Lapf annual report 2017

2015/16

LAPF - PENSIONS FUND A n n u a l R e p o rt & F i n a n c i a l S t a t e m e n t s

LAPF - PENSIONS FUND

Vision STATEMENT To become the most preferred Pension Fund.

Mission STATEMENT LAPF is dedicated to being a dynamic provider of social security benefits through the utilization of competent and motivated staff.

CORE VALUES · · · · ·

Commitment Efficient Respect Teamwork Transparency

MOTTO Retire with Pride

CONTENTS

Information brochures................................................................................................................... 2 Letter of Transmittal........................................................................................................................ 5 Board Members.................................................................................................................................... 6 Chairman’s statement ....................................................................................................................... 8 Senior Management Team............................................................................................................... 12 Report of director general ....................................................................................................... 14 Management team............................................................................................................................. 22 Benefit payments .............................................................................................................................. 15 Operational expenses..................................................................................................................... 16 Investments income.......................................................................................................................... 18 Net assets............................................................................................................................................ 18 Information and communication technology ...................................................................... 19 Human resources and administrative matters ..................................................................... 19 Public education & awareness..................................................................................................... 19 Actuarial valuations....................................................................................................................... 19 Financial management..................................................................................................................... 20 Challenges and the way forward.............................................................................................. 20 Concluding remarks....................................................................................................................... 21 Management team............................................................................................................................. 22

INFORMATION BROCHURES

INFORMATION BROCHURES

INFORMATION BROCHURES

HEAD OFFICE LAPF Office Building, Makole Road, P. O. Box 1501 DODOMA Tel: +255 26 2321952 Fax: +255 26 2321701 Email: info@lapf.or.tz

Southern Highland Zone (Rukwa, Ruvuma,Iringa, Katavi, Njombe and Mbeya regions) LUPA Street, P. O. Box 580, Mbeya Tel: +255252957326 Fax: +255252957326 Email: sz@lapf.or.tz

Central Zone (Singida, Dodoma and Tabora Regions ) Zonal Manager, LAPF Office Building, Makole Road, P. O.Box 1501 DODOMA Tel: +255 26 2323411 Email: cz@lapf.or.tz

LIAISON OFFICES LAPF Office Sumbawanga, Municipal Building P. O.Box 107, Sumbawanga Tel: +255 252802407 Fax: +255 252802407.

Dar es Salaam Zone (Temeke, Ilala, Kinondoni) Zonal Manager P. O. Box 1723, Mkwepu Street Diplomatic House ,3rd Floor DAR ES SALAAM General Line: +255 222123848 Direct Line +255 222123846 FAX :+255222123851.

Eastern Zone (Coast, Lindi, Mtwara and Morogoro regions) LAPF Msamvu Offices, 3rd Floor Zonal Manager, P. O. Box ,2565 MOROGORO Tel: +255 23 2934188 Fax: +255 23 2934189 Email: ez@lapf.or.tz Northern Zone (Arusha, Kilimanjaro, Manyara, and Tanga regions) Zonal Manager P. O. Box 12849 Summit Center, 29 Sokoine Road ARUSHA Tel: +255 27 2548346 Fax: +255 27 2548346 Email: nz@lapf.or.tz Lake Zone (Mwanza, Kagera, Mara,Geita,Simiyu and Shinyanga regions) Balewa Road Isamilo Ultra-Modern Commercial Complex P. O.Box 2311, Mwanza Tel:+255282981022 Fax: +255282981023 Email: lz@lapf.or.tz

LAPF Office Mtwara ATB Building, Ground Floor P. O. Box 1231, Mtwara Tel: +2552334540 Fax: +2552334540.

LAPF Office Kigoma Sub Treasury Building, Room no 17 1st Floor Lumumba Road -LUBENGERA, P.O. Box 1217, Kigoma Tel: +255282803852 Fax: +25522803852.

LAPF Office Iringa NIC Building, P. O. Box 2407, Iringa Tel: +255262701122 Fax: +255262701120.

LAPF Office Tanga Market Road.

P. O. Box 5522 Tanga LAPF Office Kahama Isaka Road, PLot 143, Block B P. O. Box 417 Kahama

Letter of Transmittal

Hon. George Boniface Simbachawene (MP) Minister of State-President's Office, Regional Administration and Local Government, United Republic of Tanzania

Honourable Minister of State-President's Office, Regional Administration and Local Government, The United Republic of Tanzania.

Pursuant to Section 60 subsection (3) of LAPF Pensions Fund Act, Cap. 407, I have the honour to submit to you the Annual Report and Audited Financial Statements of LAPF Pensions Fund for the year ended 30th June 2016. The report includes:1. A statement of the Chairman of the Board of Trustees of LAPF Pensions Fund; 2. Operational Report by the Director General; and 3. Audited Financial Statements of the Fund for the financial year ended 30 June 2016.

I humbly submit.

Prof. Faustine K. Bee CHAIRMAN OF THE BOARD OF TRUSTEES

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

7

Board Members

PROF. FAUSTINE K. BEE CHAIRMAN OF THE BOARD OF TRUSTEES 

Dr. Rehema G. KILONZO TRUSTEE

8

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Mr. HENRY KATABWA TRUSTEE

Mr. CORNELLIUS K. KARIWA TRUSTEE

Board Members

Mr. SULEIMAN A. KIKINGO TRUSTEE

Mr. TUMAINI P. NYAMHOKYA TRUSTEE

Mr. SAID A. NZORI TRUSTEE

MR. ELIUDI SANGA SECRETARY

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

9

Chairman’s Statement

Introduction

O

n behalf of the Board of Trustees, I am delighted to present to our esteemed members, employers and other stakeholders the Annual Report and Audited Financial Statements of the Fund for the year ended 30thJune 2016.

This was another year of attaining greater heights of financial and operational performance, as the Fund has continued to grow and improve in all the key performance areas. During the year our key strategic initiatives targeted at registration of new members, enhancement in collection of contributions from employers, growth of our investments portfolio and investment income, net assets growth and improvement of customer service.

Operating Environment During the year, the Fund continued to operate under a competitive environment in the registration of new members as the historical domains of each Fund seized with the coming of the Social Security Regulatory Authority which liberalized the sector. The anticipated recruitment in the Central and Local Government also did not take place as expected due to review and reforms in the civil service. With these constraints, the imminent window for registration remained largely to the private sector. Despite this competition, I am pleased to report that the Fund continued to attract significant number of new members.

PROF. FAUSTINE K. BEE CHAIRMAN, BOARD OF TRUSTEES

10

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Investments of the Fund and new members are profoundly affected by the socio-economic environment in terms of economic growth of the country and the dynamics of financial and capital markets as well trends in the labour market. In overall, the economic environment in Tanzania continued to provide conducive business platform for the Fund’s operations.

While GDP for the year recorded a 6.2% growth rate, future projections indicate further growth. While real income growth is projected at 7%, inflation was 5.2% in June 2016 and was decreasing further. The economic environment provides both stimulus and potential for growth in the Fund’s membership by expansion of the labour force as well as income.

Chairman’s Statement

In terms of implementation of the core business activities of the Fund, I am pleased to report that the Fund operations during the year were undertaken in accordance with the lapf Act, The Social Security Regulatory Authority Act and Guidelines, the Bank of Tanzania Investment Guidelines for Social Security Schemes as well as other applicable laws and policies in our country.

The 2014 Integrated Labour Force Survey (ILFS) indicate that the overall unemployment rate declined from 11.7 percent in 2006 to 10.3 percent in 2014. The declining unemployment trend create potential for new entrants in the social security system as labour markets expand.

Interest rates in the money market instruments, for Treasury bills ranged between 10.55% in June 2015 to 15.12% in June 2016. In February 2017 the rate stood at 15.3%. For 10 Years Treasury bond the rates were 17.02% June 2015 and reached 17.96 % in June 2016. In February 2017 the rate reached 16.8%.

The decreasing trend in the 10-years Treasury bond is the same for other tenures. The treasury bills and bonds interest movements generally influence the interest rate structure in the money market instruments. Given the low inflation levels and the fact that Government securities are presumed risk free, the returns in this category were considered satisfactory and the Fund made substantial investments in Government securities during the year.

The capital markets however demonstrated general decline in the share price of quoted companies as evidenced by the Dar es Salaam Stock Exchange statistics. The market volatility experienced by Tanzania during the year affected also other countries in Sub-Sahara Africa, noting that majority trading at DSE is held by foreign investors. As such, economic shocks

such as collapse of commodity prices and rising national debt levels in some African countries, affected international trading and investment decisions.

However, the Fund strategy in equity investment is passive aimed to enhance the value of the Fund with a long term perspective. The current trend in the stock market is considered to be short term market shocks manifested by global economic shocks that are expected to stabilize in near term.

In terms of implementation of the core business activities of the Fund, I am pleased to report that the Fund operations during the year were undertaken in accordance with the LAPF Act, the Social Security Regulatory Authority Act and Guidelines, the Bank of Tanzania Investment Guidelines for Social Security Schemes as well as other applicable laws and policies in our country.

Key Achievements during the year Membership Despite the competitive environment and limited recruitment in the public sector, the Fund recruited 16,001 new members with a net annual membership increase of 10.22%. Generally

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

11

Chairman’s Statement

the Fund has consistently enjoyed significant increase in its membership base and this trend is expected to continue in the forthcoming given our quality services to our members and attractive benefit package.

Contributions This is another area of success during the year as members’ contributions increased by 33.14% due to increase in membership to the Fund as well as increase in the general salary levels. Notably, the correlation between the increase in membership and contributions, though positive is not strong, the rationale being the fact that most recruitment during the year took place in the private sector where average salaries are higher than the public sector.

Investments The investments portfolio of the Fund reached TZS 1.10 trillion compared to TZS 884.26 billion last year, representing a 24.2% increase. For the group, the investments portfolio reached TZS 1.12 trillion at 30th June 2016. Given the attractive returns that prevailed during the year complemented by zero risk considerations, significant investments were made in Government securities.

Besides the decline of stock prices in the stock exchange which resulted in fair value losses in our equity portfolio, overall investment income for the Fund increased from TZS 99.17 billion as compared to TZS 93.48 billion posted in 2014/15, representing an increase of 6%. Further growth in revenue is expected with commencement of operations of some of our subsidiaries, Mwanza Commercial Complex Company Limited and Msamvu Properties Company Limited.

Benefits and Member Services Payment of members’ benefits is a cardinal responsibility and the ultimate ground for existence of the Fund and its Trustees.

Generally, all our members’ claims received immediate attention and were processed in the spirit of our motto “we pay our members yesterday”. We have continued to decentralize our benefit payment systems to zonal offices and upgrade and interface our ICT systems to increase effectiveness and efficiency.

Benefits paid during the year amounted to TZS 107.25 billion compared to TZS 88.60 billion paid in the previous year, representing an increase of 21.05%. The increase in benefit payments is attributed to increase in beneficiaries from 6,581 beneficiaries for the year ended 30th June 2015 to 8,011 beneficiaries for the year ended 30th June 2016.

Net Assets The Fund and the group to continued to record satisfactory levels of growth in both the total assets and net assets position. Total assets of the Fund at 30th June 2016 stood at TZS 1.27 trillion compared to TZS 1.03 trillion at 30th June 2015 representing an increase of 23.30%. For the group, the total assets reached TZS 1.31 trillion (2015: TZS 1.04 trillion).

The net assets of the Fund as at 30th June 2016 amounted to TZS1.17 trillion compared to TZS 939.35 billion at 30th June 2015. This represents an increase of 24.45%. The net assets of the Group as at 30th June 2016 amounted to TZS1.22 trillion (2015: TZS 971.1 bn). The Fund’s annual average growth rate in net assets over the last five years is 21.1%.

The net assets of the Fund as at 30thJune 2016 amounted to TZS1.17 trillion compared to TZS 939.35 billion at 30thJune 2015. This represents an increase of 24.45%.

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LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Chairman’s Statement

Corporate Governance During the year, the Board conducted its regular meetings. The Committees of the Board, namely Audit and Risk Committee; Finance Committee; Human Resources and Legal Affairs Committee; and Investments Committee also held their regular meetings. The Board exercised its independence and oversight role over the Management. In line with the good corporate governance principles, the Director Internal Unit reports directly to the Audit and Risk Committee.

Subsequent to year end and before the issue of the audited accounts, a new Board was appointed. The new Board has already received the necessary orientation on the Funds operations and systems, financial statements and applicable laws, policies and guidelines. The new Board is committed to take the achievements of the Fund to the next level for the benefit of its members and all other stakeholders.

Challenges and Way Forward Despite the impressive achievements recorded during the year, the Fund did not escape from operating challenges. The key challenges encountered include the stiff competition in the recruitment of new members, compliance on regulators guidelines, identification of new investment avenues with deteriorating stock exchange performance, delays in remittance of contributions and delays in issuing special Treasury bond to cover Government loans.

The Fund will continue with its strategies to improve customer service and move its services closer to its members. This will be in supplemented with product innovation to address our members short term benefit needs. In order to align our investment strategies with national priorities, the Fund is already undertaking a number of studies on industrial projects that have significant positive economic impact. It is also expected that the Government will in the near future work out the terms of the special Treasury bond and the Fund will continue dialogue with the respective Government authorities to realize this objective.

Prospects for the Year 2016/17 In the next financial year the Fund will remain focused on maintaining its core business functions and align its policies and strategies so as to achieve its main corporate objectives.

Strategies to improve member services and benefits will continue to be pursued. These will include the establishment

of new offices, improvement in our ICT systems and the design of new products.

On our investment side, we look forward to participate in the industrialization agenda especially through Public Private Partnerships and thus contribute to economic growth and development of the labor markets, as outlined in the second Five Year Development Plan (FYDP II).We expect that some of the ongoing studies will be concluded paving way for the projects implementation.

Conclusion The Fund has continued to register outstanding and impressive achievements during the year ending 30 June 2016. With our new team of the Board of Trustees, hardworking and committed management and staff, and with the support of the Government, our members, employers and other stakeholders, I have no doubt that we are going to have another year of greater achievements.

The above record of achievements could not have been realized without the support of our members, employers, the Government and all other stakeholders. I am therefore indebted to extend my most ardent and sincere appreciation to the Government of the United Republic of Tanzania, especially our parent ministry, PO-RALG and our sector ministry, Prime Minister’s Office- Labour, Youth Employment and Persons with Disability; The Tanzania Confederation of Trade Unions (TUCTA) and its member associations; Association of Local Government Authorities of Tanzania (ALAT); and our esteemed members and all employers.

Finally, on behalf of the Board of Trustees, I would like to express my sincere gratitude to my fellow Trustees, Management team and all members of staff for their support, uncompromising dedication and commitment. I am looking forward to record higher levels of performance beyond the expectations of our members and stakeholders line with our vision and mission.

Prof. Faustine K. Bee, CHAIRMAN, BOARD OF TRUSTEES

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

13

Chairman’s Senior Management Statement Team

MR. ELIUDI SANGA DIRECTOR GENERAL

Mr. DESDERY SIGONDA DIRECTOR OF HUMAN RESOURCES & ADMINISTRATION

14

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Ms. MARIAM SINANI DIRECTOR OF INTERNAL AUDIT

Mr. DANIEL KISSIRY DIRECTOR OF ICT

Senior Chairman’s Management Statement Team

Mr. JOHN W. KIDA DIRECTOR OF FINANCE

Mr. VALERIAN MABLANGETI DIRECTOR OF MEMBER SERVICES

Mr. FIDELIS MUTAKYAMILWA CHIEF LEGAL COUNSEL

Ms. ROSE METTA DIRECTOR OF PLANNING & INVESTMENTS

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

15

Report of the Director General

One of the principal activities of the Fund is to invest funds collected from members. In executing this role, the Fund is required to comply with the Investment Guidelines issues by Social security Regulatory Authority (SSRA) and Bank of Tanzania (BOT) and has also continued to abide by its Investments Policy which, among other things, underscores the basic investment principles of safety, yield, liquidity and socio-economic utility.

DIRECTOR GENERAL Eliud B. Sanga

DIRECTOR GENERAL

O

n behalf of the Management, it’s my pleasure to present to you review of the operating performance of the Fund for the period of 1st July 2015 to 30th June 2016. During the reporting period, the Fund witnessed yet another steady and solid operating performance. The enviable performance was primarily driven by the Annual Plan which its main focus was to provide quality customer service and improve member’s benefits in addition to the traditional roles of widening, membership coverage and

16

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

increasing contribution collections and return on investments.

The performance albeit in a nutshell is outlined hereunder.

The financial year ending 30 June 2016 proved to be transformational for the LAPF; we ended this year as a stronger and growing Fund with a total of 166,260 members and an investment portfolio of TZS1,098.40 billion. This has been achieved through team spirit, working together with the shared objective of making LAPF the most preferred Fund in Tanzania.

Report of the Director General

1.0 Membership to the Fund

The increase in contributions is commensurate with the increase in our membership base.

During the period, the Fund continued to undertake members’ education as way of enhancing peoples’ understanding of the social security issues, registering new members and improving its marketing capacity for zonal offices as an effective way of recruiting more members. Due to these efforts and strategies which have been employed by the Fund year after year, the members of the Fund have been increasing considerably over the last five years as shown in the table below:-

3.0 Figure 2: Contributions to the Fund 2012 – 2016

Table 1: Membership of the Fund 2012 – 2016

3.1 Benefit Payments

As at Members

30 June 12

30 June 13

30 June 14

30 June 15

30 June 16

91,852

104,840

127,327

150,835

166,260

For the year ended 30 June2016, the membership to the Fund increased by10.22% from 150,835 members to 166,260 members. The table above shows a stable and consistent annual increase of members as such. The average annual increase in membership stood at 15.99%over the period. The increase in membership is mainly due to the registration of new employees attributable to the on-going recruitment in the Local Government Authorities. Furthermore, due to the liberalization of the Social Security Sector under the Social Security Regulatory Authority Act No. 8 of 2008, whereby members can now be registered from any sector of the economy including private sector.

Figure 1: Membership of the Fund 2012 – 2016 166,260

180,000

150,835

160,000

MEMBERS

100,000

2011/ 12

2012/ 13

2013/ 14

2014/ 15

2015/ 16

Amount TZS (Blns)

89.06

119.17

159.22

210.07

279.68

Benefit payments is the major expenditure area of the Fund.

Currently, the Fund offers six types of benefits to its members.

It is ranked second in the country by the number of benefits offered. These benefits are: •

Retirement benefit;

•

Survivorship benefit;

•

Invalidity benefit;

•

Withdrawal benefit;

•

Maternity benefit; and

•

Funeral grant.

For the year 2015/16 a total amount of TZS 107.25 billion was paid as benefits to members compared to TZS 88.6 billion in 2014/15, representing an increase of 21.05%.

The increase in benefit payments is explained by increase in the number of beneficiaries for retirees and pensioners as well as salary increases.

Table 3: Benefits Payments 2012 – 2016

104,840 91,852

80,000 60,000 40,000 20,000 0

Year

127,327

140,000 120,000

Table 2: Contributions to the Fund 2012 – 2016

30-­‐Jun-­‐12

30-­‐Jun-­‐13

30-­‐Jun-­‐14

YEAR

30-­‐Jun-­‐15

Year

2011/ 12

2012/ 13

2013/ 14 2014/ 15

2015/ 16

Amount TZS (Bns)

38.09

57.45

78.23

88.60

107.25

Beneficiaries

2,860

3,990

5,056

6,581

8,011

30-­‐Jun-­‐16

2.0 Contributions and Benefit Payments

Table 4: Benefits Distribution for 2015/16 Benefit

Retirement

Survivorship

Invalidity

Withdrawal & Others

Total

80.46

12.92

0.13

13.74

107.25

75.02%

12.05%

0.12%

12.81%

100%

2.1 Contributions For the year ended 30th June 2016, TZS 279.68 billion was collected compared to TZS 210.07 billion collected during the previous financial year. This is an increase of 33.14%

Amount TZS (Bns) Beneficiaries

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

17

Report of the Director General

and house loans to members who have attained the age of 55 years.

Figure 3: Benefits Distribution for 2015/16 As indicated in figure 3 above, 75% of the benefits expenditure relates to retirement claims.

Withdrawal & Other Benefits 12.81% Invalidity Benefits 0.12%

4.0 Operational expenses Operational expenses of the Fund consist of employee benefits, general administrative expenses, finance costs, business expenses, depreciation, amortization and impairment.

Re#rement Benefits 75.02%

Table 6: Operational Expenses 2012 – 2016

Survivorship Benefits 12.05%

Table 5: Net Additions from Dealings with Members 2012 -2016 2011/ 12

Contributions

2012/ 13

2013/ 14

89.06

119.17

159.22

38.09

57.45

78.23

TZS (Bns) Benefits TZS (Bns) Net Cash Flow

50.97

61.72

2014/ 15

48.21%

210.07

88.6

107.25

49.13%

121.47

172.43

38.35%

For the past five years, net cash inflows remained positive and relatively stable. Our future projections indicate that this position is expected to remain for a considerable period. This signifies the financial stability of the Fund and the ability to meet the members’ obligations for the foreseeable future.

During the year 2015/16 the Fund has managed to reduce the pace of increase in benefit expenses relative to the contributions.

279.68

AMOUNT IN TZS (Bns)

210.07

200 150 100 50

159.22 89.06

119.17

38.09

57.45

78.23

88.6

107.25

0 2011/ 12 2012/ 13 2013/ 14 2014/ 15 2015/ 16 Contributions Benefits YEAR

In addition to the above specified benefits, the Fund offers soft loans to its members through SACCOS, Education loan

18

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Amount T Z S (Bns)

20.73

17.08

21.54

40.88

34.48

Figure 5: Operational expenses 2012 – 2016 40.88 34.48

40 30

20.73

21.54

17.08

20 10 2011/ 12

2012/ 13

2013/ 14

2014/ 15 YEAR

2015/ 16

During the year, total operating expenses amounted to Shs 34.48 billion (2015: Shs 40.88 billion), representing a decrease of 15.66%. The decrease is due to the fact that during this year under review, no additional impairments were provided as it was the case for the previous year.

5.0 Review of Investments 5.1 The Investments Portfolio

Figure 4: Contributions versus Benefits 2012 – 2016

250

2015/ 16

0

42.18%

300

2014/ 15

279.68

42.77%

2013/ 14

50

TZS (Bns) Benefits/Contribution (%)

2012/ 13

2015/ 16

80.99

2011/ 12

TZS IN MILLIONS

Year

Year

One of the principal activities of the Fund is to invest funds collected from members. In executing this role, the Fund is required to comply with the Investment Guidelines issues

by Social security Regulatory Authority (SSRA) and Bank of Tanzania (BOT) and has also continued to abide by its Investments Policy which, among other things, underscores the basic investment principles of safety, yield, liquidity and socio-economic utility. The policy emphasizes that at least 75% of the annual collection must be invested. Therefore, the Fund directs its investments in commercially profitable, technically feasible, financially viable and social-economically desirable projects.

Report of the Director General

Over the last five years, there has been a persistent growth in the investments portfolio of the Fund. This is attributed to an increase in both contributions collection and investments’ income. For the year 2015/16, the investments portfolio increased from TZS 884.26 billion to TZS1,098.4 billion, equivalent to 24.2 % (2014/15: 19.04%).

As at 30 June 2016, the investments portfolio of the Fund comprised of Government securities43%, loan investments 16%, real estate 19% and bank deposits 6%. The remaining portion is composed of equity investments, investments in subsidiaries and associates. Figure 7 below shows the portfolio distribution as at 30 June 2016.

Table 7: INVESTMENT PORTFOLIO 2012 - 2016

Figure 7: Portfolio Distribution as at 30 June 2016

INVESTMENT PORTFOLIO 2012 - 2016

Equity 7%

YEAR

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

AMOUNT IN BN

490.4

622.04

745.54

884.26

1,098.40

Government Securi-es 43%

Investment Proper-es 19%

Figure 6: Investments Portfolio 2012-2016 Corporate Bonds 0.15% Deposits with Financial Ins-tu-ons 6%

Subsidiaries 8%

1,200.0 TZS IN BILLION

Associates 1%

1,098.40

1,000.0 800.0

490.4

622.04

745.54

Besides the remarkable growth in the investments portfolio as observed from the above chart, Government securities have continued to dominate the investments portfolio of the Fund.

600.0 400.0 200.0 -

Loan Investments 16%

884.26

2012

2013

2014

2015

2016

YEAR

Table 8: Investments Portfolio 2012 – 2016 Investment category

30-Jun-12

30-Jun-13

30-Jun-14

30-Jun-15

30-Jun-16

(TZS Billion) %

(TZS Billion) %

(TZS Billion) %

(TZS Billion) %

(TZS Billion) %

Investment properties

78.55

16.02%

111.04

17.84%

137.52

18.45%

171.45

19.39%

205

19%

Available for Sale Quoted Investments

18.91

3.86%

31.2

5.01%

56.99

7.64%

78.65

8.89%

73.7

7%

Available for Sale unquoted Investments

8.41

1.72%

8.18

1.31%

6.65

0.89%

6.16

0.70%

5.1

0.5%

Government securities

176.79

36.05%

201.56

32.39%

Corporate Bonds held to Maturity

9.78

1.99%

9.44

1.52%

3.59

0.48%

4.9

0.55%

1.61

0.1%

Bank deposits with Financial Institutions

57.3

11.69%

46.62

7.49%

58.49

7.85%

61.09

6.91%

62.5

6%

239.24

32.09%

304.82

34.47%

474.8

43%

Loan investments

102.89

20.98%

124.47

20.00%

148.72

19.95%

157.9

17.86%

179.50

16%

Associates

1.12

0.23%

1.18

0.19%

5.74

0.77%

10.7

1.21%

7.6

1%

Investments in Subsidiaries

36.6

7.46%

88.6

14.24%

88.6

11.88%

88.6

10.02%

88.6

8%

Total Investments

490.40

100%

622.04

100%

100%

884.26

100%

1,098.40

100%

745.54

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

19

Report of the Director General

The third largest investments area is investments in corporate loans. This includes Government guaranteed projects such as the University of Dodoma – College of Health Sciences, Hombolo Local Government Training Institute and Nelson Mandela African Institution of Science and Technology.

