ZIMELE PERSONAL PENSION PLAN

Transcription

1 ZIMELE PERSONAL PENSION PLAN ABRIDGED REPORT TO THE SCHEME MEMBERS FOR THE YEAR ENDED 31 ST DECEMBER 2015

2 TABLE OF CONTENTS Advisors To The Fund... 3 Trustee s Report... 4 Statement Of Trustee s Responsibilities... 6 Declaration Statement... 6 Fund Manager s Report to the Scheme Members... 7 Report Of The Custodian... 9 Report of The Independent Auditors...10 Income Statement...11 Balance Sheet As At 31st December Personal Pension Plan Abridged Report 31 st December,

3 ADVISORS TO THE FUND TRUSTEE National Bank of Kenya Limited National Bank Building Harambee Avenue P.O. Box Nairobi, Kenya ADMINISTRATOR Pacific Insurance Brokers (EA) Ltd The Insurance Centre, Rose Avenue Off Dennis Prit Road P.O. Box Nairobi, Kenya FUND MANAGER Zimele Asset Management Company Limited Ecobank Towers, 7th Floor Muindi Mbingu Street P.O Box Nairobi, Kenya CUSTODIAN Kenya Commercial Bank Limited Kencom House, Head Office P.O. Box Nairobi, Kenya AUDITORS Lishenga & Company Associates Richmond House,3rd Floor, Suite 3A4 P.O. Box Nairobi, Kenya PRINCIPAL LAWYERS Muriu Mungai & Co. Advocates Britak Centre, Ground Floor Mara/Ring Road P.O Box Nairobi, Kenya Personal Pension Plan Abridged Report 31 st December,

4 TRUSTEE S REPORT The Trustee submits its report together with the audited financial statements for the period ended 31 st December 2015 that disclose the state of affairs of the scheme. INCORPORATION AND REGISTERED OFFICE The scheme started operations on 1 April 2007, is registered under the Retirement Benefits Act, 1997 and the Income Tax Act, Chapter 470. (Scheme No , certificate No. 995 and respectively). INVESTMENT OBJECTIVES OF THE SCHEME The main purpose of the Scheme is to provide an investment vehicle for people to build savings for use in retirement in accordance with the provisions of Retirement Benefits Act and the regulations made thereunder. The investment objective of the Scheme is to generate long term capital growth through investing the members contributions in equities and fixed income securities and other investments in accordance with the provisions of the Retirement Benefits Act and the regulations made thereunder. CHANGES TO INCORPORATION DOCUMENTS There were no changes made to Incorporation documents (Trust Deed and Rules of the Scheme) during the period. TOTAL VALUE OF THE FUND AS AT 31 ST DECEMBER 2015 The market value of the fund as at 31 st December 2014 was Kshs 89.2 million. INVESTMENT OF FUNDS Under the terms of their appointment, Zimele Asset Management Company Limited (Th e Fund Managers) is responsible for the investment of funds. The overall responsibility for investment and performance lies with the Trustees, the National Bank of Kenya Limited. Personal Pension Plan Abridged Report 31 st December,

5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The scheme's activities expose it to a variety of financial risks, including credit risk and the effects of changes in market prices and interest rates. The scheme s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance. Risk management is carried out by the Scheme Manager, Zimele Asset Management Company Limited (ZAMCO). ZAMCO identifies, evaluates and manages financial risks, with emphasis on specific areas such as interest rate risk, credit risk and investing excess liquidity. The Scheme has policies in place to ensure compliance with international best practice in corporate governance. By Order of the Trustee National Bank of Kenya Limited Personal Pension Plan Abridged Report 31 st December,

