pspf annual report

F o r p e a c e o f m i n d

Public service Pensions fundA n n u a l R e p o r t f o r t h e Ye a r E n d e d 3 0 T h J u n e 2 0 1 3

VisionTo be the provider of choice of Social Security Services in the country

MissionTo provide competitive Social Security Services to our members using dedicated staff and appropriate technology.

ValuesThe Fund will provide services to its members, stakeholders and the general public while observing the following guiding principles:• Accountability • Responsibility• Responsiveness• Integrity• Diligence • Transparency • Courtesy to all.

CoRPoRaTe oBJeCTiVesPSPF aspires to achieve the following objectives:i. To ensure sustainable growth of the Fund.ii. To have efficient and effective service delivery systems.iii. To have competent and motivated workforce.

ConTaCT addRessesDirector GeneralPublic Service Pensions FundGolden Jubilee Towers, 13th FloorOhio Street, 11101 KivukoniP.O. Box 4843Dar es SalaamTanzania

TelephonesDirector General - 022 – 2120921General Lines - 022 – 2120912/52, 21 27375/6 Fax - 022 – 2120930E-mail - [email protected] - www.pspf-tz.orgFacebook address - [email protected] Address - Pspf-Tanzania

pspf for peace of mind

pspf annual reporT for THe Year ended 30TH June 2013

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Contents1 Letter of transmittal 3

2 Board Chairman’s statement 4

3 Director General’s Review of Operations 8

4 Report of the Board of Trustees 22

5 Report of the Auditors 53

6 Statement of Change of Net Assets

AvailableforBenefits 56

7 Statement of Net Assets Available

forBenefits 57

8 Statement of Cash Flow 58

9 Notes to the accounts 59

10 Acknowledgement 105

TelephonesDirector General - 022 – 2120921General Lines - 022 – 2120912/52, 21 27375/6 Fax - 022 – 2120930E-mail - [email protected] - www.pspf-tz.orgFacebook address - [email protected] Address - Pspf-Tanzania



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Public service Pensions Fund (PsPF) is a contributory pension scheme which was established under the Public Service Retirement Benefits Act No. 2 of 1999 covering employees of the Central Government and Executive Agencies who are on permanent and pensionable terms of service. The membership is now extended to private sector employees due to the changes in the legislation brought about by Section 30 of the Social Security Regulatory Authority Act No. 8 of 2008.

The major functions of the Fund include registering eligible members, collecting monthly contributions, investing the funds so collected with a view to earn income and payment of members’ benefits.

The Annual report for the year 2012/2013 forms the first year of the Third Five year Corporate Plan which is from 2012/13 to 2016/17. The Mission, Vision and Corporate Objectives of the Fund are as follows:

ViSiON

To be the provider of choice of Social Security Services in the country

MiSSiON

To provide competitive Social Security Services to our members using dedicated staff and appropriate technology.

VAluES

the Fund will provide services to its members, stakeholders and the general public while observing the following guiding principles:

Accountability Responsibility Responsiveness integrity Diligence transparency Courtesy to all.

CORPORATE OBJECTiVES

PSPF aspires to achieve the following objectives:

i. To ensure sustainable growth of the Fund.ii. To have efficient and effective service delivery systems.iii. To have competent and motivated workforce.

PROFilE



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Minister of Finance

Hon Saada Mkuya Salum (MP)Minister of Finance,P.O. Box 9111,Dar es Salaam.

Honourable Minister,

On behalf of the Board of Trustees, i have the pleasure to submit the Annual Report of the Fund for the year ended 30th June 2013. This is in accordance with the requirement of Section 50 of the Public Service Retirement Benefits Act No. 2 of 1999.

the Report contains the Board Chairman’s statement, Director General’s review of Operations, Report of the Board of Trustees and Audited Accounts.Yours faithfully,

G. D. YambesiChairman of the Board of Trustees

10th February 2014

lETTER OF TRANSMiTTAl

On behalf of the Board of Trustees, I have the pleasure to submit the Annual Report of the Fund for the year ended 30th June

2013.



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iNTRODuCTiONi am honoured and privileged to present the annual report of the Public Service Pensions Fund (PSPF) for the year ended 30th June 2013.The year ending 30th June 2013 was characterised by the new challenges of competitions in the industry following legal and regulatory changes brought by the Social Security (Regulatory) Act No. 8 of 2008. Despite the challenges, the Board had to ensure that the Fund achieves its operational and strategic targets underpinned by increase in new contributing members by 4 percent. i would like to commend the management and staff of PSPF for this remarkable achievement and urge them to keep up the excellent performance.

in this financial year 2012/13 the Fund managed to record a surplus of TZS 164.89 billion. The surplus was a result of increased contribution resulting from increased membership and returns in investments. investment performance has been encouraging as the net return on investments amounted to TZS 204.69 billion. This represents an increase of 129 percent from TZS 89.4 billion in year 2012.

The actuarial deficit of the Fund continues to be an issue that generates much concern amongst stakeholders. This deficit is well documented and the main reason for this deficit is the payment of benefits by the Fund in respect of service prior to 1st July 1999 when the scheme was non-contributory. The Fund’s efforts to increase investment returns has not helped and we keep saying, clearly this is not good news. The Fund continues to communicate with the government to see to it that a remarkable turnaround is made as early as possible.

The key focus of the Board of Trustees is to ensure that there is efficient and effective administration of all aspects of the Fund. The

In this financial year 2012/13 the Fund managed to record a surplus of TZS

164.89billion

BOARD CHAiRMAN’S STATEMENT

GeORGe D. YAMBeSi Chairman PsPF



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BOARD CHAiRMAN’S STATEMENT

particular emphasis of the trustees has been to increase Fund’s members and improve investment returns through prudent diversification of investments aimed at reducing risks and increasing returns. We also seek to minimise administrative costs taking cognizance of Fund’s resource limitation through strategies that have been outlined by Fund’s Corporate Plan document.

it is my belief that implementation of Corporate Plan with emphasis on increasing number of contributing members, timely collection of contributions, prudent investments and sound financial management will foster growth of the Fund. The Board of Trustees is promising its members and entire stakeholders that it will continue upholding highest standards of governance to attain these objectives.

Reflecting on the year 2012/2013 and on the accomplishments described in this annual report, i would like to extend my gratitude to my fellow trustees. Your participation has made a difference.

it is your expertise, your knowledge of members’ needs, and your thoughtful assessment of the problems and potential solutions that continued to make the Fund a powerful presence in the social security sector in the country. We all can be proud of the Fund’s accomplishments of the past year and embark confidently on the next year.

Finally, On behalf of the Board of Trustees, i would like to sincerely thank our members, employers and pensioners for their forbearance and other stakeholders for holding firm with us. i am also taking this opportunity to thank the staff of the Fund for their steadfastness. i believe all of us feel challenged and motivated to deliver sterling results in the coming year.

Thank you and May God Bless us All.

George D. YambesiChairman, PSPF Board of trustees

I believe all of us feel challenged and motivated to deliver sterling results in the coming year.


pspf annual reporT for THe Year ended 30Th June 2013

GeORGe YAMBeSi Chairman of the Board of Trustees

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THE BOARD OF TRuSTEES

The Board of Trustees is the supreme governing body of the Public Service Pensions Fund.As at 30th June 2013, the Board of Trustees comprised of eight members (including the Chairman). During the financial year 2012/2013, the following trustees guided the Fund:


MR. ADAM H MAYiNGuTrustee

MR. lilA H. MkilA Trustee

MR. ALLY K.A. KiweNGeTrustee


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THE BOARD OF TRuSTEES

MR. CLeMeNT A. MSwANYAMATrustee

MR. eLiAS P. M MwAKiBiNGATrustee

MR. PeTeR A. iLOMOTrustee

DR. JANe MADeTeTrustee

HON. FReDeRiCK M. weReMATrustee



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i am pleased to present to you the statement of financial performance for the year that ended 30th June 2013. During the period the Fund’s management focused on achieving its corporate objectives.

The financial year 2012/13 was operationally good. The Fund managed to record a total of 367,402 members. Out of this number 320,860 were classified as contributing members. in the previous year (2012), contributing members stood at 309,767 showing an increase of 4 percent. The number of pensioners has grown from 36,535 in year 2012 to 46,542 in year 2013 showing an increase of 27 percent.

The increase in contributing members and the increase in salaries during the year had a corresponding rise in contribution income collected. The contribution of TZS 516.5 billion was collected for the year 2013. This amount is 16.3 percent higher than contributions collected in year 2012 which was TZS 444.1 billion. the increase in number of pensioners from 36,535 to 46,542 together with

MR ADAM H. MAYiNGu Director General, PSPF

All these good performance has resulted in Fund’s assets to continue to grow from TZS 1.09 trillion as at June 2012 to TZS

1.25 trillion as at June 2013, an increase of 14.68%. .69

DiRECTOR GENERAl’S REPORT



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the increase in number of retirees from 4,620 in year 2012 to 5,137 in year 2013 had a corresponding rise in the benefits paid. The Fund paid a total of TZS 543.7 billion to beneficiaries during the period. in year 2012, however, the amount paid to beneficiaries was TZS 360.0 billion. This represents an increase of 52.8 percent.

in this year under review the Fund registered a surplus of TZS 164.89 billion in comparison to TZS 161.8 in year 2012. investment performance has been promising and as a point of interest on investment performance the Fund achieved returns of TZS 204.69 billion. This represents an increase of 129 percent from TZS 89.4 billion in year 2012. This is a respectable result in an environment where investment opportunities are few.

All these good performance has resulted in Fund’s assets to continue to grow from TZS 1.09 trillion as at June 2012 to TZS 1.25 trillion as at June 2013, an increase of 14.68%. We believe that the Fund is well-placed to provide solid investment returns in the future.

The main challenges facing the Fund include; delays by Government to pay unremitted contributions for the period before 1 July 1999, delays in collecting matured investments, an aging and impact of HiV in relation to the increasing number of widows/widowers in pension payroll, significant increase in members’ salaries few months before retirement dates, getting information or updates of retirees for the assurance of their existence, limited safe and high yielding investment opportunities and mechanisms of tracing members’ movements from one employer to another. All these challenges have been addressed in corporate plan 2012/13 to year 2016/17.

We stand to our vision “to be the best social security

provider in Tanzania”, yes we can, and to achieve this we are positioning ourselves to take advantage of opportunities that will arise in financial year 2013/14 by increasing membership through voluntary registration, getting closer to our members through opening regional offices in new regions and investing in safe and high yielding investment opportunities. We remain committed to increasing the Fund assets value while serving members and other stakeholders with utmost trust. i must extend my appreciation to the Board of Trustees for their continued support and guidance and to the entire Management and staff for their dedication and a job well done.

DiRECTOR GENERAl’S REPORT (continued)



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FuND PeRFORMANCeThe major functions of the Fund are registration of members, collection of contributions, accounting of the funds collected, investment of the funds collected and payment of benefits. The following part shows implementation of the planned activities over the period.

OPeRATiONAL ACTiviTieSoperational activities include membership registration, collection of contributions and payment of benefits. The Fund used various strategies to ensure that it meets its objectives. The performance of the activities is detailed hereunder.

i. Registration of membershipthe Fund conducts registration of members

all over the country; in the registration exercise the Fund collects all necessary documents including employment letters, salary slips, and photos. Moreover, the documents collected during registration exercise are important for the processing of benefits. During the registration exercise, the Fund gets an opportunity to meet and educate its members on various activities as well

as obtaining necessary information to update members’ records.

In recognition of the importance of records as a tool for efficient and effective delivery of services in pensions operations, the Fund has put in place state-of-the art records management system.




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Members get an opportunity to air their views about the Fund’s operations and give their recommendations on improvement of service delivery.

The number of members of the Fund has increased from 309,767 on 30 June 2012 to 320,860 members on 30 June 2013, an increase of 11,093 members over the past one year as shown in the chart 1.

ii. Records Managementin recognition of the importance of records as a tool for efficient and effective delivery of services in pensions operations, the Fund has put in place state-of-the art records management system. Application of this system facilitated storage and retrieval of members’ information on demand. This has expedited benefit payment process.

iii. Members ContributionsFor the past five years the Fund has noted an increasing trend in members’ contributions. Contribution income has increased by 16.30% in year 2012/13. the increase is emanated by increase in membership as well as members salaries.

Chart 1: Membership Trend

PsPF record centre




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Contributions trends are shown in chart 2.

iv. Benefits issued by the FundFor the financial year 2012/2013 a total of TZS 543.71 billions were paid to 51,679 beneficiaries as gratuity and monthly pension. The benefits paid include old age gratuity and pensions, death gratuity, survivors’ pensions, withdrawals, invalidity, and funeral grants.

v. Pensioners the Fund pensioners include those retired from service, invalidity and survivors who are spouses, children and other dependants of the deceased members who died while in service. For the year 2012/13 the Fund verified 46,542 pensioners compared to 36,535 pensioners who were verified in 2011/12.

0

100

200

300

400

500

600

2008/09 2009/10 2010/11 2011/12 2012/13

Payment of Benefits in Tzs Billions

2008/09

2009/10

2010/11

2011/12

2012/13

Chart 2: Contributions Trend

Chart 3: Five Years movement of benefit expenses

For the financial year 2012/2013 a total of TZS

543.71 billions were paid to 51,679 beneficiaries




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Chart 4: Five Years movement of pensioners

Table 1: Portfolio Mix as at 30th June 2013

the Fund pays pension to its pensioners quarterly in advance. in addressing various concerns of pensioners towards improving their wellbeing, the Fund has also been issuing soft short term loans to pensioners in the form of pension advances for periods not exceeding 12 months.

vi. Members loansFollowing previous experience, PSPF has noted that a number of public servants do not have houses after their retirement. in order to assist its members to address housing problem, the Fund introduced a housing loan facility for its members who have at least five (5) years to compulsory retirement date. in the financial year 2012/13 the Fund paid a total of TZS 85.12 billion to 1,596 members.

vii. Operational challengesThe following are major identified challenges under operational activities:a. Non adherence to timely

payment of pre - July 1999 liability.

b. increase in obligation of benefits payment.

c. Recovery of outstanding loans from Government projects.

viii. investment activitiesthe Fund revised its investment Policy and procedures in line with SSRA directives on October 2012. The Fund investments are guided by the Funds investment Policy. These policies are based on safety, return, liquidity, economic and social utility, diversification and prudence. these principles provide guidance in developing the Fund portfolio mix and formulating strategies to achieve investments primary objective of providing high rate of return, consistent with prevailing market condition, high quality of investments and moderate level of risk. PSPF portfolio mix as at 30th June 2013 was as shown in Table 1.

items % of total limit of investment

% of Actual investment 2012/2013 %

Government securities 40 - 60 13.00

Fixed Deposits 5 - 20 5.12

loans and Special 0 - 50 46.35

Government project 0 - 50 46.35

equities 5 - 22 16.05

Real estate 0 - 20 18.74

Corporate Bonds 3 – 7.5 0.74

Grand total 100.00




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Major consideration in investment decision is certainty in recovery and matches with safety principle of investments.

To adhere to the principle of liquidity, part of investments is in short term assets which include fixed deposits and treasury bills. investments of this nature focus on

PSPF 3 bedroom low cost house located at lukobeMorogoro.

The Fund investments have been growing every year; from the financial year 2008/09 to 2012/13 overall growth was

57.80%.

strengthening the Fund’s ability to meet its day to day obligations like payment of benefits and administrative costs. long term obligations are matched with long term assets where the Fund invests in real estate, long term commercial loans and securities.




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PsPF plays its role in economic development by providing capital to listed and unlisted company through equity participation. As at 30th June 2013 the Fund had

Completed Police residential houses in kurasini, Dar essalaam.

shares in 14 Companies. The principle of economic and social utility is considered after fulfilment of safety, liquidity and return. The Fund has

participated in investment projects that fulfil this principle by undertaking investments which focus on strengthening education, decent accommodation and improvement of technology.

the Fund investments have been growing every year; from the financial year 2008/09 to 2012/13 overall growth was 57.80%.

Growth of the Fund

Management has the responsibility of ensuring sustainable growth of the Fund.

Percentage of shareholding in listed equity portfolio



pspf annual for THe Year ended 30Th June 2013

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Chart 5: Five Years investments Trend

Chart 6: 5 Years trend on growth of the Fund

the key attributes towards the growth of the Fund’s asset is mainly by increase in contributions collections and investment income (through prudent investments). it is expected that the Fund’s size will increase more when the Government starts to pay pre-July 1999 liability effectively.

CORPORATE SOCiAl RESPONSiBiliTYC o r p o r a t e s o c i a l Responsibility (CsR) has been one of PSPF undertaking since its establishment in 1999. PsPF continued to invest in the community with the aim of maintaining its status as a good corporate citizen.

in 2013 the Fund engaged in various social projects in the areas of health, education, Community development and Sports.

Among the many areas supported during the year were:

As it is shown in the Chart 6, the Fund assets have been growing every year regardless of increase noted in the benefit payments. For the past five years, average growth in assets was

15.30 percent.