The current equity portfolio consists of the shares from Tanzania Breweries Limited, Tanzania Cigarette Company Limited, Tanzania Portland Cement Company Limited; Tanga Cement Company Limited; CRDB Bank Plc; Umoja Trust Fund of Tanzania; Tanzania Chamber of Commerce, Agriculture and Industry; National Investments Company Limited; Azania Bank; Tanzania National Reinsurance, Watumishi Housing Company Ltd and National Microfinance Bank.

Figure 8: Investments Income 2012– 2016

TZS IN MILLIONS

Investment properties are the second largest investment area of the Fund, which includes Millennium Tower buildings and Dodoma office building.

100 90 80 70 60 50 40 30 20 10 0

93.87 72.07 60.76 36.84

2011/ 12

48.82

2012/ 13

2013/ 14 YEAR

2014/ 15

2015/ 16

Figure 8 above, shows investments’ income covering the period from 2012 to 2016, while figure 9 below shows the distribution of the same by source for the year 2015/16.

Figure 9: Distribution of investments income for the year 2015/16

The Fund has joint venture projects which it undertakes in partnership with some of the Local Government Authorities.

These projects include upgrading of Msamvu Bus Terminal and Rocky City Mall in Mwanza.

5.2 Investments Income As a result of the growth in the investments portfolio, income from investments has also been increasing at a proportionate rate. For the year under review, income from investments stood at TZS 93.87 billion as compared to TZS 72.07 billion posted in 2014/15, representing an increase of 30%. One factor which accounted for the increase is the general expansion of our investments portfolio.

Table 9: Investments Income 2012 – 2016 Year Amount TZS (Bns)

2011/ 12

2012/ 13

2013/ 14

2014/ 15

2015/ 16

36.84

48.82

60.76

72.07

93.87

5.3 Other Investments Income During the year the Fund also had other investments returns.

These include gains due to the change of fair value of investment properties, equities, Government securities, and property, plant and Equipment. Moreover, there are also gains from Foreign Exchange transactions and share of profits from our associate company (TCCIA Investment Company Ltd).

However, during the year under review, the share prices for the listed companies dropped and this resulted in fair value loss, hence reduced the growth rate of overall income.

6.0 Net Assets The Fund has recorded spectacular growth in its net assets base over the last five years. The net assets increased from TZS 939.35 billion at 30 June 2015 to TZS 1,169.06 billion at 30

20

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Report of the Director General

June 2016, representing an increase of 24% (2014/15: 24%).

The growth in net assets is mainly attributed by the increase in the contributions collections and investments income.

Table 9: Net Assets 2012 – 2016 Year End

30 Jun 12

30 Jun 13

30 Jun 14

30 Jun 15

30 Jun 16

Amount TZS (Bns)

539.60

645.04

759.57

939.35

1,169.06

Figure 10 below shows the general growth in the net assets base of the Fund from 2012 to 2016.

Figure 10: Net Assets 2012-2016

management which amongst other things, has resulted in the timely closing of books of accounts as well as the production of the Funds’ Financial Reports for the public and stakeholders use. Furthermore, the Investment and Treasury Management Modules have been incorporated in the NAVISION - DYN. On the aspect of improving the quality of service delivery to members and stakeholders, the Fund has implemented the second core ICT systems, Fundworx. The completion of this project resulted in the automation of tasks such as the registration of members, the registration of employers and benefit processing. The automation of these functions has increased the speed and accuracy in service delivery and hence, reduced the benefit processing time.

Both core systems are being upgraded to improve their functionality and efficiency.

8.0 Human Resources and Administrative Matters As at 30 June 2016 the Fund operated with the manpower of 221 employees (30 June 2015: 195 employees).

As shown in the pie chart below, the net assets for 2015/16 are mainly represented by investments 87%, amount receivable 11% and other assets 2%.

Figure 11: Distribution of Net Assets as at 30 June 2016

Receivables 11%

Other Assets 2%

Investments 87%

In recognition of the importance embodied in staff training, the Fund has continued to train its employees both locally and internationally and it has continued to encourage and support individual efforts. In this respect, a number of employees were trained during the year and several others attended undergraduate and postgraduate courses at higher learning institutions.

9.0 Public Education and Awareness The Fund continues to undertake programmes aimed at raising the awareness of its members, contributing employers and the general public on the operations of the Fund and matters of interest to different stakeholders. This includes radio programmes, members’ seminars, employers’ seminars, prospective graduate seminars and participation in the Local Government weeks, Saba-Saba and Nane-Nane trade fairs. The Fund also continued to conduct its Annual Stakeholders’ conference.

7.0 Information and Communication Technology 10.0 Actuarial Valuations The Fund has two core ICT systems. One of these is the Integrated Financial Management System (NAVISION DYN) for accounting and reporting of financial transactions.

The implementation of this application has by far improved the quality of books of accounts and efficiency in financial

The Fund carried out its last actuarial valuation at 30th June 2016. The report indicated a positive cash flow projection beyond year 2029.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

21

Report of the Director General

This means that the contributions income will be higher than the benefits expenditure resulting in net cash inflows, thus guaranteeing the going-concern status of the Fund. The next actuarial valuation of the Fund is expected to be carried out at 30 June 2019.

11.0 Financial Management Accounts for the 2015/16 were closed in time as per the LAPF Act, and audited in time by M/S PricewaterhouseCoopers

13.1 Change in Government strategies Currently the Government has reduced employment in the public sector such as employment in Education and Health sectors; this has reduced the number of new members registered with the Fund. Also, some private companies have reduced the rate of employment due to some macroeconomic factors. This has also reduced the number of members to be registered with the Fund.

(PwC), on behalf of the Controller and Auditor General (CAG).

13.2 Service Delivery to Members

During this period, the Fund’s accounts were unqualified, i.e. obtained clean audit report, meaning that the Fund pursues sound financial management resulting in good corporate governance, transparency and accountability.

Better service delivery to members continues to be a challenge to the Fund. However, the Board and the Management are

For this year the Fund became the first winner of the Best Presented Financial Statements Award in the category of Pensions and Provident Fund for the year 2015. The award was announced by the National Board of Accountants and Auditors (NBAA) in December 2016.

committed to ensure exceptional service delivery levels with regard to further reducing claims processing time. Besides the existence of the zonal offices, the Fund has embarked on further spatial spread. The Fund continued with its slogan of paying benefits yesterday, by ensuring prompt payment of members’ benefits.

13.3 Registration of New Members

Notwithstanding these noteworthy achievements, the Fund has embarked on further improvements in the financial management area. The programme entails the upgrading of NAVISION DYN to Web Enabled Version and staff capacity building especially on International Financial Reporting Standards (IFRS).

The introduction of the Social Security Regulatory Authority Act has widened the scope of enlisting new members. In response thereof, LAPF continued to carry out various campaigns to register all eligible employees in order to enhance the membership base and expand coverage. Currently, we are also covering the informal sector.

12.0 Risk Management

13.4 Expansion of the Investment Base

The Fund has demonstrated a track record of delivery with prudent risk appetite and it has no intention of changing this approach. Risk assessment was performed for all new developed products, processes and projects. Existing and emerging risks were identified and managed within acceptable risk tolerances. Risk understanding and tolerance for risk was a key consideration in the decision making. The Fund will continue to take a prudent approach to risk management.

The economy poses a challenging investment climate due to limitations in investments choices as the stock market is still underdeveloped. This is further exacerbated by onerous fiscal policies. In response thereof, the Fund has continued to rely on Government securities and Government-guaranteed projects. Bank deposits and real estate also remain as the major alternative investment avenues.

13.5 Benefits Sweeteners to Members

13.0 Challenges and the Way Forward In the face of all the impressive performance recorded during the year under review, the Fund has encountered a number of challenges and bottlenecks which imposed barriers on the Fund’s operations. The Fund’s main challenges and measures to circumvent the same are summarized below:-

22

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Generally, housing, education and general purpose loans remain the popular pre-retirement benefits. Therefore, it is a challenge to the Fund on how to address these needs, which are pertinent in poverty alleviation, without distorting the essence of social security.

Report of the Director General

In response to this challenge, the Fund introduced education loans in addition to SACCOSs, and house loans to members who have reached the age of 55.

14.0 Concluding Remarks As the Fund has continued to record successful business operations for the year 2015/16, we are very positive about the future of the Fund. This is manifested by the increases in membership and contributions; expansion of the investments portfolio and the growth in the net assets base.

the Chairman and Members of the Board of Trustees for their valuable cooperation and guidance. My sincere appreciation goes to the members of LAPF Management and staff for their continued commitment and hard work. To our members, the Government and the general public, we promise you that the Management will continue to work hard in order to continue improving our members’ benefits and quality of service delivery.

We look forward to a positive 2017, taking our Fund to another milestone.

However, notwithstanding these achievements, the Fund encountered several challenges for which response actions have been deplored.

The above notwithstanding, success or challenges, I would like to use this opportunity, on behalf of the Management, to thank the LAPF family. These include the Parent Ministry, President’s Office, Regional Administration and Local Government for its dedication in supporting our activities;

Eliudi B. Sanga DIRECTOR GENERAL

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

23

Management Team

24

Mr. ABUBAKARY NDWATA STATISTICS, ACTUARIAL & RISK MANAGER

Mr. EMMANUE MAYAGE PROCUMENT & SUPPLIES MANAGER

Mr. JAMES MLOWE CMCM

Mr. VICTOR KIKOTI COMPLIANCE MANAGER

Mr. RAMADHANI MKAYENGE PENSIONS MANAGER

Mr. ZAKARIA MACHOKE ZONAL MANAGER CENTRAL ZONE

Mr. JACOB MNYENYELWA HUMAN RESOURCES & ADMINSTRATION MANAGER

Ms. HANEM BABIKER VOLUNTARY SCHEME MANAGER

Mr. FORTUNATUS MAGAMBO TREASURY MANAGER

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Management Team

Mr. YESSAYA MWAKIFULELE ZONAL MANAGER LAKE ZONE

Mr. RAJAB KINAMBE ZONAL MANAGER NORTHERN ZONE

Mr. SAYI LULYALYA ZONAL MANAGER EASTERN ZONE

Mr. SAVUMWE YOTHAM ICT MANAGER

Ms. AMINA KASSIM ZONAL MANAGER DAR ES SALAAM ZONE

Mr. ROCK MASSAWE CHIEF ACCOUNTANT

Mr. MIRAJI SALUM ZONAL MANAGER SOUTHERN HIGHLAND ZONE

Mr. GRAYSON BAMBANZA PROJECT & ESTATE MANAGER

Ms. VONES KOKA ZONAL MANAGER WESTERN ZONE

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

25

MSAMVU BUS TERMINAL-MOROGORO

MSAMVU BUS TERMINAL-MOROGORO

THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LAPF – PENSIONS FUND FOR THE YEAR ENDED 30 JUNE 2016

The Controller and Auditor General National Audit Office, Tanzania Samora Avenue / Ohio Street PO Box 9080, Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 E-mail ocag@nao.go.tz Website: www.nao.go.tz

PricewaterhouseCoopers Pemba House 369 Toure Drive, Oysterbay PO Box 45 Dar es Salaam, Tanzania Tel: +255 (0) 22 219 2000 Fax: +255 (0) 22 219 2200 Website:www.pwc.com

REPFINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

Office of the Controller and Auditor General National Audit Office The United Republic of Tanzania (URT) (Established under Article 143 of the Constitution of the URT) The statutory duties and responsibilities of the Controller and Auditor General are given under Article 143 of the Constitution of the United Republic of Tanzania and amplified in the Public Audit Act, CAP 418.

Vision To be a centre of excellence in public sector auditing.

Mission To provide efficient audit services to enhance accountability and value for money in the collection and use of public resources.

In providing quality services, National Audit Office (NAO) is guided by the following Core Values: Objectivity: We are an impartial organization, offering services to our clients in an objective, and unbiased manner; Excellence: We are professionals providing high quality audit services based on best practices; Integrity: We observe and maintain high standards of ethical behavior and the rule of law; People focus: We focus on stakeholders’ needs by building a culture of good customer care and having competent and motivated work force; Innovation: We are a creative organization that constantly promotes a culture of developing and accepting new ideas from inside and outside the organization; and Best resource utilization: We are an organization that values and uses public resources entrusted to it in efficient, economic and effective manner.

We do this by:-

28

·

Contributing to better stewardship of public funds by ensuring that our clients are accountable for the resources entrusted to them;

·

Helping to improve the quality of public services by supporting innovation on the use of public resources;

·

Providing technical advice to our clients on operational gaps in their operating systems;

·

Systematically involve our clients in the audit process and audit cycles; and

·

Providing audit staff with adequate working tools and facilities that promote independence.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

CONTENTS Group information Report of the Trustees Statement of Trustees’ responsibilities Declaration of the Director of Finance Report of the independent auditor Financial statements: Statement of changes in net assets available for benefits Consolidated statement of net assets available for benefits Statement of net assets available for benefits Statement of cash flows Notes to the financial statements

PAGE 29 30 54 55 56 - 57 58 59 60 61 62 - 123

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

29

REPFINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

Index to the notes to the financial statements Note

30

Page

1

General information

2

Summary of significant accounting policies

62 62

3

Financial risk management

75

4

Critical accounting estimates and judgement

87

5

Contributions

89

6

Benefits expenses

89

7

Investment income

89

8

Other income

91

9 (a)

Administrative expenses

91

9 (b)

Employee benefits expenses

92

9 (c)

Depreciation and amortisation

92

10

Other expenses

93

11

Income tax (credit)/expense

94

12

Cash at bank and in hand

94

13

Deposits with financial institutions

95

14

Available for sale - quoted equity investment

96

15

Available for sale – unquoted equity investment

96

16

Investments

97

17

Government securities

98

18

Corporate bonds

99

19

Receivables and prepayments

99

20

Receivable from Treasury

100

21

Loan investments

101

22

Investment property

102

23 (a)

Investment in associate - TCCIA

104

24 (b)

Investment in subsidiaries

105

25

Stationery and consumables

107

26

Intangible assets

107

27

Property, Plant and equipment

108

28

Leasehold land

111

29

Benefits payable

111

30

Other payables and accrued expenses

112

31

Income tax liabilities

113

32

Deferred income tax

113

33

Employee death benefit obligations

114

34

Financial instruments by category

115

35

Actuarial position

117

36

Prior year adjustement

119

37

Commitments and contingent liabilities

119

38

Cash flows from operating activities

120

39

Related party transactions

121

40

Assets pledged as security for liabilities

123

41

Events after the reporting period

123

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

GROUP INFORMATION

FOR THE YEAR ENDED 30 JUNE 2016

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS:

LAPF Pensions Fund LAPF Building Makole Road PO Box 1501 Dodoma

BANKERS:

CRDB Bank Limited Plc Head Office, Azikiwe Street PO Box 268 Dar es Salaam National Microfinance Bank Plc Head Office, Samora Avenue PO Box 9213 Dar es Salaam National Bank of Commerce Limited Head Office, Sokoine Drive PO Box 1225 Dar es Salaam

LAPF SECRETARY:

The Director General LAPF Pensions Fund LAPF Building Makole Road PO Box 1501 Dodoma

PARENT MINISTRY:

President’s Office Regional Administration and Local Government P. O. Box 1923 Dodoma

ULTIMATE CONTROLLING ENTITY:

The Government of the United Republic of Tanzania

AUDITOR:

The Controller and Auditor General National Audit Office Samora Avenue/Ohio Street PO Box 9080 Dar es Salaam

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

31

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

32

1

INTRODUCTION

The Trustees submit their report together with the audited financial statements for the year ended 30 June 2016, which disclose the state of affairs of LAPF - Pensions Fund (“LAPF” or “Fund”) and its subsidiaries, Msamvu Properties Limited, Mwanza Commercial Complex Limited and Mzizima Properties Limited (together the “Group”).

The Trustees report suppliements the information provided in the financial statements of the Fund.

2

INCORPORATION

LAPF was first established in 1944 in order to create a single Fund for all Local Authorities employees in the colonial Tanganyika. In 1972 Town and District Councils were abolished and LAPF became dormant. It was revived in the year ended 1987, under Section 16 of the Local Government Service Act, No. 10 of 1982, following the re-establishment of Town and District Councils in 1982.

LAPF became an autonomous statutory corporate body under a Board of Trustees in July 2000, following the enactment of the Local Authorities Provident Fund Act, CAP.407. In 2006 the Fund was transformed into a pension scheme under the Local Authorities Pensions Fund Act, 2006. Further amendments to the LAPF Act were made in April 2012 to align it with the Social Security Regulatory Authority Act CAP135. These amendments are effective from July 2012. The Social Security Laws (Amendments) Act No. 5 of 2012 changed the name of the Fund to LAPF – Pensions Fund.

LAPF has its head office in Dodoma, and operates in six zonal offices: Morogoro for the Eastern Zone, Arusha for the Northern Zone, Mwanza for the Lake Zone, Iringa for the Southern Highlands Zone, Dodoma for the Central Zone and the Dar es Salaam special zone. As part of strategies of the Fund to extend services close to its esteemed members, it has opened liaison offices in Rukwa, Mtwara, Kigoma, Tanga, Mbeya regions and Kahama District.

3

MISSION AND VISION

Vision Statement

To become the most preferred Pension Fund.

Mission Statement

LAPF is dedicated to being a dynamic provider of social security benefits through the utilization of competent and motivated staff.

4

PRINCIPAL ACTIVITIES OF LAPF

LAPF operates a Defined Benefit (DB) scheme and is charged with the following activities: a.

To provide a scheme for payment of retirement and other benefits to insured persons payable under the Act;

b.

To work towards the gradual and continuous improvement of benefits payable to insured persons under the Act; and

c.

To formulate policies and strategies and administer the scheme in accordance with the Act.

In addition to the DB scheme, LAPF operates a voluntary Defined Contribution (DC) scheme.

There has been no significant change in the principal activities of LAPF during the financial year ended 30 June 2016.

In the discharge of the above functions, LAPF is undertaking the following activities on day to day basis: a.

Registration of members and contributing employers to the Fund;

b.

Collection of members’ contributions from employers;

c.

Payment of benefits to eligible members and other claims;

d.

Investment of surplus funds in profitable investments; and

e.

Accounting for members’ funds.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

4

PRINCIPAL ACTIVITIES OF LAPF (CONTINUED)

Benefits Coverage

According to Section 26 of the LAPF Act, CAP 407, the benefits coverage include retirement pension, survivorship benefits, invalidity benefits, withdrawal in respect of marriage, withdrawal in respect of emigration or unemployment, maternity benefits, sickness benefits, funeral grant, and education grant. With the exception of education grant, all benefits were offered during the year. Education benefits are offered in the form of education loans.

During the year ended 30 June 2016, the fund introduced Jikimu loans to its members. As at 30 June 2016, 420 members were offered Jikimu loans amounting to Shs 761.69 million.

Funding Policy

The Fund’s funding policy provides for monthly contributions calculated using determined rates that are expressed as percentages of basic salary, which are used to accumulate assets to pay pensions and other benefits when due.

Investment Policy and Strategy

The investment policy of the Fund duly approved by the Board of Trustees has set limits on the following permissible areas of investment.

Investment Category

% limit

Placement in banks (FDR)

0 – 35

Government securities

20 –70

Corporate debt security

0 – 40

Direct loan to the Government

0 – 10

Loan to corporate and cooperative Societies

0 – 10

Equity investment

0 – 15

Investment properties

0 – 30

Licensed collective schemes

0 – 10

Total

Total investments in 2016 Shs 000’ 62,467,442

% 2016 6.52%

Total investments in 2015 Shs 000’

% 2015

61,094,332

7.93% 42.44%

474,832,034

49.57%

326,847,974 4,897,491

0.64%

134,619,241

14.05%

120,560,955

15.65%

459,448

0.05%

205,005,200

1,609,776

78,832,262 -

957,825,403

0.17%

559,836

0.07%

84,808,461

11.01%

21.40%

171,448,185

22.26%

0.00%

-

0.00%

100.00%

770,217,234

100.00%

8.23%

The LAPF investment strategy focus onthe need to maintain adequate liquidity, maximize returns with minimal risk through diversification and ensuring absolute security of the Fund’s resources. The investment limits are in compliance with Bank of Tanzania and Social Security Regulatory Authority (SSRA) Social Security Investment Guidelines. The policy is reviewed annually or as circumstances require.

5

MEMBERS OF LAPF

During the year, membership to the Fund was governed by Section 2 of the LAPF Act CAP 407 as all employees of Local Government Authorities, the Local Government Loans Board, LAPF, organizations under ownership of local government authorities and any other private or public institutions or self-employed person who elect to join LAPF. LAPF receives contributions in the ratio of 15%:5%, from the employers and employees, respectively. However, there are some instances where the employers of private sectors enter into arrangement with LAPF Pensions Fund on the basis that their employees will be contributed in the ratio of 10%:10%.

Following the enactment of Social Security Regulatory Act, CAP135, membership to LAPF is open to all sectors of the economy. Accordingly, the LAPF Act was amended to reflect this position effectively from 1 July 2012.

During the year, the total number of participating employers amounted to 1,225 (2015: 818). These are mainly Local Government Authorities, Government Ministries, Independent Government departments and the private sector. As at 30 June 2016 LAPF had 166,260 active members (2015: 150,835) who contributed to the Fund.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

33

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

6

MANAGEMENT OF LAPF

The Fund is under the supervision of the Board of Trustees and the day to day management is entrusted to the Director General.

During the year the Board comprised of seven non-executive Trustees. The tenure of the Board is three years. The Chairman is appointed by the President of United Republic of Tanzania. All other Trustees are appointed by the Minister responsible for local government. Vice-Chairman is appointed by the Board amongst the Trustees. As at the date of issue of this report the vice chairman for the new Board is yet to be appointed. The composition of the Board is tripartite with representatives from the government, contributing employers and their employees. The Board reports to the Minister responsible for local government who may issue directives, as may be deemed appropriate from time to time.

The organization structure of LAPF comprises the following directorates: · · · · ·

Member services; Planning and investments; Finance; Human resources and administration; and Information and Communication Technology.

There are two specified units whose heads are directors or equivalent: · ·

Legal Services; and Internal Audit.

In addition there are three independent units which reports directly to the Director General. These are headed by managers: · · ·

Procurement Management Unit (PMU); Actuarial, Risk and Statistical Unit; and Corporate Marketing and Communication Unit.

All directorates and specified units are headed by directors except legal services unit which is headed by Chief Legal Counsel. The Director General reports to the Board of Trustees. All directors and Chief Legal Counsel report to the Director General. The Director of Internal Audit reports to the Director General administratively and to the Board Audit Committee on functional matters.

7

MAIN OBJECTIVES OF THE FUND DURING THE YEAR

The Fund’s main corporate objectives during the year were: i.

To increase membership base from the current average growth rate of 12% to 15% annually;

ii.

To increase annual contributions from the current average growth rate of 30% to 35%;

iii.

To increase return on investments from an average return of 10% to 12%;

iv.

To increase efficiency and quality of services to members and other stakeholders.

8

34

THE FUND’S STRATEGIES FOR THE STATED OBJECTIVES i.

To promote and create awareness of the Fund;

ii.

To develop mechanism to cover all potential members;

iii.

To mobilise membership from private sector

iv.

To increase compliance rate;

v.

To implement Defined Contribution Scheme (DCS);

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

vi.

To diversify investment portfolio and focusing on high yield investments;

vii.

To evaluate and monitor financial markets trends to determine attractive rates;

viii.

To enhance conducive working environment;

ix.

To improve staff welfare;

x.

To reduce benefit processing period; and

xi.

To enhance benefit packages.

9

OPERATING AND FINANCIAL REVIEW

ANALYSIS OF STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

Additions to net assets

Contributions and benefits

As reflected in the statement of changes in net assets available for benefits, contributions during the year amounted to Shs 279.68 billion (2015: Shs 210.07 billion) representing an increase of 33.14%. The increase is due to increase in contributing members from 150,835 members at 30 June 2015 to 166,260 members at 30 June 2016. The increase in contribution is also due to general salary increase. Benefits paid during the year amounted to Shs 107.25 billion (2015: Shs 88.60 billion) representing an increase of 21.05%. The increase in benefit payments is attributed to increase in beneficiaries from 6,581 beneficiaries for the year ended 30 June 2015 to 8,011 beneficiaries for the year ended 30 June 2016.

The ratio of benefits to contributions: Year

Contributions

Benefits

Net addition

Shs billion

Shs billion

Shs billion 172.44

38.35%

210.07

88.6

121.47

42.18%

33.14%

21.05%

2015/16 2014/15 % change

279.68

107.25

% change

41.96%

In view of the above, the net addition from dealings with members, which is calculated as contributions less benefits, increased by 41.96% from Shs 121.47 billion in 2015 to Shs 172.44 billion in 2016. Benefits to contributions declined from 42% in 2014/15 to 38% in 2015/16 signifying increasing positive cashflows for the Fund.

Below is the table showing the movement of members during the year: Description

Amount

Active members at 1 July 2015

150,835

New members during the year

16,001

Reactivated dormant members during the year

6,055

Dormant and merged members

(1,705)

Members paid an exited during the year

(4,926)

Members at 30 June 2016

166,260

% change

10.22%

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

35

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

36

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

ANALYSIS OF STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)

Additions to net assets (continued)

Investment income

The Group’s income from investments amounted to Shs 96.03 billion (2015: Shs 72.72 billion) which represents an annual increase of 32%. The main sources of investment income to the Group are interest income, dividend, rent income and fair value gain on investments. For example, during the year the Group recorded a fair value gain on its investment properties amounting to Shs 40.09 billion (2015: Shs 8.9 billion).