6 STATEMENT OF TRUSTEE S RESPONSIBILITIES The Retirement Benefits Act and the Regulations made thereunder requires the Trustee to prepare financial statements for each financial period that give a true and fair view of the state of affairs of the scheme as at the end of the period and of the results of its operations. It also requires the Trustee to ensure that the scheme manager keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the scheme. The Trustee is also responsible for safeguarding the assets of the scheme. The trustees accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and the Retirement Benefits (Individual Retirement Benefits Schemes) Regulations, 2000.The trustees are of the opinion that the financial statements give a true and fair view of the financial transactions of the scheme and of the disposition of its assets and liabilities, other than liabilities to pay pensions and benefits falling due after the end of the year. The trustees further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as for safeguarding the assets of the scheme and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The trustees certify that to the best of their knowledge and belief the information furnished to the auditors for the purposes of the audit was correct and complete in every respect. DECLARATION STATEMENT The Zimele Personal Pension Plan is an approved scheme within the meaning of The Retirement Benefits Act and The Regulations made there under. The members of the scheme are not liable for the debts of the scheme; The Zimele Personal Pension Plan invests in equities and fixed income securities in accordance with the provisions of the Retirement Benefits Act and the Regulations made thereunder); Nothing has come to the attention of the Trustee to indicate that the scheme will not remain a going concern for at least the twelve months from the date of this statement. By Order of the Trustee National Bank of Kenya Limited Personal Pension Plan Abridged Report 31 st December,

7 FUND MANAGER S COMMENTARY Most financial markets around the world were characterized by turbulence for the greater part of last year. Arguably, the precipitating factor behind the volatility was the anticipation of whether the US central bank would start raising its policy rate after pursuing a near-zero interest rate policy to support economic recovery following the global financial crisis in The US rate hike, which took place in mid December, effectively brought to an end a prolonged period of super-easy monetary policy that flooded most financial markets around the world with cheap money, and in the process lifted asset prices to record levels. As expected, the rate tightening caused a reversal of capital flows from the developing world back to the USA, with emerging markets losing an estimated US$735 billion (ksh.72 trillion), leaving behind a trail of battered currencies and asset prices. The financial markets turmoil also coincided with the slowdown of most economies in the developing world, led by China. The slump in growth caused a massive decline in the prices of crude oil and commodities as their demand drastically diminished. Worst hit were countries that are heavily dependent on exports of crude oil and hard commodities. The currencies of Brazil, Russia, South Africa, and other emerging markets, experienced heavy losses against the US dollar leading to substantial increases in inflation and budget deficits due to revenue shortfalls. The key beneficiaries of this environment were countries that are net importers of petroleum products and hard commodities. By extension, Kenya s imports of petroleum products declined from 23% of total imports in 2013 to 15% of total imports in 2015, resulting in savings in excess of ksh.100 billion. Falling prices of petroleum products also helped to keep the rate of inflation low during the year despite increases in taxes on various consumer goods; the overall rate of inflation averaged 6.6% last year compared to 6.9% in The Kenyan currency was not spared from the market turmoil and the sudden weakening of the shilling against the US dollar from mid last year resulted in a series of events that adversely affected the local financial market. The government s domestic borrowing program was almost disrupted after Treasury bill rates rose to double-digit levels in July, which led to heavy under-subscription as Treasury was initially reluctant to borrow at the higher than budgeted rates. The undersubscription resulted in a cashflow problem forcing Treasury to finally accept borrowing at the higher rates. As a result, the money market suddenly became volatile; in the first half of 2015 the 91- day Treasury bill rate was low and stable in the 8% range but suddenly accelerated to double-digit levels in July and peaked at a 17-year high of 22.49% in late October. As expected, the surge in short term interest rates significantly pushed up lending rates and the cost of borrowing in general, which caused most companies to postpone issuing new equity and debt capital to avoid under-subscriptions. The high interest rate environment also impacted negatively on the bond market where turnover at the NSEdeclined by 40% to ksh.305 billion,compared to an increase of 12% to ksh.506 billion in High short term interest rates generally lead to capital losses on bond holdings due to their effect of pushing bond prices downwards; at their peak in October, all Treasury bill tenors had rates much higher than all outstanding long term Treasury bonds. The government decided to borrow externally to calm the money market; in October it was able to arrangement for funding comprising of about ksh.70 billion in a standby loan from the IMF and a syndicated loan from private lenders of ksh.76 billion. The easing of pressure on domestic borrowing helped to calm the money market and by December the 91 days Treasury bill rate had descended to single digit levels. This unfortunate series of events reiterates the importance of a stable macroeconomic environment and the dangers resulting from policy uncertainty on financial market stability. In 2015, total income of the Zimele Money Market Fund increased by 86% to ksh.53 million. Expenses went up by 45% to ksh.12 million resulting in a doubling of the net surplus to ksh.40 million compared to a surplus of ksh.19 million in The fund s net assetsdeclined marginally by Personal Pension Plan Abridged Report 31 st December,