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a. in health sector the Fund supported in marking the World kidney Day through National kidney Foundation Tanzania and sponsoring National Federation of Medical Students Association- Africa regional meeting.

b. in education sector the Fund supported Bwiringu Primary school to purchase 100 students

desks and construction of two classrooms in lipalilo secondary school.

c. in community development the Fund supported “kikundi cha wanawake wajane

waishio na VVu (WAVAVu)” in purchasing water pump for irrigation at the fruit and vegetable garden situated at Tundwi Songani.




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d. The Fund Supported sports activities by Sponsoring SHiMuTA games held in Dodoma, assisted DED Rufiji in purchasing sports gears and sponsored national netball team participation in the nations championships in Singapore through CHANETA.

The Fund spent a total of TZS 0.31 billion for the year 2012/13 compared to 0.21 billion in year 2011/12 as part of its Corporate Social Responsibility.

RiSk MANAGEMENTTo safeguard Fund’s assets and investment assets allocation, the Fund employs Enterprise Risk Management

corporate risk register is able to take on board all the key exposures in both proactive and reactive approaches.

CONCluSiONi thank the Board for their continued guidance and valued participation in the activities of the Fund. Our appreciation also goes to participating employers, members and pensioners for their interest and support and to suppliers and partners for contributing to our achievements. To the management and staff, a note of thanks for their active involvement in supporting the Fund in these reported results.

We believe the Fund is well placed in all aspects to meet new challenges and to seize new opportunities.

Adam H. MayinguDiRECTOR GENERAl

System. in assessing the risk inherent in our investment portfolio, each asset category risks are assessed and mitigating measures and controls are put in place. The Fund through its

The Fund spent a total of

TZS 0.31 billion for the year 2012/13 compared to 0.21 billion in year 2011/12 as part of its Corporate Social Responsibility.




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MANAGEMENT TEAM

During the financial year 2012/2013 Management of the Fund comprised of the following members

ADAM H MAYiNGuDirector General

GODFREY l NGONYANiDirector of internal Audit

GABRiEl J SilAYO Director of Planning and

investment

NEEMA i MuRODirector of Operations

ANDREW E MkANGAADirector of information systems

MASHA J MSHOMBADirector of Finance and

Administration

Our appreciation also goes to participating employers, members and pensioners for their interest and support and to suppliers and partners for contributing to

our achievements.


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PUBLIC SERVICE PENSIONS FUND FINANCIAL STATEMENTS AS AT 30Th JUNE 2013

PsPf head offices;Golden Jubilee Towers

ohio sTreeT/11101 KivuKoni


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PRiNCiPlE AuDiTORS Office of the Controller and Auditor General National Audit Office Samora Avenue/Ohio Street P.O. Box 9080 Dar es salaam DElEGATED AuDiTORS Deloitte &Touche Certified Public Accountants (Tanzania) 10th Floor, PPF Tower Corner of Ohio Street P.O Box 1559 Dar es salaam BANkERS CRDB Bank Plc Holland House Branch P.O. Box 71960 Dar es salaam Barclays Bank Tanzania limited Barclays House P.O. Box 5137 Dar es salaam NMB Bank Plc Bank House Branch P.O. Box 9031 Dar es salaam Standard Chartered Bank Tanzania limited international House Branch P.O. Box 9011 Dar es salaam REGiSTERED OFFiCE Golden Jubilee Towers Ohio Street/11101 kivukoni P.O. Box 4843 Dar es salaam

CORPORATE iNFORMATiON

PsPf head offices;Golden Jubilee Towers

ohio sTreeT/11101 KivuKoni




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The Trustees submit their report together with the audited financial statements of Public Service Pensions Fund (the Fund) for the year ended 30 June 2013.

1. BOARD OF TRuSTEES

The Trustees of the Fund at the date of this report, all of whom have served since 1 July 2012, except where otherwise stated, are as follows:

NAME** POSiTiON AGE OCCuPATiON APPOiNTMENT RETiREMENT Mr. George D. Yambesi Chairman 60 Economist Mr. Geoffrey M.k. Msella Trustee 61 Economist 13 March 2013 Mrs.EdineE. Mangesho Trustee 62 Economist 13 March 2013 Mr. Arthur G.k. Mwakapugi Trustee 63 Economist 1 August 2012 Hon. Frederick M. Werema (AG) Trustee 58 lawyer 14 September 2013 Mr. Ally k.A. kiwenge Trustee 61 Administrator 14 September 2013 Mr. lila H. Mkila Trustee 63 Economist 14 September 2013 Mr.Ramadhani A. Maneno Trustee 49 Administrator 1 August 2012 Mrs Elipina E. Mlaki Trustee 60 Accountant 13 March 2012 Mr. Peter A. ilomo Trustee 57 Economist 1 August 2012 Mr. Clement A. Mswanyama Trustee 51 Educationist 1 August 2012 Dr. Jane Madete Trustee 44 Medical Doctor 1 August 2012 Mr. Elias P. M. Mwakibinga Trustee 54 Economist 13 March 2012 Ephery Sedekia Trustee 35 lawyer 15 September 2013 Mwanaidi J. Mwanga Trustee 59 Administrator 15 September 2013 Nyakimura M. Muhoji Trustee 52 Human 15 September Resources 2013 specialist

** All Trustees are Tanzanians.

2. ESTABliSHMENT AND MEMBERSHiP OF THE FuND

the Public service Pensions Fund is a social security institution established by the Public Service Retirement Benefits Act No. 2 of 1999. The main purpose is to provide for collection of contributions and payment of terminal benefits to members. The Fund is operated under two different schemes. These are PSPF Mandatory Scheme and PSPF Supplementary Scheme of which membership is voluntary.

REPORT OF THE BOARD OF TRuSTEES for the year ended 30 June 2013 (continued)



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2. ESTABliSHMENT AND MEMBERSHiP OF THE FuND (CONTiNuED)

Membership to the Fund is open to any person who has been employed in the formal and informal sector. Previously and under the rule of the Public Service Retirement Benefits Act No. 2 of 1999, the Fund was established to manage a defined benefit scheme in which membership was limited to pensionable employees of the Central Government and its executive agencies, including Teachers, Police and Prison Officers and Holders of Constitutional Offices.

With the enactment of the Social Security (Regulatory Authority) Act No. 8 of 2008, and subsequent amendments made to the Public Service Retirement Benefits Act No. 2 of 1999, in June 2012, the Fund’s mandate changed and it now registers any employee in the public as well as private sector. The Act gives employees in both public and private sector freedom to choose a pension scheme to which they would make pension contributions.

Members and pensioners of the Fund as at 30 June 2013 were:

a) Total members 2013 2012 Contributing members 320,860 309,767 Pensioners 46,542 36,535

367,402 346,302

b) Contributing members

At start of year 309,767 306,514 Joiners 16,230 7,873

325,997 314,387 Less:

Retired with pension (4,710) (4,580) Died in service (332) (13) Other secessionists (95) (27)

At end of year 320,860 309,767

c) Pensioners At start of year 36,535 27,741

Contributing members who retired 3,193 8,794 Dependants 7,005 13 46,733 36,548

less: Deaths (191) (13)

At end of year 46,542 36,535




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3. ViSiON

To be the provider of choice of social security services in the country

4. MiSSiON

The Fund is committed to providing competitive Social Security Services to our members using dedicated staff and appropriate technology.

5. SCHEMES AND FuNDiNG

The Fund operates two types of Social Security Schemes which are the mandatory and supplementary schemes whose design and funding is explained below.

5.1 Mandatory Scheme

Mandatory scheme is a contributory scheme which operates under defined benefit arrangement. The current contribution rates under mandatory scheme are 15% for employers and 5% for employees which make a total contribution of 20% of member’s salary. However, any contribution rates agreed between an employer and an employee that would make a total contribution rate of 20% of the employee’s salary is acceptable by the Fund.

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 or part of the month is levied on the delayed contributions until when the contribution is remitted. These rates are determined by actuaries and are sufficient to accumulate assets to pay benefits when due. The accrued investment and such sums as may be appropriated by the Parliament for the purpose of the Fund also form part of the sources of funding.

under the provisions of the Public Service Retirement Benefits Act No. 2 of 1999, effective commencement date of the Fund with respect to collection of contributions payable to the mandatory scheme was 1 July 1999. The payment of benefits effectively commenced on 1 July 2004. The benefits accrued prior to 1 July 1999 for the Fund’s retirees are met by the Fund but require explicit funding from the Government of Tanzania. under the transitional provisions of the said Act, all benefits falling due during the 5 year transitional period from 1 July 1999 to 30 June 2004 were paid under the Pensions Ordinance and from the Consolidated Fund. Hence no benefit payments were made from the Fund during the transitional period.

5.2 Supplementary Scheme

Mandatory scheme is a contributory scheme which operates under defined contribution arrangement. The Supplementary Scheme officially started on 7 March 2013. Minimum contribution under supplementary scheme is TZS 10,000.




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5. SCHEMES AND FuNDiNG (CONTiNuED)

5.2 Supplementary Scheme (Continued)

There is no maximum contribution. under this scheme, a member can choose the timing of contribution remittance. Contribution can be remitted to the Fund weekly, monthly or seasonally depending on the member’s choice and his/her income earning pattern.

These financial statements include transactions relating to the supplementary scheme with respect to contributions totalling TZS 60.6 million. No significant expenditures relating to the supplementary scheme were incurred as at 30 June 2013.

6. FuNCTiONS, OBJECTiVES AND ACTiViTiES OF THE FuND

a) Functions

under the provisions of the Public Service Retirement Benefits Act No. 2 of 1999, the Fund has the following functions:

(i) Registering members, manage and administer members contributions and provide for payment of pension, gratuity and other benefits in accordance with the provisions of this Act

(ii) investing moneys available in the Fund in order to accumulate adequate assets for payments of pension, gratuity and other benefits and

(iii) Doing all such acts and things and to enter into all such transactions as, in the opinion of the Fund, may be necessary for the proper and efficient administration of the Fund.

b) Fund’s objectives

in order to fulfil its functions and broader statutory objectives, the Fund must have sufficient resources to pay benefits to its members in the most efficient and effective manner. in order to ensure that the Fund has sufficient resources and provides superior service delivery, the focus is on three major objectives. These are to maintain sustainable growth of the Fund; to have efficient and effective service delivery; and to maintain competent and motivated work force.

in terms of strategies our approach includes:

i. Registration of members and collection of contributions having due regard to transaction costs and collection flexibility. We invest those contributions to provide sufficient liquidity to meet benefit payments as they fall due and maintain confidence in reaching stable funding level.




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6. FuNCTiONS, OBJECTiVES AND ACTiViTiES OF THE FuND (CONTiNuED)

b) Fund’s objectives (Continued)

ii. Working with the Social Security Regulatory Authority, the Government and other employers to reduce the level of risk to members’ benefits through ensuring that dues from the Government and employers are remitted to the Fund timely.

iii. Regularly assessing progress towards the funding level and review the appropriateness of, and progress towards, the funding target on an annual basis.

iv. Controlling the extent of our exposure to investment risk by altering our investment strategy. We assume the level of risk which ensures that any movements in liabilities are matched by corresponding movements in assets.

v. Hiring employees who have the required integrity, competence and the proper education and experience to carry out their jobs and ensure that the employees are suitably compensated.

vi. Managing service delivery systems and making incremental improvement in the systems to bring about sustainable improvements as quickly and effectively as possible.

c) Activities

To fulfil its functions, the Fund carries out the following activities on daily basis:

(i) Registering members who are willing and eligible to be registered as members of the Fund.

(ii) Reliably and timely collecting contributions, pre-retirement loan repayments and other receipts;

(iii) Making proper records of all contributions, payments and other data necessary for efficient and effective management of the Fund;

(iv) Paying benefits and pre-retirement loans in a correct, accurate and timely manner;

(v) Securing sound financial management and productive investment of Fund’s assets.

(vi) Maintaining an effective communication network, including development of accurate data and record keeping mechanisms to support collection, payment and financial activities;

(vii) Timely producing financial statements and reports.




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7. BENEFiTS CONFERRED BY THE FuND

items (a) to (e) below describe in brief benefits offered to members of the Fund.

Benefits offered under Mandatory Scheme

Being a defined benefit scheme, the Mandatory Scheme offers benefits based on the defined formula. The benefits are promised to members under the law and are paid regardless of the investment performance. The benefits conferred under the mandatory scheme are:

(a) Old Age Benefit

Pension benefit is based on years of service and annual pensionable emoluments. The annual compensation is based upon the highest pensionable emolument enjoyed by the member within twelve months preceding his retirement. Public Service Retirement Benefit Act provides for commutation of 50% of the member’s pension entitlement at a commutation factor of 15.5. The qualifying conditions are that the member must be employed on permanent and pensionable terms and must have contributed to the Fund. A member who has contributed to the Fund for a period of 180 months or 15 years will be paid both pension and gratuity while a member who has contributed to the Fund for a period less than 180 months or 15 years will be paid gratuity only.

(b) Death Benefit

This is paid to legal representative of a member who dies while in the service. Dependants of a deceased member who has contributed to the Fund for a period of 180 months or 15 years will be paid both pension and gratuity while a member who has contributed to the Fund for a period less than 180 months or 15 years will be paid gratuity only. Dependants are the widows, widowers, children of not more than 21 years of age or children who are of full age but incapable of working due to specific diseases or mental disablement.

(c) invalidity Benefit

This benefit is paid to any member who has been proven to have been physically or mentally disabled as to be employable. Pension benefit is based on years of service and annual pensionable emoluments. The annual compensation is based upon the highest pensionable emolument enjoyed by the member within twelve months preceding his termination date. The benefit is granted to a member after the Government Medical Board is satisfied that the member is incapable of discharging the duties of his office by reason of becoming invalid. A member who has contributed to the Fund for a period of 180 months or 15 years will be paid both pension and gratuity while a member who has contributed to the Fund for a period less than 180 months or 15 years will be paid gratuity only.




28

7. BENEFiTS CONFERRED BY THE FuND (CONTiNuED)

(d) Funeral Grant

Where a member dies his dependants shall be entitled to a funeral grant benefits at the rate of TZS 200,000.

(e) Withdrawal Benefit

Marriage: Payable to a female member who due to marriage proves to the satisfaction of the Director General that she has permanently given up employment and will not seek any gainful employment in the public service.

Maternity: Payable to a female member who proves to the satisfaction of the Director General that in consequence of her giving birth to a child she has permanently given up employment and will not seek any gainful employment in the public service.

(e) Withdrawal Benefit (Continued)

Emigration: Payable to a member who proves to the satisfaction of the Director General that he is emigrating or has emigrated and has no intention of returning to the united Republic of Tanzania and has not been employed by employer who is liable to make contributions in respect of himself for at least six months.

(f) Other Services Offered

House loans: House loans are granted to members who have at most five years before statutory retirement date. The Fund advances up to 50% of the member’s gratuity calculated at the time of application.

Low Cost Houses: the Fund constructs low cost houses which are sold to members and non-members of the Fund. Credit facilities are available at Exim Bank, CRDB Bank Plc. and Azania Bank. With these banks, the Fund entered into contract for extending credit facilities to members at affordable interest rates of 12 per cent. The Fund gives guarantees to members to secure loans to buy the houses to the maximum of 50 per cent of the members’ benefits at the time of application. At the moment, the available houses are located in Morogoro, Tabora, Mtwara, Shinyanga and Dar es Salaam.

House Loan Guarantee: PSPF members who have contributed to the Fund for not less than five years may benefit from mortgage facility guarantee given by the Fund to secure house loans from Azania Bank limited, Exim Bank limited and CRDB bank Plc. The rate of interest is negotiable between the member and the bank and the loan is repaid on monthly basis for a period up to 25 years.




29

7. BENEFiTS CONFERRED BY THE FuND (CONTiNuED)

Benefits offered under Supplementary Scheme

Being a defined contribution scheme, the Supplementary Scheme offers benefits based on the contributions and accrued interest which depends on the investment performance. Regardless of the investment performance, the Fund has promised an interest of at least 6 per cent on the members’ contributions for the next financial year. The benefits conferred under the scheme are:

(i) Education benefit

Education benefit is paid to a member who contributed to the Scheme for a period of at least 12 months. The amount payable is 50 per cent of the amount contributed to the Scheme. The remaining contribution and accrued interest will remain in the scheme for payment of other benefits payable under the scheme.

(ii) Entrepreneurial Support Benefit

Entrepreneurial Support benefit is paid to a member who contributed to the scheme for a period of at least 12 months. The amount payable is 50 per cent of the amount contributed to the Scheme. The remaining contribution and accrued interest will remain in the Scheme for payment of other benefits payable under the Scheme.

(iii) Retirement Benefit

Retirement Benefit is payable to a member who attains the age of at least 55 years. The whole contributed amount plus accrued interest, less benefit paid, if any, is paid to the retiring member.

(iv) Death Benefit

Death benefit is payable to dependants of a deceased member. The whole contributed amount plus accrued interest,less benefit paid, if any, is paid to the dependants.

(v) invalidity Benefit

invalidity Benefit is payable to a member who, because of illness, injury, or any incapability, is unable to continue with work. The whole contributed amount plus accrued interest, less benefit paid, if any, is paid to the member.

(vi) Withdrawal Benefit

Withdrawal Benefit is payable to a members who decides not to continue being a member of the Supplementary Scheme. The whole contributed amount plus accrued interest, less benefit paid, if any, is paid to the member.




