THE TIME IS NOW TO BUILD UAP HOLDINGS LIMITED PARTNERSHIPS THAT WILL ANNUAL REPORT & FINANCIAL STATEMENTS DRIVE GROWTH ACROSS AFRICA FOR THE YEAR ENDED 31 DECEMBER 2018

UAP Holdings Limited | 2018 Annual Report and Financial Statements 3

THE TIME IS NOW TO PLAN, GROW AND PROTECT WHAT YOU VALUE 4 UAP Holdings Limited | 2018 Annual Report and Financial Statements CONTENTS 5

ABOUT US UAP Old Mutual Group East Africa 10 Old Mutual Limited at a Glance 10 UAP Holdings Limited East Africa 11 UAP Old Mutual Group Quick Facts 13 Service Offering 13 Awards 14

DIRECTORS Board of Directors 17 Director Profiles 18 - 23 UAP Subsidiaries' Directors 23 - 33

KEY STATEMENTS Chairman’s Statement 34 - 38 Group CEO’s Report 40 - 44

CORPORATE REVIEW Report of the Independent Governance Auditor to Shareholders 48 Corporate Governance Report 50 - 58 Risk Management Report 59 - 60

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY 63 - 69

DIRECTORS' REPORT 72 - 73 Directors' Remuneration Report 74 - 75 Business Review 76 Report of the Independent Auditors' to the Members of UAP Holdings Limited 77 - 84

THE TIME IS NOW TO FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss 85 Consolidated Statement of other Comprehensive Income 86 PROTECT YOUR Company Statement of Profits or Loss 87 Company Statement of other Comprehensive Income 88 Consolidated Statement of Financial Position 89 WELL-BEING Company Statement of Financial Position 90 Consolidated Statement of Changes in Equity 91 - 92 Company Statement of Changes in Equity 93 Consolidated Statement of Cash Flows 94 Company Statement of Cash Flows 95 Notes to Financial Statement 97 - 199

AGM Notice of the 11th AGM 200 - 202 Proxy Form 203 AN INTEGRATED FINANCIAL SERVICES GROUP IN EAST AFRICA

UAP Holdings Limited | 2018 Annual Report and Financial Statements 9

THE TIME IS NOW TO SET YOUR GOALS UAP Holdings Limited 10

UAP OLD MUTUAL GROUP UAP HOLDINGS LIMITED EAST AFRICA EAST AFRICA

The UAP Old Mutual Group is comprised of Faulu Microfinance Bank, UAP Holdings is an East African Services Group offering Insurance, Investment UAP Holdings Limited and it's subsidiaries and the Old Mutual Life Management, Property Development & Investments, Security Brokerage Assurance and Asset Management Group of Companies, forming and Financial Advisory. Currently, UAP Holdings has 11 Businesses operating one of the largest financial services groups with a growing footprint in Kenya, Uganda, South Sudan, Rwanda and Tanzania in East Africa. The Group was formed in 2015 after Old Mutual acquired a controlling stake in Faulu Microfinance Bank in 2014 and UAP Holdings in 2015. 11 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL The Group pursues an integrated financial services model that avails BUSINESSES to customers a comprehensive range of financial solutions which include Investment, Insurance, Banking and Savings, through a wide and more accessible distribution network. 5 COUNTRIES

Our customers can now be assured of holistic solutions and unrivalled convenience to enable them realise their dreams. • INSURANCE • INVESTMENT MANAGEMENT PETER MWANGI | GROUP CEO, UAP OLD MUTUAL GROUP • PROPERTY DEVELOPMENT AND INVESTMENTS • SECURITIES BROKERAGE • FINANCIAL ADVISORY The UAP Old Mutual Group is part of Old Mutual Limited (OML). As part of OML, UAP Old Mutual is able to leverage technology, technical expertise and to offer broad career growth prospects for its employees. UAP Holdings Limited | 2018 Annual Report and Financial Statements 11

OLD MUTUAL LIMITED AT A GLANCE

OLD MUTUAL IS AN AFRICAN FOCUSED INVESTMENT, SAVINGS, INSURANCE & BANKING GROUP.

Old Mutual began in Cape Town in 1845 as South Africa’s first Mutual Life Insurance Company, offering financial security in uncertain times. Today, 174 years on, Old Mutual Limited offers a broad spectrum of financial solutions to retail and corporate customers across key markets in 14 countries; serving a combined 11.3 million customers.

OLD MUTUAL LIMITED (OML) IS NOW ANCHORED IN AFRICA. WITH THE LISTING ON THE JOHANNESBURG STOCK EXCHANGE AND CROSS - LISTING ON EXCHANGES IN MALAWI, NAMIBIA AND ZIMBABWE, OML IS NOW AN AFRICAN BUSINESS FOCUSED ON SERVING CUSTOMERS ACROSS THE CONTINENT.

Old Mutual's customers are at the heart of everything it does. The success of the Company is as a result of the continued support and trust of its customers . Old Mutual aims to be the customers most trusted financial partner helping them achieve their lifetime financial goals while investing their funds in ways that will secure a positive future for themselves and their families. 11.3M 14 R1,044.1 BN CUSTOMERS COUNTRIES FUNDS UNDER MANAGEMENT Our Values • Champion the Customer • The Power of Diversity & Inclusion • Agile Innovation that Makes a Difference • Always Act with Integrity • Respect for Each Other & Communities we Serve • Trust and Accountability

Our Vision To be our customers’ most trusted lifetime partner, passionate about helping them achieve their financial goals. And, by helping generations of Africans achieve those goals, help build the financial prosperity of the societies, businesses and shareholders we engage with.

Our Mission Through understanding and meeting our customers' needs, we will profitably expand our market for wealth accumulation and protection in East Africa.

Our Strategy How we do it: By building an integrated financial services champion in East Africa, by leveraging the strength of our capabilities in the global group.

Our Business What we are up to: Providing our customers with a comprehensive range of financial solutions, from Investment and Insurance to Banking and Savings, through a wide and accessible distribution network. UAP Holdings Limited | 2018 Annual Report and Financial Statements 13 UAP OLD MUTUAL GROUP SERVICE OFFERING QUICK FACTS

The UAP Old Mutual Group provides a one stop solution for all your financial needs. We believe our collective financial solutions are adaptable to any investors’ short term and long term goals. COUNTRIES IN EMPLOYEES EAST AFRICA 4K & AGENTS 5 WE ARE GLAD TO PARTNER WITH INDIVIDUALS AND CORPORATES TO PROVIDE THE FOLLOWING FINANCIAL SERVICES:

PROPERTIES IN 1.2M CUSTOMERS 12 4 COUNTRIES

GENERAL ASSET LIFE BANKING INSURANCE MANAGEMENT INSURANCE

• Medical • Savings Solutions • Education • Savings CUSTOMER RETAIL • Motor • Unit Trusts • Savings • Loans SEGMENTS BUSINESS • Specialty • Pensions • Transactions CORPORATE • Trade Credit • Life Covers • Investment • SME Solutions • Critical Illness • Bancassurance • SME Solutions UAP Holdings Limited 14 AWARDS 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 1st RUNNERS UP: 1st RUNNERS UP: 1st RUNNERS UP: WINNER GROUP LIFE COMPANY GENERAL INSURANCE INNOVATION BEST LOSS RATIO AWARD OF THE YEAR AWARD COMPANY OF THE AWARD YEAR 2018 YEAR 2018

AKI Agents of the Year AKI Agents of the Year AKI Agents of the Year AKI Agents of the Year Awards (AAYA) 2019 Awards (AAYA) 2019 Awards (AAYA) 2019 Awards (AAYA) 2019 UAP Holdings Limited | 2018 Annual Report and Financial Statements

AWARDS & ACCOLADES 15

OUR DIRECTORS UAP Holdings Limited

Board of Directors UAP Holdings Limited | 2018 Annual Report and Financial Statements 17

BOARD OF DIRECTORS

Standing centre

Dr. Joseph B. Wanjui CBS

Standing from left to right

Iain Williamson Dr. Peter W Muthoka EBS, MBS Peter Mwangi George Maina Nkirote Mworia Njiru Robert Mbugua

Seated from left to right

Vincent Rague Paul Truyens Susan Omanga Mike Harper James Muguiyi Jonas Mushosho UAP Holdings Limited

18 THE BOARD

Dr. Joseph Barrage Wanjui CBS Mike Harper Chairman Independent Non-Executive Director BA Physics and Mathematics, Ohio Wesleyan University. MBA and Bsc. Actuarial Science Msc. Engineering, major, University of Cape Town. Columbia University. Certified Financial Planner, University of Free State. Year of Birth: 1937 Advanced Management Program, Harvard Business School. Date of appointment: 8 November 2007 Year of Birth: 1955 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Experience: Date of appointment: Dr. Wanjui has been a Director within the Group since 1986 where he later became 29 June 2015 Chairman of the UAP Insurance Company Limited Board in 1998. Experience: Mike has previously served on the Boards of Old Mutual Unit Trust, Old Mutual His prior experience includes being the Chief Executive of East Africa Industries (which Investment Group, Old Mutual International and the Council of the Botanical later became Unilever), Chairman of CfC Stanbic Bank Limited and Chancellor of Society of South Africa. Having worked in the Old Mutual Group since 1979, Mike The University of Nairobi. Currently, Dr. Wanjui sits as Chairman and Board Member was appointed Chairman of Mutual & Federal in May 2012. of a number of other Kenyan and international organizations. Over the years, Mike has served in several Executive positions including Strategy In recognition of his exemplary contributions to positive change in society, he was Director for Old Mutual Emerging Markets, leading strategic work across Asia, Latin awarded the Chief of the Order of the Burning Spear (CBS) of the Republic of Kenya. America, South Africa and Africa markets. He also served as the Distribution Executive on the Old Mutual Group Long Term Savings business in London. UAP Holdings Limited | 2018 Annual Report and Financial Statements

The Board (continued) 19

George Maina James Muguiyi Non-Executive Director Non-Executive Director

B.Tech (Hons) Aeronautical Fellow of the Institute of Certified Engineering and Design, Public Accountants of Kenya (ICPAK) Loughborough University of Technology. Year of Birth: 1943

Year of Birth: 1952 Date of appointment: 8 November 2007 Date of appointment: 5 May 2017

Experience: Experience: George began his career in Aeronautical Engineering and went on to serve in the James was the Deputy Managing Director at UAP Insurance between 1988 and capacity of Deputy Managing Director and Marketing Manager for the Shell Company 2001. During this time, he oversaw the merger of Provincial Insurance with Union in Jamaica, Ghana and East Africa Markets. Through this experience, George gained Insurance to form UAP Provisional Insurance in 1994. Mr. Muguiyi later rose to serve expertise in various sectors including: Strategy Development and Implementation, as Group Managing Director for the UAP Group. Governance, Organization Development/Re-engineering and Capacity Building, Change Management, Risk Management, Finance and Investment Management, During this period, he oversaw the growth of the Group’s business in Kenya, and Mergers, Acquisitions and Exits, as well as Investment banking. its expansion into the neighbouring Uganda in 2004 and South Sudan in 2006. James further, oversaw the demerger of the Life Assurance Business from General He joined the UAP Holdings Board in May 2017, through Faulu Microfinance Bank Insurance Business in Kenya. where he has served the microfinance business since 2010 and was instrumental in leading the restructuring and divestiture of the bank. In 2008, under Mr. Muguiyi’s leadership, UAP Holdings was formed as the Holding Company for all the UAP subsidiaries and subsequently listed on the Over-The- George is currently a Director of Faulu Microfinance Bank and NIC Bank. Counter market at the Nairobi Securities Exchange. This allowed the Company to attract private equity funds to invest in the Company as well as open it up to a wider range of local and foreign investors. He has also been instrumental in conceptualizing the various property developments in the Group’s portfolio with UAP Old Mutual Tower being one of the major installations completed under his stewardship.

He chairs the UAP Insurance Kenya, Tanzania and South Sudan Boards and sits on the Uganda Insurance and Properties Board as a Director. UAP Holdings Limited

20 The Board (continued)

Jonas Mushosho Paul Truyens Executive Director Independent Non-Executive Director MBA and Bachelor of Accounting University of Zimbabwe. BSc Mathematical Statistics, Bachelor of Accounting Science, BA Economics and BA (Hons) University of South Africa Economics, University of Cape Town.

Year of Birth: 1958 Year of Birth: 1948

Date of appointment: Date of appointment: 28 November 2016 29 June 2015 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Experience: Experience: In February 2017, Jonas was appointed as the Managing Director of Old Mutual Paul’s experience in the Insurance industry spans 47 years. He started as an actuarial Rest of Africa, a position covering 12 countries in Africa (excluding South Africa). student with Old Mutual in South Africa in 1972. After qualification as an actuary in He is also the Group Chief Executive Officer of Old Mutual Zimbabwe Limited, a the UK in 1977, he briefly served as CFO and Chief Actuary for a small reinsurance position that he has held since October 2012. company in the UK.

Prior to this (2009 to 2012), he headed Old Mutual Life Assurance Company, as the In 1980 he joined Southern Life in South Africa where he progressed through Product Managing Director. Before that, he was the Life Assurance Finance Director (2004 Development and Actuarial Reporting to the role of Chief Actuary and CFO. He to 2009) and Head of the Retail Business (2001 to 2004). A former Zimbabwe took early retirement in 2001 and worked as a Consultant and Actuarial Auditor for Deputy Commissioner of Taxes, Jonas joined Old Mutual in 1990 as a Tax Planning PwC in the Netherlands for five years. In 2009 he joined the Board of Old Mutual Accountant, having worked for the Department of Taxes for 10 years. South Africa as an Independent Non-Executive Director until 2018. He also served on the Board of Old Mutual Insure for Mutual Federal in South Africa for 9 years. In line with his profession, Jonas is a Fellow of the Institute of Chartered Secretaries and Administrators (FCIS), a member of the Institute of Chartered Accountants in He currently serves on the Board of Old Mutual Life Assurance Company Limited, Zimbabwe & South Africa as well as the Institute of Certified Tax Accountants in Old Mutual Holdings Limited, UAP Holdings Limited and UAP Insurance Company Zimbabwe (ICTA). (all based in Kenya) UAP Holdings Limited | 2018 Annual Report and Financial Statements

The Board (continued) 21

Dr. Peter W. Muthoka EBS, MBS Iain Williamson Independent Non-Executive Director Non-Executive Director

Honorary Degree of Doctor of Management Bachelor of Business Science (Actuarial), and Leadership (D.ML) (Honoris Causa), Post Graduate Diploma in Actuarial The Management University of Africa (MUA). Science, MA (Education), with special reference to University of Cape Town UN Agencies, University of California, Los Angeles (UCLA). Year of Birth: 1970 BA Economics & History (Hons), University of East Africa, Nairobi Campus. Date of appointment: 12 March 2018 Year of Birth: 1943 Experience: Date of appointment: Iain is a qualified Actuary, and a Fellow of Actuarial Society of South Africa (FASSA). 23 June 2015 He joined Old Mutual in 1993 in Employee Benefits: Risk, where he gained experience Experience: in Pricing, Valuation, Product Design, Contract Wording and Reinsurance of Risk Dr. Muthoka is the Chancellor of Masinde Muliro University of Science and Technology Products. In 1996, he was appointed as Manager: Actuarial Finance of Individual (MMUST). Previously, Dr. Muthoka has served as Group Chairman of Kenya Commercial Life Old Mutual South Africa and relocated to London in 1999 where he progressed Bank. He is now the current Chairman of the Faulu Microfinance Bank and the UAP to Senior Manager of Corporate Development, Old Mutual plc. In 2003, Iain was Old Mutual Foundation. appointed COO of Wealth Management, Old Mutual South Africa, a business consisting of a start-up institutional division and a retail division. He was responsible Through his illustrious career, Dr. Muthoka has been a corporate leader and an for the Finance, HR, IT and Legal / Compliance functions. entrepreneur with long and varied experience in public and private sectors in the fields of Management, Education, Finance, Investment, Export Promotion, In 2007, Iain became a Finance Actuary for Old Mutual South Africa where he was Agriculture, Real Estate, Corporate Governance, International Diplomacy, and accountable for the actuarial finance function for the Retail Affluent and Retail Mass Community Voluntary work. Market business units, as well as for OMLACSA Capital Management.

In recognition of his exemplary service within the Kenyan Public Service and Iain later joined Retail Affluent in 2009 as General Manager: Finance, before he was international organizations, the President of the Republic of Kenya awarded him promoted to Managing Director: Retail Affluent in 2011. In 2015 he was appointed with the medal of Moran of the Burning Spear (MBS) in 2004 and the Medal of Financial Director, Old Mutual Emerging Market. In addition, he was Interim CEO Elder of the Burning Spear (EBS) in 2012. from 1 January to 1 June 2017. In 2017 Iain was appointed Chief Operating Officer of Old Mutual Emerging Markets. UAP Holdings Limited

22 The Board (continued)

Robert Mbugua Vincent Rague Independent Non-Executive Independent Non-Executive Director Director

MBA, Bond University Graduate MBA, Darden Business School University School of Business. of Virginia. BA (Hons) Economics, Statistics and Year of Birth: 1967 Government, The University of Nairobi. Date of appointment: 1 July 2017 Year of Birth: 1953

Date of appointment: 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 1 June 2018 Experience: Experience: Robert started his career at PricewaterhouseCoopers (PwC) in Kenya in 1989 and Vincent is a co-founder of Catalyst Principal Partners, a Nairobi based Private rose through the ranks. In June 2001, he was admitted to the position of Partner in Equity Fund Manager. He has over 25 years’ experience in Investments, Banking, the Johannesburg office of PwC where he served until the year 2003. Corporate Finance and Policy Advisory work. He has worked at the International . Finance Corporation (IFC) and the World Bank in various capacities. During his time Robert joined Standard Bank’s Africa business in 2003 and during his eight- year at IFC, Vincent played a critical role in setting up and managing IFC’s operations tenure with the bank, served in various Executive Director positions including in Southern Africa. Regional Managing Director responsible for a number of African countries. Vincent worked at the Central Bank of Kenya and served as a Financial and Private Robert joined the Board of UAP Holdings Limited in July 2017. He is a qualified Sector advisor to the National Treasury between October 2010 and June 2013. accountant and also chairs the Board of BOC Gases Plc. UAP Holdings Limited | 2018 Annual Report and Financial Statements

The Board (continued) 23

Susan Omanga Peter Mwangi Independent Non-Executive Group Chief Executive Officer Director BSc. Electrical Engineering, Bachelor of science in Business University of Nairobi. Management with minor in Advertising, Rocky Mountain College, Montana. Year of Birth: 1969 Associate of Business Management, North West Community College, USA. Date of appointment: 23 June 2015 Year of Birth: 1960

Date of appointment: 19 August 2015 Experience: Experience: Susan is the CEO and Founder of Exclamation Marketing Ltd. She previously served Peter joined Old Mutual Kenya as the Chief Executive Officer in October 2014 from in senior marketing positions at Colgate Palmolive, Boots Kenya, Barclays Bank, Nairobi Securities Exchange (NSE) and later became the Group CEO following the and Standard Chartered. From 2004 -2012 she served as a Non-Executive Director merger of UAP and Old Mutual. in the Group Board of KCB where she was also the Chairman of KCB Foundation, . Director S & L Mortgages for 2 years, and Director KCB Uganda for 4 years. At NSE, he served as the Chief Executive Officer for 6 years, during which time Peter is credited with, amongst other things, the successful Demutualization and Susan sits on the Board of Longhorn Publishers, UBA and Kenya Tea Packers Limited Self-Listing of the NSE. (KETEPA). She is also an advisory Board Member at Acumen East Africa, and a member of the Board of Trustee at The President’s Award. She has membership Prior to this, Peter was the Managing Director of Centum Investments Limited at the Marketing Society of Kenya, the Public Relations Society of Kenya (PRSK) which is Kenya’s largest publicly quoted investment Company. Early in his career, and the International Advertising Association (IAA). Susan is the Honorary Consul Peter served in the Kenya Air Force and held the rank of Captain. for Jamaica in the Republic of Kenya. He sits on the Kenya, Uganda, Tanzania, Rwanda, South Sudan Boards as an Executive Director. UAP Holdings Limited

24 The Board (continued)

Joseph Wanjui Jnr. Alternate Director

Bachelor of Science Finance, MBA in Marketing, Duquesne University, Pittsburgh, USA.

Year of Birth: 1975

Date of appointment: 1 August 2018 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Experience: Joseph is a director of Bawan Limited and its Subsidiaries where he sits on various Committees such as HR and Compliance as well Finance and Audit, advising the Board. Joseph also serves as a member of the Senior Management Team in Bawan Limited dealing primarily with investments and real estate.

Prior to joining Bawan Limited, Joseph was a career banker with over 15 years’ experience gained having started his careers at Stanbic Bank Kenya and subsequently moving to Citibank Kenya where he grew to senior managerial position. UAP Holdings Limited | 2018 Annual Report and Financial Statements

UAP Subsidiaries' Directors 25

KENYA

James Muguiyi Paul Truyens Betty Ann Mboche Lotfi Baccouche UAP Insurance, Chairman UAP Insurance UAP Insurance UAP Insurance

Prof. J.H. Kimura Franklin Sibanda Peter Mwangi David Kuria UAP Insurance UAP Insurance UAP Insurance and UAP Insurance and UAP UAP Properties Ltd Financial Services Ltd, Uganda UAP Holdings Limited

26 UAP Subsidiaries' Directors (Continued)

KENYA (Continued) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Dr. Jaine Mwai Susan Kasinga Kamau Kuria Prof. Patrick Weke UAP Insurance UAP Insurance UAP Life Assurance, UAP Life Assurance Chairman and Director, UAP Life Assurance, Uganda

Gary Voss Peter Levett Hannah - Gitonga Mwangi Joseph Lesiew UAP Life Assurance UAP Properties Ltd UAP Life Assurance UAP Life Assurance UAP Holdings Limited | 2018 Annual Report and Financial Statements

UAP Subsidiaries' Directors (Continued) 27

KENYA (Continued) UGANDA

Wainaina Kenyanjui Prof. G.Wavamunno Andrew Kasirye Dr. George Mutema UAP Properties Ltd and Chairman - UAP Old Mutual UAP Old Mutual Insurance UAP Old Mutual Insurance UAP Insurance, South Sudan Insurance and UAP Properties Ltd and UAP Properties Ltd

Mary B. Kyeyune Suzanne Batwala Mathias Katamba Stephen Chikovore UAP Old Mutual Insurance UAP Old Mutual Insurance UAP Old Mutual Insurance UAP Old Mutual Insurance UAP Holdings Limited

28 UAP Subsidiaries' Directors (Continued)

UGANDA (Continued) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Dr. William Kalema Prof. Sam Sejjaaka Sophie Nkuutu Johannes !Gawaxab UAP Old Mutual Life Assurance, UAP Financial Services Ltd, UAP Old Mutual Life UAP Old Mutual Life Chairman and Director UAP Chairman and Director UAP Assurance Assurance and UAP Properties Ltd Old Mutual Life Assurance Properties Ltd

Jerim Otieno Anthony Githuka Peter Anderson UAP Old Mutual Life UAP Old Mutual Life UAP Financial Services Ltd Assurance Assurance UAP Holdings Limited | 2018 Annual Report and Financial Statements

UAP Subsidiaries' Directors (Continued) 29

SOUTH SUDAN

Prof. Scopas Dima Peter Kimurwa Philip Coulson John Lako UAP Properties Chairman and UAP Insurance UAP Insurance UAP Properties Ltd UAP Insurance Ltd Director

RWANDA

Balla Nyerere Kris Mbaya Richard Mugisha Evangelina Soni Kayinamura UAP Properties Ltd UAP Insurance and UAP Insurance Chairman UAP Insurance UAP Properties Ltd UAP Holdings Limited

30 UAP Subsidiaries' Directors (Continued)

RWANDA (Continued) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Michael Sallu John Bosco Birungi Isaac Nzyoka Herbert Kwizera UAP Insurance UAP Insurance UAP Insurance UAP Insurance

TANZANIA

Moses Kaluwa Joseph Werema Charles Washoma Moses Obonyo UAP Insurance UAP Insurance UAP Insurance UAP Insurance UAP Holdings Limited | 2018 Annual Report and Financial Statements

UAP Subsidiaries' Directors (Continued) 31

TANZANIA (Continued) MAURITIUS

William Asiko Zawadia Nanyaro Assad Abdullatiff Jean – Claude Permal UAP Insurance UAP Insurance UAP Entities Mauritius UAP Entities Mauritius Chairman UAP Holdings Limited

32 UAP Old Mutual Executive Management 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Peter Mwangi Arthur Oginga Nkirote Mworia Njiru Apollo Njoroge Group CEO Acting Group CFO Group Company Secretary MD Faulu & Legal Counsel

David Kuria Isaac Nzyoka Jerim Otieno Peter Anderson MD General Insurance Group COO Group MD Life Assurance Group MD Asset Management UAP Holdings Limited | 2018 Annual Report and Financial Statements

UAP Old Mutual Subsidiaries Leadership Team 33

Kris Mbaya Stephen Chikovore Anthony Githuka Annie Nibishaka Managing Director UAP Acting Managing Director Managing Director UAP Acting Managing Director Insurance, South Sudan UAP Insurance, Uganda Life Assurance, Uganda UAP Insurance, Rwanda

Nelson Rwihula Mwanzo Moseti Simon Mwebaze Acting Managing Director Principal Officer UAP Managing Director UAP Insurance, Tanzania Life Assurance, Kenya UAP Financial Services, Uganda UAP Holdings Limited

34 CHAIRMAN’S STATEMENT 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Our long-term outlook for East Africa is positive based on continued political stability and sound macroeconomics.

DR. JOSEPH B. WANJUI CBS UAP Holdings Limited | 2018 Annual Report and Financial Statements

CHAIRMAN’S STATEMENT 35

Dear Shareholder, 2018 Kenya Asset Class Returns It gives me pleasure to once again present to you, the Annual Report and Financial On September 12th, 2018, the opposing parties in the 5–year civil war in South Sudan Statements of our Group. The operating environment during the year ended 31 signed a peace agreement which should lead to a cessation of hostilities. Following December 2018, was quite challenging in some of our key markets. In Kenya, the this peace agreement, we are cautiously optimistic that the security situation can bearish performance of the Nairobi Securities Exchange and the depressed property improve and with that, a gradual recovery in economic activity especially oil production market negatively impacted our investment returns, while in South Sudan, the effects which is the country’s economic mainstay. Improved operating conditions bode of an unstable political environment, a contracting economy and hyper-inflationary well for our core insurance business and investment properties. conditions led to a drop in the financial and operating results of our subsidiaries in that country. I am, however, pleased to report that even under these difficult conditions the Board and Management have made progress in the execution of 15.0% 10.0% 9.0% our long-term strategy as seen from the improved underwriting margins. 10.0% 7.3% 5.0% 2.7% (23.5%) Political Environment 0.0% Following the 2017 protracted election in Kenya, the year 2018 started with a fair (5.0%) amount of political tension. In a surprise move that significantly eased those tensions, President Uhuru Kenyatta and opposition Leader Hon. Raila Odinga, signed an (10.0%) agreement aimed at finding a long-term solution to the perennial fractious elections. (15.0%) That agreement played a big part in buoying investor confidence and private sector (20.0%) optimism about Kenya’s short to medium term economic prospects as shown in (25.0%) the Stanbic Bank Purchasing Managers Index (PMI) shown below. (30.0%) 364 Day T-Bill 182 Day T-Bill 90 Day T-Bill FTSE NSE NSE 20 2018 Stanbic Bank PMI Bond Index

58.0% In our other markets of Uganda, Rwanda and Tanzania, the political environment 56.0% was generally stable.

54.0% We have experienced challenges in our Tanzania business due to a tough operating 52.0% environment. However, we have taken actions to re-engage our customers and intermediaries to preserve our market share and position the business for growth. 50.0%

48.0%

46.0%

April May June July March August JanuaryFebruary October September NovemberDecember UAP Holdings Limited

36 Chairman’s Statement (Continued)

Macroeconomic Environment Our Uganda business, is the second largest after Kenya. The Ugandan economic environment was generally stable. There has, however, been slow progress towards 2018 GDP Growth Rates the eventual commercial exploitation of oil. We are optimistic that this position will improve significantly in the coming year. Rwanda and Tanzania continue to register strong economic growth. We believe we are well positioned in Uganda 10.0% and Rwanda to benefit from the opportunities that these two markets present. 8.6% 9.0% Our business in Tanzania is relatively small and suffered some setbacks in 2018. 8.0% Management, however, is confident that the performance of the business will be 6.8% 7.0% 6.6% 6.3% turned around in 2019. 6.0% 5.0% 2018 Average Inflation Rate 4.0%

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 5.0% 3.0% 4.7%

2.0% 4.0% 3.5%

1.0% 3.0% 2.6% 0.0% 2.0% Rwanda Tanzania Uganda Kenya 1.0% (0.3%) 0.0% The current forecasts for Kenya's 2018 GDP growth, ranges between 5.5% and 6.0% (2017: 4.9%) and are attributable to well contained inflation, a low interest rate (1.0%)

regime and stable exchange rates against major global currencies. The increase Kenya Tanzania Uganda Rwanda in GDP growth over 2017 did not translate into better economic outcomes and is in contrast to general business performance as evidenced by a number of profit warnings issued by listed companies in Kenya including ourselves, which cited The East African governments have all engaged in various large-scale infrastructure adverse economic performance as a significant contributor to the poor earnings projects; roads, railways, ports, pipelines, power plants to name a few. The expectation for the year. We believe that this dampened perfomance is partially attributable to is that the investment in infrastructure will support economic development thus fiscal consolidation efforts, coupled with lag from the business slowdown in 2017. uplifting the citizens of the East African states. The point of concern is that the governments have borrowed to fund these projects at a time when domestic revenue Similar to most of the African capital markets, Kenya’s capital market performed collection is constrained. This might pose fiscal challenges in the coming years. poorly as the major indices on the Nairobi Securities Exchange (NSE) closed the year in the negative territory. Some of the reasons for the downbeat capital market performance included adverse performance of corporates in general and sustained selling pressure by foreign investors who exited the market following signs of a pick up in the pace of economic recovery in their home countries. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Chairman’s Statement (Continued) 37

2018 LCY vs. USD Financial Performance Given the difficult operating environment more so in Kenya, Tanzania and South Sudan, our business experienced a constrained performance culminating in a loss 2.0% 1.4% before tax of KES 480Mn compared to a profit before tax of KES 1,330Mn in 2017. 1.0% (2.8%) (1.7%) (4.5%) The Group Chief Executive Officer’s statement on page 41 provides a more detailed 0.0% explanation of the financial performance for 2018. (1.0%) (2.0%) Dividends (3.0%) The Board of Directors do not recommend the payment of a dividend with respect to the financial year 2018 (FY2017: KES 1.70 per share). (4.0%)

(5.0%) Changes to the Board of Directors Kenya Tanzania Uganda Rwanda In the financial year under review, Mr. Peter De Beyer, Mr. James Wambugu and Mr. Atanas Kariuki Maina resigned from the Board. I want to thank them for their UAPHL and Old Mutual Kenya Merger immense contribution and service to the Board. We also welcomed Mr. Vincent During the year, we made progress towards the conclusion of the acquisition of Rague to the Board following his appointment as an Independent Non-Executive shares by UAP Holdings Limited (UAPHL) in Old Mutual Life Assurance Limited Director with effect from 1 June 2018. Mr. Rague brings with him a wealth of (OMLAC). I am pleased to inform you that for the OMLAC shareholders who opted investment and management experience which will undoubtedly contribute to the to be paid in cash for their shares, we have concluded the acquisition of these UAP Old Mutual Group’s vision as our customers trusted financial services partner. shares and made the requisite payments to these shareholders. Outlook Further, for the shareholders who opted for a share swap of their OMLAC shares Our long-term outlook for East Africa remains positive based on continued political for UAPHL shares, we concluded the share swap culminating in the issuance of stability and sound macroeconomics. Whilst the financial performance for 2018 UAPHL share certificates to these shareholders in December 2018. I welcome these may be disappointing, we believe the business remains well positioned to grow in shareholders to the UAPHL family and thank them for the trust they have placed in the long term. The business turnaround initiatives in Kenya are beginning to show us. We continue to explore various options for the integration of the Life and Asset green shoots of success. Our businesses in Uganda and South Sudan remain the Management businesses in Kenya to ensure that they are appropriately structured leading insurers in that market. While in Rwanda we have continued to gain market to deliver on our strategic objectives in the long-term. share. Occupancy levels in the UAP Old Mutual Tower in Nairobi are well above 85% and we have seen improvements in South Sudan following the peace deal. Old Mutual Limited Managed Separation Old Mutual Plc announced the “Managed Separation” strategy in 2016 which entailed the splitting up of Old Mutual as a conglomerate into four (4) standalone businesses. As part of this process, the residual Old Mutual Plc would comprise two separate entities, Quilter Plc with a primary listing on the London Stock Exchange (LSE) and Old Mutual Limited with a primary listing on the Johannesburg Stock Exchange (JSE). These transactions have now been completed, culminating in the listing of Old Mutual Limited on the JSE on 26 June 2018. Old Mutual Limited is now the ultimate parent company of UAPHL. UAP Holdings Limited

38 Chairman’s Statement (Continued)

I wish to thank our shareholders for their support and patience. I thank my fellow Directors for their guidance and insights as we navigated a challenging operating environment across East Africa. I thank management and staff and urge them to work hard to drive an improved performance in 2019 and beyond. I thank our intermediaries, regulators, revenue authorities and governments for providing us with a conducive environment to conduct business.

Lastly, I thank our customers for their continued support and reiterate our commitment to providing them with seamless integrated financial services.

Dr. JB Wanjui CBS Chairman 10 May 2019 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL UAP Holdings Limited | 2018 Annual Report and Financial Statements 39

THE TIME IS NOW TO GROW YOUR BUSINESS UAP Holdings Limited

40 GROUP CEO’S REPORT 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

In furtherance of this strategy we managed to reduce our underwriting losses by 2.5% and operating expenses by 10.8%.