The Fund’s income from investments stood at Shs 93.87 billion (2015: Shs 72.07 billion) which represents an annual increase of 30.25%. The main sources of investment income to the Fund are interest income, dividend and rent income. In addition, during the year the Fund recorded a fair value gain on its investment properties amounting to Shs 15.5 billion (2015: Shs 8.9 billion), a loss on equity investments amounting to Shs 14.36 billion (2015: gain of Shs 18.82 billion) due to decline in prices of listed shares, and a fair value gain on Government securities amounting to Shs 4.05 billion (2015: decrease of Shs 6.31 billion).

Other income

Other income amounted to Shs 3.3 billion (2015: Shs 1.44 billion) which includes tender fees and penalties on delayed contributions.

During the year, the Fund incurred a loss of Shs 3.02 billion (2015: a gain of Shs 4.96 billion) on its investment in associate (TCCIA Investment Company Ltd); due to decline of share prices in the Dar es Salaam Stock Exchange where the major investments of the associate are found.

Deductions from net assets

During the year, total operating expenses for the Group amounted to Shs 36.57 billion (2015: Shs 41.79 billion), representing a decrease of 12.49%. Total operating expenses for the Fund amounted to Shs 34.48 billion (2015: Shs 40.88 billion), representing a decrease of 15.65%. The decrease is mainly explained by a decrease in impairment charge on Government loans. Besides the general decrease in operating expenses, there is a noticeable increase in employee benefits due to normal salary review and increase in the number of employees.

Results for the year

The Group’s increase in net assets after income tax stood at Shs 248.25 billion (2015: Shs 179.49 billion) representing an increase of 38.3%. The Fund’s increase in net assets after income tax for the year stood at Shs 229.71 billion (2015: Shs 179.77 billion) representing an increase of 27.78% from prior year. The Group and Fund incurred an income tax expense of Shs 20.77 billion (2015: Shs 9.30 billion) and Shs 13.59 billion (2015: Shs 9.30 billion) respectively.

ANALYSIS OF STAMENTS OF CASH FLOWS

As at 30 June 2016, the Group had cash and cash equivalents of Shs 35.54 billion compared to Shs 6.64 billion as at 30 June 2015. The Fund’s cash and cash equivalents as at 30 June 2016 was Shs 35.07 billion (2016: Shs 6.63 billion).

The increase in cash and cash equivalent is attributable to receipts of contributions from Treasury at year end.

ANALYSIS OF STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

Total Assets

Total assets for the Group amounted to Shs 1.31 trillion (2015: Shs 1.04 trillion) representing 25.96% increase. For the Fund Shs 1.27 trillion (2015: Shs 1.03 trillion) representing 23.30% increase. The increase is generally due to expansion of the investment portifolio.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

ANALYSIS OF THE STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) Total assets of the Group Description Investments Other assets Total

30 June 2016 Shs billion

% of total assets

30 June 2015 Shs billion

195.36

15%

181.86

16%

1,115.33

85%

% of total assets

860.37

84%

1,310.36

100%

1,042.23

100%

30 June 2016 Shs billion

% of total assets

30 June 2015 Shs billion

% of total assets

Total assets of the Fund Description Investments Other assets Total

1,098.60

87%

884.26

86%

167.92

13%

147.09

14%

1,266.52

100%

1,031.35

100%

Investments

Investment transactions during the year were undertaken in accordance with the LAPF Act CAP 407, the Fund’s Investment Policy and Social Security Investment Guidelines, 2012.

Investments of the Group comprise government securities, corporate bonds, bank deposits, shares, investment properties and loans. As at 30 June 2016, Group investment portfolio increased by 30% to Shs 1,115 billion (2015: Shs 806.36 billion). Investments of the Fund as at 30 June 2016 amounted to Shs 1,098.4 billion (2015: Shs 884.26 billion). This represents an increase of 24.2%. The increase is attributed to additional investments made during the year due to increase in contributions and investments income.

The distribution of the investment portfolio of the Group and the Fund as at 30 June 2016 is as summarized in the table below:

Investment category Group Government securities Corporate bonds Deposits with financial institutions Equity Investment property Loans Investment in associate Total investments

30 June 2016 Shs billions

30 June % of the % of the 2015 Portfolio Portfolio Shs billions

Increase during the year Shs billions

% Change

474.83 1.61

42.57% 0.14%

304.82 4.89

35.45% 0.55%

170.01 (3.28)

56% (67%)

63.39 78.83 309.64 179.47 7.55 1,115.33

5.68% 7.07% 27.77% 16.10% 0.68% 100.00%

61.5 84.80 235.75 157.9 10.7 860.36

7.15% 9.86% 27.43% 18.36% 1.25% 100.00%

1.89 (5.97) 73.89 21.57 (3.15) 254.96

4% (7%) 31% 14% (29%) 30%

474.8 1.61

43.22% 0.16%

304.82 4.89

34.47% 0.55%

169.98 (3.28)

55.8% (67.1)%

62.5 78.8 205 179.5 7.6 88.6 1,098.4

5.69% 7.17% 18.66% 16.34% 0.69% 8.07% 100.00%

61.09 84.81 171.45 157.9 10.7 88.6 884.26

6.91% 9.59% 19.39% 17.86% 1.21% 10.02% 100.00%

1.41 (6.01) 33.55 21.63 (3.10) 214.18

2.3% (7.1%) 19.6% 13.7% (28.9%) 0% 24.2%

Fund Government securities Corporate bonds Deposits with financial institutions Equity Investment property Loans Investment in associate Investment in subsidiaries Total investments

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

37

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

ANALYSIS OF (CONTINUED)

The increase is explained as follows:

Government securities

The increase is due to new investments made during the year.

Equity

Decrease in equity investments is due to decrease in fair values of listed securities as at 30 June 2016 which had a total market value of Shs 73.70 billion (2015: Shs 78.65 billion). There was significant decrease in value of shares related to shares held in Tanzania Cigarette Company Limited, Tanga Cement Limited, Twiga Cement Limited, CRDB Bank and NMB Bank. During the year the Fund purchased 260,271 shares from Tanzania Breweries Limited for Shs 4.00 billion and 9,679,591 shares from CRDB Bank for Shs 3.39 billion.

Investment Properties

Increase is due to revaluation gain of Shs 15.51 billion based on independent valuation done by M/S Ardhi University.

The increase is also contributed by additions for the Millennium Towers Phase II, Dodoma office building and other buildings amounting to Shs 19.95 billion..

Loans

The increase of loans during the year is attributable to new loan facilities issued to LAPF members. During the year, the Fund disbursed Shs 8.16 billion as direct loans to members and Shs 100 million through Saving and Credit Societies.

Loans to members and SACCOS are guaranteed by members’ vested benefits and their employers respectively.

The outstanding balances of loans secured by government guarantee as at 30 June 2016 was Shs 121.96 billion (2015: Shs 107.91 billion). This is highlighted in the table below:

THE

STATEMENT

Name

OF

CHANGES

Principal Shs’ 000

NET

ASSETS

AVAILABLE

FOR

BENEFITS

Accrued interest

Provision for Impairment

Outstanding balance

Shs’ 000

Shs’ 000

Shs’ 000

The University of Dodoma

21,335,622

21,361,707

(100,822)

42,596,507

Local Government Training Institute - Hombolo

36,449,066

33,398,194

(12,560,236)

57,287,024

2,421,619

2,128,876

-

4,550,495

10,013,552

76,389

3,876,890

3,557,326

74,096,749

60,522,492

Bunge Project Government of Tanzania- Loan Facility Nelson Mandela African Institution of Science &Technology - Arusha Total

38

IN

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

(12,661,058)

10,089,941 7,434,216 121,958,183

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

ANALYSIS OF THE STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)

The total amount of Government loans, back purchase and contributions receivable from the Government was Shs 240.85 billion (2015: Shs 230.37 billion) as shown below:

Government loans

As at 30 June 2016

As at 30 June 2015

Shs ‘000’

Shs ‘000’

121,958,183

107,911,822

Receivable from Treasury (Back-purchase receivable)

74,425,617

75,214,400

15% Contributions receivable

44,467,720

47,248,783

240,851,520

230,375,005

Total

Back-purchase receivable refers to the amount receivable from the Governement for funding the conversion of the Fund from provident to pension scheme.

Other Assets 30 June 2016 The Group

% of total

Shs ‘000’

30 June 2015 Shs ‘000’

% of total

Receivables and prepayments

89,449,909

45.87%

82,656,133

45.45%

Receivable from Treasury

74,425,617

38.16%

75,213,400

41.36%

Cash and bank

18,865,644

9.67%

6,122,073

3.37%

Property and equipment

9,676,206

4.96%

7,965,208

4.38%

Leasehold land

2,044,925

1.05%

9,377,696

5.16%

553,437

0.28%

525,974

0.29%

195,015,738

100%

181,860,484

100%

67,407,447

40.09%

61,499,742

41.81%

Others Total The Fund

Receivables and prepayments Receivable from Treasury

74,425,617

44.26%

75,214,400

51.13%

Cash and bank

18,399,683

10.94%

6,114,124

4.16%

7,358,627

4.38%

3,742,408

2.54%

553,437

0.33%

525,974

0.36%

168,144,811

100%

147,096,648

100%

Property and equipment Others Total

Other assets are mainly represented by the amount receivable from Treasury of Shs 74.43 billion (2015: Shs 75.21 billion). Trustees are of the view that the Government will continue to honor this obligation.

Another major component of other assets is receivables and prepayments which stood at Shs 67.4 billion at 30 June 2016 (2015: Shs 61.50 billion) representing an increase of 9.88%. Included in this amount is outstanding contributions from Treasury Shs 44.47 billion.

Liabilities

As at 30 June 2016 total liabilities of the Group were Shs 91.13 billion (2015: Shs 71.12 billion). Liabilities of the Fund as at 30 June 2016 were Shs 82.1 billion (2015: Shs 92.01 billion).These liabilities comprise benefits payable to members of Shs 15.52 billion (2015: Shs 19.39 billion), deferred tax liabilities of Shs 49.95 billion (2015: Shs 31.25 billion), corporate tax liabilities of Shs 12.2 billion (2015: Shs 11.34 billion) and benefits deposit from Treasury Shs 1.47 billion (2015: Shs 4.12 billion). For the Fund, these liabilities include amount due to subsidiaries Shs 14.63 billion (2015: Shs 21.04 billion).

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

39

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

ANALYSIS OF (CONTINUED)

Net assets

The net assets of the Group as at 30 June 2016 amounted to Shs 1,219.23 billion compared to Shs 971.1 billion for the year ended 30 June 2015. The net assets of the Fund as at 30 June 2016 amounted to Shs 1,169.01 billion compared to Shs 939.35 billion for the year ended 30 June 2015. This represents an increase of 24.45% (2015: 23.67%). The Fund’s annual average growth rate of net assets over the last five years is 21.1%.

Key performance indicators and efficiency ratios for the Fund

Financial Performance Indicators

STATEMENT

OF

CHANGES

IN

NET

ASSETS

AVAILABLE

FOR

BENEFITS

Performance indicator/ratio

Definition and formula

Purpose

2015/16

2014/15

Investment ratios

(Total investments/Total assets) x 100

Showing impact of total investments to total assets

86.74%

85.74%

Return on Income = (Investments income/ total investments) x 100

Showing impact of investment income from investments

9.03%

10.57%

Return on total assets = (Investments income/Total assets) x 100

Showing impact of investment income to total assets

7.83%

9.06%

(Investments income/net assets) x 100

Showing impact of investment income to net assets

8.48%

9.95%

Current assets/ Current liabilities

Showing the liquidity of the Fund

2:1

1.7:1

Showing impact of bene(Benefits / contributions) x 100 fits paid out of contribution income

38.35%

42.18%

(Benefits / total income) x 100

Showing impact of benefits paid to total income

28.31%

29.19%

(Benefits/Total expenditure) x100

Showing impact of benefits paid to total expenditure

75.67%

68.43%

(Administrative expenses / contributions) x 100

Showing impact of administrative expenses to total contributions

12.33%

19.46%

(Administrative expenses / total income) x 100

Showing impact of administrative expenses to total income

9.10%

13.47%

Net assets /Total benefits liability

Showing funding level of the Fund

43.49%

58.68%

Income ratios

Liquidity ratio

Benefits ratios

Expenditure Ratios

Funding Ratio

40

THE

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

9

OPERATING AND FINANCIAL REVIEW (CONTINUED)

Key performance indicators and efficiency ratios (continued)

Non-Financial Performance Indicators Performance indicator

2015/16

2014/15

93%

93%

Average benefit processing time (days)

10

10

Customer service lounges/call centres

1

1

New offices opened

2

4

6.7%

6.7%

Compliance rate

Administrative efficiency ratio

Changes in the Fund during the period.

During the year under review there were no any significant change in benefits computation/determination.

10

ACCOUNTING POLICIES

The accounting policies used in the preparation of the financial statements have been disclosed in Note 2 to the financial statements. These policies are all considered to be critical to an understanding of the performance and financial position of the Fund. During this financial year, there were no major changes in the accounting policies adopted by the Fund.

11

SOLVENCY EVALUATION

Accumulation of sufficient funds to meet current and future obligations to members is a primary responsibility of the Trustees. The Trustees have reviewed the current financial position of the Fund and confirms that applicable accounting standards have been followed and that the financial statements have been prepared on a going concern basis.

Based on the current actuarial valuation as at 30 June 2016 performed by Alexander Forbes Financial Services (EA) Limited, an independent firm of actuaries, the funding level has declined to 43.5% from 58.7% in 2013. The decline is attributable to increase in the average members salary. However, the cashflow projections to year 2055 and beyond shows positive and consistently increasing cash flows signifying existence of the Fund for a foreseeable future. The next valuation is due in June 2019.

Further details of the actuarial position of the Fund are disclosed in note 35 of the financial statements.

12

RESPONSIBLE BEHAVIORS TOWARDS STAKEHOLDERS

The Trustees believe that members’ welfare is the primary reason for the existence of the Fund. Several measures have been taken to institute a responsible behavior towards members of the Fund and other stakeholders. These measures include the establishment of a customer services lounge at head office, strengthening of zonal services so as to move services closer to members with plans to open more regional offices and liason offices, and reducing the members’ benefit processing time by commissioning a computer based Pensions Management System (PMS) and integrating it to the financial reporting system. Furthermore, all members’ claims and enquiries receive immediate attention.

The Fund conducts an annual stakeholders’ conference which is an important forum to gather the views of all the stakeholders in order to improve accountability and quality of services and benefits to members. The last annual stakeholders’ conference for 2016 was held on 10 and 11 March 2016.

13

CURRENT AND FUTURE DEVELOPMENT PLANS

The current and future development plans centers around improved benefits and quality service delivery to members of the Fund. In this endeavor, the following priority areas have been identified:

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

41

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

14

·

Upgrading and integration of Pensions Management System (Fundworx) and Financial Management system (Microsoft Dynamic NAV) so as to enhance corporate efficiency in business processes;

·

Expansion of the Fund’s investment base through the undertaking of new projects, and identification of other lucrative investments avenues including the industrial sector.

·

Geographical expansion of the Fund’s activities so as to move its services closer to its members, facilitate the registration of new members and improve competitiveness and operational performance;

·

Capacity building for the Board of Trustees, staff and management;

·

Alignment of LAPF Act, policies, systems and procedures to comply with the Social Security Regulatory Act and Guidelines issued from time to time;

·

Expansion of the membership base;

·

Expansion of the members’ loan portfolio, through SACCOS and direct lending through housing and education loans and low cost housing schemes to ensure that our members enjoy maximum non-conventional benefits prior to retirement; and

·

Effective risk management.

FACTORS THAT ARE LIKELY TO AFFECT THE CURRENT AND FUTURE DEVELOPMENT PLANS Opportunities:

42

i.

Private Public Partnership in the industrial sector

ii.

Strengtherning of Central and Local Government Authorities may lead to increased recruitment of staff and hence increase membership of the Fund;

iii.

The possibility of forging business partnerships with Local Authorities and Central Government may avail investment opportunities in real estate development and industrial parks for Small and Medium Enterprises (SMEs). The coming opportunity for municipal bonds will create an investment opportunity;

iv.

The establishment of SACCOS for employees working with the councils provides an opportunity for the Fund to introduce members’ loan though SACCOS that may attract potential members;

v.

Technological development opens up opportunities for the Fund to adopt new technology, which will minimize costs and increase efficiency;

vi.

Investment opportunities in Special Economic Zones;

vii.

Membership of LAPF in International Social Security Association (ISSA) and East and Central African Social Security Association (ECASSA) will enhance sharing of knowledge and technical expertise, which may facilitate the on-going Transformation of the Fund;

viii.

Investments opportunity within East Africa Region in view of the new BOT Investments guidelines 2014;

ix.

The East Africa Community (EAC) opens up opportunity for implementing joint studies in areas such as portability of benefits and other regional social security reforms; and

x.

In addition to its traditional membership base, the Fund is now free to register members from all sectors of the economy.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

Challenges: The challenges facing the Fund include: i.

The tax legislation may reduce the Fund’s ability to pay attractive benefits to its members and also reduce funds available for investments;

ii.

Plans to expand coverage and to get service delivery closer to members will lead to an increase in administrative costs;

iii.

The prevalence of HIV/AIDS may lead to reduced contributions from members and an increase of survivors’ benefits;

iv.

Delays in finalization of social security reforms have adverse effects on the operations of the Fund. An example of pending reforms is the establishment of Social Security Appeal Tribunal;

v.

Competition with other social security institutions;

vi.

High cost of acquiring and maintaining application software;

vii.

Lack of properly defined legislative and policy framework to shape e-governance;

viii.

Lack of systems interface across Government entities (NIDA, BRELA, TIC, TRA and TCRA);

ix.

Low level of compliance by informal sector members;

x.

Low level of awareness of social security services;

xi.

The impact of the Government monitoring monetary and fiscal policies; and

xii.

Prevalence of inherited mentality among prospective members (especially teachers) to other schemes.

15

STOCK EXCHANGE INFORMATION

The Fund, its subsidiaries and associates are not listed but the Fund has invested in selected equity and bonds traded in the Dar es Salaam Stock Exchange.

The distribution of equity investments held by the Fund and listed at Dar es Salaam Stock Exchange as at 30 June 2016 was as follows:

30 June 2016

30 June 2015

Company

Number of Shares

Tanzania Breweries Limited

2,796,671

13,710

38,342

2,536,400

14,500

36,778

624,000

12,000

7,488

624,000

16,500

10,296

Tanzania Cigarette Company Limited Tanga Cement Company Limited

Price per share (Shs)

Value (Shs’m)

Number of Shares

Price per share (Shs)

Value (Shs’m)

220,780

1,650

364

220,780

3,810

841

Umoja Trust Fund of Tanzania

14,894,150

479.1

7,136

14,894,150

455.5

6,784

CRDB Bank Plc

58,077,549

310

18,004

48,397,958

400

19,359

1,005,425

1,600

1,609

1,005,425

3,470

3,489

National Microfinance Bank Limited Tanzania Portland Cement Company Limited

315,678

2,390

754

315,678

3,500

1105

NICOL

1,000,000

245

245

1,000,000

245

245

TOTAL

78,934,253

73,942

68,994,391

78,897

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

43

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

16

ADMINISTRATIVE EFFICIENCY The Fund has achieved the following administrative efficiencies:

44

(i)

The Fund has not borrowed funds and consequently no interest charges have accrued against the Fund. All statutory payments such as Pay As You Earn (PAYE), pension contributions and other statutory deductions effected from staff salaries were made and submitted to the relevant authorities on time.

(ii)

All properties of the Fund have or will have requisite certificates of ownership. No loss of assets was sustained during the year under review.

(iii)

The existing internal control systems are invariably complied with. This has resulted in smooth operations of the Fund. The Fund had 221 employees as at 30 June 2016 (2015: 195). The Fund’s subsidiaries; Msamvu Properties Company Limited had 11 employees as at 30 June 2016 (2015: 10) and Mwanza Commercial Complex Limited had 7 employees as at 30 June 2016 (2015: Nil).The Mzizima Properties Limited is yet to commence operations.

(iv)

The Trustees have reviewed the cash flow forecasts of the Fund and confirm that it will be able to meet its maturing obligations and capital commitments without liquidating any investments.

17

TRUSTEES

The Board of Trustees which existed during the year was dissolved by the appointing authority on 21 September 2016 and a new Board was appointed before the issue of this report as shown below:

Trustee who held office during the year.

S/N Name

Position

Nationality

Age Discipline and Qualifications

Remarks

1

Prof. Hasa M. Mlawa

Chairman

Tanzanian

68

Appointed on 16 October 2014 and exited on 21 September 2016

2

Mr. Hussein S. Kamote

Vice Chair- Tanzanian man

61

Professor in Technology Management/ Consultant PhD (Technology Management and Continuous Improvement) Economist; MSc (Economics), BA (Economics)

3

Ms. Janet Reuben -Lekashingo

Trustee

Tanzanian

44

Management Development Master Degree; (Arts), Bachelor Degree (Arts)

Appointed on 16 October 2014 and exited on 21 September 2016

4

Mr. Jeremia E. Sendoro Trustee

Tanzanian

51

Appointed on 16 October 2014 and exited on 21 September 2016

5

Ramadhan K. Njaa

Trustee

Tanzanian

53

6

Ms. Sarah D. Mwaipopo Trustee

Tanzanian

40

Economist, Planning & Policy analyst; MA (Health Management, Planning and Policy); Bachelor of Arts (Economics) Lawyer, Pg. Dip. (Law, Mediation and Arbitration) Adv. Dip (Cooperative Management) Lawyer, LLM (International Law and Human Rights), LLB (Hons)

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Appointed on 16 October 2014 and exited on 21 September 2016

Appointed on 16 October 2014 and exited on 21 September 2016 Appointed on 16 October 2014 and exited on 21 September 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

17

TRUSTEES (CONTINUED)

Current Board Members

S/N

Name

Position

Nationality

Age

Discipline and Qualifications

Remarks

1

Prof. Faustine K. Bee

Chairman

Tanzanian

58

Appointed on 18 November 2016

2

Dr. Rehema G. Kilonzo

Trustee

Tanzanian

51

3

Mr. Said A. Nzori

Trustee

Tanzanian

54

4

Mr. Suleiman A. Kikingo

Trustee

Tanzanian

57

Professor of Development Studies, hold B.A. in Economics, M.A. in Development Studies, Ph.D in Literature and Philosophy in Development Studies Doctor of Philosophy in Sociology, hold B.A in Sociology, M.A. (Sociology), Post Graduate Diploma in Research Methodology, PhD in Sociology.

Lawyer, LLM, LLB and Diploma in Translation Certificate in Legislative Drafting, Certificate in Industrial Management, Supervisory Management, Leadership in Local Government. Certificate in Trade Union Leadership.

5

Mr. Henry Katabwa

Trustee

Tanzanian

53

Masters degree in Appointed on Public Administra- 11 January 2017 tion, (HRM), Advanced Diploma in Public Administration and Certificate in Change Management.

6

Mr. Cornellius K. Kariwa

Trustee

Tanzanian

57

7

Mr. Tumaini P. Nyamhokya

Trustee

Tanzanian

45

Masters Degree in Law (LLM- IT & T) E-Commerce Law, Corporate Labour Relations Consultant.

Bachelor Degree in Law (LLB) Bachelor Degree in Law (LLB), Certificate in Trade Union Leadership & Labour Relations.

Appointed on 11 January 2017

Appointed on 11 January 2017 Appointed on 11 January 2017

Appointed on 11 January 2017

Appointed on 11 January 2017

The Secretary to the Board is Mr. Eliudi B. Sanga who is the Director General. The Director General is an ex-officio and is not entitled to vote.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

45

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

18

TRUSTEES’ INTEREST

LAPF is a public body established by LAPF Act CAP.407. It is under the supervision and control of the Board of Trustees. During the year Trustees did not have any interest in the Fund except for those reported under Note 39 to the financial statements. The Trustees Report supplements the information provided in the financial statements of the Fund.

19

TRUSTEES’ REMUNERATION

All the Trustees are non-executive. The Trustees were remunerated as approved by the Minister responsible for Local Government. During the year total payment and allowances given to Trustees amounted to Shs 46.2 million (2015: Shs 57.4 million). Other Board expenses which include sitting allowances for Board and Committee meetings as well as Trustee’s capacity building amounted to Shs 682.42 million (2015: Shs 851.52 million).

20

CORPORATE GOVERNANCE

The Board of Trustees is the supreme policy making body in the Fund. The Board of Trustees is charged with the following functions as per the LAPF Act Cap. 407.

46

·

To manage and administer the scheme in a fiduciary capacity;

·

Protect, safeguard and promote members interests;

·

Ensure that there is good corporate governance;

·

Approving Annual Plans and Budgets;

·

Formulation of policies;

·

Exercise discretionary powers in the best interest of the Fund; and

·

Advising the Minister responsible on the affairs of the Fund.

The Trustees consider corporate governance as key to good performance of the Fund. The Board is also responsible for overseeing the Fund performance and internal controls. In view of this, the Trustees confirm that: ·

They met regularly throughout the year;

·

All the Trustees are non-executive and retains full and effective control of the Fund and monitor the executive management;

·

They accept and exercise responsibility for strategic and policy decisions, the approval of budgets and the monitoring of performance;

·

They continued to strengthen good governance systems by overseeing the implementation of various policies and guidelines in the areas of financial management, operations, investments, internal audit, human resources and ICT; and

·

They acted and behaved ethically in discharge of their responsibilities.

Board meetings

During the year ended 30 June 2016 the Board of Trustees held seven meetings (2015: eighteen meetings). The Board made various decisions including but not limited to, approving the Annual Investment Plan and Budget for the year ended 30 June 2016, approving or reviewing Board and Committee chatters, approving annual procurement plan, approving and reviewing policies of the Fund and signing the audited financial statements for the year ended 30 June 2015.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

20

CORPORATE GOVERNANCE (CONTINUED)

Board meetings (continued)

All members of the Board who held office during the year were committed to attend the Board meetings, except where it was not possible to do so. Below is a summary indicating the number of meetings attended by members of the Board from 1 July 2015 to 30 June 2016.