30

8. REViEW OF PERFORMANCE FOR THE YEAR

The Fund recorded increased investment income in line with our expectations resulting in increase in surplus by 1.9 percent. increased surplus during the year depended entirely on the investment income. The Fund continued to make investments in line with its plan and strategy. The detailed financial performance of the Fund during the year is set out on page 34 to 36 of these financial statements.

a) key Performance indicators

key performance indicators, both financial and non-financial, are used by the Trustees in assessing the Fund’s progress towards achieving its objectives. The indicators are contained in the Fund’s Annual Plan and Budget and are developed to monitor key results in the following strategic areas: increasing registration of members, improving contribution collections; improving investment performance, improving cost management efficiency, improving service delivery efficiency, compliance to the legal, regulatory and best practices requirements, technological improvement with respect to the use of iCT, improving human resources excellence and increasing investment in corporate social responsibility.

The key performance indicators include: percentage of members registration and contribution collection against set targets; percentage of benefits paid within set time limits; percentage of return on investments collection of investment proceeds against set targets, average level of user satisfaction with Fund’s services and percentage of administrative expenses to income figures.

in accordance with the Fund’s performance management framework, performance

indicators are brought to the Board of Trustees for review and endorsement at the time of reviewing and approving the Annual Plan and Budget.

b) Significant Achievement

The year ending 30 June 2013, there are a number of achievements. These include but not limited to:

(i) Establishment of Fund’s call centre service through which members and other stakeholders will be inquiring about the services and obtain response through telephone.

(ii) introduction of PSPF Supplementary Scheme in which people from all sectors, employed or unemployed will be making voluntary savings to the scheme to obtain various benefits.

(iii) Successful implementation of the following iCT-related projects:




31

8. REViEW OF PERFORMANCE FOR THE YEAR (CONTiNuED)

b) Significant Achievement

• implementation of iCT based bulky SMS service through which the Fund will be communicating with its members and stakeholders using short messages. This will bring about overall improvement in Fund’s communication system.

• Establishment of extensive review program of our internally generated iCT-based pension administration system to support changes in our business models and the PsPF supplementary scheme and

• Enhancement of interactive website that will enable members of the Fund to obtain their contribution and other information via internet.

(iv) Comprehensive review of Fund’s policies and procedures. These include Training Policy, Staff Regulations, Financial Regulations, iCT Policy, internal Audit Charter, Client Service Charter and internal Audit Manual.

(v) Comprehensive review of the Fund’s Performance Management System and continual improvement of Personnel Management information Reports.

(vi) increased registration of members, improved service delivery and investment performance.

c) Financial results

(i) Additions

The major income streams of the Fund come from members and employers contributions, investment income and other income which include penalties, fees and commission for recoveries of loans advanced to employers.

During year ended 30 June 2013, contribution remittances increased by 16.3 per cent to TZS 516.5 billion from TZS 444.1 billion reported in the year ended 30 June 2012. The increase in contribution revenue was mainly attributed by salary increase to Government employees. Also, the Fund increased its members by 16,230 in the year ended 30 June 2013 (30 June 2012: 7,873). This increase is 106.1 per cent and is due to increased efforts in members registration. Other income increased to TZS 13.5 million from TZS 3.1 million in year ended 30 June 2012. This was mainly attributed by penalties on delayed repayments of loans and contributions.

investment income increased by 129 per cent to TZS 204.7 billion from TZS 89.4 billion recorded in the year ended 30 June 2012. Such significant increase in investment income was attributed by recognition of interest on loan from completed government projects and repayment by the Government of the loan granted to Tanpower Resources limited (kiWiRA Coal Mine).




32


c) Financial results (continued)

The completed projects are loans to Government in respect of Police Force and Dodoma university College of Education. in addition, market prices of shares held by the Fund in various companies increased significantly. The companies that had its shares increased include Tanzania Cigarettes Company limited, Swiss port, CRDB Bank Plc, National Micro finance Bank and Tanzania Breweries limited. As a result of increase in share prices, the Fund recorded positive changes in market values of investments to the tune of TZS 33.8 billion (30 June 2012: 10.1billion).

(ii) Deductions

The main Fund’s expenses emanate from benefits and administration expenses. Benefits are paid to eligible members of the Fund upon retirement, death and cessation of employment for any reason. The Fund recorded benefit expenses amounting to TZS 543.7 billion (30 June 2012: TZS 360.0 billion) and benefit payments amounting to TZS 373.0billion (2012: TZS 349.3 billion) representing an increase of 52.8 per cent on benefit expenses and 64.0 per cent on benefits paid. The increase in benefit payments was a result of the increase in the number of retirees, death cases and increase in Government salaries. in the year ending 30 June 2013, the number of retirees increased to 5,137 from 4,620 in year ended 30 June 2012. Trend shows that the number of members who are expected to exit in the year 2014 are 7,647 and this number is expected to increase in the next three years and this will have a financial impact on Fund’s resources.

Administration expenses amounted to TZS 26.1 billion as compared to TZS 18.8 billion in the year ended 30 June 2012, which represents an increase of 38.8 per cent. increase in administrative costs was attributed by the increase in Fund’s activities and increase in the number of staff and their salaries. in the year ended 30 June 2013 the number of staff was 185 (30 June 2012: 140)

(iii) Net Surplus/Deficit

During the year ended 30 June 2013, the deficit from dealing with members was TZS 27.2 billion compared to surplus of TZS 88.1 billion in the year ended 30 June 2012. The deficit is a result of having benefit payments obligations which are more than streams of income from contributions. The overall net surplus was TZS 164.9 billion (30 June 2012: 161.8 billion). This overall surplus is mainly attributed by investment performance in the year 2013.




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d) Financial Position

The financial position of the Fund is as set out in the statement of net assets available for benefits on page 35. Net assets grew by 15.2 per cent from TZS 1,086.3 billion to TZS 1,251.2 billion in the year ended 30 June 2013. This was mainly due to good investment performance during the year.

Significant assets accumulation was recorded in investment property, listed equities, loans and contribution receivables. investment property increased to 152.9 billion in the year ended 30 June 2013 from TZS 112.6 billion in the year ended 30 June 2012. This increase is a result of Fund’s investment diversification strategy to spread risk into various investment portfolios. Quoted equities increased to TZS 101.3 billion from TZS 74.7 billion in the year ended 30 June 2012. This increase is mainly due to increase in market value for all listed equities. investment in loans increased to TZS 466.9 billion from TZS 343.6 billion in the year ended 30 June 2012. The increase was mainly due to additional loans to university of Dodoma, Police Force Project and the Prevention and Combating of Corruption Bureau (PCCB). There was also capitalisation of unremitted interest from university of Dodoma and Police Force Projects.

Contribution receivables increased to TZS 256.2 billion from TZS 139.1 billion in the year ended 30 June 2012. This was mainly caused by non-remittance of 15% contribution from Ministry of Finance for the month of May 2013 and June 2013 totalling TZS 56.0 billion and amount of contribution receivable relating to pre 1 July 1999 of TZS 184.9 billion which the Government promised to pay the Fund by the end of 30 June 2013.

9. RESOuRCES

Apart from the items reflected in the Statement of Net Assets Available for Benefits, the Fund has strengths which can assist in achieving its objectives. These strengths include competent Trustees and Management, skilled, dedicated and motivated personnel, strong networking and relationship with the Government, oversight agencies, employers, members, Trade unions, media and other stakeholders, and strong iCT-based connectivity across all Fund’s regional offices which provides an excellent platform for superior service delivery.

10. SiGNiFiCANT EXTERNAl FACTORS AFFECTiNG THE FuND

The Fund continues to keep a close watch, make appropriate adjustments and monitor the basic components of its external environment that affect its ability to function. Significant external factors that affect the Fund include:

legislative Changes - the legislative framework within which the Fund operates is dynamic. Change is a constant factor and the Trustees recognise that they have to lead the Fund to meet its objectives in relation to the recent changes brought about by the regulatory regime.




34

10. SiGNiFiCANT EXTERNAl FACTORS AFFECTiNG THE FuND (CONTiNuED)

The main changes include:

The law which requires the Fund to compete with other pension funds in members registration with some specified restrictions. it has eliminated the Fund’s existing monopoly with respect to the registration of employees of Central Government and its Executive Agencies. However, this has brought about additional potential members in private sectors, parastatals and local government authorities.

The regulatory requirements have also introduced additional restrictions in modus operandi and maximum thresholds with respect to the components of investments portfolio. There are also requirements relating to reporting and investments management which will mean additional man-hours and other resources to respond to the regulatory requirements.

All these changes will mean that the Fund may be limited in terms of its flexibility to

take investment opportunities and increase overall transaction costs particularly in areas of compliance, registration, marketing and investment management.

Demographics – an aging population and impact of HiV. This is especially the case in

relation to the increasing number of young widows/widowers in pension payroll. This and the deteriorating pattern of early retirements have an impact on the amount of resources required to pay pensions over long term. At the moment the funding level does not increase in response to the growing number of pensioners and resource requirements.

Significant increase in Benefits Obligation - Benefits obligation has been increasing more than the increase in contributions. This especially happens with the increasing number of employees having their salaries significantly increased few months before their retirement dates. As the Fund’s benefit formula take into account the last salary as having been received throughout employee’s service period, such significant salary increases towards retirement dates bring about significant impact on benefit obligations without having corresponding impact in terms of asset accumulation.

Just like legislative intervention, the risk of significant increase in members’ salaries few months before retirement dates is outside Trustees’ control, although the Trustees do their best to support the appropriateness of the Fund’s statutory objectives and the need to accumulate adequate asset for payment of pensions and other benefits to members and their beneficiaries.

Proceeds from the Government - Delays by government to pay unremitted contributions for the period before 1 July 1999 impinges on the Fund’s ability to accumulate assets as more resources from current members are used to pay for unfunded portion of retiring members.




35

10. SiGNiFiCANT EXTERNAl FACTORS AFFECTiNG THE FuND (CONTiNuED)

Additionally, delays by the Government to pay loan extended to finance its projects negatively affects liquidity position of the Fund and its investment

performance in general,

11. FuTuRE DEVElOPMENTS

The Fund will continue to improve its service delivery and quality of service through increasing Service delivery channels and number of competent staff with required level of integrity and ethical values. The Fund will expand its regional offices in terms of both number and scope while carefully managing associated costs and risks.

The Fund has a strategic plan covering a period from 2012/13 to 2016/17. This plan sets out development trajectory of the Fund and establishes clear set of plans in the following areas: achieving sustainable growth of the Fund, efficiency and effectiveness in service delivery and workforce competency and motivation.

SpecificFund’sfutureplanwillbe:

i. Reviewing hardware infrastructure, network performance and business applications with the aim of improving efficiency and introducing additional and multiple iCT-enabled service delivery channels. The Fund is targeting to provide service in a completely paperless environment by the end of its Corporate Plan in June 2017.

ii. Putting in place effective liaison mechanisms with employers and other stakeholders to ensure that all documents that are necessary for payment of benefits are obtained ahead of time to allow timely benefit payments to eligible members.

i. instituting measures to ensure collections of all statutory contributions. The Fund will also put in place strategies to ensure that real return on investment is increased on a yearly basis and that administrative and capital expenditures are controlled. There should also be a proper matching of assets and liabilities to ensure timely payment of various obligations.

ii. Continuing with re-engineering of its business processes, enhancing performance measurement system, addressing customer feedback on service delivery and enhancing record management system.

iii. Promoting the Fund’s corporate image through development and maintenance of

public relations and properly managing corporate social investment programs.

iv. Continuing with registration of members employed in the formal sector in both public and private sectors at all levels and in all types of employment contracts in the Mandatory Scheme. The Fund will also make sufficient market campaigns to register members from diverse milieux and sectors in the Supplementary Scheme.




36

12. iNVESTMENT OF FuNDS

investment decisions are guided by the approved investment Policy which sets out the mandates and maximum investment thresholds. The general limits per permissible areas of investments are as follows:

investment category % of total limit % of actual limit investment of investment

Government securities 20 – 60 13.00% Fixed deposits 5 – 20 5.12% loans and special government projects 0 – 50 46.35% Equities 5 – 22 16.05% Real estate 0 – 20 18.74% Corporate bonds 3 - 7.5 0.74%

The strategy of the Fund is to carry out investment function in accordance with the best practices and the investment Policy of the Fund which is in line with the investment Guidelines issued by the Social Security Regulatory Authority. Best practices require that investment must be made based on safety; yield; liquidity; economic and social utility; diversification and prudence.

investment performance for the year ending 30June 2013 is impressive. As at 30 June 2013, the Fund recorded a total TZS 167.0 million as investment income (30 June 2012: TZS 79.2million) with average return on investment of 19.0 per cent (30 June 2012: 8.9 per cent). This is return is higher than the inflation rate of 7.6 per cent as at 30 June 2013 (30 June 2012: 17.4 per cent). it is expected that the investment performance will be improved further in the year 2013/2014.

13. STOCk EXCHANGE iNFORMATiON

The Fund has invested in listed equities in the Dar es Salaam stock exchange in a portfolio depicted below. The value of investment in each listed equity is reflected at the market price as at 30 June 2013.

Value of listed equities at Dar es Salaam Stock Exchange as at 30 June 2013.

S/NCompany Number Share Price value of shares (TZS) (TZS)’ 000

1 Tanzania Breweries ltd 7,520,581 3,220.00 24,216,370 2 Tanzania Cigarette Company ltd 4,334,735 6,500.00 28,175,778 3 Tanga Cement Company 4,553,856 2,400.00 10,929,254 4 Swissport Tanzania limited 1,616,988 2,060.00 3,330,995 5 Tanzania Portland Cement 4,847,065 2,660.00 12,893,193 6 CRDB Bank Plc 51,531,350 280.00 14,428,778 7 NMB Bank ltd 2,212,991 1,620.00 3,585,045




37

14. SOlVENCY EVAluATiON

As already stated under Schemes and Funding, the effective commencement date of the Fund with respect to collection of contributions payable to the mandatory scheme was 1 July 1999. The payment of benefits effectively commenced on 1 July 2004. The benefits accrued prior to 1 July 1999 for the Fund’s retirees are met by the Fund but require explicit funding from the Government.

Based on the last actuarial valuation report, that was completed as at 30 June 2010 by Genesis Actuarial Solutions limited, an independent firm of actuaries, the financial position of the Fund has deteriorated over the three years period since the previous actuarial valuation that was completed as at 30 June 2007.

As at 30 June 2010, the total value of liabilities amounted to TZS 7,219,513 million (30 June 2007: 3,374,695 million). The value placed on the Fund’s assets as at 30 June 2010 was TZS 732,382 million (30 June 2007: 492,385). This valuation revealed an actuarial deficit of TZS 6,487,131 million as at 30 June 2010 (30 June 2007: 2,882,310 million) and is attributed by the unremitted contributions for the period prior to 1 July 1999.

The provision of section 46 of the Public Service Retirement Benefits Act No. 2 of 1999, gives the Fund guarantees that the Government will help it out when it is unable to meet its obligations. This guarantee was also affirmed by a letter from the Permanent Secretary, Ministry of Finance with reference number C/HC: 191/338/01/021 of 15 June 2009.

14. SOlVENCY EVAluATiON (CONTiNuED)

in an effort to address the shortfall, on 5 March 2012, the Government made a commitment to pay TZS 716.6 billion over the period of 10 years as per letter with reference C/CA.486/607/02/99 dated 5 March 2012. The amount relates to benefits paid by the Fund up to 30 June 2010 of which the Government has already paid TZS 30.0 billion by 30 June 2013. in the year 2013/14, the Government paid an additional amount of TZS 30.0 billion.

Also, in June 2013, the Government formed a team to study and recommend on the best possible ways to finance the actuarial shortfall within the framework of Actuarial recommendations and the broader Government’s budgetary provisions. Members of the team were drawn from the Ministry of Finance, the Ministry of labour, the Public Service Pensions Fund, the Social Security Regulatory Authority and the Bank of Tanzania. The team has just completed its task and recommendations have already been submitted to the Government.

Being an entity with the government guarantee as aforesaid, the Fund is a going concern despite its actuarial shortfall that emanated from unremitted contributions. The Board of Trustees has reasonable expectation that the Fund has and will have adequate resources to continue in operational existence for the foreseeable future.




38

15. ACCOuNTiNG POliCiES

Financial statements have been prepared assuming the going concern status. The Fund intends to continue carrying out its business and is able to do so. The Fund’s accounting policies, which are laid out in Note 6, are subject to an annual review to ensure continuing compliance with laws and the requirements of the international Financial Reporting Standards.

16. CASH FlOW PROJECTiON

The four years cash flow projection based on the current structure of benefits and contributions shows that the benefits payments will be higher than the contribution income for two years. The Fund’s cash projections indicate that future cash flows will mostly be generated from investment activities. Cash generation from investment activities in turn is dependent upon repayments of loan granted to Government’s projects and repayment of actuarial shortfall by the Government.