PETER MWANGI UAP Holdings Limited | 2018 Annual Report and Financial Statements

GROUP CEO’S REPORT 41

Dear Shareholder, Our business in Tanzania similarly faced revenue shortfalls as a result of tightening It is my pleasure to once again present a review of our business performance for the fiscal positions taken by the Government which led to a slowdown in business activity. year ended 31 December 2018. In the past year, we have witnessed a rather subdued In addition, the collapse of Bank M during the year led to increased impairments operating environment across most of our markets which has translated to the for balances held with the bank at the time of its collapse. I am, however, pleased disappointing results. This was further compounded by the implementation of a to report that subsequent to year end, the Bank of Tanzania has entered into an new accounting standard – IFRS 9 – which led to an increase in impairments to take agreement with Azania Bank that will see Bank M depositors re-gaining access to account of expected future losses. The negative impact of market movements on their deposits. the results in 2018, has further reinforced the resolve by the board and management to focus on growing quality and profitable business based on strong relationships Financial Performance in order to ensure the long-term sustainability of our results. Gross written premium (GWP) declined slightly by 1.8% to KES 18,770 Mn as a result of a decline in premiums in Kenya, Tanzania and South Sudan, partially offset In furtherance of this strategy we managed to reduce our underwriting losses by by good growth experienced in Uganda and Rwanda. The decline in premiums 2.5% and operating expenses by 10.8%. However, due to the bearish performance in Kenya, was as a result of the general insurance business which continued to of the Nairobi Securities Exchange and the depressed property market, the overall focus on growing a sustainable, profitable customer base. In addition the slower result was a Loss Before Tax (LBT) of KES 479.8Mn. Subsequent sections of this report than anticipated economic growth in Kenya, negatively impacted the growth of will explain the drivers of financial performance in detail. the industry. As mentioned above the political and economic environment had a negative effect on premiums in South Sudan. Operating Environment The Chairman’s statement gives a broad outline of the regional operating environment. Net earned premiums (NEP) remained steady at KES 15,523Mn. Our market position However, a brief overview of events in Kenya, South Sudan and Tanzania is necessary in our countries of operation is summarised in the table below: to fully inform an assessment of the impact that these countries have had on the Group’s overall financial performance. Country General Insurance Life Assurance Kenya #4 #10 In Kenya, while GDP growth was robust, the general insurance industry saw the continued real decline in premiums. This is as a result of pricing based competition Uganda #2 #1 as well as the tough choices our customers have had to make in the face of a South Sudan #1 #1 challenging economic environment. In 2018, total industry premiums amounted to KES 216.4Bn representing a 4.2% growth, compared to a growth rate of 6.6% in Rwanda #3 n.a 2017. The general insurance segment grew at 3.5% while life assurance grew by 5.3%. Tanzania #9 n.a

In addition to the above, the Nairobi Securities Exchange suffered a decline of more than 20% as a result of the exit of foreign investors back to their home countries as the western world started to experience a sustainable economic recovery.

Although the operating conditions in South Sudan are improving, the economy has once again experienced a contraction as the impact of the political standoff took its toll on the economy. Many donors have also not returned to full operations due to the insecurity experienced for the better part of the year. UAP Holdings Limited

42 Group CEO’s Report (Continued)

NEP (KES Bn) The main driver for the loss recorded in the year was the 20.4% decline in investment income. This was due to poor performance of the equity market in Kenya which saw the Nairobi Securities Exchange 20 Share Index decline 23.5% in 2018. The 20.0 15.5 total unrealised losses on equities totalled KES 478Mn. 15.3 15.3

15.0 On the property portfolio, the depressed property market in Kenya and the limited 12.1 appetite for long term property decisions by potential tenants in South Sudan due to the political instability has led to a downward revision to our property 10.0 carrying values. In total, the business wrote down the values of our properties by KES 581Mn. However, I am pleased to announce that the commendable efforts 5.0 by management paid off and occupancy in the UAP Old Mutual Tower in Nairobi now stands at above 85%. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 0.0 The Group also impaired KES780Mn in financial assets due to a combination of the 2015 2016 2017 2018 implementation of IFRS 9 and the credit deterioration of Athi River Mining (ARM) and Bank M in which the Group held corporate bonds and deposits respectively. Net claims payable increased 10.0% to KES 10,389 Mn largely driven by more prudent reserving in the short-term insurance businesses and claims deterioration Investment Income (KES Bn) in the South Sudan, which was consistent with the hyper-inflationary conditions experienced in the country. In the life business, reserves increased in line with the 5.0 growth of the business.

4.0 Net Claims (KES Bn) 3.7 3.3 3.1 3.0 2.9 15.0 2.0 13.0

11.0 9.8 10.4 1.0 9.0 8.0 9.4 7.0 0.0 2015 2016 2017 2018 5.0

3.0

1.0

(1.0) 2015 2016 2017 2018 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Group CEO’s Report (Continued) 43

The business also performed a goodwill impairment test and as a consequence we PBT (KES Mn) wrote down the goodwill held for the Tanzania business by KES 174Mn.

1,600.0 Expenses were fairly well managed leading to a decline in operating expenses of 1,330.2 10.8%. This was driven by a combination of savings realised from the reorganisation 1,220.6 1,200.0 carried out in the first half of the year coupled with other cost optimisation initiatives. We continue to invest in technology, process improvements and our people in order to improve operating efficiencies that will eventually complement our efforts to 800.0 693.2 grow underwriting profits. 400.0 Operating Expenses (KES Bn) -

7.0 6.1 (400.0) 6.0 5.6 (479.8) 5.2 5.5 (800.0) 5.0 2015 2016 2017 2018 4.0

3.0 Restatement of Financials 2.0 Our 2017 financial performance has been restated with the reported PBT down 1.0 to KES 1,330Mn compared to KES 1,963Mn earlier reported. The restatement is attributable to an error in the accounting for property construction costs of the 0.0 UAP Old Mutual Tower which led to an overstatement in the valuation gains in the 2015 2016 2017 2018 prior year. In addition, due to an accounting error in our Life business, income was overstated in prior years which has now been corrected. Management has taken As a consequence of the above, the business has reported a loss after tax of KES corrective action to ensure these errors are not repeated. 517.9Mn. UAP Holdings Limited

44 Group CEO’s Report (Continued)

Outlook Africa’s economic growth continues to strengthen, reaching an estimated 3.5% in 2018, about the same as in 2017 and up 1.4% from 2.1% in 2016. East Africa led with GDP growth estimated at 5.7% in 2018. East Africa, the fastest growing region, is projected to achieve growth of 5.9% in 2019 and 6.1% in 2020. Between 2010 and 2018, growth averaged almost 6%. A stable outlook in terms of the macroeconomic environment and continued efforts by governments to enhance governance and transparency bode well for our businesses in East Africa.

However in Kenya, our largest market, the delay and possible inadequacy of the long rains (March to May) could undermine growth prospects given the importance of agriculture to the economy. The latest peace agreement in South Sudan continues to hold and we are cautiously optimistic that operating conditions will continue to improve in a market where we have a commanding lead.

Appreciation I wish to thank management and staff for their resilience during what was a difficult year for our business. I also thank the Board of Directors for their effective oversight and guidance. I wish to thank our intermediaries, partners, regulators and government agencies who are key stakeholders for our business. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Our customers are the reason we exist and I would like to humbly thank them for continuing to trust us to help them realise their financial dreams. Finally, I thank our shareholders and reiterate our commitment to deliver sustainable long-term returns.

Peter Mwangi Group Chief Executive Officer 10 May 2019 UAP Holdings Limited | 2018 Annual Report and Financial Statements 45

THE TIME IS NOW TO PLAN FOR YOUR RETIREMENT GORPORATE GOVERNANCE REPORT UAP Holdings Limited | 2018 Annual Report and Financial Statements 47

The Board firmly believes that well-articulated governance policies and processes are an indispensable component of the smooth, effective and transparent operation of the Company and its ability to attract investment, protect the rights of Stakeholders and enhance shareholder value in the long term. UAP Holdings Limited

48 Report of the Independent Governance Auditor to the Shareholders of UAP Holdings Limited

Introduction We have carried out a Governance Audit of UAP Holdings Limited (the “Company”) for the Financial Year ended 31st December 2018 through which we reviewed the Governance Practices, Structures and Systems put in place by the Board of the Company.

Board Responsibility The Board of UAP Holdings Limited is responsible for putting in place governance structures and systems that support the practice of good governance in the Company. The responsibilities of the Board include planning, designing and maintaining governance structures through policy formulation necessary for efficient and effective management of the Company. The Board is responsible for ensuring that it is properly constituted to promote and enhance ethical leadership and corporate citizenship, accountability, risk management, internal controls, transparency, disclosure, members’ rights and obligations, members’ relationship, compliance with laws and regulations, sustainability, and performance management.

Governance Auditor’s Responsibility Our responsibility is to express an opinion on the existence and effectiveness of governance instruments, policies, structures, systems and practices in the Company within 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL the legal and regulatory framework and in accordance with best governance practices as envisaged under proper Board constitution and composition; ethical leadership and corporate citizenship; accountability, risk management and internal control; transparency and disclosure; members’ rights and obligations; members’ relationship; compliance with laws and regulations; sustainability; and performance management based on our audit.

We conducted our audit in accordance with the ICPSK Governance Audit Standards and Guidelines which conform to global Standards. These standards require that we plan and perform the governance audit to obtain reasonable assurance on the adequacy and effectiveness of the Company’s policies, systems, practices and processes. We believe that our governance audit provides a reasonable basis for our opinion.

Opinion In our opinion, the Board of UAP Holdings Limited has put in place effective, appropriate and adequate governance structures which are in compliance with the legal and regulatory framework and in line with good governance practices for the interest of stakeholders.

J L G Maonga, P.108 For: Maonga Ndonye Associates Date: 10 May 2019 UAP Holdings Limited | 2018 Annual Report and Financial Statements 49

THE TIME IS NOW TO PLAN FOR YOUR FUTURE UAP Holdings Limited

50 Corporate Governance Report

The Board and Management of UAP Holdings Limited, (“UAPH” or the “Company”) are The Board considers that collectively, the Directors have the breadth and depth of committed to maintaining the highest standards of corporate governance practices skills, knowledge and experience necessary to direct the Company. The Directors on and have devoted considerable effort to identify and formalize best practices in the Board represent a diverse group of nationalities, skills and backgrounds to ensure corporate governance. The Board firmly believes that well-articulated governance that decisions of the Board encompass views from a wide reach of stakeholders. The policies and processes are an indispensable component of the smooth, effective detailed profiles of the board of directors including their academic and professional and transparent operation of the company and its ability to attract investment, qualifications can be found on our website. protect the rights of stakeholders and enhance shareholder value in the long term. The Board Charter together with the Articles of Association guide the Board of Key Highlights Directors in the discharge of their duties as they set out the expectation of the The key governance highlights for the year included: Board, Management and their expected contribution to the Company. Every Board ◊ Review and update of the Board Charter and Terms of Reference of each of Committee has its own Terms of Reference that sets out the scope and mandate the Boards’ committees to ensure that they optimally set out the delegated of the Committee and its responsibility to the Board. The Charter is reviewed on an responsibilities of each committee and the Boards’ overall oversight role. annual basis to ensure that the principles set out therein are relevant and comply 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Additionally, the Board approved and adopted formal Board level policies with applicable laws and regulations. related to the management of Conflicts of Interest, Diversity and Appointment of Directors. The key functions of the Board include: ◊ A review of the Memorandum and Articles of Association of the Company to ◊ Approving and monitoring the implementation of the strategic plan and bring them into compliance with the Companies Act, 2015 was completed annual business plans including regular review of the company’s performance and these amendments were approved by the shareholders during the Annual against the set objectives. General Meeting held in June 2018. ◊ Review the financial reports and approve the requisite public announcements ◊ The Board undertook a self-assessment of the Board and its committees to and ensuring that there are adequate controls and procedures in place to determine its effectiveness and an action plan has been developed to enhance maintain the integrity of accounting and financial records and statements. the areas of improvement that were identified. ◊ Enhancing long-term shareholder returns whilst having regards to the interests ◊ We continue to enhance our level of transparency by ensuring that our of stakeholders including customers, suppliers, employees and the communities stakeholders are provided with regular and accurate information relating to the in which we operate. Company through semi-annual stakeholder briefings, public announcements ◊ Reviewing and monitoring that the Company maintains an effective system placed in the press as well as on the Company’s website. of internal controls, processes and that the Company conducts its operations in accordance with applicable laws and regulations. 1. Board Functions and Responsibilities ◊ Ensuring that a formal risk, compliance and internal controls assessment is The Board is comprised of eleven (11) Directors, majority of whom are non-executive undertaken on a regular basis to ensure that the governance and statutory Directors with one (1) executive Director. More than one-third of the members are requirements of the company and its stakeholders are met. independent non-executive Directors. The Board is responsible for the formulation, ◊ Approving key executive appointments and remuneration, monitoring and implementation and monitoring of the Group’s Strategic Plan with the aim of reviewing executive succession planning and diversity. Additionally, the achieving sustainable, profitable growth for the Group. Board reviews and monitors the performance of the Group CEO and senior management. ◊ Monitoring the regulated subsidiaries within the Group to ensure that they carry out their businesses in a financially sound manner and that they do not fall below the required capital adequacy levels as set out by regulators. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Corporate Governance Report (continued) 51

◊ Where required or necessary, seek independent professional advice. ◊ Ensuring that the company operates in compliance with all relevant laws and ◊ The Board has delegated the day to day operations of the Group to the regulations. Management team which is headed by the Group Chief Executive Officer. The roles and responsibilities of the Chairman and the Group Chief Executive 1.1 Board and Committee Responsibilities Officer are separate with each having their distinct duties and responsibilities. 1.1.1 Main Board The Chairman is responsible for: ◊ The leadership of the Board and ensuring that the Board functions are effectively The Board meets at least once every quarter, but the business may warrant the carried out. convening of special meetings from time to time. All Board meetings are scheduled ◊ Setting the Boards’ agenda while striking a balance between strategy and in advance of the respective year through an annual calendar of Board Meetings performance. including a rolling annual calendar, which facilitates planning and availability of ◊ Ensuring that the Board has sufficient oversight over its committees by ensuring the members. Board Committee meetings are scheduled in advance of the Board that the Committees meet regularly and comprehensively report back on their meeting so that all technical matters are appropriately addressed and reported to activities to the Board. the Board for ratification or approval. For the period ended 31st December 2018, ◊ Ensuring that sufficient time is allowed for discussions on complex, contentious the Board met five (5) times. and critical issues and that all Directors engage and contribute to these discussions while ensuring that appropriate time and information is provided The Directors are given appropriate and timely information on key activities of the to Directors to take sound decisions on such matters. business regularly and on request in order to carry out their roles. Specifically, Directors ◊ Encouraging active engagement and appropriate challenge by the Board on are provided with all available information in respect of items to be discussed at a the Group’s risk and control environment. meeting of the Board or Committee prior to the meeting. ◊ Facilitating effective communication between the Board and the leadership team inside and outside of the Board meeting framework.

The Group Chief Executive Officer is responsible for: ◊ Driving the implementation of the strategy and business as approved by the Board and regularly reporting on the progress on execution. ◊ Leading and motivating the Senior Management team by ensuring they set annual performance objectives that stretch their capabilities and monitoring the delivery of the same. ◊ Maintaining and ensuring the effectiveness of the system of governance adopted across the Group. ◊ Managing all matters affecting the operations and performance of the Group within the authority delegated to him by the Board. ◊ Providing timely and accurate information about the company and key/material developments to the Board. ◊ Communicating to internal and external stakeholders on matters affecting the Company. UAP Holdings Limited

52 Corporate Governance Report (continued)

During the year, the following Directors held office and attended meetings as follows: The Board has incorporated five (5) standing Committees: Board Audit Committee, Risk and Compliance Committee, Remuneration Committee, Corporate Governance and Nominations Committee; and the Committee for Customer Affairs. Attendance Name Role at qualifying meetings The Board has three (3) ad hoc Committees: Project Saffron Independent Oversight Committee, Integration Committee and the UAP Old Mutual Tower Committee. The Chairman – Non- Dr. JB Wanjui 5/5 Executive Director tenure of the Integration Committee lapsed as at 31st August 2018 without further extension of its term as it had substantially dispensed its mandate. Independent Non- Peter De Beyer (resigned 31 May 2018) 3/3 Executive Director 1.1.2 Board Audit Committee Independent Non- Michael John Harper 5/5 Executive Director Membership Meetings Meetings eligible during the year attended to attend

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL James Muguiyi Non-Executive Director 5/5 Robert Mbugua (Chairman) 4 4 Independent Non- Paul Truyens 4 4 Dr. Peter Wanyaga Muthoka 5/5 Executive Director Susan Omanga 4 4 Independent Non- Paul Truyens 5/5 Peter De Beyer* 2 2 Executive Director Vincent Rague** 2 2 Independent Non- Robert Mbugua 5/5 Executive Director *Resigned on 1st June 2018; **Appointed 1st June 2018 Independent Non- Susan Omanga 5/5 Executive Director The Board Audit Committee is responsible for monitoring the integrity of the Independent Non- financial statements and any formal announcements relating to the Company’s George Maina 5/5 Executive Director performance, considering any significant issues and judgements reflected in them before submission to the Board. Independent Non- Vincent Rague (Appointed 1 June 2018) 2/2 Executive Director The Committee held four (4) meetings in the year and considered the following Jonas Mushosho Non-Executive Director 5/5 matters: ◊ Reviewed the 2017 full year financial statements and 2018 half year results as Iain Williamson Non-Executive Director 5/5 well as the related public announcements; ◊ Quarterly reports on the financial performance of the Group and its subsidiaries; Peter Mwangi Executive Director 5/5 ◊ In line with its oversight mandate, received reports from the subsidiary Audit Committees; Atanas Kariuki Maina Non-Executive Director 2/3 ◊ Considered and approved the Internal Audit Plan and Charter; (resigned 24 August 2018) ◊ Received and considered a report on the effectiveness of the Internal Audit James Wambugu (resigned 31 May 2018) Executive Director 2/2 Function; and ◊ The Committee noted the rotation of the audit engagement team, including the rotation of the Audit Partner and Audit Manager who had held office from UAP Holdings Limited | 2018 Annual Report and Financial Statements

Corporate Governance Report (continued) 53

2015 to 2017 for the holding company and its Kenya based subsidiaries. The same 1.1.4 Remuneration Committee was considered in light of the relevant statutory and regulatory requirements. Membership Meetings Meetings eligible during the year attended to attend 1.1.3 Risk and Compliance Committee Dr. Peter Muthoka (Chairman) 4 4 Membership Meetings Meetings eligible James Muguiyi 4 4 during the year attended to attend Jonas Mushosho 3 4 Paul Truyens (Chairman) 4 4 Clinton Rodgers* (co-opted) 4 4 Robert Mbugua 4 4

George Maina 4 4 *co-opted member Peter De Beyer* 2 2 Peter Mwangi 3 4 The Remuneration Committee supports the Board by reviewing and assessing the James Muguiyi 4 4 Group’s remuneration policies and practices that apply to employees benefits as well as non-executive Directors’ fees. The Committee met four (4) times and the *Resigned on 1st June 2018 following key activities were undertaken during the year:

The Risk and Compliance Committee supports the Board by providing oversight ◊ Reviewed and made recommendations on the staff re-organisation exercise to the Group’s risk profile in line with the approved risk appetite and making undertaken in H1 to ensure that the process across the Group was carried out recommendations regarding the risk appetite and risk management practices. in a fair manner and in accordance with applicable laws; ◊ Reviewed and recommended the tilting factors and benefits of the Group The Committee met four (4) times in the year and considered the following matters: Chief Executive Officer and members of the Executive Leadership Team based ◊ Receive and consider reports on key risks including those on financial, regulatory on financial and other performance measures as set out in the business plan; and operational risks. ◊ Made recommendations on the remuneration and harmonisation of non- ◊ Consider and recommend to the Board, the Company’s risk appetite. executive Directors’ benefits across the Group; ◊ Received and approved the Compliance Plan. ◊ Approved Human Resources Risk and Remuneration Risk Policies as they ◊ Approved Risk Policies for adoption across the Group. apply to the Group; and ◊ Reviewed and monitored reports on material litigation across the Group. ◊ Provided oversight and monitored the implementation of the Group payroll ◊ Received reports on whistleblowing and fraud incidents across the Group. administration system.

Areas of focus in 2019 ◊ Review of the organisation design principles adopted by the Group to ensure that it is appropriate and supports the current leadership structure; ◊ Review and approve the rationalisation of the employee benefits structure; ◊ Review and consider the automated staff performance management portal; and ◊ Succession planning for key talent and the Senior Leadership team. UAP Holdings Limited

54 Corporate Governance Report (continued)

1.1.5 Corporate Governance and Nominations Committee 1.1.6 Committee for Customer Affairs Membership Meetings Meetings eligible Membership Meetings Meetings eligible during the year attended to attend during the year attended to attend Michael Harper** (Chairman) 2 2 Paul Truyens (Chairman) 2 2 Dr. JB Wanjui 4 4 (Appointed 24 August 2018) Dr. Peter Muthoka 4 4 Michael Harper 4 4

George Maina 3 4 Jerim Otieno 2 2 Peter De Beyer* 2 2 (Appointed 30 May 2018) Joseph Wanjui Jr 2 2 *Resigned on 1st June 2018; **Appointed 1st June 2018 (Appointed 30 May 2018)

The Corporate Governance and Nominations Committee supports the Board Anne Mutahi 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 1 3 by monitoring the size and composition of Boards across the Group including (resigned on 31 October 2018) recommending appointments, succession planning for non-executive Directors, James Wambugu 2 2 reviewing Board and committee structures, and providing oversight to the Board’s (resigned 31 May 2018) professional development program. The Committee for Customer Affairs’ supports the Board by receiving and monitoring The Committee met four (4) times in the year and considered the following matters: of customer trends, customer complaints, products and technology innovations, ◊ Provided oversight in the development and monitoring of governance-related review of policy documentation and related concerns in a bid to ensure that policies including the review of the Board and committee terms of reference. customers are treated fairly and receive appropriate information based on their ◊ Reviewed and made recommendations on appointments of new Directors literacy levels. The membership of the Committee was reconstituted during the across the Group. year following the impending resignation of some of the members with Mr. Harper ◊ Considered Directors’ competencies and skills matrix to ensure that Boards relinquishing his role as the Committees’ Chairman and Mr. Truyens appointed as are fit for purpose. Chairman in his place. ◊ Reviewed the Board succession plan. ◊ Considered the Company’s corporate governance self-assessment as against The Committee met four (4) times in the year and reviewed: the CMA Code of Corporate Governance including reviewing the reporting ◊ The Group Customer Strategy and reports on customer value. template prior to submission to the CMA and monitoring the implementation ◊ The implementation of applicable Treating Customers Fairly (TCF) Frameworks of the remedial action plan. across the Group. ◊ Ensured that an independent governance and legal audits are undertaken for ◊ The practical results of the implementation of TCF outcomes to ascertain the year ended 31st December 2018. whether they are aligned with the TCF goals. ◊ The market conduct principles and explicit rules underpinning TCF and Areas of focus in 2019 ensuring that measures implemented by UAP Old Mutual Group pursuant to • Monitor the revamped Directors’ Development Program 2019; TCF requirements, generate the benefits envisaged. • Review and monitor succession planning across the Group; and • Ensure that the Board undertakes an independently facilitated Board evaluation.

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Corporate Governance Report (continued) 55

UAPHL Non-Executive Directors' Remuneration for the year ended 31 December 2018

Corporate Committee Risk & Governance Annual Board sitting Board Audit for Remuneration Project Tower Integration Compliance and TOTAL Retainer allowance Committee Customer Committee Saffron Committee Committee Committee Nominations Affairs Committee

Dr. JB Wanjui 4,815,000 250,000 120,000 30,000 5,215,000 Mike Harper 2,050,000 150,000 140,000 80,000 2,420,000 Peter De Beyer 958,500 100,000 60,000 60,000 80,000 1,258,500 James Muguiyi 2,050,000 200,000 120,000 120,000 30,000 40,000 30,000 2,590,000 Dr. Peter Muthoka 2,050,000 200,000 160,000 120,000 2,530,000 Paul Truyens 2,050,000 200,000 120,000 160,000 80,000 30,000 2,640,000 Robert Mbugua 2,050,000 200,000 160,000 120,000 2,530,000 Susan Omanga 2,050,000 200,000 120,000 40,000 30,000 2,440,000 George Maina 1,653,000 200,000 120,000 90,000 2,063,000 Vincent Rague 826,500 80,000 60,000 966,500 AK Maina 1,030,000 80,000 1,110,000 Joseph Wanjui Jr. 60,000 60,000 Lotfi Baccouche 30,000 30,000 25,853,000

2. Changes in the Board During the year, the following changes were recorded: 1. Mr. James Wambugu resigned with effect from 31 May 2018 2. Mr. Peter De Beyer resigned with effect from 13 June 2018 and was replaced with Mike Harper as Deputy Chairman 3. Mr. Atanas Kariuki Maina resigned with effect from 24 August 2018 4. Mr. Vincent Rague was appointed with effect from 1 June 2018

3. Board Induction and Continuous Skills Development

The Board has in place a formal, detailed induction program to prepare new Board or Committee members for their role, by providing a foundation of knowledge and understanding, which will enable them effectively fulfil the functions of the role. The induction program is facilitated and coordinated by the Group Company Secretary who ensures that the new Director meets with the Board Chairman, the Group Chief Executive Officer, Senior Management and the Secretary or designee to obtain practical information pertaining to the company. A Director is required to undertake and complete this induction program within six (6) months of their appointment. UAP Holdings Limited

56 Corporate Governance Report (continued)

In addition, each Director is issued with a Directors’ compendium which contains Additionally, the company regularly communicates to its shareholders, investors, their appointment letter, copies of the Board Charter and Terms of Reference of regulators and financial analysts though briefings, press releases, our website and at relevant committees, the Board work plan, the Board calendar and relevant Board the Annual General Meeting as required. During the year, we organized two investor policies and company information required to fulfil their duties. briefings to share our interim and full year results and a roadshow where we updated our investors and shareholders on our strategy and business outlook for East Africa. The Corporate Governance and Nominations Committee is reviewing the Board development programme to ensure that there is a cohesive and consistent 6. Company Secretary development plan to appraise the Board on key developments and trends. We The Group Company Secretary/Legal Counsel is Ms. Nkirote Mworia Njiru who is a continue to review and refine our Board development needs to ensure that training member in good standing of the Institute of Certified Secretaries (ICS). The Group interventions are timely and relevant. Company Secretary is responsible for the improvement and monitoring of good corporate governance processes and procedures. The GCS coordinates and ensures During the year under review, Directors attended training on Corporate Governance, that there is appropriate flow of information from Management to the Board and the revised IFRS standards and Cybersecurity with a view of attaining the required vice versa. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 12 hours of training per Board member. All Board Members have direct access to the Group Company Secretary who ensures 4. Conflict of Interest that the business of the Board functions optimally and adheres to all statutory The Board Charter places an obligation on Directors to make declarations on their requirements, while keeping the Board informed on emerging legal and regulatory personal or commercial interests with a view of avoiding any action, position or requirements and developments. interest that conflicts or appears to conflict with a Group interest. This is a matter for active and ongoing consideration by all Directors, and thus a standard declaration STATUS OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE form has been developed for recording and updating Directors’ interests as they FOR ISSUERS OF SECURITIES TO THE PUBLIC, 2015 occur and on an annual basis. The declaration of interest arising from any specific The Board and Management continue to put in deliberate efforts towards full issue on the agenda of a meeting is also provided as a standing agenda item for compliance with the Code of Corporate Governance Practice for Issuers of Securities Board and Committee meetings. to the Public 2015 (the “Code”). Fuller details of the specific status of compliance with the Code can be found in the 2018 submission which is hosted on our website In November 2018, the Board adopted a formal Conflict of Interest Policy which http://www.uapoldmutual.com/about-us/investors formally codifies and augments the procedure adopted by the Board in respect of declaring and regular review of Directors’ interests. The Company has taken the following steps in 2018 to enhance compliance with Code: 5. Shareholders Rights 1. Revision of the Board and Committee Charters and Terms of Reference to The rights and restrictions attaching to the shares are set out in the Company’s ensure compliance with the requirements of the Code. Amended Articles of Association which can only be amended at the Company’s 2. Adoption of formal Board Policies related to: Insider Dealing, Conflict of Interests, General Meetings with the last review/amendments to the Articles undertaken Appointment and Board Diversity Policies. in the prior year AGM. All shareholders are entitled to receive the annual report 3. Facilitation of the annual Board evaluation exercise and development of an and financial statements and to attend, speak and vote at the General Meetings action plan for continuous improvement of Board performance. including the appointment of proxies which allows them to effectively participate 4. Facilitation and conducting of an Independent Governance Audit undertaken in the company. On a poll, shareholders are entitled to one vote for each share held by the firm of Maonga Ndonye Associates whose opinion is included in and there are no shares carrying special rights. this report. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Corporate Governance Report (continued) 57

5. The Legal Audit is on-going, and the summary of the key findings will be published on our website once the audit is completed. 6. Developing a roadmap towards integrated reporting. 7. We continue to review diversity on the Board and particularly in respect of gender balance with proposed appointments being considered as part of the Board succession plan.

SHAREHOLDING STRUCTURE As at 31 December 2018, the top ten shareholders in the Company were:

31 Dec 2018 31 Dec 2017 Holder Names Shares held % Holding Rank Shares held % Holding Rank

Old Mutual Holdings Limited 78,919,889 37.28 1 78,919,889 37.28 1

Old Mutual Life Assurance Company (South Africa) Limited 49,332,445 23.30 2 49,332,445 23.30 2

Bawan Ltd 43,258,299 20.43 3 43,258,299 20.43 3

James Ngatia Muguiyi 12,611,247 5.96 4 12,611,247 5.96 4

Estate of The Late William Kimutai Martin 2,341,480 1.11 5 2,341,480 1.11 5

Andrew Stephen Gray Smith 1,789,189 0.85 6 1,789,189 0.85 6

A/C 017 Genghis Nominees 1,544,900 0.73 7 1,544,900 0.73 7

Standard Chartered Nominee A/C 9230 1,403,000 0.66 8 1,403,000 0.66 8

Owen-Burke Timothy Michael John 1,371,562 0.65 9 1,371,562 0.65 9

Sayani Investments Limited 1,194,957 0.56 10 1,194,957 0.56 10

Notes 1. There were no changes in ranking in the top ten shareholders as compared to prior year. 2. The formal conclusion of the acquisition of a combined 6% of shares from Bawan Limited and Mr. James Muguiyi by Old Mutual Holdings Limited was not completed in 2018, as such, the changes in shareholding will be reflected in 2019 after the completion of the requisite registration formalities. 3. The transfer of shares by Old Mutual Life Assurance Company (South Africa) Limited to Old Mutual Holdings Limited is ongoing and subject to the registration formalities which are expected to be concluded in 2019 UAP Holdings Limited

58 Corporate Governance Report (continued)

The distribution of shareholders as at 31 December 2018 was:.

Range Shares Shares % Shareholders Shareholders %

1 – 500 31,174 0.01 65 6.06

501 – 5000 1,588,366 0.75 689 64.21

5001 – 10000 924,734 0.44 124 11.56

10001 - 100000 4.810,906 2.28 158 14.73

100001 - 1000000 9,179,281 4.34 26 2.42

>1000000 194,885,428 92.18 11 1.03

TOTALS 211,419,889 100 1,073 100 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Shareholders Analysis by Domicile

Industry Shares Shares % Shareholders Shareholders% East African Community Partner States Institutions 131,107,055 62.01 143 13.33

Foreign Individual 1,116,227 0.53 20 1.86

East African Community Partner States Individuals 29,849,087 14.12 908 84.62

Foreign Institutions 49,347,520 23.34 2 0.19

TOTALS 211,419,889 100 1,073 100

The Directors’ direct and indirect interests in the ordinary share capital of the Company on 31 December 2018 was as follows: Name Shares % holding 1. Dr. JB Wanjui 43,258,299 20.432

2. James Ngatia Muguiyi 12,611,247 5.957

3. Atanas Kariuki Maina* 118,100 0.056

*Resigned with effect from 24th August 2018

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Risk Management Report 59

Our Risk Management Strategy positioning them to support and advise, and independently challenge business The UAP risk strategy is an integral part of the Group’s business strategy. It expresses decisions from a risk perspective. As business advisers on risk matters, the risk our overall philosophy towards risk, taking into consideration what we regard officers, equipped with technical risk skills as well as business skills, help foster a necessary to achieve our vision and reflects the risk elements of our business strategy. risk-aware culture in the business.

Our Risk Strategy is based on a prudent approach towards risk and capital The Board Risk and Compliance Committee prescribes the mandates of the Group’s management. We avoid taking excessive risks that could threaten the financial 2nd Line Control Functions, i.e. the Group Risk, Compliance, Actuarial and Financial stability of the Group in adverse financial conditions. However, our business strategy Crime Control Functions. These Control Functions support the business and provide also requires strong growth in market share and profits. We are therefore willing assurance to the BRC that the Risk Management and Internal Control Systems are to accept certain risks, and there are some risk types for which we have a strong operating effectively. appetite for. We will however ensure that we have the skills to manage these risks and that the risks we take are not excessive or so concentrated that they could ERM Risk Classification Model threaten the financial stability of the group in very adverse financial conditions. The ERM Risk Classification Model is designed to be used consistently across the UAP Group by all the Lines of Assurance with the objective of enabling aggregation and consistent reporting of risks and risk events. Our objective is to optimize returns on a risk-adjusted basis i.e. to take on those risks where the expected return more than compensates us for the risk taken, and Risk Classification Description we want to avoid those risks where the expected return is too low. We believe in the value of diversification (of risk types, products, target markets and distribution Risk Classification Description channels) to avoid excessive risk concentration, so that the sustainability of the whole business is not undermined. The risk of loss or adverse changes in the value of insurance Insurance Risk liability due to inadequate pricing and/or reserving The UAP Group’s risk preferences and appetite limits are set out in the UAP-OM assumptions Risk Strategy document which describes specific risk preferences and metrics. This Risk Strategy is reviewed at a minimum at least annually by the UAP Holdings Board and subsidiary risk preferences and appetite limits may need to be adjusted The risk that business performance will be below projections accordingly. Risk appetite preferences or statements are supplemented by the risk Business Risk as a result of negative variances in new business volumes, policies of the Risk Policy Suite. margin, lapse experience or expenses.

Risk Governance The UAP Group subscribes to the 3 Lines of Assurance Model, which establishes The risk that discretionary decisions are made that adversely Strategic Risk clear accountability and ownership for risk management, the control environment affect future earnings and sustainability of the business. and required mitigating management actions and enables effective separation of risk taking from risk oversight activities. The risk of Loss due to people failing to carry out their The risk function is independent of the business by being a vertically integrated Operational Risk duties, the failure of processes or systems and/or due to the occurrence of external events function where all risk staff across the Group have a matrix reporting line into the Group Chief Risk Officer (CRO). Risk officers are embedded in the business, UAP Holdings Limited

60 Corporate Governance Report (continued)

designated Group risk sponsor. The sponsor must ensure policy content is suitable Risk Classification Description for application to the various lines of business and business models, communicate with OML subsidiaries, oversee implementation of the requirements and provide periodic compliance assessments. The risk that an asset against a counterparty will not be Credit Risk repaid at the due and stipulated time. The CEOs, risk sponsors and 2nd Line Control Functions of the subsidiaries are required periodically to attest to the adherence of their business to the requirements of every applicable risk policy, including identifying the nature and status of any material The risk that available liquid assets will be insufficient to meet changing market and business conditions, liabilities, gaps and the management actions underway or planned to address these gaps. Liquidity Risk funding of asset purchases, or an increase in client demands for cash.