S/N 1

Name Prof. Hasa M. Mlawa

Board

Number of meetings FC

18

N/A

AC

N/A

IC 3

HC

N/A

2

Mr. Hussein S. Kamote

9

N/A

5

1

2

3

Mr. Eliudi B. Sanga

15

3

5

4

4

4

Mr. Jeremia E. Sendoro

10

3

5

1

N/A

5

Ms. Janet R. Lekashingo

9

3

N/A

1

2

6

Ms. Sarah D. Mwaipopo

4

N/A

N/A

1

1

7

Mr. Ramadhani K. Njaa

10

3

N/A

N/A

2

IC – Investments Committee FC – Finance and Planning Committee AC – Audit and Risk Committee HC – Human Resources and Legal Affairs Committee N/A – Not Applicable (not a member)

Board committees

Clause 6 of Schedule 1 to the LAPF Act CAP 407 provides for the establishment of various committees of the Board.

The key role of all the committees is to assist the Board in the review and analysis of various reports submitted by the executive management in relation to specific areas of performance. Whilst the Board is the decision making organ, the committees have an advisory role to the Board.

The Fund has four committees and during the year meetings were held as follows: Investment committee held four meetings (2015 - four meetings), Human Resource and Legal Affairs Committee held four meetings (2015 - four meetings), Audit committee held five meetings (2015 - five meetings), and Finance and Planning committee held five meetings (2015 – four meetings).In the event a committee member is not available, other Board members from another committee may be invited.

Investment committee

The Investments Committee is made up of three Trustees. The Committee is mandated to assist the Board in the review and analysis of the following main areas:·

Annual investment plan;

·

Investment appraisal reports for new investments;

·

Quarterly corporate performance appraisals ;

·

Projects progress reports; and

·

Investment policies and guidelines.

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REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

20

CORPORATE GOVERNANCE (CONTINUED)

The composition of the committees during the year was as follows: Name

Position

Nationality

Discipline &Qualifications

Remarks

Mr. Hussein S. Kamote

Chairman

Tanzanian

- Economist; MSc (Economics), BA (Economics)

Appointed on 16 October 2014 and exited on 21 September 2016

Mr. Jeremia E Sendoro

Member

Tanzanian

- Economist, Planning &Policy analyst; MA (Health Management, Planning and Policy); Bachelor of Arts (Economics)

Appointed on 16 October 2014 and exited on 21 September 2016

Ms. Sarah D. Mwaipopo

Member

Tanzanian

- Lawyer, LLM (International Law and Human Rights), LLB (Hons)

Appointed on 16 October 2014 and exited on 21 September 2016

Current composition of the Committee

Dr. Rehema G. Kilonzo

Chairperson

Tanzanian

- Doctor of Philosophy in Sociology, hold B.A in Sociology, M.A. (Sociology), Post Graduate Diploma in Research Methodology, PhD in Sociology.

Appointed on 20 January 2017

Mr. Cornellius K. Kariwa

Member

Tanzanian

- Masters Degree in Law (LLM- IT & T) E-Commerce Law, Corporate Labour Relations Consultant. Bachelor Degree in Law (LLB)

Appointed on 20 January 2017

Mr. Tumaini P. Nyamhokya

Member

Tanzanian

- Bachelor Degree in Law (LLB), Certificate in Trade Union Leadership & Labour Relations.

Appointed on 20 January 2017

Audit and Risk committee The Audit and Risk Committee is made up of three Trustees. The Committee is mandated to assist the Board in the review and analysis of the following main areas:·

Annual internal audit plan;

·

Internal control;

·

Financial reporting;

·

Internal audit reports;

·

External audit reports;

·

Risk management;

·

Internal audit and audit committee charter.

48

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Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

CORPORATE GOVERNANCE (CONTINUED)

The composition of the committees during the year was as follows: Name

Position

Nationality Discipline &Qualifications Tanzanian

Economist, Planning &Policy analyst; MA (Health Management, Planning and Policy); Bachelor of Arts (Economics)

Remarks

Mr. Hussein S. Kamote

Member

Tanzanian

Economist; MSc (Economics), BA (Economics)

Exited on 21 September 2016

Mr. Aziz H. Kifile*

Co-opted member

Tanzanian

Accountant, MBA, CPA(T), BCom (Accounting) , Diploma in Education

Exited on 21 September 2016

Appointed on 20 January 2017

Mr. Jeremia E. Sendoro

Chairman

Current composition of the commitee

Exited on 21 September 2016

Dr. Rehema G. Kilonzo

Ag. Chairperson

Tanzanian

Doctor of Philosophy in Sociology, hold B.A in Sociology, M.A. (Sociology), Post Graduate Diploma in Research Methodology, PhD in Sociology.

Mr. Cornellius K. Kariwa

Member

Tanzanian

Masters Degree in Law (LLM- Appointed on 20 JanuIT & T) E-Commerce Law, ary 2017 Corporate Labour Relations Consultant. Bachelor Degree in Law (LLB)

Mr. Suleiman A. Kikingo

Member

Tanzanian

Certificate in Legislative Drafting, Certificate in Industrial Management, Supervisory Management, Leadership in Local Government.

Certificate in Trade Union Leadership.

Appointed on 20 January 2017

*Mr Aziz H. Kifile was co-opted to attend meetings of the Committee given his qualifications, knowledge and experience in finance and audit Matters.

The Secretary of the Audit and Risk Committee is the Director of Internal Audit.

Finance and Planning Committee

The Finance Committee is made up of three Trustees. The Committee is mandated to assist the Board in the review and analysis of the following main areas:·

Annual plan and budget;

·

Budget re-allocations and supplementary budget;

·

Corporate plan;

·

Treasury management;

·

Assets disposal;

·

Impairment and write offs; and

·

Accounting policies and procedures.

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Annual Report & Financial Statements for the year ended 30 June 2016

49

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

20

CORPORATE GOVERNANCE (CONTINUED)

The composition of the committees during the year was as follows: Name

Position

Nationality Discipline &Qualifications

Remarks

Mr. Jeremia E. Sendero

Chairman

Tanzanian

Exited on 21 September 2016

Ms Janet Reuben-Lekashingo

Trustee

Tanzanian

Mr. Ramadhan K. Njaa

Trustee

Tanzanian

Current composition of the commitee Mr. Henry Katabwa Chairman

Tanzanian

Mr. Suleiman A. Kikingo

Member

Tanzanian

Mr. Said A. Nzori

Member

Tanzanian

Economist, Planning &Policy analyst; MA (Health Management, Planning and Policy); Bachelor of Arts (Economics) Management Development Master Degree; (Arts), Bachelor Degree (Arts) Lawyer, Pg. Dip. (Law, Mediation and Arbitration) Adv. Dip (Cooperative Management) Masters degree in Public Administration, (HRM), Advanced Diploma in Public Administration and Certificate in Change Management.

Certificate in Legislative Drafting, Certificate in Industrial Management, Supervisory Management, Leadership in Local Government. Certificate in Trade Union Leadership.

Lawyer, LLM, LLB and Diploma in Translation

Exited on 21 September 2016 Exited on 21 September 2016

Appointed on 20 January 2017

Appointed on 20 January 2017

Appointed on 20 January 2017

Human Resources and Legal Affairs Committee The Human Resources and Legal Affairs Committee is made up of three Trustees. The Committee is mandated to assist the Board in the review and analysis of the following main areas:·

Organization structure;

·

Staffing;

·

Compensation structure;

·

Staff appointments and promotions;

·

Disciplinary matters; and

·

Human resources policies.

The composition of the committees during the year was as follows: Name

Position

Nationality

Qualifications

Remarks

Ms Janet Reuben-Lekashingo

Chairperson

Tanzanian

Management Development Master Degree; (Arts), Bachelor Degree (Arts)

Exited on 21 September 2016

Mr. Ramadhan K. Njaa

Member

Tanzanian

Lawyer, Pg. Dip. (Law, Mediation and Arbitration)

Exited on 21 September 2016

Ms. Sarah D. Mwaipopo

Member

Tanzanian

Lawyer, LLM (International Law and Human Rights), LLB (Hons)

Exited on 21 September 2016

Current composition of the commitee

50

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

Mr. Said Nzori

Chairman

Tanzanian

Lawyer, LLM, LLB and Diploma in Translation

Appointed on 20 January 2017

Mr. Henry Katabwa

Member

Tanzanian

Masters degree in Public AdminisAppointed on 20 tration, (HRM), Advanced Diploma in January 2017 Public Administration and Certificate in Change Management.

Mr. Tumaini P. Nyamhokya

Member

Tanzanian

Bachelor Degree in Law (LLB), Certificate in Trade Union Leadership & Labour Relations.

Appointed on 20 January 2017

Secretary to the Board

The secretary to the Board and its committees meetings, except for Audit and Risk Committee is Mr. Eliudi B. Sanga who is the Director General. The Director General is an ex-officio and is not entitled to vote.

The Secretary to the Board is responsible for advising the Board and ensures proper functioning of the Board. The Secretary is responsible for submission of management reports to the Board and is the custodian of Board documents including minutes and the Board’s seal. He is responsible for ensuring that there is good flow of information between the Board, its Committees and Management.

Independence of Trustees and Ethical behavior

All the Trustees are considered by the Board to be independent both in character, judgement and free of relationships or circumstances, which could affect their judgement. All the Trustees are considered to have behaved and acted ethically in the discharge of their fiduciary responsibilities.

21

RISK MANAGEMENT AND INTERNAL CONTROL

The Trustees accepts final responsibility for risk management and internal control system of the Fund. The management ensures that adequate financial and operational control systems are maintained on an ongoing basis. The objective is to provide reasonable assurance on the following: ·

Safeguarding of members funds and the Fund’s assets;

·

Effectiveness and efficiency of operations;

·

Compliance with applicable laws and regulations;

·

Reliability of accounting records and financial information;

·

Sustainability of the Fund’s operations under normal and adverse conditions; and

·

Responsive behavior towards stakeholders.

The efficiency of any internal control system is dependent on the strict observance of prescribed measures. There is always a risk of non-compliance of such measures by staff. Whilst no system, of internal control can provide absolute assurance against misstatement or losses, the Fund’s system is designed to provide the Trustees with reasonable assurance that procedures in place are operating effectively. The Trustees have assessed the internal control system and generally satisfied as explained below.

The Fund has a risk management framework and various policies through which it manages its risks. On the other hand, the Fund has an internal audit function which reports to the board audit committee through which the Board monitors and directs corrective measures on the internal control environment.

Risk and internal control assessment

The Fund invests in the following principal financial assets and liabilities. Financial assets include treasury bonds, treasury bills, corporate bonds, loans, fixed deposits, trade receivables. Financial liabilities include trade and other payable. The main purpose of these financial assets is to generate revenue to the Fund.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

51

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

21

52

RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

The main financial risks facing the Fund include:-

Interest risk

Interest risk is a market risk emanating from changes in value of assets of the Fund as a result of adverse price movement for investments held by the Fund. Investment in long term government securities with fixed income is one way of mitigating interest rate risk in volatile markets.

Foreign currency risk

The foreign exchange risk (or currency risk) is the risk arising from changes in the value of foreign currencies. The Fund has no significant foreign currency transactions hence the effects of foreign exchange risk are minimal. Where necessary, the Fund negotiates forward contracts in order to settle future transactions denominated in foreign currencies.

Credit risk

Credit risk is the risk that the counterparty to any financial transaction may not be able to fulfil its obligation on due date. Apart from Government based credit lines, the Fund does not have significant concentration of credit risk in other areas. However, in order to minimize credit risk, the Fund has set limits on different categories of investments and has also set exposure limits for each bank where it makes placements of funds. Loan appraisals, investments appraisals and approval processes are in place to mitigate this risk. For Government based lending, the Fund is taking measures to ensure that all the required guarantees and assurances are in place. other loan has a cash collaterals placed on them futher details are provided under note 21.

Liquidity risk

Liquidity risk is the risk of failing to meet obligations when they fall due. Liquidity risk may also arise from inability to sell financial assets quickly at close to its fair value. The Fund is exposed to daily calls on its available cash for benefits payment and other administrative expenses. The Fund manages liquidity risk by maintaining a pool of short term placements with banks which is adequate to meet its obligations for benefit payments as well as investment commitments and administrative expenditure. The Fund carries out weekly cash flow projection which is discussed

by Management Investment Committee for investment decisions. Main sources of funds include monthly pension contributions and income from investments.

There are number of non-financial risks affecting the Fund in addition to the above highlighted financial risks which include:-

Operational Risk

Operational risks result from inadequate systems, management failures, ineffective internal control processes, fraud, theft and human errors. The Fund addresses this risk inter alia through ensuring existence of Business Continuity Plan (BCP) and sound internal control system. Main instruments of the internal control system include operational and procedural manuals, policies and guidelines, and independent internal audit function. Managing operational risks in the Fund is an integral part of day to day operations by the management. The Management, Internal Audit Function, Audit and Risk Committee and the Board of trustees, are actively involved in monitoring process.

Legal Risk

This risk arises from possible litigations instituted by or against the Fund and uncertainty of enforceability of contracts.

In mitigating this risk, the Fund operates a fully-fledged Legal Services Unit and for each contract entered by the Fund, there is a Contract Manager responsible for managing the implementation of specific contract entered into by the Fund.

Reputational Risk

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

21

RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

The Fund has an obligation to ensure that it performs its functions and maintains its reputation as a Social Security Scheme in accordance with LAPF Act CAP 407 and other applicable laws and regulations. In this endeavour, the Board of Trustees and Management ensure that they fulfill their fiduciary responsibilities by applying principles of sound corporate governance and adopting best practices in the industry

Safeguarding of Fund’s Assets

The Trustees are responsible for safeguarding the assets of the Fund. The Board has approved various policies and regulations including but not limited to financial regulations, investments policy, human resources policies and internal audit manual in order to strengthen the internal control environment. These are reviewed from time to time to align with the dynamics of the operating environment. The Trustees are pleased to report that during the year under review no material incidences of fraud were encountered.

Reliability of Accounting Records and Financial Statements

The Fund has employed sufficient and competent staff in the Directorate of Finance and has in place a computerized accounting system, NAVISION – DYN. Accordingly, proper books of accounts have been maintained and the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

22

RELATED PARTY TRANSACTIONS

All related party transactions and balances are disclosed under Note 39 to these financial statements.

23

GENDER PARITY

The Fund and the Group is an equal opportunity employer, as it has no discriminatory policies or practices. As at 30 June 2016, the Group and Fund had the following distribution of employees by gender: Group

Gender Male Female Total

Fund

30 June 2016

30 June 2015

30 June 2016

30 June 2015

155

135 70

144

130

84

77

65

239

205

221

195

24

POLITICAL DONATIONS

The Fund did not make any political donations during the year.

25

CORPORATE SOCIAL RESPONSIBILITY

In fulfilling its corporate social responsibility, the Fund spent Shs 160.71 million (2015: Shs 178.61 million) as donations to support the community in which the Fund operates in form of social and financial aid. Donations made by the Fund were mainly in the areas of education, health, sports, environmental conservation and corporate governance.

Some of the activities for which support was provided by the Fund include the following programs: ·

Contribution towards 8th East and Central Africa Social Security Association (ECASSA) policy makers conference

·

Purchase of 300 mattress to Kiwira Prison college

·

Donations for 70 years of United Nations conference

·

Donation of bed sheets to Kisarawe District Hospital and Makole Hospital in Dodoma Municipality

·

Donation towards environmental conservation in Mufindi District

·

Donation towards purchase of desks in Kinondoni Municipal Council, Mpwapwa District and Kikuyu Primary School in Dodoma Municipality

·

Donation towards sports in Kinondoni Municipal Council LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

53

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

54

26

ENVIRONMENTAL CONTROL

The Trustees recognize that environmental protection is a contemporary agenda. The Fund monitors the impact of its operations on the environment, which is mainly through the use of power, water and generation of waste. The Fund minimizes its impact through better use of its premises and facilities to ensure that there is proper waste management.

All the Fund’s investments are environmentally friendly, and if applicable, investments financed by the Fund must be subjected to Environmental and Social Impact Assessment (ESIA). The Fund supports the national campaign for environmental protection.

27

EMPLOYEES’ WELFARE

The Fund has the following employees’ welfare arrangements:

Training

The Fund offers sponsorship to its employees both in short and long term courses within and outside the country on various disciplines depending on the corporate needs and financial resources available. The Fund supports also employees’ own initiatives for both short and long-term training.

Staff loans and advances

The Fund provides housing, home appliances, computers, education and car loans to staff as well as salary advances to enable them to overcome financial needs and promote their economic development. Staff loans and advances are based on specific terms and conditions approved by the Board of Trustees and are issued in accordance with the annual approved budget.

Medical facilities

The Fund entered into a contract with AAR Health Insurance to provide medical insurance scheme for its employees and their immediate family dependents.

Financial assistance

The Fund operates a policy to assist in the event of death of an employee or immediate family dependent. In addition, employees have their own supplementary scheme “Furaha na Huzuni” which provides additional support to their social needs.

Retirement benefits

The Fund pays contributions to the publicly administered pension plans which include the LAPF– Pensions Fund, Public Service Pensions Fund, PPF Pensions Fund and National Social Security Fund on a mandatory basis on behalf of all employees.

Relationship between management and employees

The Fund is in agreement with Tanzania Local Government Workers Union (TALGWU) branch at LAPF, for the establishment of a Master Workers Council. The Master Workers Council meets twice yearly, among other things, to discuss employees’ welfare.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

Persons with disabilities

The Fund gives equal opportunities to disabled persons for vacancies they are able to fill.

Health and safety

The business activities carried out by the Fund is services in nature. The Board ensures that the working environment is clean at all times as authorized firms have been engaged to ensure that the working environment is clean and attractive. Fire extinguishers have also been installed in office buildings to ensure that unexpected fire incidences are contained.

Relationship between management and other stakeholders

The Fund has continued to maintain good relationship with its key suppliers, such as suppliers of computer systems Microsoft Dynamics Navision and Pensions Management Systems. The Fund also maintained good relationships with its contractors, Tanzania Revenue Authority, Bank of Tanzania and the commercial banks. During the year, the Fund complied with all regulations and guidelines issued by various regulatory authorities.

28

COMPLIANCE WITH LAWS AND REGULATIONS

The principal functions and operations of the Fund are governed by the Local Authorities Pensions Fund Act, CAP 407. The Fund also observes compliance to other applicable laws and regulations, policies and guidelines which have impact on the Fund’s operations. These include The National Social Security Policy; The Social Security Regulatory Authority Act; The Income Tax Act, 2004; The Public Procurement Act, 2011 and its regulations. The Trustees confirm that the activities and operations of the Fund were conducted in accordance with LAPF Act and other applicable laws and the Trustees are not aware of non-compliance that would have material impact on the Fund.

The operations of the Fund are significantly affected by the Social Security Regulatory Authority Act, CAP.135, which liberalizes and regulates the social security industry. Accordingly, the Trustees will ensure that the Fund complies with all new regulatory requirements including correct implementation of the pension benefit harmonization rule of July 2014.

29

SERIOUSLY PREJUDICIAL MATTERS

During the year ended 30 June 2016 there was no serious prejudicial matters to report as required by Tanzania Financial Reporting Standard No 1.

30

STATEMENT OF COMPLIANCE

The Trustee’s Report has been prepared in full compliance with Tanzania Financial Reporting Standards No 1.

31 AUDITOR

The Controller and Auditor-General is the statutory auditor of the Fund by virtue of Article 143 of the Constitution of the United Republic of Tanzania, and amplified in section 10 of the Public Audit Act No 11 of 2008. However, in accordance with section 33 of the same Act M/S PricewaterhouseCoopers was authorized to carry out the audit of financial statements of LAPF – Pensions Fund for the year ended 30 June 2016 on behalf of the Controller and Auditor General.

BY THE ORDER OF THE BOARD

Prof. Faustine K. Bee Chairman of the Board of Trustees

Date

Dr. Rehema G. Kilonzo Trustee

Date

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

55

STATEMENT OF TRUSTEES’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2016

The Trustees are required by the Local Authorities Pensions Fund Act, CAP 407 to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Fund as at the end of the financial year and of its changes in net assets for the year. The Trustees are also obliged to ensure that the Fund keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Fund.

They are also responsible for safeguarding the assets of the Fund. The Trustees accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgement and estimates, in conformity with International Financial Reporting Standards (IFRS) and in compliance with The Local Authorities pensions Fund Act, CAP 407. The Trustees are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Fund and of its changes in net assets for the year.

The Trustees further accepts 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 control.

Nothing has come to the attention of the Trustees to indicate that the Fund will not remain a going concern for at least twelve months from the date of this statement.

BY THE ORDER OF THE BOARD

Prof. Faustine K. Bee Chairman of the Board of Trustees

Dr. Rehema G. Kilonzo Trustee

56

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Date

Date

DECLARATION OF THE DIRECTOR OF FINANCE OF LAPF-PENSIONS FUND FOR THE YEAR ENDED 30 JUNE 2016

The National Board of Accountants and Auditors (NBAA) according to the power conferred under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a declaration issued by the Head of Finance/Accounting responsible for the preparation of financial statements of the entity concerned.

It is the duty of a Professional Accountant to assist the Board of Trustees to discharge the responsibility of preparing financial statements of an entity showing true and fair view of the entity position and performance in accordance with applicable International Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the Board of Trustees as understatement of Trustees’ responsibilities on an earlier page.

I, John William Kida being the Director of Finance of LAPF - Pensions Fund hereby acknowledge my responsibility of ensuring that financial statements for the year ended 30 June 2016 have been prepared in compliance with the International Financial Reporting Standards and the Local Authorities Pensions Fund Act, CAP 407.

I thus confirm that the financial statements give a true and fair view position of LAPF Pensions Fund as on that date and that they have been prepared based on properly maintained financial records.

CPA - John William Kida Director of Finance

NBAA Membership No:-

Date

ACPA 1138

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

57

REPORT OF THE INDEPENDENT AUDITOR FOR THE YEAR ENDED 30 JUNE 2016

AUDIT REPORT ON THE FINANCIAL STATEMENTS To: Prof. Faustine K. Bee, Chairman of the Board of Trustees LAPF - Pensions Fund, LAPF Building, Makole Road, PO Box 1501, Dodoma.

REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LAPF – PENSIONS FUND FOR THE YEAR ENDED 30 JUNE 2016 I have audited the accompanying financial statements of LAPF - Pensions Fund (the “Fund”) and its subsidiaries (together, the “Group”) which comprise the Group’s and the Fund’s statements of net assets available for benefits as at 30 June 2016, and their respective statements of changes in net assets available for benefits and statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes set out from page 58 to 123 of this report.

Trustees’ Responsibility for the financial statements The Board of Trustees of LAPF - Pensions Fund is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Responsibilities of the Controller and Auditor General My responsibility as an auditor is to express an independent opinion on the financial statements based on the audit. The audit was conducted in accordance with International Standards on Auditing (ISA), and such other audit procedures I considered necessary in the circumstances. These standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Fund’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

In addition, Sect. 10 (2) of the Public Audit Act No. 11 of 2008 requires me to satisfy myself that the accounts have been prepared in accordance with the appropriate accounting standards and that; reasonable precautions have been taken to safeguard the collection of revenue, receipt, custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have been duly observed and expenditures of public monies have been properly authorized.

Furthermore, Sect.48 (3) of the Public Procurement Act No. 7 of 2011 Public Procurement (Goods, works, Non-consultant services and Disposal of Public Assets by Tender) Regulations of 2013 requires me to state in my annual audit report whether or not the auditee has complied with the provisions of the Law and its Regulations.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

58

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

REPORT OF THE INDEPENDENT AUDITOR FOR THE YEAR ENDED 30 JUNE 2016

Unqualified Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of LAPF - Pensions Fund and its subsidiaries as at 30 June 2016 and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and in compliance with The Local Authorities Pensions Fund Act, CAP.407.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In view of my responsibility on the procurement legislation, and taking into consideration the procurement transactions and processes I reviewed as part of this audit, I state that LAPF – Pensions Fund has generally complied with the Public Procurement Act No.7 of 2011 and its related Regulations of 2013.