The future cash flow projections of the Fund will be significantly affected by the timing of remittance of contributions, proceeds from the Government, payments of terminal benefits and payment of pre-retirement loans to members. For the next financial year 2014, these cash movement items are expected to be as follows:

16. CASH FlOW PROJECTiON

30 June 2014 June 2013 TZS’000 TZS ‘00030

a) Contribution remittances 539,184.69 379,450,099 b) Proceeds from repayment of 40,155.87 6,000,000 loans granted to Government c) Proceeds from repayment of 178,130.00 20,000,000 actuarial shortfalls d) Payments of terminal benefits (522,322,380) (572,989,751) e) Payment of loans to members (50,100.00) (31,333,865)

With the increasing actuarial shortfall and the decreasing cash flow trend, an early cash injection by the Government is indispensable to bring the Fund’s financial position to the desired level.

17. TRuSTEES’ REMuNERATiON

Trustees of the Fund are non-executive. The remuneration for services rendered by the Trustees of the Fund duringthe year ended 30 June 2013 includes fees and sitting allowances. Payment of Trustees’ fees was as follows:




39

17. TRuSTEES’ REMuNERATiON (CONTiNuED)

30 June 2014 June 2013 TZS’000 TZS ‘00030

a) trustees Fees Chairperson (1) 4,000 3,000 Other Trustees (7) 36,714 29,857 b) Allowances Chairperson (1) 8,400 8,400 Other Trustees (7) 86,400 67,800

18. FuND’S REMuNERATiON POliCY

The Fund has in place processes and procedures for determining remuneration paid to its key Management Personnel and other employees. Management normally prepares a proposal for emoluments payable to management and employees. This is done after having conducted a market survey to ensure that market-related salaries are paid and that market-related trends are followed in terms of changes in employees’ benefits. Management, at the same time, take intoaccount the intrinsic value of individual contributions into the Fund’s performance. The proposal is then forwarded to Board for consideration and approval.

Trustees’ remunerations are paid after having been approved by the Minister responsible for Finance who receives a proposal from the Fund which is normally prepared after having considered remuneration of trustees in similar entities in the Public Sector and the Fund’s performance.

19. CORPORATE GOVERNANCE

The Fund is committed to the principles of effective corporate governance and the Board is of the opinion that the Fund currently complies with the principles of good Corporate Governance. Good governance requires professionalism, transparency, and accountability. The Fund has put in place internal mechanisms to ensure that this is achieved. These mechanisms include structure and practices of the Board, Management, Employees’ roles and Whistle Blower Policy.

a) The Board of Trustees

The Board is comprised of eight trustees with diverse skills and knowledge all of whom are non-executive. A non-executive Chairman is by law appointed by the President. The other trustees are appointed by the Minister responsible for Finance for tenure of three years renewable. However, the trustees who are appointed by the Minister are representatives of the statutory positions mentioned in the Public Service Retirement Benefits Act No. 2 of 1999.




40

19. CORPORATE GOVERNANCE (CONTiNuED)

a) The Board of Trustees (continued)

The Board have access to outside expertise to minimize the gap between industry developments and best practices relating to its functions.

Director General of the Fund is appointed by the President after receiving recommendations of a suitable candidate from the Board of Trustees. The Director General is the Secretary to the Board. The appointment of Director General is for a period of five years, subject to renewal upon satisfactory performance in the initial period.

The Board meets at least four times a year. During the financial year 2012/13, 12 meetings were held, all of which were geared to enable Trustees to review the operations and results of the Fund and discharge of their fiduciary duties.

The matters specifically reserved to the Board for decision include the approval of the audited financial statements, the Corporate Plan; the Fund’s Annual Plans and Budget; significant capital expenditure; investments in corporate debt and equity instruments; loans; disposal of assets; any significant change in accounting policies or practices; and the appointment of directors and managers.

To advise the Board on policies, investments and administration, the Board has set up three committees. These Committees are: Finance and investments Committee; Staff Welfare, Appointments and Disciplinary Matters and Audit and Risk Management Committee. The Committees scrutinize in depth all major issues which require approval of the Board.

The members of the committees of the Board and the number of meetings held and attended during the year 2012/13 were:

(i) Members of Finance and investments Committee of the Board

Name Status Date of ChairmanshipHon. Frederick M. Werema Member -

Mrs.Edine E. Mangesho Member -

Mr. lila H. Mkila Chairman 1 August 2012 – 14 September

2013

Dr. Jane Madete Member -

Mr. Arthur G.k. Mwakapugi Chairman up to 31 July 2012

Mr. Elias P. M. Mwakibinga Chairman From 15 September 2013

Mr. Ramadhani A. Maneno Member -

Mrs. Elipina E. Mlaki Member -




41



During the financial year 2012/13, the Committee for Finance and investmentsheld five meetings.

During the financial year 2012/13, the Committee received investment proposals from and held discussion with management on the proposals. Also, the Committee reviewed investment progress reports and policies and regulations relating to finance and investments. The Committee reviewed investment recommendations for final review and approval by the Board.

(ii) Members of Staff Welfare, Appointments and Disciplinary Matters Committee of the Board

Name Status Date of ChairmanshipMr. George D. Yambesi Chairman up to 31 July 2012

Mrs.Edine E. Mangesho Member -

Hon. Frederick M. Werema Chairman 1 August 2012– 14 September 2013

Mr. Ally k.A. kiwenge Member -

Mr. Peter A. ilomo Member -

Mr. Clement A. Mswanyama Chairman From 15 September

2013

Mrs.Elipina E. Mlaki Member -

During the year 2012/13, the Committee for Staff Welfare, Appointments and Disciplinary Mattersheld five meetings.

During the financial year 2012/13, the Committee received reports from and held discussion with management on matters relating to staff welfare and disciplinary issues. The Committee reviewed the matters and made recommendations for final review and approval by the Board.




42



(iii) Members of Audit and Risk Management Committee of the Board and their qualifications/occupation are:

Membership

Name Status Date of ChairmanshipMr. lila H. Mkila Chairman up to 31 July 2012

Mr. Arthur G.k. Mwakapugi Member -

Mr. Peter A. ilomo Chairman From 1 August 2012

Mr. Ally k. A. kiwenge Member -

Mr. Peter A. ilomo Member -

Mr. Clement A. Mswanyama Member -

Qualifications/Occupation

Name Qualifications/OccupationMr. lila H. Mkila BA (Economics & Statistics), MBA (Finance)

Mr. Arthur G. k. Mwakapugi BA (Economics), Master of international

Affairs in Economics

Mr. Clement A. Mswanyama Educationist

Mr.Ally k. A. kiwenge Advanced Diploma in Public Administration,

PGD (General Management)

Mr. Peter i. ilomo Economist

The Committee held four meetings during the financial year.

During the financial year 2012/13, the Audit Committee received reports from and held

discussion with management and auditors. in discharging its duties, the Committee

reviewed the financial statements and the quality and acceptability of the related

accounting policies, practices and financial reporting disclosures; reports from internal

and external auditors and the scope of the work of the Fund’s internal Audit Directorate.




43



(iv) Board Meetings Attendance

The following table shows the attendance of Trustees to meetings of the Board and

Audit Committee during the financial year ended 30 June 2013.

Board Staff Finance and Audit welfare investment and Risk Audit Committee Management

Mr. George D. Yambesi 12 - - -

Hon. Frederick M. Werema 6 4 3 -

Mr. Peter i. ilomo 8 4 - 4

Mrs. EdineE. Mangesho 2 - - -

Mr. lila H. Mkila 8 - 4 2

Mr. Adam H. Mayingu 11 4 5 4

Dr. Jane Madete 10 - 5 -

Mr. Ally k.A. kiwenge 11 5 - 4

Mr. Clement A. Mswanyama 10 5 - 4

Mr. Elias P.M Mwakibinga 1 1 2 -

Mr. Arthur G. k. Mwakapugi 1 - - -

Mr. Ramadhani A. Maneno 2 - - -

Mrs. Elipina E. Mlaki 10 2 2 -

b) Management Team

The Board has delegated to management the powers to make decisions on operational matters, including those relating to placement of funds in banks, investments in government debt instruments and investment in listed equities, within the framework of approved Board policies.

The structure of the Fund comprises of the following directorates which are headed by directors who report to the Director General:

• Finance and Administration;

• Operation;




44


b) Management Team (continued)

• Planning and investments;

• information Systems and

• internal Audit. There are five specified units headed by managers and report directly to the

Director General. These are:

• Communication, Marketing and Outreach;

• legal Service unit;

• Procurement Management unit;

• Actuarial Services and Risk Management and

• Fraud and investigation unit.

(i) key Management Personnel of the Fund

The key management personnel who served during the year ended 30 June

2013 were:

Mr. Adam H. Mayingu Acting Director General and Director

of information Systems

Mr. Patrick M. Mongella Director of Operation

Mr. Gabriel J. Silayo Director of Planning and investments

Mr. Masha J. Mshomba Director of Finance and Administration

Mr. Godfrey l. Ngonyani Director of internal Audit

Ms.Hasnakh. Nasoro Acting legal Service Manager

Mr. Abraham P. Siyovelwa legal Service Manager

The management meets to assist the Director General in performing his/

her duties. Management has two (2) committees that help it digest or carry

out some of the activities in line with the instruments that have set out

these committees. These management committees are: Management Audit

Committee and Management investment Committee.




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b) TManagement Team (continued)

(ii) Management Audit Committee

The Management Audit Committee meets every quarter and is composed of

the Director General who is the Chairperson, legal Service Manager who is

the Secretary and Heads of Directorates and units. its responsibility includes

receiving and deliberate on internal and external audit reports and make

decisions aimed at improving performance or enhancing controls.

(iii) Management investment Committee

Management investment Committee meets at least every week and is

composed of the Director General who is the Chairperson, Director of Planning

and investments who is the Secretary, Director of Operation, Director of

information System, Director of Finance and Administration and the legal

Service Manager. The Committee is charged with the responsibility of making

investment decisions on behalf of the Board within the restrictions set out in

the Fund’s investment Policy.

c) Employees and Whistle Blower Policy

Hiring and staffing decisions include assurance that individuals have the

integrity, competence and the proper education and experience to carry out

their jobs and that the necessary formal, on-the-job training is provided.

Staff have a general responsibility for the security of the Fund’s property, for

avoiding loss and for due economy in the use of resources as part of their day

to day duties and responsibilities.

the Fund has a clearly communicated whistle blower policy within its

Financial Regulations which, among other things, requires every employee to

report to his superior, Director responsible for Finance, Director of internal

Audit, any Director or the Director General, any event or action which may

constitute a potential fraud, irregularity and deviation from legal or regulatory

requirements.




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20. MEMBERS AND STAkEHOlDERS RElATiONS

The Fund issues various member guides that help them understand Fund’s services and requirements with respect to registration, benefits offered and qualifying conditions for various benefits. Also, the Fund has a Client Service Charter that enables members and other stakeholders to know Fund’s promises, and their rights as well as obligations in connection with the services and benefits offered by the Fund.

The Fund holds one meeting annually with members and stakeholders to discuss matters relating to governance and performance. The last such meeting was held on 7 and 8 March 2013 and the next meeting is expected to be held on 19 and 20 February 2014. The meetings form important forum to obtain feedback from members and stakeholders which helps to improve performance and good governance. it also helps to build and maintain good relations and maintain an effective communication network with members and other stakeholders of the Fund as part of Fund’s Functions. These stakeholders include employers, employees, suppliers, service providers, consultants, contractors and regulatory authorities.

21. iNDuCTiON AND TRAiNiNG

Appropriate training is provided to the Trustees, Management and employees of the Fund in accordance with the result of needs assessment.

in particular, Trustees attended training in the areas relating to management of pension funds, investments and risk management. The key objective of conducting trainings to trustees is for the Fund to obtain the services of the Trustees who are both competent and independent-minded.

The Board believes that the improved performance and governance process is a direct result of the training which the Trustees, Management and Employees are exposed to. As a result of the exposure, for example, the Fund has reviewed its risk management practices through reviewing the Risk Management Framework, Policy and Plan.

22. ADMiNiSTRATiVE EFFiCiENCY

The Fund has not borrowed funds and consequently no interest charges have accrued against the Fund. All statutory payments such as Pay As You Earn (PAYE), pension contributions and other statutory deductions from fees, and other services were remitted promptly to the relevant tax authorities.

All properties of the Fund have requisite certificates of ownership and are adequately insured. No significant loss of assets was sustained during the year under review. The existing management systems were invariably complied with. This has resulted in smooth operations of the Fund.




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22. ADMiNiSTRATiVE EFFiCiENCY (CONTiNuED)

The Board is mindful of the limitations of the resources available to the Fund and works hard to minimise administrative and compliance cost of performing Fund’s functions. The Board will continue to effectively manage resources within these resource

limitations.

23. RiSk MANAGEMENT

a) scope

The main risks that the Fund is exposed to are financial risks which include solvency, credit, liquidity and market risks; operational risks which is the risk of loss resulting from inadequate or failed internal processes, people and systems; and other risks which include reputation, compliance, legal and regulatory risks. The Board is responsible for managing these risks in order to minimise pension cost to contributors and avoid possibility that the assets will be insufficient to pay benefits.

The Fund evaluates risks in an unbiased way. it consciously takes the appropriate amount of risks and manages these risks competently to seize related opportunities. Risk taking is core to Fund’s innovation capacity and its entrepreneurial success in the investments arena.

Risk Management is an integral part of the Fund’s business practice at all levels of the Fund. The Fund identify, analyse and evaluate risks and make appropriate response, track and report risks to provide assurance regarding the achievement of objectives.

b) Responsibilities

To achieve this objective, the Board has approved a Risk Management Framework that sets out the foundations (Risk Management Policy, objectives, mandate and commitment) and organizational arrangements (plans, relationships, accountabilities, resources, processes, and activities) for risk management practices. The guidelines contained in these documents are the basis of risk management practices within the Fund.

The Board has also reviewed and approved various policies, regulations, rules and procedures which guide and control the operations. These include investment Policy, Training Policy, Staff Regulations, Financial Regulations, internal Audit Charter, internal Audit Manual, and iCT Policy.

At management level, Risk Management in the Fund is a responsibility of each directorate and unit. All directorates and units take accountability for the material completeness of the risk identification, the material correctness of their risk analysis, as well as for the timeliness and appropriateness of their risk decisions at individual or aggregate level. Directorates and units are also responsible for the implementation of their decisions as well as tracking of risks and their reporting.

Risk Management Function in the Fund is under the Actuarial Service and Risk Management unit which is responsible for the necessary alignment, co-ordination and development of the Fund’s Risk Management practices. it maintains guidelines to ensure common terminology, aligned processes and minimal standards.




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23. RiSk MANAGEMENT (CONTiNuED)

b) Responsibilities (continued)

The internal Audit directorate performs the Risk Management reviews and report to the Board in accordance with the Fund’s internal Audit Charter. in the course of carrying out its review work, internal Audit Directorate gets feedback from risk function (the Actuarial Service and Risk Management unit) on critical areas to focus on. The Board constantly fine-tunes the risk management guidelines based on audit feedback.

c) Compliance with the legal and Regulatory Requirements

Compliance with the legal and regulatory requirements is the core of risk management practices. For the period under review, the activities of the Fund were in compliance with the legal and regulatory requirements and the Trustees are unaware any non-compliance to the laws and regulations. The Board is set out to support the designated compliance officers so that the compliance is sustained.

d) Reporting and Disclosures

Risk information goes to the Board and includes information on assessment of the Risk Management environment, along with proposed or action taken. The Director General ensures that the Board Committee responsible for risk management is regularly informed on risk management issues.

The Board is pleased to report that in the financial year 2012/13, there were no incidents of material fraud or loss of assets.

24. RElATED PARTY TRANSACTiONS AND BAlANCES

Related parties comprise the Trustees, the participating entities, and entities which are related to these parties through common shareholdings or common trusteeships.

Other than contributions as shown in Note 9 and the transactions disclosed in Note 37, there are no other transactions made to related parties.

25. GENDER PARiTY

The Fund is an equal opportunity employer. it gives equal access to employment opportunities and ensures that the best available person is appointed to any given position free from discrimination of any kind and without regard to factors like gender, marital status, tribes, religion and disability which does not impair ability to discharge duties. As at 30 June 2013, the Fund had 185 (30 June 2012: 140 employees), of which 102 or 56% were male and 82 or 44% were female.




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26. EMPlOYEE WElFARE

A healthy relationship continues to exist between management and the trade union (TuGHE). Management liaise and communicate with the TuGHE, for inputs, on matters relating to the Fund’s operations and its employees. Such matters include but not limited to, long and short term plans, budgetary allocations and operational efficiency.

A voluntary agreement between Management and TuGHE which established a Workers’ Council forum was signed on 23 September 2011 and will expire 22 September 2014. Through Workers’ Council, regular meetings with employees’ representatives are held to discuss matters as aforesaid as part of employees involvement in the Fund’s decision making process. These meetings provide important forums for employees to provide inputs into Fund’s performance and employees’ welfare and form important ingredients into management decision making process.

Management intends to sign another such agreement with TuGHE upon expiry of the existing agreement. During the year ending 30 June 2013, there were no unresolved complaints, grievances or disputes received by management from the employees or TuGHE.

a) Employee Benefit Plan

The Fund pays contributions to mandatory pension funds of an employee’s choice in respect of employees’ retirement benefits. At the moment the Fund pays pension contributions to the Public Service Pensions Fund (PSPF), National Social Security Fund (NSSF), PPF Pensions Fund (PPF) and the Government Employees Provident Fund (GEPF). in the year ending 30 June 2013, a total of TZS 908,438 was paid as retirement contributions (30 June 2012: TZS 706,400).

b) Training

in the year ending 30 June 2013, employees were trained in accordance with the training programme with a view to equipping them with the necessary skills, knowledge and attitude required to meet the Fund’s needs in relation to its objectives.