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL The risk of adverse changes in the balance sheet or on future Market Risk earnings whether directly or indirectly, due to fluctuations in the market prices of financial instruments

The risk of providing inappropriate/wrong legal advice or not applying/conforming to the law or non-compliance Legal and Regula- with laws, regulations/directives resulting in legal liability, tory Risk financial loss, reputational damage and/ or regulatory sanctions and penalties

Risks outside the control of the company which are difficult External to predict or manage.

The risk that unfair outcomes are delivered to customers Market Conduct or the organisation's integrity in the market is impaired, Risk due to actions or decisions taken by the organisation or its employees.

Our ERM Policy Suite The UAP Group Risk Policy Suite is aligned to the ERM Risk Classification Model. The Risk Policy Suite consists of Level 1 risk policies which are principle-based policies aligned to the Level 1 risk categories, prescribing the high-level approach on how the UAP Group wishes to manage each particular risk type and Level 2 risk policies subordinate to each of the Level 1 risk policies. Minimum standards by which risks must be managed and reported on, including clearance and escalation requirements, are prescribed in the risk policies, each of which has a UAP Holdings Limited | 2018 Annual Report and Financial Statements 61

THE TIME IS NOW TO GROW YOUR INVESTMENTS UAP Holdings Limited

SUSTAINABILITY AND SOCIAL RESPONSIBILITY UAP Holdings Limited | 2018 Annual Report and Financial Statements 63

We believe in acting NOW and doing great things everyday so that our shareholders, employees and customers can in turn achieve their dreams and become their exceptional best. UAP Holdings Limited

64 Sustainability and Social Responsibility

As a Group, we are proud of the impact we continue to make to our customers, The Anchoring was marked with roadshows across the 13 countries OML operates shareholders, communities in which we operate and staff members. We beleive in in. Staff were delighted and celebrated in true African style complete with pomp, creating meaningful partnerships which have seen us; provide innovative solutions vibrancy in colour and dance. like the Dream Enabler application, that offers solutions on the go for our customers; impacting various communities and providing an enabling working environment Staff Engagements for staff. As a Group, we engage our staff in various activities to ensure a good work balance as well as provide an environment that allows for creativity and moments to unwind. We believe in acting NOW and doing great things everyday so that our shareholders, employees and customers can in turn achieve their dreams and become their In 2018, staff were presented with a myriad of initiatives that encouraged their exceptional best. participation in: Health and Wellness checkups, screening of the FIFA World Cup in the office, Game night and Financial Education during the customer service week. Anchoring in Africa For the Internationally recognised Women’s Day 2018, the Old Mutual Women Network (OWN) hosted staff for a breakfast and invited speakers who enlighted 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL our employees on nutrition as well as awarded women who are changing the Organization in meaningful ways. The highlight of the event was the unveiling of the new mothers’ room.

Top leadership teams were also provided with the opportunity to attend leadership programs at the Strathmore University – Aspire Leadership Programs, Advanced Management Program and Senior Management Leadership Program. 90% graduated and are currently implementing their projects and learnings within the Group.

The UAP Old Mutual Group Executive Committee, receive the Anchor from (middle right) MD, Old Mutual Corporate, Clement Chinaka during the Anchoring in Africa roadshow at the UAP Old Mutual Tower

2018 saw the birth of Old Mutual Limited (OML) which was occasioned by the return to its roots in Africa with the listing on the Johannesburg Stock Exchange (JSE) and subsequent listings in Malawi, Namibia and Zimbabwe. This was as a result of Old Mutual Plc announcing the “Managed Separation” strategy in 2016 which started the journey of the Company moving back home. Staff celebrate a win during a game night held at the UAP Old Mutual Tower UAP Holdings Limited | 2018 Annual Report and Financial Statements

Sustainability and Social Responsibility (continued) 65

600 Renovation of Uasin Gishu County Hospital 500 400

300

200

100

0 Uasin Gishu Bungoma Nakuru Eye Bungoma Eye Cancer Cancer Screening Screening Screening Screening

Total Attendance Abnormalities

Group CEO, Peter Mwangi and Uasin Gishu County Governor, H.E. Hon. Jackson K. Arap 2018 Medical Camps Mandago officially open the refurbished Uasin Gishu County Hospital. About the UAP Old Mutual Foundation UAP Old Mutual Foundation invested KES 10.9 Million to renovate the Uasin How we are investing in the communities across Kenya Gishu County Hospital that serves up to 300 patients daily.

The renovation focussed on remodelling the entire laboratory and maternity building for space optimization. The renovation served to improve the services at the hospital and to decongest other county labs. + 14% 7% IMPACT IMPACT Project Scope 70% 50,000 trees 600 visually 1. Upgrading the waiting bay and reception area for the comfort of the patients planted towards impaired pupils 2. Construction of the phlebotomy area to guarantee the patients’ privacy environmental supported IMPACT conservation 3. Construction of lavatories & showers Kenyatta National Hospital 4. Complete overhaul of the roof and floor A&E: Improved services for 180,000 patients Supporting Prevention of Non-Communicable Diseases + 4% The Foundation also sponsored free medical camps in Eldoret, Nakuru and Bungoma Uasin Gishu County Hospital: 5% Counties in 2018 to support the prevention or early detection of non-communicable IMPACT Improved lab & maternity IMPACT diseases. Through our partnership with the Africa Cancer Foundation, Kenya Society 2,000 People 600 staff volunteers for the Blind, hospitals and County Governments, we have supported over 2,000 services for over 108,000 attended to patients annually through medical people with free screening services for; prostate, cervical, breast, eye as well as Blood camps Pressure, BMI and Blood Sugar screening. UAP Holdings Limited

66 Sustainability and Social Responsibility (continued)

Innovation On the website, the enhanced customer journeys ensure that customers can find the information they need easily and fast. They can also express interest right on the site for any product and, for a select number of products, be able to buy online.

By close of 2018, the business had registered Kshs.10.6Mn in revenue and more than 3500 customer registrations through the platform.

Customer Driven We continuously seek to understand the needs and aspirations of our customers in order to help them work towards achieving them.

Through initiatives such as our Financial Education Program held during the Customer Service Week, where we provided an opportunity for one on one engagement as 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL well as the timely paying out of claims, we believe this went a long way in facilitating the journey towards our Customers fulfilling their dreams.

(L-R) Group COO, Dr. Isaac Nzyoka and Group CEO, Peter Mwangi go through the The Old Mutual Investment Group (OMIG) also held a conference for their clients Dream Enabler App focusing on Public Private Partnerships; The New Investment Frontier was a topical subject. The conference also saw the attendees have one on one engagement on In August 2018, The Group officially launched the first phase of a digital initiative personal financial wellness. aptly referred to as “Dream Enabler”. The initiative kicked-off in 2016 with two main objectives;

◊ To provide customers with service at their fingertips. ◊ To offer an on-the-go intergrated financial services solution to customers.

The move was informed by customer needs, brand visioning and business strategy objectives that sought to use digital channels to grow business and improve our customer experience while saving on costs. The resultant solution has two main components; the website with enhanced customer journeys for business development and a self-service portal for customers and intermediaries.

The platform has enabled customers to have a view of all their policies at the touch of a button. Customers can also initiate some servicing requests on the platform such as motor claims and health reimbursement. Intermediaries, will for the first time be able to get a view of customers on the Dream Enabler, view their commission Health and wellness checkup for customers in Uganda statements, see upcoming policy renewals, keep track of claims status on behalf of their customers’ and prepare quotations. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Sustainability and Social Responsibility (continued) 67

A refurbished Uasin Gishu County Hospital Uganda staff celebrating International Customer Tanzania staff at a childrens home during Care and Service Week Share day

Rwanda staff go through the Customer Service Happy Customer Service Week from Eye checkup at Nakuru Medical Camp Charter during International Customer Service Uganda Week UAP Holdings Limited

68 Sustainability and Social Responsibility 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Uganda celebrates the football CSR in Uganda Staff at the UAP Old Mutual Tower dress up in their favorite football jersey season during the final game of the World Cup

I've Got the Power campaign launch A panel discussion during the H.E. Hon. Governor Wycliffe Wangamati Group Critical Illness launch at the during a Health & Wellness checkup in Radisson Blu Hotel Bungoma County UAP Holdings Limited | 2018 Annual Report and Financial Statements

Sustainability and Social Responsibility (continued) 69

H.E. First Lady Bungoma County, Mrs. Caroline W. The Mothers' room at the UAP Wangamati during a meet and greet session at the Old Mutual Tower medical camp in Bungoma County

A customer enjoys the view from the 33rd floor of the UAP Old Staff enjoy a cross fit The Aspire program graduants at the Strathmore Business Mutual Tower session to improve their School health UAP Holdings Limited 70

DIRECTORS' REPORT UAP Holdings Limited | 2018 Annual Report and Financial Statements 71

The Directors submit their report together with the audited financial statements for the year ended 31 December 2018 which disclose the state of affairs of UAP Holdings Limited (the ‘Company’) together with its subsidiaries (the ‘Group’). UAP Holdings Limited

72 Directors’ Report

The Directors submit their report together with the audited financial statements for the year ended 31 December 2018 which disclose the state of affairs of UAP Holdings Limited (the ‘Company’) together with its subsidiaries (the ‘Group’).

Principal activities The Group is engaged in the business of Insurance, Premium Financing, Investment Management, Property and Stock Broking Services. These activities are carried out through the Group’s Subsidiaries in Kenya, Uganda, Tanzania, South Sudan, Mauritius and Rwanda. These activities are briefly described below:

Insurance business: The Group has seven subsidiary undertakings that underwrite all classes of life and non-life insurance risks as defined by the Insurance Act in their respective countries of domicile. The Group does not underwrite industrial life insurance. The Group also issues investment contracts to provide its customers with asset management solutions for their savings and retirement needs, and provides insurance premium financing services. These operations are carried out in Kenya, Uganda, Tanzania, South Sudan and Rwanda.

Stock broking:The Group provides stock broking services through its subsidiary, UAP Financial Services Limited, a Ugandan based Company. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Property:The Group holds investments in two property companies based In Uganda and South Sudan. The company directly owns commercial property and through its other subsidiaries owns a portfolio of commercial and residential properties in Kenya, Uganda, Rwanda and South Sudan.

Directors The Directors of the Company, who held office during the year and up to the date of this report, are:

Dr JB Wanjui, CBS Kenyan Chairman (Non-Executive Director) Mr Michael Harper South African Deputy Chairman and Independent Non-Executive Director Mr Peter De Beyer South African Independent Non-Executive Director (Resigned 31 May 2018) Mr James Ngatia Muguiyi Kenyan Non-Executive Director Dr Peter W Muthoka, EBS Kenyan Independent Non-Executive Director Mr Paul Truyens Dutch Independent Non-Executive Director Mrs Susan Omanga Kenyan Independent Non-Executive Director Mr AK Maina Kenyan Non-Executive Director (Resigned 24 August 2018) Mr Robert Mbugua Kenyan Independent Non-Executive Director Mr George Maina Kenyan Non-Executive Director Mr Vincent Rague Kenyan Independent Non-Executive Director (Appointed 1 June 2018) Mr Jonas Mushosho Zimbabwean Non-Executive Director Mr Iain Williamson South African Non-Executive Director Mr Peter Mwangi Kenyan Executive Director (Group Chief Executive Officer) Mr James Wambugu Kenyan Executive Director (Resigned 31 May 2018) UAP Holdings Limited | 2018 Annual Report and Financial Statements

Directors’ Report (continued) 73

Results Restated

2018 2017

Kshs ’000 Kshs ’000 (Loss)/profit for the year (517,875) 607,515

(Loss)/profit attributable to shareholders of the company (350,468) 662,578

Dividends The Directors do not recommend the payment of a dividend (2017: Kshs 1.70 per share amounting to Kshs 359 million).

Relevant audit information The Directors in office at the date of this report confirm that:

◊ There is no relevant audit information of which the Group’s auditor is unaware; and ◊ Each Director has taken all the steps that they ought to have taken as a Director so as to be aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.

Auditor The Company’s auditors, Messrs KPMG Kenya, have expressed willingness to continue in office for the ensuing financial year.

Approval of the financial statements The financial statements set out on pages 85 to 199 were approved and authorised for issue by the Directors on 1st April, 2019.

By order of the Board

Nkirote Mworia Njiru Secretary

Date: 1 April 2019 UAP Holdings Limited

74 Directors’ Remuneration Report

UAP Holdings Limited is pleased to present the Directors’ remuneration report for (b) Non-Executive Directors: Dr. JB Wanjui (Chairman), Mr. JN Muguiyi, Mr. AK Maina the year ended 31 December 2018. This report is in compliance with the Capital (resigned 24 August 2018), Mr. George Maina, Mr. Jonas Mushosho, and Mr. Iain Williamson Markets Authority (CMA) Code of Corporate Governance Guidelines for Issuers of Securities to the Public. (c) Independent Non-Executive Directors: Mr. Peter De Beyer( resigned 31 May 2018), Mrs. Susan Omanga, Dr. Peter W. Muthoka, Mr. Paul Truyens, Mr. Michael UAP Holdings Limited offers a selection of financial and non-financial reward and Harper, Mr. Robert Mbugua and Mr. Vincent Rague (appointed 1 June 2018). benefits to Non-Executive Directors. In determining the remuneration structure for Non-Executive Directors, the Group has adopted a Directors' Remuneration model For the financial year ended 31 December 2018, the Consolidated Directors’ fees that takes into account the size and nature of the Group’s business and comparative were Kshs 198.61m (2017: Kshs 191.61m) and Company Director fees were benchmarks of similar entities within the financial services sector in East Africa. Each Kshs 39.98m (2017: Kshs 31.68m) as detailed below: Non-Executive Director (other than the Old Mutual representatives) are entitled to the following fees and benefits in respect of their appointment on the Board: Note Group Company

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL (a) Directors' Fees : This is an annual retainer paid to Non-Executive Directors prorated 2018 2017 2018 2017 and paid monthly in arrears for service rendered to the Board. Kshs’000 Kshs’000 Kshs’000 Kshs’000

Non-Executive Directors fees 86,743 86,478 39,978 31,683 (b) Directors' Sitting Allowances : These relate to allowances paid out to Directors to compensate them for their time in preparation and attendance in Board and Executive Directors salaries 111,862 105,132 - - committee meetings. Total Directors fees 44 (vii) 198,605 191,610 39,978 31,683

(c) Directors’ Medical Cover : These are benefits provided to Directors that entitle them to receive medical assistance under the corporate medical cover as and The Company values the input of the shareholders and engages directly with when necessary. them when making any revisions to the Board remuneration package through the Annual General Meeting. (d) Directors’ Liability Cover : This is provided in line with best market practice to provide protection for the Non-Executive Directors in undertaking their duties in By order of the Board such capacity.

In respect of Executive Directors, they are remunerated based on their employment contracts. Nkirote Mworia Njiru The Company’s Board of Directors consisted of: Secretary (a) 2 Executive Directors: Mr. Peter Mwangi and Mr. James Wambugu (resigned 31 May 2018). The GCEO is currently not paid through the Date: 1 April 2019 company but through a related party of the parent.

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Statement of Directors' Responsibilities 75

The Directors are responsible for the preparation and presentation of the consolidated and separate financial statements of UAP Holdings Limited set out on pages 85 to 199 which comprise the consolidated and separate statements of financial position at 31 December 2018, and the consolidated and separate statements of profit or loss, consolidated and separate statements of other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended and Notes to the Financial Statements, including a summary of significant accounting policies and other explanatory information.

The Directors’ responsibilities include: determining that the basis of accounting described in Note 2 is an acceptable basis for preparing and presenting the financial statements in the circumstances,preparation and presentation of financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act, 2015 and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Under the Kenyan Companies Act, 2015, the Directors are required to prepare financial statements for each financial period which give a true and fair view of the financial position of the Group and Company as at the end of the financial period and of the profit or loss of the Group and Company for that period. It also requires the Directors to ensure the Company and its subsidiaries keeps proper accounting records which disclose with reasonable accuracy the financial position of the Group and Company.

The Directors accept responsibility for the annual consolidated and separate financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act, 2015. The Directors are of the opinion that the consolidated and separate financial statements give a true and fair view of the financial position of the Company and of its profit or loss

The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of consolidated and separate financial statements, as well as adequate systems of internal financial control.

The Directors have made an assessment of the Group and Company’s ability to continue as a going concern and have no reason to believe the Company and its subsidiaries will not be a going concern for at least the next twelve months from the date of this statement.

Approval of the financial statements The financial statements, as indicated above, were approved and authorised for issue by the Board of Directors on 1 April 2019

­­­­­­

Dr JB Wanjui CBS Peter Mwangi Chairman Group Chief Executive Officer

Date: 1 April 2019 UAP Holdings Limited

76 Business Review

The Group reported a loss before tax for the year of KShs 479.8m. The loss is attributed Underwriting profit and combined ratio to the difficult operating environment across the region but in Kenya and South Our underwriting loss decreased from KShs 1.779Bn to KShs 1.735Bn mainly Sudan in particular. Investment income returns declined sharply as a result of the attributable to a 10.8% decrease in Operating Expenses which partially offset the bearish performance of the Nairobi Securities Exchange, dampened property market 10.0% increase in the Net Claims. The combined ratio decreased in tandem from across the region and impairment losses attributed to the implementation of IFRS9 111.6% to 111.2%, a decrease of 0.4%. and the deteriorating credit ratings on some corporate bond issuers. Investment income Despite the above challenges the performance of the core insurance business Investment income decreased by 25.6% to KShs 2.9Bn mainly due to a bear was steady as management continued to focus on underwriting quality business, market on the Nairobi Securities Exchange (NSE) which led to a decline in equity containing costs and reserving appropriately under the current difficult market performance as well as a dampened property market which led to lower returns environment. from the property portfolio. Whilst occupancy increased across all the properties and especially the UAP Tower, declining rentals and market outlook led to lower The key risks surrounding the Group’s businesses are outlined under Note 4 to valuations and thus write downs in the portfolio. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL these financial statements. Dividend Revenue growth The Board of Directors recommend the payment of no dividend (FY 2017: KES 1.70 Net Earned Premium (NEP) increased by 0.7% to KShs 15.5Bn. In our core market per share) to be recommended for approval by shareholders at the Annual General Kenya, total general insurance industry premiums growth has been muted over the Meeting to be held on Friday, June 14th, 2019. last 3 years which is a reflection of pricing pressures. Under these conditions, the Group has continued to focus on improving underwriting performance by retaining and growing quality business.

Net claims Peter Mwangi Net claims increased by 10% to KShs10.4Bn due to increased reserving from actions Group Chief Executive Officer to strengthen the underwriting process. Inflationary pressures in South Sudan has also seen the cost of claims rise significantly as suppliers, continuously raised prices Date: 1 April 2019 to keep up with inflation.

Operating expenses In line with the muted topline growth across the industry, the management has been taking actions to improve efficiency and lower cost. Over the last three years, management has invested in replacing and upgrading various systems and improving processes and procedures. These initiatives have led to a 13% reduction in operating expenses to KShs 5.4Bn (2017: KShs 6.1Bn). Included in the expenses are a once off restructuring cost of KShs 342m. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Report of the Independent Auditors’ to the Members of UAP Holdings Limited 77

Report on the audit of the consolidated and separate financial statements

Opinion We have audited the consolidated and separate financial statements of UAP Holdings Limited ("the Group and Company”) set out on pages 85 to 199 which comprise of consolidated and separate statements of financial position at 31 December 2018, and the consolidated and separate statement of profit or loss, consolidated and separate statement of other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statement of cash flows for the year then ended, and Notes to the Financial Statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of UAP Holdings Limited as at 31 December 2018 and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act, 2015.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated and separate Financial Statements section of our report. We are independent of the Group and Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the requirements that are relevant to our audit of the consolidated and separate financial statements in Kenya, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. UAP Holdings Limited

78 Report of the Independent Auditor's to the Members of UAP Holdings Limited (continued)

Key Audit Matters Short term insurance contract liabilities (Applicable to the consolidated financial statements) See Note 33 to the financial statements

The Key audit matter How the matter was addressed in our audit Short term insurance contract liabilities constitute a significant portion of the Our audit procedures in this area included, among others: Group’s total liabilities. Valuation of these liabilities is highly judgmental, and requires a number of assumptions to be made that have high estimation uncertainty. ◊ Evaluating and testing key controls around the claims handling and reserve setting processes of the Group; This is particularly the case for those liabilities that are recognised in respect ◊ Checking for any unrecorded liabilities at the end of the period; of claims that have occurred, but have not yet been reported to the Group. Small changes in the assumptions used to value the liabilities, particularly ◊ Checking samples of claims reserves through comparing the estimated amount of those relating to the amount and timing of future claims, can lead to material the reserve to appropriate documentation, such as reports from loss adjusters; impacts on the valuation of insurance liabilities. ◊ Re-performing reconciliations between the data recorded in the financial systems 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL The key assumptions that drive the reserving calculations includes, loss ratios, and the data used in the actuarial reserving calculations; inflation assumptions and claims expense assumptions. The valuation of ◊ Using our actuarial specialists to review the reserving methodology applied and insurance contract liabilities depends on accurate data about the volume, analytically review the valuation results presented and movements since the previous amount and pattern of current and historical claims since they are often used to year end. We focused on understanding the methodologies applied and examined form expectations about future claims. If the data used in calculating insurance areas of judgment such as changes in valuation assumptions; and liabilities, or for forming judgments over key assumptions, is not complete and ◊ Considering the validity of management’s liability adequacy testing by assessing the accurate then material impacts on the valuation of insurance liabilities may arise. Consequently, we have determined the valuation of short term insurance reasonableness of the projected cash flows and challenging the assumptions adopted contract liabilities to be a key audit matter. in the context of Group and industry experience data and specific product features. The Group’s accounting policies in respect of short term insurance contract liabilities are included in the Group’s accounting policies while the disclosures are included in Note 33 to the financial statements. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Report of the Independent Auditor's to the Members of UAP Holdings Limited 79 (continued)

Key Audit Matters (continued)

Long term insurance contract liabilities (Applicable to the consolidated financial statements) See Note 33 and 34 to the financial statements

The key audit matter How the matter was addressed

The Group has significant long term insurance contract liabilities and deposit Our audit procedures in this area included, among others: administration liabilities representing a significant portion of the Group’s total ◊ Comparing the assumptions to expectations based on the Group’s historical liabilities. This is an area that involves significant judgement over uncertain future experience, current trends and our own industry knowledge; outcomes, mainly the ultimate total settlement value of long-term policyholder ◊ Evaluating the governance around the overall Group reserving process, including liabilities. the scrutiny applied by the internal and appointed external actuaries. We Economic and operating assumptions, such as investment returns, mortality and assessed qualifications and experience of those responsible and examined the persistency (including consideration of policyholder behaviour), expenses and output of the reviews to assess the scope and depth of these processes. Our expense inflation, withdrawals and sensitivity analysis are the key inputs used to evaluation of the methodologies and key assumptions enabled us to assess estimate these long-term liabilities. the quality of the challenge applied through the Group’s reserving process;

The assumptions to be made have high estimation uncertainty and changes in ◊ Observing the extraction of the data used in the actuarial reserving calculations the estimates may lead to material impact on the valuation of the liabilities. The from the system; valuation also depends on accurate data extraction from the information systems. If ◊ Using our actuarial specialists to review the reserving methodology applied and the data used is not complete and accurate then material impacts on the valuation analytically reviewed the valuation results presented and movements since the of policyholder liabilities may also arise. previous year end. We focused on understanding the methodologies applied and examined areas of judgment such as changes in valuation assumptions; Due to the high level of judgment, sensitivity of the assumptions used and complexity ◊ Considering the validity of management’s liability adequacy testing by assessing of the valuation of long term insurance contract liabilities, we considered this to the reasonableness of the projected cash flows and challenging the assumptions be a key audit matter. adopted in the context of Group and industry experience data and specific product features; and The Group’s accounting policies in respect of insurance contract and deposit ◊ Considering whether the Group’s disclosures in relation to the assumptions administration liabilities are included in the Group’s accounting policies while the used in the calculation of insurance contract liabilities are compliant with disclosures are included in Notes 33 and 34 to the financial statements. the relevant accounting requirements in particular the sensitivities of these assumptions to alternative scenarios and inputs. UAP Holdings Limited

80 Report of the Independent Auditor's to the Members of UAP Holdings Limited (continued)

Key Audit Matters (continued) Valuation of investment properties (Applicable to the consolidated and separate financial statements) See Note 21 to the financial statements

The key audit matter How the matter was addressed

Our audit procedures in this area included, among others: The Group and Company own investment properties which represent the single largest category of assets on the Group and Company statements of ◊ Assessing the Group’s and Company’s processes for the selection of the external financial position as at 31 December 2018. These investment properties are valuers, determining the scope of work of the valuers, and the review and acceptance stated at their fair values based on independent external valuations. of the valuations reported by the external valuers; ◊ Evaluating the qualifications and competence of the external valuers and reading Valuation of investment properties is considered a key audit matter because the terms of engagement of the valuers with the Group and Company to determine the valuation process involves significant judgment in determining the whether there were any matters that might have affected their objectivity or limited

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL appropriate valuation methodology to be used, and in estimating the underlying the scope of their work; assumptions to be applied. The valuations are highly sensitive to key assumptions ◊ Considering the adequacy of the descriptions in the consolidated and separate applied in deriving at the capitalisation, discount and terminal yield rates financial statements, in describing the inherent degree of subjectivity and key and a small change in the assumptions can have a significant impact to the assumptions in the estimates. This includes the relationships between the key valuation.. unobservable inputs and fair values, in conveying the uncertainties, and ◊ Considering the valuation methodologies used against those applied by other valuers for similar property types. Considering other alternative valuation methods. Testing the integrity of inputs of the projected cash flows used in the valuation to supporting leases and other documents. Challenging the capitalisation, discount and terminal yield rates used in the valuation by comparing them against available industry data, taking into consideration comparability and market factors. Where the rates were outside the expected range, undertaking further procedures to understand the effect of additional factors and, when necessary, held further discussions with the valuers. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Report of the Independent Auditor's to the Members of UAP Holdings Limited 81 (continued)

Key Audit Matters (continued) Information Technology (IT) systems and controls (Applicable to the consolidated financial statements)

The key audit matter How the matter was addressed

Many financial reporting controls depend on the correct functioning of related In this area our audit procedures included, among others: elements of the operational and financial IT systems, for example interfaces ◊ Testing general IT controls around system access and change management and between policy administration and financial reporting systems or automated testing controls over computer operations within specific applications which are controls which are designed to prevent inaccurate or incomplete transfers required to be operating correctly to mitigate the risk of misstatement in the of financial information. This is an area of significant risk in our audit due to financial statements; the complexity of the IT infrastructure, particularly where systems require ◊ With the support of our own IT specialists, testing these controls through examining increased manual inputs. whether changes made to the systems were appropriately approved, and assessing whether appropriate restrictions were placed on access to core systems through There is an inherent risk that automated accounting procedures and related testing the permissions and responsibilities of those given that access; IT dependent manual controls may not be designed and operating effectively. ◊ Where general IT controls were not operating effectively and were therefore unable to rely on certain automated IT controls, considering whether financial information was impacted and extended the scope of our work by performing additional audit procedures in a limited number of areas; and ◊ Performing additional procedures to place reliance on manual compensating controls, such as reconciliations between systems and other information sources, or performing additional testing, such as extending the size of our sample sizes, to obtain sufficient appropriate audit evidence over the financial statement balances that were impacted. UAP Holdings Limited

82 Report of the Independent Auditor's to the Members of UAP Holdings Limited (continued)

Key Audit Matters (continued) Transition and adoption of IFRS 9 Financial Instruments (classification, measurement & impairment) (Applicable to the consolidated and separate financial statements)

The key audit matter How the matter was addressed

The Group implemented IFRS 9 Financial Instruments on 1 January 2018. Financial Our audit procedures in this area included, among others: assets for the Group form at least 40% of the Group’s total assets. The key risks associated with the adoption of IFRS 9 include: ◊ Reviewing and challenging management’s assertions around the classification and measurement of financial assets; ◊ Complex accounting requirements underlying the determination of adjustments ◊ Assessing the expected credit loss provisions as per IFRS 9; on transition. ◊ Reviewing the ECL inputs i.e. Probability of Default (PD), Loss Given Default ◊ New judgments and estimates. (LGD) and Exposure at Default (EAD). This involved review of the accuracy

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL ◊ New processes, data and controls that have not been subject to testing previously. and reliability of IFRS 9 model inputs; ◊ Transition adjustments are likely to be subject to scrutiny from investors/ regulators. ◊ Reviewing the assumptions made by management in arriving at the provision; ◊ Expected Credit loss (ECL) modelling risk (e.g. inappropriate methodology and and design decisions). ◊ Reviewing the IFRS 9 disclosures in the financial statements in line with the ◊ Relevance and reliability of data used for ECL measurement. disclosure requirements. ◊ Estimation uncertainty from post-model adjustments (management overlays). ◊ Subjective assumptions/ judgments made to determine the classification category (e.g. business model, Solely Payments of Principal and Interest (SPPI) assessment). ◊ Relevance and reliability of data used for classification purposes (e.g. to assess the business model or the SPPI criterion). ◊ New disclosure requirements.

As a result of the above factors, the transition and adoption of IFRS 9 was considered to be a key audit matter.

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Report of the Independent Auditor's to the Members of UAP Holdings Limited 83 (continued)

Other information The Directors are responsible for overseeing the Group’s and Company’s financial The Directors are responsible for the other information. The other information reporting process. comprises the Directors’ Report, Directors’ Remuneration Report, Statement of Directors’ Responsibilities and Business Review which we obtained prior to the date Auditors’ responsibility for the audit of the consolidated and separate of this auditor’s report, and the other information to be included in the Published financial statements Annual Report and Financial Statements, which is expected to be made available Our objectives are to obtain reasonable assurance about whether the consolidated to us after that date. Other information does not include the consolidated and and separate financial statements as a whole are free from material misstatement, separate financial statements and our auditors’ report thereon. whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee Our opinion on the consolidated and separate financial statements does not cover that an audit conducted in accordance with ISAs will always detect a material the other information and we do not and will not express any form of assurance misstatement when it exists. Misstatements can arise from fraud or error and are conclusion thereon. considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these In connection with our audit of the consolidated and separate financial statements, consolidated and separate financial statements. our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the As part of an audit in accordance with ISAs, we exercise professional judgment and consolidated and separate financial statements or our knowledge obtained in the maintain professional skepticism throughout the audit. We also: audit, or otherwise appears to be materially misstated. ◊ Identify and assess the risks of material misstatement of the consolidated If, based on the work that we have performed on the other information that we and separate financial statements, whether due to fraud or error, design and have obtained prior to the date of this auditors report, we conclude that there is perform audit procedures responsive to those risks, and obtain audit evidence a material misstatement of this other information, we are required to report that that is sufficient and appropriate to provide a basis for our opinion. The risk fact. We have nothing to report in this regard. of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional Directors’ responsibility for the consolidated and separate financial statements omissions, misrepresentations, or the override of internal control. As stated on page 72-73, the Directors are responsible for the preparation of the ◊ Obtain an understanding of internal control relevant to the audit in order to consolidated and separate financial statements that give a true and fair view in design audit procedures that are appropriate in the circumstances, but not for accordance with International Financial Reporting Standards and in the manner the purpose of expressing an opinion on the effectiveness of the Group and required by the Kenyan Companies Act, 2015 and for such internal control, as the Company’s internal control. Directors determine necessary to enable the preparation of the consolidated and ◊ Evaluate the appropriateness of accounting policies used and the reasonableness separate financial statements that are free from material misstatements, whether of accounting estimates and related disclosures made by the Directors. due to fraud or error. ◊ Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether In preparing the consolidated and separate financial statements, Directors are a material uncertainty exists related to events or conditions that may cast responsible for assessing the Group’s and Company’s ability to continue as a going significant doubt on the Group’s and Company’s ability to continue as a concern, disclosing, as applicable, matters related to going concern and using the going concern. If we conclude that a material uncertainty exists, we are going concern basis of accounting unless Drectors' either intend to liquidate the required to draw attention in our auditors report to the related disclosures Group and/or Company or to cease operations, or has no realistic alternative but in the consolidated and separate financial statements or, if such disclosures to do so. are inadequate, to modify our opinion. Our conclusions are based on the UAP Holdings Limited

84 Report of the Independent Auditor's to the Members of UAP Holdings Limited (continued)

Auditors’ responsibility for the audit of the consolidated and separate financial statements (continued) audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group and/or Company to cease to continue as a going concern.

◊ Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. ◊ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements As required by the Kenyan Companies Act, 2015, we report to you based on our audit, that:

(i) In our opinion, the information in the report of the Directors on pages 72 to 73 is consistent with the financial statements; (ii) Our report on the consolidated and separate financial statements is unqualified.

The Signing Partner responsible for the audit resulting in this independent auditors’ report is CPA Alexander Mbai – P/2172.

