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PARASTATAL PENSIONS FUNDAnnual Report for the Year ended 31 December, 2010

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Parastatal Pensions Fund Annual Report for the year ended 31st December 2010


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Table of Contents

Our VisionThe Fund is desirous of freeing members from hardships aris-ing out of loss of income due to old age, disability, death and the related risks

Our MissionThe Fund is committed to providing quality pensions and al-lied benefits to members from both formal and informal sectors through utilization of dedicated human resources and modern technology with high degree of accuracy and promptness.

Core ValuesPPF will achieve its vision through a developed corporateculture that has been the following core values;

Intergrity,Commitment,Teamwork,Innovativeness,

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Table of Contents01 Letter of Transmittal

02 Financial Highlights

03 Chairman’s Statement

06 Director General’s Review of Operations

15 Report of the Trustees

24 Statement of Trustees’ responsibility in preparation of financial statements

26 Report of the Controller and Auditor General on the Financial Statements of Parastatal Pensions Fund

28 Statement of Changes in Net Assets Available for Benefits for the year ended 31 December 2010

29 Statements of net assets available for benefits

30 Statement of cash flows

32 Notes to the financial statements

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Table of Contents Letter of Transmittal

Hon. Mustafa H. Mkullo (MP)Minister for Finance,P.O. Box 9111,DAR ES SALAAM

Honourable. Minister,

In accordance with section 14(3) of the Parastatal Pensions Act of 1978, I hereby submit, on behalf of the Board of Trustees, a report on the Fund’s operational performance for the financial year ended 31st December 2010, together with the audited accounts of the same period.

Yours sincerely,

Dr. Kassim M. KapalataVice Chairman of the Board of Trustees


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Financ ia l H igh l i gh ts

The Parastatal Pensions Fund was established under section 6 of the Parastatal Organisations Pensions Scheme Act (Cap 372 R.E 2002) to provide pensions and other allied terminal benefits to all eligible employees of parastatal and private companies in Tanzania.

Since its establishment, the Fund has been able to record a steady growth, and recent statistics show that the size of the accumulated fund has, as at 31 December 2010, reached TZS 722.5 billion from TZS 624.85 billion as at 31 December 2009.

FINANCIAL HIGHLIGHTS (IN TZS BILL)

ItemYear

2006 2007 2008 2009 2010

Contribution Income 63.83 83.21 109.78 136.60 147.7

Investment Income before tax 25.36 35.3 62.24 67.08 43.5

Benefits Paid 21.65 24.84 36.88 47.19 63.8

Net Income 52.71 74.14 108.04 125.52 97.62

Size of the Fund 317.15 391.29 499.33 624.85 722.5


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On behalf of the Board of Trustees of PPF, I am delighted to present the Annual Report and Financial Statements of the Fund for the year ended 31 December 2010 following another solid performance despite the challenging environment.

The year 2010, saw the economy recovering from global financial crisis registering real GDP growth rate of 6.7 percent up from 5.5 percent recorded in the previous year. The recovery was largely attributed to implementation of government fiscal stimulus package and pursuit of other prudent macro economic policies.

During the year 2010, interest rates movement in the economy continued to be influenced by the treasury bills and bond markets. The overall weighted average rate on time deposits decreased from 6.36 percent in December 2009 to 5.11 percent in December 2010, while 12 months time deposit rate decreased from 8.95 percent in December 2009 to 7.09 percent in December 2010. Negotiated deposit rate decreased from 9.94 percent in December 2009 to 8.45 in December 2010. On the other hand, overall lending rate decreased from 14.38 percent in December 2009 to 13.45 percent in December 2010.

During the year, overall performance of the Fund continued to be good. Contributions income increased by 8 percent from Tshs 136.60 billion in 2009 to Tshs 147.6 billion in 2010 as a result of increased membership size, improved compliance and increase in salaries among contributing members. However, investment income decreased from Tshs 67.08 billion in 2009 to Tshs 43.5 billion in 2010 due to depreciation of share values in the companies where the Fund has invested and continued fall in interest rates in the money market which affected investment income from the fixed income assets. The accumulated size of the Fund increased by 16 percent from Tshs 624.85 billion in 2009 to Tshs 722.47 billion in 2010.

During the year total benefits payments were Tshs 63.8 billion while in 2009 the benefits amounted to Tshs 47.2 billion, hence an increase of 35 percent. The increase in benefits payments was a result of new retirements during the year, deferred pensioners attaining qualifying age for monthly pension, increase in minimum pension from Tshs 21,000 to Tshs 50,000, indexation of monthly pension by 2 percent and cessation of employment due to other reasons.

These achievements were possible despite the problems and challenging environment that the Fund has continued to face, including massive depreciation of shares values in which the Fund has invested, delays in contribution remittances from some employers, early withdrawal of benefits when changing employment and complaints from members on the pension formula compared to the Government Funds which has had negative impact in recruitment of new members.

Fina nc ia l H igh l i gh ts

Chairman’s

Statement


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Chairman’s Statement (Continued)

In addressing these challenges the Fund continues to look into investments avenues with better returns, employers to remit members’ contributions in time, continue to institute legal action against employers who deliberately delay remittance of employees’ contributions, to ensure timely processing and settlement of claims to members upon leaving their employment and continue educating members on the importance of membership continuity when changing from one employer to another. Towards the end of year 2010, the Director General and the Board of Directors of the Social Security Regulatory Authority were appointed and assumed their responsibilities.

I would like to pay tribute to my fellow Trustees for their continued guidance and support that has contributed to the Fund realizing its main objectives. I am grateful to the member employers and employees, Trade Unions, the business community, Media Houses and their staff and all other stakeholders for their cooperation in the year under review. Lastly but not least I would like to thank PPF Management and staff for their hard work and commitment in fulfilling their responsibilities. It is my expectation that they will continue to deliver high quality service to our members, customers and all stakeholders.

Dr. Kassim M. KapalataVice Chairman, Board of Trustee20th June 2011


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Introduction On behalf of the Management, it is my great pleasure to present performance review of the Fund for the year ended 31st December 2010. PPF continued to perform well in the year 2010 and achieved most of its targets as it was the case in the preceding year. The review covers membership recruitment, contributions collection, investment activities, benefits payments, net effect of the financial operations on the size of the Fund, human capital management, PPF members’ conference, risk management, social investment, challenges and future prospects.

Membership and Contribution IncomeMembership recruitment and contribution collection are among the core activities undertaken by the Fund. The Fund continued to enhance its marketing capacity for its zonal offices with a view of recruiting more members. As a result of the efforts and strategies employed, the Fund recruited 40,735 new members during the year 2010 as compared to 39,326 recruited in 2009. In the same year however, 13,545 members left the schemes thus bringing membership size of the Fund to 160,068 members as of December 2010 from 132,878 of December 2009. On the other hand during the year, contribution income increased by 8 percent from Tshs 136.6 billion in 2009 to Tshs 147.65 billion in 2010. This was attributed to increase in membership size, raise in salaries and compliance in remittances of members’ contributions. Investments and Investment IncomeThe Fund’s investments portfolio remained within four categories of fixed income assets, properties, equities and licensed collective scheme. Total investments during the year 2010 were Tshs 668.8 billion which earned the Fund a net investment income amounting to Tshs 43.5 billion. Individual portfolio performance for the period under review is provided hereunder:

Investments in Fixed Income AssetsThis group of assets comprise of placement in Commercial banks (fixed deposits), treasury bills, treasury bonds, government stocks, corporate bonds, promissory notes and term loans. During the year 2010, investments in fixed income assets were Tshs 510.1 billion compared to Tshs 395.7 billion in 2009. This was about 76 percent of the total investible funds of Tshs 667.9 billion. During the year under review, income received from fixed income assets was Tshs 34.7 billion. This was an increase of 1.7 percent from Tshs 34.0 billion earned in 2009. Out of the total income received, 14.1 percents arose from investments in Treasury debt securities.

Director

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Director General’s Review Of Operations (Continued)

Investments in Properties Investments in properties as at 31st December 2010 stood at Tshs 89.3 billion. This was an increase of 4 percent from Tshs 85.9 billion at the end of 2009 resulting from additional investments during the year under review. Investment in properties constituted 13 percent of the Fund’s total investment portfolio. Rent income received from properties increased form Tshs 6.3 billion in 2009 to Tshs 6.5 billion in 2010 which is an increase of 3.2 percent. Investments in EquitiesEquity investment involves holding of or subscribing to shares in private and public companies. As at 31st December 2010, investment in equities inclusive of associate companies stood at Tshs 87.1 billion down from Tshs 88.9 billion of 2009. This is a decrease of 2.4 percent as a result of depreciation in share values. Income received from equity investment during the year 2010 increased from Tshs 2.1 billion of 2009 to Tshs 4.1 billion in 2010. Table I below summarises PPF investments and investment income during 2009 and 2010.

Table I: Investments and Investments Income 2009 - 2010 (Fig in TZS ‘000’)

Investment/Income TypeInvestments Investments Income

2009 2010 2009 2010Fixed Income Assets

Placement in Banks 178,861,347 211,558,705 13,048,017 15,478,320

Treasury Securities 86,875,364 117,063,593 12,797,005 14,257,910

Corp. Debt Securities 10,549,506 31,262,006 1,666,926 936,090

Loans 72,314,514 92,887,016 6,560,590 4,061,587

Sub Total 348,600,731 452,771,320 34,072,538 34,733,907

Properties 85,914,775 89,257,005 6,349,517 6,526,055

Equities and Associate 88,963,334 87,057,565 2,117,399 4,057,875

Licensed collective schemes 31,527,969 38,900,172 1,902,631 2,305,446

Others

Low cost housing 2,690,242 5,651,244Changes in fair value of investments 22,527,269 (7,296,913)

Gain on foreign exchange 1,014,926 5,139,045

Revenue from hotel operations 645,228 126,367

Investment expenses (4,240,411) (7,784,333)

Grand Total 555,006,809 667,986,062 67,079,339 43,458,693

Members’ servicesIn order to improve services to our Members the Fund extended its branch network by opening three liaison offices and continued to educate our members on PPF Taarifa which can be accessed by sms or through the internet. This service enables members to view the records held by the Fund including their personal and contribution details. A member can also check the status of a submitted claim. Employers who register for the PPF Taarifa service can view details of remittances made to the Fund and can track claims submitted by their employees.

Director

General’s

Review

Of Operations


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Furthermore, pensioners can check status of pension’s payments and view their payment history. Generally, this has reduced physical follow ups on their benefits claims.

The Fund also introduced payment of claims through Zonal offices whereby members no longer need to wait for their claims to be processed from head office.

The Fund raised minimum pension from Tshs 21,000/= to Tshs 50,000/= effectively January 2010. Further more monthly pension above Tshs 50,000/= was indexed by 2 percent with effect from May 2010.

Benefits PaymentsBenefit payments to PPF pensioners and other beneficiaries increased by 28 percent from Tshs 47.19 billion in 2009 to Tshs 63.5 billion in 2010. Table 2 below summarises benefits payment to PPF members for the year 2009 and 2010.

With effect from year 2008, PPF was appointed to be an agent for payment of Government pensioners and during the year the Fund continued with this function.

Table II: Benefits Payments to PPF members 2009 - 2010 in TZS (‘000’)

Benefit TypePeriod

2009 2010

Deposit Admin. 8,819,557 10,881,845

Withdrawal 8,167,941 10,067,254

Gratuity 262,469 79,892

Monthly Pension 14,643,286 24,246,857

Commuted Pensions 12,374,336 15,890,908

Death Gratuity 2,521,921 2,142,454

Education 401,565 508,212

Total 47,191,255 63,817,422

Size of the FundAs a result of the Fund’s operations during the year 2010, the accumulated size of the Fund increased by 15.6 percent from Tshs 624.8 billion in December 2009 to Tshs 722.5 billion in December 2010.

Human Capital ManagementStaff PositionAs at 31st December 2010, the Fund had 228 employees out of whom 119 were females and 109 were males.