During the year, 180 employees attended 24 different training, seminars, and conferences so as to build their capacity and increase their calibre.

The Fund spent a sum of TZS 1,206 million for staff training (30 June 2012: TZS 1,017 million). Programs have been, and continue to be, developed to ensure that employees are adequately trained at all levels.

c) Medical benefit

All employees and their dependants up to the maximum of four dependants for each employee were availed medical insurance guaranteed by the Fund. The Fund contracted a Health insurance Service provider, which at the moment is AAR Health Services limited, for medical services to staff.




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26. EMPlOYEE WElFARE (CONTiNuED)

b) Medical benefit (continued)

All employees and their dependants up to the maximum of four dependants for each employee were availed medical insurance guaranteed by the Fund. The Fund contracted a Health insurance Service provider, which at the moment is AAR Health Services limited, for medical services to staff. The medical treatment is provided within the country but the insurance services cover medical treatment outside the country when an employee becomes sick while abroad or where in the opinion of the medical practitioner and the insurer, a required medical service is unavailable in the country. The medical services provided by the Fund through the insurer presents acceptable services to employees at all levels.

in the year ending 30 June 2013, a total of TZS 340.2 million was paid as medical insurance premium (30 June 2012: 341.5 million)

c) Health and safety

in order to ensure awareness of HiV/AiDS pandemic to staff, the Fund embarked on the HiV/AiDS intervention program at the workplace. Through this programme, the Fund managed to sensitize its employees on the pandemic and the Fund is expecting to minimise new infections among employees and accord care and support to employees who are already infected with the virus.

The Board ensures that working environment is safe in many respects including ventilation, lighting, cleanness, availability of working fire extinguishers, communicated escape routes and acceptable working tools including fixtures and furniture.

The Board provides opportunity through the Health insurance Services provider for employees to make medical check-up at least semi-annually in line with the requirement of Occupational Health and Safety Act of 2003.

d) Persons with Disabilities

The Fund’s accepts disabled persons for employment for those vacancies that they are able to fill. Opportunities for advancement are provided to each disabled person when a suitable vacancy arises within the organisation and all necessary assistance is given with initial training. Where an employee becomes disabled during the course of his or her employment, the Fund will seek to provide suitable alternative employment and any training as necessary.




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27. POliTiCAl AND CHARiTABlE DONATiONS

The Fund did not make any political donations during the year. The Fund continued to support Tanzanian society through its Corporate Social Responsibility programs. During the year donations and investment in Corporate Social Responsibility programs amounted to TZS 311.2 million (30 June 2012: TZS 210.9 million). These interventions were in the areas of health, education, sports and community development and resources used for corporate social intervention were as follows:

27. POliTiCAl AND CHARiTABlE DONATiONS (CONTiNuED)

2013 2012 TZS 000 TZS 000

Education 8,500 51,618

Health 113,344 22,500

Sports 33,692 28,500

Community development 155,704 108,282

311,240 210,900

28. SERiOuS PREJuDiCiAl MATTERS

The Fund has three litigations in the court. These litigations are in relation to the disputes emanating from tenancy agreement, amount of benefits paid to a retiree and Board’s decision regarding staff disciplinary matter. in the opinion of the Trustees, there are no serious unfavourable matters that can affect the Fund.

29. STATEMENT OF COMPliANCE

The Trustees’ report has been prepared in full compliance with Tanzania Financial Reporting Standard No. 1 (Directors’ Report) and constitutes an integral part of the financial statements.

30. AuDiTORS

Controller and Auditor General is the statutory auditor of the Fund by virtue of article 143 of the constitution of the united Republic of Tanzania, amplified in Public Audit Act No.11 of 2008. However, in accordance with section 33 of Public Audit Act, Deloitte &Touché were authorized to carry out the audit of the Fund on behalf of the Controller and Auditor General.

FOR THE BOARD OF TRuSTEES

30/12/13 Goerge D. Yembesi CHAiRMAN




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The Public Service Retirement Benefits Act No. 2 of 1999 requires the Trustees to prepare financial statements for each financial year which give a true and fair view of the Fund’s financial affairs as at the end of the year and of the operating results of the Fund for the year. 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 the safeguarding the assets of the Fund.

The Trustees are responsiblefor the preparation and fair presentation of the financial statements in accordance with international Financial Reporting Standards and the requirements of Public Service Retirement Benefits Act No. 2 of 1999 and for such internal controls as Trustees determine are necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.

The Trustees accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with international Financial Reporting Standards and the requirements of Public Service Retirement Benefits Act No. 2 of 1999. 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 system of internal financial control.

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

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

FOR THE BOARD OF TRuSTEES

30/12/13Goerge D. Yembesi CHAiRMAN

STATEMENT OF BOARD OF TRuSTEES’ RESPONSiBiliTiESfor the year ended 30 June 2013



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To:

MR. GeORGe D. YAMBeSiChairman to the Board of TrusteesPublic Service Pensions Fund13th Floor, Golden Jubilee Towers, Front TowerOhio Street, 11101 KivukoniP.O. Box 4843Dar es Salaam

RePORT OF THe CONTROLLeR AND AuDiTOR GeNeRAL ON THe FiNANCiAL STATeMeNTS OF PuBLiC SeRviCe PeNSiONS FuND FOR THe YeAR eNDeD 30 June 2013

i have audited the accompanying financial statements of the Public Service Pensions Fund(PSPF) which comprise the statement of net assets value available for benefits as at 30 June2013,statement of changes in net assetsvalue available for benefits, 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 37to 81of the report.

Trustees’ Responsibility for the financial statement

The Trustees are responsible for the preparation and fair presentation of the financial statements in accordance with internationalFinancial Reporting Standards and the requirements of Public Service Retirement Benefits Act No. 2 of 1999 and for such internal controls as Trustees determine are necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.

Responsibilities of the Controller and Auditor General

My responsibility as an auditor is to express an independent opinion on the financial statements based on the audit. The audit conducted in accordance with international Standards on Auditing, international Standardsof Supreme Audit institutions and such other audit procedures i considered necessary in the circumstances. These standards require that i comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making the risk assessments, i considered the internal control relevant to the Fund’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control.

AuDiT REPORT ON THE FiNANCiAl STATEMENTSfor the year ended 30 June 2013 (continued)



54

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

in addition, Sect 10(2) of the Public Audit Act 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.

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.

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

Unqualified Opinion

in my opinion, the financial statements give a true and fair view of the state of affairs of the Fund as at 30 June2013 and of the disposition at that date of its assets and liabilities, other than liability to pay pensions and benefits falling due after the end of the year in accordance with theinternational Financial Reporting Standards and the requirements of the Public Service Retirement Benefit Act No. 2 of 1999.

Emphasis of matter

Without qualifying my opinion, i draw attention to Note 2 to the financial statements which indicates that based on Actuarial Valuation carried out in 2010, the Fund has actuarial deficit of TZS 6.49 trillion. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that may cast significant doubt about the Fund’s ability to continue as a going concern.

i draw attention to Note 22 to the financial statements, the Fund has recognized TZS 107,843,083,000 used to finance the construction of the College of Education of The university of Dodoma as a loan which is contrary to the contract terms which states that the project is in the form of Design, Build, Own and Transfer the building where by the Fund will in turn receive rent calculated on the basis of cost of investment and interest on investment i.e. 15% over a period of 10 years.




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

ludovick S.l. utouhCONTROllER AND AuDiTOR GENERAl

National Audit Office,Dar es Salaam, Tanzania30th December 2013




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STATEMENT OF CHANGES iN NET ASSET AVAilABlE FOR BENEFiTSfor the year ended 30 June 2013

Notes 2013 2012CONTRiBuTiON AND BeNeFiTS TZS ‘000 TZS ‘000

Contributions 9 516,542,678 444,099,420

Benefit expenses 10 (543,711,973) (355,980,302)

Net(deficit)/surplusfromdealingwithmembers (27,169,295) 88,119,118

ReTuRNS ON iNveSTMeNTS

investment income 11 167,039,376 79,166,638

investment expenses 14 (121,565) (38,580)

impairment release on loan investments 22 3,997,127 160,000

Change in fair value on investments 20 33,774,833 10,093,704

Net return on investments 204,689,771 89,381,762

Other income 12 13,465,511 3,051,739

Administration expenses 13 (26,096,861) (18,770,112)

increase in net assets for the year 164,889,126 161,782,507



57

STATEMENT OF NET ASSET AVAilABlE FOR BENEFiTSas at 30 June 2013

Notes 2013 2012 TZS ’000 TZS ’000

ASSeTS

Property and equipment 15 22,145,880 23,055,047

intangible assets 16 326,462 147,438

Prepaid operating lease 17 6,827,405 5,173,031

investment property 18 152,887,898 112,630,235

inventories 19 29,042,808 22,534,838

Quoted equities 20 101,268,423 74,673,591

unquoted equities 21 60,361,015 60,361,015

loan investments 22 466,905,293 343,579,444

Contributions receivable 23 256,171,957 139,079,377

Other receivables 24 64,286,168 65,731,149

Government securities held-to-maturity 25 130,939,789 122,865,841

Corporate bonds held-to-maturity 26 7,476,770 8,377,341

Deposits with financial institutions 27 51,560,694 192,050,557

Cash at bank 28 5,498,538 51,135,960

TOTAL ASSeTS 1,355,699,100 1,221,394,864

LiABiLiTieS

Benefits payable 30 52,733,039 81,509,546

Other payables and accrued expenses 31 9,349,952 9,282,130

Overdrawn bank balance 28 42,447,276 44,323,481

TOTAL LiABiLiTieS 104,530,267 135,115,157

NeT ASSeT AvAiLABLe FOR BeNeFiTS 32 1,251,168,833 1,086,279,707

The financial statements on page 34 to 81 were authorized and approved for issue by the

board of Trustees on 30 /12/2013 and signed on their behalf by:

Goerge D. Yembesi CHAiRMAN



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Notes 2013 2012

TZS’000 TZS’000

Cashflowsfromoperatingactivities

Contributions received 33 399,450,099 388,079,341

Other income 11,622,916 2,402,194

Benefits paid 34 (572,989,751) (349,295,733)

Payment for administrative expenses (8,332,615) (34,567,431)

Net cash (used in) / generated from (170,249,351) 6,618,371

operating activities

Cash flows from investing activities

Purchase of property and equipment 15 (247,637) (667,852)

Proceeds from disposal of property and equipment 6,057 41,693

Purchase of intangible assets 16 (261,294) (34,025)

Receipt from investment income 122,429,898 54,187,569

Net movement on investments - quoted equities 8,207,588 (2,007,236)

Decrease /(increase) in government securities 11,409,060 (1,138,439)

issue of long term loan (87,065,849) (21,883,326)

Decrease in fixed deposits 44,000,000 85,000,000

increase in inventory (6,336,870) (17,358,081)

Net payment to acquire investment property (36,135,229) (28,274,402)

Net cash generated from/(used in) investing activities 56,005,724 67,865,901

(Decrease) / increase in cash and cash equivalents (114,243,627) 74,484,272

Cash and cash equivalents at start of the year 150,812,479 76,328,207

Cash and cash equivalents at end of the year 28 36,568,852 150,812,479

STATEMENT OF CASHFlOWSfor the year ended 30 June 2013



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NOTES TO THE FiNANCiAl STATEMENTSfor the year ended 30 June 2013

1. REPORTiNG ENTiTY

the Public service Pensions Fund is a social security institution established by the Public Service Retirement Benefits Act No. 2 of 1999. The main purpose is to provide for collection of contributions and payment of terminal benefits to members. The Fund is operated under two different schemes. These are: PSPF Mandatory Scheme and PSPF Supplementary Scheme of which membership is voluntary.

Details on membership are as included in the Report of the Board of Trustees. 2. SOlVENCY OF THE FuND

The effective commencement date of the Fund was 1 July 1999. However, under the Transitional Provisions of the Act, the Fund was given a grace period of five years. Consequently, all benefits falling due during the 5 year transitional period from 1 July 1999 to 30 June 2004 were paid by the Ministry of Finance from the Consolidated Fund. No benefits were paid from the Fund during the transitional period. The payments of benefits under the provisions of the Act effectively commenced from 1 July 2004. The benefits accruing prior to 1 July 1999 for the Fund’s current in-service members are to be met by the Fund but require explicit funding from the Government of Tanzania.

Based on the last actuarial valuation report, that was completed as at 30 June 2010 by Genesis Actuarial Solutions limited, an independent firm of actuaries, the financial position of the Fund has deteriorated over the three years period since the previous actuarial valuation. The valuation revealed an actuarial deficit of TZS 6,487,131 million as at 30 June 2010.

The actuarial present value of promised retirement benefits is as follows:

2010 2007 TZS Million TZS Million Accrued liabilities Value of accrued liabilities in respect of post 1 July 1999 service 3,180,821 1,120,628 Assets Value placed on Fund assets as at 30 June 732,382 492,385 Actuarial shortfall Excess of accrued liabilities over assets (2,448,439) (628,243) Value of accrued liabilities in respect of pre 1 July 1999 service 4,038,692 2,254,067

As stated under Trustees’ report, the effective commencement date of the Fund was

1 July 1999



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2. SOlVENCY OF THE FuND (CONTiNuED)

The payments of benefits under the provisions of the Act effectively commenced from 1 July 2004. The benefits accruing prior to 1 July 1999 for the Fund’s current in-service members are met by the Fund but require explicit funding from the Government of Tanzania. The actuarial shortfall is attributed by the unfunded contributions relating to the service prior to 1st July 1999.

The financial assumptions that were used in the actuarial valuation are set out below:

Summary of core actuarial basis for 2010 valuation

Discount rate 8.0% per annum

Earnings growth 7.5% per annum

Pension increases 0.00 per annum

inflation rate 6.50 per annum No allowance has been made for any increase to pensions on the basis that no provision

is made for explicit pension increases in the Public Services Retirement Benefit Act No. 2 of 1999.

The principal demographic assumption on mortality is based on standard tables. in-service employees’ mortality is based on the A49/52 ultimate Table of assured lives published by the institute and Faculty of Actuaries. in-retirement mortality is based on the A(55) Mortality Tables for Annuitants published by the institute and Faculty of Actuaries.

3. STATEMENT OF COMPliANCE

The financial statements have been prepared in accordance with iFRS and the requirements of the Public Service Retirement Benefit Act No 2 of 1999. Additional information required by regulatory bodies is included where appropriate.

4. BASiS OF PREPATiON

The financial statements summarise the transactions of the Fund and deal with the net assets at the disposal of the Trustees. They do not take account of obligations to pay pensions and benefits that fall due after the end of the year. The actuarial position of the Fund, which sets out these obligations, is set out in Note 2 to the financial statements.

The financial statements are presented in Tanzania Shillings (TZS), rounded to the nearest thousand, and prepared under the historical cost basis, except where otherwise stated in the accounting policies set forth in Note 6.

NOTES TO THE FiNANCiAl STATEMENTSfor the year ended 30 June 2013 (continued



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4. BASiS OF PREPATiON (CONTiNuED)

The preparation of financial statements in conformity with iFRS requires the use of certain critical accounting estimates. it also requires management to exercise its judgement in the process of applying the Fund’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 7.

5. ADOPTiON OF NEW AND REViSED iNTERNATiONAl FiNANCiAl REPORTiNG STANDARDS

a) Amendments to published standards effective for the year ended 30 June 2013

The following amendments to iFRSs have been applied in the current year and have had no material impact on the amounts and/or disclosures reported in these financial statements.

Amendments to iFRS 7 Disclosure - Transfer of Financial Assets

The amendments to iFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures of transactions where a financial asset is transferred but the transferor retains some level of continuing exposure in the asset.

The application of the amendment had no effect on the Fund’s financial statements as the Fund did not transfer any such financial assets during the year.

Amendments to iAS 1 Presentation of items of Other Comprehensive income The amendments to iAS 1 introduce new terminology for the statement of

comprehensive income and income statement. under the amendments to iAS 1, the ‘statement of comprehensive income’ is renamed the ‘statement of profit or loss and other comprehensive income’ and the ‘income statement’ is renamed the ‘statement of profit or loss’. The amendments to iAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to iAS 1 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met.

Other than the above mentioned presentation changes, the application of the amendments to iAS 1 has not resulted into any impact on profit or loss, other comprehensive income and total comprehensive income.