KPMG Kenya Certified Public Accountants P.O Box 40612 – 00100 Nairobi Date: 1 April 2019 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Consolidated statement of profit or loss 85

Restated* 2018 2017 Note Kshs’000 Kshs’000 Gross written premium 5 (b) (i) 18,770,446 19,111,117 Gross earned premium 5 (b) (i) 18,618,939 19,713,080 Reinsurance ceded 5 (b) (ii) (3,096,094) (4,401,082) Net earned premium 15,522,845 15,311,998 Investment income 6 (a) 2,919,753 3,668,108 Commissions earned 5 (b) (iii) 881,472 799,451 Other income 7 (a) 124,423 243,879 Net impairment loss on financial assets 2 (b) (i) (779,922) - Total Income 18,668,571 20,023,436 Claims and policy owners’ benefits payable 8 (12,078,268) (10,923,956) Less: Amount recoverable from reinsurers 5 (b) (ii) 1,689,462 1,477,310 Net claims payable (10,388,806) (9,446,646) Operating and other expenses 9 (a) (5,485,107) (6,149,057) Commissions payable 5 (b) (iii) (2,265,141) (2,294,754) Total expenses & commissions (7,750,248) (8,443,811) Finance costs 37 (a) (1,009,268) (763,970) (Loss)/profit before tax from continuing operations (479,751) 1,369,009 Loss on disposal of subsidiary - (38,833) (Loss)/profit before tax (479,751) 1,330,176 Income tax expense 11 (a) (38,124) (722,661) (Loss)/profit for the year (517,875) 607,515 (Loss)/profit attributable to: Owners of the parent (350,468) 662,578 Non-controlling interest (167,407) (55,063) (Loss)/profit for the year (517,875) 607,515 Basic and diluted EPS 12 (1.66) 3.13 * See Note 46

The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited

86 Consolidated statement of other comprehensive income

Restated*

2018 2017

Note Kshs’000 Kshs’000

(Loss)/profit for the year (517,875) 607,515

Other comprehensive income

Items that will be recycled to profit or loss Exchange differences on translating foreign operations (215,122) 1,470

Total items that will be recycled to profit or loss (215,122) 1,470

Items that will not be recycled to profit or loss 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Gains/(losses) on revaluation of equity investments: Listed ordinary shares 24 (c) - 362,926

Unlisted ordinary shares 24 (c) - (3,553)

Remeasurementof retirement benefit obligations 23 20,697 (291,783)

Gains on revaluation of property & equipment 19 (a) 38,448 29,985

Elimination of translation reserve on disposal of subsidiary - 40,682

Total items that will not be recycled to (loss)/profit 59,145 138,257

Total other comprehensive income for the year, net of tax (155,977) 139,727

Total comprehensive income for the year (673,852) 747,242

Total comprehensive income attributable to: Owners of the parent (458,090) 826,861

Non-controlling interests (215,762) (79,619)

Total (673,852) 747,242 *See Note 46

The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Company statement of profit or loss 87

Restated* 2018 2017 Note Kshs’000 Kshs’000 Investment income 6 (b) 957,383 1,319,456 Other income 7 (b) 720,164 801,163

Net impairment loss on financial assets 2 (b) (i) 2,438 -

Total Income 1,679,985 2,120,619 Operating and other expenses 9 (b) (1,564,085) (1,550,813)

Total expenses & commissions (1,564,085) (1,550,813) Finance costs – interest cost on borrowings 37 (b) (705,893) (615,085)

Loss before tax (589,993) (45,279) Income tax credit 11 (b) 170,222 182,728

(Loss)/profit for the year (419,771) 137,449

*See Note 46

The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited

88 Company statement of other comprehensive income

Restated 2018 2017 Note Kshs’000 Kshs’000 (Loss)/profit for the year (419,771) 137,449

Other comprehensive income - -

Total comprehensive income for the year (419,771) 137,449

The notes on pages 97 to 199 are an integral part of these financial statements. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL UAP Holdings Limited | 2018 Annual Report and Financial Statements

Consolidated statement of financial position 89

Restated* 2018 2017 CAPITAL EMPLOYED Note Kshs’000 Kshs’000 Share capital 13 (a) 1,057,099 1,057,099 Share premium 13 (b) 4,612,626 4,612,626 Fair value reserve for equity investments 14 513 1,599,002 Retained earnings 15 10,206,124 9,061,001 Proposed dividend 16 - 359,414 Translation reserve 17 (170,260) ( 3,493) Statutory reserve 17 415,542 404,006 Revaluation Surplus 68,433 29,985 Shareholders’ funds 16,190,077 17,119,640 Non-controlling Interest 1,005,302 1,217,925 Total equity 17,195,379 18,337,565 REPRESENTED BY: Assets Goodwill 18 65,667 240,030 Property and equipment 19 (a) 2,716,812 2,678,583 Intangible assets 20 (a) 100,628 101,766 Investment properties 21 (a) 19,756,714 20,360,418 Deferred income tax asset 22 (a) 1,049,551 665,859 Equity investment at fair value through Other Comprehensive Income 24 (a) - 1,684,260 Equity investment at fair value through profit or loss 24 (b) 3,293,090 2,050,670 Mortgage loans recoverable 26 306,412 356,774 Current income tax recoverable 11 (a) 145,854 46,062 Reinsurers’ share of insurance liabilities 27 3,276,959 3,388,445 Deferred acquisition cost 28 445,985 502,565 Receivables arising out of direct insurance arrangements 1,850,411 1,698,966 Receivables arising out of reinsurance arrangements 1,294,978 1,241,402 Other receivables 29 2,077,314 2,051,839 Corporate bonds 30 1,286,271 1,543,914 Government securities 31 14,411,180 12,150,195 Deposits with financial institutions 32 (a) 4,841,184 5,614,116 Cash and bank balances 32 (a) 1,757,053 1,746,851 Total assets 58,676,063 58,122,715 Liabilities Retirement benefit liability 23 - 12,921 Deferred income tax liability 22 (a) 969,700 890,258 Insurance contract liabilities 33 12,370,988 11,469,148 Payable under deposit administration contracts 34 4,441,210 4,520,777 Unit-linked investment contracts 35 859,754 865,276 Borrowings 37 11,098,307 10,839,592 Provision for unearned premium 38 7,021,818 6,969,326 Current income tax payable 11 (a) - 88,857 Creditors arising from reinsurance arrangements 40 1,175,563 881,684 Other payables 39 3,070,241 2,961,302 Dividends payable 16 473,103 286,009 Total liabilities 41,480,684 39,785,150 Net Assets 17,195,379 18,337,565 *See Note 46 The financial statements on pages 85 to 199 were approved and authorized for issue by the Board of Directors on 1 April 2019

Dr JB Wanjui CBS (Chairman) Peter Mwangi (Group Chief Executive Officer) The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited

90 Company statement of financial position

Restated* Note 2018 2017 Kshs’000 Kshs’000 CAPITAL EMPLOYED Share capital 13 (a) 1,057,099 1,057,099 Share premium 13 (b) 4,612,626 4,612,626 Retained earnings 1,109,314 1,540,269 Proposed Dividend 16 - 359,414 Total equity 6,779,039 7,569,408 REPRESENTED BY:

Assets Property and equipment 19 (b) 156,234 225,461 Intangible assets 20 (b) 97,124 94,200 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Investment properties 21 (b) 7,090,983 7,186,331 Investment in subsidiaries 25 5,216,368 5,658,121 Deferred tax asset 22 (b) 521,921 351,699 Amounts due from subsidiaries 44 (iv) 4,306,166 3,902,786 Other receivables 29 (b) 1,094,748 1,258,306 Deposits with financial institutions 32 (b) 443,392 587,641 Cash and bank balances 32 (b) 19,414 42,483 Total assets 18,946,350 19,307,028

Liabilities Borrowings 37 (b) 9,887,108 10,029,855 Amounts due to subsidiaries 44 (iv) 1,489,970 495,204 Current income tax payable 11 (b) - - Other payables 39 (b) 317,130 926,552 Dividends payable 16 473,103 286,009 Total liabilities 12,167,311 11,737,620 Net Assets 6,779,039 7,569,408 *See Note 46 The financial statements on pages 85 to 199 were approved and authorised for issue by the Board of Directors on 1 April 2019

Dr JB Wanjui CBS Peter Mwangi (Chairman) (Group Chief Executive Officer) The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Consolidated statement of changes in equity 91

Attributable to owners of the parent Share 2017 Non- capital & Share Fair value Retained Proposed Translation Statutory Revaluation controlling Total Total premium reserves earnings dividends reserves reserve surplus interest equity Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Balance at 1 January 2017 5,669,725 1,240,045 8,906,796 359,414 (76,523) 342,400 - 16,441,857 1,252,413 17,694,270 Other comprehensive income Re-measurement of retirement - - (291,783) - - - - - benefit obligations (291,783) (291,783) Gains/(losses) on revaluation of equity investments: Quoted ordinary shares 24 (c) - 362,510 - - - - - 362,510 416 362,926 Unquoted ordinary shares 24 (c) - (3,553) - - - - - (3,553) - (3,553) Gains on revaluation of property ------72,559 - and equipment 72,559 72,559 Elimination of translation reserve - - - - 40,682 - - - on disposal of subsidiary 40,682 40,682 Currency translation differences - - - - 31,308 - - 31,308 (31,802) (494) Total other comprehensive income - 358,957 (291,783) - 71,990 - 72,559 211,723 (31,386) 180,337 for the year Profit for the year - - 1,172,248 - - - - 1,172,248 37,269 1,209,517 Total comprehensive income for - 358,957 880,465 - 71,990 - 72,559 1,383,971 5,883 1,389,854 the year Transfer to statutory reserve 17 - - (100,078) - - 54,947 - (45,131) 45,131 - Transactions with owners 2016 Dividend paid 16 - - - (359,414) - - - (359,414) - (359,414) 2017 Final dividend proposed 16 - - (359,414) 359,414 ------Elimination of disposal of subsidiary - - 255,467 - - - - 255,467 - 255,467 Total transactions with owners - - (103,947) - - - - (103,947) - (103,947)

Balance at 31 December 2017 5,669,725 1,599,002 9,583,236 359,414 (4,553) 397,347 72,559 17,676,750 1,303,427 18,980,177

The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited

92 Consolidated statement of changes in equity (continued)

2018 Attributable to owners of the parent Share Non- Fair value Retained Proposed Translation Statutory Revaluation Total capital & Total controlling reserves earnings dividends reserves reserve surplus equity Share Kshs’000 interest Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 premium Kshs’000 Notes Kshs’000 Balance at 31 December 2017 5,669,725 1,599,002 9,583,236 359,414 (4,533) 397,347 72,559 17,676,750 1,303,427 18,980,177 Impact of corrections 46 - - ( 522,235) - 1,040 6,659 (42,574) (557,110) (85,502) (642,612) Restated balance as at 31 5,669,725 513 10,555,121 359,414 (3,493) 404,006 29,985 17,015,271 1,213,374 18,228,645 December 2017 Adjustment on initial application of 2(b(i)) - - (104,369) - - - - (104,369) (4,551) (108,920) IFRS 9 Transfer of fair value reserves - (1,598,489) 1,598,489 ------Restated balance as at 1 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 5,669,725 5 1 3 10,555,121 359,414 (3,493) 404,006 29,985 17,015,271 1,213,374 18,228,645 January 2018 Profit for the year - - (350,468) - - - - (350,468) (167,407) (517,875) Other comprehensive income Re-measurement of retirement 23 - - 20,697 - - - - 20,697 - 20,697 benefit obligations Gains on revaluation of Property, ------38,448 38,448 - 38,448 Plant & Equipment Currency translation differences - - - - (166,767) - - (166,767) (48,355) (215,122) Total other comprehensive income - - 20,697 - (166,767) - 38,448 (107,622) (48,355) (155,977) for the year Total comprehensive income - - - (329,771) - (166,767) - 38,448 (458,090) (215,762) (673,852) for the year Transfer to statutory reserve 17 (19,226) 11,536 (7,690) 7,690 - Transactions with owners 2017 Dividend paid 16 - - - (359,414) - - - (359,414) - (359,414) Total transactions with owners - - - (359,414) - - - (359,414) - (359,414) Balance at 31 December 2018 5,669,725 513 10,206,124 - (170,260) 415,542 68,433 16,190,077 1,005,302 17,195,379 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Company statement of changes in equity 93

2017 Share Capital & Share premium Retained Proposed Earnings Dividends Total Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Balance at 1 January 2017 5,669,725 1,762,234 359,414 7,791,373 Profit for the year - 585,575 - 585,575 Other comprehensive income - - - - Total comprehensive income for the year - 585,575 - 585,575 Transactions with owners - 2016 Dividend paid 16 - - (359,414) (359,414) 2017 Final dividend proposed 16 - (359,414) 359,414 - Total transactions with owners - (359,414) - (359,414) Balance at 31 December 2017 5,669,725 1,988,395 359,414 8,017,534

2018 Share capital & Retained Proposed Share premium Earnings Dividends Total

Notes Kshs'000 Kshs'000 Kshs'000 Kshs'000 Balance at 31 December 2017 5,669,725 1,988,395 359,414 8,017,534 Impact of corrections 46 - ( 448,126) - ( 448,126) Restated balance as at 31 December 2017 5,669,725 1,540,269 359,414 7,569,408 Adjustment on initial application of IFRS 9 2 (b(i)) - ( 11,184) - ( 11,184) Restated balance as at 1 January 2018 5,669,725 1,529,085 359,414 7,558,224 Profit for the year - ( 419,771) - ( 419,771) Other comprehensive income - - - - Total comprehensive income for the year - ( 419,771) - ( 419,771) Transactions with owners 2017 Dividend paid 16 - - (359,414) ( 359,414) 2018 Final dividend proposed 16 - - - - Total transactions with owners (359,414) ( 359,414) Balance at 31 December 2018 5,669,725 1,109,314 - 6,779,039

The notes on pages 97 to 199 are an integral part of these financial statements UAP Holdings Limited

94 Consolidated statement of cash flows

Restated* 2018 2017 Notes Kshs’000 Kshs’000 Cash flow from operating activities Cash generated from operations 41 (a) (399,648) (778,251) Tax paid 11 (a) (511,239) (385,084) Net cash generated from operating activities (910,887) (1,163,335) Cash flow from investing activities Purchase of property and equipment 19 (a) (368,542) (448,128) Purchase of intangible assets 20 (a) (37,568) (38,636) Net purchase of government securities (2,234,226) (995,050) Purchase of equity investments 24 (329,266) (810,983)

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Net purchase/(redemption) of corporate bonds 30 45,932 333,565 Additions to investment properties 21 (237,013) (503,360) Mortgage loans advanced 26 (172,149) (284,591) Mortgage loans repaid 26 222,330 264,783 Proceeds from sale of equity investments 24 (b) 254,154 1,141,222 Proceeds from disposal of fixed assets 10,974 29,339 Rent, interest and dividends received 6 (a) 3,899,155 3,260,061 Proceeds on disposal of subsidiary - 4,884 Net cash generated in investing activities 1,053,781 1,953,106 Cash flow from financing activities Dividends paid 16 (172,320) (73,405) Net Proceeds from borrowings 37 (a) (733,304)) (991,003) Net cash (used in) financing activities (905,624) (1,064,408)

Decrease in cash and cash equivalents (762,730) (274,637) Movement in cash and cash equivalents At 1 January 7,360,967 7,635,604 (Decrease) during the year (762,730) (274,637) At 31 December 32 6,598,237 7,360,967

*See Note 46 The notes on pages 97 to 199 are an integral part of these financial statements. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Company statement of cash flows 95

2018 Restated* Notes Kshs’000 2017 Kshs’000 Cash flow from operating activities Cash generated from operations 41 (b) (45,545) (2,199,460) Net cash generated from operating activities (45,545) (2,199,460) Cash flow from investing activities Purchase of property and equipment 19 (b) (67,075) (208,461) Purchase of intangible assets 20 (b) (40,089) (54,874) Proceeds on sale of property and equipment 989 - Transfer from/(to) related party 19 (b) 95,154 - Additions to investment properties 21 (b) - (643,046) Rent, interest and dividends received 6 (b) 1,066,417 1,469,750 Investments in subsidiaries 25 (156,209) - Net cash used in investing activities 899,187 563,369 Cash flow from financing activities - Dividends paid 16 (172,320) (73,405) Net Proceeds from borrowings 37 (b) (848,640) 437,772 Net cash generated from/(used in) financing activities (1,020,961) 364,367

Increase in cash and cash equivalents (167,318) (1,271,724) Movement in cash and cash equivalents At 1 January 630,124 1,901,848 Decrease during the year (167,318) (1,271,724) At 31 December 32 462,806 630,124

*See Note 46

The notes on pages 97 to 199 are an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements 97

1. General information (i) Basis of measurement The Company is incorporated in Kenya under the Kenyan Companies Act, 2015 as The measurement basis used is the historical cost basis except where otherwise a limited liability company, and is domiciled in Kenya. The address of its registered stated in the accounting policies below. office is UAP Old Mutual Tower, Upper Hill Road, P.O. Box 43013 - 00100 Nairobi. For those assets and liabilities measured at fair value, fair value is the price that would The Company has seven subsidiary companies that operate as insurance companies be received to sell an asset or paid to transfer a liability in an orderly transaction and three property Companies in Kenya, Uganda and South Sudan. Four of the between market participants at the measurement date. When measuring the fair Company’s insurance subsidiaries are short term excluding health insurance value of an asset or a liability, the company uses market observable data as far companies, two are long term (“life”) insurance companies and one is a composite as possible. If the fair value of an asset or a liability is not directly observable, it is insurance company selling both general and life insurance. estimated by the company using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs (e.g. by Long term business comprises life assurance business, deposit administration business use of the market comparable approach that reflects recent transaction prices for and investment contracts. Life assurance business relates to the underwriting of similar items or discounted cash flow analysis). Inputs used are consistent with the risks relating to death of an insured person, and includes contracts subject to the characteristics of the asset / liability that market participants would take into account. payment of premiums for a term dependent on the termination or continuance of the life of an insured person.Short term insurance business relates to all other Fair values are categorised into three levels of fair value hierarchy based on the degree categories of insurance business, analysed into several sub-classes of business based to which the inputs to the measurements are observable and the significance of on the nature of the assumed risks. the inputs to the fair value measurement in its entirety. See note 4 (e).

The Group also holds investments in UAP Financial Services Limited Uganda that (ii) Use of estimates provides stock broking services and fund management services. UAP Properties The preparation of financial statements in conformity with IFRS requires the use (Uganda) Limited and UAP Properties (South Sudan) Limited are property holding of certain critical accounting estimates. It also requires management to exercise companies for Nakawa Business Park and Equatorial Towers which are located in its judgment in the process of applying the group’s accounting policies. The areas Kampala and South Sudan respectively. UAP Investments Kenya ceased its operations involving a higher degree of judgment or complexity, or areas where assumptions in fund management and is currently a dormant entity. and estimates are significant to the consolidated financial statements are disclosed in note 3. 2. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial (iii) Statement of compliance statements are set out below. These policies have been consistently applied to all The financial statements have been prepared in accordance with International years presented, unless otherwise stated. Financial Reporting Standards (IFRSs) and the Kenyan Companies Act, 2015.

(a) Basis of preparation For Kenyan Companies Act, 2015 reporting purposes in these financial statements, The financial statements are prepared in compliance with International Financial the balance sheet is represented by the statement of financial position and the Reporting Standards (IFRS) and in the manner required by the Kenyan Companies profit and loss account is presented in the statement of profit or loss to these Act, 2015. financial statements. UAP Holdings Limited

98 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

(iv) Going concern (b) Changes to standards and new interpretations effective in the year 2018 As at 31 December 2018, the Group and Company incurred a net loss of KShs 518m and KShs 420m respectively (2017: Net profits of KShs 608m and KShs 137m (i) New standards, amendments and interpretation effective and adopted during respectively) and as of that date the Group’s and Company’s total assets exceeded the year by the Group total liabilities by KShs 17,195m and KShs 6,779m (2017: total assets of the Group and Company exceeded total liabilities by KShs 18,338m and KShs 7,569m respectively). The Group and Company has adopted the following new standards and amendments during the year ended 31 December 2018, including consequential amendments The loss in 2018 is largely attributable to mark to market movements on equity to other standards with the date of initial application by the Group and Company and property portfolios. As markets recover, the Directors expect that these losses being 1 January 2018. The nature and effects of the changes are explained below: will be recouped.

Effective for annual periods The Group has a corporate bond of KShs 2bn maturing in the year 2019 and the New standard or amendments beginning on or after Nedbank Loan, which requires a bullet repayment of US$ 31m, maturing in 2020. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL In addition there are balances due to Old Mutual Holdings Limited with no fixed Revenue from contracts with customers (IFRS 15) 1 January 2018 maturity dates. Financial instruments (IFRS 9) 1 January 2018 The Directors have instituted the following measures:

Applying IFRS 9 financial instruments with IFRS 4 1 January 2018 ◊ Put in place arrangements to refinance the maturing corporate bond and the insurance contracts (Amendments to IFRS 4) Nedbank loan, including negotiations with its bankers and ultimate parent. ◊ By mutual agreement with the Directors of Old Mutual Holdings Limited, the IFRIC 22 foreign currency transactions and 1 January 2018 outstanding loan will not be settled within the next 12 months. advance consideration ◊ The loan from Old Mutual Africa Holdings is subordinated to other creditors

Classification and measurement of share based 1 January 2018 The Directors, having taken into account the initiatives above and information at payment transactions (Amendments to IFRS 2) hand and on the strength of the actions above, are of the opinion that the Group and Company will be a going concern in the subsequent financial period and that the Transfers of Investment Property (IAS 40) 1 January 2018 going concern assumption is appropriate in the preparation of these consolidated and separate financial statements.

The consolidated and separate financial statements have therefore been prepared on IFRS 15 Revenue from Contracts with Customers the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 of assets and settlement of liabilities will occur in the ordinary course of business. Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 99

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

IFRS 15 Revenue from Contracts with Customers (contunued)

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The standard specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures.

The standard provides a single, principles based five-step model to be applied to all contracts with customers in recognising revenue being: Identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; Allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The adoption of these changes did not have a significant effect on the amounts and disclosures of the group’s financial statements.

IFRS 9 Financial Instruments (2014)

On 24 July 2014 the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model.

The standard is effective for annual period beginning on or after 1 January 2018 with retrospective application and early adoption permitted. The group fully implemented IFRS 9 with effect from 1 January 2018, with the impact of the cumulative adjustment reflected as an adjustment to opening retained income. UAP Holdings Limited

100 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

IFRS 9 Financial Instruments: Impact on the Group’s statement of financial position

Restated IFRS 9 At 31 December Adjustment At 1 January 2018 2017 Financial assets Kshs’000 Kshs’000 Kshs’000 Other receivables 2,051,839 (2,431) 2,049,408 Corporate bonds 1,543,914 (65,070) 1,478,844 Government securities 12,150,195 (8,434) 12,141,761 Deposits with financial institutions 5,614,116 (29,597) 5,584,519 Cash and bank balances 1,746,851 (3,388) 1,743,463

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Total financial assets 23,106,915 (108,920) 22,997,995

IFRS 9 :Financial Instruments Impact on the Company’s statement of financial position

Restated IFRS 9 At 31 December Adjustment At 1 January2018 2017 Financial assets Kshs’000 Kshs’000 Kshs’000 Other receivables 1,258,306 (962) 1,257,344 Deposits with financial institutions 587,641 (9,831) 577,810 Cash and bank balances 42,483 (391) 42,092 Total financial assets 1,888,430 (11,184) 1,877,246

Impact of adopting IFRS 9 on opening total equity at 1 January 2018

Group Company Retained earnings Kshs’000 Kshs’000 Recognition of expected credit loss allowance (108,920) (11,184) Transfer of cumulative fair value changes linked to changes in credit risk of assets to other reserves 1,598,489 - Total impact - Retained earnings 1,489,569 (11,184) Total impact on shareholders’ equity 1,489,569 (11,184) UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 101

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued) (i) New standards, amendements and intrepretations effective and adopted during the year by the Group (continued)

IFRS 9: Financial Instruments (2014)

Classification and measurement under IFRS 9

All financial assets under IFRS 9 are to be initially recognised at fair value, including directly attributable transactions costs (for financial assets not measured at fair value through profit or loss).

Financial assets are to be classified based on (i) the business model within which the financial assets are managed and (ii) the contractual cash flow characteristics of the financial assets (whether the cash flows represent ‘solely payment of principal and interest’). Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold those assets for the purpose of collecting contractual cashflows and those cashflows comprise solely payments of principal and interest (‘hold to collect’).

Financial assets are measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cashflows and selling financial assets, and those contractual cashflows comprise solely payments of principal and interest (‘hold to collect and sell’). Movements in the carrying amount of these financial assets should be taken through OCI, except for impairment gains or losses, interest revenue and foreign exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

Other financial assets are measured at FVTPL. All derivative instruments that are either financial assets or financial liabilities will continue to be classified as held for trading and measured at fair value through profit and loss.

The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the fair value of these financial liabilities that are attributable to the group’s own credit risk are recognised in OCI. Where the financial liability is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity. The group currently provides note disclosure in respect of the change in fair value due to credit risk of the group’s financial liabilities designated at FVTPL, in note 4 b.

For equity investments that are neither held for trading nor contingent consideration, the Group may irrevocably elect to present subsequent changes in fair value of these equity investments in either (i) profit or loss (FVTPL); or (ii) other comprehensive income (FVOCI). Where the equity investment is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity. UAP Holdings Limited

102 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued) (i) New standards, amendements and intrepretations effective and adopted during the year by the Group (continued)

Based on the financial assets at 31 December 2017, the Group and Company assessment is shown below.

IFRS 9 transition impact assessment

Consolidated

Financial Classification and Classification and Balance at Balance at statement measurement in measurement in 31 December 2017 1 January 2018 line item terms of IAS 39 terms of IFRS 9 - IAS 39 - IFRS 9 Equity investments FVOCI FVTPL 3,734,930 3,734,930 Corporate bonds Amortised cost Amortised cost 1,543,914 1,478,844 Government securities Amortised cost Amortised cost 12,150,195 12,141,761

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Other receivables Amortised cost Amortised cost 2,051,839 2,049,408 Cash and bank balances Amortised cost Amortised cost 1,746,851 1,743,463 Deposits with financial institutions Amortised cost Amortised cost 5,614,116 5,584,519

Company

Financial Classification and Classification and Balance at Balance at statement measurement in measurement in 31 December 2017 1 January 2018 line item terms of IAS 39 terms of IFRS 9 - IAS 39 - IFRS 9 Listed Equity investments FVOCI FVTPL - - Corporate bonds Amortised cost Amortised cost - - Government securities Amortised cost Amortised cost - - Other receivables Amortised cost Amortised cost 3,902,724 3,901,762 Cash and bank balances Amortised cost Amortised cost 42,483 42,092 Deposits with financial institutions Amortised cost Amortised cost 587,641 577,810

Impairments under IFRS 9 Impairments in terms of IFRS 9 was determined based on an expected credit loss (ECL) model rather than the incurred loss model required by IAS 39. The Group would recognise an allowance of 12-month ECLs, depending on the increase in credit risk since initial recognition.

The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity’s best available forward-looking information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of a credit loss occurring is low. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 103

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued) (i) New standards, amendements and intrepretations effective and adopted during the year by the Group (continued)

IFRS 9 Financial Instruments (2014) (continued) The ECL model applies to financial assets measured at amortised cost and FVOCI, lease receivables and certain loan commitments as well as financial guarantee contracts. The Group estimated the impact of IFRS 9’s ECL model to be KShs 108,920,000 based on 31 December 2017 financial assets on retained earnings

IAS 39 IFRS 9 impairment provision – allowance for ECL at 1 Instruments impairment January 2018 ECL coverage % at 1 January 2018 Kshs ‘000 provision

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Treasury Bonds - 8,380 - - 8,380 10% 0% 0% 1%

Treasury Bills - 54 - - 54 0% 0% 0% 0%

Bank deposits - 32,985 - - 32,985 40% 0% 0% 2%

Corporate bonds - 38,987 26,083 - 65,070 47% 100% 0% 5%

Other Receivables 1,215,744 2,431 - 1,215,744 1,218,175 3% 0% 100% 92%

Total 1,215,744 82,837 26,083 1,215,744 1,324,664 100% 100% 100% 100%

The Company estimated the impact of IFRS 9’s ECL model to be Kshs 11.184m based on 31 December 2017 financial assets on the retained earnings

IAS 39 IFRS 9 impairment provision – allowance for ECL at 1 Instruments impairment January 2018 ECL coverage % at 1 January 2018 Kshs ‘000 provision

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Treasury Bonds - - - - - 0% 0% 0% 0%

Treasury Bills - - - - - 0% 0% 0% 0%

Bank deposits - 10,222 - - 10,222 91% 0% 0% 91%

Corporate bonds - - - - - 0% 100% 0% 0%

Other Receivables - 962 - - 962 9% 0% 0% 9%

Total - 11,184 - - 11,184 100% 0% 0% 100% UAP Holdings Limited

104 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued) (i) New standards, amendements and intrepretations effective and adopted during the year by the Group (continued) IFRS 9 Financial Instruments (2014) (continued)

Cumulative impact on the equity of the Group on transition to IFRS 9

IFRS 9 impairment provision – allowance for Movement between 1 January 2018 and Instruments ECL at 31 December 2018 31 December 2018 ECL coverage at 31 December 2018

Kshs ‘000 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Treasury Bonds 19,618 - - 19,618 11,238 - - 11,238 13% 0% 0% 1% Treasury Bills 5,729 - - 5,729 5,675 - - 5,675 4% 0% 0% 0% Bank deposits 67,266 29,816 - 97,082 34,280 29,816 - 64,096 45% 58% 0% 5% Corporate bonds 5,140 21,223 368,265 394,628 (33,845) (4,861) 368,265 329,559 3% 42% 19% 19% 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Other Receivables 52,130 - 1,535,400 1,587,530 49,698 - 319,656 369,354 35% 0% 81% 75% Total 149,883 51,039 1,903,665 2,104,587 67,046 24,955 687,921 779,922 100% 100% 100% 100%

Cumulative impact on the equity of the Company on transition to IFRS 9

IFRS 9 impairment provision – allowance for Movement between 1 January 2018 and Instruments ECL at 31 December 2018 31 December 2018 ECL coverage at 31 December 2018

Kshs ‘000 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Treasury Bonds ------0% 0% 0% 0% Treasury Bills ------0% 0% 0% 2% Bank deposits 7,715 - - 7,715 (2,507) - (2,507) 100% 0% 0% 0% Corporate bonds ------0% 0% 100% 0% Other Receivables 1,031 - - 1,031 69 - - 69 0% 0% 0% 0% Total 8,746 - - 8,746 (2,438) - (2,438) 100% 0% 0% 0%

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4)

The amendments in applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance Contracts’ (Amendments to IFRS 4) provide two options for entities that issue insurance contracts within the scope of IFRS 4:

◊ an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach; UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 105

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(i) New standards, amendments and interpretation effective and adopted during related asset, expense or income (or part of it). the year by the Group (continued) This Interpretation stipulates that the date of the transaction for the purpose of Applying IFRS 9 with IFRS 4 determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises ◊ an optional temporary exemption from applying IFRS 9 for entities whose the non-monetary asset or non-monetary liability arising from the payment or predominant activity is issuing contracts within the scope of IFRS 4; this is the receipt of advance consideration. This Interpretation does not apply to income so-called deferral approach. taxes, insurance contracts and circumstances when an entity measures the related asset, expense or income on initial recognition: The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied. (a) at fair value; or (b) at the fair value of the consideration paid or received at a date other than the date An entity applies the overlay approach retrospectively to qualifying financial assets of initial recognition of the non-monetary asset or non-monetary liability arising when it first applies IFRS 9. Application of the overlay approach requires disclosure from advance consideration (for example, the measurement of goodwill applying of sufficient information to enable users of financial statements to understand how IFRS 3 Business Combinations). the amount reclassified in the reporting period is calculated and the effect of that reclassification on the financial statements. The amendments apply retrospectively for annual periods beginning on or after 1 January 2018, with early application permitted.The adoption of these changes An entity applies the deferral approach for annual periods beginning on or after 1 January did not affect the amounts and disclosures of the Group and Company financial 2018. Predominance is assessed at the reporting entity level at the annual reporting date statements. that immediately precedes 1 April 2016. Application of the deferral approach needs to be disclosed together with information that enables users of financial statements to Classification and Measurement of Share-based Payment Transactions (Amendments understand how the insurer qualified for the temporary exemption and to compare to IFRS 2) insurers applying the temporary exemption with entities applying IFRS 9. The deferral can only be made use of for the three years following 1 January 2018. Predominance is The following clarifications and amendments are contained in the pronouncement: only reassessed if there is a change in the entity’s activities. Accounting for cash-settled share-based payment transactions that include a The adoption of these changes will affect the amounts and disclosures of the Group’s performance condition. financial statements. The Group has adopted IFRS 9 Financial Instrument and has therefore not applied the amendments to this standard in the preparation of the Up until this point, IFRS 2 contained no guidance on how vesting conditions affect the fair financial statements.It has continued the use of IFRS 4 Insurance Contracts for contracts value of liabilities for cash-settled share-based payments. IASB has now added guidance which are in force and will transition from IFRS 4 to IFRS 17 Insurance Contracts in 2022. that introduces accounting requirements for cash-settled share-based payments that follows the same approach as used for equity-settled share-based payments. IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration Classification of share-based payment transactions with net settlement features. This Interpretation applies to a foreign currency transaction (or part of it) when an entity recognises a non-monetary asset or non-monetary liability arising from IASB has introduced an exception into IFRS 2 so that a share-based payment where the payment or receipt of advance consideration before the entity recognises the the entity settles the share-based payment arrangement net is classified as equity- UAP Holdings Limited

106 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(i) New standards, amendments and interpretation effective and adopted during the year by the Group (continued)

settled in its entirety provided the share-based payment would have been classified (ii) New and amended standards and interpretations in issue but not yet as equity-settled had it not included the net settlement feature. effective for the year ended 31 December 2018

Accounting for modifications of share-based payment transactions from cash- A number of new standards, amendments to standards and interpretations are settled to equity-settled not yet effective for the year ended 31 December 2018, and have not been applied in preparing these financial statements. Up until this point, IFRS 2 did not specifically address situations where a cash- settled share-based payment changes to an equity-settled share-based payment The Group does not plan to adopt these standards early. These are summarised below; because of modifications of the terms and conditions. The IASB has introduced the following clarifications: Effective for annual New standards periods beginning on IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL or after

◊ On such modifications, the original liability recognised in respect of the cash- settled share-based payment is derecognised and the equity-settled share- IFRS 16 Leases 1 January 2019 based payment is recognised at the modification date fair value to the extent IFRIC 23 Classification on accounting for income services have been rendered up to the modification date. 1 January 2019 tax exposures ◊ Any difference between the carrying amount of the liability as at the modification IAS 28 Long-term Interests in Associates and date and the amount recognised in equity at the same date would be recognised 1 January 2019 in profit and loss immediately. Joint Ventures

IFRS 17 Insurance contracts 1 January 2022 The amendments are effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The amendments are to be applied prospectively. IFRS 9 Prepayment Features with Negative 1 January 2019 However, retrospective application is allowed if this is possible without the use of Compensation hindsight. If an entity applies the amendments retrospectively, it must do so for Sale or Contribution of Assets between an Investor all of the amendments described above. and its Associate or Company (Amendments to To be determined IFRS 10 and IAS 28). The Group and the Company do not have share based payments hence there Annual improvements cycle (2015 – 2017) 1 January 2019 amendment has no impact. IAS 19 Plan Amendment, Curtailment or 1 January 2019 Transfers of Investment property (Amendments to IAS 40) Settlement (Amendments to IAS 19)

The IASB has amended the requirements in IAS 40 Investment property on when IFRS 3 Definition of balances 1 January 2020 a company should transfer a property asset to, or from, investment property. The Group implemented the amendment with transfer of Kshs 1.83m (2017 - Kshs. 1.87m) Amendments to IAS 1& IAS 8 Definition of Material 1 January 2020

Amendments to references to conceptual 1 January 2020 framework in IFRS standards UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 107

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2018 (continued)

IFRS 16: Leases The entity is required to measure the impact of the uncertainty using the method IFRS 16 was issued in January 2016 and replaces replaces IAS 17 Leases and its that best predicts the resolution of the uncertainty (that is, the entity should related interpretations for reporting periods beginning on or after 1 January 2019. use either the most likely amount method or the expected value method when measuring an uncertainty). The Group as lessee: IFRS 16 introduces a ‘right of use’ model whereby the lessee recognises a right-of-use asset and an associated financial obligation to make The entity will also need to provide disclosures, under existing disclosure requirements, lease payments for all leases with a term of more than 12 months. The asset will be about; amortised over the lease term and the financial liability measured at amortised cost with interest recognised in profit and loss using the effective interest rate method. (a) judgments made; (b) assumptions and other estimates used; and The Group as lessor: IFRS 16 substantially carries forward the lessor accounting (c) potential impact of uncertainties not reflected. requirements in IAS 17. Accordingly, a lessor continues to classify and account for its leases as operating leases or finance leases. Management is currently evaluating the impact of the new standard to the Group’s financial statements. The Group is in the process of assessing the impact of IFRS 16 and which transitional approach will be used. IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts sets out the requirements that an entity should apply in IFRIC 23 Clarification on accounting for Income tax exposures reporting information about insurance contracts it issues and reinsurance contracts IFRIC 23 clarifies the accounting for income tax treatments that have yet to be it holds. An entity shall apply IFRS 17 Insurance Contracts to: accepted by tax authorities, whilst also aiming to enhance transparency. (a) insurance contracts, including reinsurance contracts, it issues; IFRIC 23 explains how to recognise and measure deferred and current income tax (b) reinsurance contracts it holds; and assets and liabilities where there is uncertainty over a tax treatment. (c) investment contracts with discretionary participation features it issues, provided the entity also issues insurance contracts An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. IFRS 17 requires an entity that issues insurance contracts to report them on the statement of financial position as the total of: If an entity concludes that it is probable that the tax authority will accept an uncertain tax treatment that has been taken or is expected to be taken on a tax a) the fulfilment cash flows—the current estimates of amounts that the entity return, it should determine its accounting for income taxes consistently with that tax expects to collect from premiums and pay out for claims, benefits and expenses, treatment. If an entity concludes that it is not probable that the treatment will be including an adjustment for the timing and risk of those amounts; and accepted, it should reflect the effect of the uncertainty in its income tax accounting in the period in which that determination is made. Uncertainty is reflected in the overall measurement of tax and separate provision is not allowed. b) the contractual service margin—the expected profit for providing insurance coverage. The expected profit for providing insurance coverage is recognised in profit or loss over time as the insurance coverage is provided. UAP Holdings Limited

108 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2018 (continued)

IFRS 17 requires an entity to recognise profits as it delivers insurance services, rather Prepayment Features with Negative Compensation (Amendments to IFRS 9) than when it receives premiums, as well as to provide information about insurance The amendments clarify that financial assets containing prepayment features with contract profits that the Company expects to recognise in the future. IFRS 17 requires negative compensation can now be measured at amortised cost or at fair value an entity to distinguish between groups of contracts expected to be profit making through other comprehensive income (FVOCI) if they meet the other relevant and groups of contracts expected to be loss making. Any expected losses arising requirements of IFRS 9. Management is currently evaluating the impact of the new from loss-making, or onerous, contracts are accounted for in profit or loss as soon standard to the Group’s financial statements. as the Company determines that losses are expected. IFRS 17 requires the entity to update the fulfilment cash flows at each reporting date, using current estimates of The amendments apply for annual periods beginning on or after 1 January 2019 the amount, timing and uncertainty of cash flows and of discount rates. The entity: with retrospective application, early adoption is permitted.

a) accounts for changes to estimates of future cash flows from one reporting date to Long-term Interests in Associates and Joint Ventures (Amendment to IAS 28) another either as an amount in profit or loss or as an adjustment to the expected The amendments clarify that an entity applies IFRS 9 to long-term interests in an 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL profit for providing insurance coverage, depending on the type of change and the associate and joint venture that form part of the net investment in the associate reason for it; and or joint venture but to which the equity method is not applied. b) chooses where to present the effects of some changes in discount rates—either in profit or loss or in other comprehensive income. Management is currently evaluating the impact of the new standard to the Group’s financial statements. IFRS 17 also requires disclosures to enable users of financial statements to understand the amounts recognised in the entity’s statement of financial position and statement The amendments apply for annual periods beginning on or after 1 January 2019. of profit or loss and other comprehensive income, and to assess the risks the Early adoption is permitted. Company faces from issuing insurance contracts Sale or Contribution of Assets between an Investor and its Associate or Company IFRS 17 replaces IFRS 4 Insurance Contracts. IFRS 17 is effective for financial periods (Amendments to IFRS 10 and IAS 28) commencing on or after 1 January 2022. An entity shall apply the standard retrospectively unless impracticable. A Company can choose to apply IFRS 17 The amendments require the full gain to be recognised when assets transferred before that date, but only if it also applies IFRS 9 Financial Instruments and IFRS between an investor and its associate or Company meet the definition of a ‘business’ 15 Revenue from Contracts with Customers. under IFRS 3 Business Combinations. Where the assets transferred do not meet the definition of a business, a partial gain to the extent of unrelated investors’ interests The adoption of these changes are expected to have a significant impact on the in the associate or Company is recognised. The definition of a business is key to amounts and disclosures of the Group’s financial statements. Management is determining the extent of the gain to be recognised. currently evaluating the impact upon adoption of the standard. The effective date for these changes has now been postponed until the completion of a broader review.