Prof. Mussa J. Assad CONTROLLER AND AUDITOR GENERAL National Audit Office Dar es Salaam, Tanzania 7th March, 2017

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

59

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

ADDITIONS

Income from dealings with members

Group 2016 Shs’ 000

2015 Shs’ 000 210,069,302

2015 Shs’ 000

279,681,821

210,069,302

(88,597,242) (107,246,058)

(88,597,242)

172,435,763

121,472,060

172,435,763

121,472,060

7 22 14 & 15 17 28 & 29

96,029,591 40,089,184 (14,364,063) 4,053,577 1,163,780 126,972,069

72,716,587 8,901,360 18,816,668 (6,310,345) 94,124,270

93,875,576 15,511,097 (14,364,063) 4,053,577 97,298 99,173,485

72,074,775 8,901,360 18,816,668 (6,310,345) 93,482,458

20 8

2,485,082 3,330,621 3,383,702 (3,018,823) 305,588,414

3,889,755 1,444,344 4,690,007 4,962,795 230,583,232

2,485,082 3,330,621 3,374,253 (3,018,823) 277,780,380

3,889,756 1,444,344 4,714,843 4,962,795 229,966,256

(8,818,370) (18,051,301) (1,898,805) (7,797,497) (36,565,973)

(9,033,963) (12,277,117) (1,375,523) (19,102,676) (41,789,279)

(7,884,655) (17,745,236) (1,603,798) (7,243,832) (34,477,521)

(8,592,726) (12,108,784) (1,121,195) (19,062,291) (40,884,996)

269,022,441

188,793,953

243,302,859

189,081,260

(20,771,958)

(9,306,286)

(13,591,007)

(9,306,302)

248,250,483

179,487,667

229,711,852

179,774,958

960,761,208

774,963,196

961,380,519

775,295,216

(22,027,685)

(15,717,340)

(22,027,685)

(15,717,340)

938,733,523

759,245,856

939,352,834

759,577,876

Contributions

5

279,681,821

Outgoings from dealings with members Benefits expenses

6

(107,246,058)

Net additions from dealings with members Returns on investments Investment income Change in fair value of investment properties Change in fair value of equity investments Change in fair value of government securities Gain from PPE and land revaluation Net income on investments Interest back purchase -Treasury contribution Other income Gain on foreign exchange Share of (loss)/profit of associate DEDUCTIONS Other administrative expenses Employee benefits Depreciation and amortisation Other expenses

23

9 (a) 9 (b) 9 (c) 10

Increase in net assets for the year before income tax Income tax expense Increase in net assets for the year after income tax Net assets available for benefits at start of year as previously stated Prior year adjustment Net assets available for benefits at start of year as restated Increase/(decrease) in net assets for the year attributable to: Non-controlling interest Members of the Fund

11

36

5,162,858

(52,209)

243,087,624

179,539,876

37,405,754

32,371,409

1,181,821,148

938,733,523

1,219,226,902

971,104,932

Net assets available for benefits at end of year Attributable to non controlling interest Attributable to members of the Fund

60

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Fund

2016 Shs’ 000

Note

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS Restated Assets

Note

Cash in hand and at bank

12

Deposits with financial institutions

13

Available for sale quoted investments

14

Available for sale unquoted investments

15

Government securities

17

Corporate bonds

18

Receivables and prepayments

19

Receivables from treasury

20

Loan investments

21

Investment property

22

Investment in associate

23

Stationery and consumables

25

Intangible assets

26

Property and equipment

27

Leasehold land

28

2016

Shs’ 000

Restated

2015

2014

Shs’ 000

Shs’ 000

6,122,073

23,323,884

61,500,182

59,134,349

73,697,721

78,652,138

56,986,050

6,156,323

6,652,972

474,832,034

304,820,289

239,239,940

4,897,491

3,589,372

89,449,909

82,656,133

30,991,257

18,865,644

63,398,215 5,134,541

1,609,776

75,213,400

75,297,735

179,474,521

157,896,480

149,102,870

309,646,770

235,745,912

186,387,029

7,552,113

10,702,142

5,739,347

156,387

72,774

79,714

382,936

453,200

734,507

9,690,320

7,965,208

4,760,128

2,044,925

9,377,696

9,468,239

1,310,361,429

1,042,231,441

851,487,393

15,519,894

19,392,118

13,777,558

8,431,330

10,795,256

12,202,962

11,340,251

9,081,550

49,946,322

31,252,074

25,714,465

926,363

710,736

505,061

91,134,526

71,126,509

59,873,890

1,219,226,902

971,104,932

791,613,503

37,405,754

32,371,409

32,367,647

Members of the Fund

1,181,821,148

938,733,523

759,245,856

Net assets available for benefits

1,219,226,902

971,104,932

791,613,503

Total assets Liabilities

Benefits payable

29

Other payables and accrued expenses

30

Income tax liabilities

31

Deferred income tax

32

Employee death benefit obligation

33

Total liabilities Net assets available for benefits Attributable to

Non-controlling interest (NCI)

74,425,617

12,538,986

The financial statements from pages 58 to 123 were approved for issue by the Board of Trustees and signed on its behalf by:

Prof. Faustine K. Bee Chairman of the Board of Trustees

Dr. Rehema G. Kilonzo Trustee

Date

Date

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

61

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

FUND’S STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS

Assets

Note

Cash in hand and at bank

12

Deposits with financial institutions

13

Available for sale quoted investments

14

Available for sale unquoted investments

15

Government securities

17

Corporate bonds

18

Receivables and prepayments

19

Receivables from treasury

20

Loan investments

21

Investment property

22

Investment in associate

23

Investment in subsidiaries

24

Stationery and consumables

25

Intangible assets

26

Property and equipment

27

Total assets Liabilities

Benefits payable

29

Other payables and accrued expenses

30

Income tax liabilities

31

Deferred income tax

32

Employee death benefit obligation

33

Amounts due to subsidiaries

34

Total liabilities Net assets available for benefits

2016

Shs’ 000

18,399,683

62,467,442

73,697,721

2015

2014

Restated

Restated

Shs’ 000

Shs’ 000

6,114,124

23,225,243

61,094,332

58,493,399

78,652,138

56,986,050

6,156,323

6,652,972

474,832,034

304,820,289

239,239,940

4,897,491

3,589,372

67,407,447

61,499,742

9,844,965

5,134,541 1,609,776

75,213,400

75,297,735

179,474,521

157,896,480

148,725,372

205,005,200

171,448,185

137,518,121

7,552,113

10,702,142

5,739,347

88,600,000

88,600,000

88,600,000

72,774

77,893

453,200

734,507

7,372,741

3,742,408

2,032,626

1,266,518,159

1,031,363,028

856,757,542

15,519,894

19,392,118

13,777,558

8,264,304

8,851,731

12,373,481

11,336,744

9,097,363

74,425,617

156,387 382,936

11,395,229

42,604,815

31,265,545

25,706,709

710,736

505,061

14,633,691

21,040,747

39,241,244

97,453,473

92,010,194

97,179,666

1,169,064,686

939,352,834

759,577,876

926,363

The financial statements from pages 58 to 123 were approved for issue by the Board of Trustees and signed on its behalf by:

Prof. Faustine K. Bee Chairman of the Board of Trustees

Dr. Rehema G. Kilonzo Trustee

62

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Date

Date

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

STATEMENTS OF CASH FLOWS

Note

Cash flows from operating activities

Net cash from operating activities

37

Group

2016

2015

Fund

2016

2015

Shs ‘000

Shs ‘000

Shs ‘000

Shs ‘000

144,882,443

53,880,340

138,092,765

37,157,328

1,108

33,250

1,108

-

Cash flows from investing activities Proceeds from disposal of property and equipment Purchase of intangible assets

Purchase of property and equipment Subsequent expenditure on investment properties

Investment in government securities Investment in equity

26

(155,406)

(36,955)

(155,406)

(36,955)

27

(3,054,497)

(4,176,300)

(3,027,657)

(2,517,215)

22

(25,758,914)

(40,457,523)

(19,953,829)

(25,028,704)

17

(170,695,220)

(86,896,949) (170,695,220)

(86,896,949)

(13,135,054)

(13,135,054)

(8,387,864)

Investment in loans

(14,338,931)

Fixed deposits

Investment in corporate bonds

Net cash used in investing activities Cash flows from financing activities Receipts from the treasury

(117,072,984)

(112,939,516)

220,208,536

20

Net cash used in financing activities

(Decrease)/ increase in cash and cash equivalents

(8,387,864)

(14,338,931)

(2,352,771)

(116,272,984)

(112,539,516)

168,728,725

219,908,277

168,087,775

(119,254,172)

(93,195,093)

(112,922,506)

(76,381,389)

3,272,865

3,974,090

3,272,865

3,974,090

3,272,865

3,974,090

3,272,865

3,974,090

28,901,136

(35,340,663)

28,443,124

(35,249,971)

6,637,377

41,978,040

6,629,428

41,879,399

28,901,136

(35,340,663)

28,443,124

(35,249,971)

35,538,513

6,637,377

35,072,552

6,629,428

-

Proceeds from investments

(2,352,771)

(1,962,000)

-

(1,962,000)

Movement in cash and cash equivalents Cash and cash equivalents at the start of the year (Decrease)/ increase during the year Cash and cash equivalents at the end of year

12

During the year, there was no amount of cash and cash equivalents that was held by the Group that is not available for use.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

63

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES

1

GENERAL INFORMATION LAPF - Pensions Fund is registered in Tanzania under the Local Authorities Pensions Fund Act, CAP 407 as a registered defined benefits scheme, and is administered in Tanzania. The address of its registered office is: LAPF - Pensions Fund, LAPF Building, Makole Road, PO Box 1501, Dodoma.

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of LAPF Pensions Fund and its subsidiaries. (a)

Basis of preparation

(i)

Compliance with IFRS The consolidated financial statements of the group have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to entities reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).

(ii)

Historical cost conventions The financial statements have been prepared on historical cost basis except where otherwise stated in the below accounting policies.

Changes in accounting policy and disclosures (iii)

New and amended standards adopted by the Group

The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2015:

Title

64

Key requirements

Amendments to IFRS 13 “Fair value measurement’

IFRS 13 confirms that short-term receivables and payables can continue to be measured at invoice amounts if the impact of discounting is immaterial. The amendment also clarifies that the portfolio exception in IFRS 13 (measuring the fair value of a group of financial assets and financial liabilities on a net basis) applies to all contracts within the scope of IAS 39 or IFRS 9.

Amendments to IAS 16 “Property, plant and equipment and IAS 38 “Intangible assets”

The amendment clarifies how the gross carrying amount and accumulated depreciation are treated where an entity measures its assets at revalued amounts

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a)

Basis of preparation (continued)

(iii)

New and amended standards adopted by the Group (continued)

Title

Key requirements

Amendments to IAS 24 “Related party disclosures”

The amendment requires that where an entity receives management personnel services from a third party (a management entity), the fees paid for those services must be disclosed by the reporting entity, but not the compensation paid by the management entity to its employees or directors.

Amendments to IAS 40 “Investment properties”

IAS 40 – clarifies that IAS 40 and IFRS 3 are not mutually exclusive when distinguishing between investment property and owneroccupied property and determining whether the acquisition of an investment property is a business combination.

Defined Benefit Plans: Employee Contributions – Amendments to IAS 19

The amendments clarify the accounting for defined benefit plans that require employees or third parties to contribute towards the cost of the benefits.

The amendments allow contributions that are linked to service, but that do not vary with the length of employee service (e.g. a fixed % of salary), to be deducted from the cost of benefits earned in the period that the service is provided. Therefore many entities will be able to (but not be required) continue accounting for employee contributions using their existing accounting policy.

The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.

As these amendments merely clarify the existing requirements, they do not affect the Group’s accounting policies or any of the disclosures.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

65

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) (iv)

Basis of preparation (continued) New standards and interpretations not yet adopted by the Group

Certain new accounting standards and interpretations have been published that are not mandatory for this reporting period and have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below; Title IFRS 15, ‘Revenue from contracts with customers’

IFRS 9, ‘Financial instruments’

Key requirements The standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.

Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The Group is yet to assess the IFRS 15’s full impact.

IFRS 9 replaces the multiple classification and measurement models in IAS 39 Financial instruments: Recognition and measurement with a single model that has initially only two classification categories: amortised cost and fair value.

Classification of debt assets will be driven by the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

A debt instrument is measured at amortised cost if: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest.

All other debt and equity instruments, including investments in complex debt instruments and equity investments, must be recognised at fair value. All fair value movements on financial assets are taken through the statement of profit or loss, except for equity investments that are not held for trading, which may be recorded in the statement of profit or loss or in reserves (without subsequent recycling to profit or loss). For financial liabilities that are measured under the fair value option entities will need to recognise the part of the fair value change that is due to changes in the their own credit risk in other comprehensive income rather than profit or loss.

The new hedge accounting rules (released in December 2013) align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation.

66

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) (iv)

Basis of preparation (continued) New standards and interpretations not yet adopted by the Group (continued)

Title

Key requirements

IFRS 9, ‘Financial instruments’ (continued)

In December 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model.

With these amendments, IFRS 9 is now complete. The changes introduce: ·

a third measurement category (FVOCI) for certain financial assets that are debt instruments

·

a new expected credit loss (ECL) model which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for financial assets that do not have a significant financing component (e.g. trade receivables).

On initial recognition, entities will record a day-1 loss equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the assets are considered credit impaired.

For financial years commencing before 1 February 2015, entities can elect to apply IFRS 9 early for any of the following: ·

the own credit risk requirements for financial liabilities

·

classification and measurement (C&M) requirements for financial assets

·

C&M requirements for financial assets and financial liabilities, or

·

C&M requirements for financial assets and liabilities and hedge accounting.

After 1 February 2015, the new rules must be adopted in their entirety The Group is well positioned to implement IFRS 9 for the financial year ending 31 December 2018.

In order to prepare for the implementation, The Group has constituted a Steering Committee which is supported by a number of working groups. The working groups have made sound progress in setting, inter alia, the accounting policies; determining the classification of instruments under IFRS 9; developing pilot models for credit modeling; and designing reporting templates.

The impact is expected to be significant however the development of models is still in the early stages and subject to validation it is therefore not possible to provide an accurate indication of what the amount will be.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

67

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) (v)

Basis of preparation (continued) New standards and interpretations not yet adopted by the Group (continued)

Title

Key requirements

Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38

The amendments clarify that a revenue-based method of depreciation or amortisation is generally not appropriate.

The IASB has amended IAS 16 Property, Plant and Equipment to clarify that a revenue-based method should not be used to calculate the depreciation of items of property, plant and equipment.

IAS 38 Intangible Assets now includes a rebuttable presumption that the amortisation of intangible assets based on revenue is inappropriate. This presumption can be overcome if either •

The intangible asset is expressed as a measure of revenue (i.e. where a measure of revenue is the limiting factor on the value that can be derived from the asset), or

•

It can be shown that revenue and the consumption of economic benefits generated by the asset are highly correlated.

The standard is effective for annual periods beginning on or after 1 January 2016 and earlier application is permitted.

Equity method in separate financial statements – Amendments to IAS 27

The IASB has made amendments to IAS 27 Separate Financial Statements which will allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates.

IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and associates either at cost or as a financial asset in their separate financial statements. The amendments introduce the equity method as a third option. The election can be made independently for each category of investment (subsidiaries, joint ventures and associates). Entities wishing to change to the equity method must do so retrospectively.

The standard is effective for annual periods beginning on or after 1 January 2016 and earlier application is permitted.

68

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d)

Basis of preparation (continued)

(vi)

New standards and interpretations not yet adopted by the Group (continued)

Title

Key requirements

IFRS 16 Leases

IFRS 16 will affect primarily the accounting by lessees and will result in the recognition of almost all leases on balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. An optional exemption exists for short-term and low-value leases.

The income statement will also be affected because the total expense is typically higher in the earlier years of a lease and lower in later years. Additionally, operating expense will be replaced with interest and depreciation, so key metrics like EBITDA will change.

Operating cash flows will be higher as cash payments for the principal portion of the lease liability are classified within financing activities. Only the part of the payments that reflects interest can continue to be presented as operating cash flows.

The accounting by lessors will not significantly change. Some differences may arise as a result of the new guidance on the definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group is currently assessing the impact of the new standards and amendments on the disclosures in its financial statements There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

(b)

Revenue recognition

(i)

Contributions

Contributions are accounted for in the period in which they fall due. Employers’ and employees’ contributions are accounted for on accrual basis. Accrual is made based on actual salaries paid to members of the Group.

(ii)

Rent income Rental income from operating leases is recognised on a straight-line basis over the lease term.

(iii)

Interest income

Interest income is recognised for all interest-bearing instruments using the effective interest method. Interest income includes coupons earned on fixed income investments and accrued discount and premium on treasury bills and other discounted instruments. Interest income for all interest bearing financial instruments is recognised in the statement of changes in net assets available for benefits using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial asset and allocating the interest income. The effective rate is the rate that exactly discounts estimated future cash receipts through the expected life of a financial instrument or when appropriate, to a shorter period to the net carrying amount of the financial asset.

(iv)

Services

The group also sells services to passenger vehicles that pass by Msamvu bus station. The revenue from the services comprises gate collection fees and fees from other services rendered to customers.

Revenue from sale of services are recognised in the period in which the services are rendered by reference to completion of the specific transactions assessed on the basis of actual services provided as a percentage of the total services to be provided.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

69

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b)

v) Penalty income

Penalty income is recognized on accrual basis on contribution received. The computation of penalty is done in accordance with Section 62 (1) of the Local Authorities Pensions Fund Act, 2006, where an employer failing to remit to the Fund the whole or any part of the contributions required to be remitted under Section 19 (2) within 30 days after the end of the month to which the contributions relate, a penalty equal to 5 percent per month of the amount unpaid shall be levied.

Revenue recognition

(c)

Dividend income is recognised in the period in which the right to receive payment is established.

(d)

Foreign currency translation

(i)

Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the Group operates (the “functional currency”). The financial statements are presented in Tanzania Shillings (Shs), rounded to the nearest thousand, which is the Group’s functional and presentation currency.

Dividend income

(ii) Transactions and balances

Transactions in foreign currencies during the year are converted into Tanzania Shillings (“Shs”) at rates prevailing at the transaction dates. Monetary items denominated in foreign currency are translated using the exchange rate as at the reporting date. Non-monetary items measured at historical cost denominated in a foreign currency are translated at the date of initial recognition. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of changes in net assets available for benefits.

(e) Contributions receivable

Current service and other contributions are accounted for in the period in which they fall due.

(f) Transfers

Transfers are recognised in the period in which members join from other pension funds or leave for other pension funds. The values are based on methods and assumptions determined by actuaries.

(g) Benefits payable

Pensions and other benefits payable are recognised as liabilities in the period in which they fall due.

(h) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.

(i) Consolidation

Subsidiaries

70

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i)

Identifiable assets acquired and liabilities. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated.

Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(j)

Property that is held for long-term rental yields or for capital appreciation or both, are classified as investment properties. It also includes property that is being constructed or developed for future use as investment property.

Recognition of investment properties takes place only when it is probable that the future economic benefits that are associated with the investment property will flow to the Group and the cost can be reliably measured. This is usually the day when all risks are transferred. Investment property is measured initially at cost, including transaction costs.

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. Valuations are performed as of financial position date by professional valuers who hold recognised and relevant professional qualifications and have recent experience in the location and category of the investment property being valued. These valuations form the basis for the carrying amounts in the financial statements.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. Subsequent expenditure is capitalized to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Changes in fair values are recognised in the statement of changes in net assets available for benefits in the year in which they arise. Investment properties are derecognised when they have been disposed. Where the Group disposes of a property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the statement of changes in net assets available for benefits.

Consolidation (continued)

Investment property

(k) Inventory - Stationery and consumables

Inventories are stated at the lower of cost and net realizable value. Cost is determined on a first in first out basis (FIFO).

Any obsolete items are provided for in full in the year they are detected.Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(l) Income tax

Current tax: Current income tax is the amount of income tax payable on the taxable profit for the year determined in accordance with the Tanzania Income Tax Act. The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the end of reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

71

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l)

Income tax (continued)

Deferred tax: Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, if the deferred income tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the end of reporting period and are expected to apply when the related deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

(m) Property and equipment

Property and equipment are stated at fair value, based on valuations by external independent valuers, less subsequent depreciation and impairment losses. Valuations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of changes in net assets available for benefits during the financial period in which they are incurred.

Any revaluation surplus is credited to the statement of changes in net assets available for benefits, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the statement of changes in net assets available for benefits, in which case the increase is recognised in the statement of changes of net assets available for benefits. A revaluation deficit is recognised in the statement of changes of net assets available for benefits, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Depreciation is calculated using the straight line method to write down their cost or revalued amounts to their residual values over their estimated useful lives, as follows: Asset description

72

Rate (%)

Buildings

2

Motor vehicles

20

Furniture, fittings and equipment

10

Computer equipment

25

Property and equipment is periodically reviewed for impairment. When the carrying amount of the asset is greater than its estimated recoverable amount, it is written down immediately to its estimated recoverable amount.

The residual values useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

An item of motor vehicles and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of changes in net assets available for benefits in the year the asset is derecognised.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n)

Intangible assets – Computer software

Intangible assets acquired are measured at cost on initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is charged in the statement of changes in net assets available for benefits in the year in which the expenditure is incurred. Intangible assets are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at each financial year end date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.

The amortization expense on intangible assets is recognised in the statement of changes in net assets available for benefits. The annual rate of amortization, which has been consistently applied, is 20% per annum.

Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment of intangible assets. The carrying value of intangible assets as at the year-end is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(o)

Fund as a lessee

A lease is classified at the inception date as a finance lease or an operating lease. A lease that does not transfers substantially all the risks and rewards incidental to ownership to the Fund is classified as an operating lease. Operating lease payments are recognised as an operating expense in the Statement of Changes in Net Assets on a straight-line basis over the lease term.

Fund as a lessor

Leases in which the Fund does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of changes in net assets due to its operating nature.

(p) Employee benefits

The group operates a defined contribution scheme whereby it contributes to the publicly administered pension plans on a mandatory basis. The contributions are recognised as an employee benefits expenses when they are due. The group’s contributions to the defined contribution schemes are charged to the statement of changes in net assets available for benefits in the year in which they fall due. The group has no legal or constructive obligation to pay further contributions if the funds do not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to statement of changes in net assets available for benefits on a straight-line basis over the period of the lease. The Group leases its properties under operating lease.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

73

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p) Employee benefits (continued)

(ii) Other entitlements

The estimated monetary liability for employees accrued leave entitlement as at the reporting date is recognised as an expense accrual. Provision is made for estimated liability in respect of annual leave accrued on reporting date.

(i)

Employee death benefit obligations

The group has an unfunded non-contributory employee death policy arrangement for permanent and pensionable employees (the “Arrangement”) which provide for lump sum payments to the employees upon the death of their immediate family members and to the dependants upon the death of the employees. Payments to the employees and dependants of the deceased employees are made from the group’s internally generated funds.

The cost of providing benefits under the defined benefit plan is determined separately for each plan using the projected unit credit method. Actuarial gains and losses are recognised in full in the period in which they occur in statement of changes in net assets available for benefits. The defined benefit liability comprises the present value of the defined benefit obligation using financial assumptions, as explained in Note 33. (q) Financial assets Classification The group classifies its investments into the following categories: loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this at every reporting date. (i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Contributions receivable, loan investments and corporate bonds measured at amortised cost, all other receivables and deposits with financial institutions and cash and cash equivalents in the statement of net assets available for benefits fall in this category.

The Fund’s investments in government securities are measured at fair value. The fair value is determined by price of similar instruments in an observable market. Changes in fair value are recorded in the statement of changes in net assets available for benefits.

(ii) Available for sale financial assets Available-for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. These only includes equity instruments.

Available-for sale financial assets are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates, or equity prices. The group classifies equity investments as available-for-sale.

74

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Financial assets (continued)

Recognition and measurement

Loans and receivables are recognised on the day the funds are advanced or when the fund becomes a party to the

contract which is normally when an invoice is raised. Loans and receivables are initially recognised at fair value which is the cash consideration and subsequently measured at amortized cost using the effective interest method.

Available for sale investments are initially recognised at fair value plus transaction costs and subsequently measured at fair value except for investments whose fair value cannot be reliably measured. Investments for which fair value cannot be reliably measured are measured at cost plus transaction costs and are also subjected to impairment losses. Gains and losses arising from changes in fair value in respect of available-for-sale investments are included in the statement of changes in net assets available for benefits for the year.

Impairment of financial assets (i)

Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include: · · · ·

indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments; the probability that they will enter bankruptcy or other financial reorganization; and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of changes in net assets available for benefits. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of changes in net assets available for benefits. (i)

Assets classified as available for sale

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss –measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in statement of changes in net assets available for benefits – is recognised in the statement of changes in net assets available for benefits. Impairment losses recognised in the statement of changes in net assets available for benefits on equity instruments are not reversed through the consolidated statement of changes in net assets available for benefits.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

75

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Financial assets (continued)

76

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has subsequently transferred all risks and rewards of ownership.

(r)

Loans that are subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. Loans subject to individual impairment assessment, whose terms have been renegotiated, are subject to ongoing review to determine whether they are considered impaired or past due.

(s)

Associate is an entity over which the group has significant influence but not control, generally accompanying a shareholding of 20% or more of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition.

The group share of post-acquisition profit or loss and its share of post-acquisition is recognised in the statement of changes in assets available for benefits, with a corresponding adjustment to the carrying amount of the investment.

When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in the statement of changes in assets available for benefits.

(t)

The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

(u)

Accounts payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Renegotiated loans

Associate

Impairment of non-financial assets

Accounts payables

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v) Benefits payables

Benefit payables are obligations to pay for the benefits of the members. Benefit payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(w) Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

3 FINANCIAL RISK MANAGEMENT

The group’s activities expose it to a variety of financial risks, including credit risk, liquidity risk, interest rates, and price risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance, but the group does not hedge any risks.

Risk management is carried out by the Actuarial Statistics and Risk Management Department under the supervision of the Risk and Audit Committee which is guided by the policies approved by the Board of Trustees.

The Board of Trustees has overall responsibility for the establishment and oversight of the Group’s risk management framework. As part of governance structure, the Board of Trustees has established a comprehensive risk management framework for measuring, monitoring, controlling and mitigating the Group’s risks. This includes, the provision of written policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk. The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

The Risk and Audit Committee is responsible for monitoring compliance with the Group’s risk management policies

and procedures, and review of the adequacy of risk management framework in relation to the risks faced by the Group.

The notes below provide detailed information on each of the above risks and the Group’s objectives, policies and processes for measuring and managing risk.

3.1 Credit Risk

Credit risk is the risk that the counterparty to any financial transaction may not be able to fulfil its obligation on due date. The group’s credit risk arises from government securities, corporate debt securities, loan receivables as well as bank placements and balances. In order to minimize credit risk, the group has set limits on different categories of investments and has also set exposure limits for each bank where it makes placements of funds.

