board of Trustees. During the year the all the Trustees submitted the annual Conflict of interest declaration. Code of conduct Each Trustee derives his or her authority and position from a legitimate nomination procedure. However, on becoming a Trustee, each Trustee becomes bound by the overriding fiduciary duty to act in good faith in the pursuit of the best interests of the Fund members as a whole. In the discharge of their duties, Trustees operate within the framework of a collective Board. In order to enable the Board to operate effectively and in the best interests of the Fund, all Trustees observe rules and regulations governing the Conduct of Trustees as contained in the Board manual. Board Induction programs & Training Each Trustee on appointment is provided with sufficient information to enable him/her perform his/her roles. Induction of newly-appointed Trustees is organized by the Secretary to the Board. The Board ensures that all Trustees keep abreast of both practical and theoretical developments, and that their expertise is constantly relevant. Trustee development comprises of induction and enhancement of skills as determined from regular evaluations. Every year the Secretary to the Board carries out a Trustees training needs analysis and prepares a training calendar which is implemented during the year. In addition, according to the Capacity Building of Trustees of Retirement Benefits Schemes Prudential Guideline Number RBA 001,2013 all Trustees of Retirement Benefits Schemes and Directors of Corporate Trustees of any retirement benefits scheme in Kenya are required to undergo training in order to be certified and approved by the Retirement Benefits Authority by the end of the year 2014. As at 31 st December, 2013 three out of six Trustees had been trained. All the remaining trustees will have complied with this requirement by December, 2014. Board Evaluation The Board takes time off to evaluate its own performance regularly. The evaluation comprises a self-critique of the Board and its Committees as a collective agency and that of the Fund in general. The output from the evaluation forms the basis for identifying shortfalls in skills and competencies and subsequently short training courses are organized for the Trustees to address such gaps. Every three years a review of Board performance is facilitated by an external service provider. RISK MANAGEMENT The Trustees are committed to a process of Enterprise Risk Management that will manage identified strategic and operational risks through a structured, systematic, proactive and integrated process. This is done through a risk management framework which enables management to focus in a comprehensive and holistic manner on all risks faced by the Fund. A risk management policy established by the Trustees is one of the important steps in ensuring that management identifies and manages all risks and the Trustees provide oversight as well as policy direction in managing risks. Risk Management Structure and Roles Risk management on an enterprise wide basis requires an integrated approach between the various risk-related specialists, department and staff. The risk management structure of the Fund is composed of the Board of Trustees, Audit committee, the management team and a risk committee at the Secretariat level composed of representatives from each department. Role of the Board of Trustees The overall function of risk oversight is the responsibility of the Trustees. The Board ensures that strategic risks are identified, assessed and managed. The board also incorporates Risk management into decision making and helps 2013 ANNUAL REPORT 31

Corporate Governance Statement (Continued) ensure that a systematic, documented assessment of the processes and outcomes surrounding key risk areas is undertaken regularly through regular reviews and assessments, that Audit committee together with the management have established appropriate systems to manage these risks and finally provides appropriate resources for risk management. Role of Audit Committee The Board of Trustees has established committees among them being the audit committee whose mandate is to implement and monitor implemented risk management framework established by the board. The Committee also ensures that risk management system implemented by management meets the requirements set out in the policy. Role of Internal Auditors In addition to the implementation of risk management framework, the Board has appointed independent internal auditors whose function is to provide independent assurance to the Trustees and management through general and specific audits, reviews, testing and other techniques, carrying out a risk based audit from time to time, report on effectiveness of and efficiency of risk management process as well as report on Fund s compliance with the risk policy. A risk assurance audit was conducted during the year to review the risk status. A review of the strategic and operational risk registers was conducted. Role of Management Team The Management team s role in risk management is that of implementing the risk framework established by the Board of Trustees. In addition the management receive and approve the quarterly reports on operational risk management Issues, report any strategic risks identified to the Audit Committee and the Board. The management team also approve risk mitigating actions to be taken by the Secretariat risk committee and contribute to the development of the Risk Management system and arranges internal audits on the risk management process at appropriate intervals on behalf of the Board. Risk Categories The Fund has identified and categorised risks as follows: Strategic risks : These risks arise out of the Funds Strategic plan Investments Risks: Risk associated with investments of the Fund Financial Risk: Risks associated with financial aspect of the Fund Operational risk: This refers to all the risks associated with the operations of the Fund Legal and regulatory risks: Legal risks can arise non-compliance with the legal and regulatory requirements. The Investment and financial risks have also been reported under our Note No3 as per IFRS 7 disclosure requirements on nature and extent of risks arising from financial instruments both qualitative and quantitative. Risk Assessment and Risk Register Our risks are assessed both quantitatively and qualitatively and measured in terms of impact and likelihood. A risk register is maintained by the Fund and this is reviewed quarterly by the Board and Secretariat to monitor existing risks and well as update emerging risks. Risk training and awareness The Board s commitment to risk management has also been evidenced by the awareness and training given to the Board of Trustees, management and the staff of the Fund. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Fund recognizes the importance of giving back to society and is committed to contributing to socio-economic development while acting ethically and improving the quality of life for members of needy communities and the society at large. The cornerstone of our sustainability and commitment is through various engagements with stakeholders whether directly or indirectly and activities that are planned for each year. The Fund spent a total of Ksh. 420,000 which was within the allocated budget. In line with the Fund s CSR policy, the Fund was involved in three corporate social activities Education The Fund identified Kikuiyan primary school, a needy school located in the remote part of Narok County as needy candidates which deserved assistance. The secretariat visited the school and donated classroom desks for pupils, stationery including textbooks, and writing materials for pupils, sanitary towels for teenage girl pupils, a water tank and a cheque worth Ksh. 97,250 as a grant. The Fund continuously looks for similar avenues to identify needy establishments that have a big impact to the general society in the locality of the project, as this forms a bigger part of our CSR initiative. 32 2013 ANNUAL REPORT