The adoption of these changes will not affect the amounts and disclosures of the Group and Company financial statements. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 109

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2018 (continued)

Annual improvement cycle (2015 – 2017) – various standards

Standards Amendments

Clarifies how a Company accounts for increasing its interest in a joint operation that meets the definition of a business: IFRS 3 Business Combinations ◊ If a party maintains (or obtains) joint control, then the previously held interest is not remeasured. and IFRS 11 Joint Arrangements ◊ If a party obtains control, then the transaction is a business combination achieved in stages and the acquiring party remeasures the previously held interest at fair value.

IAS 12 Income taxes Clarifies that all income tax consequences of dividends (including payments on financial instruments classified as equity) are recognised consistently with the transactions that generated the distributable profits – i.e. in profit or loss, OCI or equity.

Clarifies that the general borrowings pool used to calculate eligible borrowing costs excludes only borrowings that specifically finance qualifying assets that are still under development or construction. Borrowings that were intended to IAS 23 Borrowing costs specifically finance qualifying assets that are now ready for their intended use or sale – or any non-qualifying assets – are included in that general pool. As the costs of retrospective application might outweigh the benefits, the changes are applied prospectively to borrowing costs incurred on or after the date an entity adopts the amendments.

The amendments are effective for annual reporting periods beginning on or after 1 January 2019 with earlier application permitted. The adoption of these amendments is not expected to affect the amounts and disclosures of the Company’s financial statements.

IAS 19 Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) The amendments clarify that:

◊ on amendment, curtailment or settlement of a defined benefit plan, a Company now uses updated actuarial assumptions to determine its current service cost and net interest for the period; and ◊ the effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income (OCI).

Consistent with the calculation of a gain or loss on a plan amendment, entities will now use updated actuarial assumptions to determine the current service cost and net interest for the period. Previously, entities would not have updated the calculation of these costs until the year-end. Further, if a defined benefit plan is settled, any asset ceiling would be disregarded when determining the plan assets as part of the calculation of gain or loss on settlement. The amendments apply for plan amendments, UAP Holdings Limited

110 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2018 (continued)

curtailments or settlements that occur on or after 1 January 2019, or the date on which or the Conceptual Framework for Financial Reporting issued in 2010. Amendments to the amendments are first applied. Earlier application is permitted.The adoption of References to the Conceptual Framework in IFRS Standards updates some of those this standard will not have an impact on the financial statements of the Company. references and quotations so that they refer to the 2018 Conceptual Framework, and makes other amendments to clarify which version of the Conceptual Framework IFRS 3 Definition of a Business is referred to in particular documents. With a broad business definition, determining whether a transaction results in an asset or a business acquisition has long been a challenging but important area of These amendments are based on proposals in the Exposure Draft Updating judgement. These amendments to IFRS 3 Business Combinations seek to clarify References to the Conceptual Framework, published in 2015, and amend Standards, this matter as below however complexities still remain their accompanying documents and IFRS practice statements that will be effective for annual reporting periods beginning on or after 1 January 2020. ◊ Optional concentration test The amendments include an election to use a concentration test. This is a The adoption of these changes will not affect the amounts and disclosures of the 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL simplified assessment that results in an asset acquisition if substantially all Company’s financial statements. of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. IAS 1 and IAS 8 Definition of Material The amendment refines the definition of Material to make it easier to understand ◊ Substantive process and aligning the definition across IFRS Standards and the Conceptual Framework. If an entity chooses not to apply the concentration test, or the test is failed, then The amendment includes the concept of ‘obscuring’ to the definition, alongside the the assessment focuses on the existence of a substantive process. existing references to ‘omitting’ and ‘misstating’. Additionally, the amendments also adds the increased threshold of ‘could influence’ to ‘could reasonably be expected The definition of a business is now narrower and could result in fewer business to influence’ as below. combinations being recognised. “Information is material if omitting, misstating or obscuring it could reasonably The amendment applies to businesses acquired in annual reporting periods be expected to influence decisions that the primary users of general purpose beginning on or after 1 January 2020. Earlier application is permitted. The adoption financial statements make on the basis of those financial statements, which of this standard will not have an impact on the financial statements of the Company. provide financial information about a specific reporting entity.”

Amendments to References to the Conceptual Framework in IFRS Standards However, the amendment has also removed the definition of material omissions or misstatements from IAS 8 Accounting Policies, Changes in Accounting Estimates This amendment sets out amendments to IFRS Standards (Standards), their and Errors. The amendments are effective from 1 January 2020 but may be applied accompanying documents and IFRS practice statements to reflect the issue of the earlier.The Company is assessing the potential impact on its financial statements International Accounting Standards Board (IASB) revised Conceptual Framework resulting from the application of the refined definition of materiality. for Financial Reporting in 2018 (2018 Conceptual Framework).

Some Standards, their accompanying documents and IFRS practice statements contain references to, or quotations from, the IASC’s Framework for the Preparation and Presentation of Financial Statements adopted by the IASB in 2001 (Framework) UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 111

2. Summary of significant accounting policies (continued)

(b) Changes to standards and new interpretations effective in the year 2018 (continued)

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2018 (continued)

(c) Insurance contracts insurance (i.e. class of business not included under those listed above)

Classification Motor insurance business means the business of affecting and carrying out contracts The Group issues contracts that transfer insurance risk. Insurance contracts are of insurance against loss of, or damage to, or arising out of or in connection with those contracts that transfer significant insurance risk. As a general guideline, the the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks. group defines as significant insurance risk, the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits Personal accident insurance business means the business of affecting and carrying payable if the insured event did not occur. out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result Insurance contracts are classified into two main categories, depending on the of an accident or of an accident of a specified class or becoming incapacitated in duration of risk and as per the provisions of the Insurance Act: long term insurance consequence of disease or of disease of a specified class. business and short term insurance business. Fire insurance business means the business of affecting and carrying out contracts (i) Long term insurance business of insurance, otherwise than incidental to some other class of insurance business Includes business of all or any of the following classes, namely; group life business, against loss or damage to property due to fire, explosion, storm and other ordinary life business, deposit administration business and unit linked business. occurrencescustomarily included among the risks insured against in the fire insurance business. Life insurance business means the business of, or in relation to, the issuing of, or the undertaking of liability to pay money on death (not being death by accident or Recognition and Measurement in specified sickness only) or on the happening of any contingency dependent on the termination or continuance of human life (either with or without provision for (i) Premium income a benefit under a continuous disability insurance contract), and include a contract For long term insurance business, premiums are recognised as revenue when they which is subject to the payment of premiums for term dependent on the termination become payable by the contract holder. Premiums are shown before deduction or continuance of human life and any contract securing the grant of an annuity for of commission. a termdependent upon human life. For short term insurance business, premium income is recognised on assumption Superannuation business means life assurance business, being business of, or in of risks, and includes estimates of premiums due but not yet received less unearned relation to, the issuing of or the undertaking of the liability under superannuation, premium. Unearned premiums represent the proportion of the premiums written group life and permanent health insurance policy. in periods up to the accounting date that relates to the unexpired terms of policies in force at the financial reporting date, and is computed using the 365ths method. (ii) Short term insurance business Premiums are shown before deduction of commission and are gross of any taxes Means insurance business of any class or classes not being long term insurance or duties levied on premiums. business. Classes of general insurance include aviation insurance, engineering insurance, fire insurance - domestic risks, fire insurance - industrial and commercial risks, liability insurance, marine insurance, motor insurance-private vehicles, motor insurance - commercial vehicles, personal accident insurance, theft insurance, workmen’s compensation and employer’s liability insurance and miscellaneous UAP Holdings Limited

112 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(c) Insurance contracts (continued)

(ii) Claims The benefits to which the Group is entitled under its reinsurance contracts held For long term insurance business, benefits are recorded as an expense when they are recognised as reinsurance assets. These assets consist of short-term balances are incurred. Claims arising on maturing policies are recognised when the claim due from reinsurers, as well as longer term receivables that are dependent on the becomes due for payment.Death claims are accounted for on notification.Surrenders expected claims and benefits arising under the related reinsured insurance contracts. are accounted for on payment. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with For short term insurance business, claims incurred comprise claims paid in the the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums year and changes in the provision for outstanding claims.Claims paid represent all payable for reinsurance contracts and are recognised as an expense when due. payments made during the year, whether arising from events during that or earlier years. Outstanding claims represent the estimated ultimate cost of settling all claims The Group assesses its reinsurance assets for impairment on a quarterly basis. If there arising from incidents occurring prior to the financial reporting date, but not settled is objective evidence that the reinsurance asset is impaired, the Group reduces the at that date. Outstanding claims are computed on the basis of the best information carrying amount of the reinsurance asset to its recoverable amount and recognises available at the time the records for the year are closed, and include provisions for that impairment loss in profit or loss. The Group gathers the objective evidence that 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL claims incurred but not reported (“IBNR”).Outstanding claims are not discounted. a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is also calculated following the same (iii) Commissions payable and deferred acquisition costs (“DAC”) method used for these financial assets. These processes are set out under Note 2(k). Commissions payable are based on the premium written and are recorded as an expense in the period in which they are incurred. (vi) Receivables and payables related to insurance contracts and investment contracts A proportion of commission payable is deferred and amortised over the period Receivables and payables are recognised when due. These include amounts due in which the related premium is earned. Deferred acquisition costs represent a to and from agents, brokers and insurance contract holders. proportion of acquisition costs that relate to policies that are in force at the period end. If there is objective evidence that the insurance receivable is impaired, the Group (iv) Liability adequacy test reduces the carrying amount of the insurance receivable accordingly and recognises At each financial reporting date, liability adequacy tests are performed to ensure the that impairment loss in the income statement. The Group gathers the objective adequacy of the insurance contract liabilities net of related DAC. In performing these evidence that an insurance receivable is impaired using the same process adopted tests, current best estimates of future contractual cash flows and claims handling for financial assets classified at amortised cost. The impairment loss is also calculated and administration expenses, as well as investment income from the assets backing under the same method used for these financial assets. These processes are such liabilities, are used. Any deficiency is immediately charged to profit or loss. described under Note 2 (k).

(v) Reinsurance contracts held (vii) Salvage and subrogation reimbursements Contracts entered into by the Group with reinsurers under which the Group is Some insurance contracts permit the Group to sell (usually damaged) property compensated for losses on one or more contracts issued by the Group and that meet acquired in settling a claim (for example, salvage). The Group may also have the right the classification requirements for insurance contracts are classified as reinsurance to pursue third parties for payment of some or all costs (for example, subrogation). contracts held. Contracts that do not meet these classification requirements are Estimates of salvage recoveries are included as an allowance in the measurement of classified as financial assets.Insurance contracts entered into by the Group under the insurance liability for claims, and salvage property is recognised in other assets which the contract holder is another insurer (inwards reinsurance) are included when the liability is settled. The allowance is the amount that can reasonably be with insurance contracts. recovered from the disposal of the property. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 113

2. Summary of significant accounting policies (continued)

(c) Insurance contracts (continued)

Subrogation reimbursements are also considered as an allowance in the measurement (vii) Service income of the insurance liability for claims and are recognised in other assets when the Service income relates to recharges issued by the Holding Company to subsidiaries liability is settled. The allowance is the assessment of the amount that can be of the Group for the distribution of shared service costs. recovered from the action against the liable third party. (e) Investment contracts (d) Revenue recognition The Group issues investment contracts without fixed terms (unit-linked) and investment contracts with fixed and guaranteed terms (fixed interest rate).The (i) Insurance premium revenue investment contracts include funds administered for a number of retirement The revenue recognition policy relating to insurance contracts is set out under benefit schemes. note 2 (c) above. Investment contracts without fixed terms are financial liabilities whose fair value (ii) Commissions is dependent on the fair value of underlying financial assets, and are designated Commissions receivable are recognised as income in the period in which they are at inception as at fair value through profit or loss. The Group designates these earned. investment contractsto be measured at fair value through profit or loss because it eliminates or significantly reduces a measurement or recognition inconsistency (iii) Interest income (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise Interest income is recognised on a time proportion basis that takes into account the from measuring assets or liabilities or recognising the gains and losses on them effective yield on the asset.When a receivable is impaired, the Group reduces the on different bases. carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues The best evidence of the fair value of these financial liabilities at initial recognition unwinding the discount as interest income. is the transaction price (i.e. the fair value received) unless the fair value of that instrument is evidenced by comparison with other observable current market (iv) Dividend income transactions in the same instrument or based on a valuation technique whose Dividends are recognised as income in the period in which the right to receive variables include only data from observable markets. When such evidence exists, payment is established. the Group recognises profit at inception.

(v) Rental income The fair value of financial liabilities for investment contracts without fixed terms Rental income is recognised as income in the period in which it is earned. All is determined using the current unit values in which the contractual benefits are investment income is stated net of investment expenses. denominated. These unit values reflect the fair values of the financial assets contained within the Group’s unitised investment funds linked to the financial liability. The (vi) Fee income fair value of the financial liabilities is obtained by multiplying the number of units Fee income consists primarily of administration fees arising from services rendered attributed to each contract holder at the financial reporting date by the unit value in relation to the issue and management of deposit administration and investment for the same date. contracts. Fees are recognised in the accounting period in which the services are rendered and are presented in the income statement within ‘other income’. For investment contracts with fixed and guaranteed terms, the amortised cost basis is used. In this case, the liability is initially measured at its fair value less transaction costs that are incremental and directly attributable to the acquisition or issue of the contract. UAP Holdings Limited

114 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(e) Investment contracts (continued)

Subsequent measurement of investment contracts at amortised cost uses the (g) Investment properties effective interest method. This method requires the determination of an interest Buildings, or part of a building, (freehold or held under a finance lease) and land rate (the effective interest rate) that exactly discounts to the net carrying amount of (freehold or held under an operating lease) held for long term rental yields and/or the financial liability, the estimated future cash payments or receipts through the capital appreciation and are not occupied by the Group are classified as investment expected life of the financial instrument or, when appropriate, a shorter period if property under non-current assets. Investment property is carried at fair value, the holder has the option to redeem the instrument earlier than maturity. representing open market value determined annually by external valuers. Properties under construction and development sites with projected use as Investment The Group re-estimates at each reporting date the expected future cash flows and properties are valued at projected fair values taking into account current market recalculates the carrying amount of the financial liability by computing the present conditions, outstanding investment costs and a risk loading according to the value of estimated future cash flows using the financial liability’s original effective progress of the project. Changes in fair values are included in investment income interest rate. Any adjustment is immediately recognised as income or expense in in the income statement. the income statement. On a consolidated basis, the business evaluated the proportion of the properties 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL (f) Property and equipment that are owner occupied and reclassified them to Property, Plant and Equipment All categories of property and equipment are initially recorded at cost and subsequently as disclosed in note 19. stated at historical cost less depreciation and impairment losses.Historical cost includes expenditure that is directly attributable to the acquisition of the items. (h) Intangible assets The Group’s intangible assets relate to computer software and goodwill (note 2 (a (iv)). 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 Acquired computer software licences are capitalised on the basis of the costs benefits associated with the item will flow to the Group and the cost of the item incurred to acquire and bring to use the specific software.These costs are amortised can be measured reliably. All other repairs and maintenance costs are charged over their estimated useful lives of three years. to the income statement during the financial period in which they are incurred. Development costs that are directly associated with the production of identifiable and Depreciation is calculated using the straight line method to write down unique software products controlled by the Group, and that will probably generate their cost to their residual values over their estimated useful lives, as follows: economic benefits exceeding costs beyond one year, are recognised as intangible assets if:

◊ Motor vehicles – 5 years ◊ It is technically feasible to complete the software product so that it will be ◊ Computers & computer equipment – 3 years available for use; ◊ Office equipment – 5 years ◊ Management intends to complete the software product and use or sell it; ◊ Furniture & fittings – 8 years ◊ There is an ability to use or sell the software product; ◊ It can be demonstrated how the software product will generate probable The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, future economic benefits; at each financial reporting date. An asset’s carrying amount is written down ◊ Adequate technical, financial and other resources to complete the development immediately to its estimated recoverable amount if the asset’s carrying amount and use or sell it are available; and, is greater than its estimated recoverable amount. Gains and losses on disposal of ◊ The expenditure attributable to the software product during its development property and equipment are determined by comparing proceeds with carrying can be reliably measured. amount and are included in the income statement. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 115

2. Summary of significant accounting policies (continued)

(h) Intangible assets (continued)

Direct costs include the software development, employee costs and an appropriate Fair values of quoted investments in active markets are based on current bid prices. portion of relevant overheads. Other development expediture that do not meet Fair values for unlisted equity securities are estimated using valuation techniques.These these criteria are recognised as an expense as incurred. Development costs that include the use of recent arm’s length transactions, discounted cash flow analysis and have been expensed are not recognised as an asset in a subsequent period. other valuation techniques commonly used by market participants.

Computer software development costs recognised as assets are amortised over their Classification and measurement estimated useful lives (not exceeding three years). Costs associated with maintaining The Group classifies its financial assets as subsequently measured at either amortised cost computer software programmes are recognised as an expense as incurred. or fair value on the basis of both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. A financial asset (i) Impairment of non-financial assets is measured at amortised cost if both of the following conditions are met: Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed ◊ the asset is held within a business model whose objective is to hold assets in for impairment whenever events or changes in circumstances indicate that the order to collect contractual cash flows. carrying amount may not be recoverable. An impairment loss is recognised for the ◊ the contractual terms of the financial asset give rise on specified dates to cash amount by which the asset’s carrying amount exceeds its recoverable amount. The flows that are solely payments of principal and interest on the principal amount recoverable amount is the higher of an asset’s fair value less costs to sell and value outstanding. in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The Group’s corporate bonds, government securities, receivables, mortgage loans, Non-financial assets other than goodwill that suffered an impairment are reviewed cash at bank and deposits with financial institutions are classified at amortised cost. for possible reversal of the impairment at each reporting date. The carrying values of various categories of Financial asset and Financial liabilities are shown in note 43. (j) Financial assets All financial assets that do not meet the above criteria are measured at fair value. Recognition and de-recognition Equity investments for life business are classified at fair value through profit or loss. Financial assets are recognised when the Group becomes a party to the contractual Equity investment for non-life business are classified at fair value through other provisions of the asset. Initial recognition of financial asset is at fair value plus, for all comprehensive income (note 24). financial assets except those carried at fair value through profit or loss, transaction costs.Financial assets are derecognised when the rights to receive cash flows from (k) Impairment of financial assets (2018) the financial assets have expired or where the Group has transferred substantially IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ all risks and rewards of ownership. (ECL) model and results in credit losses being recognised earlier than under IAS 39. The new impairment model applies to financial assets measured at amortised cost. Equity investments are carried at fair value. Gains and losses arising from changes As a consequence of the new standard, the company has revised its impairment in the fair value of equity investments are recognised in profit and loss and other methodology under IFRS 9 for each of the classes of assets measured at amortised comprehensive income. When equity investments are derecognised, the cumulative cost. gain or loss previously recognised in other comprehensive income are transferred to retained earnings. Dividends on equity instruments are recognised in the income The ECL impairment loss allowance is an unbiased, probability-weighted amount statement when the Group’s right to receive payment is established. determined by evaluating a range of possible outcomes that reflects reasonable and supportable information that is available without undue cost or effort of past UAP Holdings Limited Notes to the Financial Statements (continued) 116 2. Summary of significant accounting policies (continued)

(k) Impairment of financial assets (2018) (continued)

events, current conditions and forecasts of forward-looking economic conditions. Stage 1 : At initial recognition a financial instrument is allocated into stage 1, except The ECL model is dependent on the availability of relevant and accurate data for purchased or originated credit impaired financial instruments. to determine whether a significant increase in credit risk occurred since initial recognition, the probability of default (PD), the loss given default (LGD) and the Stage 2 : A financial instrument is allocated to stage 2 if there has been a significant possible exposure at default (EAD). Of equal importance is sound correlation between increase in credit risk since initial recognition of the financial instrument. these parameters and forward-looking economic conditions. Stage 3 : A financial instrument is allocated to stage 3 if the financial instrument ECL reflects an entity’s own expectations of credit losses. However, when considering is in default or is considered to be credit impaired. all reasonable and supportable information that is available without undue cost or effort in estimating ECL, an entity should also consider observable market Under IFRS 9, impairment loss allowances are measured on either of the following information about the credit risk of the particular financial instrument or similar bases: financial instruments. 12-month ECLs: these are ECLs that result from possible default events within the 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL In the absence of sufficient depth of data, management apply expert judgment 12 months after the reporting date; and within a governance framework to determine the required parameters. The expert judgement process is based on available internal and external information. Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. Forward-looking information includes, but is not limited to macro-economic conditions expected in the future. Forward looking information used in the ECL The company measures loss allowances at an amount equal to lifetime ECLs, except calculation should reflect the nature and characteristics of the credit risk exposures. for the following, which are measured as 12-month ECLs: All reasonable and supportable information that is available should be used when ◊ Financial assets that are determined to have low credit risk at the reporting incorporating forward-looking information into the ECL allowance. Forward looking date; and assessments can be performed on an individual or collective basis. ◊ Financial assets where credit risk (i.e. the risk of default occurring over the Forward-looking factors should be aligned with risk factors used in risk assessments, expected life of the financial instrument) has not increased significantly since stress testing, budgeting as well as strategy and pricing decisions. Relevant factors initial recognition. include factors intrinsic to the entity and its business or derived from external conditions. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the company Estimates regarding credit risk parameters and the impact of forward-looking considers quantitative and qualitative information, based on the company’s historical information used in the calculation of the ECL loss amount should be reviewed experience, credit assessment and including forward-looking information. The at each reporting date and updated if necessary. The ECL loss amount depends Company’s assessment of a significant increase in credit risk from initial recognition on the specific stage where the financial instrument has been allocated to within consists of a primary and secondary risk driver as follows: the ECL model: ◊ The primary risk driver aligns to the quantitative credit risk assessments performed, such as the credit score, credit rating, probability of default or arrears aging of a financial instrument.

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 117

2. Summary of significant accounting policies (continued)

(k) Impairment of financial assets (2018) (continued)

◊ The secondary risk assessment considers a broad range of qualitative risk factors (e) the disappearance of an active market for that financial asset because of based on a forward looking view such as economic and sector outlooks. The financial difficulties; secondary risk assessment can be performed on a portfolio basis as opposed (f) observable data indicating that there is a measurable decrease in the estimated to a quantitative assessment at a financial instrument level. future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual When making a quantitative assessment, the company uses the change in the financial assets in the Group, including: probability of default occurring over the expected life of the financial instrument. This requires a measurement of the probability of default at initial recognition and ◊ Adverse changes in the payment status of borrowers in the Group; or at the reporting date. ◊ National or local economic conditions that correlate with defaults on the assets in the Group. The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk. Details on the impact of The estimated period between a loss occurring and its identification is determined adopton of IFRS 9 impairment of financial instruments is outlined in note 4 (d). by management for each identified portfolio.

Impairment of financial assets (2017) The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for Assets carried at amortised cost financial assets that are not individually significant.If the Group determines that no The Group assesses at each financial reporting date whether there is objective evidence objective evidence of impairment exists for an individually assessed financial asset, that a financial asset or a group of financial assets measured at amortised cost is whether significant or not, it includes the asset in a group of financial assets with impaired. A financial asset or a group of financial assets is impaired and impairment similar credit risk characteristics and collectively assesses them for impairment. losses are incurred only if there is objective evidence of impairment as a result of Assets that are individually assessed for impairment and for which an impairment one or more events that occurred after initial recognition of the asset (a ‘loss event’) loss is or continues to be recognised are not included in a collective assessment and that loss event (or events) has an impact on the estimated future cash flows of impairment. of the financial asset or group of financial assets that can be reliably estimated. If there is objective evidence that an impairment loss on financial assets carried Objective evidence that a financial asset or group of assets is impaired includes at amortised cost has been incurred, the amount of the loss is measured as the observable data that comes to the attention of the Group about the following loss difference between the asset’s carrying amount and the present value of estimated events: future cash flows (excluding future credit losses that have not been incurred) discounted at the financial instrument’s original effective interest rate.The carrying (a) significant financial difficulty of the borrower; amount of the asset is reduced through the use of an allowance account and the (b) a breach of contract, such as default or delinquency in interest or principal amount of the loss is recognised in the income statement.If a loan has a variable repayments; interest rate, the discount rate for measuring any impairment loss is the current (c) the Group granting to the borrower, for economic or legal reasons relating to the effective interest rate determined under the contract.As a practical expedient, the borrower’s financial difficulty, a concession that the Groupwould not otherwise Group may measure impairment on the basis of an instrument’s fair value using consider; an observable market price. (d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; UAP Holdings Limited

118 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(k) Impairment of financial assets (2018) (continued)

The calculation of the present value of the estimated future cash flows of a collateralised (l) Accounting for leases financial asset reflects the cash flows that may result from foreclosure less costs for Leases of property and equipment where the Group assumes substantially all the obtaining and selling the collateral, whether or not foreclosure is probable. risks and rewards of ownership are classified as finance leases. Assets acquired under finance leases are capitalised at the inception of the lease at the lower of For the purposes of a collective evaluation of impairment, financial assets are their fair value and the estimated present value of the underlying lease payments. grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Each lease payment is allocated between the liability and finance charges so as Group’s grading process that considers asset type, industry, geographical location, to achieve a constant rate on the finance balance outstanding. The corresponding collateral type, past-due status and other relevant factors).Those characteristics are rental obligations, net of finance charges, are included in non-current liabilities. relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual The interest element of the finance charge is charged to the income statement terms of the assets being evaluated. over the lease period. Property and equipment acquired under finance leases is depreciated over the estimated useful life of the asset. Future cash flows in a group of financial assets that are collectively evaluated for 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL impairment are estimated on the basis of the contractual cash flows of the assets Leases in which a significant portion of the risks and rewards of ownership are in the Group and historical loss experience for assets with credit risk characteristics retained by the lessor are classified as operating leases. Payments made under similar to those in the Group. Historical loss experience is adjusted on the basis of operating leases are charged to the income statement on a straight-line basis over current observable data to reflect the effects of current conditions that did not the period of the lease. affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. (m) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, When a loan is uncollectible, it is written off against the related provision for loan other short term highly liquid investments with original maturities of three months impairment.Such loans are written off after all the necessary procedures have or less, and bank overdrafts. been completed and the amount of the loss has been determined.Subsequent recoveries of amounts previously written off decrease the amount of the provision (n) Employee benefits for loan impairment in the income statement. (i) Retirement benefit obligations If, in a subsequent period, the amount of the impairment loss decreases and the The Group operates a defined benefit scheme for employees.A defined benefit plan decrease can be related objectively to an event occurring after the impairment was is a pension plan that defines an amount of pension benefit that an employee will recognised (such as an improvement in the debtor’s credit rating), the previously receive on retirement, usually dependent on one or more factors such as age, years recognised impairment loss is reversed by adjusting the allowance account. The of service and compensation d an amount of pension benefit that an employee amount of the reversal is recognised in the income statement. will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to The liability recognised in the statement of financial position in respect of defined be past due but are treated as new loans. In subsequent years, the renegotiated benefit pension plans is the present value of the defined benefit obligation at the terms apply in determining whether the asset is considered to be past due. end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 119

2. Summary of significant accounting policies (continued)

(k) Impairment of financial assets (2018) (continued) discounting the estimated future cash outflows using interest rates of government Deferred income tax assets are recognised only to the extent that it is probable that bonds that are denominated in the currency in which the benefits will be paid, future taxable profits will be available against which the temporary differences can and that have terms to maturity approximating to the terms of the related pension be utilised. Deferred income tax is provided on temporary differences arising on obligation. investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the Actuarial gains and losses arising from experience adjustments and changes in actuarial temporary difference will not reverse in the foreseeable future. assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.Past-service costs are recognised immediately in income. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred (ii) Other entitlements income taxes assets and liabilities relate to income taxes levied by the same taxation Employee entitlements to long service awards are recognised when they accrue authority on either the same taxable entity or different taxable entities where there to employees. A provision is made for the estimated liability for such entitlements is an intention to settle the balances on a net basis. as a result of services rendered by employees up to the financial reporting date. (p) Functional currency and translation of foreign currencies The estimated monetary liability for employees’ accrued annual leave entitlement at the financial reporting date is recognised as an expense accrual. (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are (o) Current and deferred income tax measured using the currency of the primary economic environment in which the The tax expense for the period comprises current and deferred income tax. Tax is entity operates (‘the functional currency’). The consolidated financial statements are recognised in the profit or loss except to the extent that it relates to items recognised presented in ‘Kenyan Shillings (Kshs), which is the Group’s presentation currency. in other comprehensive income or directly in equity.In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using The current income tax charge is calculated on the basis of the tax enacted or exchange rates prevailing at the dates of the transactions or valuation where items substantively enacted at the reporting date.Management periodically evaluates are re-measured.Foreign exchange gains and losses resulting from the settlement of positions taken in tax returns with respect to situations in which applicable tax such transactions and from the translation at year-end exchange rates of monetary regulation is subject to interpretation. It establishes provisions where appropriate assets and liabilities denominated in foreign currencies are recognised in profit or loss. on the basis of amounts expected to be paid to the tax authorities. Foreign exchange gains and losses that relate to borrowings and cash and cash Deferred income tax is provided in full, using the liability method, on all temporary equivalents are presented in profit or loss within ‘finance income or cost’. All other differences arising between the tax bases of assets and liabilities and their carrying foreign exchange gains and losses are presented in profit or loss within ‘other values for financial reporting purposes. However, if the deferred income tax arises income’ or ‘other expenses’. from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting Translation differences related to changes in amortised cost are recognised in nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined profit or loss, and other changes in carrying amount are recognised in other using tax rates and laws that have been enacted or substantively enacted at the comprehensive income. financial reporting date and are expected to apply when the related deferred income tax liability is settled. UAP Holdings Limited

120 Notes to the Financial Statements (continued) 2. Summary of significant accounting policies (continued)

Impairment of financial assets (2017) (continued) Functional currency and translation of foreign currencies (continued)

Translation differences on non-monetary financial assets and liabilities, such as The group applies the acquisition method to account for business combinations. equities held at fair value through profit or loss, are recognised in profit or loss as The consideration transferred for the acquisition of a subsidiary is the fair values of part of the fair value gain or loss. Translation differences on non-monetary financial the assets transferred, the liabilities incurred to the former owners of the acquiree assets, such as equities classified as available-for-sale financial assets, are included and the equity interests issued by the group. The consideration transferred includes in other comprehensive income. the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities (iii) Group balances assumed in a business combination are measured initially at their fair values at the The results and financial position of all the Group entities (none of which has the acquisition date. The group recognises any non-controlling interest in the acquiree currency of a hyperinflationary economy) that have a functional currency different on an acquisition-by-acquisition basis, either at fair value or at the non-controlling from the presentation currency are translated into the presentation currency as interest’s proportionate share of the recognised amounts of acquiree’s identifiable follows: net assets.