NOTES TO THE FiNANCiAl STATEMENTSfor the year ended 30 June 2013 (continued)



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5. ADOPTiON OF NEW AND REViSED iNTERNATiONAl FiNANCiAl REPORTiNG STANDARDS (continued)

b) New and amended standards and interpretations in issue but not yet effective in the year ended 30 June 2013

The Fund has not applied the following new and revised iFRSs that have been issued but are not yet effective:

Effective for annual periods beginning on or after

New and Amendments to standards iFRS 9, Financial instruments 1 January 2015 iFRS 10, Consolidated Financial Statements 1 January 2013 iFRS 11, Joint Arrangements 1 January 2013 iFRS 12, Disclosure of interests in Other Entities 1 January 2013 iFRS 13, Fair Value Measurement 1 January 2013 Amendments to iFRS 7 Disclosures - Offsetting Financial Assets and Financial liabilities 1 January 2013 Amendments to iFRS 9 and iFRS 7 Mandatory Effective Date of iFRS 9 and Transition Disclosures 1 January 2015 Amendments to iFRS 10, iFRS 11 and iFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of interests in Other Entities: Transition Guidance 1 January 2013 iAS 19, Employee Benefits (as revised in 2011) 1 January 2013 iAS 27, Separate Financial Statements (as revised in 2011) 1 January 2013 iAS 28, investments in Associates and Joint Ventures (as revised in 2011) 1 January 2013 Amendments to iAS 32 Offsetting Financial Assets and Financial liabilities 1 January 2014 Annual improvements to iFRSs 2009-2011 Cycle 1 January 2013

iFRS 9 Financial instruments

iFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. iFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for de-recognition.




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b) New and amended standards and interpretations in issue but not yet effective in the year ended 30 June 2013 (continues)

Key requirements of iFRS 9:

• All recognised financial assets that are within the scope of iAS 39 Financial instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. in addition, under iFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, iFRS 9 requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under iAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

The directors anticipate that iFRS 9 will be adopted in the Fund’s financial statements for the annual period beginning 1 January 2015 and that the application of iFRS 9 may have a significant impact on amounts reported in respect of the Fund’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review is done.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

in May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including iFRS 10, iFRS 11, iFRS 12, iAS 27 (as revised in 2011) and iAS 28 (as revised in 2011).




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key requirements of these five Standards are described below.

iFRS 10 replaces the parts of iAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SiC-12 Consolidation – Special Purpose Entities will be withdrawn upon the effective date of iFRS 10. under iFRS 10, there is only one basis for consolidation, that is, control. in addition, iFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in iFRS 10 to deal with complex scenarios.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

iFRS 11 replaces iAS 31 interests in Joint Ventures. iFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. SiC-13 Jointly Controlled Entities – Non-monetary Contributions by Venturers will be withdrawn upon the effective date of iFRS 11. under iFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. in contrast, under iAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. in addition, joint ventures under iFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under iAS 31 can be accounted for using the equity method of accounting or proportional consolidation.

iFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. in general, the disclosure requirements in iFRS 12 are more extensive than those in the current standards.

in June 2012, the amendments to iFRS 10, iFRS 11 and iFRS 12 were issued to clarify certain transitional guidance on the application of these iFRSs for the first time.

These five standards together with the amendments regarding the transition guidance are effective for annual periods beginning on or after 1 January 2013, with earlier application permitted provided all of these standards are applied at the same time.




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The Fund will apply these amendments prospectively. The directors anticipate that the application of iFRS 10 and iFRS 11 will have no material impact to the Fund’s financial statements currently. However, the Fund would have to apply this standard to any such arrangements entered in the course of its expansion strategy. The directors anticipate that the application of iFRS 12 would result in more extensive disclosures in the financial statements.

iFRS 13 Fair value Measurement

iFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of iFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other iFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. in general, the disclosure requirements in iFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under iFRS 7 Financial instruments: Disclosures will be extended by iFRS 13 to cover all assets and liabilities within its scope.

iFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements, however, the Fund is yet to assess iFRS 13’s full impact and intends to adopt the standard no later than the accounting period beginning on or after 1 January 2013.

Amendments to iFRS 7 and iAS 32 Offsetting Financial Assets and Financial Liabilities and the related disclosures

The amendments to iAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’.

The amendments to iFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial

instruments under an enforceable master netting agreement or similar arrangement.




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b) New and amended standards and interpretations in issue but not yet effective in

the year ended 30 June 2013 (continues) The amendments to iFRS 7 are effective for annual periods beginning on or after 1

January 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the amendments to iAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

The directors anticipate that the application of these amendments to iAS 32 and iFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.

IAS19EmployeeBenefits

The amendments to iAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of iAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of iAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.

The amendments to iAS 19 require retrospective application.

The directors anticipate that the amendments to iAS 19 will be adopted in the Fund’s financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to iAS 19 will not have an impact on the financial statements because the Fund does not have defined benefit plans.

Annual improvements to iFRSs 2009 – 2011 Cycle issued in May 2012

The Annual improvements to iFRSs 2009 – 2011 Cycle include a number of amendments to various iFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to iFRSs include:

• amendments to iAS 1 Presentation of Financial Statements;• amendments to iAS 16 Property, Plant and Equipment; and• amendments to iAS 32 Financial instruments: Presentation.




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iAS 1 Presentation of Financial Statements

The amendments to iAS 1 clarify that an entity is required to present a statement of financial position as at the beginning of the preceding period (third statement of financial position) only when the retrospective application of an accounting policy, restatement or reclassification has a material effect on the information in the third statement of financial position and that the related notes are not required to Fund the third statement of financial position.

The amendments also clarify that additional comparative information is not necessary for periods beyond the minimum comparative financial statement requirements of iAS 1. However, if additional comparative information is provided, the information should be presented in accordance with iFRSs, including related note disclosure of comparative information for any additional statements included beyond the minimum comparative financial statement requirements. Presenting additional comparative information voluntarily would not trigger a requirement to provide a complete set of financial statements.

The directors anticipate that the amendments to iAS 1 will result in the Fund presenting a statement of financial position at the beginning of the preceding period (third statement of financial position) only when the restatement or reclassification has a material effect on the information in the financial statements.

iAS 16 Property, Plant and Equipment

The amendments to iAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in iAS 16 and as inventory otherwise.

The directors do not anticipate that the amendments to iAS 16 will have a significant effect on the Fund’s financial statements.

iAS 32 Financial instruments: Presentation

The amendments to iAS 32 clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with iAS 12 income Taxes.

The directors anticipate that the amendments to iAS 32 will have no effect on the Fund’s financial statements as the Fund has already adopted this treatment.




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c) Early adoption of standards

The Fund did not early adopt any new or amended standards during the year ended 30 June 2013.

6. 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.

(a) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the revenue can be reliably measured, regardless of when payment is made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding, where applicable, discounts, rebates and Value Added Tax.

(i) Contributions

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

(ii) Interest income

For all financial instruments measured at amortised cost and interest-bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EiR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. interest income is included in investment income in the statement of changes in net assets.

(iii) Dividend income

Dividend income is recognised when the Fund’s right to receive payment is established.




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6. SiGNiFiCANT ACCOuNTiNG POliCiES (continued)

(iv) Penalty income

Where an employer fails to remit to the Fund the whole or any part of the contributions required to be remitted within 30 days after the end of the month to which the contributions relate, a penalty of 5 % of the unremitted amount is levied for every month or part of the month delayed. Penalty income is recognised on accrual basis based on delayed contributions which have been received.

(v) Rent income

Rent income is measured at the fair value of the consideration received or receivable and represents amounts receivable for occupying the Fund’s investment property in the normal course of business, net of discounts and related value added taxes. Rent income is recognized on straight line basis over the lease term.

(vi) Other Income

Other income is recognised when the Fund’s right to receive payment is established.

(b) Benefits payable

Pensions and other benefits payable are taken into account in the period in which they fall due.

(c) Translation of foreign currencies

The Fund’s financial statements are presented in Tanzanian Shillings (TZS), which is also the Fund’s functional and presentation currency.

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 recognised in the statement of changes in net assets available for benefits in the period in which they arise.




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(d) Property and equipment

Property and equipment is stated at historical cost less accumulated depreciation and accumulated losses, if any. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Fund and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of changes in net assets available for benefit during the period in which they are incurred.

Depreciation is calculated using the straight line method to write down the cost of asset to their residual values over their estimated useful lives, as follows:

Buildings 2%

Furniture and fittings 20%

Machines and equipment 20%

Computer hardware 25%

Motor vehicles 25%

The estimated assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of the asset.

Gains and losses on disposal of property and equipment are determined by reference to their carrying amounts and are taken into account in determining operating surplus/deficit.

(e) Work in progress

Construction in progress includes accumulated cost of buildings which is under construction or for which cost has been incurred, but which is not yet ready for use by the Fund. it also includes cost incurred for assets being constructed by third parties, assets which have not been delivered to, or installed in, the facility and assets which cannot be used until certain other assets are acquired and installed. Where there is a significant interval between the time at which cost is incurred in connection with the acquisition of an asset and when the asset will be ready for use, the cost is accumulated in work in progress. Construction in progress is not depreciated, since by the definition it is not yet ready for use. At the time the asset is ready for use, the accumulated cost is to be transferred to the appropriate category and depreciation starts.




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(e) Work in progress

An item of work in progress is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from de recognition of the Work in Progress (calculated as the difference between the net disposal proceeds and the carrying amount) is included in the statement of changes in net assets in the year the Work in Progress is derecognized.

(f) intangible assets

Acquired computer software are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected on the Statement of Changes in Net Assets in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that an intangible asset may be impaired. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Changes in Net Assets in the expense category consistent with the function of the intangible assets.

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the intangible asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

These costs are amortised over their useful lives. The annual rate used is 25% per annum.

(g) inventories

inventory constitutes low cost houses constructed for sale to members and the general public. Other stock and store items do not accumulate in inventory as they are ordered when required for use. Cost of low cost hoses is recognized as construction cost and included in the Work in Progress. Other stock and store items, if any, are valued at the lower of cost and net realisable value. Cost of other stock and store items are recognized as expense in the Statement of Changes in Net Assets.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.




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(h) leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

• Fund as a lessee

Operating lease payments are recognised as an operating expense in the statement of changes in net assets on a straight line basis over the lease term.

Finance leases which transfer to the Fund substantially all the risks and benefits incidental to ownership of the leased item are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. lease payments are apportioned between finance charges and reduction of the lease liability in order to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the statement of changes in net assets.

A leased asset is depreciated over the useful life of the asset. if, however, there is no reasonable certainty that the Fund will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

• leasehold land

Payments to acquire leasehold interest in land are treated as prepaid operating leases. No amortisation is charged for land or land improvements as land is considered to have an unlimited useful life and its salvage value is unlikely to be less than its acquisition cost.

• Fund as a lessor

leases in which the Fund does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.




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(i) investment property

investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes). investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflect market conditions at the balance sheet date. in order to ascertain the fair value, investment properties are revalued after every three years. 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.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of changes in net assets in the period in which the property is derecognised.

Transfers are made to or from investment property when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. if owner occupied property becomes an investment property, the Fund accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use.

(j) investment in associate

The Fund’s investment in its associate is accounted using the equity method. An associate is an entity in which the Fund has significant influence. under the equity method, the investment in the associate is carried in the statement of net assets available for benefit at cost plus post acquisition changes in the Fund’s share of net assets of the associate.

The statement of changes in net assets reflects the share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the Fund recognises its share of any changes and discloses this, when applicable.

unrealised gains and losses resulting from transactions between the Fund and the associate are eliminated to the extent of the interest in the associate. The share of profit of an associate is shown on the face of the statement of changes in net assets.

This is the profit attributable to equity holders of the associate and therefore is profit after tax and non-controlling interests in the subsidiaries of the associate.




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(j) investment in associate (continued)

After application of the equity method, the Fund determines whether it is necessary to recognise an impairment loss on the Fund’s investment in its associate. The Fund determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. if this is the case, the Fund calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the ‘share of profit of an associate’ in the statement of changes in net assets.

upon loss of significant influence over the associate, the Fund measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in the statement of changes in

net assets.

(k) impairment of tangible and intangible assets

The Fund assesses at each reporting date whether there is an indication that an asset may be impaired. if any indication exists, or when annual impairment testing for an asset is required, the Fund estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

in assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. in determining fair value less costs to sell, recent market transactions are taken into account, if available. if no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

impairment losses of continuing operations, including impairment on inventories, are recognised in statement of changes in net assets in those expense categories consistent with the function of the impaired asset, An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. if such indication exists, the Fund estimates the asset’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised.




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6. SiGNiFiCANT ACCOuNTiNG POliCiES (CONTiNuED)

(k) impairment of tangible and intangible assets (continued) The reversal is limited so that the carrying amount of the asset does not exceed

its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of changes in net assets unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

(l) Cash and cash equivalents

Cash and cash equivalents in the statement of net assets available for benefits comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the statement of cash flows, cash and cash equivalents consist of

cash and short-term deposits as defined above, net of outstanding bank overdrafts. Cash and cash equivalents are carried at amortised cost in the statement of net assets available for benefits.

(m) Employees benefits

Employee benefits include short-term benefits (for example, wages and salaries, annual leave), post-employment benefits such as retirement benefits, other long-term benefits (for example, long service leave) and termination benefits.

• Short-term in service entitlements

Cost of providing employee wages, salaries and other allowances is recognised in the period in which the benefit is earned by the employee. The estimated monetary liability for employees accrued leave entitlement as at the date of the statement of net assets available for benefits is recognised as an expense accrual. Provision is made for the estimated liability in respect of annual leave accrued on reporting date.

• Post-employment benefits

As part of post-employment benefits to employees, the Fund makes retirement contribution to one of the mandatory pension schemes of an employee’s choice. All of the Fund’s employees are members of the Public Service Pensions Fund (PSPF), National Social Security Fund (NSSF), the PPF Pensions Fund (PPF), or Government Employees Provident Fund (GEPF). While GEPF operate under defined contribution arrangement, all other schemes are defined benefit plans. These plans are prescribed by laws.




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(m) Employees benefits (continued)

Both the Fund and the employees contribute 10% of the employees’ gross salaries to the PPF. To PSPF, the Fund and employees contribute respectively 15% and 5% of the employees’ basic salaries. For the GEPF, the Fund contributes 15% and the employee contributes 5%. The contribution is charged to the Statement of changes in net assets when incurred.

under the laws establishing the plans, the sponsor of all mandatory schemes is the Government of the united Republic of Tanzania. Thus, the Fund does not have any legal or constructive obligation to pay further contribution to the defined benefit plans or any of the mandatory plans if the plans do not hold sufficient assets to pay benefits relating to employee service in the current and prior period.

• Termination benefits

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

• Other long term benefits

Other long term benefits are recognised as expenses on accrual basis.

(n) Provisions

Provisions are recognised when the Fund has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Fund expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in statement of changes in net assets net of any reimbursement.

(o) taxation

The Fund is tax exempt under section 47 of the Public Service Retirement Benefits Act No 3 of 1999 (as amended). Thus, provision for deferred tax is not applicable. Nonetheless, the Fund collects Value Added Tax on behalf of the Tax Authority and recovers Value Added Tax from the Tax Authority.

With respect to the Value Added Tax, revenues, expenses and assets are recognised net of the amount of Value Added Tax except where the Value Added Tax is not recoverable from the taxation authority, in which case the Value Added Tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.




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(o) taxation (continued)

The net amount of Value Added Tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of net assets available for benefits.

(p) Financial instruments

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

Financial Assets

The Fund classifies its financial assets in the following categories: financial assets at fair value through profit and loss, 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.

i. Financial Assets at Fair Value through profit and loss

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.

ii. 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.

iii. Held-to-Maturity

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 with banks.




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(p) Financial instruments (continued)

iv. Available for Sale

Available for sale financial assets are non-derivatives that are either designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. 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.

Recognition and Measurement of Financial Assets

Purchase and sale of investments are recognized on trade 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 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:

i. Loans 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.

ii. 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.




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(p) Financial instruments (continued)

iii. 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 less any identified impairment losses at the end of each reporting period.

(q) 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.

(r) Comparatives

Where necessary, comparative figures have been re-grouped and re-classified to conform to changes in presentation in the current year.




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7. CRiTiCAl ACCOuNTiNG ESTiMATES AND JuDGEMENTS AND kEY SOuRCES OF ESTiMATiON uNCERTAiNiTY

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 judgments 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 judgment. in making this judgment, 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 the end of each reporting period, 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 recognized in the statement of changes in net asset whenever the carrying amount of the asset exceeds its recoverable amount.

Actuarial valuation

The value of the defined benefit scheme is determined by Actuaries after carrying out 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. The summary of actuarial valuation report has been presented under clause eight of the Trustees’ Report.

Property and equipment

Management reviews the useful lives and residual values of the items of property and equipment on a regular basis. During the financial year, the board of trustees determined no significant changes in the useful lives and residual values.




81

8. 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 analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The 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. 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 type of risks are:• Solvency risk• Credit risk• liquidity risk• Market risk o interest rate risk o Foreign exchange risk o Price 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 and increasing contribution rates. in compliance with the Social Security (Regulatory Authority) Act No 8 of 2008, the last actuarial valuation for the scheme was carried out in 2010.




82

8. FiNANCiAl RiSk MANAGEMENT (continued)

Credit risk management

Credit risk is the risk that the counterpart to any financial transaction may not be able to fulfil its obligation on due date. The Fund’s principal financial assets are Government securities, corporate debt securities, loans, and placements and balances with banks. 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. 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 with the Management Technical Committee under the chairmanship of the Director General. Regular audits of the credit processes and management are undertaken by internal Audit.