Training and DevelopmentDuring the year 2010, the Fund continued to invest in human capital through training mainly on core business areas. The training was in terms of long term training, short courses, study tours, seminars and conferences. Areas of study included customer care, finance, social security administration, human resources, investments, risk management and information technology.


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Industrial RelationsDuring the year 2010, members of staff continued to enjoy harmonious relationship. Meetings of workers council were held as scheduled. The annual part was held during which best workers of the Fund were presented with awards.

Risk ManagementDuring the year, the Fund continued to take prudent approach on risk management to ensure the Fund remains well positioned to capture opportunities and avoid surprises.The Fund’s emphasis is on taking proactive stance towards risk management, undertaking analysis and appropriate actions to prevent incidents and adverse effects from occurring rather than reacting to individual incidents.

During the year, business processes were reviewed, risks were identified and mitigation strategies were put in place. The Fund implemented and maintained control procedures to reduce significant risks to the acceptable level. All decisions were made after risk analysis as per the Fund risk management philosophy “action informed by analysis” where analysis of risks, costs, benefits and other items were considered. To facilitate more informed decision making, the Fund risk profile was reported on quarterly basis to the Board of Trustees.

PPF Members’ ConferenceThe Fund held its 20th Annual Members’ Conference. The holding was in line with Fund’s spirit of transparency and openness which offer opportunity for members, to share their ideas to the development of the Fund. Resolutions made at the meeting are being implemented.

Corporate Social Responsibility (CSR)Corporate Social responsibility is part of the culture of the Fund whereby part of its annual income is provided to the community. The Fund provided various support to schools, health centers, and vulnerable groups. The Fund provided emergence relief in the affected communities of the Kilosa district devastated by the floods which hit the district towards end of year 2009 and beginning of year 2010. The involvement of the Fund in social responsibilities enhances its value and improves its image to the public.

ChallengesDespite the achievements attained in the year 2010, there were a number of challenges facing the Fund. The major ones were continued fall in interest rates in the financial markets delay in remittance of members’ contributions by some employers, non continuity of membership for members shifting employment, complaints from public regarding PPF pension formula and HIV/AIDS pandemic.

In addressing these challenges the Fund will continue studying viable and alternative investments in properties, equities and collective licensed scheme to address the issue of falling interest rates in the financial markets. The Fund will also continue to educate defaulters to ensure that there is timely remittance of contributions before instituting legal actions against them. The Fund will also continue to enhance membership continuity for the former members of the Fund when re-employed.

The Social Security Regulatory Authority was established and one of the issues to be addressed is the pension formula. In line with members’ resolutions in the PPF annual conferences, the Fund will encourage employers to have HIV/AIDS policy at their work place so that members can prolong their lives, working period and contributing time to the Fund.


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Future ProspectsDuring the period under review the 5 Year Strategic Corporate Plan (2008 – 2012) was reviewed in order to assess its relevance by evaluating adequacy of objectives, accuracy of performance targets, and effectiveness of the strategies employed during the first half. The Fund aims at achieving all set targets in membership recruitment, contribution income, investment income, expenses control and improving operation efficiency and ensuring maximum customer satisfaction.

The Fund will also continue providing education benefit to the children of members who die while in service up to the ordinary secondary level, meanwhile looking at the possibility of extending the benefits to the advanced level of secondary school. Extension of line of credits will continue to be made to Savings and Credit Co-operative Societies (SACCOS) of PPF members as this facility has shown positive effects to members with minimum risk to the Fund.

Acknowledgment On behalf of the Management, I would like to conclude by extending special appreciation to our members, employers, business associates and other stakeholders for their continued support.

I wish also to thank the Board of Trustees for their guidance that has enabled the management to discharge its duties efficiently and PPF staff for their continued hard work throughout the year 2010.

William E. ErioDirector General

20th June 2011.


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CORPORATE INFORMATION BOARD OF TRUSTEESThe Trustees of the Fund at the date of this report and who have served since December 2008 except where otherwise stated, are:

Name Position Nationality Date of appointment/retirement

Mr. Ramadhani Khijjah Chairman Tanzanian December 2002 to 23 June 2010

Dr. Kassim Kapalata Vice Chairman Tanzanian December 2002

Mr. Nassoro Kheri Baraza, Trustee Tanzanian December 2008

Hon. Rosemary Kirigini Trustee Tanzanian December 2008

Dr. Aggrey Mlimuka Trustee Tanzanian December 2008

Ms. Sabina M. Gellejah Trustee Tanzanian December 2008

Mr. Eliakim Lucas Lovillilo Trustee Tanzanian December 2008

Mr. William E. Erio Trustee Tanzanian Appointed in 2005

AUDITORS Controller and Auditor General

National Audit Office

Samora Avenue/Ohio Street

P.O Box 9080

Dar es Salaam

MAIN BANKERS CRDB Bank Limited

Tower Branch

P.O Box 2302

Dar es Salaam

National Bank of Commerce Ltd

P.O Box 9062,

Dar es Salaam

REGISTERED OFFICE PPF House

Samora Avenue/Morogoro Road

P.O Box 72473

Dar es Salaam


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Trustees of the Fund

Hon. Rosemary Kirigini was appointed a Trustee in 2008. She is a Member of Parliament prior to that she was Country Business Manager - Shelys Pharmaceutical Limited. She has 10 years working experience. She holds a BA (General) degree from the Open University of Tanzania, a Diploma in Animal Management (Veterinary College of Northamptonshire, UK), Diploma in Animal Health and Production-LITI, Tengeru. Aged 38.

Dr. Mlimuka was appointed as a Trustee in 2008. He is the Executive Director of the Association of Tanzania Employers (ATE), Senior Lecturer in Law at the University of Dar es Salaam and an Advocate of the High Court of Tanzania for more than 20 years. He is a member of various committees including the Technical Committee on Social Security coordinated by the Bank of Tanzania. He holds a PhD (Magna Cum Laude) in Law, LLM (Magna Cum Laude) from University of Hamburg. LLM, LL.B. degree from the University of Dar es Salaam and Post graduate Diploma in International Law and Organization for Development from the Institute of Social Studies the Hague, Netherlands. Aged 53.

Ms. Gellejah wa appointed as a Trustee in 2008. She is a Senior Lecturer at the Mzumbe University where she has worked for the past 33 years. She served as a Consultant in various Institutions including; Police Force, Prime Minister’s Office, Tanzania Institute of Bankers, World Bank, UNDP, Commonwealth Secretariat and IDM (Botswana, Lesotho, Swaziland). She holds an MA (Economics & Policy studies) Degree from Institute of Social Studies, the Hague, Netherlands, Postgraduate Diploma in Public Service Training (Manchester University) UK, and Diploma in Public Administration IDM-Mzumbe (Now Mzumbe University). Aged 57.

Mr. Baraza was appointed as a Trustee in 2008. He is the Deputy General Manager, Tanzania China Friendship Textile Company Limited for the 10 years. Prior to that he served as the General Manager Ubungo Spinning Mills Limited, Commercial Manager Blanket Manufacturing Company Limited and a Senior Economist with TEXCO. He has 32 years working experience. He is also a Board Member of DAWASCO. He holds a BA (Industrial Economics degree from University of Dar es Salaam, Postgraduate Diploma in Business studies - Australia and Postgraduate Diploma in Textile Management Netherlands. Aged 60.

Mr. Erio joined the Fund in year 2000 as the Fund Secretary before he was appointed the Director General in 2005.He is the Chief Executive Officer (CEO). He has vast experience in Corporate Management. He serves as the Chairman of the Board of Azania Bank, Non-executive Director of Tan-Re, Zep-Re (PTA Re-Insurance Company), International House Company. He holds a Master of Laws degree from the University of Hull (UK) and LL.B. from the University of Dar es Salaam. He is a registered advocate of the High Court of Tanzania and subordinate Courts there to. He has working experience of about 18 years. Aged 46.

Mr. Lovililo was appointed as Trustee in 2008. He is along serving Civil Servant who is working as an Assistant Accountant General-Financial Management in the Ministry of Finance and Economic Affairs. He has worked as Chief Internal Auditor in the Ministry of Foreign Affairs and International Cooperation. Also he worked as Financial Controller in water sector World Bank project. Accountant incharge of several sections in the Ministry of Lands, Water and Finance .He has 31 years working experience in various departments and Ministries with vast experience in Finance and Auditing.He holds a Msc (Finance) Degree from Strathclyde University of UK. He is registered with NBAA as Associate Certified Public Accountant (ACPA) [T] . Aged 53.

Dr. Kapalata was appointed as Trustee in 2002 to date. He is the current Chairman of the Audit Committee of the Board of Trustees and the Vice Chairman of the Board. Dr. Kapalata is a medical Doctor and Lawyer by training. He is currently working as a Director of Occupational Health and Safety in the Trade Union Congress of Tanzania (TUCTA) since 2002. He is also an Advocate of the High Court of Tanzania and Courts subordinate thereto. He served as a Commissioner for the Tanzania Commision of Mediation and Arbitration (CMA) 2007-2011. Prior to this he worked as a Medical Tutor for Paramedical Colleges in the Ministry of Health and Social Welfare, a Company medical Doctor for NASACO Ltd and served as a Director of the Board of Directors of the defunct NASACO Ltd. He also worked as Case Manager for Medical Express Tanzania Ltd, a Health Insurance Company. He has a working experience of more than 30 years in Tanzania and has had extensive training on social Protection world wide. Aged 57

Hon. Rosemary KiriginiTrusTee

Dr. Aggrey MlimukaTrusTee

Eliakim Lucas LovililoTrusTee

Sabina M. GellejahTrusTee

Nassoro Kheri BarazaTrusTee

William E. ErioTrusTee/DirecTor General

Dr. Kassim M. KapalataVice chairman


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The Trustees are pleased to present this report together with the audited financial statements for the year ended 31 December 2010 which disclose the state of affairs of the Fund, in accordance with Section 14(3) of the Parastatal Organization Pensions Scheme Act CAP 372 R.E. 2002.

INCORPORATION

The Parastatal Pensions Fund was established under section 6 of the Parastatal Pensions Act No. 14 of 1978 as amended by the Parastatal Pensions (Amendment) Act 2001 to provide pensions and other allied terminal benefits to all eligible employees of Parastatal and private companies in Tanzania.

FUND’S VISION

The Fund is desirous of freeing members from hardship arising out of loss of income due to old age, disability, death and related risks.

FUND’S MISSION

The Fund is committed to providing quality pensions and allied benefits to members from both formal and informal sectors through the utilization of dedicated human resources and modern technology with high degree of accuracy and promptness.

PRINCIPAL ACTIVITIES OF THE FUND

The Fund operates two types of Social Security Schemes namely Parastatal Pensions Scheme (PPS) which is a defined benefit scheme and Deposit Administration which is a defined contribution scheme both of which are contributory schemes.

The principal activities of the Fund are recruitment of new members (both employers and employees) collection of contribution from members, investment of Funds and payment of benefits to eligible member employees. Benefits offered under Parastatal Pensions scheme are:• Old age, • Death,• Survivors,• Education Benefits,

Report of the Trustees


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Report of the Trustees (Continued)

• Gratuity Benefit,• Disability Benefits and• Withdrawal Benefit.

Benefits offered under Deposit Administration Scheme are lump sum or lump sum with annuities based on total member’s contribution plus interest accrued thereon.

The Fund continued to administer payment of pension to government pensioners, the responsibility which was shifted to PPF in 2008 by the Government.

CORPORATE GOVERNANCE

The Board of Trustees of PPF consists of seven (7) Trustees. Apart from the Director General, the other Trustees are non executive. The Board takes overall responsibility for the Fund, including responsibility for identifying key risk areas, considering and monitoring investment decisions, considering significant financial matters, and reviewing the performance of management business plans and budgets. The Board is also responsible for ensuring that a comprehensive system of internal control policies and procedures is operative, and for compliance with sound corporate governance principles. The Board is required to meet at least four times a year. The Board delegates the day to day management of the business to Director General assisted by Senior Management. Senior Management is invited to attend Board meetings and facilitates the effective control of all the Fund’s operational activities, acting as a medium of communication and coordination between all the various business units.