◊ assets and liabilities for each statement of financial position presented are Acquisition-related costs are expensed as incurred. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL translated at the closing rate at the end of the reporting period; ◊ income and expenses for each income statement amount are translated at If the business combination is achieved in stages, the acquisition date carrying value average exchange rates (unless this average is not a reasonable approximation of of the acquirer’s previously held equity interest in the acquiree is re-measured to fair the cumulative effect of the rates prevailing on the transaction dates, in which value at the acquisition date; any gains or losses arising from such re-measurement case income and expenses are translated at the dates of the transactions); and are recognised in profit or loss. ◊ all resulting exchange differences are recognised in other comprehensive income. Any contingent consideration to be transferred by the group is recognised at fair Goodwill and fair value adjustments arising on the acquisition of a foreign entity are value at the acquisition date. Subsequent changes to the fair value of the contingent treated as assets and liabilities of the foreign entity and translated at the closing consideration that is deemed to be an asset or liability is recognised in accordance rate.Exchange differences arising are recognised in equity. with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its (q) Dividends subsequent settlement is accounted for within equity. Dividends payable to the Group’s shareholders are charged to equity in the period in which they are declared.Proposed dividends are shown as a separate component The excess of the consideration transferred the amount of any non-controlling of equity until declared. interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired (r) Consolidation is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value (i) Subsidiaries of the net assets of the subsidiary acquired in the case of a bargain purchase, the Subsidiaries are all entities (including structured entities) over which the group has difference is recognised directly in the income statement. control. The group controls an entity when the group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect Inter-company transactions, balances and unrealised gains on transactions between those returns through its power over the entity. Subsidiaries are fully consolidated group companies are eliminated. Unrealised losses are also eliminated. When from the date on which control is transferred to the group. They are deconsolidated necessary amounts reported by subsidiaries have been adjusted to conform with from the date that control ceases. the group’s accounting policies. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 121 2. Summary of significant accounting policies (continued)

Impairment of financial assets (2017) (continued) (r) Consolidation (continued)

(ii) Changes in ownership interests in subsidiaries without change of control each reporting date whether there is any objective evidence that the investment Transactions with non-controlling interests that do not result in loss of control are in the associate is impaired. If this is the case, the group calculates the amount of accounted for as equity transactions – that is, as transactions with the owners in impairment as the difference between the recoverable amount of the associate their capacity as owners. The difference between fair value of any consideration paid and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) and the relevant share acquired of the carrying value of net assets of the subsidiary of associates in the income statement Profits and losses resulting from upstream is recorded in equity. Gains or losses on disposals to non-controlling interests are and downstream transactions between the group and its associate are recognised also recorded in equity. in the group’s financial statements only to the extent of unrelated investor’s interests in the associates. (iii) Disposal of subsidiaries When the group ceases to have control any retained interest in the entity is Unrealised losses are eliminated unless the transaction provides evidence of an remeasured to its fair value at the date when control is lost, with the change in impairment of the asset transferred. Accounting policies of associates have been carrying amount recognised in profit or loss. The fair value is the initial carrying changed where necessary to ensure consistency with the policies adopted by the amount for the purposes of subsequently accounting for the retained interest as group. Dilution gains and losses arising in investments in associates are recognised an associate, joint venture or financial asset. In addition, any amounts previously in the income statement. Currently the Group doesn’t have any investments in recognised in other comprehensive income in respect of that entity are accounted associates. for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are (s) Goodwill reclassified to profit or loss. Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over the Company’s interest (iv) Associates in net fair value of the net identifiable assets, liabilities and contingent liabilities Associates are all entities over which the group has significant influence but not of the acquiree and the fair value of the non-controlling interest in the acquiree. control, generally accompanying a shareholding of between 20% and 50% of the For the purpose of impairment testing, goodwill acquired in a business combination voting rights. Investments in associates are accounted for using the equity method is allocated to each of the Cash Generating Units (CGUs), or groups of CGUs, that is of accounting. Under the equity method, the investment is initially recognised at expected to benefit from the synergies of the combination. Each unit or group of cost, and the carrying amount is increased or decreased to recognise the investor’s units to which the goodwill is allocated represents the lowest level within the entity share of the profit or loss of the investee after the date of acquisition. The group’s at which the goodwill is monitored for internal management purposes. Goodwill investment in associates includes goodwill identified on acquisition. is monitored at the operating segment level.

If the ownership interest in an associate is reduced but significant influence is Goodwill impairment reviews are undertaken annually or more frequently if events retained, only a proportionate share of the amounts previously recognised in other or changes in circumstances indicate a potential impairment. The carrying value comprehensive income is reclassified to profit or loss where appropriate. The group’s of goodwill is compared to the recoverable amount, which is the higher of value in share of post-acquisition profit or loss is recognised in the income statement, and its use and the fair value less costs to sell. Any impairment is recognised immediately share of post-acquisition movements in other comprehensive income is recognised as an expense and is not subsequently reversed. in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at UAP Holdings Limited

122 Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

(t) Segmental reporting The main source of uncertainty is that epidemics such as AIDS could result in future Operating segments are reported in a manner consistent with the internal reporting mortality being significantly worse than in the past for the age groups in which the provided to the chief operating decision- maker (CODM). The CODM is the person Group has significant exposure to mortality risk. However, continuing improvements or group that allocates resources to and assesses the performance of the operating in medical care and social conditions could result in improvements in longevity segments of an entity. The group has determined the UAP Holdings Limited Board in excess of those allowed for in the estimates used to determine the liability for of Directors to be its CODM. contracts where the Group is exposed to longevity risk. For contracts without fixed terms and with discretionary participation in profits, it is assumed that the Group All transactions between business segments are conducted on an arm’s length will be able to increase mortality risk charges in future years in line with emerging basis, with intra-segment revenue and costs being eliminated in head office.Income mortality experience. Estimates are also made as to future investment income and expenses directly associated with each segment are included in determining arising from the assets backing long-term insurance contracts. These estimates are business segment performance. based on current market returns as well as expectations about future economic and financial developments. The average estimated rate of investment return is (u) Comparatives 12.5 % p.a.(2017: 12.5% p.a.). 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Where necessary, comparatives figures have been restated to conform to changes in presentation in the current year. (ii) Claims reserving and determination of IBNR The estimation of future contractual cash flows in relation to reported losses and 3. Critical accounting estimates and judgments in applying losses incurred but not reported is a key accounting estimate. There are several accounting policies sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Case estimates are computed The Group makes estimates and assumptions that affect the reported amounts on the basis of the best information available at the time the records for the year of assets and liabilities within the next financial year. Estimates and judgements are closed. Further details on the process used to estimate claims incurred but not are continually evaluated and based on historical experience and other factors, reported and amounts recorded as liabilities at the end of the current and previous including expectations of future events that are believed to be reasonable under year are set out in note 33 of the financial statements. the circumstances. (iii) Fair value of financial assets (i) Future benefit payments from long-term insurance contracts Fair values of certain financial assets recognised in the financial statements are The estimation of future benefit payments from long-term insurance contracts is determined using valuation techniques based on assumptions that are not supported one of the Group’s most critical accounting estimates. There are several sources of by prices from current market transactions or observable market data. uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Note 33 contains further details on this process. The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example The determination of the liabilities under long-term insurance contracts is dependent models) are used to determine fair values, they are validated and periodically on estimates made by the Group. Estimates are made as to the expected number independently reviewed by qualified senior personnel. All models are certified of deaths for each of the years in which the Group is exposed to risk. before they are used, and models are calibrated to ensure that outputs reflect The Group bases these estimates on standard mortality tables that reflect historical actual data and comparative market prices. To the extent practical, models use mortality experience. The estimated number of deaths determines the value of the observable data, however, areas such as credit risk (both own and counterparty), benefit payments and the value of the valuation premiums. volatilities and correlations require management to make estimates. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 123

3. Critical accounting estimates and judgments in applying accounting policies

(iv) Recoverable amount of receivables Our risk management strategy defines the extent of the risks we are prepared to incur Critical estimates are made by the Directors in determining the recoverable amount for our clients and shareholders. The development of our risk strategy is embedded of impaired receivables. This process is set out in note 2(k). The carrying amounts in the annual planning cycle and hence in our business strategy.That is, Integrating of receivables are shown on note 4(b). Strategy, Risk and Performance management takes place at strategy setting, first with a full Executive management consensus on clearly defined business objectives. (v) Goodwill impairment Once Executive management have defined the objectives, they then identify the Critical estimates have been made by Directors in determining whether the key risks that may present an opportunity to pursue those business objectives, or goodwill is impaired. Based on discounted cash flows with a discount factor of impede their ability to achieve them. 19.5%theDirectors deemed goodwill to be impaired relating to investment in Tanzania (UAP Insurance Tanzania). These assumptions are disclosed on note 18. Organisational structure To ensure that our risk management operates efficiently and effectively, we have established 4. Risk Governance and Risk Management System a specific risk management function within UAP Global Services as a Shared Service for the entire Group. Our Risk Management supervises risk management Group-wide with Risk management objectives the support of decentralized structures in all units of the Group. It is headed by the Group Risk management is a central part of the Group’s strategic management process Risk and Compliance Manager (GCRM), who is supported by interdisciplinary teams of hence we continuously seek to enhance the risk management capabilities of highly qualified staff. The Group’s activities expose it to a variety of risks, including insurance the Group. It is anticipated that our risk management practices will increase the risk and financial risk. probability of success, and reduce both the potential of failure and the uncertainty associated with achieving the group’s overall objectives. The Group’s overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial The objectives of the Group’s risk management activities are to achieve sustained performance, by use of underwriting guidelines and capacity limits, reinsurance planning, competitive advantage via a rigorous, group wide risk management system that is credit policy governing the acceptance of clients, and defined criteria for the approval of fully aligned to the Group values, strategic business initiatives and processes. At a intermediaries and reinsurers. Investment policies are in place which help manage liquidity, strategic level, our risk management objectives are to: and seek to maximise return within an acceptable level of interest rate risk. Management Framework ensure that staff in our risk management structure and the Group as a whole ◊ Identify the Group’s significant risks in relation to the corporate strategies pursued; are kept informed of our risk strategy, organisation and processes, enabling the risks ◊ Formulate the Group’s risk appetite and ensure that business profile and plans incurred to be actively controlled. are consistent with it; ◊ Optimise risk/return decisions by taking them as closely as possible to the Risk Management Framework business, while establishing strong and independent review and challenge In order to achieve its mission and objectives, the Group has developed an Enterprise structures; Risk management framework to provide a guide within which key risks affecting the ◊ Ensure that business growth plans are properly supported by effective risk group are identified, measured and managed. This risk management framework infrastructure; also provides management with proven risk management guidelines that support ◊ Manage risk profile to ensure that specific financial deliverables remain possible their decision-making responsibilities and processes, together with managing the under a range of adverse business conditions; and risks that impact on the objectives of the Group. ◊ Help executives improve the control and co-ordination of risk taking across the business. UAP Holdings Limited

124 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

Risk Management Framework (continued)

At the heart of the risk management framework is a governance process with clear (a) Insurance risk responsibilities for taking, managing, monitoring and reporting risks. The Group The risk under any one insurance contract is the possibility that the insured event articulates the roles and responsibilities for risk management throughout the occurs and the uncertainty of the amount of the resulting claim. By the very nature organization, from the Board of Directors and the Group Chief Executive Officer of an insurance contract, this risk is random and therefore unpredictable. For a (CEO) to its businesses and functional areas, thus embedding risk management portfolio of insurance contracts where the theory of probability is applied to pricing in the business and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the The UAP Risk Management Framework is the Group’s main risk governance document; insurance liabilities. This could occur because the frequency or severity of claims it specifies the Group’s Target Risk Management Operating Model including Risk and benefits are greater than estimated. Insurance events are random and the management authorities and responsibilities, procedures and reporting requirements. actual number and amount of claims and benefits will vary from year to year from The risk management framework also classifies the risks the Group faces into broad the level established using statistical techniques. Experience shows that the larger risk categories. The Group regularly enhances the ERM Framework to reflect new the portfolio of similar insurance contracts, the smaller the relative variability about insights and changes in the Group’s environment. the expected outcome will be. In addition, a more diversified portfolio is less likely 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL to be affected by a change in any subset of the portfolio. The group has developed One of the key elements of the Group’s risk management framework is to foster risk its insurance underwriting strategy to diversify the type of insurance risks accepted transparency by establishing risk reporting standards throughout the Group. The and within each of these categories to achieve a sufficiently large population of Group regularly reports on its risk profile, current risk issues, adherence to its risk risks to reduce the variability of the expected outcome. Factors that aggravate policies and improvement actions both at a local and on a Group level. The Group insurance risk include lack of risk diversification in terms of type and amount of has procedures in place for the timely referral of risk issues to senior management risk, geographical location and type of industry covered. and the Board of Directors. The following tables disclose the concentration of insurance risk by the class of business The implementation of the framework is driven by a risk management culture in which the contract holder operates and by the maximum insured loss limit included in and awareness that permeates throughout the Group and is supported by a set the terms of the policy. The amounts are the maximum insured loss limit of the insurance of policies and procedures; Tools; and A robust reporting mechanisms The Group liabilities (gross and net of reinsurance) arising from insurance contracts. continues to consciously take risks for which it expects an adequate return. This approach requires sound judgment and an acceptance that certain risks can and will materialize in the future.

Significant risks According to our classification, significant risks are risks that could have a long-term adverse effect on the Group’s assets, financial situation or profitability. We have applied this definition consistently to the individual business units and legal entities, taking account of their individual risk tolerance. The section below summarises the significant risks faced by the group and how they are managed. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 125

4. Risk Governance and Risk Management System (continued)

(a) Insurance risk (continued)

For the year ended 31 December 2018 Class of business Maximum insured loss Total (Amounts presented in Kshs 000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000 General insurance business Motor Gross 56,826,401 58,169,650 267,564,352 382,560,403 Net 57,403,300 48,187,234 12,803,145 118,393,679 Fire Gross 28,559,409 127,793,134 492,258,886 648,611,429 Net 28,811,264 125,471,341 302,678,790 456,961,395 Accident Gross 16,300,667 32,052,572 33,598,990 81,952,229 Net 10,267,792 12,428,583 8,375,521 31,071,896 Other Gross 30,930,380 117,002,465 16,330,340,002 16,478,272,847 Net 31,417,804 84,310,506 33,208,748 148,937,058 Life assurance business Ordinary life Gross 8,567,265 1,352,359 - 9,919,624 Net 8,567,265 495,403 - 9,062,668 Group life Gross 24,790,964 48,528,220 739,335,992 812,655,176 Net 21,292,013 29,279,954 406,547,118 457,119,085 Total Gross 165,975,086 384,898,400 17,863,098,222 18,413,971,708 Net 157,759,438 300,173,021 763,613,322 1,221,545,781

For the year ended 31 December 2017 Class of business Maximum insured loss Total (Amounts presented in Kshs ‘000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000 General insurance business Motor Gross 51,044,262 33,158,363 966,839,397 1,051,042,022 Net 58,198,620 16,623,341 608,960,957 683,782,918 Fire Gross 16,452,139 81,098,896 4,091,862,660 4,189,413,695 Net 19,698,339 78,587,253 86,821,326 185,106,918 Accident Gross 23,180,230 42,188,904 388,467,780 453,836,914 Net 13,078,967 12,327,507 4,655,410 30,061,884 Other Gross 34,779,891 110,398,475 799,522,521 944,700,887 Net 54,376,413 82,245,731 33,797,566 170,419,710 Life assurance business Ordinary life Gross 7,010,210 1,044,488 - 8,054,698 Net 7,010,210 273,611 - 7,283,821 Group life Gross 9,418,581 15,229,290 547,344,076 571,991,947 Net 8,313,790 7,589,536 294,459,442 310,362,768 Total Gross 141,885,313 283,118,416 6,794,036,434 7,219,040,163 Net 160,676,339 197,646,979 1,028,694,701 1,387,018,019 UAP Holdings Limited

126 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(a) Insurance risk (continued)

The concentration by sector or maximum insured loss at the end of the year is At 31 December 2018, if the Shilling had weakened/strengthened by 10% against broadly consistent with the prior year. the US dollar with all other variables held constant, the post-tax profit for the year would have been Kshs 87million (31 December 2017: Kshs 25 million) higher/lower, (b) Financial risk mainly as a result of US dollar earnings. At 31 December 2018, and 31 December The Group is exposed to financial risk through its financial assets, financial liabilities 2017, the Group had no significant exposure with respect to any other currencies. (investment contracts and borrowings), reinsurance assets and insurance liabilities. In particular the key financial risk is that the proceeds from its financial assets are not (ii) Price risk sufficient to fund the obligations arising from its insurance and investment contracts. The Group is exposed to equity securities price risk because of investments in The most important types of risk are credit risk, liquidity risk and market risk. Market quoted and unquoted shares classified either as fair value through profit or loss or risk includes currency risk, interest rate risk, equity price risk and other price risks. other comprehensive income. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group These risks arise from open positions in interest rate, currency and equity prices, diversifies its portfolio. Diversification of the portfolio is done in accordance with all of which are exposed to general and specific market movements. The risks that policies set out by the Board. All quoted shares held by the Group are traded on 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL the Group primarily faces due to the nature of its investments and liabilities are the various Stock Exchanges across the region. liquidity rate risk and equity price risk. At 31 December 2018, if the NSE and USE Indices had increased/decreased by The Group manages these risks through policies set out by the Finance and 10% with all other variables held constant and all the Group’s equity instruments Investment Committee of the Board (FIC). These policies have been developed to moved according to the historical correlation to the indices, equity would have achieve long-term investment returns in excess of the Group’s obligations under been KShs 278 million higher/ lower (31 December 2017: Kshs 373 million). There insurance and investment contracts. The principal technique is to match assets to was no concentration of price risk. the liabilities arising from insurance and investment contracts by reference to the type of benefits payable to contract holders. For each distinct category of liabilities, (iii) Interest rate risk a separate portfolio of assets is maintained. Fixed interest rate financial instruments expose the Company and Group to fair value interest rate risk. Variable interest rate financial instruments expose the company Market risk to cash flow interest rate risk. The Group’s fixed interest rate financial instruments are government securities, deposits with financial institutions and borrowings. The (i) Foreign exchange risk Company’s variable interest rate financial instruments are quoted corporate bonds, The Group underwrites some short term insurance policies contracted in US dollars which are always the treasury bills rate plus some basis points. No limits are placed and maintains foreign currency denominated current accounts with local banks. on the ratio of variable rate financial instruments to fixed rate financial instruments. Additionally, the group invests in offshore stock exchange markets and places deposits in local financial institutions denominated in foreign currencies. This exposes the Investment contracts with fixed and guaranteed terms, government securities and group to onward foreign exchange risk arising from the various currency exposures, deposits with financial institutions held to maturity are accounted for at amortised primarily with respect to the Uganda shillings, US dollar, Euro and Sterling Pound. cost and their carrying amounts are not sensitive to changes in the level of interest Foreign exchange risk arises from future commercial transactions and recognised rates. At 31 December 2018, if interest rates on bonds had been 2% higher/lower assets and liabilities. with all other variables held constant, post-tax profit for the year would have been Kshs 26 million (31 December 2017: Kshs 32 million) lower/higher, mainly as a result of higher/lower interest income on floating rate quoted corporate bonds.

UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 127

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are:

◊ Receivables arising out of direct insurance arrangements; ◊ Receivables arising out of reinsurance arrangements; ◊ Reinsurers’ share of insurance liabilities; ◊ Corporate bonds; ◊ Government securities; and ◊ Mortgage loans recoverable.

The Group has no significant concentrations of credit risk. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparty, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved quarterly by the Board of Directors.

Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract.

The exposure to individual counterparties is also managed by other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Group. Management information reported to the Group includes details of provisions for impairment on loans and receivables and subsequent write-offs. Finance and Investment committee of the Group Board makes regular reviews to assess the degree of compliance with the Group procedures on credit. Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring by the management credit committee.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings if available or historical information about counterparty default rates. None of the group’s credit risk counter parties are rated except the Government of Kenya, the issuer of the Group’s government securities which has B+ rating. The Company classifies corporates that have issued Corporate BondsThe Company classifies counterparties without an external credit rating as below:

Group 1 - new customers/related parties. Group 2 - existing customers/related parties with no defaults in the past. Group 3 - existing customers/related parties with some defaults in the past.All defaults were fully recovered. UAP Holdings Limited

128 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Maximum exposure to credit risk before collateral held-Group

2018 2017

Restated* Adjustment As Reported

31-Dec 31-Dec 31-Dec 31-Dec Credit rating/ Classification Kshs ’000 Kshs ’000 Kshs ’000 Kshs ‘000 Receivables arising out of reinsurance arrangements Group 2 1,294,978 1,241,402 - 1,241,402 Receivables arising out of direct insurance arrangements Group 2 1,850,411 1,698,966 - 1,698,966 Reinsurers’ share of insurance liabilities Group 2 3,276,959 3,388,445 - 3,388,445

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Other receivables Group 2 1,853,792 1,785,317 20,720 1,764,597 Government securities B+ rating 14,411,180 12,150,195 - 12,150,195 Corporate bonds Group 2 1,286,271 1,543,914 - 1,543,914 Mortgage loans receivable Group 2 306,412 356,774 - 356,774 Deposits with financial institutions Group 2 4,841,184 5,614,116 (2,253) 5,616,369 Cash at bank Group 2 1,757,053 1,746,851 (1,146) 1,747,997 Total 30,878,240 29,525,980 17,321 29,508,659

*See Note 46 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 129

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Maximum exposure to credit risk before collateral held-Company 2018 2017 Restated* Adjustment As reported Notes Credit rating/ 31-Dec 31-Dec 31-Dec 31 -Dec Classification Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Cash at bank 32 (b) Group 2 19,414 42,483 4,883 37,600 Deposits with financial institutions 32(b) Group 2 443,392 587,641 - 587,641 Amounts due from subsidiaries 44 (iv) Group 2 4,306,166 3,902,786 - 3,902,706 Other receivables 29 (b) Group 2 1,044,901 1,215,888 - 1,215,888 Total 5,813,873 5,748,798 4,883 5,743,835

*See Note 46

No collateral is held for any of the above assets other than for staff mortgage loans and car loans included in other receivables. Properties in relation to staff mortgage loans and motor vehicles in relation to staff car loans are charged to the group as collateral. The fair value of this collateral was Kshs 387 million (2017: Kshs 358 million) and no collateral had been repossessed at as the end of the year. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated. All receivables are classified in group 2.

None of the above assets are either past due or impaired except for the following amounts in the Group’s receivables under direct insurance and reinsurance arrangements.

Credit rating/ Receivables arising from direct Receivables arising from classification insurance arrangements re-insurance arrangements 31-Dec 31-Dec 31-Dec 31-Dec 2018 2017 2018 2017 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Past due but not impaired: - by up to 30 days Group2 459,003 546,627 580,343 228,975 - by 31 to 60 days Group2 319,831 102,715 19,238 13,186 - by 61 to 150 days Group2 272,948 546,413 564,129 833,355 - by 151 to 360 days Group2 798,629 503,213 131,268 165,887 Total past due but not impaired 1,850,411 1,698,968 1,294,978 1,241,403 Carrying amount before provision for impairment 1,535,400 1,215,744 - - Provision for impairment loss (1,535,400) (1,215,744) - - Net carrying amount 1,850,411 1,698,968 1,294,978 1,241,403 UAP Holdings Limited

130 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

No collateral is held in respect of the receivables that are past due but not impaired. Movements on the provision for impairment of receivables arising on direct insurance arrangements are as follows:

All receivables past due by more than 365 days are considered to be impaired, and are carried at their estimated recoverable value.

31-Dec 31-Dec 2018 2017 Kshs ’000 Kshs’000 At 1 January 1,215,744 1,387,971 Provision/(Reversal) in the period (Note 2 (b)) 319,656 (172,227)

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL At 31 December 1,535,400 1,215,744

The individually impaired receivables mainly relate to receivables arising out of direct insurance arrangements, the following amounts have been individually assessed:

Direct insurance arrangements 31-Dec-18 31-Dec-17 Kshs’000 Kshs’000 Individually assessed impaired receivables Brokers 627,779 352,533 Agents 637,828 593,757 Insurance Companies 127,194 156,736 Direct Clients 142,599 112,718 At end of year 1,535,400 1,215,744 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 131

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Corporate bonds at amortised cost Under IFRS 9, an entity shall recognize a loss allowance for expected credit losses on a financial asset that is measured at amortised cost or at fair value through other comprehensive income. The Group and Company has measured the loss allowance for corporate bonds, at each reporting date, at an amount equal to the lifetime expected losses if the credit risk on that financial instrument has increased significantly since initial recognition and if the credit risk has not increased significantly at an amount equal to the 12 month expected losses. Summary of the expected credit loss impairments are as below: i) Group 31 December 2018 1 January 2018 12 month Lifetime expected credit losses 12 month Lifetime expected credit losses expected expected

(Kshs’000) credit losses Not credit Credit Total credit Not credit Credit- Total impaired impaired losses impaired impaired Gross value 1,452,413 - 228,486 1,680,899 1,543,914 - - 1,543,914 Loss allowance (166,142) - (228,486) (394,628) (65,070) - - (65,070) Amortised cost 1,286,271 - - 1,286,271 1,478,844 - - 1,478,844 ii) Company The Company does not have investments in corporate bonds. UAP Holdings Limited

132 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Government securities at amortised cost Under IFRS 9, an entity shall recognize a loss allowance for expected credit losses on a financial asset that is measured at amortised cost or at fair value through other comprehensive income. The Group has measured the loss allowance for government securities, at each reporting date, at an amount equal to the lifetime expected losses if the credit risk on that financial instrument has increased significantly since initial recognition and if the credit risk has not increased significantly at an amount equal to the 12 month expected losses. Summary of the expected credit loss impairments are as below:

i) Group 31 December 2018 1 January 2018 12 month Lifetime expected credit losses 12 month Lifetime expected credit losses expected expected

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL (Kshs’000) credit losses Not credit Credit Total credit Not credit Credit- Total impaired impaired losses impaired impaired Gross value 13,800,781 - - 13,800,781 11,591,895 - - 11,591,895

Loss allowance (25,437) - - (25,437) (8,434) - - (8,434)

Amortised cost 13,775,434 - - 13,775,434 11,583,461 - - 11,583,461

ii) Company The company does not have investments in government securities. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 133

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Deposits with financial institutions: Under IFRS 9, an entity shall recognize a loss allowance for expected credit losses on a financial asset that is measured at amortized cost or at fair value through other comprehensive income. The Group and Company has measured the loss allowance for fixed deposits with financial institutions, at each reporting date, at an amount equal to the lifetime expected losses if the credit risk on that financial instrument has increased significantly since initial recognition and if the credit risk has not increased significantly at an amount equal to the 12 month expected losses. Summary of the expected credit loss impairments are as below: i) Group

31 December 2018 1 January 2018

12 month Lifetime expected credit losses 12 month Lifetime expected credit losses expected expected

(Kshs’000) credit losses Not credit Credit Total credit Not credit Credit- Total impaired impaired losses impaired impaired Gross value 4,765,622 - 143,201 4,908,823 5,643,713 - - 5,643,713

Loss allowance (51,730) - (15,909) (67,639) (25,597) - - (25,597)

Amortised cost 4,713,892 - 127,292 4,841,184 5,614,116 - - 5,614,116 ii) Company

31 December 2018 1 January 2018

12 month Lifetime expected credit losses 12 month Lifetime expected credit losses expected expected

(Kshs’000) credit lossesv Not credit Credit Total credit Not credit Credit- Total impaired impaired losses impaired impaired Gross value 450,936 - - 450,936 587,641 - - 587,641

Loss allowance (7,544) - - (7,544) (9,831) - - (9,831)

Amortised cost 443,392 - - 443,392 577,810 - - 577,810 UAP Holdings Limited

134 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Cash and bank balances at amortised cost: Under IFRS 9, an entity shall recognize a loss allowance for expected credit losses on a financial asset that is measured at amortized cost or at fair value through other comprehensive income. The Group and Company has measured the loss allowance for cash and bank balances, at each reporting date, at an amount equal to the lifetime expected losses if the credit risk on that financial instrument has increased significantly since initial recognition and if the credit risk has not increased significantly at an amount equal to the 12 month expected losses. Summary of the expected credit loss impairments are as below:

i) Group

31 December 2018 1 January 2018

12 month 12 month Lifetime expected credit losses Lifetime expected credit losses expected expected 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Not credit Credit credit Not credit Credit- (Kshs’000) credit losses Total Total impaired impaired losses impaired impaired

Gross value 1,645,783 - 111,270 1,757,053 1,746,851 - - 1,746,851

Loss allowance (15,536) - (13,907) (29,443) (3,388) - - (3,388)

Amortised cost 1,630,247 - 97,364 1,727,610 1,743,463 - - 1,743,463

ii) Company

31 December 2018 1 January 2018

12 month Lifetime expected credit losses 12 month Lifetime expected credit losses expected expected credit losses Not credit Credit Total credit Not credit Credit- Total (Kshs’000) impaired impaired losses impaired impaired

Gross value 19,585 - - 19,585 42,483 - - 42,483

Loss allowance (171) - - (171) (391) - - (391)

Amortised cost 19,414 - - 19,414 42,092 - - 42,092 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 135

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Other receivables at amortised cost: Under IFRS 9, an entity shall recognize a loss allowance for expected credit losses on a financial asset that is measured at amortized cost or at fair value through other comprehensive income. The Group and Company has measured the loss allowance for other receivables, at each reporting date, at an amount equal to the lifetime expected losses if the credit risk on that financial instrument has increased significantly since initial recognition and if the credit risk has not increased significantly at an amount equal to the 12 month expected losses. Summary of the expected credit loss impairments are as below: i) Group

31 December 2018 1 January 2018 12 month 12 month Lifetime expected credit losses Lifetime expected credit losses expected expected

Not credit Credit credit Not credit Credit- (Kshs’000) credit losses Total Total impaired impaired losses impaired impaired

Gross value 2,115,713 - - 2,115,713 2,051,839 - - 2,051,839

Loss allowance (52,130) - - (52,130) (2,431) - - (2,431)

Amortised cost 2,063,583 - - 2,063,583 2,049,408 - - 2,049,408

ii) Company

31 December 2018 1 January 2018 12 month 12 month Lifetime expected credit losses Lifetime expected credit losses expected expected Not credit Credit credit Not credit Credit- (Kshs’000) credit losses Total Total impaired impaired losses impaired impaired Gross value 4,307,197 - - 4,307,197 4,109,188 - - 4,109,188

Loss allowance (1,031) - - (1,031) (962) - - (962)

Amortised cost 4,306,166 - - 4,306,166 4,108,226 - - 4,108,226 UAP Holdings Limited

136 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Credit risk (continued)

Receivables arising from direct insurance arrangements

(i) Group

31 December 2018 1 January 2018 12 month 12 month Lifetime expected credit losses Lifetime expected credit losses expected expected

Not credit Credit credit Not credit Credit- (Kshs’000) credit losses Total Total impaired impaired losses impaired impaired Gross value - - 3,385,811 3,385,811 - - 2,914,710 2,914,710 Loss allowance - - (1,535,400) (1,535,400) - - (1,215,744) (1,215,744) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Amortised cost - - 1,850,411 1,850,411 - - 1,698,966 1,698,966 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 137

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Liquidity risk

Liquidity risk is the risk that the Group and Company is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.

The Group and Company is exposed to daily calls on available cash resources for claims settlement and other administration expenses. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Finance and Investment Committee sets limits on the minimum level of cash balances.

The table below presents the cash flows payable by the Group and Company under financial liabilities by remaining contractual maturities (other than insurance contract liabilities which are based on expected maturities) at the financial reporting date.

Up to 1 1-3 3-12 1-5 Over 5 month months months years years Total As at 1 January 2018 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Liabilities Insurance contract liabilities 1,244,380 824,905 2,218,743 5,133,369 2,949,591 12,370,988 Payable under deposit administration contracts 28,958 39,509 182,716 1,063,582 3,126,445 4,441,210 Unit-linked investment contracts 54,346 13,479 71,928 424,310 295,691 859,754 Creditors arising from reinsurance arrangements 542,646 102,746 388,029 142,142 - 1,175,563 Other payables 677,137 767,616 939,506 685,853 129 3,070,241 Borrowings - - 3,001,396 8,081,432 15,479 11,098,307 Total financial liabilities as at 31 December 2018 2,547,467 1,748,255 6,802,318 15,530,688 6,387,335 33,016,063 UAP Holdings Limited

138 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(b) Financial risk (continued)

Liquidity risk (continued)

Up to 1 1-3 3-12 1-5 Over 5 Restated* month months months years years Total As at 1 January 2017 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Liabilities Insurance contract liabilities 2,686,207 875,397 1,838,836 3,417,062 2,651,646 11,469,148 Payable under deposit administration contracts 54,453 54,859 186,416 1,042,759 3,182,290 4,520,777 Unit-linked investment contracts 25,472 15,001 74,458 393,872 356,473 865,276 Creditors arising from reinsurance arrangements 482,999 53,399 222,982 122,304 - 881,684 Other payables 777,474 984,279 1,046,840 152,709 - 2,961,302 Borrowings - - 1,362,679 9,143,704 333,209 10,839,592

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Total financial liabilities as at 31 December 2017 4,026,605 1,982,935 4,732,211 14,272,410 6,523,618 31,537,779

Investment contracts and deposit administration contracts can be surrendered before maturity for a cash surrender value specified in the contractual terms and conditions. Prudent liquidity risk management includes maintaining sufficient cash balances to cover anticipated surrenders before the contractual maturity dates. In addition, the Group invests only a limited proportion of its assets in investments that are not actively traded. The Group’s listed securities are considered readily realisable, as they are actively traded on the Nairobi Securities Exchange and Uganda Stock Exchange.

The table below presents the cash flows payable by the Company under financial liabilities by remaining contractual maturities at the financial reporting date.

Less than 1 year Greater than 1 year Kshs ’000 Kshs ’000 At 31 December 2018: Amounts due to subsidiaries (Note 44(iv)) 1,489,970 - Other payables 317,130 - Borrowings 2,109,628 7,777,480 3,916,728 7,777,480 At 31 December 2017: Restated Amounts due to subsidiaries (Note 44(iv)) 495,204 - Other payables 926,552 - Borrowings 4,026,610 6,003,246

5,448,366 6,003,246 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 139

4. Risk Governance and Risk Management System (continued)

(c) Capital management

The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial position, are:

◊ to comply with the capital requirements as set out in the regulations of the jurisdictions in which the Group entities operate in; ◊ to comply with regulatory solvency requirements as set out in legislation in the jurisdictions in which the Group entities operate in; ◊ to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stake holders; and ◊ to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.

The Group’s paid up capital comprises share capital as disclosed on note 13. The Group manages the minimum paid up capital and regulatory Capital (solvency) held in each subsidiary as capital. Capital adequacy and solvency margin are monitored regularly by the Board of Directors. The required information is filed with the respective authorities.