II. Maximum exposure to credit risk before collateral held

the amount that best represents the Fund’s maximum exposure to credit risk at 30 June 2013 is made up as follows:

PUBLIC SERVICE PENSIONS FUND

81

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. FINANCIAL RISK MANAGEMENT (continued)

Credit risk management Credit risk is the risk that the counterpart to any financial transaction may not be able to fulfil its obligation on due date. The Fund’s principal financial assets are Government securities, corporate debt securities, loans, and placements and balances with banks. 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. 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 with the Management Technical Committee under the chairmanship of the Director General. Regular audits of the credit processes and management are undertaken by Internal Audit.

II. Maximum exposure to credit risk before collateral held

The amount that best represents the Fund’s maximum exposure to credit risk at 30 June2013 is made up as follows:

CREDIT EXPOSURES 2013 2012 Financial assets

TZS ’000

TZS ’000

Contributions and other receivables

320,458,125

26%

204,810,526

19%

Deposit with financial institutions

51,560,694

4%

192,050,557

18%

Corporate bonds held to maturity 7,476,770

1% 8,377,341

1%

Government Securities 130,939,789 10% 122,865,841 11%

Loans investment 466,905,293 37% 343,579,444 32%

Total

977,340,671

78%

871,683,709

81%

Net asset 1,251,168,833 100% 1,086,279,707 100%

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

The above represents the worst case scenario of credit exposure for both years, without

taking into account of any collateral held or other credit enhancements attached.




83


Credit risk management (continued)


82

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 8. FINANCIAL RISK MANAGEMENT (Continued)

Credit risk management (continued) The amount that best represents the fund’s maximum exposure to credit risk as at 30 June2013 is made up as follows:

Total Fully

performing

Past due Impaired TZS ’000 TZS ’000 TZS ‘000 TZS ‘000

Contributions and other receivables

320,458,125

55,046,305

265,411,820 -

Deposit with financial institutions

51,560,694

51,560,694

-

-

Corporate bond Securities

7,476,770

7,476,770

- -

Government Securities

130,939,789

130,939,789

- -

Loans and advances 466,905,293 411,390,520 55,079,714 435,059

977,340,671

656,414,078 320,491,534 435,059

The amount that best represents the fund’s maximum exposure to credit risk as at 30 June 2012 is made up as follows:

Total Fully

performing Past due Impaired TZS ’000 TZS ’000 TZS ‘000 TZS ‘000

Contributions and other receivables 204,810,526

68,204,835 136,605,691 -

Deposit with financial institutions 192,050,557

192,050,557 - - Corporate bond Securities 8,377,341

8,377,341 - - Government Securities 122,865,841

122,865,841 - - Loans and advances 343,579,444

278,645,991 60,501,267 4,432,186

871,683,709 670,144,565 197,106,958 4,432,186




84




83


Credit risk management (Continued)

III. Classification of Loans and Advances

2013 2012

TZS’000

TZS’000

Neither past due nor impaired 466,905,293 343,579,444 Impaired 435,059 4,432,186

Sub Total (Gross) 467,340,352 348,011,630 Less: Allowance for Impairment (435,059) (4,432,186)

466,905,293 343,579,444

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 loan investments in the form of security deposit under lien mortgage over property, registered securities over assets, andguarantees by the Government of Tanzania. Estimates of fair values are based on the value of collateral assessed at the time of issue of loans, and reviewed after every three years. Security structures and legal covenants are also subjected to regular review to ensure they continue to fulfil their intended purpose. The Fund does not hold collateral against government securities. 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).




85




84



Level 1 Level 2 Level 3 Total30 June 2013 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 Fair value through profit or loss:

Equity shares 20&21 101,268,423 60,361,015 - 161,629,438Government securities

25

- 130,939,789

- 130,939,789

Corporate bonds

26 - 7,476,770

- 7,476,770

101,268,423

198,777,574

- 300,045,997

30 June 2012 Note Level 1 Level 2 Level 3 Total TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000Fair value through profit or loss:

Equity shares 20&21 74,673,591 60,361,015 - 135,034,606Government securities

25 - 122,865,841 - 122,865,841

Corporate bonds 26 8,377,341 - - 8,377,341

83,050,932 183,226,856 - 266,277,788

Movement of doubtful debts allowance

Loans and advances

Contributionand penalty receivables

Other

receivables

Total TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 At 1 July 2011 4,592,186 - - 4,592,186Recovered and releasedinto the statement of changes in net assetavailable for benefit for the year

(160,000) - -

(160,000) At 30 June 2012

4,432,186 -

4,432,186

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

(3,997,127) - -

(3,997,127)

At 30 June2013

435,059 - -

435,059




86


liquidity Risk


85


Liquidity Risk

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 Funds sources of funds include monthly contribution from its contributing member companies. Other sources are penalty income, investment income and other income.

The table below analyses the Fund’s financial liabilities as at 30 June2013 that will require settlement 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.

Financial liabilities

Less than1 month

Between Between 3-12

months

Over Total 1 – 3

months 12

months 30 June2013 TZS’000 TZS’000 TZS’000 TZS’000 TZS’000 Members’ claims payable -

51,782,047 -

-

51,782,047

Unclaimed members benefits 950,992

- - -

950,992 Other payables 51,797,228

- - -

51,797,228

Total 52,748,220

51,782,047 - -

104,530,267

30June2012 Members’ claims payable - 81,265,163

-

-

81,265,163

Unclaimed members benefits 244,383 -

-

-

244,383 Other payables 53,605,610

-

-

-

53,605,610

Total 53,849,993 81,265,163

-

-

135,115,156




87


Market risk management


86


8. FINANCIAL RISK MANAGEMENT (Continued)

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. (i) Interest rate risk management The Fund invests in long term instruments when interest rates are considered to be temporarily high 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 temporarily low. Investment Committee forms its view on interest rates before the strategy to invest is determined. Market Risk has been subdivided into interest rate risk and foreign exchange risk. The Fund holds government securities and loan investments with fixed interest rates with exception of some corporate bonds with floating interest rates. If the price of floating interest rate securities/units were to appreciate/depreciate by 5% the return on investment would have increased/decreased by TZS 678,702,791. (ii) Foreign exchange risk management The foreign exchange risk (or currency risk) is the risk arising from changes in the value of foreign currencies. However, the Fund has no significant foreign currency transactions and therefore the Fund’s currency risk is ranked as low. (iii) Price risk management The Fund is exposed to equity securities price risk because of investments in quoted shares classified at fair value through profit or 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 4,877,966,000(30 June 2012: TZS 3,154,669,000).




88


87


9. CONTRIBUTIONS 2013 2012

TZS ’000 TZS ’000 From employers 333,097,480 278,257,122 From members 111,755,311 94,213,031 Pre-1999 income from the Government 71,629,267 71,629,267 PSPF Supplementary Scheme(PSS) Contribution 60,620 -

516,542,678

444,099,420

Contributions comprise mainly those received from the Mandatory Scheme. As at 30 June 2013 members of the Mandatory Scheme were 320,860 (30 June 2012: 309,767) and the Supplementary Scheme had 530 members (30 June 2012: Nil).

10. BENEFIT EXPENSES

Old pension gratuity 407,172,086 256,733,308 Death gratuity 49,671,371 39,733,592 Funeral grant 349,874 332,300 Incapacity gratuity 91,374 36,413 Withdrawal benefit 367,872 559,836 Old age pension 77,918,970 49,791,281 Survivors pension 8,140,426 8,793,572

543,711,973

355,980,302

During the year ended 30 June 2013 the Fund paid benefits to 5,137 beneficiaries (30 June 2012: 4,620). The Fund had 46,542 pensioners (30 June 2012: 36,535).

11. INVESTMENT INCOME

Dividend income 8,092,123 7,856,664 Interest on Government securities 16,781,484 16,081,992 Interest on corporate bonds 1,142,919 1,080,252 Interest on deposits with financial institutions 17,315,963 24,788,573 Interest on loan investments 99,334,848 16,333,445 Profit on sale of shares 1,027,588 - Penalty income on investments 17,347,497 11,127,793 Rent income 5,650,503 1,806,879 Car parking fees 346,451 91,040

167,039,376

79,166,638




89


88

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2013 2012 TZS ’000 TZS ’000 12. OTHER INCOME Service charge on staff loans 256,665 56,165 Bank interest 1,547,593 1,631,874 Tender fees 12,950 17,100 Penalty on late payment of contributions 11,237,675 1,110,545 Miscellaneous income 40,364 47,217 Commitment Fee on Loans - 26,458 Commission for loan recoveries 366,347 137,646 Profit from sale of fixed assets 1,162 24,734 Gain on foreign exchange difference 2,755 -

13,465,511

3,051,739 13. (a) ADMINISTRATIVE EXPENSES Staff costs (Note 13(b)) 10,632,213 8,460,595 Trustees’ fees and expenses 1,091,328 648,977 Auditor’s remuneration 197,189 156,461 Legal fees 26,704 6,067 Subscription and donations 434,380 327,435 Depreciation and amortisation (Note 15& 16) 1,234,180 1,187,515 Communication 361,548 423,063 Travelling 1,342,457 925,750 Other administrative expenses 10,776,862 6,634,249 26,096,861 18,770,112

(b) STAFF COSTS

Salaries and wages 6,334,918 5,018,811 Social security contributions 908,438 726,400 Skills Development Levy 452,840 358,792 Other benefits 2,936,017 2,356,592

10,632,213

8,460,595 14. INVESTMENT EXPENSES Management fee on rent collected 121,565 38,580

Investment expenses mainly constitute management fees on Investment Properties. In the year ended 30 June 2012, the amount of investment expenses was included as part of administrative expenses. This amount has been re-classified to form part of investment expenses as this is directly related to investments management. This reclassification had no impact on the Fund's reported results.




90

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91


90

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 15. PROPERTY AND EQUIPMENT(CONTINUED)

Information relating to property and equipment i) There is no an item of property and equipment that was used as security

for any loan. ii) No valuation was carried out for the purpose of establishing the market

value of the Fund’s property and equipment. iii) There is no contractual commitment for the acquisition of property and

equipment. 16. INTANGIBLE ASSETS – COMPUTER SOFTWARE

2013 2012 TZS ’000 TZS ’000 Cost At start of year 1,030,210 996,185 Additions 261,294 34,025 At end of year

1,291,504

1,030,210

Amortization

At start of year 882,772 830,760 Charge for the year 82,270 52,012 At end of year 965,042

882,772

Net book valueat 30 June 326,462

147,438

All the intangible assets have finite useful life and are amortised on straight line basis at the rate of 25 per cent.

17. PREPAID OPERATING LEASE

Leasehold land comprises of plots acquired for the purposes of construction of commercial buildings.

At 1 July 5,173,031 5,173,031 Additions 1,654,374 - At 30 June 6,827,405 5,173,031




92


91

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 18. INVESTMENT PROPERTY

2013 2012 TZS ’000 TZS ’000 At 1 July 112,630,235 78,306,789 Additions 40,257,663 34,323,446 At 30 June 152,887,898 112,630,235

Investment property comprises of two properties namelyGolden Jubilee Towers and PSPF Commercial Complex which is currently under construction.

19. INVENTORIES

Low cost houses 29,042,808 22,534,838

Inventory comprises of low cost houses constructed for sale. As at 30 June 2013 666 houses were in stock (30 June 2012: 641 houses). The houses were constructed in 6 regions: Dar essalaam, Morogoro, Mtwara, Tabora, Shinyanga and Iringa. As at 30 June 2013 two houses were sold before completion of construction (30 June 2012: Nil).

20. QUOTED INVESTMENTS

At fair value At the beginning of year 74,673,591 63,093,372 Additions - 1,731,515 Disposals (7,180,001) - Reclassification - (245,000) Fair value adjustment 33,774,833 10,093,704 At end of year 101,268,423 74,673,591

QUOTED INVESTMENTS BY ENTITY

Tanzania Breweries Limited 24,216,270 22,010,217 Tanzania Cigarette Company 28,175,778 14,391,321 Tanga Cement Company Limited 10,929,254 10,838,177 Dar es Salaam Handling Company 3,330,995 1,681,667 Tanzania Portland Cement 12,893,194 11,729,898 Unit Trust of Tanzania 3,709,109 3,201,639 National Microfinance BankPlc 3,585,046 2,058,082 CRDB Bank Plc 14,428,777 8,762,590

101,268,423

74,673,591




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)

8,9

16,1

88

14

,428

,777

8,76

2,59

0N

MB

Bank

Plc

2,

212,

991

2,21

2,99

1

2,05

8,08

2 -

1,

526,

964

3,

585,

046

2,

058,

082

UTT

sha

res

15

,492

,675

-

15,4

92,6

75

3,

201,

639

-

507,

470

3,

709,

109

3,

201,

639

Tot

al

113,

740,

601

(16

,500

,000

)

97,1

10,2

41

74,

673,

591

(6,7

48,3

51)

33,

774,

833

101

,268

,423

74,

673,

591




94


93


UNQUOTED EQUITIES BY ENTITIES

Ubungo Plaza Limited 9,824,252 9,824,252 International House Properties 4,888,836 4,888,836 Tanzania National Reinsurance 3,719,927 3,719,927 Azania Bank Limited 5,680,000 5,680,000 Pensions Properties Limited 3,000 3,000 Quality Plaza Limited 36,000,000 36,000,000 National Investment Company Limited 245,000 245,000 Tanzania Pharmaceuticals Industries 1,500,000 1,500,000

61,861,015

61,861,015

A reconciliation of the impairment loss on unquoted investment is as follows;

2013 2012 TZS ’000 TZS ’000 Balance at 30 June 1,500,000 1,500,000

22. LOAN INVESTMENTS

Corporate entities 369,100,305 291,497,713 Members 85,120,909 50,425,970 Staff 13,119,138 6,087,947 Less: Impairment allowance for loan investments (435,059) (4,432,186) Net 466,905,293

343,579,444

Current 63,235,998 51,808,740 Non – current 403,669,295 291,770,704

466,905,293 343,579,444

21. UNQUOTED EQUITIES 2013 2012 TZS ’000 TZS ’000

Unquoted equities– gross 61,861,015 61,340,294 Additions - 275,721 Reclassification from quoted investments - 245,000

61,861,015 61,861,015 Less: impairment losses (1,500,000) (1,500,000)

60,361,015 60,361,015


94


22. LOAN INVESTMENTS (CONTINUED) Maturity analysis

The maturity analysis is based on the remaining periods to contractual maturity from year end. Maturity analysis 2013 2012 TZS ’000 TZS ’000 Maturing within 12 months 63,235,998 51,808,740Maturing after 12 months 403,669,295 291,770,704

466,905,293 343,579,444

Segmental analysis – industry Agriculture` 17,793,064 19,920,123Properties 22,910,029 20,462,792Electricity 12,294,965 17,421,072Education 273,215,611 222,077,508Hotel 19,741 19,741Personal 98,240,047 56,513,918Others 42,431,836 7,164,290

466,905,293 343,579,444

Impairment allowance for loan Investments

A reconciliation of the impairment allowance for loan investmentsis as follows:

2013 2012 TZS ’000 TZS ’000

Balance at 1 July 4,432,186 4,592,186 Release of impairment allowance on loans and advances

(3,997,127)

(160,000)

Balance at 30 June 435,059 4,432,186

Loans are re-payable monthly or semi-annually with interest ranging from 9% p.a. to 15% p.a. Retirement benefits, property and equipment and Government guarantees are collateral to the loans.

23. CONTRIBUTIONS RECEIVABLE

Contributions receivable 71,251,002 5,783,661Pre- July 1999 contribution receivable 184,887,802 133,258,535Dishonoured cheques 33,153 37,181

256,171,957 139,079,377




95


94


22. LOAN INVESTMENTS (CONTINUED) Maturity analysis

The maturity analysis is based on the remaining periods to contractual maturity from year end. Maturity analysis 2013 2012 TZS ’000 TZS ’000 Maturing within 12 months 63,235,998 51,808,740Maturing after 12 months 403,669,295 291,770,704

466,905,293 343,579,444

Segmental analysis – industry Agriculture` 17,793,064 19,920,123Properties 22,910,029 20,462,792Electricity 12,294,965 17,421,072Education 273,215,611 222,077,508Hotel 19,741 19,741Personal 98,240,047 56,513,918Others 42,431,836 7,164,290

466,905,293 343,579,444

Impairment allowance for loan Investments

A reconciliation of the impairment allowance for loan investmentsis as follows:

2013 2012 TZS ’000 TZS ’000

Balance at 1 July 4,432,186 4,592,186 Release of impairment allowance on loans and advances

(3,997,127)

(160,000)

Balance at 30 June 435,059 4,432,186

Loans are re-payable monthly or semi-annually with interest ranging from 9% p.a. to 15% p.a. Retirement benefits, property and equipment and Government guarantees are collateral to the loans.