The Fund is committed to the principles of effective corporate governance .The Trustees also recognize the importance of integrity, transparency and accountability. The Board of Trustees has the following board sub-committees to ensure a high standard of corporate governance throughout the Fund.

Audit Committee

The Committee Charter approved by the Board governs activities of the Committee. The Audit Committee meets at least four (4) times a year.

Name Position Nationality

Dr. Kassim Kapalata Chairman Tanzanian

Ms. Sabina M. Gellejah Member Tanzanian

Mr. Eliakim Lucas Lovillilo Member Tanzanian

The Audit Committee reports to the Board of Trustees and met 6 times during the year. The Director of Legal Affairs is the secretary to the Committee. The Director General, and Director of Internal Audit (who is an ex-officio member) attended all meetings.

During the year, the Audit Committee received reports and held discussion with Management and auditors. In discharging its duties the Committee reviewed the financial statements Committee received the financial statements, equality and acceptability of related accounting policies, practices and financial reporting disclosures reports from the Fund’s internal audit Directorate reports from external auditors on the scope of the work of the Fund’s internal audit unit, reports from external auditors on their findings on accounting and internal controls. The Committee met the Director of Internal audit once during the year.


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Risk Oversight Committe

Name Position Nationality

Dr. Aggrey Mlimuka Chairman Tanzanian

Mr. Nassoro Kheri Baraza Trustee Tanzanian

Mr. Eliakim Lucas Lovillilo Trustee Tanzanian

Hon. Rosemary Kirigini Trustee Tanzanian

The Risk Oversight Committee reports to the Board of Trustees and met 5 times during the year.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board accepts final responsibility for the risk management and internal control systems of the Fund. It is the task of management to ensure that adequate internal financial and operational control systems are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding:

• The effectiveness and efficiency of operations;

• The safeguarding of the fund’s assets;

• Compliance with applicable laws and regulations;

• The reliability of accounting records;

• Business sustainability under normal as well as adverse conditions; and

• Responsible behaviours towards all stakeholders.

The Board assessed the internal control systems throughout the financial year ended 31st December, 2010 and is of the opinion that they met accepted criteria.

MANAGEMENT

The Management of the Fund is under the Director General and is organized in the following Directorates:-• Directorate of Finance;• Directorate of Human Capital Management and Administration; • Directorate of Information Systems; • Directorate of Internal Audit; • Directorate of Legal Affairs; • Directorate of Planning and Investments;and• Directorate of Operations.


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PERFORMANCE REVIEW FOR THE YEAR

Membership position

At 31 December 2010 the number of participating employers was 2,197 (2009: 2,110) and plan membership consisted of:

(i) 17,775 (2009: 20,742) retirees and beneficiaries receiving monthly pension and 10,263 (2009:11,315) deferred Pensioners

(ii) 160,068 (2009: 132,878) employees are actively contributing to the Fund.

Contribution and Penalties

During the year 2010 contribution remittances and penalty revenue amounted to TZS 147 billion as compared to TZS 136.6 billion for year 2009. This is an increase of 8 per cent. The increase in contribution revenue is attributed to salary increase for member employees and recruitment of new members.

During the year 2010 total benefit payments were TZS 63.8 billion while in 2009 the benefits amounted to TZS 47.2 billion, hence an increase of 35 percent.

The increase in benefit payments was a result of new retirements during the year, deferred pensioners attaining qualifying age for monthly pension, increase in minimum pension from TZS 21,000 to TZS 50,000, indexation of monthly pension by 2 per cent and cessation of employment due to other reasons.

Refund of contribution amounted to TZS 0.10 billion in 2010 compared to TZS 0.30 billion in 2009. Net surplus from dealing with members decreased to TZS 83.1 billion from TZS 89.1 billion in 2009.

Other Income

Other income increased to TZS 2.5 billion in 2010 from TZS 1.6 billion in 2009. The main source of other income is agency fee earned on administration of payment of pension to government pensioners which started in 2008/2009 government financial year.


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Administrative expenses

Administration expenses amounted to TZS 23.30 billion as compared to TZS 19.80 billion in the year 2009, an increase of 17.91 per cent.

Investment Performance

The investment of pension funds by its nature is a long term undertaking. The investment policy of the Fund duly approved by the Board of Trustees, as reviewed in 2010, has set limits on four permissible areas of investment namely equities, fixed income assets, properties land licensed collective scheme as follows:

TABLE III. INVESTMENTS ALLOCATION AS AT 31 DECEMBER 2010

S/No Particulars TZS Actual ‘000’ Percentage Approved

Allocation

1

Fixed Income Assets

Placement in Banks(FDR) 211,558,705 %

Treasury w 117,063,593

Corporate Debt Security 31,262,006

Long term loan 92,887,016

Sub- Total 452,771,320 67.82 35-80

2

Equities Investment in Associates 18,443,500

Equity Investment 68,614,065

Sub- Total 87,057,565 13.04 10-30

3 Properties 89,257,005 13.32 5-30

4 Licensed collective schemes 38,900,172 5.83 0-10

Sub- Total

Grand Total 667,636,941 100.00

In the year 2010 net income from investments amounted to TZS 35.2 billion, compared to TZS 54.5 billion earned in 2009, a decrease of 35 percent. The major factors affecting investment performance are general decline in interest rate and fluctuations in share prices for companies in which the Fund invested.

During the year the Fund decided to lease East Africa Hotel written above 1 June 2010 and stop its direct involvement in management of hotel operations. Consequently the hotel income and expenses included in the financial statements are for the period up to 30 May 2010. From June 2010 the accounting for the hotel changed from owner occupied to investment property and income arising from the property is accounted as rental income.

For the year 2010, Fund’s investments registered a rate of return of 7 percent. The Fund’s investments rate of return for year 2009 was 12 percent.


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Funding (Accumulated fund)

The overall objective of a pension fund is to accumulate sufficient funds to meet all expected future obligations to members. The contribution requirements are determined as a percentage of earnings. During the year 2010 net assets available for promised benefits increased from TZS 624.9 billion in 2009 to TZS 722.5 billion, an increase of 15.6 percent. The Fund has adequate liquidity to settle its current maturing obligations. The Fund settled all processed claims during the year without borrowing or selling investments.

ACTUARIAL VALUATION OF THE FUND

The last actuarial valuation was carried out as at 31 December 2008 by Alexander Forbes Financial Services (East Africa) Limited, Actuaries and Consultants. The next actuarial valuation is expected to be carried out as at 31 December 2011. The actuarial valuation involves determination of a present value of the expected payments to existing and past members, attributable to the service already rendered.

The actuarial valuation indicated that the market value of the assets of the Fund was TZS 499.33 billion and the present value of the expected payments by PPF calculated using current salaries amounted to TZS 493.69 billion. The results of the valuation indicated that there was a past service actuarial surplus of TZS. 5.64 billion. The level of funding (the ratio of the value of the assets to the past service liability) was 101.1%. The Fund is committed to maintain funding level at the minimum level of 100 percent.

SOLVENCY

The Board of Trustees confirms that applicable accounting standards have been followed and that the financial statements have been prepared on a going concern basis. The Board of Trustees has reasonable expectation that the Fund has adequate resources to continue in operation existence for the foreseeable future.

FUTURE DEVELOPMENTS

This is the third year of the Fund’s five years strategic corporate plan covering year 2008 to 2012. The major focus of the Fund under the newly formulated strategic plan will continue to be increasing membership coverage from formal as well as informal economies. Recruitment of new members is one of the key strategic objectives in the current corporate plan, with specific annual targets. Also the Fund will continue to explore means to enhance the quality and quantity of benefits offered to members and also to improve on delivery of quality services to its members. The Trustees consider that, increased membership coverage, coupled with prudent investment is of necessity in sustaining the Fund, and in delivering quality benefits to its members.

ADMINISTRATIVE EFFICIENCY

(i) The Fund has not borrowed funds and consequently no interest charges have accrued against the Fund. All statutory payments such as PAYE, pension contributions and other statutory deductions effected from staff salaries were made promptly to the relevant authorities. All properties of the Fund have requisite certificates of ownership and are adequately insured. No loss of assets was sustained during the year under review.


21


(ii) The existing management systems are invariably complied with. This has resulted in smooth operations of the Fund.

RELATED PARTY TRANSACTIONS AND BALANCES

The details of transactions and balances with related parties have been disclosed in Note 34 to the financial statements.

EMPLOYEES OF THE FUND

Employment Policy

PPF is committed to employment policies which follow best practices, based on equal opportunity for all employees irrespective of sex, race, religious, disability, age or marital status. The Fund recognizes the need for ensuring fair employment practices in recruitment and selection, and the retention, training and career development of staff. As a measure toward improving Employer/Employee good relationship, during the year 2010 management convened two (2) meetings with all staff.

Management/Employees Relationship

In the year 2010 the relationship between employees and management continued to be good. There were no unresolved complaints received by Management from the employees during the year. A healthy relationship continues to exist between management and trade union.

The Fund is equal opportunity employer. It gives equal access to employment opportunities and ensures that the best available persons are appointed to any position free from discrimination of any kind without regard to factors like gender, marital status, tribes, religion and disability which does not impair ability to discharge duties.

Training Facilities

When presenting its annual budget for the year 2010, the Fund put aside a sum of TZS 1.47 billion for staff training in order to improve employees technical skills and hence effectiveness (2009 TZS 1.12 billion). Training programs have been and are continually being developed to ensure employees are adequately trained at all levels, all employees have some form of annual training to upgrade skills and enhance development.

Medical Assistance

All immediate dependants of staff with a maximum number of four beneficiaries (dependants) for each employee were availed medical insurance. Currently medical insurance is provided by AAR.

HIV/AIDS Policy

The Funds’ HIV/AIDS policy focuses on creating awareness on HIV/AIDS among staff members by providing them with update information on HIV/AIDS with emphasis on the preventive strategies and education against the pandemic. The policy also focus on encouraging employees to undertake Voluntary Counseling and Testing (VCT).


22


Financial Support

Loans are available to all confirmed employees depending on the assessment of and discretion of management as to the need for loans and circumstances. Management has established a revolving Fund and has influenced staff to establish and join employees Savings and Credit Co-operative Society (SACCOS) to assist in promoting their welfare.

Persons with Disabilities

Applications for employment by disabled persons are always considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Fund continues and appropriate training is arranged. It is the policy of the Fund that training, career development and promotion of disabled should, as far as possible, be identical to that of other employees.

Employees Benefit Plan

The Fund pays contribution to a Parastatal Pensions Scheme (PPS) on mandatory basis which qualifies to be a defined contribution plan. The average number of employees during the year was 228 (2009:220).

Gender Parity

The Fund had 228 employees, out of which 119 were female and 109 were male.

CORPORATE SOCIAL RESPONSIBILITY

Donations made to charitable organizations during the year amounted to TZS. 0.01 billion.The main reason for the existence of the Fund is to provide coverage to eligible members for old age benefits. The Fund is committed to offer quality services to members and to widen the coverage of members to informal economy. The Fund continued with implementation of its program for providing credits to employer based SACCOS. During the year 2010 the Fund also continued to sell the low cost houses to all citizens of Tanzania. The construction of low cost houses by the Fund addresses the problem of shortage of quality housing to the citizens of Tanzania. By providing credit to SACCOS the Fund contributes to overall improvement of standard of living of Tanzanians and attainment of objectives of the National Strategy for Growth and Reduction of Poverty (MKUKUTA).

The Fund continued to provide direct support to the community in which it operates in form of social and financial support, mainly in the area of education, health and social calamities.


23


AUDITORS

Deloitte & Touche were the independent auditors of the Fund for the financial year ended 31 December 2010 following their appointment by the Controller and Auditor General in accordance with Sections 37(4) and 37(5) of the Public Finance Act No. 6, of 2001.