Before granting any loan which may involve obtaining a guarantee where necessary, the group would normally carry out an in-depth credit analysis of the project to establish viability. Day to day management of the group’s credit risk is vested in the director of planning and investments under the supervision of the management investment committee which is chaired by the Director General. Regular audits of credit under processes and management are undertaken by the internal audit unit. For banks only reputable banks are used by the Group for banking services.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

77

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1

Credit Risk (continued)

Maximum exposure to credit risk before collateral held or other credit enhancements

Financial instruments whose carrying amounts represent the maximum exposure to credit risk without taking into account any collateral held and other credit enhancements are disclosed as follows:

GROUP 30 June 2016 Financial assets Investments: Government securities Corporate bonds Loan Investments Other assets: Cash at bank Deposits with financial institutions Receivables excluding prepayments Receivable from Treasury

Financial liabilities

Benefit payable Other payable and accrued expenses

2016

2015

Shs’000

Shs’000

474,832,034 1,609,776 179,474,521

326,847,974 4,897,491 157,896,480

18,861,679 63,398,215 89,000,389 74,425,617

6,122,073 61,500,182 80,958,978 75,213,400

901,602,231

713,436,578

15,519,894 12,538,985

19,392,118 8,431,331

28,058,879

27,823,449

FUND 30 June 2016 Financial assets Investments:

Government securities Corporate bonds Loan Investments

474,832,034 1,609,776

326,847,974 4,897,491

179,474,521

157,896,480

18,398,276

6,122,011

Other assets: Cash at bank Deposits with financial institutions Receivables excluding prepayments Receivable from Treasury

62,467,442 66,968,491 74,425,617 878,176,157

Financial liabilities Benefit payable

Other payable and accrued expenses Amounts due to subsidiaries

78

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

61,094,332 59,814,492 75,213,400 691,886,180

15,519,894

19,392,118

14,633,691

21,040,747

41,548,814

48,697,169

11,395,229

8,264,304

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1

Credit Risk (continued)

The Trustees are confident in the ability to continue to control and sustain minimal exposure of credit risk to the Fund resulting from both government securities and loans issued to banks and customers. All credit exposures arise in Tanzania.

Contributions receivable

The ageing analysis of contributions receivable is as follows: Group and Fund a)

Neither past due nor impaired*

Less than 30 days-current b)

2015

Shs’000

Shs ‘000

23,117,287

12,200,185

13,311,889

24,240,369

24,010,446

18,367,105

60,439,622

54,807,659

7,821,171

7,119,205

68,260,793

61,926,864

Past due but not impaired:

- less than 60 days but greater than 30 days - above 60 days

c)

2016

Impaired

Total contribution receivables

*All receivable on the above category are of high quality

Contributions receivable are as a result of assessments of unremitted contributions for each employer during the year.

Loan investments

Total balance of loan investments as at year end is Shs 179.47 billion (2015: Shs 157.90 billion) net of accumulated impairment of Shs 12.68 billion (2015: Shs 12.66 million). All loans issued to government institutions are past due, however, the Trustees believe that these are not impaired as government will honour its obligations.

Group and Fund Past due but not impaired Impaired Total

2016

2015

Shs’000

Shs ‘000

166,788,151

145,233,746

12,686,370

12,662,734

179,474,521

157,896,480

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

79

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1

Credit Risk (continued)

Other financial assets.

Group

Other receivables excluding prepayments and contributions Neither past due nor impaired Impaired Total

2016

2015

Shs’000

Shs ‘000

27,807,793

26,151,317

752,974

-

28,560,767

26,151,317

6,269,654

4,885,992

259,215

-

6,528,869

4,885,992

Fund

Other receivables excluding prepayments and contributions Neither past due nor impaired Impaired Total

80

Deposits with financial institutions, government securities, corporate bonds and cash at bank are all neither past due nor impaired.

3.2

Liquidity risk

Liquidity risk is the risk of failing to meet obligations when they fall due. The consequences may be the failure to meet obligations to pay benefit expenses to the members. The Group is exposed to daily calls on its cash obligations for benefits payments and other administrative expenses. The Group manages liquidity risk by maintaining a pool of short term placements with banks which is adequate to meet its obligations for benefit payments as well as investment commitment and administrative expenditures. The Group carries out weekly cash flow projection which is discussed

by Management Investment Committee for investment decisions. Main sources of the group income include monthly pension contributions and investment income.

The table below analyses financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the statement of net assets available for benefits date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.2 Liquidity risk (continued) Less Between 1 and than 1 year 2 years Group At 30 June 2016 Benefits payable

Other payables and accrued expenses

Assets held for managing liquidity risk (contractual maturity dates) At 30 June 2015 Benefits payable

Other payables and accrued expenses Total liabilities (contractual maturity dates) Assets held for managing liquidity risk (contractual maturity dates)

Over 5 years

Shs ’000

Shs ’000

Shs ’000

Shs ’000

11,777,201

3,562,730

179,963

-

9,944,847

346,352

705,439

1,542,347

21,722,048

3,909,082

885,402

1,542,347

131,434,251

32,835,936

143,115,876

249,709,829

17,315,619

2,033,096

43,403

-

5,670,166

346,352

705,439

1,709,375

22,985,785

2,379,448

748,842

1,709,375

117,357,864

23,891,620

93,287,192

159,933,553

11,777,201

3,562,730

179,963

-

Total liabilities (contractual maturity dates)

Between 2 and 5 years

Fund At 30 June 2016 Benefits payable

Other payables and accrued expenses Amounts due to subsidiaries Total liabilities (contractual maturity dates) Assets held for managing liquidity risk (contractual maturity dates) At 30 June 2015 Benefits payable

Other payables and accrued expenses Amounts due to subsidiaries Total liabilities (contractual maturity dates) Assets held for managing liquidity risk (contractual maturity dates)

8,801,091

346,352

705,439

1,542,347

14,641,980

-

-

-

35,220,272

3,909,082

885,402

1,542,347

130,037,517

32,835,936

143,115,876

249,709,829

17,315,619

2,033,096

43,403

-

5,628,410

304,595

663,682

1,667,618

21,040,747

-

-

-

43,984,776

2,337,691

707,085

1,667,618

116,944,065

23,891,620

93,287,192

159,933,553

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

81

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.3

Market risk

Market risk is the risk of changes in value of net assets of the group as a result of adverse price movement for investments held by the group. The group is exposed to market risk on its investments resulting from movement in interest rates. The group is also exposed to market risk on equity as a result of movement in market prices. The group holds such assets for income generation, hence mitigating the effect of short term price movement.

3.3.1 Interest risk

82

The group invests in long term instruments when interest rates are considered to be high temporarily so as to take advantage of high interest rate for a long period. The Group and Fund does not have borrowings. Interest rate exposure mainly arise from investments made. Government securities are measured at fair valuation which takes into account the current market interest risk. Other investments of the Group are short term instruments where interest rate exposure is considered to be low.

At 30 June 2016, an increase/decrease in interest rates by 100 basis points with all other variables held constant would have resulted in an increase/decrease in the net assets available for benefits of Shs 853 million (2015: Shs 678 million).

Interest rate risk exposure

The table below summarizes the exposure to interest rate risk. Included are the group’s assets and liabilities at carrying amounts, categorized by the earlier of contractual re pricing or maturity dates.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

Market risk

3.3

Interest sensitivity gap

9,822,655

-

9,822,655

As at 30 June 2015 Total assets

Total liabilities

6,883,350

7,375,951

-

7,375,951

23,676,887

- -

23,676,886

6,883,350 - -

16,975,433 -

358,743 6,342,710

3,711,995 3,171,355

-

1-3 months Shs ‘000

Up to 1 Month Shs ‘000

Interest sensitivity gap

Payable and accruals Total liabilities

Liabilities

Total financial assets

Other assets Cash in hand and at bank Deposits with financial institutions Receivables excluding prepayments Receivable from Treasury

Unquoted shares Loan investments

Group As at 30 June 2016 Assets Investments Government securities Corporate bonds Quoted shares

3.3.1 Interest risk (continued)

FINANCIAL RISK MANAGEMENT (CONTINUED)

3

71,929,906

-

71,929,906

110,658,012

- -

110,658,013

46,422,782 -

35,693,034 28,542,197

3 - 12 months Shs ‘000

537,227,015

-

537,227,015

670,496,022

- -

652,521,914

74,425,617

435,068,262 1,609,776 141,418,259

over 12 months Shs ‘000

-

28,534,185

171,889,512

-

28,058,879 28,058,879

186,698,295

18,865,644 89,000,389 -

5,134,541 -

73,697,721

Non-interest bearing Shs ‘000

-

28,534,185

798,245,039

-

28,058,879 28,058,879

980,438,458

18,865,644 63,398,215 89,000,389 74,425,617

5,134,541 179,474,521

474,832,034 1,609,776 73,697,721

Total Shs ‘000

FOR THE YEAR ENDED 30 JUNE 2016

FINANCIAL STATEMENTS NOTES (continued)

Annual Report & Financial Statements for the year ended 30 June 2016

LAPF - PENSIONS FUND

83

84

Interest risk (continued)

3.3.1

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

-

Receivable from Treasury

Interest sensitivity gap

Total liabilities

Total assets

As at 30 June 2015

9,822,655

-

9,822,655

6,883,350

-

Total financial liabilities

Interest sensitivity gap

-

Payables and accruals

Liabilities

6,883,350

-

Receivables excluding prepayments

Total financial assets

-

Cash and bank

Deposits with financial institutions

Other assets

-

6,970,101

-

6,970,101

23,374,323

-

-

23,374,322

-

16,672,869

-

6,342,710

3,171,355

Unquoted shares

Loan investments

-

-

358,743

Shs ‘000

1-3 months

Corporate bonds

3,711,995

Shs ‘000

Up to 1 month

Quoted shares

Government securities

Investments

Assets

As at 30 June 2016

Fund

Market risk (continued)

FINANCIAL RISK MANAGEMENT (CONTINUED)

1.3

3

71,929,906

-

71,929,906

110,029,803

-

-

110,029,803

-

-

45,794,573

-

28,542,197

-

-

-

35,693,034

Shs ‘000

3 - 12 months

537,227,015

-

537,227,015

670,496,022

-

-

652,521,914

74,425,617

-

-

-

141,418,259

-

-

1,609,776

435,068,262

Shs ‘000

Over 12 months

-

49,407,905

150,737,079

-

41,548,814

41,548,814

164,200,436

-

66,968,491

-

18,399,683

-

5,134,541

73,697,721

-

-

Shs ‘000

Non-interest bearing

-

49,407,905

776,686,756

-

41,548,814

41,548,814

957,009,826

74,425,617

66,968,491

62,467,442

18,399,683

179,474,521

5,134,541

73,697,721

1,609,776

474,832,034

Shs ‘000

Total

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.3

Market Risk (continued)

3.3.2 Foreign exchange risk

The foreign exchange risk (or currency risk) is the risk arising from changes in the value of foreign currencies.

However, the group has no significant foreign currency transactions and therefore the effects of foreign exchange risk are minimal.

The various currencies to which the group is exposed are summarized in the table below (All amounts expressed in thousands of Tanzania Shillings).

GROUP

At 30 June 2016

Assets

Investments

Government securities measured at fair value Corporate bonds

Shs

US$

Total

474,832,034

-

474,832,034

1,609,776

-

1,609,776

73,697,721

-

73,697,721

Unquoted shares

5,134,541

-

Loan investments

169,384,583

10,089,938

179,474,521

Cash and bank

18,417,477

448,167

18,865,644

Fixed deposits

35,556,408

27,841,807

63,398,215

Receivables excluding prepayments

89,000,389

-

89,000,389

Receivable from Treasury

74,425,617

-

74,425,617

942,058,546

38,379,912

980,438,458

Quoted shares

Other assets

Total financial assets Liabilities

5,134,541

Payables and accruals

(28,058,879)

-

(28,058,879)

Total financial liabilities

(28,058,879)

-

(28,058,879)

Net assets position

913,999,667

38,379,912

952,379,579

Total financial assets

768,365,596

29,879,443

798,245,039

Total financial liabilities

(28,534,185)

-

(28,534,185)

Net assets position

739,831,411

29,879,443

769,710,854

At 30 June 2015

At 30 June 2016, if the foreign exchange had increased or decreased by 5%, with all other variables held constant, the increase or decrease in the Group’s net assets available for benefits would have been Shs 1,919 million (2015: Shs 1,482.23 million).

The exchange rate as at 30 June 2016 was Shs 2,240.11 per US$ (2015: Shs 2,020).

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

85

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3 FINANCIAL RISK MANAGEMENT (CONTINUED) 3.3 Market risk (continued) 3.3.2 Foreign exchange risk (continued) FUND

At 30 June 2016 Assets

Investments

Government securities measured at fair value

Corporate bonds Quoted shares

Shs

US$

Total

474,832,034

-

474,832,034

1,609,776

-

1,609,776

73,697,721

-

73,697,721

Unquoted shares

5,134,541

-

5,134,541

Loan investments

169,384,583

10,089,938

179,474,521

Other assets

Cash and bank

18,250,556

149,127

18,399,683

Fixed deposits

34,625,635

27,841,807

62,467,442

Receivables excluding prepayments

66,968,491

-

66,968,491

Receivable from Treasury

74,425,617

-

74,425,617

918,928,954

38,080,872

957,009,826

Payables and accruals

(26,915,123)

-

(26,915,123)

Amounts due to subsidiaries

(14,633,691)

-

(14,633,691)

Total financial liabilities

(41,548,814)

-

(41,548,814)

Total financial assets Liabilities

Net assets position

877,380,140

38,080,872

Total financial assets

746,807,313

29,879,443

776,686,756

Total financial liabilities

(49,407,905)

-

(49,407,905)

Net assets position

697,399,408

29,879,443

727,278,851

At 30 June 2015

86

915,461,012

At 30 June 2016, if the foreign exchange had increased or decreased by 5%, with all other variables held constant, the increase or decrease in the Fund’s net assets available for benefits would have been Shs 1,904.04 million (2015: Shs 1,482.23 million).

The exchange rate as at 30 June 2016 was Shs 2,240.11 per US$ (2015: Shs 2,020).

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.3

Market risk (continued)

3.3.3 Price risk

The group is also exposed to price risk in arising from investments in equity securities classified in the statements of net assets available for benefits as available for sale as a result of movement in market prices. The exposure to price risk is managed primarily by diversifying the group investment portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

At 30 June 2016, if the prices of all quoted equity investments had increased or decreased by 2%, with all other variables held constant, the increase or decrease in net assets available for benefits for the financial year would have been Shs 1,479 million (2015: Shs 1,578 million).

Fair value of financial assets and liabilities

Financial instruments not measured at fair value

The carrying amount of financial assets and liabilities not presented on the Group’s and Funds statement of net assets available for benefits at their fair values approximates their fair value.

The fair value for financial assets is based on market prices. Where this information is not available, fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.

Deposits with financial institutions

The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount receivable on demand.

The fair values of deposits with financial institutions approximate their carrying values at the reporting date.

Loans and receivables

The fair value of term loans is the present value of the estimated future cash flows. The estimated amounts to be recovered are discounted at the effective interest rate after taking into account the timing of recovery. The amounts to be recovered are established using the historical data or agreed repayment plans.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

87

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.3.3 Price risk (continued) Financial instruments measured at fair value Fair value hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the group’s market assumptions. These two types of inputs have created the following fair value hierarchy: ·

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on the Dar es Salaam Stock Exchange.

·

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

·

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The group considers relevant and observable market prices in its valuations where possible.

Group

Financial assets and liabilities measured at fair value Level 1

Assets

Available for sale quoted investments

Level 2

Shs’000

Shs’000

73,697,721 -

Available for sale unquoted investments Government securities

Level 3

Total

Shs’000

Shs’000

-

-

73,697,721

-

5,134,541

5,134,541

-

474,832,034

-

474,832,034

73,697,721

474,832,034

5,134,541

553,664,296

78,652,138

-

-

78,652,138

30 June 2015 Assets

Available for sale quoted investments

88

Available for sale unquoted investments

-

-

6,156,323

6,156,323

Government securities

-

304,820,289

-

304,820,289

78,652,138

304,820,289

6,156,323

389,628,750

Assumptions for level 3 disclosures are disclosed in note 15.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 3

FINANCIAL RISK MANAGEMENT (CONTINUED)

3.3.3 Price risk (continued)

Fair value hierarchy (continued)

Non-financial assets measured at fair value - Level 3 Group

Investment properties Property and equipment

Fund

Investment properties Property and equipment

2016

2015

Shs’000

Shs’000

277,018,714

235,745,912

9,417,462

7,965,208

286,436,176

243,711,120

205,005,200

171,448,185

212,266,528

175,190,593

7,261,328

3,742,408

Assumptions are disclosed in note 22 and 27.

4

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgement are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (i)

The Group follows the guidance of IAS 39 to determine when a financial asset is impaired. This determination requires significant judgement. The Group assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the financial instrument is reduced through use of an allowance account. The amount of the loss is recognized in the statement of changes in net assets available for benefits. Additional information is disclosed under note 3. (ii)

Impairment of financial assets at amortised cost

Pension benefits obligations

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate, earnings growth and inflation rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

89

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 4

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED) (ii)

The Group determines the appropriate discount rate at the end of every 3 years. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Fund considers interest on Government of Tanzania long term Treasury bond as published by the Bank of Tanzania that have terms and maturity approximating to the terms of the related pension liability. Other key assumptions for the pension obligations are based on the current market conditions. Additional information is disclosed under note 35.

If the Group had assumed pension increases at 3.0% per annum, retirement age of 55 and earnings growth of 16.5%, the funding level would have reduced to 39.4%, 40.3% and 16.2% respectively. (iii)

90

Pension benefits obligations (continued)

Fair value of available for sale financial assets

The fair value of available for sale financial assets traded in active markets at the financial reporting date is based on their quoted bid market price or dealer price quotations without any deductions for transaction costs. For all other financial assets not listed in an active market, the fair value is determined by using appropriate valuation techniques.

The Fund uses discounted cash flow methods for equity investments that are not traded in active markets. The fair values of these financial instruments are determined using appropriate assumptions on credit risk and market volatility.

Changes in valuation assumptions could affect the reported fair value of financial instruments. For example, to the extent that the Trustees increased the discount rate by 20 basis points, the fair values would be estimated at Shs 5,123 million (2015: Shs 6,557 million) as compared to their reported fair value of Shs 5,134 million at 30 June 2016 (2015: Shs 6,653 million). If the discount rate had decreased by 20 basis points the fair value would be estimated at Shs 5,146 million (2015: Shs 6,635 million)

(iv) Estimation of fair value of investment property

The valuation of investment properties was determined principally using discounted cash flow projections based on estimates of future cash flows, supported by the terms of any existing lease and other contracts and by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. Management has assumed constant cash flow from rental income based on existing short term contracts (3-5 years) that the Fund has with existing tenants. Additional information is disclosed under note 22.

(v) Property and equipment

Critical estimates are made by the Trustees in determining depreciation rates for properties and equipment and their residual values. The rates applied are set out in note 2 (m). An independent valuation of the group’s motor vehicles and equipment was performed by M/S Ardhi University an independent valuer to determine the fair value of the motor vehicle and equipment on 30 June 2016. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms. Sales prices of comparable properties in close proximity are adjusted for differences in key attributes such as property size

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 5

CONTRIBUTIONS 2016

Group and Fund

Contributions from employers Contributions from employees

Contributing employers by category: Local government authorities Government ministries and independent departments Regional secretariats Parastatal organizations Private sector Other government agencies

2015

Shs ‘000

Shs ‘000

204,339,910

154,050,852

75,341,911

56,018,450

279,681,821

210,069,302

Number of employers

Number of employers

177

166

28

29

118

108

25

25

795

431

1,225

818

82

59

As at 30 June 2016 the number of participating employers was 1,225 (2015: 818). The number of active members who contributed to the Fund during the year was 166,260 (2015: 150,835).

6

BENEFITS EXPENSES 2016

Group and Fund

Retirement benefits Survivorship benefits Invalidity benefits Withdrawal benefits Other benefits - maternity and funeral Refund of erroneous contributions

2015

Shs ‘000

Shs ‘000

80,463,744

69,034,829

12,920,044

11,234,965

10,810,220

5,897,766

126,023

194,762

2,829,492

1,847,964

96,535

386,956

107,246,058

88,597,242

During the year the Fund paid 8,011 beneficiaries (2015: 6,581 beneficiaries). As at 30 June 2016, the Fund had a total of 8,601 pensioners (2015: 6,485 pensioners).

7

INVESTMENT INCOME

2016

Group Rent income

Fees income Dividends income - Unquoted shares - Quoted shares

2015

Shs ‘000

Shs ‘000

6,635,867

1,449,567

49,607

-

599,443

3,392,859

600,769

2,741,933

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

91

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 7

INVESTMENT INCOME (CONTINUED)

Interest and discounts receivable - Treasury bills - - - -

Treasury bonds Fixed and time deposits Corporate bonds Loan investments

2016 Shs ‘000

2015 Shs ‘000

2,477,945

787,644

53,382,181 6,929,329 408,818 22,153,542

38,647,536 8,494,808 405,327 19,589,003

96,029,591

72,716,587

4,836,164

1,332,410

315,258

117,157

1,484,445

-

Rent income distribution Millennium Towers, Dar es Salaam Other properties in Dodoma Municipality Mwanza Commercial Complex

6,635,867

1,449,567

374,400 1,817,836 96,597 12,143 49,607 987,318 104,565 3,442,466

405,600 1,395,020 84,286 26,494 725,969 104,564 2,741,933

5,151,423

1,449,567

Dividend income distribution Tanzania Cigarettes Company Limited Tanzania Breweries Limited Tanzania Portland Cement Company Tanga Cement Company TAN-RE Insurance CRDB Bank National Microfinance Bank Limited FUND

Rent income Dividends income - Unquoted shares - Quoted shares

49,607

-

3,392,859

2,741,933

2,477,945

787,644

53,382,183

38,647,536

Interest and discounts receivable - Treasury bills - Treasury bonds - Fixed and time deposits - Corporate bonds - Loan investments

6,859,199

8,453,765

22,153,542

19,589,003

93,875,576

72,074,775

4,836,164

1,332,410

408,818

405,327

Rent income distribution Millennium Towers, Dar es Salaam Other properties in Dodoma Municipality

315,258

5,151,423

92

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

117,157 1,449,567

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 8

OTHER INCOME Group and Fund

2016

Shs ‘000

Tender fees Penalties on late contributions Sundry income

20,500

2,176,316

2015 Shs ‘000 12,800 984,993

1,133,805

446,551

3,330,621

1,444,344

2,241,258

1,253,566

1,847,177

4,191,186

1,392,183

1,115,837

9 (a) OTHER ADMINISTRATIVE EXPENSES

Group General office expenses** Repairs and maintenance Marketing expenses Utilities Transport and travelling Legal fees Audit fees Bank charges and commission Trustee fees and other expenses

857,399 145,811 7,467

346,833

985,598

533,992 136,093 19,952 339,982 312,794

994,644

1,130,559

8,818,370

9,033,961

1,168,371

974,562

1,847,177

4,191,186

1,392,183

1,079,023

7,466

19,952

Fund General office expenses** Repairs and maintenance Marketing expenses Utilities Transport and travelling Actuarial valuation Legal fees Audit fees Bank charges and commission Trustee fees and other expenses

857,399

145,811

270,000

531,075 115,802 -

278,360

297,065

933,836

1,072,914

7,884,655

8,592,726

984,052

311,147

**General office expenses include office stationary, rent, postage and courier expenses.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

93

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 9(b)

EMPLOYEE BENEFITS EXPENSES

The following items are included within employee benefits expenses:

Group Salaries and wages Social security costs- defined contribution plan Other statutory remittances Employees death benefits – interest expense (Note 33) Employees death benefit – current cost (Note 33) Housing allowance Leave expenses

Shs ‘000

Shs ‘000

9,527,428

6,605,629

665,790

464,727

285,268

303,052

1,381,299

984,679

64,182

68,183

1,801,474

1,281,481

521,370

588,229

517,752

725,242

Medical expenses Other employees expenses

2015

2016

1,463,385

3,079,248

18,051,301

12,277,117

9,221,363

6,493,934

665,790

457,903

285,268

303,052

The Group had a total of 239 employees at 30 June 2016 (2015: 205).

Fund

Salaries and wages Social security costs- defined contribution plan Other statutory remittances Employees death benefits – interest expense (Note 33) Employees death benefit – current cost (Note 33) Housing allowance Leave expenses

1,381,299

967,936

64,182

68,183

1,801,474

1,262,660

521,370

584,929

514,571

725,242

Medical expenses Other employees expenses

1,455,616

3,079,248

12,082,704

17,745,236

9(c)

The Fund had a total of 221 (2015: 195) employees at 30 June 2016.