23. CONTRIBUTIONS RECEIVABLE

Contributions receivable 71,251,002 5,783,661Pre- July 1999 contribution receivable 184,887,802 133,258,535Dishonoured cheques 33,153 37,181

256,171,957 139,079,377




96


95


23. CONTRIBUTIONS RECEIVABLE (Continued) 2013 2012 TZS ’000 TZS ’000Aging of contributions receivable Outstanding for less than 30 days 37,234,337 3,473,687Outstanding for more than 30 days 218,937,620 135,605,690 256,171,957 139,079,377

24. OTHER RECEIVABLES

Contractors advances for construction of investment property 10,179,508 16,452,272 Imprest and staff advances 971,367 478,112 Advances to pensioners 922,645 421,375

Dividend receivable 1,145,644 1,322,273 Prepayments 866,329 17,480,293 Other advances 1,306,118 1,301,977 Penalty receivable on investment not capitalized 44,007,955

26,719,039

Rent receivable 2,420,359 930,997 Penalty receivable on late contributions 2,466,243 624,811

64,286,168 65,731,149

25. GOVERNMENT SECURITIES HELD TO MATURITY

Government securities held to maturity Treasury bonds 97,487,314 105,321,045Treasury bills 33,452,475 17,544,796

130,939,789 122,865,841

Maturity analysis Maturing up to 3 months 23,517,590 4,249,999 Maturing 3 to 12 months 43,142,848 - Maturing over 12 months 64,279,351 118,615,842

130,939,789 122,865,841




97


96


25. GOVERNMENT SECURITIES HELD TO MATURITY (CONTINUED)

Treasury Bonds and Treasury Bills are not actively traded in the stock exchange. These have been stated at amortized cost, which is estimated to be the fair value for these investments.

2013 2012 TZS ’000 TZS ’000

26. CORPORATE BONDS HELD TO MATURITY

Aluminium Africa Limited (ALAF) 2,625,000 3,500,000 Standard Chartered Bank (Tanzania) Limited 1,500,000 1,500,000 Tanzania Breweries Limited 3,000,000 3,000,000 Interest receivable on corporate bonds 351,770 377,341

7,476,770 8,377,341

Maturing up to 3 months 3,186,078 -

Maturing 3 to 12 months 165,692 - Maturing over 12 months 4,125,000 8,377,341

7,476,770 8,377,341

Corporate Bonds are not actively traded in the stock exchange. These have been stated at amortized cost, which is estimated to be the fair value for these investments.

27. DEPOSITS WITH FINANCIAL INSTITUTIONS

African Banking Corporation Tanzania Limited 3,000,000 10,000,000 Azania Bank Limited 5,000,000 17,000,000 Barclays Bank Tanzania Limited - 12,500,000 Bank M Tanzania Limited 7,000,000 14,000,000 Bank of Africa Tanzania Limited 3,000,000 7,000,000 Commercial Bank of Africa Tanzania Limited - 4,500,000 CRDB Bank Plc 20,000,000 39,000,000 DCB Commercial BankPlc - 7,000,000 Exim Bank Tanzania Limited 5,000,000 24,000,000 I&M BankTanzania Limited - 4,000,000 Equity Bank Tanzania Limited 3,000,000 - Stanbic Bank Tanzania Limited - 23,000,000 Standard Chartered Bank TanzaniaLimited - 10,000,000 Tanzania Women Bank 1,000,000 - NIC Bank Tanzania Limited - 1,000,000 Amana Bank Limited 1,000,000 2,000,000 United Bank for Africa Tanzania Limited 3,000,000 6,500,000 First National BankTanzania Limited - 1,000,000 Interest receivable on fixed deposits 560,694 7,300,557 Matured investments - 2,250,000

51,560,694 192,050,557




98


97


27. DEPOSITS WITH FINANCIAL INSTITUTIONS (CONTINUED)

2013 2012 TZS ‘000 TZS ‘000

Maturity analysis

Maturing up to 3 months 50,000,000 139,750,000 Maturing 3 to 12 months 1,560,694 52,300,557

51,560,694 192,050,557

The maturity period of the Deposits with Financial Institutions ranges between 30 to 180 days and deposits mature at different dates between July 2013 and October 2013. Interests are received on maturity at varying rates between 11% and 15.75%.

28. CASH AND CASH EQUIVALENTS

Cash at bank CRDB Bank Plc 4,955,115 51,135,960 Standard Chartered Bank Tanzania Limited(TZS) 303,330 - Standard Chartered Bank Tanzania Limited (USD) 237,983 - National Microfinance Bank Plc 2,110 -

Balance at 30 June 5,498,538 51,135,960

Overdrawn bank balance

Barclays Bank Tanzania Limited (28,466) (380,982) National Microfinance Bank Plc (42,418,810) (43,602,735)

Standard Chartered Bank TanzaniaLimited (TZS) - (339,764)

Balance at 30 June (42,447,276) (44,323,481)

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

2013 2012 TZS ’000 TZS ’000

Treasury Bills and bonds maturing within 3 months (Note 25)

23,517,590

4,250,000

Fixed deposits maturing within 3 months (Note 27) 50,000,000 139,750,000 Cash at bank 5,498,538 51,135,960 Overdrawn bank balance (42,447,276) (44,323,481)

36,568,852 150,812,479




99


98


29. FINANCIAL ASSETS

a) Classification of Financial Assets

The classification of Financial Assets is as follows:

2013 2012 TZS ’000 TZS ’000

a) Financial Assets at Fair Value Through Profit and Loss

i. Designated upon initial recognition 60,361,015 60,361,015 ii. Held for trading 101,268,423 74,673,591

b) Held to Maturity Investments 189,977,253 323,293,739 c) Loans and Receivables 787,363,419 548,389,970 d) Available for Sale 29,042,808 22,534,838

b) Held to Maturity investments

Effective interest rates 2013 2012

Tanzania Government securities - Treasury bonds 15.71% 15.71%- Treasury bills 14.75% 14.28%

Commercial paper and corporate bonds 12.80% 12.80%Fixed and time deposits (Tanzania) 16.78% 16.78%Loan investments 14.11% 14.11%

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

Investments 2013 2012 % Net Asset

Value % Net Asset

Value Treasury bonds 7.9% 9.7% Loan investments 37.4% 31.6% Fixed deposits - 17.7% Equities: - Quoted equities 8.1% 6.9% - Unquoted equities - 5.6%

The following investments are held by the Fund at amounts which exceed 5% of the class or type of security. Loan investments 2013 2012 Higher Education Student Loan Board 19% 25.2% Tanzania Electric Supply Company Limited - - University of Dodoma 56.4% 35.0% Members Loan 18.2% 14.7%




100


99

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 29. FINANCIAL ASSETS (CONTINUED)

Effective interest rates

2013 2012 TZS ’000 TZS ’000

Fixed deposits African Banking Corporation 5.8% 5.2% Bank M Tanzania Limited 13.6% 7.2% Barclays Bank Tanzania Limited - 6.5% Exim Bank Tanzania Limited 9.7% 12.5% Azania Bank Limited 9.7% 8.9% Stanbic Bank Tanzania Limited - 12.2% CRDB BankPlc 38.8% 20.3% Standard Chartered Bank Tanzania Limited - 5.3% Bank of Africa Tanzania Limited 5.8% - Equity Bank 5.8% - United Bank of Africa 5.8% - Quoted equities Tanzania Breweries Limited 23.9%

29.5%

Tanzania Cigarette Company Limited 27.8% 19.3% Tanga Cement Company 10.8% 14.5% Tanzania Portland Company limited 12.7% 15.7% CRDB Bank Plc 14.2% 11.7%

2013 2012

% Net Asset Value

% Net AssetValue

Unquoted equities Ubungo Plaza limited 16.3% 16.3%International House Properties 8.1% 8.1%Quality Plaza Limited 59.6% 59.9%Azania Bank Limited 9.4% 9.4%Tanzania National Reinsurance 6.2% 6.2%

30. BENEFITS PAYABLE

Accrued Benefits 49,651,756 51,685,023Minimum pension from Treasury 2,477,573 29,580,140Uncollected pension 603,710 244,383

52,733,039 81,509,546

Benefits payable are in respect of retired members and are settled within 7 days after having received relevant documents supporting benefit payments. The carrying amounts of the benefits payable and accrued expenses approximate to their fair values




101


100

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2013 2012 TZS ’000 TZS ’000 31. OTHER PAYABLES AND ACCRUED EXPENSES

Accrued administrative expenses 853,307 470,106 Rent received in advance 17,016 7,541 Deferred revenue from sale of Asset 171,100 - Retention money 8,308,529 8,804,483

9,349,952 9,282,130

Other payables are non-interest bearing and have an average term of 30 days. The carrying amounts of the above payables and accrued expenses approximate to their fair values

32. NET ASSET AVAILABLE FOR BENEFITS

At start of the year

1,086,279,707

924,497,200

Increase in net assets for the year 164,889,126 161,782,507 At end of the year 1,251,168,833 1,086,279,707

33. CONTRIBUTIONS RECEIVED

Beginning balance 139,079,377 83,059,298 Contributions for the year 516,542,678 444,099,420 Closing balance (256,171,956) (139,079,377) Cash received from contributions 399,450,099

388,079,341

34. BENEFITS PAID

Balance at the beginning of the year - payable 81,509,546

74,626,167

Balance at the beginning of the year - monthly pension advance (421,374)

(222,564)

Benefits for the year 543,711,973 355,980,302 Balance at the end of the year –benefit payable (52,733,039)

(81,509,546)

Balance at the end of the year - payable 922,645 421,374 Cash paid for benefits 572,989,751 349,295,733

35. TAX STATUS OF THE SCHEME

Public Service Pensions Fund is an exempt fund under the Income Tax Act, 2004.




102


101

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 36. CONTINGENT LIABILITIES

The Fund had no contingent liabilities as at 30 June2013 (30 June 2012: Nil).

37. RELATED PARTY TRANSACTIONS

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 Fund has shareholdings with Azania Bank Limited, Ubungo Plaza Limited and Pensions Properties Limited. Fund’s shareholdings in these three companies are as follows:

Investee Per cent of shareholding Azania Bank Limited 16.8% Pensions Properties Limited 30% Ubungo Plaza Limited 35%

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

2013

TZS’000 2012

TZS’000

Placements - Azania Bank Limited 20,000,000 20,000,000 Loan to Ubungo Plaza Limited 922,709 922,709 Loan to Pensions Properties Limited 7,794,082 7,794,082

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.

2013TZS’000

2012TZS’000

Senior management – salaries 879,457 806,161 Senior management –contribution to defined pension plan 178,766

160,974

Trustee’s fees and allowances 135,514 109,057




103


102

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 38. COMMITMENTS a) Capital Commitment

As at 30 June 2013, the Fund had capital commitment of TZS 79 billion in respect of the on-going construction of Golden Jubilee Towers, PSPF Commercial Complex and low cost houses in Dar es Salaam, Mtwara, Shinyanga, Tabora and Morogoro. The expenditure contracted for at year end is as follows:

b) Loan commitment

As at 30 June 2013, the Fund had committed to extend loans to various quasi-government institutions amounting to TZS3,308 million (30 June 2012: TZS 5,037 million) for various construction projects as indicated below:

39. FUNCTIONAL CURRENCY AND PRESENTATION CURRENCY

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

40. OPERATING LEASE COMMITMENTS

The Fund as a lessee The Fund entered into commercial leases for office use in respect of its various regional offices and its back up site. There are no restrictions placed upon the Fund for entering into the leases. The total contract sum for all lease contacts is TZS 96 million (30 June 2012: 195 million). The lease contracts are for the period ranging from two to three years renewable.

2013 2012 TZS ‘000 TZS ‘000

Opening Balance 110,016,446 134,956,365 Additions 7,340,903 2,397,488 Discharged (38,203,447) (27,337,407) Total ending Balance 79,153,902 110,016,446

2013 2012 TZS ‘000 TZS ‘000

Opening balance 5,037,187 18,992,826 Additions-Tanzania Intelligence Security Services (TISS) project 4,436,006

-

Discharged (6,166,063) (13,955,639) Total ending Balance 3,307,130 5,037,187




104


103


40. OPERATING LEASE COMMITMENTS (CONTINUED) The Fund as a lessor The Fund has entered into commercial contract leases with respect to its investment property –Golden Jubilee Towers, with tenants. The total contract sum for all lease contacts is TZS 5,997 million (2012: 1,898 million). The lease contracts are for the period of two to three years renewable.

41. EVENTS SUBSEQUENT TO FINANCIAL YEAR END

At the date of signing the financial statements, the Trustees are not aware of any other matter or circumstance arising since the end of the financial year, not otherwise dealt with in these financial statements, which significantly affected the statement of net asset available for benefits of the Fund and the changes in net asset value available for benefits.




105

ACkNOWlEDGEMENT


104

I would like to thank all those who assisted in the preparation of this annual report; in particular my fellow Members of the Board of Trustee, and employees of the Fund. G. D. Yambesi

CHAIRMAN

10th February 214

G.D. Yembesi CHAiRMAN10th February 2014


106pspf annual reporT for THe Year ended 30TH June 2013

HEADQuARTERS - DAR ES SAlAAMGolden Jubilee Towers – Front Tower,Ohio Street,Central Area, Plot No. 8, 9, 12 and 15,P. O. Box 4843,DAR ES SAlAAM.TEl: +255 22 2120912/52 +255 22 2127375/76FAX: +255 22 2120930Email: [email protected]: www.pspf-tz.org

PSPF REGiONAl OFFiCES

ARuSHASummit Centre Building, 5th Floor, Block B - East Wing, Sokoine Road,P. O. Box 16300, Arusha.TEl: +255 027 2544297 DODOMANiC Building, 1st Floor, Mtendeni Street/lindi Avenue,Block M, Plot No. 12-15,P. O. Box 2284, Dodoma.TEl: +255 026 2323338

iRiNGARegional Commissioner’s Office, Wilolesi Area,P. O. Box 521, iringa.TEl: +255 026 2700363

kAGERAluangisa Road, Opposite lake Hotel,P. O. Box 947, kagera.TEl: +255 028 2221062

kiGOMASub Treasury Building, 1st Floor – Room No. 18, lubengera Area,P. O. Box 1117, kigoma.TEl: +255 028 2802077FAX: +255 028 2802078

kiliMANJAROSub Treasury Building, Ground Floor, Renguo Street,P. O. Box 7725, Moshi.TEl: +255 027 2754006 liNDiSub Treasury Building,Baraza Street,P. O. Box 226, lindi.TEl: +255 023 2202516

MANYARASub Treasury Building, 1st Floor, Room No. 53, komoto Street, Singida Road,P. O. Box 234, Babati.TEl: +255 027 2530715FAX: +255 027 2530716

MARAOffice of the RAS Building, Boma Street,P. O. Box 1334, Musoma.TEl: +255 028 2620880

MBEYAN i C Building, 2nd Floor, Sokoine Road,P. O. Box 6368, Mbeya.TEl: +255 025 2504341FAX: +255 025 2504342

MOROGOROSub Treasury Building, Ground Floor,kitope Street,P. O. Box 6542, Morogoro.TEl: +255 023 2613156

MTWARAOffice of the RAS Building, TANu Road,P. O. Box 628, Mtwara.TEl: +255 023 2334359

MWANZAkauma Building, 1st Floor, Room No. 13,kenyatta Road,P. O. Box 382, Mwanza.TEl: +255 028 2541909FAX: +255 028 2541909

PWANiRegional Commissioners’ Office Building 3rd Floor, Room no. J 125.Mkoani Street, kibaha Mailimoja,P. O. Box 30272, kibaha.TEl; +255 023 2402699.

SHiNYANGAGalame Traders Complex Building, 1st Floor, Nkomo and kaunda Street,Block G, Plot No. 17,P. O. Box 1305, Shinyanga.TEl: +255 028 2763515

SiNGiDANational Audit Building, Ground Floor,Bomani Street,P.O. Box 35, Singida.TEl: +255 026 2502624

RukWARegional Commisioner’s Office, 3rd Floor, Mkoani Street,Block N, Plot No.241,P. O. Box 514, Sumbawanga.TEl: +255 025 2802950

RuVuMASub Treasury Building, Ground Floor, Junction of Sokoine and Mshangano Road,P. O. Box 400, Songea.TEl: +255 026 2600509

TABORAWETCu Building, Ground Floor,Coronation Road, Bachu Area,Block O, Plot No. 50,P. O. Box 665, Tabora. TEl: +255 026 2605718FAX: +255 026 2605719

TANGAOld Revenue Building (BOHRA), 1st Floor, Room No.2,Swahili Street,P. O. Box 684, Tanga.TEl: +255 027 2645739FAX: +255 027 2645737

kATAVi Regional Commissiner Office,Ground Floor, kasimba areaP.O. BOX 235, MpandaTEl: +255 025 2957113

NJOMBE Mtewele General Traders Building, 2nd Floor,Plot No 246 Block J. Posta Street, P.O Box 1009, NjombeTEl: +255 026 2782276

SiMiYu Old TAkukuRu Building, Marambo Street,P. O. Box 138, Bariadi - Simiyu.



107

The ongoing project of 32 storey pspf commercial complex located along sokoine drive & mission street

32 Storey

pspf management team and the parliamentary pac members touring the tallest building in the country (pspf commercial complex )

pspf commercial complex

Golden Jubilee Towers, Front Tower 6th -13th Floors, Ohio/kibo Street P.O. Box 4843 Dar es Salaam TanzaniaTel: 255-22-2120912/52, 2127375/6 • Fax: 255-22-2120930

E-Mail: [email protected] • Website: www.pspf-tz.org • Twitter: Pspf-Tanzania Facebook :[email protected]

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