BY ORDER OF THE BOARD OF TRUSTEES

_____________________

Dr. Kasim M. Kapalata

Vice Chairman of the Board of Trustees

20th June 2011


24

The Parastatal Organization Pensions Scheme Act CAP 372 R.E. 2002 requires the Trustees to prepare financial statements for each financial year which show a true and fair view of the financial transactions of the Fund for the year and of disposition at year end of its assets and liabilities. It also requires the Trustees to ensure that the Fund keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Fund. They are also responsible for safeguarding the assets of the Fund.

The Trustees are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the Organization Pensions Scheme Act CAP 372 R.E. 2002. This responsibility includes: designing, implementing and maintaining internal controls 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.

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 Organization Pensions Scheme Act CAP 372 R.E. 2002. The Trustees are of the opinion that the financial statements give a true and fair view of the financial affairs of the Fund and of its operating results. The Trustees further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

The Trustees certify that to their best knowledge and belief the information furnished to the auditors for the purpose of the audit was correct and complete in every respect.

Nothing has come to the attention of the Trustees to indicate that the Fund will not be able to meet its obligations for at least the next twelve months from the date of this statement.

_________________________

Dr. Kassim M. Kapalata

Vice Chairman

20th June 2011

Statement Of Trustees’ Responsibilities in Preparation of Finance Statements

Parastatal Pensions Fund


25


Management of the Fund

Mr. Erio joined the Fund in year 2000 as the fund Secretary before he was appointed Director General in 2005.He is the Chief Executive Officer (CEO). He has vast experience in corporate Management. He serves as the Chairman of the Board of Azania Bank, Non-executive Director of Tan-Re, Zep-Re (PTA Re-Insurance Company), International House Company. He holds a Master of Laws degree from the University of Hull (UK) and LL.B. from the University of Dar es Salaam. He is a registered advocate of the High Court of Tanzania and subordinate Courts there to. He has working experience of about 18 years. Aged 46.

Mr. Kashimba joined the Fund in 1996 as an Accountant. He served as the Chief Internal Auditor of the Fund since year 2000 and currently he is the Director of Internal Audit of the Fund. He is a member of Governing Council of the Institute of Finance Management, Alternate Director Zep-Re (PTA-RE Insurance Company) and Non - Executive Director, NCH/PPF-IPS Company Limited. He holds MBA Degree in Corporate Management from Mzumbe University, Advance Diploma in Certified Accountancy from IDM, Mzumbe (Now Mzumbe University) and he is registered with NBAA as Associate Certified Public Accountant (ACPA-T). Aged 40.

Mr. Mganga joined the Fund in year 2007 as a Director of Human Resources & Administration. Prior to that he was a Manager, Administration & Personnel Capital Markets and Securities Authority, Principal Human Resources Officer TRA and a Lecturer at the Institute of Development Management (IDM) Mzumbe. He holds Msc. in Human Resources Management and Diploma in Advanced study in Human Resources studies from Manchester University, UK, Advanced Diploma in Public Administration IDM Mzumbe (Now Mzumbe University). He has working experience of about 24 years. Aged 49.

Mr. Alfred joined the Fund in year 2009 as an Investment Manager. He is currently Director of Planning and Investments, the post held from 1st December, 2009 to date. He has working experience of 13 years out of which 2 years is with the Fund and 11 years with PRIDE (T), Tanzania Investment Bank (TIB) and Tanzania Gatsby Trust (CBA-Project). He holds Masters Degree in Business Admnistration (Finance) from the University of Dar es Salaam and Bachelor of Arts-Economics from the Universtity of Dar es Salaam. He is a Non - Executive Director in the NHC/PPF-IPS Company Limited, International House Property Ltd (PPL) and TATEPA. Aged 42.

Ms. Ligate joined the Fund in year 2002 as a Senior Legal Counsel, she was appointed as Fund Secretary in year 2005. She is the Secretary to the Board of Trustees and the Director of Legal Affairs, she has 16 years working experience, 8 years with the Fund. She is a member of Tanzania Women Lawyers Association, Non-executive Director International House Property Limited, NHC/PPF-IPS Building Company Limited, Pensions Property limited and member of the Tanganyika Law Society. She holds an MA degree in Gender and Development from the University of Sussex, UK and LL.B. (Hons) degree from the University of Dar es Salaam, she is a registered Advocate of the High Court of Tanzania and subordinates Courts there to. Aged 42.

Mr. Mmari joined the Fund early 2001 as a Senior Accountant. He is currently the Director of Finance, the position he held since 2001. He has more than 19 years of working experience of which 9 years worked with Bank of Tanzania (BOT). Currently he is the Chairman of the Board of Directors of CRDB Bank Plc, Non - executive Director of International House Property Limited, NHC/PPF-IPS Building Company Limited and Member of University Funding Promotion Committee - UDSM. He holds an MBA in International Banking and Finance from Birmingham University and Bcom (Hons) from University of Dar es Salaam, he is registered with NBAA as Associate Certified Public Accountant (ACPAT). Aged 47.

Mrs. Wangwe joined the Fund in year 2002 as the Head of Computer Support Unit. She has working experience of 16 years of which 8 years with the Fund. She is now the Director of Information Systems of the Fund. Prior to that, she worked in various public and private organizations. Ms Wangwe holds Msc. in Computer Science from the university of Edinburgh and Bsc. Degree in Computer Science from the University of Dar es Salaam. She is a Certified IT Project Manager (COMPITA/GARTNER) and Certified Information Security Manager (CISM-ISACA) and is also certified in the Governance of Enterprise IT (CISM-ISACA). Aged 38.

Ms. Mallya joined the Fund in year 2002 as Marketing Manager, in 2009 she was transferred to the Directorate of Pensions Services and become a Member care & Marketing Manager before her new appointment as the Director of Operations in January, 2010. She has 15 years working experience out of which 8 years are with the Fund. She holds a Masters degree in Marketing/Finance from University of Dar es Salaam, bachelor degree of Arts - Economics from the University of Dar es Salaam. Aged 42.

William E. ErioDirector General

Mr. Hosea KashimbaDirector of internal audit

Mr. Julius Kam MgangaDirector of human capital management & administration

Mr. Steven AlfredDirector of Planning & investments

Mrs. Vupe LigateDirector of legal affairs

Mr. Martin MmariDirector of Finance

Mrs. Carina WangweDirector of information systems

Mrs. Assumpta MallyaDirector of operations


26

To: Chairman to Board of Trustees

Parastatal Pensions Fund,

P.O. Box 72473

Dar es Salaam

REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF PARASTATAL PENSIONS FUND FOR THE YEAR ENDED 31 DECEMBER 2010

Report on the financial statements

I have audited the accompanying financial statements of the Parastatal Pensions Fund (PPF) which comprises the Statement of net assets as at 31 December 2010, statement of changes in net assets, and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes set out from pages 28 to 67 of the report.

Trustees’ Responsibility for the financial statement

The Board Trustees of the Fund are 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. According to Sect. 9 of the Public Audit Act No. 11 of 2008, my specific responsibilities are to examine, enquire into, audit and report on the accounts of the Government.


In addition, Sect 10(2) of the PAA of 2008 requires me to satisfy myself that the accounts have been kept in accordance with generally accepted accounting principles; reasonable precautions have been taken to safeguard the collection of revenue, the receipt, custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have been duly observed, expenditures of public monies have been properly authorized, and to satisfy myself whether the funds generated by the Parastatal Pensions Fund were used exclusively and judiciously to meet eligible expenditure with due regard to economy and efficiency.

Furthermore, Sect. 44(2) of the Public Procurement Act No. 21 of 2004 and Reg. No 31 of the Public Procurement (goods, works, non-consultant services and disposal of public assets by Tender) Regulations issued under G.N 97 of 2005 requires me to state in my annual audit report whether or not audited entity has complied with the provisions of the law and its regulations.

Report of the Controller and Auditor General


27

Report of the Controller and Auditor General

Basis of opinion

The audit was conducted in accordance with International Standards on Auditing (ISA), INTOSAI standards and such other audit procedures I considered necessary in the circumstances. These standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also, includes assessing the significant estimates and judgments made in the preparation of the financial statements, assessing whether the internal control system and the accounting policies are appropriate to the circumstances of the Parastatal Pensions Fund and that they have been consistently applied and adequately disclosed. It also involves evaluating the overall financial statements presentation and assessing the extent of compliance with the statutory requirements. I believe the audit provides a reasonable basis for my opinion.

The financial statements have been prepared and presented based on the accrual basis of accounting. Under the accrual basis, revenue is recognized when earned and expenses are recognized when incurred.

Unqualified Opinion

In my opinion, the financial statements give a true and fair view of the statement of net assets available for benefits the Parastatal Pensions Fund as at 31 December 2010, its surplus, statement cash flows and changes in equity for the year ended in accordance with International Financial Reporting Standards and comply with Parastatal Organizations Pensions Scheme Act.

Report on compliance with procurement legislation

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 the Parastatal Pensions Fund has generally complied with the Public Procurement Act, 2004 and its related regulations of 2005.

LUDOVICK UTOUH

CONTROLLER AND AUDITOR GENERAL

National Audit Office,

Dar es Salaam, Tanzania

20th June 2011


28

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED 31 DECEMBER 2010

2010 2009

CONTRIBUTIONS AND BENEFITS Notes TZS’000 TZS’000

Contributions 6 147,650,695 126,963,463

Penalty on delayed contributions 7 (620,270) 9,647,094

Benefits paid 8 (63,817,422) (47,191,255)

Refunds of contributions (85,346) (310,835)

Net surplus from dealing with members 83,127,657 89,108,467

RETURN ON INVESTMENTS

Dividend income 4,057,875 2,117,399

Interest income 9 34,733,907 34,072,538

Rental income from investment properties 6,526,055 6,349,517

Revenue from hotel operations 126,367 645,228

Sales proceeds-low cost housing 5,651,244 2,690,242

Changes in fair value of investments 10 (4,991,467) 24,429,900

Gain on foreign exchange 5,139,045 1,014,926

Investment expenses 11 (7,784,333) (4,240,411)

Net investment income before taxation 43,458,693 67,079,339

Taxation 12 (8,220,038) (12,556,645)

Net return on investments 35,238,655 54,522,694

Gain on disposal of assets 506 27,019

Other Income 2,589,103 1,643,732

Administrative expenses 13 (23,329,997) (19,786,145)

INCREASE IN NET ASSETS 33 97,625,923 125,515,767

The financial statements on pages 28 to 30 were approved by the Board of Trustees on 20 June 2011 and were signed on its behalf by:

___________________________ ___________________________

Dr. Kassim Kapalata Mr. William Erio

Vice Chairman Director General


29

STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS AT 31 DECEMBER 2010

2010 2009

ASSETS Notes TZS’000 TZS’000

Property and equipment 15 6,777,744 10,090,343

Intangible assets-computer software 16 640,673 447,281

Prepaid operating leases 17 1,264,985 1,281,483

Investment properties 18 89,257,005 85,914,775

Investment in associate 19 18,443,500 15,589,880

Investment in shares 20 68,614,065 73,373,454

Investment in Government Securities 21 117,063,593 86,875,364

Corporate debt securities 22 70,162,178 42,077,475

Loans 23 92,887,016 72,314,514

Placements in banks 24 211,558,705 178,861,347

Inventory 25 4,287,832 10,083,690

Contribution, penalties and other receivables 26 63,031,479 58,671,339

VAT recoverable - 1,222,887

Current tax recoverable 12 306,940 343,311

Cash and bank balances 27 9,675,590 15,702,472

753,971,305 652,849,615

LIABILITIES

Deferred tax liability 28 8,290,884 8,102,691

VAT payable 407,871 -

Members’ claims payable 29 3,400,334 4,557,985

Unclaimed members benefits 30 625,728 314,845

Provision for employees’ benefits 31 11,988,454 10,726,756

Other payables 32 6,781,425 4,296,652

31,494,696 27,998,929

NET ASSETS 722,476,609 624,850,686

REPRESENTED BY:

FUND BALANCE 33 722,476,609 624,850,686

The financial statements on pages 29 to 30 were approved by the Board of Trustees on 20 June 2011 and were signed on its behalf by:

________________________ _______________________Dr. Kassim Kapalata Mr. William ErioVice Chairman Director General


30

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010

2010 2009

TZS’000 TZS’000

Receipts from contributions 145,447,505 120,127,041

Receipts from penalties 2,067,893 3,937,899

Other income 2,589,103 1,643,732

Benefit disbursements (64,664,190) (46,946,081)

Operations and administrative expenses (18,923,139) (14,920,217)

Tax paid (7,995,474) (10,999,937)

Net (advances to)/receipts from staff and others (3,605,339) 614,499

NET CASH FLOWS FROM OPERATING ACTIVITIES (A) 54,915,852 53,456,936

CASH FLOWS FROM INVESTING ACTIVITIES

Receipts from investment income 40,080,449 32,604,790

Dividend Received 3,959,604 2,407,925

Rent Income 5,814,848 5,999,150

Increase in placements with banks (32,697,359) (54,673,438)

Net (purchase of)/sale of treasury securities (30,188,230) 6,589,779

Net investment in corporate debt instruments (25,779,257) (7,264,250)

Acquisition of equity investments (2,996,654) (15,008,731)

Issue of long term loans (20,532,829) (9,026,677)

Proceed from sale of fixed assets 506 26,850

Acquisition of property and equipments, intangible assets,

and investment properties (3,742,855) (7,022,448)

NET CASH FLOWS FROM INVESTING ACTIVITIES (66,081,780) (45,367,050)

Net cash flows before adjustments for the effects of

foreign exchange rates changes (11,165,927) 8,089,885

Effect of exchange rate changes in cash and cash equivalents 5,139,045 1,014,926

NET(DECREASE)/INCREASE IN CASH

AND CASH EQUIVALENTS (6,026,882) 9,104,811

CASH AND CASH EQUIVALENTS AT 1 JANUARY 15,702,472 6,597,661

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 9,675,590 15,702,472


31

1. THE REPORTING ENTITY

Parastatal Pensions Fund (PPF or the Fund) was established under Section 6 of the Parastatal Pensions Act (No.14) of 1978 to provide pension and allied retirement benefits for eligible member employees. The Fund operates two types of social security schemes, i.e. defined benefit scheme (Parastatal Pensions Scheme, PPS) and defined contribution scheme (Deposit Administration Scheme, DAS), and both are contributory schemes.

Membership to the Fund is a mandatory requirement for all employees of Parastatal organizations under the law and employees of private companies are eligible for membership if they are not registered in any other social security fund.

Benefits under PPS are established by the law, Parastatal Pensions Act 1978 as amended from time to time. The Board of Trustees has been empowered to design and establish additional benefits and schemes such as DAS.

At 31 December 2010 the number of participating employers was 2,197 (2009: 2,110) and plan membership consisted of:

(i) 17,775 (2009: 20,742) retirees and beneficiaries receiving monthly pension and 613 (2009: 11,315) terminated employees entitled to future monthly pension.

(ii) 160,068 (2009: 132,878) employees are actively contributing to the Fund.

While items (b) to (h) below describe in brief benefits under PPS, benefits under DAS are made as lump sum or lump sum with annuities, i.e. a series of payment within a specified period based on total member’s contributions plus interest accrued thereon.

(a) Pension Benefit

Member employees who have contributed to the plan for 10 years or more are entitled to monthly pension benefits beginning at early retirement age of fifty five years to compulsory retirement age of sixty.

Pension benefit is based on years of service and annual pensionable emoluments. The annual compensation is based upon the average of employees’ five highest years’ salaries. Members may elect to commute 25% of their pension entitlement at a commutation factor of 12.5.

(b) Death Gratuity

Death gratuity is the greater of deceased member’s annual pensionable emolument and commuted pension gratuity. It is payable to the administrator of the estate of deceased member.

(c) Survivors’ Benefit

If a member dies while he/she has contributed for a period of not less than 10 years, survivors’ benefit equal to monthly pensions will be granted to dependant spouse and children of less than 18 years of age for 36 months.

(d) Education Benefit

If a member dies, education benefit shall be payable directly to school of children of deceased member at the amounts not exceeding 1/12th annual pensionable emolument for maximum of 4 children from nursery school to ordinary level of secondary education.

Notes To The Financial Statements For The Year Ended 31 December 2010


32

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued)

THE REPORTING ENTITY (Continued)

(e) Gratuity Benefit

Gratuity benefit is payable to a member who cease employment due to retrenchment/ retirement in public interest or by a presidential decree and has less than 120 months contributing period.

(f) Disability Benefit

Active member who is retired from employment on medical grounds and has more than 120 months contributing period is entitled to disability benefit from the date of retirement.

(g) Withdrawal Benefit

Withdrawal benefit equal to the total of member’s and his or her employer’s contributions together with interest for those contributed more than five years, are payable to an active member who ceases to be employed in circumstances, where he or she is not eligible for pension, gratuity or any other benefit granted by the Fund.

(h) Contributions

The Minister for Finance has been empowered to gazette contribution rates as advised by the Board of Trustees. The current contribution rates are 15% (or 10%) for employers and 5% (or10%) for employees to make a total contribution of 20% of member’s salary.

Contributions are deducted by employers and remitted to the Fund on monthly basis with 30 days grace period.

If contributions are not remitted to the Fund within 30 days from the month when salary payment is due, then additional contribution by way of penalty at the rate of 5% per month is levied on the defaulting employers until when the contribution is remitted.

(i) Funding Policy

The Fund’s funding policy provides for monthly contributions at actuarially determined rates that are expressed as percentages of pensionable emolument, which are sufficient to accumulate assets to pay pensions and allied benefits when due.

(j) Investment Policy

The investment policy of the Fund duly approved by the Board of Trustees has set limits on four permissible areas of investment namely equities, fixed income assets properties and licensed collective scheme as follows:

Investment Category % of total investments

Fixed income Assets 35-80

Equities 10-30

Properties 5-30

Licensed Collective Schemes 0-10


33

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued)

THE REPORTING ENTITY (Continued)

The guiding principles for PPF investments are the need to maintain adequate liquidity, maximize returns with minimal risk through diversification and ensuring absolute security of the Fund’s resources. The policy is reviewed periodically as circumstances dictates.

(k) Actuarial Valuation of the Fund

An actuarial valuation of the Fund was carried out by Alexander Forbes Financial Services (EA) Limited, Actuaries and Consultants as at 31 December 2008.

The results of the Actuarial valuation indicated the accrued past service liability, which at the present value of the expected payments by the Fund using salaries at the valuation date, amounted to TZS. 494 billion. The value placed on the assets was TZS. 499 billion.

The actuarial method employed in carrying out valuation is the funding method known as “Attained Age Method”.

Significant assumptions used in arriving at the valuation results are:-

(i) Interest rate (discounting factor) of 10% p.a.

(ii) Salary increase at the rate of 0% p.a. (assuming current salary)

(iii) The rate of mortality for members in service has been assumed to follow the A 1949/5 ultimate table of assured lives and for pensioners, mortality rates are based on the (55) table for annuities published by the Institute of Actuaries.

ACTUARIAL VALUE OF ACCRUED BENEFITS

TZS billion

Current Pensioners 72

Suspended Pensioners 33

Active in service employees (DB Scheme) 312

Active in service employees (DA Scheme) 77

Total Accrued past service benefits (A) 494

Assets Available for Benefits (B) (499)

Actuarial Surplus (B-A) 5


34

NOTES TO THE FINANCIAL STATEMENTS (Continued)

1. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

STATEMENT OF COMPLIANCE

The financial statements have been prepared in accordance with and comply with the International Financial Reporting Standards (IFRS).

Adoption of new and revised International Financial Reporting Standards (IFRSs)

(a) New standards and amendments to published standards effective for the year ended 31st December 2010

• IFRS 3, Business Combinations – Comprehensive revision on applying the acquisition method (effective for annual periods beginning on or after 1 July 2009);

• IFRS 7 Financial Instruments: Disclosures – Amendments enhancing disclosures about fair value and liquidity risk (Revised March 2009 ) – effective for annual periods beginning on or after 1 January 2009;

• IFRS 8, Operating Segments (effective for annual periods beginning on or after 1 January 2009);

• IAS 1, Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009);

• IAS 24, Related Party Disclosures - Revised definition of related parties (effective annual periods beginning on or after 1 January 2009);

• IAS 27, Consolidated and Separate Financial Statements - (effective annual periods beginning on or after 1 January 2009);

• IAS 28, Investments in Associates (effective annual periods beginning on or after 1 January 2009);

• IAS 31, Interests in Joint Ventures - Consequential amendments arising from amendments to IFRS 3(effective for annual periods beginning on or after 1 July 2009);

• IAS 32, Financial Instruments: Presentation – amendments relating to puttable instruments and obligations arising on liquidation (2008) – (effective annual periods beginning on or after 1 January 2009);

• April 2009 and May 2010 Improvements to IFRSs (effective from various annual periods mainly periods beginning on or after 1 January 2010).

(b) New standards and amendments to published standards in issue but not yet effective in the year ended 31st December 2010

• IFRS 9, Financial Instruments – Classification and Measurement (November 2009) – effective annual periods beginning on or after 1 January 2013;

• IAS 24, Related Party Disclosures – Revised definition of related parties (November 2009) – effective annual periods beginning on or after 1 January 2011;

• IAS 32, Financial Instruments: Presentation – amendments relating to classification of rights issues (2009) – effective for annual periods beginning on or after 1 February 2010;

• April 2009 and May 2010 Improvements to IFRSs (effective from various annual periods mainly periods beginning on or after 1 January 2010)


35


2. ADOPTION OF NEW AND REVISED INTERNATIONALFINANCIAL REPORTING STANDARDS (Continued)

(c) New and amended interpretations in issue but not yet effective in the year ended 31st December 2010

• IFRIC 13, Customer Loyalty Programmes - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective annual periods beginning on or after 1 January 2011);

• IFRIC 14, AS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction - November 2009 Amendments with respect to voluntary prepaid contributions (effective annual periods beginning on or after 1 January 2011); and

• IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments (effective annual periods beginning on or after 1 July 2010).

(d) Impact of new and amended standards and interpretations on the financial statements for the year ended 31 December 2010 and future annual periods

IAS 1 (as revised in 2007) Presentation of Financial Statements

IAS 1(2007) has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of the financial statements. In addition, the revised Standard has required the presentation of a third statement of financial position at 1 January 2008, because the entity has retrospectively restated its financial statements.

Improving Disclosures about Financial Instruments (Amendments to IFRS 7 Financial Instruments: Disclosures)

The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. The Fund has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments.

Improvements to IFRSs (April 2009 and May 2010)

In addition to the changes affecting amounts reported in the financial statements described at 1(a) above, the Improvements have led to a number of changes in the detail of the Fund’s accounting policies – some of which are changes in terminology only, and some of which are substantive but have had no material effect on amounts reported. The majority of these amendments are effective from 1 January 2010.

Board of Trustees will continue assessing the impact of new and revised standards and interpretations which are in issue but not effective once are effective and determine their impact to the results and presentation of the Fund’s financial reports.


36


3. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all year presented, unless otherwise stated.

3.1 Basis of Preparation

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments as stated in specific accounting policies. The principal accounting policies adopted are set out below.

3.2 Revenue Recognition

(a) Contribution income

Employers’ and employees’ contributions are accounted for on accrual basis. Contribution income is recognized to the extent and the amount of contribution established based on salary actually paid by member employer to member employees.

(b) Penalty income

Penalty Income is recognized on accrual basis on contribution receivable as stated in 3.2 (a) above. The computation of penalty is done in accordance with Section 9 (1) of the Parastatal Organization Pensions Scheme Act CAP 372 R.E. 2002, where an employer failing to remit to the Fund the whole or any part of the contributions required to be remitted under Section 9 (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 unremitted is levied.