DEPRECIATION AND AMORTISATION Group

2016

Depreciation of property and equipment (Note 27) Depreciation of leasehold land (Note 28) Amortisation of intangible assets (Note 26)

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

2016

2015

Shs ‘000

Shs ‘000

Shs ‘000

Shs ‘000

1,582,596

966,720

1,378,130

802,933

90,541

225,668

1,898,805

94

2015

Fund

90,541 318,262 1,375,523

-

225,668

1,603,798

318,262 1,121,195

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 10

OTHER EXPENSES 2016

2015

Shs ‘000

Shs ‘000

85,713

69,482

160,713

178,606

1,332,934

608,712

Insurance

244,144

199,819

Website and internet

218,572

188,291

1,237,149

1,129,135

186,125

247,470

Sundry expenses

83,783

37,555

Entertainment

44,762

37,128

1,354,971

663,567

Seminars, study tours and capacity building

845,018

1,191,423

Land rent

243,479

184,958

1,760,134

14,366,530

7,797,497

19,102,676

85,713

69,483

160,713

178,606

1,332,934

568,327

Insurance

244,144

199,819

Website and internet

218,572

188,291

1,237,149

1,129,135

186,125

247,469

Sundry expenses

23,878

37,556

Entertainment

44,761

37,128

1,354,971

663,567

Seminars, study tours and capacity building

845,018

1,191,423

Land rent

243,479

184,958

1,266,375

14,366,530

7,243,832

19,062,292

Group National holidays, sports and game expenses Donations Fees and subscriptions

Research and development Management/workers council meetings

Estate management

Impairment of receivables

Fund National holidays, sports and game expenses Donations Fees and subscriptions

Research and development Management/workers council meetings

Estate management

Impairment of receivables

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

95

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 11

Group 2016

INCOME TAX EXPENSE

Current income tax

-current period

Deferred income tax

-current period

-prior period

Fund 2016

2015

Shs ’000

Shs ’000

Shs ’000

Shs ’000

1,753,824

3,768,677

1,927,850

3,747,467

16,868,967

5,588,599

5,609,825

1,825,280

(50,990)

9,280,273

2,058,997

(50,990)

20,771,958

9,306,286

13,591,007

9,306,302

-

323,887

-prior period

2015

-

323,887

The tax on LAPF’s income before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows: Group

Income before tax Tax calculated at the statutory income tax rate of 30% Tax effects of: Income not subject to tax Expenses not deductible for tax purposes Under provision of prior year income Under provision of prior year deferred Income tax expense 12

CASH AT BANK AND IN HAND Group CRDB Bank Plc National Microfinance Bank Plc National Bank of Commerce Cash in hand

Fund

2016 Shs ’000

2015 Shs ’000

2016 Shs ’000

2015 Shs ’000

269,022,441

195,104,298

243,302,860

195,391,606

80,706,732

58,531,289

72,990,858

58,617,482

(102,629,888)

(78,813,870)

(102,629,888)

(78,813,870)

40,545,947

29,639,857

40,847,153

29,553,680

1,825,280 20,771,958

(50,990) 9,306,286

2,058,997 13,591,007

(50,990) 9,306,302

2016

2015

323,887

-

323,887

Shs ‘000

16,658,913

-

Shs ‘000

4,995,782

2,106,697

1,039,458 80,588

98,327

80,588

1,707

6,245

18,865,644

6,122,073

16,193,253

4,991,968

Fund CRDB Bank Plc - National Microfinance Bank Plc - National Bank of Commerce Cash in hand

96

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

2,106,697

1,039,459

98,327

80,585

1,406

2,112

18,399,683

6,114,124

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 12

CASH AT BANK AND IN HAND (CONTINUED)

For the purpose of statement of cash flows, the year-end cash and cash equivalents comprise the followings: 2016

2015

Shs ‘000

Shs ‘000

Cash at bank and in hand

18,865,644

6,122,073

Deposits with financial institutions with original maturity of not more than 90 days

16,672,869

515,304

35,538,513

6,637,377

Cash at bank and in hand

18,399,683

6,114,124

Deposits with financial institutions with original maturity of not more than 90 days

16,672,869

515,304

35,072,552

6,629,428

Group

Fund

13

DEPOSITS WITH FINANCIAL INSTITUTIONS Group

Fund

2016

2015

2016

2015

Shs ‘000

Shs ‘000

Shs ‘000

Shs ‘000

61,500,182

59,134,349

61,094,332

58,493,399

133,445,853

113,454,820

132,945,853

113,054,820

Interest

6,884,122

8,459,615

6,859,199

8,453,765

Exchange gain

1,519,153

1,545,724

1,519,153

1,545,724

(139,951,095)

(121,094,326)

(139,951,095)

(120,453,376)

63,398,215

61,500,182

62,467,442

61,094,332

INSTITUTIONS

At start of year Additions

Matured during the year At end of year

Group

Fund

2016

2015

2016

2015

Shs ‘000

Shs ‘000

Shs ‘000

Shs ‘000

Maturing within 90 days

16,672,869

14,634,426

16,672,869

14,634,426

Maturing over 90 days

46,725,346

46,865,756

45,794,573

46,459,906

63,398,215

61,500,182

62,467,442

61,094,332

Maturity analysis

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

97

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 14

AVAILABLE FOR SALE- QUOTED EQUITY INVESTMENT Group and Fund

DETAILS

% interest held

Tanzania Cigarette Company Limited

0.62

Tanzania Breweries Limited

0.86

Tanga Cement Limited

0.18

CRDB Bank Plc

2.04

National Microfinance Bank

0.2

Unit Trust Fund of Tanzania

3.3

NICO Limited

Shs ‘000

% interest held

7,488,000

0.62

10,296,000

0.83

36,777,800

364,287

38,342,359

0.35

Twiga Cement Limited

2015

2016

2.28

Less: Provision for impairment

0.35

841,172

754,470

0.18

1,104,873

18,004,040

2.04

19,359,183

1,608,680

0.20

3,488,825

7,135,884

3.30

6,784,285

245,000

2.28

245,000

73,942,721

78,897,138

73,697,721

78,652,138

(245,000)

(245,000)

2015

2016

Movement of investment in quoted securities is as follows: At start of year Additions (Loss)/gain in fair value of shares At end of year

Group and Fund

% interest held

Pensions Properties Limited Watumishi Housing Co. Ltd Watumishi Real Estate Investment Azania Bank Limited TAN-RE Insurance

98

Shs’000

78,652,138

56,986,050

(12,342,281)

20,384,648

1,281,440 78,652,138

73,697,721

AVAILABLE FOR SALE- UNQUOTED EQUITY INVESTMENT

DETAILS

Shs’000

7,387,864

15

Shs ‘000

2015

2016 Shs’000

% interest held

Shs’000

1,000

10

1,000

14

250,000

14

250,000

3,053,111

14

2,053,111

14

2,604,156

10

633,509

1,196,921

10

1,248,056

10 14 14

5,134,541

6,156,323

The fair value of unquoted equity investments are estimated using discounted cash flow techniques. The following methods and assumptions were used to estimate fair values: ·

Cash flow projection of 5 years;

·

Annual growth rate on the Compounded Annual Growth Rate (CAGR) formula; and

·

A discount rate of 17.78% - 17.96% per annum.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 15

AVAILABLE FOR SALE- UNQUOTED EQUITY INVESTMENT (CONTINUED) 2015

2016

Movement during the year At start of year Additions Loss in fair valuation of shares At end of year

Shs’000

Shs’000

6,156,323

6,652,972 1,071,331

1,000,000

(2,021,782)

(1,567,980)

5,134,541

6,156,323

Changes in fair value of equity investments

The net change in fair value of quoted and non-quoted investments is as shown below; 2015

2016

Quoted shares (Note 14) Unquoted shares (Note 15)

Shs’000

Shs’000

(12,342,281)

20,384,648

(2,021,782)

(1,567,980)

(14,364,063)

18,816,668

16 INVESTMENTS

The following investments are held by the Fund at amounts which exceed 5% of the net assets.

Group and Fund

Government securities Loan investments Available for sale quoted investments Fixed deposits

2016 Percentage

2015 Percentage

40% 15%

32% 17%

5%

7%

6%

8%

The following investments are held at amounts exceeding 5% of investments in their portfolio Loan investments

The University of Dodoma Local Government Training Institute, Hombolo Member’s Loans Government of Tanzania - Loan Facility

National Housing Corporation

2016 24% 32% 16% 6%

2015 23% 30% 12% 7%

7%

9%

52% 10%

47% 13%

NMB Bank

10% 24%

25% 4%

Unquoted shares Azania Bank Limited

12%

42%

Quoted shares

Tanzania Breweries Limited Tanzania Cigarette Company Limited CRDB Bank

Watumishi Real Investment Trust TAN-RE Insurance Watumishi Housing Company Limited

59%

33%

23%

20%

5%

4% LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

99

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 17

GOVERNMENT SECURITIES

Group and Fund Treasury bills

Treasury bonds Shs ‘000

Shs ‘000

6,106,823

320,741,152

326,847,975

116,386

(22,144,072)

(22,027,686)

6,223,209

298,597,080

304,820,289

25,953,115

144,742,105

170,695,220

2,477,945

53,175,878

55,653,823

(9,358,330)

(51,032,547)

(60,390,877)

65,744

3,987,835

4,053,579

25,361,683

449,470,351

474,832,034

- As previously stated

574,632

254,382,648

254,957,280

- Prior year adjustment

25,368

(15,742,708)

(15,717,340)

600,000

238,639,940

239,239,940

7,744,546

79,152,403

86,896,949

787,644

38,647,536

39,435,180

(3,000,000)

(51,441,435)

(54,441,435)

91,019

(6,401,364)

(6,310,345)

6,223,209

298,597,080

304,820,289

Year ended 30 June 2016

Shs ‘000

Total

At the start of the year - As previously stated - Prior year adjustment - As restated Additions Interest Repayments Fair valuation gain

Year ended 30 June 2015 At the start of the year

- As restated Additions Amortized interest Repayments Fair valuation gain/(loss)

The fair value of government securities has been determined by using the yield of similar instruments traded in Bank of Tanzania auctions.

Group and Fund 2016

2015

Shs ‘000

Shs ‘000 Restated

Maturity analysis

100

Maturing up to 3 months

4,070,738

2,150,751

Maturing 3 to 12 months

35,693,034

17,920,706

Maturing over 12 months

435,068,264

284,748,832

474,832,036

304,820,289

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 17

GOVERNMENT SECURITIES (CONTINUED) The following table summarizes the weighted average effective interest rates at the year end on the main interest bearing investments: Group and Fund Government securities - Treasury bonds - Treasury bills Corporate bonds

18.01%

16.08%

12.59%

15.63%

Loan investments

15.19% 12.01% 14.61%

14.44%

13.20%

2016

2015

CORPORATE BONDS

At start of year Additions Interest At end of year MATURITY ANALYSIS

Maturing 3 to 12 months Maturing over 12 months RECEIVABLES AND PREPAYMENTS Group

Staff debtors Dishonored cheques Prepaid expenses Prepaid capital expenditure Withholding tax Sundry debtors Receivable from members Accrued rental income receivable Statutory contribution debtors** Receivable from Ministry of Finance Value added tax (VAT) recoverable Receivables from non-controlling interest Provision for impairment of receivables

Current Non-current

Shs ‘000

Shs ‘000

4,897,491

3,589,372

-

1,962,000

(3,696,533)

(1,059,208)

1,609,776

4,897,491

-

342,496

408,818

Interest received

19

2015

17.49%

Fixed and time deposits (Tanzania)

18

2016

405,327

1,609,776

4,554,995

1,609,776

4,897,491

571,999

349,704

182,349

175,850

-

1,688,920

449,519 596,212

3,589,268 267,029

1,737,963

8,236 364,013 580,280 267,029 613,215

68,260,793

61,926,865

297,491

2,364,821

21,126,608

21,244,556

(7,821,171)

(7,119,205)

89,449,909

82,656,133

45,028,293

43,270,340

89,449,909

82,656,133

191,849

44,421,616

191,849

39,385,793

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

101

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 19

RECEIVABLES AND PREPAYMENTS (CONTINUED) Fund

Staff debtors Dishonoured cheques Prepaid expenses Withholding tax Sundry debtors Receivable from members Accrued rental income receivable Statutory contribution debtors** Receivable from Ministry of Finance Value added tax (VAT) recoverable Provision for impairment of receivables

Fund

Current Non-current

2016

Shs ‘000 556,480

182,349

1,685,249

2,842,931

701,121

452,777

267,029

1,737,963

At start of year Additions Recoveries of previously written off receivables At end of year

267,029 613,215

68,260,793

61,926,865

297,491

2,364,820

191,849

191,849

(7,821,171)

(7,119,205)

67,407,447

61,499,742

48,479,832

42,004,266

18,927,615

19,495,476

67,407,447

61,499,742

2015

Shs ‘000

Shs ‘000

7,119,205

6,460,442

(564,409)

(313,109)

7,821,171

7,119,205

2016

2015

1,266,375

971,872

RECEIVABLE FROM TREASURY Shs ‘000

Shs ‘000

75,213,400

75,297,735

Cash received from Treasury

(3,272,865)

(3,974,090)

At end of year

74,425,617

75,213,400

Group and Fund At start of year Interest

102

364,013

** Includes contributions receivable from Treasury for the year ended 30 June 2016 amounting to Shs 44.5 billion (2015: Shs 47.23 billion).

Movement in impairment of provision:

328,936 175,850

438,956

2016

20

2015 Shs ‘000

2,485,082

3,889,755

In 2006, the Government converted the Fund from Provident Fund to Pension Scheme so as to improve the benefit package of members. As at 30 June 2005, the actuarial report established a funding requirement of Shs 107.3 billion.

The Government of United Republic of Tanzania agreed to pay this amount over a period of 10 years starting from financial year 2007/2008 financial year. The Government further agreed to pay interest of 11.08% effective from 1 July 2010. During the year only Shs 3,273 million was received from Treasury.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 21 LOAN INVESTMENTS

2016 Shs ‘000 Pension Properties Limited - Bunge project

Nelson Mandela Institute Arusha TANESCO (i) TANESCO syndicated loan (ii) The University of Dodoma Project

Local Government Training Institute-Hombolo Project SACCOS (iii) Members’ loan (iv) Staff loans (v) Government of Tanzania (vi) National Housing Corporation (vii)

Group and Fund 2015 Shs ‘000

Interest rate (%)

Tenor (years) 10

4,000,542

12.95

7,434,217 3,898,584 42,596,507

6,404,642 1,065,185 4,545,483 36,683,294

12.95

(i) (ii) 15

10

57,287,025 434,138 28,894,604 12,345,947 10,089,938 11,943,066 179,474,521

47,576,344 583,474 19,108,017 11,031,565 13,247,000 13,650,934 157, 896,480

15

10

13 7 11 (vi) 15.3

2 5 10 7 11

4,550,495

6 7 10

All loans to higher learning institutions and Bunge projects except Local Government Training Institute (LGTI) Hombolo are secured by Government guarantee. (i)

The loan to TANESCO is a syndicated loan whereby Stanbic Bank is the lead arranger. The loan carries an interest at 182 days, Treasury Bills rate with margin between 0.5% - 2%. The loan is secured by a Government guarantee. The loan was fully repaid during the year.

(ii)

The TANESCO syndicated loan was issued during the financial year 2013/14 whereby Citibank is the lead arranger. The loan carries interest at 182 days Treasury bills rate plus margin of 4.5% p.a. This loan has a cash collateral of Shs 750 million deposited at CRDB Bank at interest rate of 12% p.a.

(iii)

SACCOS loans are guaranteed by contributing employers.

(iv)

Members’ loans are granted at age 55 and are secured by benefits vested in the Fund.

(v)

Staff loans are secured by motor vehicle registration cards or title deeds for car loans and house loans, respectively.

(vi)

The loan to the Government of United Republic of Tanzania is part of USD 250 million syndicated loan facility arranged by Standard Bank of South Africa whereby the Fund issued US dollar 10 million. The loan carries interest at LIBOR plus 4.5%.

(vii)

The Fund issued Shs15 billion loan to NHC. The loan carries interest at 15.3% per annum and is secured by real estate properties.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

103

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 21

LOAN INVESTMENTS (CONTINUED)

The movement in the total loan outstanding amount is as follows; 2016 Shs’000

2015 Shs’000

At start of year Additions and accrued interest Repayments Exchange gain

170,559,214 36,347,365 (16,047,827) 1,302,138

149,102,870 29,633,958 (10,787,912) 2,610,298

Gross loans

192,160,890

170,559,214

Provision for impairment At end of year

(12,686,370) 179,474,521

(12,662,734) 157,896,480

Group and Fund

Movement in impairment provision – Group and Fund: At start of year

35,518

12,662,734

Impairment charge for the year Recoveries of previously written off loans

23,636

12,661,058

12,686,370

12,662,734

141,418,259

152,896,480

(33,842)

-

At end of year Current

5,000,000

38,056,262

Non-current

157,896,480

179,474,521 22

INVESTMENT PROPERTY Rental

Work in

buildings

progress

Total

Shs’000

Shs’000

Shs’000

At start of year

76,099,237

159,646,675

235,745,912

Revaluation surplus

40,089,184

-

40,089,184

Additions

14,037,011

11,721,903

25,758,914

(830,864)

909,033

78,169

104,745,163

(104,745,163)

-

8,049,969

-

8,049,969

-

(75,378)

(75,378)

209,561,644

67,457,070

309,646,770

67,004,371

119,382,658

186,387,029

8,901,360

-

8,901,360

193,506

40,264,017

40,457,523

76,099,237

159,646,675

235,745,912

Group

Year ended 30 June 2016

Reclassification from/(to) property and equipment Transfer from work in progress Reclassification from leasehold land Adjustment At end of year Year ended 30 June 2015 At start of year

Revaluation surplus Additions At end of year

104

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 22

INVESTMENT PROPERTY (CONTINUED) Fund

Rental

Work in

buildings

progress

136,356,700

35,091,485

171,448,185

Revaluation surplus

15,511,097

-

15,511,097

Additions

14,037,011

5,916,818

19,953,829

Reclassification to property and equipment

(1,215,872)

(692,039)

(1,907,911)

Transfer from work in progress

40,316,264

(40,316,264)

-

205,005,200

-

205,005,200

65,354,800

72,163,321

137,518,121

8,901,360

-

8,901,360

Year ended 30 June 2016

Shs’000

At start of year

At end of year Year ended 30 June 2015 At start of year

Revaluation surplus Additions Transfers At end of year

Shs’000

Total

Shs’000

176,634

24,852,070

25,028,704

61,923,906

(61,923,906)

-

136,356,700

35,091,485

171,448,185

The Fund’s investment properties were revalued at 30 June 2016 by independent professionally qualified valuers, M/S Ardhi University who has recent experience in the locations and categories of the respective investment properties valued.

The following table summarises the quantitative information about significant unobservable inputs used in recurring fair value measurement of investment properties.

Fair value at

30 June 2016

30 June 2015

Shs’000

Shs’000

Group

277,018,714

Fund

205,005,200

Hierarchy

Valuation technique and key inputs

Significant unobservable inputs

Applicable rate

235,745,912 171,448,185 Level 3

Income approach

Capitalisation rate

7.75% 8%

Relationship of unobservable input to fair value The higher the capitalization rate, the lower the fair value

Work in progress is measured at cost as fair value can not be established realibly.

The Fund leases out all its investment properties under operating leases. The leases are for terms of one year or more.

There are no restrictions on realisability of investment property or remittance of income and proceeds from disposal.

None of the Fund Investment property has been pledged as a collateral.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

105

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 22

INVESTMENT PROPERTY (CONTINUED)

The following investments exceed 5% of investments in the Fund’s net assets: 2016

Millennium Towers II Millennium Towers I Dodoma offices building

2015

Shs’ 000

% of net assets

Shs’ 000

% of net assets

69,300,000

5.8

64,900,000

6.8

52,130,000

5.4

50,200,000

4.2

-

-

53,630,000

4.5

117,030,000

173,130,000

The following are amounts recognized in profit or loss for investment properties: 2016 Shs’ 000

2015 Shs’ 000

Rental Income

6,635,867

1,449,567

Direct operating expenses used to manage the properties

2,077,034

663,560

15,511,097

8,901,360

Rental Income

5,151,423

1,449,567

Direct operating expenses used to manage the properties

1,354,970

663,560

15,511,097

8,901,360

Group

Fair value gain

Fund

Fair value gain

106

23

INVESTMENT IN ASSOCIATE – TCCIA

The Group and Fund has equity investments in TCCIA Investment Company Limited.

Nature of business

Investment Company

Incorporation - Place of Business

Tanzania

Measurement method

Equity

Reporting period

31 December

Percentage Interest Held:

40%

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 23

INVESTMENT IN ASSOCIATE - TCCIA (CONTINUED)

2015

2016

Group and Fund At start of year

Share of (loss)/profit Dividend received At end of year

Shs ‘000

Shs ‘000 10,702,142

5,739,347

(3,018,823)

4,962,795

(131,206)

-

7,552,113

10,702,142

The Group and Fund’s share of the results, assets and liabilities of their associate is as follows: Non-current assets Current assets Total assets

Non-current liabilities Current liabilities Total liabilities

Revenue Profit for the year Total Comprehensive (loss)/income

13,837,311

326,988

340,831

14,178,142

3,309,849

10,742,234 11,069,222 3,208,404

152,261

175,895

3,485,744

647,700

212,853

4,962,795

3,360,665 566,903

264,619

(3,018,824)

The financial statements reporting period of the associate is 31 December. However for the purpose of preparation of group accounts, special purpose financial statements for the period ending 30 June 2016 have been prepared.

As at 30 June 2016, There were no contingent liabilities in relation to our interest to associate. There are no restrictions in the ability of associate to transfer funds to the Fund in form of cash dividends or to repay loan and advances. The Fund is complying with the Government fiscal period and therefore it has different reporting period with its associate.

24

INvestments IN SUBSIDIARIES

FUND Year ended 30 June 2016 and 31 December 2015 Msamvu Properties Limited Mwanza Commercial Complex Mzizima Properties Limited

At the start and end of year Shs ‘000 24,000,000 64,000,000 600,000 88,600,000

The Fund’s Investment in subsidiaries represents investments in Msamvu Properties Company Limited, Mwanza Commercial Complex Limited and Mzizima Properties Limited whose minority shareholders are Morogoro Municipal Council, Mwanza City Council and Dar es Salaam City Council respectively. The companies were established for the purposes of jointly undertaking: i) development of Msamvu bus terminal into modern bus terminal facility; ii) development modern international commercial complex in Mwanza City Council and; iii) development of modern truck terminal at Mbezi Louis in Dar es Salaam. Msamvu Properties Company Limited started operations in July 2010, Mwanza City Commercial Complex Limited started operations in September 2016 whilst Mzizima Properties Limited is yet to commence operations. Currently, the Fund has control in each of the three companies.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

107

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 24

INvestments IN SUBSIDIARIES (continued)

Set out below are the Group’s principal subsidiaries at 30 June 2016. Unless otherwise stated, the subsidiaries as listed below have share capital consisting solely of ordinary shares, which are held directly by the group and the proportion of ownership interests held equals to the voting rights held by group. The country of incorporation is also their principal place of business.

During the year under review there was no restriction to transfer cash and other assets between subsidiaries and parent company.

Name of undertaking

Country of incorporation

Nature of business

Msamvu Properties Limited

Transportation support services

Tanzania

Mwanza Commercial Complex

Renting of buildings

Tanzania

Mzizima Properties Limited

Transportation support services

Tanzania

% of ownership held

by Fund

2016

2015

2016

2015

40%

40%

60%

60%

20%

20%

80%

80%

40%

40%

60%

60%

Fund’s share of the results, assets and liabilities of its subsidiaries are as follows: Msamvu Properties Limited 2016

Current assets

21,565,512

8,579,414

28,811,141

50,376,653

3,129,584

3,129,584

Profit/(loss) Total Comprehensive Income

599,443

39,993,684

-

Revenue

Mwanza Commercial Complex 2016

2015

Shs’000

86,733,636

68,538,511

11,095,462

97,829,098

10,799,252

79,337,763

-

-

39,682

7,310,765

Mzizima Properties Limited

Shs’000

31,414,270

Non-current liabilities

Total liabilities

Current liabilities

2015

Shs’000

Total assets

Shs’000

Non-current assets

108

% of ownership held by NCI

39,682

600,769

7,310,765

1,484,444

2016

2015

Shs’000

Shs’000

1,104,925

1,104,925

1,104,925

1,104,925

-

-

-

48,587

-

-

48,587

-

6,163,216

11,508

11,229,157

(316,299)

7,292,566

11,508

11,229,157

(316,299)

125,021

-

125,021

-

-

-

-

-

The financial reporting period of the subsidiaries is 30 June.

The Fund does not foresee any risks associated with its interests in these subsidiaries. There are no restrictions on the Fund’s ability to access or use assets and settle liabilities of the group. No guarantees have been issued/given to the subsidiaries.

The subsidiaries did not pay any dividends during the year.

There was no change in ownership during the year.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 25

STATIONERY AND CONSUMABLES

Stationeries Shs ‘000

Other Consumables Shs ‘000

Total Shs ‘000

66,958 403,641 (325,980) 144,619

5,816 117,336 (111,384) 11,768

72,774 520,977 (437,364) 156,387

Opening balance Purchased during the year Utilised during the year

75,110 267,690 (275,842)

4,604 70,754 (69,542)

79,714 338,444 (345,384)

Closing net book amount

66,958

5,816

72,774

Group and Fund Year ended 30 June 2016 Opening balance Purchased during the year Utilised during year Closing net book amount Year ended 30 June 2015

None of the Group’s and Fund’s inventory was pledged as security for liability during the year. Inventories amounting to Shs 437.4 million (2015: Shs 345.38 million) were recognized as an expense during the year.