During the year, the Group held the minimum paid up share capital required. The Group entities also met the solvency margins required in the jurisdictions in which they operate, except for the Life Assurance (Uganda) subsidiary. Appropriate measures, including capital injection and business turn-around initiatives, have been instituted to resolve the solvency gap in this entity.

The table below summarises the capital requirements of the Group’s entities in the various jurisdictions in which the Group operates and the amount of capital held.

2018 31-Dec-18

Kenya South Sudan Uganda Rwanda Tanzania General Life Composite General General General Life Insurance insurance Assurance Insurance insurance Insurance Insurance Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Regulatory capital requirements 600,000 400,000 458,010 109,856 82,392 194,260 107,278 Amount of paid up capital 1,000,000 1,585,456 342,709 214,939 521,609 1,175,625 940,720

Required solvency 4,451,952 660,080 458,010 320,545 2,860,090 194,260 128,193

Solvency margin by Company 6,633,731 1,530,626 2,294,453 408,193 2,380,845 414,196 138,070

Surplus/(deficit) over required margin 2,181,779 870,546 1,836,443 87,648 (479,245) 219,936 9,877 UAP Holdings Limited

140 Notes to the Financial Statements (continued)

4. Risk Governance and Risk Management System (continued)

(c) Capital management (continued)

2017 31-Dec-2017 South Kenya Uganda Rwanda Tanzania Sudan General Life General Life General General Composite Insurance Assurance Insurance Insurance Insurance Insurance Insurance Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Regulatory capital requirements 300,000 150,000 464,400 113,395 85,046 140,000 107,278 Amount of paid up capital 1,000,000 1,585,456 342,709 214,939 499,417 1,031,110 940,720 Required solvency margin 10,452,801 475,442 463,860 260,494 1,733,099 140,247 177,275 Solvency margin by Company 13,612,325 1,121,217 2,537,665 291,032 2,247,967 222,873 337,213

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Surplus/(deficit) over required margin 3,159,524 645,775 2,073,805 30,538 514,868 82,626 159,938

(d) Fair values of financial assets and liabilities The fair value of government securities at 31 December 2018 is estimated at Kshs 10,156 million (2017: Shs 9,488 million) compared to the carrying value Kshs 14,411 million (2017: Shs 12,150 million). The fair values of the Group’s other financial assets and liabilities approximate the respective carrying amounts, due to the generally short periods to contractual repricing or maturity dates as set out above.Fair values are based on discounted cash flows using a discount rate based upon the borrowing rate that the Directors expect would be available to the Group at the financial reporting date.

(e) Fair values estimation IFRS 7 and IFRS 13 require disclosure of fair value measurements by the following levels of hierarchy for financial instruments that are measured in the statement of financial position at fair value:

◊ Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). ◊ Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). ◊ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 141

4. Risk Governance and Risk Management System (continued)

(e) Fair values estimation (continued)

The following table presents the Group’s assets that are measured at fair value at the end of the year.

Level 1 Level 2 Level 3 Total balance Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Year ended 31 December 2018 Assets Equity investments 3,174,843 - 118,247 3,293,090 Government securities 635,747 - - 635,747 Corporate bonds 801,437 - - 801,437 Investment Properties - - 19,756,714 19,756,714 Total 4,612,027 - 19,874,961 24,486,988

Year ended 31 December 2017 Assets Equity investments 3,616,764 - 118,166 3,734,930 Government securities 566,934 - - 566,934 Corporate bonds 822,029 - - 822,029 Investment Properties - - 20,360,418 20,360,418 Total 5,005,727 - 20,478,584 25,484,311

The fair value of financial instruments traded in active market is based on quoted market prices at the end of each reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise of primarily equity investments quoted on the Nairobi Securities Exchange and the Uganda Stock Exchange.

Financial instruments measured at fair value that are not traded in active market relate to Group’s investment in the holding company for an investment property and investments in equities that aren’t traded in active markets. Fair value estimate is based on the Group’s share of the net asset of the investee company and on use of rental income and a capitalization rate of 8%. As the investment property of the investee company is measured at their fair value, the net asset value of the investee company approximates its fair value. This estimate is classified as level 3. There were transfers out of level 3 during the year amounting to Kshs 1.8bn (2017: Kshs 1,9bn) due to the reclassification of owner occupied investment property to property and equipment. UAP Holdings Limited

142 Notes to the Financial Statements (continued)

5(a) Segmental information

Management has determined the operating segments based on the reports reviewed by the Group’s Board of Directors that are used to make strategic decisions.

The Group reviews its operating segments (business units) by type of business and by geography. Based on this, the group’s operating segments comprise of General Insurance, Life Assurance, Property, Investment Management and related Financial Services. The group currently has operations in five countries namely Kenya, Uganda, South Sudan, Rwanda and Tanzania.

The reportable operating segments derive their revenue primarily from the underwriting of classes and non-life risks as defined by the Insurance Act and investment property.

Other services offered by the Group that are included within the Kenya and Uganda segments include stock brokerage, investment management and related financial advisory services. The results of these operations are included in the all other segments column as they are not material to the Group. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL The Group Board of Directors assesses the performance of the reporting segments based on a measure of revenue and profitability.

The segment information provided to the Group Board of Directors for the reportable segments for the year ended 31 December 2018 is as follows: UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 143

5(a) Segmental information (continued)

Year ended 31 December 2018 Kenya South Sudan Uganda Rwanda Tanzania All other

General Life General General Life General General Life Property Property Total Insurance Assurance Insurance Insurance Assurance Insurance Insurance segments

Gross written premium (external) 9,255,347 1,372,590 1,580,356 157,098 - 3,044,041 1,149,535 - 1,244,192 967,287 - 18,770,446 Gross earned premium 9,282,159 1,439,668 1,422,203 140,823 - 2,910,959 1,149,535 - 1,201,349 1,072,243 - 18,618,939 Net earned premium 8,140,782 1,166,481 1,262,869 66,587 - 2,140,900 1,088,478 - 907,821 748,927 - 15,522,845 Interest income 722,756 908,065 7,543 23,333 - 188,794 272,375 - 115,864 109,412 (39,497) 2,308,645 Other investment income 12,403 (29,200) 369,611 1,006 (245,332) 30,062 (11,042) 327,696 (115) (27) 156,046 611,108 Commissions and other income 332,988 167,576 17,601 36,595 - 238,583 20,173 - 86,079 81,583 24,717 1,005,895 Net impairment loss on financial (442,519) (112,837) 3,374 - - 10,623 25,061 (129) (27,304) (170,022) (66,169) (779,922) assets Total income 8,766,410 2,100,085 1,660,998 127,521 (245,332) 2,608,962 1,395,045 327,567 1,082,345 769,873 75,097 18,668,571 Claims and policy owners’ (5,396,151) (1,194,019) (513,920) (17,892) - (1,177,273) (978,443) - (585,511) (525,597) - (10,388,806) benefits payable Finance cost - - (43,089) - (302,409) - - (202,980) - - (460,790) (1,009,268) Depreciation (37,771) (12,881) (34,368) - (13,373) (14,974) (4,303) (18,327) (6,076) (12,197) (81,742) (236,012) Amortisation (153) - - - - - (1,095) - - (268) (37,165) (38,681) Commissions and other (3,032,517) (642,098) (582,696) (54,181) (110,947) (1,025,077) (533,535) (93,407) (414,278) (487,371) (499,448) (7,475,555) operating expenses Profit before tax 299,818 251,087 486,925 55,448 (672,061) 391,638 (122,331) 12,853 76,480 (255,560) (1,004,048) (479,751) Income tax expense (128,202) (134,465) - - 55,621 (93,914) - (3,907) - 73,493 193,250 (38,124) Profit or (loss) after tax for the 171,616 116,622 486,925 55,448 (616,440) 297,724 (122,331) 8,946 76,480 (182,067) (810,798) (517,875) year Profit attributable to 171,616 116,622 486,925 55,448 (431,508) 157,794 (64,835) 7,054 76,480 (109,241) (816,823) (350,468) shareholders of the parent Profit attributable to Non- - - - - (184,932) 139,930 (57,496) 1,892 - (72,826) 6,025 (167,407) controlling interests Profit or (loss) after tax for the 171,616 116,622 486,925 55,448 (616,440) 297,724 (122,331) 8,946 76,480 (182,067) (810,798) (517,875) year Other comprehensive income 20,697 - (22,923) (1,678) (19,174) (36,457) (379) (42,678) (22,375) (40,682) 9,672 (155,977) Total comprehensive income 192,313 116,622 464,002 53,770 (635,614) 261,267 (122,710) (33,732) 54,105 (222,749) (801,126) (673,852) Additions: Property and equipment 147,981 24,910 8,964 - 87,658 7,723 2,617 10,413 1,210 11,896 65,170 368,542 Investment property - - - - 122,136 - - 114,877 - - - 237,013 Intangible assets (5,261) - - - - - 2,738 - - - 40,091 37,568 Total assets 15,640,573 11,430,484 4,695,882 443,805 4,338,149 5,506,091 3,133,942 4,556,705 1,867,839 2,426,694 4,635,899 58,676,063 Total equity 7,443,355 1,875,092 2,292,699 191,000 551,625 1,527,172 (150,644) 1,336,159 549,564 728,645 850,712 17,195,379 UAP Holdings Limited

144 Notes to the Financial Statements (continued)

5(a) Segmental information (continued)

Year ended 31 December 2017 Kenya South Sudan Uganda Rwanda Tanzania General Life General General Life General General All other Insurance Assurance Insurance Life Property Insurance Assurance Property Insurance Insurance segments Total Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs Kshs ’000 Kshs Kshs ’000 Kshs ’000 Kshs Kshs ’000 Kshs ’000 ’000 ’000 ’000

Gross written premium (external) 9,804,897 1,462,351 1,428,441 143,925 - 2,960,918 842,903 - 1,176,150 1,291,532 - 19,111,117 Gross earned premium 10,653,811 1,366,879 1,482,490 143,100 - 2,738,836 842,903 - 1,062,392 1,422,669 - 19,713,080 Net earned premium 8,188,615 998,448 1,304,259 67,653 - 2,014,513 795,829 - 954,547 988,134 - 15,311,998 Interest income 717,795 758,676 75,016 18,756 - 172,442 223,270 - 80,806 179,750 (69,428) 2,157,083 Other investment income 275,249 496,870 79,466 641 (199,393) 86,217 (6,135) 781,497 506 - (3,893) 1,511,025 Commissions and other income 386,170 210,788 23,234 20,874 - 173,661 28,323 - 80,346 99,954 19,980 1,043,330 Total income 9,567,829 2,464,782 1,481,975 107,924 (199,393) 2,446,833 1,041,287 781,497 1,116,205 1,267,838 (53,341) 20,023,436 Claims and policy owners’ benefits 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL payable (5,039,847) (1,087,687) (340,925) (20,822) - (1,071,243) (805,516) - (673,588) (407,018) - (9,446,646) Finance cost - - (57,263) - (98,897) - - (226,865) - - (380,945) (763,970) Depreciation (26,939) (14,377) (37,871) - (1,155) (13,923) (3,545) (14,264) (8,128) (10,992) (69,937) (201,131) Amortisation (3,516) - - - - - (732) - - (1,732) (29,479) (35,459) Commissions and other operating expenses (3,173,379) (602,204) (664,769) (59,337) (147,601) (1,098,916) (482,757) (115,398) (450,335) (670,994) (780,365) (8,246,056) Profit before tax 1,324,148 760,514 381,147 27,765 (447,046) 262,751 (251,263) 424,970 (15,846) 177,102 (1,314,066) 1,330,176 Income tax expense (354,933) (236,290) - - 40,487 (49,294) - (254,100) - (60,130) 191,601 (722,661) Profit or (loss) after tax for the year 969,215 524,224 381,147 27,765 (406,559) 213,457 (251,263) 170,870 (15,846) 116,972 (1,122,467) 607,515 Profit attributable to shareholders of the parent 969,215 524,224 381,147 27,765 (284,591) 113,132 (133,169) 134,731 (15,846) 70,183 (1,124,213) 662,578 Profit attributable to Non-controlling interests - - - - (121,968) 100,325 (118,094) 36,139 - 46,789 1,746 (55,063) Profit or (loss) after tax for the year 969,215 524,224 381,147 27,765 (406,559) 213,457 (251,263) 170,870 (15,846) 116,972 (1,122,467) 607,515 Other comprehensive income 52,273 - 63,526 718 12,113 (62,401) 2,297 (3,247) (8,241) (12,859) 95,547 139,727 Total comprehensive income 1,021,488 524,224 444,673 28,483 (394,446) 151,056 (248,966) 167,623 (24,087) 104,113 (1,026,919) 747,242 Additions: Property and equipment 3,520 15,891 92,201 - 55,693 39,921 4,596 9,752 3,392 16,107 207,055 448,128 Investment property ------172,387 - - 330,973 503,360 Intangible assets (16,524) - - - - - 296 - - - 54,864 38,636 Total assets 16,749,694 11,009,576 4,144,282 340,428 4,560,156 5,123,829 2,401,916 4,709,289 1,429,257 2,439,878 5,214,410 58,122,715 Total equity 7,769,361 1,801,678 2,004,673 137,231 1,187,239 1,265,906 (27,933) 1,370,520 355,481 962,439 1,510,970 18,337,565 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 145

5(a) Segmental information (continued)

Premiums by source country

31-Dec-18 31-Dec-17 South South Kenya Uganda Rwanda Tanzania Total Kenya Uganda Rwanda Tanzania Total Sudan Sudan Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 Short - term insurance Gross written premium 9,255,347 3,044,041 1,580,356 1,244,192 967,287 16,091,223 9,804,897 2,960,918 1,428,441 1,176,150 1,291,532 16,661,938 Gross earned premium 9,282,159 2,910,959 1,422,203 1,201,349 1,072,243 15,888,913 10,653,811 2,738,836 1,482,490 1,062,392 1,422,669 17,360,198

Net earned premium 8,140,782 2,140,900 1,262,869 907,821 748,927 13,201,299 8,188,615 2,014,513 1,304,259 954,547 988,134 13,450,068 Long - term business Gross written premium 1,372,590 1,149,535 157,098 - - 2,679,223 1,462,351 842,903 143,925 - - 2,449,176 Gross earned premium 1,439,668 1,149,535 140,823 - - 2,730,026 1,366,879 842,903 143,100 - - 2,352,882 Net earned premium 1,166,481 1,088,478 6,587 - - 2,321,546 998,448 795,829 67,653 - - 1,861,930

Gross written premium 10,627,937 4,193,576 1,737,454 1,244,192 967,287 18,770,446 11,267,248 3,803,821 1,572,366 1,176,150 1,291,532 19,111,117 Gross earned premium 10,721,827 4,060,494 1,563,026 1,201,349 1,072,243 18,618,939 12,020,690 3,581,739 1,625,590 1,062,392 1,422,669 19,713,080 Net earned premium 9,307,263 3,229,378 1,329,456 907,821 748,927 15,522,845 9,187,063 2,810,342 1,371,912 954,547 988,134 15,311,998

Investment income 1,670,156 868,302 156,161 115,749 109,385 2,919,753 2,137,392 1,295,168 (25,514) 81,312 179,750 3,668,108 Commission earned 432,659 243,143 54,196 69,891 81,583 881,472 453,102 172,235 44,108 30,052 99,954 799,451 Other income 80,444 27,791 - 16,188 - 124,423 154,235 39,350 - 50,294 - 243,879 Net impairment loss on (553,088) (32,882) 3,374 (27,304) (170,022) (779,922) ------financial assets Total income 10,937,434 4,335,732 1,543,187 1,082,345 769,873 18,668,571 11,931,792 4,317,095 1,390,506 1,116,205 1,267,838 20,023,436 UAP Holdings Limited

146 Notes to the Financial Statements (continued)

5(a) Segmental information (continued)

Asset allocation by country

31-Dec-18 31-Dec-17 South South Kenya Uganda Rwanda Tanzania Other Total Kenya Uganda Rwanda Tanzania Other Total Sudan Sudan Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 Property and 1,297,241 538,507 818,372 13,319 49,373 - 2,716,812 1,219,308 574,028 813,455 19,155 52,637 - 2,678,583 equipment

Investment 4,399,980 - - - 10,938,094 4,817,015 4,605,309 - - - property 10,678,607 4,678,127 19,756,714 20,360,418

Intangible 98,574 2,054 - - - - 100,628 101,062 424 - - 280 - 101,766

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL assets

Total assets 31,611,589 13,292,106 9,477,835 1,867,839 2,426,694 - 58,676,063 32,923,953 12,282,911 9,044,867 1,429,257 2,439,878 1,849 58,122,715

Total equity 10,087,758 2,794,087 3,035,325 549,564 728,645 - 17,195,379 11,065,666 2,622,988 3,329,142 355,481 962,439 1,849 18,337,565 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 147

5(b) (i) Gross earned premium

The premium income of the Group can be analysed between the main classes of business as shown below:

Gross Written Premium Gross Earned Premium 2018 2017 2018 2017 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short term insurance business Engineering 622,709 762,324 609,144 659,943 Fire 1,562,732 1,722,573 1,618,109 1,746,880 Liability 270,049 270,439 271,958 276,310 Marine 279,617 354,261 303,348 343,207 Motor 3,496,053 4,120,735 3,636,660 4,226,709 Workmen’s Compensation 291,893 349,935 294,648 363,226 Personal Accident and medical 422,717 467,450 429,204 472,046 Theft 528,213 520,447 541,690 556,390 Medical 8,291,123 7,634,301 7,844,311 8,172,142 Others 326,118 459,473 339,841 543,346 Total 16,091,224 16,661,938 15,888,913 17,360,199

Long term business Ordinary life 1,517,233 1,135,582 1,517,234 1,135,581 Group life 1,161,989 1,313,597 1,212,792 1,217,300 Total 2,679,222 2,449,179 2,730,026 2,352,881

Total 18,770,446 19,111,117 18,618,939 19,713,080

Gross written premium represents the total premiums receivable by the Group before adjusting for the unearned proportion of the premiums. It is reported in the income statement for information purposes only. Revenue comprises gross earned premiums.

All revenue is earned from external customers. UAP Holdings Limited

148 Notes to the Financial Statements (continued)

5(b) (ii) Reinsurance ceded and Amounts recoverable from reinsurers

Reinsurance ceded Amounts recoverable from reinsurers

2018 2017 2018 2017 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short term insurance business Engineering 483,975 504,828 467,430 109,010 Fire 989,294 1,061,920 383,540 186,803 Liability 121,917 131,888 46,015 131,272 Marine 153,976 178,659 186,205 61,655 Motor 68,175 246,402 117,651 (135) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Workmen’s Compensation 9,061 17,551 95,543 (8,346) Personal Accident 57,569 65,063 34,464 16,023 Theft 213,019 187,256 (10,597) 25,062 Medical 340,087 1,045,514 442,783 128,440 Others 250,541 471,049 (132,692) 665,644 Total 2,687,614 3,910,130 1,630,342 1,315,428 Long term business 408,480 490,952 59,120 161,882 Total 3,096,094 4,401,082 1,689,462 1,477,310

5(b) (iii) Commissions earned and commissions payable

Commissions earned Commissions payable 2018 2017 2018 2017 Restated Restated

Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short-term business 715,776 674,198 1,917,837 1,952,777 Long-term business 163,208 118,133 347,304 341,977 Brokerage/Investment management 2,488 7,120 - - Total 881,472 799,451 2,265,141 2,294,754 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 149

6 Investment income

(a) Group Restated* 2018 2017 Kshs ’000 Kshs ’000 Interest from government securities 1,865,856 1,614,543 Bank deposit interest 408,627 520,333 Loan interest receivable 34,162 22,207 Rental income from investment properties 1,085,469 996,621 Dividends receivable from equity investments 152,747 155,299 Miscellaneous income/(costs) 352,294 (48,942) Rent, interest and dividends received 3,899,155 3,260,061 Fair value losses on investment properties (note 21) (581,266) (56,088) (Loss)/profit on sale of equities (14,860) 30,857 Fair value (losses)/gains on equity investments at fair value through profit or loss (note 24(b)) (478,049) 342,037 Fair value gains/(losses)on government securities assets at fair value through profit or loss 26,759 (12,360) (Loss)/ Gain in foreign exchange 64,239 103,601 Profit on sale of property and equipment 3,775 - Other investment income (979,402) 408,047 Total 2,919,753 3,668,108

(b) Company Restated* 2018 2017 Kshs ’000 Kshs ’000 Bank deposit interest 14,472 49,926 Loan interest receivable 190,631 114,038 Rental income from investment properties 183,648 111,921 Dividends receivable from equity investments 677,479 1,167,244 Miscellaneous income 187 26,621 Rent, interest and dividends received 1,066,417 1,469,750 Fair value losses on investment properties (note 21) (95,348) (173,191) Profit on sale of property and equipment 962 - (Loss)/gain on foreign exchange (14,648) 22,897 Other investment income (109,034) (150,294) Total 957,383 1,319,456 UAP Holdings Limited

150 Notes to the Financial Statements (continued)

7. Other income (a) Group Restated 2018 2017 Kshs ’000 Kshs ’000 Fee income 33,196 124,077 Others 91,227 119,802 Total 124,423 243,879

Fee income relates to administration fees arising from services rendered in relation to the issue and management of deposit administration and other investment contracts. There are no individually significant items included in other category. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL (b) Company 2018 2017 Kshs ’000 Kshs ’000 Shared Services income 720,164 801,163 Total 720,164 801,163

8. Claims and policyholder benefits payable (a) Group

(i) Short term insurance business

2018 2017 Kshs ’000 Kshs ’000 Engineering 509,775 138,720 Fire 526,323 347,942 Liability 110,045 164,196 Marine 226,329 124,136 Motor 2,413,539 2,207,025 Workmen’s compensation 130,590 83,612 Personal accident 126,892 114,091 Theft 98,276 119,207 Medical 5,707,905 4,824,209 Others (20,881) 724,911 Sub Total 9,828,793 8,848,049 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 151

8. Claims and policyholder benefits payable (continued)

(ii) Long term insurance business Restated 2018 2017 Kshs ’000 Kshs ’000 Death, maturity and benefits payable 791,221 913,035 Increase in policy owners’ liabilities 1,337,776 1,069,215 Interest payable on deposit administration and unit linked investments contracts 120,478 93,657 Sub Total 2,249,475 2,075,907

Total 12,078,268 10,923,956

9. Operating and other expenses (a) Group Restated 2018 2017 Kshs ’000 Kshs ’000 Staff costs (Note 10 (a)) 2,430,879 2,679,065 Office running costs 817,885 1,048,523 Bank charges and other expenses 444,986 577,647 Publicity andmarketing expenses 409,779 586,933 Depreciation (Note 19 (a)) 236,012 201,131 Impairment loss on property, plant & equipment (Note 19 (a)) 24,640 43,802 Consultancy fees and expenses 235,378 235,124 Software costs 185,466 186,401 Premium tax costs 180,092 194,285 Directors Expenses 150,413 115,811 Recurrent property costs 144,013 191,533 Travel Costs 91,491 107,659 Licenses costs 60,739 50,978 Amortisation of intangible assets (Note 20 (b)) 38,681 35,459 Repairs & Maintenance costs 13,760 45,814 Subscriptions costs 10,869 13,803 Other insurance expenses 10,024 7,316 Impairment (credit)/charge on receivables arising out of insurance arrangements (Note 4 (b)) - (172,227) Total 5,485,107 6,149,057 UAP Holdings Limited

152 Notes to the Financial Statements (continued) 9. Operating and other expenses (continued)

(b) Company Restated 2018 2017 Kshs ’000 Kshs ’000 Bank charges and other expenses* 658,460 174,171 Staff costs (Note 10 (b)) 450,953 499,111 Office running costs 122,494 458,855 Software costs 117,094 152,861 Consultancy fees and expenses 41,480 53,581 Depreciation (Note 19 (b)) 41,121 39,413 Directors Expenses 39,978 31,683

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Amortisation of intangible assets (Note 20 (b)) 37,165 24,480 Licenses costs 17,095 29,866 Publicity and marketing expenses 14,985 58,232 Travel Costs 13,130 14,289 Repairs and Maintenance costs 7,824 468 Subscriptions costs 2,306 13,803 Total 1,564,085 1,550,813

*Other expenses include an amount of KShs. 597,961,842relating toimpairment of the investment in UAP Insurance Tanzania which is 60% owned by UAP Africa Limited (Mauritius).UAP Africa Limited (Mauritius) is a fully owned subsidiary of UAP Holdings Limited. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 153

10. Staff costs

(a) Group

2018 2017 Kshs ’000 Kshs ’000 Salaries and wages 2,072,085 2,081,815 Social security benefits costs 116,924 145,799 Retirement benefit costs: Defined benefits scheme (Note 23) 7,776 (20,733) Defined contribution scheme 115,903 100,388 Other staff costs 118,191 371,796 Total 2,430,879 2,679,065

(b) Company

Salaries and wages 424,285 472,871 Social security benefits costs 26,668 26,240

Total 450,953 499,111 UAP Holdings Limited

154 Notes to the Financial Statements (continued)

11. Income tax expense

(a) Group

Restated 2018 2017 Kshs ’000 Kshs ’000

Current income tax 322,590 436,519 Deferred tax (Note 22) (284,466) 286,142 Total 38,124 722,661

The tax on the Group’s profit/(loss) before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows: 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Restated 2018 2017 Kshs ’000 Kshs ’000 (Loss)/Profit before tax (479,751) 1,330,176 Tax calculated at a tax rate of 30% (2017: 30%); (143,925) 399,083 Less: tax effect of income not subject to tax (631,633) (580,677) Add: tax effect of expenses not deductible for tax purposes 813,928 899,293 Prior year over-provision of deferred tax (246) 4,962 Total 38,124 722,661 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 155 11. Income tax expense (continued)

(a) Group (continued)

Movement in the tax (payable)/recoverable account is as follows:

Restated 2018 2017 Kshs ’000 Kshs ’000 At 1 January (42,795) 8,640 Taxation charge (322,590) (436,519) Taxation paid 511,239 385,084 At end of the year 145,854 (42,795)

Disclosed as follows;

Current income tax recoverable 145,854 46,062 Current income tax payable - (88,857) Total 145,854 (42,795)

(b) Company Restated 2018 2017 Kshs ’000 Kshs ’000 Current income tax - - Deferred tax (Note 22) (170,222) (182,728) Total (170,222) (182,728)

The tax on the Company’s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows : Restated 2018 2017 Kshs ’000 Kshs ’000 Loss before tax (589,993) (45,279) Tax calculated at a tax rate of 30% (2017: 30%); (176,998) (13,584) Less: tax effect of income not subject to tax (377,732) (447,823) Add: tax effect of expenses not deductible for tax purposes 384,508 278,679 Prior year over-provision of deferred tax - - Total (170,222) (182,728) UAP Holdings Limited

156 Notes to the Financial Statements (continued) 11. Income tax expense (continued)

(b) Company (continued)

Movement in the tax payable account is as follows:

2018 2017 Kshs ’000 Kshs ’000 At 1 January - (84,543) Taxation charge - - Over provision of income tax in previous year - 84,543 At end of the year - -

Disclosed as follows;

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Current income tax payable - - UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 157

12. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Restated 2018 2017 Kshs ’000 Kshs ’000 (Loss)/profit attributable to equity holders of the company (350,468) 662,578 Number of shares in issue (in thousands) 211,420 211,420 Basic earnings per share (1.66) 3.13 Diluted earnings per share (1.66) 3.13

There were no potentially dilutive shares outstanding at 31 December 2018 or 31 December 2017. Diluted earnings per share are therefore the same as basic earnings per share. There was no change in number of shares during the year ended 31 December 2018.

13. (a) Share capital

The total authorised number of ordinary shares is 220 million (2017: 220 million) with a par value of Kshs 5 per share. At 31 December 2018, 211 million ordinary shares were in issue and were fully paid.

Number of shares Ordinary shares Share premium

’000 Kshs ’000 Kshs ’000

Balance at 1 January 2017, 31 December 2017, 1 January 2018 and 211,420 1,057,099 4,612,626

31 December 18

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

13. (b) Share premium

Ordinary shares are classified as share capital in equity. Any premium received over and above the par value of the shares is classified as share premium.

14. Fair value reserve for equity investments

The fair value reserves relate to unrealised gains or losses on the Group’s equity investments that are carried at fair value through other comprehensive income. This reserve is not distributable. UAP Holdings Limited

158 Notes to the Financial Statements (continued)

15. Retained earnings 18.Goodwill

The retained earnings balance represents the amount available for dividend The goodwill arose from acquisition of UAP Century Tanzania in 2013 (Kshs 174,363,000) distribution to the shareholders of the Company, except for cumulative fair value and UAP Insurance Uganda Limited in 2004 (Kshs 65,667,000) and is therefore profit on the investment properties of Kshs 5,420 million (31 December 2017 : Kshs all allocated to the Tanzania and Uganda Cash Generating Units (CGUs) for the 6,001 million - Restated) whose distribution is subject to restrictions imposed by purposes of impairment assessment. regulation. 2018 2017 16. Dividends Kshs ’000 Kshs ’000 Balance as at 1 January 240,030 240,030 The Directors do not recommend the payment of a final dividend (2017: Kshs 359 Goodwill impairment – UAP Tanzania (174,363) - million). Payment of dividends is subject to withholding tax at a rate of either 0%, 5% or 10% depending on the nature and residence of the respective shareholders. Balance as at 31 December 65,667 240,030 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 2018 2017 The recoverable amount of a CGU is determined based on value-in-use calculations. Kshs ’000 Kshs ’000 These calculations use cash flow projections based on financial budgets approved At beginning of the year 286,009 - by management covering a 5 year period. The growth rates do not exceed the long- Increase in the year 359,414 359,414 term average growth rates for the respective businesses in which CGUs operate. Payments (172,320) (73,405) The goodwill impairment of Kes 174,363,000 in 2018 relates to the Tanzania CGU. Total 473,103 286,009 The key assumptions used for the value in use calculations are: 17. Reserves 31 31 December 2018 December (i) Translation reserve 2017 The translation reserve compiles all foreign currency differences arising from the translation of the financial statements of foreign operations. The Growth rate % 19.5 19.0 translation reserve is not distributable to shareholders unless the foreign Discount rate % 4.0 4.0 operation is abandoned or closed.

(ii) Statutory reserve Management determined budgeted profit from operating activities based on past The statutory reserve represents amounts set up in the Group’s Ugandan subsidiary performance and its expectations for the market developments. The weighted in accordance with the Ugandan Insurance Act, which requires the following average growth rates used are consistent with the forecasts included in industry amounts to be appropriated from earnings: reports. The discount rates used are pre-tax and reflect specific risks relating tothe ◊ a contingency reserve calculated at the higher of 2% of gross premium and Tanzania and Uganda segment. 15% of net profits of UAP Insurance Uganda Limited. ◊ a capital reserve, calculated at 5% of net profits of UAP Insurance Uganda Limited.

The reserve is available for distribution to the extent that the minimum amounts required by the Uganda Insurance Act are maintained. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 159

19. Property and equipment

(a) Group Included in equipment are assets with a gross value of Kshs 630,142,344 (2017 – Kshs 668,499,000) which are fully depreciated and still in use. Such assets would have attracted a notional depreciation of Kshs 161,961,521 (2017 – Kshs 168,405,000). The revaluation surplus in buildings relates to the portion of fair value gains on investment properties which is owner occupied. The owner occupied portion of investment property was transferred to buildings as detailed above and in note 21.