(c) Dividend income

Dividend income is recognized when the right to receive payment is established.

(d) Rent income

Rent income is measured at the fair value of the consideration received or receivable and represents amounts receivable for occupying Fund’s investment property in the normal course of business, net of discounts and related Value Added taxes.

(e) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

3.3 Staff costs

Short term employee benefits

All short term benefits are recognized on accrual basis. Entitlements to annual leave are recognized when they accrue to employees. Provision is made for the estimated liability in respect of annual leave accrued on reporting date.


37


3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Post Employment Benefits

Contributions to defined contribution retirement benefit plans are charged as an expense as they fall due. The obligation of the Fund for payments made to the statutory plans is to the extent of statutory contribution rates.

The total of current service cost and past service cost in respect of endowment scheme benefits is recognized as expense on a straight line basis over the average period until it become payable.

Termination Benefits

Terminal benefits are expensed in the year of termination of employment.

Other long term benefits

Other long term benefits are recognized as expense on accrual basis.

3.4 Foreign Currency Translations

Transactions in foreign currencies are recorded at the rates of exchange ruling at the transaction date. At each financial reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, on the retranslation of monetary items, and on the retranslation of non-monetary items carried at fair value are included in the statement of changes in net assets available for benefits for the period.

3.5 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable investment income for the year. Taxable investment income differs from net investment income as reported in the statement of changes in net assets available for benefits because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

The Fund’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the financial reporting date.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable investment income, and is accounted for using the liability method.

Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable investment income will be available against which deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable investment incomes will be available to allow all or part of the asset to be recovered.


38


3.5 TAXATION ACCOUNTING POLICIES (Continued)

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realized. Deferred tax is charged or credited to the statement of changes in net assets available for benefits.

3.6 Property and equipment

Buildings held for administrative purposes and other owner occupied buildings are stated in the statement of net assets available for benefits, at cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Fund’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Motor vehicles, computer hardware, equipment and furniture and fittings are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets, other than properties under construction, over their estimated useful lives, using the straight-line method on the following bases:-

ParticularsEconomic useful life

Years

Motor Vehicles 6Buildings 50Generators 10Computer Hardware 5Furniture and Fittings 5Other Equipments 5

Residual Value and expected useful lives are reassessed annually.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of changes in net assets available for benefits.

3.7 Prepaid operating leases

Payments to acquire leasehold interest in land are treated as prepaid operating leases and amortized over the period of the lease.

3.8 Investment Property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at Fair Value at the financial reporting date. Gains or losses arising from changes in the fair value of investment property are included in the statement of changes in net assets available for benefits for the period in which they arise.


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3.9 SIGNIFICANT ACCOUNTING POLICIES (Continued)

3.9 Investments in Associates

An associate is an entity over which the Fund is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting except when classified as held for sale. Investments in associates are carried in the statement of net assets available for benefits at cost as adjusted by post-acquisition changes in the

Fund’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of the associates in excess of the Fund’s interest in those associates are not recognized.

3.10 Intangible Assets – Computer Software Costs

Costs incurred on computer software are initially accounted for at costs as intangible assets and subsequently at cost less any accumulated amortization. Amortization is calculated on a straight-line basis over the estimated useful lives. The Fund’s intangible assets have finite useful life of 5 years. The residual value and expected useful lives are reassessed annually.

3.11 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost comprises direct materials and, where applicable, directs labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the First in First out (FIFO) method.

3.12 Impairment of Assets

The carrying amounts of Fund’s assets, other than financial assets, are reviewed at every balance sheet date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Fund estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of changes in net assets available for benefits, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-


40



generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the statement of changes in net assets available for benefits.

Financial instruments

Financial assets and liabilities are recognized when the Fund becomes a party to the contractual provisions of the instrument.

3.13 Financial Assets Categories

The Fund classifies its financial assets in the following categories: financial assets at fair value, loans and receivables, held to maturity investments, and available-for-sale financial assets. Management determines the classification of investments at initial recognition and re-evaluates this designation at every reporting date.

3.14.1Financial Assets at Fair Value through statement of changes in net assets

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term (assets held for trading) or if so designated by the Trustees. Derivatives are also categorized as held for trading unless they are designated as hedging instruments. The Fund classifies trading equity investment as financial assets at fair value.

3.14.2 Loans and Receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market.

They arise when the Fund provides money or services directly to a debtor with no intention of trading the receivable. All loans and receivables held by the Fund fall under this category.

3.14.3 Held-to-Maturity Investments

Held-to-Maturity investments are non derivative financial assets with fixed determinable payments and fixed maturities that the Fund has a positive intention and ability to hold to maturity. The Fund classifies its investments in fixed income assets as held-to-maturity i.e. investments in government securities, corporate bonds and placement in banks.

3.14.4 Available for Sale

Available-for sale investments are those 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 Fund classifies equity investments, other than those acquired for trading purposes as available-for-sale. Investments in redeemable preference shares and Umoja Units are also classified by the Fund as available for sale financial assets.

3.14 Recognition and Measurement of Financial Assets

Purchase and sale of investments are recognized on trade date- the date on which the Fund commits to purchase or sale the asset. Loans and receivables are recognized on the day the funds are advanced or when an invoice is raised. Financial assets are initially recognized at fair value or at cost plus transaction costs for all financial assets not carried at fair value. Financial assets are derecognized when the rights to receive


41



cash flow from the investments have expired or have been transferred and the Fund has subsequently transferred all risks and rewards of ownership.

At subsequent reporting date different classes of financial assets are measured as follows:

3.15.1Loans and Receivables

Loans and receivables are measured at amortized cost using the effective interest rate method. Receivables which do not carry interest rate are stated at their nominal value. Appropriate allowances for estimated irrecoverable amounts are recognized in the statement of changes in net assets available for benefits when there is objective evidence that the Fund will not be able to collect all amounts due according to the original terms of the receivables.

3.15.2 Held-to-Maturity Financial Instruments

Held-to-maturity investments are measured at amortized cost using the effective interest rate method, less any impairment loss recognized to reflect irrecoverable amounts.

3.15.3 Available-for-sale Financial Instruments

Available-for-sale investments are measured at fair value except for investments for which fair value cannot be reliably measured. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Fund establishes fair value by using valuation techniques. 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 period.

Investments for which fair value cannot be reliably measured are measured at cost and are also subjected to impairment losses.

3.15.4 Impairment of Financial Assets

The Fund assesses at each reporting date whether there is objective evidence that a financial assets or a group of financial assets is impaired. An impairment loss is recognized in the Statement of changes in Net assets available for benefits when there is objective evidence that the asset is impaired. Impairment loss on financial assets other than equity securities classified as available –for-sale is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

In the case of equity securities classified as available –for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired.

Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognized, subject to the restriction that, in case of held-to –maturity investments, the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortized cost would have been had the impairment not been recognized.


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3.15 Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments with original maturities of three months or less.

3.16 Accounts Payables

Accounts payables are not interest bearing and are stated at their nominal value.

3.17 Provisions

Provisions are recognized when the Fund has a present obligation as a result of a past event, and it is probable that the Fund will be required to settle that obligation. Provisions are measured at the Trustees’ best estimate of the expenditure required to settle the obligation at the financial reporting date, and are discounted to present value where the effect is material.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING THE FUND’S ACCOUNTING POLICIES

In the process of applying the Fund’s accounting policies, management has made estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. These are dealt with below:

Held -to-maturity investments

The Fund follows the guidance of IAS 39; Financial Instruments: Recognition and Measurement on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the Fund evaluates its intention and ability to hold such investments to maturity. If the Fund fails to keep these investments to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value not amortised cost.

Impairment losses on financial assets

At each reporting period end, the Fund reviews the carrying amounts of its financial assets to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated and an impairment loss is recognised in the statement of changes in net assets whenever the carrying amount of the asset exceeds its recoverable amount.

actuarial valuation

The present value of the defined benefit pension plan is determined using actuarial valuation. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. See note Trustees Report on actuarial valuation.


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5. FINANCIAL RISK MANAGEMENT

The Fund is exposed to a variety of financial risks which arise out of a variety of its activities. The Fund’s risk management policies are designed to identify and analyze 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 Fund’s regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

The Board of Trustees has overall responsibility for the establishment and oversight of the Fund’s risk management framework. As part of its governance

structure the Board of Trustees has embedded a comprehensive risk management framework for measuring, monitoring, controlling and mitigation of the Fund’s risks. The policies are integrated in the overall management information system of the Fund’s and supplemented by a management reporting structure.

The Audit Committee of the Board of Trustees is responsible for monitoring compliance with the Fund’s risk management policies and procedures, and review of the adequacy of risk management framework in relation to the risks faced by the Fund’s. This committee is assisted in these functions by Technical Committee of management which undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Board.

The most important types of risks are:

• Solvency Risk

• Credit risk

• Liquidity risk

• Market risk

o Interest rate risk

o Foreign exchange risk

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

Solvency risk management

The major scheme run by the Fund is a defined benefit scheme whereby members’ benefits are guaranteed irrespective of returns from investments. The Fund thus assumes funding risk in case the Fund’s assets are inadequate to cover the promised benefits. The Fund engages actuarial consultants to determine the present value of promised benefits to members, after every three years. In case of Under-funding different options are sought to address the funding including adjusting retirement age, determination of annual pensionable emoluments etc.

Credit risk management

Credit risk is the risk that the counterpart to any financial transaction may not be able to fulfill its obligation on due date. The Fund’s principal financial assets are Government securities, corporate debt securities, loans, and bank placements and balances.


44


5. FINANCIAL RISK MANAGEMENT (Continued)

To minimize credit risk the Fund has set limits on different categories of investments; the Fund has also set exposure limits for each bank where it makes placements of funds. To address lending risk the Fund requires guarantees from top rated banks or the Government for credits other than, credits to well establish employer based Savings and Credit Societies (SACCOS). In granting loans the Fund carries out in-depth credit analysis of the project to establish viability.

I. Management of Credit Risk

• Day to day management of the Fund’s credit risk is vested the Management Technical Committee under chairmanship of the Director General. Regular audits of the credit processes and management are undertaken by Internal Audit.

I. Maximum exposure to credit risk before collateral held.

The amount that best represents the Fund’s maximum exposure to credit risk at 31 December 2010 is made up as follows:

CREDIT EXPOSURES 2010 2009

ON-BALANCE SHEET ITEMS TZS,000 % TZS,000 %

Contributions, penalties and other receivables 71,189,677 13 65,403,617 15

Placements in banks 211,558,705 38 178,861,347 40

Corporate Debt Securities 70,162,178 12 42,077,475 9

Treasury Securities 117,063,593 21 86,875,364 20

Loans and advances 92,374,734 16 72,866,468 16

562,348,887 100 446,084,271 100

The above represents the worst case scenario of credit exposure for both years, without taking account of any collateral held or other credit enhancements attached.

Loans and advances to customers comprise of 17% of the total maximum exposure. While collateral is an important mitigation of credit risk, the capacity of the customer to repay is the primary way out. The fair value of collateral held for impaired loans, and advances is TZS 0.58 billion. The Fund’s is confident that its policies and procedures provide sufficient safeguards against exposure on credit risk as shown on the table below:


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Credit risk management (continued) The amount that best represents the fund’s maximum exposure to credit risk as at 31 December 2010 is made up as follows:

Fully performing Past due Impaired

TZS,000 TZS,000 TZS,000

Contributions, penalties and other receivables 70,707,948 8,256,469 8,256,469

Placements in banks 211,558,705 - -

Corporate Debt Securities 70,162,178 - -

Treasury Securities 117,063,593 - -

Loans and advances 93,399,297 - -

562,893,722 8,256,469 8,256,469

The amount that best represents the fund’s maximum exposure to credit risk as at 31 December 2009 is made up as follows:

Fully performing Past due Impaired

TZS’000 TZS’000 TZS’000

Contributions and penalties receivables 58,819,498 6,731,779 6,731,779

Placements in banks 178,861,347 - -

Corporate Debt Securities 42,077,475 - -

Treasury Securities 86,875,364 - -

Loans and advances 72,866,468 - -

439,500,151 6,731,779 6,731,779


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Credit risk management (continued) III. Classification of Loans and Advances

2010 2009TZS’000 TZS’000

Neither past due nor impaired 92,887,016 72,314,514

Past due but not impaired - - Impaired 512,281 551,954 Sub Total (Gross) 93,399,297 72,866,468

Less: Allowance for Impairment (512,281) (551,954)

92,887,016 72,314,514

Apart from the loans and advances to customers and receivables, all other credit exposures are neither past due nor impaired.