8 2% to ksh.382 million, compared to an increase of 17% in 2014.The fund s net yield averaged 12.7% compared to 10.2% in 2014 due to the high interest rate environment that prevailed from mid year. Performance of the fund s investments in 2016 will continue to be influenced by the government s budget deficit financing strategy. The revised budget deficit for 2015/16 is projected at ksh.522 billion or 8.1% of GDP compared to a deficit of ksh.504 billion or 8.9% of GDP in the 2014/15 budget. If the government is able to reduce its deficit at the projected level of ksh.46.9 billion, the resultant decrease in domestic borrowing could push down 91 days Treasury bill rates back to single digit levels. However, increased external borrowing from private lenders, via syndicated loans or Euro/Dollar bonds, may put considerable upward pressure on interest rates and the economy in the event of a sudden weakening of the shilling. Based on this background, we only expect a rally in the bond market if short term interest rates decline significantly, and stay low for a prolonged duration. The investment strategy in the first half of 2016 will be biased towards short term fixed income securities. Personal Pension Plan Abridged Report 31 st December,

9 REPORT OF THE CUSTODIAN In accordance with the Retirement Benefits (Managers and Custodians) Regulations, 2000 (The Regulations) and the Custody Agreement between Kenya Commercial Bank Limited as the Custodian and National Bank of Kenya as the Trustee, we confirm that we have discharged the duties prescribed for a Custodian under Regulation 8 of the regulations, to Zimele Personal Pension Plan. From the period 1 st January 2015 to 31 st December 2015, we have held the assets for the Zimele Personal Pension Plan, including title documents, securities and income that accrue thereof, to the order of the Trustee and facilitated the transfer, exchange or delivery in accordance with the instructions received from the Fund Manager. By Order of the Custodian Kenya Commercial Bank Limited Personal Pension Plan Abridged Report 31 st December,

10 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ZIMELE PERSONAL PENSION PLAN We have audited the financial statements of the Zimele Personal Pension Plan for the period ended 31 December 2015 as set out on pages 11 and 12. Respective Responsibilities of the Trustee and Auditors The Trustee is responsible for the preparation of financial statements. Our responsibility is to express an independent opinion on the financial statements based on our audit. Basis of Opinion We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit includes an examination, on a test basis, of evidence supporting the amounts and disclosures in the financial statements. It also includes an assessment of the accounting policies used and significant estimates made by the Trustee, as well as an evaluation of the overall presentation of the financial statements. We have obtained all the information and explanations that to the best of our knowledge and belief were necessary for the purpose of our audit and believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, proper books of accounts have been kept and the financial statements, which are in agreement with the Scheme's books of accounts, give a true and fair view of the state of the Scheme's financial affairs as at 31 December 2015 and of its operating results and cash flow for the period then ended and comply with International Financial Reporting Standards and the Retirement Benefits Act and the Regulations made thereunder. Lishenga & Company Associates, CPA (K) Certified Public Accountants Nairobi, Kenya. Personal Pension Plan Abridged Report 31 st December,

11 INCOME STATEMENT KSHS KSHS INCOME Dividends 253, ,095 Interest income 10,913,163 6,944,549 Capital gains on disposal of investments 1,183,095 5,502,398 Other income 54,083 12,753 Total 12,403,608 12,737,795 EXPENDITURE Bank charges 80,113 32,120 Service Fees 2,967,085 2,387,305 Total 3,047,198 2,419,424 Net Surplus/(Deficit) 9,356,410 10,318,371 Personal Pension Plan Abridged Report 31 st December,

12 BALANCE SHEET AS AT 31 ST DECEMBER KSHS KSHS INVESTMENTS 87,504,464 75,167,525 CURRENT ASSETS Receivables 1,020,000 1,165,836 Bank Balances 1,010,396 2,160,198 2,030,396 3,326,034 CURRENT LIABILITIES Payables &Accruals 295, ,067 Net Current Assets/(Liabilities) 1,734,593 3,045,967 Net Assets 89,239,057 78,213,492 FINANCED BY Members' Contribution 57,982,629 53,559,732 Reserves 31,256,428 24,653,760 Members Net Worth 89,239,057 78,213,492 Personal Pension Plan Abridged Report 31 st December,