26 INTANGIBLE ASSETS – COMPUTER SOFTWARE

Group and Fund Year ended 30 June 2016

PMS

Total

Shs ‘000

Shs ‘000

Shs ‘000

400,624 155,406 556,030

1,347,659 1,347,659

1,748,283 155,406 1,903,689

(246,405) (42,290) (288,695)

(1,048,680) (183,378) (1,232,058)

(1,295,085) (225,668) (1,520,753)

267,335

115,601

382,936

Navision Shs ‘000

PMS Shs ‘000

Total Shs ‘000

363,669 36,955

1,347,661 -

1,711,330 36,955

400,624

1,347,661

1,748,285

Amortization At start of year Amortization charge for the year

(191,831) (54,573)

(784,992) (263,689)

(976,823) (318,262)

At end of year

(246,404)

(1,048,681)

(1,295,085)

154,220

298,980

453,200

Cost At start of year Additions

At end of year Amortization At start of year Amortization charge for the year At end of year

Net book amount Year ended 30 June 2015 Cost At start of year Additions At end of year

Net book amount

Navision

The Group and Fund have no internally generated intangible asset. The annual rate of amortization, which has been consistently applied on straight line method, is 20% per annum. None of the Group and Fund’s fully amortised intangible assets are still in use.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

109

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 27

PROPERTY AND EQUIPMENT

Group Year ended 30 June 2016 Opening net book value

Additions Gain/(loss) on revaluation Disposal Transfers to/(from) investment properties Depreciation charge

Buildings

Motor vehicles

Shs’ 000

Shs’000

Capital work in progress

Furniture and equipment

Shs’000

Shs’000

Total

Shs’000

751,298

1,822,907

3,146,079

2,244,924

7,965,208

-

-

3,054,497

-

3,054,497

428,510

321,612

(394,079)

-

356,042

-

-

(24,663)

-

(24,663)

-

(385,008)

2,551,763

(2,244,924)

(78,169)

(289,808)

(101,079)

(1,191,709)

-

(1,582,596)

890,000

1,658,432

7,141,888

-

9,690,320

890,000

1,658,432

7,141,888

-

9,690,320

Motor vehicles

Furniture and Buildings equipment

Capital work in progress

Total

Closing net book amount

At 30 June 2016 At valuation

At 30 June 2014 Cost

Accumulated depreciation Net book amount Year ended 30 June 2015

Shs’ 000

Shs’000

Shs’000

Shs’000

Shs’000

506,000

2,525,941

2,487,819

594,418

6,114,178

(194,000)

(576,737)

(583,313)

-

(1,354,050)

312,000

1,949,204

1,904,506

594,418

4,760,128

Opening net book value

312,000

1,949,204

1,904,506

594,418

4,760,128

Additions

685,313

-

1,840,481

1,650,506

4,176,300

Disposal

(4,500)

-

-

-

(4,500)

(241,515)

(126,297)

(598,908)

-

(966,720)

751,298

1,822,907

3,146,079

2,244,924

7,965,208

Cost

1,186,813

2,525,941

4,328,300

2,244,924

10,285,978

Accumulated depreciation

(435,515)

(703,034)

(1,182,221)

-

(2,320,770)

751,298

1,822,907

3,146,079

2,244,924

7,965,208

Depreciation charge

Closing net book amount

At 30 June 2015

Net book amount

110

None of the Group’s property and equipment has been pledged as collateral.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 27

PROPERTY AND EQUIPMENT (continued)

Fund Year ended 30 June 2016 Opening net book amount Additions Disposal

Motor vehicles

Furniture and equipment Shs '000

Total

Shs ‘000

Shs ‘000

Shs ‘000

751,298

2,991,110

3,742,408

-

3,027,917

3,027,917

-

(24,664)

(24,664)

428,510

(331,211)

92,299

(289,808)

(1,077,130)

(1,366,938)

Reclassification from investment properties (note 22)

-

1,907,911

1,907,911

Reclassification to non-current assets held for sale

-

(25,306)

(25,306)

890,000

6,468,627

7,358,627

890,000

6,468,627

7,358,627

Motor vehicle

Furniture and equipment

Total

Gain/(loss) on revaluation Depreciation charge during year

Closing net book amount At 30 June 2016 At valuation

Shs ‘000

Shs ‘000

506,001

2,137,066

2,643,067

(194,001)

(416,440)

(610,441)

312,000

1,720,626

2,032,626

Opening net book amount

312,000

1,720,626

2,032,626

Additions

685,313

1,831,902

2,517,215

Disposal

(4,500)

-

(4,500)

(241,515)

(561,418)

(802,933)

751,298

2,991,110

3,742,408

Cost

1,186,814

3,968,968

5,155,782

Accumulated depreciation

(435,516)

(977,858)

(1,413,374)

751,298

2,991,110

3,742,408

Fund At 1 July 2014 At valuation

Accumulated Net book amount Year ended 30 June 2015

Depreciation charge during year Closing net book amount At 30 June 2015

Net book amount

Shs ‘000

If property and equipment were stated on the historical cost basis, the amounts would be as follows:

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

111

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 27

PROPERTY AND EQUIPMENT (continued)

Group 2016 Cost

Accumulated depreciation Net book amount 2015 Cost

Shs’ 000

Furniture and equipment

Shs’ 000

1,588,838

10,866,708

(1,422,250)

(2,894,817)

166,588

7,971,891

1,588,838

5,310,417

(1,132,442)

(1,714,300)

Net book amount

456,396

3,596,117

Fund

Motor vehicles

Furniture and equipment

Accumulated depreciation

2016 Cost

Accumulated depreciation Net book amount 2015 Cost

Accumulated depreciation Net book amount

112

Motor vehicles

Shs’ 000

Shs’ 000

1,588,838

4,951,086

(1,132,442)

(1,676,810)

456,396

3,274,276

1,588,838

9,836,945

(1,422,250)

(2,753,940)

166,588

7,083,005

None of the Fund property and equipment has been pledged as collateral. None of properties and equipments is fully depreciated but still in use.

None of the Group and Fund property and equipment were temporary idle as at 30 June 2016 (2015: Nil).

The Fund had no contractual commitments to acquire property and equipment as at 30 June 2016. The Group’s commitment to acquire property and equipment are disclosed in note 37 (a).

There is no compensation from third parties for item in property and equipment that were impaired, lost or given up that is included in profit or loss.

An independent valuation of the group’s motor vehicles and equipment was performed by M/S Ardhi University an independent valuer to determine the fair value of the motor vehicle and equipment on 30 June 2016. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms. Sales prices of comparable properties in close proximity are adjusted for differences in key attributes such as property size.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 28

LEASEHOLD LAND 2016

Shs’000

9,730,292

9,730,292

(8,049,969)

-

807,739

-

2,488,062

9,730,292

(352,596)

(262,055)

(90,541)

(90,541)

At end of year

(443,137)

(352,596)

Net book amount

2,044,925

9,377,696

At valuation

2,044,925

9,377,696

2016

2015

Group Cost

At the start and end of the year Reclassification to investment properties Gain from revaluation At year end Depreciation

At start of year Charge for the year (note 9)

29

BENEFITS PAYABLE

Group and Fund

Retirement benefits Survivorship benefits

Shs ‘000

Shs ‘000

11,131,837

13,844,690

2,068,506

3,743,542

1,397,961

1,360,603

880,089

443,283

Pension liability

15,519,894

19,392,118

Current

11,777,201

17,315,619

3,742,693

2,076,499

15,519,894

19,392,118

Invalidity benefits Withdrawal benefits Other benefits – maternity and funeral

Non-current Total

2015

Shs’ 000

41,501

-

Pension liability refers to benefit claims received or due but not yet settled as at year end.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

113

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 30

OTHER PAYABLES AND ACCRUED EXPENSES Group Excess remittances of contributions Sundry payables Millennium Tower rental deposits Benefit deposit from Treasury* Deferred loan facility fees Other creditors and accruals Interest collected in advance

Sundry payables Tenant advances

Dishonoured and stale cheques Interest payable Provisions and accruals

Current Non-current

Fund Excess remittances of contributions Sundry payables Millennium Tower rental deposits Benefit deposit from Treasury* Deferred loan facility fees Other creditors and accruals Interest collected in advance

2016

2015

Shs ‘000

Shs ‘000

556,576

424,868

4,476,397

2,897,099

1,470,846

1,455,910

4,302,040

2,740,774

12,538,986

8,431,330

746,916

1,056,959

98,235

63,715

1,227,766

7,950

497,411

464,975 11,923 435,781

117,492

136,591

3,513,754

1,639,834

4,476,397

2,897,099

9,944,847

5,670,164

2,594,138

2,761,166

12,538,985

8,431,330

556,576

424,868

3,332,642

2,730,430

1,470,846

1,455,910

4,302,038

2,740,418

497,411

435,780

11,395,229

8,264,304

746,916

1,056,959

1,227,766 7,950

464,975 11,923

Sundry payables Tenant Advances Dishonoured and stale cheques Interest payable Provisions and accruals

Current Non-current

114

117,492

136,591

2,369,999

1,473,165

3,332,642

2,730,430

8,801,091

5,628,409

2,594,138

2,635,895

11,395,229

8,264,304

98,235

63,715

*The Fund has entered into an Agreement with the Ministry of Finance (MOF) to pay benefit on its behalf to members of the central government. The Fund receives funds periodically from MOF out of which the benefits are paid.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 31

INCOME TAX LIABILITIES

At the beginning of the year Current income tax (credit)/charge for the year (Note 11)

Group

Fund

2015

2016

2016

2015

Shs’000

Shs’000

Shs’000

Shs’000

11,340,251

9,081,550

11,336,744

9,097,363

2,077,711

3,768,677

2,251,737

3,747,467

Tax paid during the year

(1,215,000)

(1,509,976)

(1,215,000)

(1,508,086)

At year end

12,202,962

11,340,251

12,373,481

11,336,744

32

DEFERRED INCOME TAX

Deferred income tax is calculated on all temporary differences under the liability method using a principal tax rate of 30%. The movement on the deferred tax account is as follows: Group

2016

At start of year

Fund

2015

2016

2015

Shs’000

Shs’000

Shs’000

Shs’000

31,252,074

25,714,465

31,265,545

25,706,710

5,537,609

11,339,270

5,558,835

31,252,074

42,604,815

31,265,545

Debited to statement of changes in net assets available for benefits (Note 11)

18,694,248

At end of year

49,946,322

Deferred income tax assets and liabilities, deferred income tax charge/ (credit) in the statement of changes in net assets available for benefits is attributed to the following items:

Group Deferred income tax liabilities Fair value gain on investments Deferred income tax assets

Motor vehicles and equipment Provisions Loss Net deferred income tax liabilities

Fund Deferred income tax liabilities Fair value gain on investments

1 July 2015

(Credit)/Charge to statement of changes

in net assets

30 June 2016

Shs’000

Shs’000

Shs’000

26,428,703

9,236,232

35,664,935

8,989,754

8,428,645

17,418,399

(4,141,495)

2,084,015

(2,057,480)

(24,888)

(1,054,644)

(1,079,532)

31,252,074

18,694,248

49,963,642

1 July 2015

(Credit)/Charge to statement of changes

in net assets

30 June 2016

Shs’000

Shs’000

Shs’000

8,978,269

7,547,013

16,525,282

(4,141,427)

2,232,074

(1,909,352)

Deferred income tax assets Motor vehicles and equipment Provisions

Net deferred income tax liabilities

31,265,545

11,339,270

42,604,815

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

115

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 32

DEFERRED INCOME TAX (CONTINUED)

During the year ended 30 June 2016, government securities were fair valued resulting to net fair value loss of Shs 17.97 billion which was split over the years ended 30 June 2016, 30 June 2015 and 30 June 2014. For the year ended 30 June 2016 there was a fair value gain of Shs 4.05 (2015: a loss of Shs 6.31 billion and 2014; a loss of 15.72 billion).

Due to this prior year adjustment the deferred tax liability was decreased by Shs 6.61 billion.

in net assets

30 June 2015

Shs’000

Shs’000

Shs’000

18,113,294

8,315,409

26,428,703

7,689,148

1,300,606

8,989,754

Provisions

(63,089)

(4,078,406)

(4,141,495)

Loss

(24,888)

-

(24,888)

25,714,465

5,537,609

31,252,074

18,113,294

8,315,409

26,428,703

Group Deferred income tax liabilities Fair value gain on investments Deferred income tax assets

Motor vehicles and equipment

Net deferred income tax liabilities

1 July 2014

(Credit)/Charge to statement of changes

Fund Deferred income tax liabilities Fair value gain on investments Deferred income tax assets

Motor vehicles and equipment Provisions Net deferred income tax liabilities

33

7,656,437

1,321,832

8,978,269

(63,021)

(4,078,406)

(4,141,427)

25,706,710

5,558,835

31,265,545

EMPLOYEE DEATH BENEFIT OBLIGATIONS

2016

Group and Fund

Shs ‘000

710,736

505,061

285,268

303,052

At start of the year Interest expense

64,182

Current service cost Payments made during the year

68,183

(133,823)

(165,560)

926,363

710,736

At end of the year

The Fund has an unfunded non-contributory employee death policy arrangement for permanent and pensionable employees (the “Arrangement”) which provide for lump sum payments to the dependants of its employees upon their death and death of close family members. An actuarial valuation of the arrangement as at 30 June 2016 was carried out by the group actuary using the Projected Unit Credit Method.

The trustees believe that the carrying value of the death benefit obligation as at 30 June 2016 represents the fair value of the accrued liability. The principal assumptions used in the actuarial valuation are: Rate (% p.a)

116

2015

Shs ‘000

· Discount rate

17.96

per annum

· Rate of salary escalation

10.00

per annum

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 33

EMPLOYEE DEATH BENEFIT OBLIGATIONS (CONTINUED)

The ‘notional’ Fund contribution rate to meet the cost of future accrual of benefits is estimated at 0.5% of salaries per annum. The next valuation is due on 30 June 2017.

The 3-year trend of this non-contributory employee gratuity arrangement is a follows: 2016 Shs’000 926,363

Present value of the defined benefit obligation

2015 Shs’000 710,736

2014 Shs’000 505,061

The amounts recognised in the statement of changes in net assets available for benefits are as follows:

Interest cost (discount unwinding) Current service cost

Total, included in staff costs - Note 10 (b)

2016 Shs’000

2015 Shs’000

64,182

68,183

285,268

303,052

371,235

349,450

There are no plans for any plan amendments, curtailments and settlements. Additionally, there are no contingent liabilities arising from post-employment benefit obligations.

34

FINANCIAL INSTRUMENTS BY CATEGORY GROUP

30 June 2016 Financial assets Investments: Government securities Corporate bonds Quoted shares Unquoted shares Long term loans Other assets: Cash and bank Fixed deposits Receivables (excluding prepayments) Receivable from Treasury

30 June 2015 Financial assets Investments: Government securities Corporate bonds Quoted shares Unquoted shares Long term loans Other assets: Cash and bank Fixed deposits Receivables excluding prepayments Receivable from Treasury

Loans and receivables

Available for sale

Total

Shs’000

Shs’000

Shs’000

474,832,034 1,609,776 179,474,521

73,697,721 5,134,541 -

474,832,034 1,609,776 73,697,721 5,134,541 179,474,521

18,865,644 63,398,215 89,000,389 74,425,617 901,606,196

78,832,262

18,865,644 63,398,215 89,000,389 74,425,617 980,438,458

326,847,974 4,897,491 157,896,480

78,652,138 6,156,323 -

326,847,974 4,897,491 78,652,138 6,156,323 157,896,480

6,122,073 61,500,182 80,958,978 75,213,400

-

6,122,073 61,500,182 80,958,978 75,213,400

713,436,578

84,808,461

798,245,039

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

117

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 34

FINANCIAL INSTRUMENTS BY CATEGORY

2015

2016

Financial liabilities at amortised cost Benefit payable Other payables and accrued expenses

FUND 30 June 2016 Financial assets Investments: Government securities Corporate bonds Quoted shares Unquoted shares Loan investments Other assets: Cash and bank Deposits with financial institutions Receivables (excluding prepayments) Receivable from Treasury

FUND 30 June 2015 Financial assets Investments: Government securities Corporate bonds Quoted shares Unquoted shares Loan investments Other assets: Cash and bank Deposits with financial institutions Receivables excluding prepayments Receivable from Treasury

Shs’000

Shs’000

15,519,894 12,538,985

19,392,118 8,264,303

28,058,879

27,656,421

Loans and receivables Shs’000

Available for sale Shs’000

Total Shs’000

474,832,034 1,609,776 179,474,521

73,697,721 5,134,541 -

474,832,034 1,609,776 73,697,721 5,134,541 179,474,521

18,399,683 62,467,442 66,968,491 74,425,617

-

18,399,683 62,467,442 66,968,491 74,425,617

878,177,564

78,832,262

957,009,826

326,847,974 4,897,491 157,896,480

78,652,138 6,156,323 -

326,847,974 4,897,491 78,652,138 6,156,323 157,896,480

6,114,124 61,094,332 59,814,494 75,213,400

-

6,114,124 61,094,332 59,814,494 75,213,400

691,878,295

84,808,461

776,686,756

2016

Financial liabilities at amortised cost Benefit payable

Other payable and accrued expenses Amounts due to subsidiaries

118

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

2015

Shs’000

Shs’000

15,519,894

19,392,118

14,633,691

20,040,747

41,548,814

47,697,168

11,395,229

8,264,303

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 35

ACTUARIAL POSITION The actuarial valuation was completed on 30 June 2016 by Alexander Forbes Financial Services (East Africa) Limited, an independent firm of Actuaries and Consultants, using the projected unit method. This is a recommended method of valuing pension liabilities by the International Financial Reporting Standards. According to the valuation as at the date, the actuarial present value of promised retirement benefits was as follows: Fund

2016

Accrued liabilities

Value of accrued benefit liability Assets

Value placed on Fund assets as at 30 June Actuarial deficit

Excess of accrued liabilities over assets

Shs million

Shs million

2,688,200

1,099,200

(1,169,100)

(645,038)

(1,519,100)

(454,162)

43.5%

58.7%

Funding level

2013

Vested and non-vested benefits Vested

2,540,800

Non-vested

21.2%

1,099,200 21.0%

Vested benefits refers to past service liabilities. Non vested benefits refer to future service liabilities. Vesting of benefits occurs when the employee completes the number of years of service required to receive benefits under the plan at some point in the future. Non-vested benefits are those in which the employee has not completed the required years of creditable service in order to earn the right to receive benefits under the terms of the plan. The next valuation is due at 30 June 2019 as per the Fund’s accounting policy.

Summary of core actuarial basis

The financial assumptions that were used in the 2016 actuarial valuation are set out below:

Financial assumptions

Rate (% p.a)

·

Discount rate

10.0

per annum

·

Earnings growth

7.5

per annum

·

Pension increases

0.0

per annum

·

Inflation rate

5.5

per annum

Demographic assumptions ·

Voluntary/early retirement is at age 55 and compulsory is at age 60;

·

Any member over the normal retirement age is deemed to have retired on the valuation date;

·

An allowance for withdrawal from service is based on the average experience of other similar schemes in East Africa; and

·

On retirement it was assumed that 100% of the members will elect to commute 50% of their pension for a cash lump sum, in accordance with the Fund’s Act.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

119

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 35

ACTUARIAL POSITION (CONTINUED)

The Fund’s vested liability for the year ended 30 June 2016 was Shs 2,688.2 billion (2013: Shs 1,099.2 billion). Non vested liability was 21.2% (2013: 21.0%) of pensionable salaries.

The above financial assumptions are different from the ones used in 2013 actuarial valuation. The key financial assumptions used in the 2013 actuarial valuation are set out below:

Rate (% p.a)

·

Discount rate

8.5

per annum

·

Earnings growth

7.5

per annum

·

Pension increases

0.0

per annum

·

Inflation rate

6.5

per annum

Had the same assumptions been used as at 30 June 2016, the funding level would be at 49.9%. If the Fund is unable to fully recover the amounts due from the Government of Tanzania in respect of the back-purchase receivable, then the funding position of the Fund will drop to 40.7% from 43.5% and the actuarial deficit increases to Shs 1,519 million from Shs 1,594 million.

36

PRIOR YEAR ADJUSTEMENT

The financial statements for the year ended 30 June 2015 and 30 June 2014 have been restated to refelect fair value in measurement of Government securities. In prior years, the Group and Fund’s investment in government securities was measured at amortised cost and this has been changed to fair value during the year. The effect of the restatement on those financial statements is summarized below: GROUP

2015

Shs’000

2014

Shs’000

Impact on statement of changes in net asset available for benefits Change in fair value of government securities -

-

Adjustment

As previously stated

(6,310,345)

(15,717,340)

As restated

(6,310,345)

(15,717,340)

As previously stated

326,847,974

254,957,280

Prior year adjustment

(22,027,685)

(15,717,340)

As restated

304,820,289

239,239,940

As previously stated

960,761,208

774,963,196

Prior year adjustment

(22,067,685)

(15,717,340)

As restated

938,733,523

759,245,856

Impact on statement of net asset available for benefits Government securities

Net assets available for benefits

120

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 36

PRIOR YEAR ADJUSTEMENT (CONTINUED) FUND 2015 Shs’000

2014 Shs’000

-

-

Adjustment

(6,310,345)

(15,717,340)

As restated

(6,310,345)

(15,717,340)

As previously stated

326,847,974

254,957,280

Prior year adjustment

(22,027,685)

(15,717,340)

As restated

304,820,289

239,239,940

As previously stated

961,380,519

775,295,215

Prior year adjustment

(22,067,685)

(15,717,340)

As restated

939,352,834

759,577,876

Impact on statement of changes in net asset available for benefits Change in fair value of government securities As previously stated

Impact on statement of net asset available for benefits Government securities

Net assets available for benefits

37

COMMITMENTS AND CONTINGENT LIABILITIES a)

Capital commitments

As at 30 June 2016, the Group had capital commitments of Shs 6.5 billion (2015: Shs 10.1 billion) in respect of construction of office accommodation in Dodoma. Furthermore, the Fund has capital commitment for subsidiaries as follows:

Msamvu Properties Limited Mwanza Commercial complex

b)

2015

Shs million

Shs million

16,697

20,074

2,861

967

19,558

21,041

Loan commitments

As at 30 June 2016, the Group had no loan contractual commitment. c)

2016

Finance lease commitments

The Group and the Fund had no finance lease commitments as at 30 June 2016 (2015: Nil)

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

121

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 37

COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) d)

Operating lease commitments as lessee

The Group has various operating leases for the premises in which it carries out its operations. The total of future minimum lease payments under non-cancellable operating leases is as follows: 2015

2016

Not later than 1 year Later than 1 year but less than 5 years

e)

Shs’000

250,470

230,088

181,220

151,223

431,690

381,311

Legal contingent liabilities

The Group and the Fund had no contingent liabilities as at 30 June 2016 (2015: Nil)

38

CASH FLOWS FROM OPERATING ACTIVITIES Group

2016

Contributions received Rent income Fees income Dividend income Interest income Other income Benefits paid to members Salaries paid Employee death benefit obligations Administrative expenses paid Other expenses Stationery and consumables Due to subsidiaries Taxes paid Net cash from operating activities

122

Shs’000

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

2015

Fund

2016

2015

Shs ‘000

Shs ‘000

Shs ‘000

Shs ‘000

267,701,763

156,288,216

267,701,763

156,288,216

599,443

600,769

-

-

5,511,119

2,175,680

3,442,466

2,741,933

3,696,533

3,330,621 (111,118,282)

5,915,581 1,444,344 (82,982,682)

(17,701,851)

(11,905,882)

(6,933,059)

(8,301,266)

(133,823)

(1,947,030)

(165,560) (10,082,373)

(520,977)

(338,444)

(1,044,480) 144,882,443

-

-

4,026,675

2,175,680

3,442,466

2,741,933

3,696,533

3,330,621 (111,118,282)

5,915,581 1,444,344 (82,982,682)

(17,395,786)

(11,737,549)

(6,344,567)

(7,850,389)

(133,823)

(1,869,802) (520,977)

(165,560) (8,625,219) (338,444) (18,200,497)

(1,509,976)

(5,507,056)

(1,215,000)

(1,508,086)

53,880,340

138,092,765

37,157,328

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 39

RELATED PARTY TRANSACTIONS

The following are transactions and balances outstanding with related parties:

i) Payments made to related parties

Msamvu Properties Company (T) Limited Mwanza City Commercial Complex Limited Staff loans Members loans ii)

Receipts from related parties

Repayments for staff loans Members’ loans

iii)

Pensions Properties Limited Mzizima Properties Ltd Mwanza City Commercial Complex Members’ loans

Outstanding balances due to related parties

Msamvu Properties Ltd Mwanza City Commercial Complex

v)

2015

Shs ‘000

Shs ‘000

3,374,086

2,664,944

2,912,129

15,656,393

2,680,695

3,197,653

11,516,579

8,945,253

20,483,489

30,464,243

1,366,315

1,286,873

3,320,301

2,070,035

4,686,616

3,356,908

12,345,947

11,031567

4,550,495

4,000,542

120,841

120,841

1,936,961

-

Outstanding balances due from related parties

Staff loans

iv)

2016

28,894,604 47,848,848

34,260,967

16,696,888

20,073,866

-

966,881

16,696,888

21,040,747

Interest income from related parties

Interest from staff loans Interest Members’ loans

19,108,017

54,628

48,542

1,590,309

910,099

1,644,937

958,641

At 30 June 2016, LAPF had an outstanding loan amount of Shs 4.5 billion (2015: Shs 4 billion) receivable from Pensions Properties Limited (PPL). The loan was extended at commercial rates and was guaranteed by the Government.

Placements of funds and loans to related parties were made at the Fund’s usual terms and conditions and at market interest rates.

The amounts outstanding for subsidiaries are unsecured, Members’ loans are granted at age 55 and are secured by benefits vested in the Fund while Staff loans are secured by motor vehicle registration cards or title deeds for car loans and house loans respectively. All amounts will be settled in cash. No provision have been made for doubtful debts in respect of the amounts owed by related parties.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

123

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 39

RELATED PARTY TRANSACTIONS (CONTINUED)

Remuneration of Trustees and Key Management Personnel

The Board of Trustees is a body of appointed members who jointly oversee the activities of the Fund. Their remuneration is set out below: 2016

vi) Board of Trustees Trustees’ remuneration Other board expenses

Shs ‘000

Shs ‘000

46,200

57,400

682,423

851,520

728,623

908,920

Key management personnel are described as those persons having authority and responsibility for planning, directing and controlling the Fund, comprising the directors of the Fund. Their remuneration, allowances and loans are as set below:2016

vii) Key management compensation Short-term employee benefits

Social security contributions – defined contribution plan Employee death benefit expense – defined benefit plan Other allowances Other long-term benefits

viii)

2015

Shs ‘000

Shs ‘000

1,188,565

918,473

178,285

137,771

339,007

335,982

99,047

76,539

1,365,165

1,108,785

3,170,069

2,577,550

Loans to key management personnel

Movement in loans to key management personnel: Opening balance Additions Interest Repayment

ix)

124

2015

1,108,785 480,550 9,799

1,357,056 66,264 14,328

(233,969)

(328,863)

1,365,165

1,108,785

Government- Related Entities

The Fund operates under the President’s Office - Regional Administration and Local Government (PO-RALG). Largely, the members of the Fund are working with the Government-related entities. Out of the total contributions during the year of Shs. 279.68 billion (2015: Shs. 210.07 billion), the amount received from Government-related entities was Shs 249.65 billion (2015: 195.49 billion).

Apart from contributions above and loans disclosed in Note 21, there are no other significant transactions with Government–related entities.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued) 40

ASSETS PLEDGED AS SECURITY FOR LIABILITIES

None of the Fund’s assets has pledged as security for liabilities.

41

EVENTS AFTER THE REPORTING PERIOD

There were no material events after the reporting date which required disclosure or adjustment.

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

125

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

NOTES (continued)

126

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

INFORMATION BROCHURES NOTES (continued)

LAPF - PENSIONS FUND

Annual Report & Financial Statements for the year ended 30 June 2016

127

HEAD OFFICE Makole Road, P. O. Box 1501, DODOMA Tel: +255 26 2321952 Fax: +255 26 2321701 Email: info@lapf.or.tz