IV. Collateral held

The Fund holds collateral against loans and advances to customers in the form of deposit under lien mortgage interests over property, registered securities over assets, and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and refreshed after every three years. Security structures and legal covenants are also subjected to regular review to ensure they continue to fulfill their intended purpose. Collateral usually is not held against government securities, and no such collateral was held at 31 December 2010 or 31 December 2009.

Fair Value of financial assets and liabilities

The table below shows an analysis of financial instruments at fair value by level of the fair value hierarchy. The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable:

i) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

ii) Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as a price) or indirectly (i.e. derived from prices); and

iii) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).


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Credit risk management (continued)

Note Level 1 Level 2 Level 3 Total

31 December 201

Fair value through profit or loss:

Equity shares

Government securities

Corporate bonds

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000

19 63,998,874 4,615,191 - 68,614,06420 - 117,063,593 - 117,063,59321 70,162,178 - - 70,162,178

134,161,052 121,678,784 - 255,839,835

31 December 2009

Fair value through profit or loss:

Equity shares

Government securities

Corporate bonds

19 70,321,675 3,051,778 - 73,373,453

20 - 86,875,364 - 86,875,364

21 42,077,475 - - 42,077,475

112,399,150 89,933,142 - 202,326,292

Movement of doubtful debts allowance

Loans and advances

Contribution and penalty receivables

Other receivables Total

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000

At 1 January 2009 308,869 4,471,197 1,675,992 6,456,058

Charge to the statement of changes in net assets for the year

243,085 877,298 (292,708) 827,675

At 31 December 2009 551,954 5,348,495 1,383,284 7,283,733

Write offs (22,002) (22,002)

Charge to the statement of changes in net assets for the year

(39,672) (72,651) 1,619,344 1,507,021

At 31 December 2010 512,282 5,275,844 2,980,626 8,768,752


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Liquidity risk management

Liquidity risk is the risk of failing to meet obligations when they fall due. Liquidity risk may also arise from an inability to sell financial assets quickly at close to its fair value. The Fund manage 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 Fund carries out weekly cash flow projection which is discussed by Investment committee for placement/investment decisions.

The Fund sources of fund include Monthly contribution from its contributing member companies. Other sources are Penalty income, Investment Income and other income.

The table below analyses the organization’s financial liabilities as at the balance sheet date that will be settled on a cash basis. The amounts disclosed in the table below are the undiscounted cash flows. Balances due equal their carrying balances, as the impact of discounting is not significant.

Less than

1 month

Between

1 – 3 months

Between

3-12 months

Over 12

monthsTotal

TZS’000 TZS’000 TZS’000 TZS’000 TZS’000

Financial liabilities

As at 31 December 2010

Members’ claims payable 1,385,008 1,692,788

-

- 3,077,796

Unclaimed members benefits 31,208 187,246 187,246 218,454 624,153

Other payables 402,079 402,079 904,678 301,559 2,010,395

Total 1,818,295 2,282,113 1,091,924 520,013 5,712,344


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Liquidity risk management (Continued)

As at 31 December 2009

Less than

1 month

Between

1 – 3

months

Between

3-12 months

Over 12

monthsTotal

TZS’000 TZS’000 TZS’000 TZS’000 TZS’000Financial liabilities

Members’ claims payable 2,051,093 2,506,892

-

- 4,557,895

Unclaimed members benefits 15,742 94,454 94,454 110,196 314,845

Other payables 729,839 729,839 1,642,138 547,479 3,649,195

Total 2,796,674 3,331,185 1,736,592 657,575 8,522,025

Market risk management

Market risk is the risk of changes in value of net assets of the Fund as a result of adverse price movement for investments held by the Fund. The Fund is exposed to market risk in its: long term investments in fixed income assets resulting from movement in interest rates. The Fund is also exposed to market risk in equities and Property investments as a result of movement in market prices. Except for trading equities, the Fund holds such assets for income generation, hence mitigating the effect of short term price movement.

The Fund 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 Fund on the other hand invests in short term instruments when interest rates are considered to be low temporarily.

Investment Committee will have to form its view on interest rate before the strategy to invest is determined. Market Risk has been subdivided into interest rate risk and foreign exchange risk.

Currency risk management

The currency risk is the risk arising from changes in the value of foreign currencies. The Fund generates foreign currency from rental income which is invoiced in USD to preserve the value and return of its investment properties due to persistent depreciation of Tanzania shilling against major currencies. The funds generated from rental collections are maintained in placements/investments denominated in foreign currencies to hedge against continuous weakening of Shilling as well as building a pool of foreign currency resources for off shore investment once the capital account is liberalized.


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FINANCIAL RISK MANAGEMENT (Continued)

Currency risk management (Continued)

The Fund held foreign denominated net monetary assets worth US$ 33,801,214 (2009- US $ 31,746,601), which are stated in the financial statements at exchange rates TZS /US$ 1453.54 (2009- TZS/US$ 1,313.32). If Tanzania Shillings strengthened or weakened by 5% the reported gain or loss on foreign exchange be higher by TZS 2,456,570,844 (2009- (TZS 2,084,672,301)

Price risk management

The Fund is exposed to equity securities price risk because of investments in quoted shares classified at fair value through profit and loss. The Fund is also exposed to the risk that the value of debt securities will fluctuate due to changes in market value. To manage its price risk arising from investments in equity and debt securities, the Fund diversifies its portfolio. For equities, the Fund has invested in companies in different sectors of the economy, while for debt securities; the Fund has invested in bonds of varying maturities. Diversification of the portfolio is done in accordance with Investment Policy of the Fund. All quoted shares held by the Fund are traded on the Dar es Salaam Stock Exchange (DSE).

If the price of securities/units were to appreciate/depreciate by 5% the return on investment would have increase/decrease by TZS 3,484,998,195. (2009: 3,641,281,000).

6. CONTRIBUTIONS REVENUE

2010 2009TZS ‘000 TZS ‘000

Employers’ contributions - PPS 84,948,990 73,507,254

Employees’ contributions - PPS 31,427,166 26,902,642

Employers’ contributions - DAS 15,997,201 14,210,045

Employees’ contributions - DAS 15,277,338 12,343,522

147,650,695 126,963,463

7. PENALTY ON DELAYED CONTRIBUTION

Penalty charge during the year 15,307,431 10,916,518

Penalty waiver (15,927,701) (1,269,424)

(620,270) 9,647,094

During the year the Board of Trustees approved general penalty waiver by limiting penalty charge to a maximum default period of 48 months. In the prior years the penalties were waived on case to case basis depending on circumstances contributing to delays in remittance of member contribution.


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8. BENEFITS PAID

Withdrawals/Surrender Claims 10,067,254 8,167,941

Death Benefits 2,142,454 2,521,921

Pension Benefits 24,246,857 14,643,286

Gratuity Benefits 79,892 262,649

Education Benefit 508,212 401,565

Commuted Pensions 15,890,908 12,374,336

Deposits Administration 10,881,845 8,819,557

63,817,422 47,191,255

9. INTEREST INCOME

Government Securities 14,257,910 12,797,005Loans 4,042,427 6,544,757Staff Housing Scheme (Loans) 19,160 15,833Placements in banks 15,478,320 13,048,017Corporate debt securities 936,090 1,666,926

34,733,907 34,072,538

10. NET INCREASE IN FAIR VALUE

Net increase in fair value arose out of the following investment categories:

Equity securities (6,596,147) 18,205,635

Investment in associates 1,693,722 446,022

Corporate debt securities (Umoja units) 2,305,446 1,902,631

Investment properties (2,394,488) 3,875,612

(4,991,467) 24,429,900


52


11. INVESTMENT EXPENSES

Cost of sale low cost houses 6,105,897 2,502,082

Investment Administration Costs 1,678,436 1,738,329

7,784,333 4,240,411

12. TAXATION

The tax charge for the year is arrived at as follows:

2010

TZS’000

2009

TZS’000

Current year’s charge at 30% of Taxable Income 8,031,845 7,917,636

Under/(over)provision in previous years - 1,934,900

Deferred Tax charge/(credit) 188,193 2,704,109

8,220,038 12,556,645

The tax assessments for the years of income 2007, 2008 and 2009 have not yet been finalized by TRA. The Tax assessments for years of Income 1998, 1999, 2002, 2003, 2005 and 2006 were disputed by the Fund and the amount disputed is TZS 4.94 billion. The Tax charge for the year can be reconciled to the investment income before tax as follows:

2010 2009

TZS’000 TZS’000

Reconciliation of tax based on accounting profit to tax charge

Investment Income before tax 43,458,694 67,079,339

Tax calculated at a tax rate of 30% 13,037,608 20,123,802

Tax effect of income not subject to tax or subject to lower tax rates (4,563,837) (9,750,510)

Tax effect on impairment losses (444,187) 248,453

Under/(Over) provision of tax in prior years - 1,934,900

8,220,038 12,556,645


53


TAXATION (Continued)

INCOME TAX PAYABLE/(RECOVERABLE)

Balance as at 1 January (343,311) 804,090

Add: Provision for tax for year 2010 8,031,846 7,917,636Adjustment for under/(overprovision) in previous years - 1,934,900

Net Provision for tax during the year 7,688,535 10,656,626Payments made during the year (7,995,474) (10,999,937)

Balance as at 31 December (306,940) (343,311)

13. ADMINISTRATIVE EXPENSES

Staff Expenses (Note 14) 10,364,576 10,606,216

Operational Expenses 9,664,389 7,118,259

Audit fees 173,203 132,515Trustees fees 66,429 19,118Bank charges 412,539 139,107Bad debts expense 1,507,021 828,175Depreciation of Property and equipments 982,707 747,214Amortization expenses 159,135 195,541

23,658,517 19,786,145

2010 2009

TZS’000 TZS’00014. STAFF COSTS

Salaries and wages 5,076,824 4,468,076

Social security costs (contribution to PPS) 723,190 960,307

Skills Development Levy 479,246 348,576

Terminal Benefits 161,254 1,301

Post-employment benefits 1,412,062 2,439,670

Other long-term benefits 601,241 477,526

Others 1,910,760 1,910,760

10,364,577 10,606,216


54


STAFF COSTS (Continued)

Payments to defined benefit retirement benefit plans are charged as an expense as they fall due. The obligation of the Fund for payments made to the PPS is to the extent of statutory contribution rates. Currently all the employees of the Fund are members of the Fund. PPF as employer has option to contribute 15 percent or 10 percent and employees contribute 5 percent or 10 percent on monthly basis to make total contribution of 20 percent of gross salary of employees. The Contribution by the Fund is charged to the statement of changes in net assets available for benefits when due.

The Fund provides endowment scheme benefits to all employees where by the benefits are paid to employees on separation from employment with a maximum accrual for 10 years at accrual factor of 40 percent of annual salary. Endowment benefits together with Gratuity benefits are accounted as post employment benefits.

The Fund also provide long service award to its employees attaining 10 years of service. Long service awards are considered to be long term employee’s benefits.


55

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56


16. INTANGIBLE ASSETS- COMPUTER SOFTWARE

2010 2009TZS’000 TZS’000

CostAt 1 January 707,155 1,625,073

additions 178,607 26,564

Transfer from property and equipment 159,542 -

Disposal (5,089) (944,482)

At 31 December 1,040,215 707,155

Amortization

At 1 January 259,874 1,025,314

charge for the year 142,637 179,042

Disposal/adjustment (2,969) (944,482)

At 31 December 399,542 259,874 NET BOOK VALUE

At 31 December 640,673 447,281

17. PREPAID OPERATING LEASE

At 1st January and 31 December 1,545,915 1,545,915

Amortization

At 1st January 264,432 247,933

Charge for the Year 16,498 16,499

At 31 December 280,930 264,432

NBV At 31 December 1,264,985 1,281,483


57


18. INVESTMENT PROPERTIES

The investment properties comprise of office and residential buildings, which have been rented to various customers.