Corporate Governance Statement (Continued) Health support through participating in Mater Heart Run Community Secretariat donate stationery, desks and cash during a CSR visit to Kikuyian Health Primary school in Narok County In the year 2013 the Fund participated in the annual Mater Heart Run event usually organized by Mater Hospital, which took place in May 2013 at Nyayo Stadium. Funds collected in this event go towards the support of needy patients suffering from heart-related diseases to get necessary heart surgeries. The Fund is proud to have been represented by the staff members who participated in the event, and looks forward to committing its support and attend future events. The Fund also supported Kenya Power and Lighting Company Ltd Christian Union Fellowship with cash and foodstuff donations during a visit to Msamaria Mwema Children s home in Lower Kabete, Nairobi in October 2013. They embarked on this noble engagement, in support of the children home s mission to provide a home for orphaned children with love and caring for their needs, as well as giving them Christian values, education and training skills for their development. The children are affected by the HIV/AIDS pandemic directly and indirectly. The Fund is also proud to have been represented by the staff members of Kenya Power who participated in the event, and looks forward to providing more support. Kenya Power Pension Fun and Kenya Power Christian Union donate foodstuff during a visit to Msamaria Mwema children s Home in Kiambu County Staff Secretariat donate sanitary towels to girls at Kikuyian Primary school in Narok County The Fund secretariat comprises of fifteen (15) staff, six (6) of whom are female employees and nine (9) are male employees. This meets the 30% affirmative action on gender 2013 ANNUAL REPORT 33

Corporate Governance Statement (Continued) equality. The team has a diverse skills set of competence, experience and knowledge in the required fields such as pension administration, finance & investments, property management, customer service, human resources & administration and information technology. The Fund endeavors to improve employee s performance through performance based rewarding, training, team building and a good working environment. of the potential environmental impacts and proper measures to mitigate the impacts. These impacts are monitored to avert environmental degradation. The Fund has also adopted the use of solar panels in all the developed houses to promote use of green energy as well as save on energy. From the design to installations and usage, environmentally friendly and innovative methods have been incorporated so as to promote sustainable use of natural resources and blend with the obtaining ecosystem. In the Loresho project, the Fund has ensured that there is enhanced use of rainwater, natural light and push sensitive water taps. The adoption of modern waste management technology in the Fund s projects ensures that there is better disposal of hazardous waste and recycling of what is environmentally and aesthetically fit for re-use. Members Secretariat staff at the team building session The Fund s effort in improving the environment is anchored on the understanding that the environment provides the resources that organizations require to do their business. This premise notwithstanding, it is our view that environmental improvement ought to be taken seriously irrespective of legal, regulatory or business gains that may arise from such actions. The board has recognised that besides offering the standard service to members, provision of member training on various aspects of their life such as financial management, nutritional and health are paramount to creating the all-round member. Through the annual member education program, members have received these trainings and have provided positive feedback on the impact on their personal lives. In addition, the Trustees established an Orphan Trustee Program which assists many beneficiaries of deceased in service members. This Fund provides a channel through which the beneficiaries can utilize these benefits for child education. ENVIRONMENT Environment is a current hot topic and one that is likely to grow in importance in light of increasing global temperatures, decreasing natural resources and increasing energy costs. The Fund takes cognizance of this fact and is ever aware of its role in ensuring that its business operations do not in any way negatively impact on the environment. The Fund s commitment to best practices in promoting the environment is best demonstrated by its continued undertaking of Environmental Impact Assessment (EIA) for all the proposed development to assist in the understanding Loresho Ridge project (under construction above) showing use of solar panels and waste water treatment plant in Loresho Ridge project 34 2013 ANNUAL REPORT