2010 2009TZS’000 TZS’000

At 1 January 85,914,775 58,185,192

Add: additional during the year 2,203,374 5,945,198

Property and equipment 3, 533,345 18,025,016

Increase (decrease) in fair value during the year (2,366,347) 3,759,369

At 31 December 89,257,005 85,914,775

The investment properties of the Fund are valued by independent valuation experts after every three years to validate the internally determined fair value. The fair value of the Fund’s investment property at 31 December 2010 has been arrived at on the basis of a valuation carried out internally. Independent valuation of was last performed on 31 December 2008 by Messrs Proper Consults (T) Ltd, independent property valuation expert not connected with the Fund.

The valuation, which conforms to International Valuation Standards, was arrived based on discounted cash flow method. Different discount factors were applied for properties for residential use and for properties for office accommodation. The discount factor used for properties for residential use was 6.5 percent while the discount factor used for properties for office accommodation was 7 percent. The discount factors used were based on market yield of properties.

The property rental income earned by the Fund from its investment property, all of which is rented to tenants, amounted to TZS 6.53 billion (2009: TZS 5.95 billion). Direct operating expenses arising on the investment property in the period amounted to TZS 1.68 billion (2009: TZS 1.74 billion).

The value of PPF Tower and Kijenge estate, which are significant investment properties, as at 31 December 2010 amounted to TZS 40.24 billion and TZS 17.03 billion respectively (2009: TZS 38.56 billion and TZS 16.93 billion respectively). The values account for 5.6 percent and 2.4 percent of Fund’s net assets respectively.

PPF Tower consist of eighteen storey of office towers with 13,560 square meters let-table space, four storey parking arcade facility having 340 parking bays and conference facility with the capacity to accommodate maximum of 300 people. The occupancy rate of the property is 95 percent with annual rental income of TZS 2.97 billion. (2009: 95 percent with annual rental income of TZS 3,52 billion).

PPF Kijenge estate consists of 64 bungalows, 26 flats and nursery school. In addition the estate has 2,170 square meters of commercial space, a club house, property management office and warehouse. The occupancy rate of the property is 98 percent with annual rental income of TZS 1.45 billion (2009: 98 percent with annual rental income of TZS 1.41 billion).


58


19. INVESTMENT IN ASSOCIATES

Details of Fund’s associates as at 31 December 2010 are as follows:

Principal activity

Place of incorporation

Proportion of ownership interest and voting power held

Azania Bank Ltd PPF/NHC IPS Building Co. Ltd International House Property Ltd Pensions Property Ltd

2010 2009

Banking Tanzania 35 30Real estate Tanzania 50 50Real estate Tanzania 46 46Real estate Tanzania 25 25

2010

TZS’000

2009

TZS’000

Tan-Re Ltd - -Azania Bank Ltd 4,901,054 3,741,157PPF/NHC IPS Building Co. Ltd 6,871,036 5,384,702International House Property Ltd 6,668,910 6,461,521Pensions Property Ltd 2,500 2,500

18,443,500 15,589,880

Investments in associates are stated at equity values of invested companies. Except for International House Property Ltd (IHPL), whose financial year ended on 30 June 2010, adjustments have been made on IHPL based on draft accounts for year ended 30 June, 2010 as there were no updated financial statements. Again no account has been taken for Pensions Properties Ltd equity position from 2006 as the company has not provided accounts to the Fund.


59


INVESTMENT IN ASSOCIATES (Continued)

Aggregate amounts relating to associates

2010

TZS’000

2009

TZS’000

Revenue 20,140,637 19,711,974

Total profit for the period 4,004,953 2,330,375

Fund’s share of profits of associates 1,673,385 966,655

20. a) INVESTMENTS IN SHARES

Trading listed equities 63,998,874 70,321,675

Available for sale equities (unlisted at estimated Fair Value) 4,615,191 3,051,779

68,614,065 73,373,454

The equity investments provide an opportunity for dividends and trading gains to the Fund. They have no fixed maturity or coupon rates. The fair value of listed equities is based on quoted market prices. The carrying amount of unlisted equities is based on cost. The Trustees consider that the carrying amount of unlisted equity investment approximates their fair value.


60

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61


21. INVESTMENT IN GOVERNMENT SECURITIES

2010

TZS’000

2009

TZS’000

Treasury bills 3,585,300 7,015,703Treasury bonds 113,463,293 79,844,661Government Stocks 15,000 15,000

117,063,593 86,875,364

Treasury securities are classified as held to maturity financial instruments, with determinable maturity date and interest rate. The Fund has no intention to discount the securities before maturity date.

22. CORPORATE DEBT SECURITIES

2010

TZS’000

2009

TZS’000

Redeemable preference shares 562,006 562,006

Umoja units 38,900,172 31,527,969

Corporate bonds 30,700,000 9,987,500

70,162,178 42,077,475

Redeemable preference shares are a five year financial asset due for redemption in year 2010. Both the redeemable preference shares and corporate bonds are investments in financial assets with fixed maturity and coupon rate. Valuation of units is based on net assets of the Umoja Fund as at reporting date, the cost of investment in Umoja units was TZS 26.9 billion as at 31 December 2010 (TZS 22.0 billion- December 2009).

23. LOANS AND ADVANCES

2010

TZS’000

2009

TZS’000At 1 January 72,866,468 63,839,790Additions 27,633,179 14,859,831Less: Repayment (7,100,350) (5,833,153)At 31 December 93,399,297 72,866,468Less: Allowance for probable losses (512,281) (551,954)

92,887,016 72,314,514

Loans are classified as financial instruments. The Trustees consider that the carrying amount of loans approximates their fair value.


62


24. PLACEMENTS IN BANKS

2010

TZS’000

2009

TZS’000

Local Currency 165,480,510 138,485,228

Foreign Currency 46,078,195 40,376,119

211,558,705 178,861,347

Placement (deposits) in banks is classified as held to maturity financial instruments with determinable maturity date and interest rate. The Fund has no intention to discount the deposits before maturity date.

25. INVENTORY

2010

TZS’000

2009

TZS’000

Stationeries & Consumables 99,144 59,325Low Cost houses 4,188,688 10,024,365

4,287,832 10,083,690

26. (a) CONTRIBUTION, PENALTIES AND OTHER RECEIVABLES

Contributions receivable 25,237,602 23,119,758

Penalty receivable 14,991,089 17,679,253

Other receivables (Note 26(b) 28,078,631 23,220,823

Provision for doubtful debts (5,275,843) (5,348,495)

63,031,479 58,671,339

The Trustees consider that the carrying value of these assets approximates their fair value.


63


26. (b) OTHER RECEIVABLES

2010 2009TZS’000 TZS’000

Prepayments 457,175 199,813

Rent receivable 2,866,007 2,154,800

Accrued interest on investments 12,607,734 12,201,080

Interest Receivable 4,078,324 4,053,908

Staff debtors 4,161,755 3,021,464

Advance to Contractors 4,039,023 1,447,508

Sundry Receivables 2,750,969 1,525,534

Dividend receivable 98,270 -

31,059,256 24,604,107

Less: Accumulated Impairment Losses (2,980,626) (1,383,284)

28,078,631 23,220,823


27. CASH AND BANK BALANCES

2010 2009TZS’000 TZS’000

Cash in hand 5,889 2,195

Bank balances 9,669,701 15,700,277

9,675,590 15,702,472



64


28. DEFERRED INCOME TAX

The following are the major deferred tax liabilities and assets recognized by the Fund and movements thereon during the current and prior reporting period.

2010 2009TZS’000 TZS’000

At 1 January 8,102,691 5,398,582

Charge to statement of changes in net assets 188,193 2,704,109

At 31 December 8,290,884 8,102,691

Deferred tax liabilities comprise:

Accelerated capital allowance 6,018,242 3,423,859

Fair value of investment properties 2,272,646 4,678,832

8,290,888 8,102,69129. MEMBERS’ CLAIMS PAYABLE

Death claim 184,773 333,415

Withdrawals outstanding 653,718 720,472 Gratuity 1,308,408 129,874

Deposit administration 810,372 1,238,103

Commuted pension - 1,954,382

Pension expenses 412,405 156,692

Education benefit 3,075 10,334

Excess Remittance 14,713 14,713

3,400,334 4,557,985

Provision for claims payable is arrived at by determining actual amount payable for specific claims, where the actual amount cannot be determined the amount is calculated taking into account the average amount settled during the current financial year multiplied by the number of claims outstanding as at the year-end. The number of claims outstanding as at 31 December 2010 was 729 claims (2009: 968 claims).


65


30. UNCLAIMED MEMBERS BENEFITS

2010

TZS’000

2009

TZS’000

Unclaimed monthly pensions 58,487 63,582

Unclaimed pensions-Govt. Pensioners 405,239 89,798

Unclaimed lump-sum pensions 162,002 161,465

625,728 314,845

The outstanding amounts represent pension and other benefits not collected by member beneficiaries.

31. PROVISION FOR EMPLOYEES’ BENEFITS

2010

TZS’000

2009

TZS’000Short-term employee benefit 312,968 164,804

Post-employment benefits 11,626,556 10,380,510

Other long-term benefits 48,930 181,442

11,988,454 10,726,756

32. OTHER PAYABLES

Audit Fees 116,283 128,156Retention Money 2,766,003 1,174,577Security Deposit 506,757 416,425Advance House Rent 504,796 209,860Unapplied Receipts 904,775 219,835Accruals 329,742 671,928Other 1,653,069 1,509,916

6,781,425 4,296,652

Other payables principally comprise amounts outstanding for in respect of services rendered to the Fund. The Trustees consider that the carrying amount of other payables approximates their fair value.


66


33. FUND BALANCE

2010

TZS’000

2009

TZS’000Balance at the beginning of year 624,850,686 499,334,919

Increase in fund balance for year 97,625,923 125,515,767

Balance at the end of year 722,476,609 624,850,686

34. RELATED PARTY TRANSACTIONS AND BALANCES

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Related Party Transactions - Associates

The outstanding balances for transactions between the Fund and its associates are disclosed below.

2010

TZS’000

2009

TZS’000

Azania Bank Limited

Placements 4,510,863 4,510,863

Loan Stock 200,000 200,000

Promissory Notes 2,697,648 3,301,376

Current Account 790,676 1,536,510

Loans 5,899,190 9,548,749

Loan to Pension Properties Limited 13,326,567 6,142,966

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 are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Remuneration of key management personnel

The remuneration of the Trustees and Director General, who are the key management personnel of the Fund, is set out below in aggregate for each of the categories specified in IAS 24 related Party Disclosures.


67


RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

2010

TZS’000

2009

TZS’000Short-term employee benefit 298,045 276,244

35. COMMITMENTS

As at year end capital commitments were as follows:

Uncompleted works of projects for which tenders have been awarded. 1,061,583 7,134,970

Loans and Receivables approved not disbursed 23,493,775 8,801,705

24,555,358 15,936,67536. CONTINGENT LIABILITIES

The Fund is a defendant in fifteen lawsuits in which the total amount of claim is TZS 10 billion. No provision has been made in the financial statements because in the opinion of the Trustees, based on legal advice, the likelihood of crystallization of the liability is remote.

37. FUNCTIONAL CURRENCY AND PRESENTATION CURRENCY

The functional currency of the Fund, which is also its presentation currency, is Tanzanian Shillings.

38. COMPARATIVE FIGURES

Previous year’s figures have been reclassified whenever considered necessary in order to make them comparable with those of the current year.


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parastatal pensions fund - · pdf fileparastatal pensions fund annual report for the year...

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