Office furniture and Capital Computer Motor work-in Telephone Buildings equipment equipment Vehicles progress equipment Total Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2018: Cost At 1 January 2018 1,946,108 848,266 602,151 125,270 225,015 102,904 3,849,714 Additions - 296,601 53,467 3,577 12,709 2,188 368,542 Disposals - (10,907) (8,268) (20,590) (371) 1,970 (38,166) Transferred from investment property (Note 21) 21,539 - - - - - 21,539 Transferred from/(to) related company - - - (95,154) - (95,154) Capitalised 35,351 - - (35,351) - - Revaluation surplus 38,448 - - - - - 38,448 Translation difference (15,984) (2,520) (2,338) (2,000) (514) (23,356) At 31 December 2018 2,006,095 1,153,327 644,830 105,919 104,848 106,548 4,121,567

Depreciation At 1 January 2018 71,311 415,238 476,614 123,134 - 84,834 1,171,131 Charge for the year 39,799 115,872 60,560 8,091 1,972 9,718 236,012 Accumulateddepreciation on disposals - (4,742) (6,074) (19,630) - (521) (30,967) Translation difference - (5,966) (1,916) (1,886) 14,147 (440) 3,939 Impairment loss 24,640 - - - - - 24,640 At 31 December 2018 135,750 520,402 529,184 109,709 16,119 93,591 1,404,755 Net book amount At 31 December 2018 1,870,345 632,925 115,646 (3,790) 88,729 12,957 2,716,812 UAP Holdings Limited

160 Notes to the Financial Statements (continued) 19. Property and equipment (continued)

(a ) Group (continued)

Office Capital As

furniture and Computer Motor work-in Telephone reported Effect of Restated* Buildings equipment equipment Vehicles progress equipment Total restatement Total Kshs'000 Kshs'000 Kshs'000 Kshs'000 Kshs'000 Kshs'000 Kshs'000 Kshs'000 Kshs'000

Year ended 31 December 2017 Cost

At 1 January 2017 - 667,297 528,006 118,303 97,556 100,298 1,511,460 - 1,511,460 Additions - 196,274 92,535 7,036 147,699 4,584 448,128 - 448,128 Disposals - (12,763) (17,554) (94) (19,750) (1,863) (52,024) - (52,024) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Transferred from investment property 1,916,123 - - - - - 1,916,123 - 1,916,123 (Note 21)

Revaluation surplus 72,559 - - - - - 72,559 (42,574) 29,985 Translation difference (2,542) (836) 25 (490) (115) (3,958) (3,958) At 31 December 2017 1,988,682 848,266 602,151 125,270 225,015 102,904 3,892,288 (42,574) 3,849,714 Depreciation At 1 January 2017 - 342,702 434,913 102,118 - 72,079 951,812 - 951,812 Charge for the year 27,509 80,760 59,598 21,220 - 12,044 201,131 - 201,131 Accumulated depreciation on disposals - (7,067) (19,068) - - 3,450 (22,685) - (22,685) Translation difference - (1,157) 1,171 (204) - (2,739) (2,929) - (2,929) Impairment loss 24,703 - - - - - 24,703 19,099 43,802 At 31 December 2017 52,212 415,238 476,614 123,134 - 84,834 1,152,032 19,099 1,171,131 Net book amount At 31 December 2017 1,936,470 433,028 125,537 2,136 225,015 18,070 2,740,256 (61,673) 2,678,583

*See Note 46 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 161 19. Property and equipment (continued)

(b) Company

Office Capital furniture and Computer Motor work-in Telephone equipment equipment vehicles progress equipment Total Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2018 Cost At 1 January 2018 22,590 201,413 8,899 130,505 36,781 400,188 Additions 31,074 31,676 - - 4,325 67,075 Disposals - (87) (3,095) - - (3,182) Capitalised 35,351 (35,351) - - Transfer from/(to) related party - - - (95,154) - (95,154) At 31 December 2018 89,015 233,002 5,804 - 41,106 368,927 Depreciation At 1 January 2018 8,629 130,428 8,899 - 26,771 174,727 Charge for the year 4,024 32,778 - - 4,319 41,121 Disposals - (60) (3,095) -- - (3,155) At 31 December 2018 12,653 163,146 5,804 - 31,090 212,693 Net book amount At 31 December 2018 76,362 69,856 - - 10,016 156,234

Year ended 31 December 2017 Cost At 1 January 2017 15,396 132,799 8,899 - 34,633 191,727 Additions 7,194 68,614 - 130,505 2,148 208,461 Disposals ------At 31 December 2017 22,590 201,413 8,899 130,505 36,781 400,188 Depreciation At 1 January 2017 6,392 100,963 5,904 - 22,055 135,314 Charge for the year 2,237 29,465 2,995 - 4,716 39,413 Disposals ------At 31 December 2017 8,629 130,428 8,899 - 26,771 174,727 Net book amount At 31 December 2017 13,961 70,985 - 130,505 10,010 225,461 Included in equipment are assets with a gross value of Kshs 144,749,097 (2017 – Kshs 93,263,000) which are fully depreciated and still in use. Such assets would have attracted a notional depreciation of KShs 46,284,880 (2017 – Kshs 21,629,000). UAP Holdings Limited

162 Notes to the Financial Statements (continued)

20. Intangible assets

(a) Group Computer Work in Total software progress Kshs ’000 Kshs ’000 Kshs ’000

Year ended 31 December 2018: Cost At 1 January 2018 649,807 10,201 660,008 Additions 37,568 - 37,568 Transfers - - - Translation difference (25) - (25) At 31 December 2018 687,350 10,201 697,551 Amortisation 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL At 1 January 2018 558,242 - 558,242 Charge for the year 38,681 - 38,681 At 31 December 2018 596,923 - 596,923 Net book amount At 31 December 2018 90,427 10,201 100,628 Cost At 1 January 2017 573,039 48,328 621,367 Additions 38,636 - 38,636 Transfers 38,127 (38,127) - Translation difference 5 - 5 At 31 December 2017 649,807 10,201 660,008 Amortisation At 1 January 2017 522,783 - 522,783 Charge for the year 35,459 - 35,459 At 31 December 2017 558,242 - 558,242 Net book amount At 31 December 2017 91,565 10,201 101,766

(b)Company 2018 2017 Kshs ’000 Kshs ’000 Carrying value At start of year 94,200 63,806 Additions 40,089 54,874 Amortisation charge for the year (37,165) (24,480) At end of year 97,124 94,200 *The intangible assets for the company relate to computer software. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 163

21. Investment properties

(a) Group 2018 2017 Restated* Adjustment As Reported Kshs’000 Kshs ’000 Kshs’000 Kshs’000 At start of year 20,360,418 21,798,958 - 21,798,958 Additions 237,013 503,360 381,725 121,635 Fair value losses unrealised (581,266) (56,088) (320,051) 263,963 Translation difference (237,912) 30,311 - 30,311 Transferred to PPE (Note 19) ( 21,539) (1,916,123) - (1,916,123) At end of year 19,756,714 20,360,418 61,674 20,298,744 b) Company 2018 2017 Restated* Adjustment As Reported Kshs’000 Kshs ’000 Kshs’000 Kshs’000 At start of year 7,186,331 7,028,549 - 7,028,549 Additions - 643,046 381,725 261,321 Tax credit transferred to other receivables - (312,073) - (312,073) Fair value losses (95,348) (173,191) (381,725) 208,534 At end of year 7,090,983 7,186,331 - 7,186,331 UAP Holdings Limited

164 Notes to the Financial Statements (continued) 21. Investment properties (continued)

The Group’s investment properties were revalued in December 2018 and 2017 by Knight Frank Valuers Limited, professional independent valuers in Kenya, South Sudan, Rwanda and Bageine & Company in Uganda respectively on the basis of open market and the comparative and investment methods. The open market value of all properties was determined using recent market prices. The rental income earned by the Group from its investment properties leased out under operating leases amounted to Kshs 1,085 million (2017: Kshs 997 million). Direct operating expenses arising on investment properties amounted to Kshs 144 million (2017: Kshs 192 million). All investment properties are classified as non-current assets. Transfers of investment property to property and equipment in 2018 and relates to the reclassification of the owner occupied portions of the properties.

Details of the Group’s investment properties and information about fair value hierarchy as at 31 December 2018 are as follows:

2018 2017 Kshs ‘000 Kshs ‘000 Level 1 - - 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Level 2 - - Level 3 19,756,714 20,360,418 Fair value as at 31 December 19,756,714 20,360,418

Details of the Company’s investment properties and information about fair value hierarchy as at 31 December 2018 are as follows:

2018 2017 Kshs ‘000 Kshs ‘000 Level 1 - - Level 2 - - Level 3 7,090,983 7,186,331 Fair value as at 31 December 7,090,983 7,186,331 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 165 21. Investment properties (continued)

The carrying value of the investment properties is the fair value of the property as determined by a registered independent valuer having an appropriate recognized professional qualification and experience in the category of the property being valued.

The investment properties are leased to third parties under operating leases as well as being partly occupied by companies of the group though the owner occupied portion (occupied by the UAP Group) has been reclassified to property and equipment. No contingent rents are charged.

There is neither restriction on the realisability of the investment properties nor are there contractual obligations pegged to the investment properties.

All investment properties as at 31 December 2018 are measured at fair value.

The table below shows the valuation methodology used in measuring fair value of investment property as well as significant considerations used.

Valuation Methodology Valuation Considerations Valuation Bases

The Income Approach was used to value the 1. Passing Rent Market Value is defined within RICS Valuation – investment properties. 2. Yield of asset class Professional Standards / International Valuation 3. Estimated lease terms Standards as: The Income approach is predicted on the principal 4. Estimated occupancy levels over the estimated of anticipation which holds that the present value is lease period “The estimated amount for which an asset or liability indicated by the expectations of future benefits. 5. Estimated reversionary rent should exchange on the valuation date between a 6. Estimated yield on reversion willing buyer and a willing seller in an arm’s length This method is used for valuation of income 7. Tax credits held on the properties transaction after proper marketing and where the producing properties. Given a known or estimated parties had each acted knowledgeably, prudently and stream of net rental income, the end value is thus without compulsion.” driven by the rate of return that is expected. The choice of return is made by comparison with such other investments as bear the nearest relationship in such matters as the physical characteristics, use and degree of risk and life of the investment.

For the Income Approach market value can be expressed in a formula: Market Value = Annual Income/Rate of Return or the capitalization rate (MV=A/R) UAP Holdings Limited

166 Notes to the Financial Statements (continued)

22. Deferred income tax

Deferred tax is calculated, in full, on all temporary differences under the liability method using a principal tax rate of 30% (2017: 30%). The movement on the deferred income tax account is as follows:

(a) Group 2018 2017 Restated* Adjustment As Reported 31-Dec 31-Dec 31-Dec 31-Dec Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 At start of year: 224,399 (61,882) - (61,882) Profit or loss(Note 11) (284,466) 286,142 (30,946) 317,088 Translation difference (19,784) 139 125 14 Total (79,851) 224,399 (30,821) 255,220

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL * See Note 46

Disclosed as follows; 31-Dec 31-Dec 2018 2017 Kshs ’000 Kshs ’000 Deferred tax asset (1,049,551) (665,859) Deferred tax liability 969,700 890,258 Total (79,851) 224,399

Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the Group areattributable to the following items: Year ended 31 December 2018 1-Jan (Charged) Translation 31-Dec 2018 /credited reserves 2018 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis (415,445) 4,573 226 (410,646) Investment property fair value gains (1,135,545) 50,442 30,610 (1,054,493) Other provisions 1,321,629 229,697 (11,052) 1,540,274 Deferred tax not recognized/under provision 4,962 (246) - 4,716 Net deferred tax liability (224,399) 284,466 19,784 79,851

Year ended 31 December 2017 1-Jan (Charged) Translation 31-Dec 2017 /credited reserves 2017 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis 30,950 (446,425) 30 (415,445) Investment property fair value gains (1,030,048) (105,312) (185) (1,135,545) Other provisions 1,060,980 260,634 15 1,321,629 Deferred tax not recognised/under provision - 4,962 - 4,962 Net deferred tax liability 61,882 (286,141) (140) (224,399) UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 167

22. Deferred income tax (continued)

(b) Company 2018 2017 Restated* Adjustment As Reported 31-Dec 31-Dec 31-Dec 31-Dec Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 At start of year: (351,699) (168,971) - (168,971) Profit or loss(Note 11) (170,222) (182,728) (18,299) (164,429) Total (521,921) (351,699) (18,299) (333,400) * See Note 46

Disclosed as follows; Restated 31-Dec 31-Dec 2018 2017 Kshs ’000 Kshs ’000 Deferred tax asset (521,921) (351,699) Deferred tax liability - - Total (521,921) (351,699)

Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the company areattributable to the following items: Year ended 31 December 2018 1-Jan (Charged) 31-Dec 2018 /credited 2018 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis 424,785 441,030 865,815 Investment property fair value gains 28,782 (4,287) 24,495 Tax losses carried forward (769,840) (628,056) (1,397,896) Staff gratuity (35,426) 21,091 ( 14,335) Net deferred tax liability (351,699) (170,222) (521,921)

Year ended 31 December 2017 - Restated 1-Jan (Charged) 31-Dec 2017 /credited 2017 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis (21,460) 446,245 424,785 Investment property fair value gains 37,442 (8,660) 28,782 Tax losses carried forward (150,800) (619,040) (769,840) Staff gratuity (34,153) (1,273) (35,426) Net deferred tax liability (168,971) (182,728) (351,699) UAP Holdings Limited

168 Notes to the Financial Statements (continued)

23. Retirement benefit obligation

Description of plan The Group operates a funded defined benefit plan for all employees.The Scheme is open to new entrants.Scheme members’ contributions are a fixed percentage of pensionable pay with the Group responsible for the balance of the cost of benefits accruing.The Scheme is established under trust.The Scheme funds are invested by a fund manager in a variety of asset classes comprising government securities (Treasury bills and bonds), stocks and shares and commercial paper.

The amounts recognised in the statement of financial position are determined as follows: 2018 2017 Shs ’000 Shs ’000 Opening Retirement Benefit Asset 12,921 (258,129) Adjustments Through statement of Profit or Loss Expected Return on Assets (104,273) (157,017) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Current and past service cost 5,606 16,386 Year 2018-Interest Cost 106,443 119,898 Other Employer contributions - - Total Adjustment Through Profit or Loss 7,776 (20,733) Adjustments Through Other Comprehensive Income DBO Actuarial gain/loss - 58,706 Actuarial (loss)/gain due to experience/financial assumptions (151,595) 78,781 Settlement loss 129,249 154,296 Return on plan assets 1,649 - Total Adjustment Through Other Comprehensive Income (20,697) 291,783 Present value of over/under-funding - 12,921

The movement in the fair value of funded obligations is as follows: 2018 2017 Shs ’000 Shs ’000 At start of year 1,186,723 853,277 Current service cost 5,606 - Interest cost 106,443 119,898 Past service cost - 16,386 Remeasurements Actuarial Loss due to change in financial assumptions 8,543 40,838 Actuarial (Gain)/Loss due to experience (160,138) 37,943 Benefits paid (836,403) (35,915) Settlement loss/ loss on plan assets - 154,296 At end of year 310,774 1,186,723 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 169

23 . Retirement benefit obligation (continued)

The movement in the fair value of the plan assets is as follows:

2018 2017 Kshs ’000 Kshs ’000

At start of year 1,173,802 1,111,406 Interest on scheme assets 104,273 157,017 Actuarial gains/(losses) (1,649) (58,706) Benefits paid (836,403) (35,915) At end of year 440,023 1,173,802 Plan assets comprise: 2018 2017 Shs’ 000 Shs’ 000 Equity instruments 9,219 2.10% 181,340 15.45% Debt instruments 271,648 61.73% 911,047 77.61% Other 159,156 36.17% 81,415 6.94% 440,023 100% 1,173,802 100.00%

The amounts recognised in the income statement for the year are as follows: 2018 2017 Kshs ’000 Kshs ’000 Current service cost net of contributions 5,606 (16,386) Net interest cost 106,443 (119,898) Return on scheme assets (excluding interest) (104,273) 157,017 Change in effects of asset ceiling - Total change included in employee benefit expense (note 10 (a)) 7,776 20,733

Financial Assumptions The principal actuarial assumptions used were as follows: 2018 2017 Discount rate 13% 13% Expected rate of return on scheme assets 13% 13% Future salary increases 8% 8% Future pension increases 6% 6% UAP Holdings Limited

170 Notes to the Financial Statements (continued)

23. Retirement benefit obligation (continued)

Demographic Assumptions

The principal demographic assumptions used were as follows:

a) Mortality ◊ Pre-retirement: A1949/52 mortality table (as per the previous valuation) was assumed ◊ Post-retirement: The a (55) life table was assumed. ◊ AIDS: No allowance for additional deaths due to the impact of AIDS has been made.

b) Retirement ◊ It was assumed that members will retire at their Normal Retirement Date. No allowance for ill-health retirement, early retirement or late retirement was made. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

Sensitivity analysis of the above actuarial assumptions The sensitivity of the defined benefit obligation to the financial assumptions has been assessed by increasing and decreasing the discount rate assumption by 0.5%.

Defined benefit obligation 2018 Discount rate 12.5% 13% 13.5% Total accrued liability 312,328 310,774 440,023 Change 1% - 0.5% 2017 Discount rate 13.3% 13.8% 14.3% Total accrued liability 1,192,827 1,186,723 1,181,102 Change 1% - 0.5% UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 171

24. Equity investments

The Group’s equity investments are measured at fair value with fair value changes recorded through either other comprehensive income or income statements for different portfolios of equity investments, as follows:

(a) Equity investments at fair value through other comprehensive income

2018 2017 Kshs ’000 Kshs ’000 At 1 January 1,684,260 1,661,826 Additions - 210,389 Disposals - (546,906) Fair value gains recognised in equity - 359,374 Transfer to fair value through profit or loss (1,684,260) - Translation difference - (423) At end of the year - 1,684,260 UAP Holdings Limited

172 Notes to the Financial Statements (continued)

24. Equity investments (continued)

(b) Equity investments at fair value through profit or loss 2018 2017 Kshs ’000 Kshs ’000 At 1 January 2,050,670 1,671,630 Transfer to fair value through profit or loss 1,684,260 - Additions 329,266 600,594 Disposals (269,014) (563,459) Fair value gains charged to profit or loss (478,049) 342,037 Translation difference (24,043) (132) At end of the year 3,293,090 2,050,670

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Total 3,293,090 3,734,930

For purpose of the cashflow statement, the proceeds from sale of equity investments are Kshs 254,154,000 (2017: Kshs 1,141,222,000) being the disposal amounts in 24 (a) fair value through other comprehensive income and 24 (b) above plus profit/(loss) on sale of equities of Kshs (14,860,000) (2017: Kshs 30,857,000) as per note 6 (a).

(c) Equity investments (listed and unlisted) 2018 2017 Kshs ’000 Kshs ’000 (i) Listed securities At 1 January 3,616,764 3,211,265 Additions 317,069 810,983 Disposals (259,110) (1,110,365) Fair value gains charged to other comprehensive income - 362,926 Fair value gains charged to income statement (478,049) 342,037 Translation difference (21,831) (82) At end of the year 3,174,843 3,616,764 (ii) Unlisted securities At 1 January 118,166 122,191 Additions 12,197 - Disposals (9,904) - Fair value gains charged to other comprehensive income - (3,553) Translation difference (2,212) (472) At end of the year 118,247 118,166

Total 3,293,090 3,734,930 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 173

25. Investments in subsidiaries

Country of 2018 2017 Incorporation Interest held Kshs’000 Kshs’000 UAP Insurance Company Limited (Kenya) Kenya 100% 600,000 600,000 UAP Life Assurance Limited (Kenya) Kenya 100% 1,510,791 1,510,791 UAP Insurance Limited (South Sudan) S.Sudan 100% 339,442 339,442 UAP Insurance Limited (Uganda) Uganda 53% 202,507 202,507 UAP Financial Services Limited (Kenya) Kenya 100% - - UAP Financial Services Limited (Uganda) Uganda 89% 140,861 140,861 UAP Properties Limited (Uganda) Uganda 79% 488,743 488,743 UAP Investments (Kenya) Limited Kenya 100% 6,179 6,179 UAP Insurance Tanzania Limited Tanzania 60% - - UAP Rwanda Limited Rwanda 100% - - UAP Life Uganda Limited Uganda 53% 390,215 390,215 UAP Properties Limited (South Sudan) S.Sudan 70% - - UAP Africa Limited (Mauritius) Mauritius 100% 1,537,630 1,979,383 UAP Global Services Limited Mauritius 100% - - Total 5,216,368 5,658,121

During the year, the Company (impaired)/ increased its investments in subsidiaries as follows: Country of 2018 2017 Incorporation Kshs’000 Kshs’000 UAP Africa Limited (Mauritius) Mauritius (441,753) - UAP Financial Services Limited (Kenya) Kenya - (10,000) UAP SPRL RDC DRC Congo - (175,737) UAP Investments (Kenya) Kenya - (118,821) Total (441,753) (304,558)

The investments in UAP Insurance Tanzania Limited, UAP RDC sprl and UAP Rwanda Limited have been made through UAP Africa Limited (Mauritius). UAP Africa increased its investment in UAP Rwanda Limited amounting to Kshs.151,470,000 million in 2018. Annual assessments of goodwill are carried out for the Cash Generating Units (CGU’s) acquired.The assessment of the goodwill of the Tanzania CGU using discounted cashflows method led to an impairment of approximately KShs 174 million. Assessment of the carrying value of the Tanzanian business in the books of UAP Africa Limited led to an impairment of KShs 597,961,842. The proceeds from disposal of UAP SPRL RDC in 2017 amounting to Kshs. 4,739,010 was transferred in 2018 to UAP Africa Limited. UAP Holdings Limited

174 Notes to the Financial Statements (continued)

26.Mortgage loans recoverable

2018 2017 Kshs’000 Kshs’000 At start of year 356,774 336,774 Loans advanced 172,149 284,591 Loan repayments (222,330) (264,783) Translation difference (181) 192 At end of year (Note 44(iii)) 306,412 356,774

Maturity profile of loans

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL 2018 2017 Kshs’000 Kshs’000 Loans maturing Within 1 year 4,773 5,793 In 1-5 years 64,561 63,319 In over 5 years 237,078 287,662 306,412 356,774

There is no concentration of credit risk with respect to mortgage loans.

27. Reinsurers’ share of insurance liabilities

2018 2017 Kshs’000 Kshs’000 Reinsurers’ share of: Unearned premium (Note 38) 1,441,813 1,280,483 Notified claims outstanding: - short term insurance (Note 36) 1,243,914 1,390,115 - long term insurance contract liabilities (Note 36) 206,011 365,055 Claims incurred but not reported short term insurance (Note 36) 385,221 352,792 At end of year 3,276,959 3,388,445

Amounts due from reinsurers in respect of claims already paid by the Group on contracts that are reinsured are included in receivables arising out of reinsurance arrangements on the statement of financial position. Movements in the above reinsurance assets are shown in note 36 and 38. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 175

28. Deferred acquisition costs

2018 2017 Kshs’000 Kshs’000 At start of year 502,565 515,706 Additions 302,866 295,257 Amortisation charge (353,369) (307,355) Translation difference (6,077) (1,043) At end of year 445,985 502,565

29. Other receivables and prepayments

(a) Group Restated 2018 2017 Kshs ’000 Kshs ’000 Prepayments 209,791 266,521 Accrued income 624,003 439,988 Staff debtors 154,175 142,757 Others 1,089,345 1,202,573 2,077,314 2,051,839

(b) Company Restated 2018 2017 Kshs ’000 Kshs ’000 Prepayments 49,847 42,418 Accrued Income 604,302 430,673 Staff debtors 1,064 767 Others 439,535 784,448 Total 1,094,748 1,258,306

Due from related party(note 44 (iv)) 4,306,166 3,902,786

* Others include bank balances held in Chase Bank (K) Limited (in Receivership). The Bank was put under receivership on 7 April 2016 by the Central Bank of Kenya and was re-opened on 27 April 2016 under statutory management by the Kenya Deposit Insurance Corporation (KDIC). In 2018, State Bank of Mauritius (SBM) acquired Chase Bank (IR) andundertook to release 75% of customer deposits. The total Group balances in Chase Bank (IR)at 31 December 2018 are Kshs 370 million whilst that for the Company are Kshs 60 million. Of the Kshs 370 m, Kshs 93 m (Kshs 15 m for the company) being 25% of the deposits has been provided for based on a Board resolution as this portion of the receivable was not being taken up by the new investor.Under IFRS 9, all financial instruments have been re-evaluated under the Expected Credit Loss model and adequately impaired in the financials. UAP Holdings Limited

176 Notes to the Financial Statements (continued)

30. Corporate bonds 2018 2017 Kshs ’000 Kshs ’000 At 1 January 1,543,914 1,878,698 Purchases/(redemptions) (45,932) (333,565) Fair value losses charged to income statement (211,711) (1,219) At 31 December 1,286,271 1,543,914

31. Government securities

Treasury bills and bonds maturing: 2018 2017 Kshs ’000 Kshs ’000 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Within 91 days - - 91 days to 1 year 1,038,144 385,981 In 1-5 years 4,934,911 2,286,350 After 5 years 8,438,125 9,477,864 At end of the year 14,411,180 12,150,195

Government securities – fair value 635,747 566,934 Government securities – amortised cost 13,775,433 11,583,261 At end of the year 14,411,180 12,150,195

32. Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:

(a)Group Restated* 2018 2017 Kshs ’000 Kshs ’000 Cash and bank balances 1,786,496 1,746,851 IFRS 9 impairment (29,443) - Net cash and bank balances 1,757,053 1,746,851 Deposits with financial institutions 4,908,823 5,614,116 IFRS 9 impairment (67,639) - Net deposits with financial institutions 4,841,184 5,614,116

At end of the year 6,598,237 7,360,967 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 177

32. Cash and cash equivalents (continued)

(b) Company 2018 2017 Kshs ’000 Kshs ’000

Cash and bank balances 19,585 42,483 IFRS 9 impairment (171) - Net cash and bank balances 19,414 42,483 Deposits with financial institutions 450,936 587,641 IFRS 9 impairment (7,544) - Net deposits with financial institutions 443,392 587,641 At end of the year 462,806 630,124

33. Insurance contract liabilities

2018 2017 Kshs ’000 Kshs ’000 Short term insurance contracts -claims reported and claims handling expenses 4,570,720 4,647,393 -claims incurred but not reported 1,783,717 1,772,951 At end of the year 6,354,437 6,420,344

Long term contracts -claims reported and claims handling expenses 6,016,551 5,048,804 Total gross insurance liabilities 12,370,988 11,469,148 Movements in insurance liabilities and reinsurance assets are shown in Note 36.

(i) Short term insurance contracts liabilities Gross claims reported, claims handling expense liabilities and the liability for claims incurred but not reported are net of expected recoveries from salvage and subrogation. The expected recoveries at the end of 31 December 2018 and 31 December 2017 are not material.

The Group uses chain-ladder techniques to estimate the ultimate cost of claims and the IBNR provision.Chain ladder techniques are used as they are an appropriate technique for mature classes of business that have a relatively stable development pattern.This involves the analysis of historical claims development factors and the selection of estimated development factors based on this historical pattern.The selected development factors are then applied to cumulative claims data for each accident year that is not fully developed to produce an estimated ultimate claims cost for each accident year.

The development of insurance liabilities provides a measure of the Groups’ ability to estimate the ultimate value of claims.The table below illustrates how the Groups’ estimate of total claims outstanding for each accident year has changed at successive year ends. UAP Holdings Limited

178 Notes to the Financial Statements (continued) 33. Insurance contract liabilities (continued) (i) Short term insurance contracts liabilities (continued)

Year ended 31 December 2018 2014 2015 2016 2017 2018 Total Accident year Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Estimate of ultimate claims costs At end of accident year 4,928,455 5,809,259 6,005,906 6,898,241 7,525,497 31,167,358 One years later 5,167,354 6,001,067 7,879,084 7,838,144 - 26,885,649 Two years later 5,014,110 5,820,506 8,017,941 - - 18,852,557 Three years later 4,960,749 5,934,508 - - - 10,895,257 Four years later 4,935,366 - - - - 4,935,366 Current estimate of cumulative claims 4,935,366 5,934,508 8,017,941 7,838,144 7,525,497 34,251,456 Less: Cumulative payments to date (4,735,452) (5,662,249) (7,584,062) (7,013,779) (6,034,666) (31,030,208) 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Liability in the Balance sheet 199,914 272,259 433,879 824,365 1,490,831 3,221,248 Liability in respect of prior years - - - - 946,969 946,969 Incurred but not reported - - - - 2,186,220 2,186,220

Total gross claims liability included in the balance sheet 199,914 272,259 433,879 824,365 4,624,020 6,354,437

(ii) Long term business contracts The Group determines its liabilities on long term insurance contracts based on assumptions in relation to future deaths, voluntary terminations, investment returns and administration expenses.A margin for risk and uncertainty is added to these assumptions.The liabilities are determined on the advice of the consulting actuary and actuarial valuations are carried out on an annual basis.

Actuarial valuation assumptions The latest actuarial valuation of the Life Fund was carried out as at 31 December 2018 by the Internal Actuarial Function and reviewed by QED Actuaries & Consultants (Pty) Ltd. The valuation has been conducted on two bases; Published/Internal Reporting Basis (PRB) – this is a discounted cash flow GPV basis with ASSA SAP104 margins and the Statutory RBC basis – this is a discounted cash flow GPV basis as suggested by the Insurance Act with IRA margins as per the amended Act and RBC guidelines. UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 179 33. Insurance contract liabilities (continued) (ii) Long term business contracts (continued)

Actuarial valuation assumptions (continued) The Gross Premium valuation (GPV) method places a realistic value (with an appropriate allowance for margins) on the liabilities of a life insurance Company. This method is based on a discounted cash flow approach taking into account the expected cash flows from existing inforce business. By setting appropriate assumptions this method determines liabilities which are consistent with the value of assets included in the accounts. The more significant valuation assumptions are summarised below.The assumptions used for the previous year-end valuation are shown in brackets:

Mortality – The Company used SA56-62 (2017: SA56-62) as a base table of standard mortality on both the internal and RBC basis. Statistical methods are used to adjust the rates reflected in the table based on the Company’s experience. An allowance for AIDS is made based on the Actuarial Society of South Africa’s 2003 AIDS tables. For contracts insuring survivorship the a(90) (2017: a(90)) life table was used as a base; no allowance is made for future mortality improvements.

◊ Persistency – The Company does not have sufficient historical data to allow statistical methods to be used to determine an appropriate persistency rate.The persistency rates used in the valuation were set according to the experience observed (by the actuary) in the Company’s data.

◊ Investment return assumptions are derived with reference to the return on long term fixed interest investments available in Kenya and adjusted to reflect the actual underlying mix of assets. For the current valuation, the base discount rate was 12.5% p.a. (2017: 12.5% p.a.) for the internal basis with the NSE yield curve with a margin of 3.2% used to value annuity contracts. For the RBC basis, the NSE Yield curve was used as per the amended act and RBC guidelines.

◊ Expenses, tax and inflation – The current level of renewal expenses were taken to be an appropriate expense base.Expenses pertaining to business establishment and expansion were excluded from the valuation assumption. Expense inflation is assumed to be 6% p.a. (2017:10% p.a.).It has been assumed that the current tax legislation and rates continue unaltered. Under the NPV method it is not possible to model expenses, tax and inflation explicitly. UAP Holdings Limited

180 Notes to the Financial Statements (continued) 33. Insurance contract liabilities (continued) (ii) Long term business contracts (continued)

Sensitivity analysis The following table presents the sensitivity of the value of long term insurance liabilities to movements in key assumptions used in the estimation of liabilities.For liabilities under insurance contracts with fixed and guaranteed terms, key assumptions are unchanged for the duration of the contract.For long term insurance contracts without fixed terms and with discretionary participation in profits, the liability is set approximately equal to the value of the underlying asset of the contract.Hence, there is no sensitivity analysis for these types of contracts.

Change in variable Increase in liability 2018 Increase in liability 2017 Contracts with Fixed and Guaranteed Terms – Variable: Shs ’000 Shs ’000 Worsening of mortality +10% 39,192 27,958 Lowering of investment returns p.a. -1% 174,615 161,603 Worsening of expense inflation rate +1% 37,040 19,603 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Worsening of lapse rate +10% (9,164) (5,139)

34. Amounts payable under deposit administration contracts

Deposit administration contracts are recorded at amortised cost.Movements in amounts payable under deposit administration contracts during the period were as shown below. The liabilities are shown inclusive of interest accumulated to the end of the reporting period. Interest was declared and credited to the customers’ accounts at a weighted average rate of 2 % for the year (2017: 12 %). UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 181

34. Amounts payable under deposit administration contracts (continued)

2018 2017 Kshs ’000 Kshs ’000 At start of year 4,520,777 5,264,160 Pension fund deposits received 987,507 1,159,229 Surrenders and annuities paid (1,183,039) (2,028,465) Interest payable to policyholders 79,146 104,653 Administration fees (1,337) (7,546) Other movements* 53,737 28,644 Translation difference (15,581) 102 At end of the year 4,441,210 4,520,777

35. Unit-linked investment contracts

The benefits offered under these contracts are based on the return of a portfolio of equities and debt securities.The maturity value of the financial liabilities is determined by the fair value of the linked assets. There will be no difference between the carrying amount and the maturity amount at maturity date.

2018 2017 Kshs ’000 Kshs ’000 At start of year 865,276 856,045 Premium received 87,020 77,555 Interest credited 120,272 93,466 Liabilities released for payment (190,758) (131,437) Other movements* (20,363) (30,290) Translation difference (1,693) (63) At end of the year 859,754 865,276 Other movements relate to increase in actuarial liabilities. UAP Holdings Limited

182 Notes to the Financial Statements (continued)

36. Movements in insurance liabilities and reinsurance assets

31-Dec-18 31-Dec-17 Gross Reinsurance Net Gross Reinsurance Net Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short term insurance business Notified claims 4,647,392 (1,390,115) 3,257,277 4,163,402 (1,018,922) 3,144,480 Incurred but not reported 1,772,951 (352,792) 1,420,159 1,543,090 (216,614) 1,326,476 Total at beginning of year 6,420,343 (1,742,907) 4,677,436 5,706,492 (1,235,536) 4,470,956 Cash paid for claims settled in year 3,380,190 (336,964) 3,043,226 (5,289,440) 711,456 (4,577,983) Increase in liabilities - arising from current year claims (4,027,452) 403,409 (3,624,043) 4,164,579 (739,436) 3,425,143 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL - arising from prior year claims 665,189 14,665 679,854 1,853,282 (484,090) 1,369,192 Translation difference (83,833) 32,662 (51,171) (14,569) 4,699 (9,870) Total at year end 6,354,437 (1,629,135) 4,725,302 6,420,344 (1,742,907) 4,677,438 Notified claims 4,685,946 (1,243,914) 3,442,032 4,647,393 (1,390,115) 3,257,279 Incurred but not reported 1,668,491 (385,221) 1,283,270 1,772,951 (352,792) 1,420,159 Total at year end 6,354,437 (1,629,135) 4,725,302 6,420,344 (1,742,907) 4,677,438

Long term insurance business At 1 January 5,048,803 (365,055) 4,683,748 4,054,338 (339,690) 3,714,648 Premium received/valuation premium 2,152,053 (273,187) 1,878,866 1,750,075 (368,431) 1,381,644 Liabilities released for payments and interest credited (1,137,136) 432,086 (705,050) (744,665) 340,451 (404,214) Translation difference (47,169) 145 (47,024) (10,944) 2,615 (8,330) Total at year end 6,016,551 (206,011) 5,810,540 5,048,804 (365,055) 4,683,748

Total at year end 12,370,988 (1,835,146) 10,535,842 11,469,148 (2,107,962) 9,361,186 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 183

37. Borrowings (a) Group 2018 2017 Kshs ’000 Kshs ’000 At start of year 10,839,592 11,031,582 Proceeds from borrowings (733,304) (991,003) Interest cost payable 1,009,268 763,970 Unrealised forex loss on borrowings (40,344) (92,437) Translation difference 23,095 127,480 At end of the year 11,098,307 10,839,592

The breakdown of the borrowings is shown below: 2018 2017 Maturity Kshs ’000 Kshs ’000 Old Mutual Short term financing- UAP Holdings Limited N/a 4,623,299 4,026,610 Corporate Bond- UAP Holdings Limited 2019 2,109,628 2,092,867 Nedbank loan- UAP Holdings Limited 2020 3,154,181 3,197,135 SFC loan- UAP Insurance South Sudan Limited 2021 305,340 433,440 PTA Bank Loan -UAP Properties Limited Uganda 2022 295,245 333,210 Norfund Loan - UAP Properties Limited South Sudan 2023 305,307 378,165 IFC Loan - UAP Properties Limited South Sudan 2023 305,307 378,165 At end of the year 11,098,307 10,839,592

(b) Company 2018 2017 Kshs ’000 Kshs ’000 At start of year 10,029,855 8,976,998 Proceeds from borrowings, net of transaction costs (848,640) 437,772 Interest cost payable 705,893 615,085 At end of the year 9,887,108 10,029,855

Construction of Nakawa Park, a project undertaken by UAP Properties Uganda, is partly financed through PTA Bank. The borrowings are repayable in 9 years (from 31 May 2015 to 30 April 2024) and bear an interest rate of 8.5%. UAP Holdings Limited

184 Notes to the Financial Statements (continued) 37. Borrowings (continued)

On 28 July 2014, the group issued Kshs 2 billion 13% Kenya Shilling medium term notes to finance its expansion programme and working capital requirements. The related transaction costs amounting to Kshs 36 million have been netted off against the proceeds and amortised over the tenure of the notes. The notes are repayable on 28 July 2019.

Construction of UAP Equatoria Tower, a project undertaken by UAP Properties South Sudan, is partly financed through Norwegian Investment Fund for Development (Norfund) – USD 5 million and International Finance Corporation (IFC) - USD 5 million. The borrowings are repayable in 7 years beginning 2017 and bear an interest rate of LIBOR plus 6% payable semi-annually.UAP Insurance South Sudan has taken a 5 year loan with SFC Finance Limited which is a USD 6 million facility at an interest rate of 9.5%.

The short term finance from Old Mutual Holdings Kenya comprises USD 16.5 million which bears an interest rate of 3 months LIBOR plus 7.5% and Kshs 1 billion at interest rate of 12.5%. The Nedbank loan is a USD 31 million 5 year loan at an interest of 3 months LIBOR plus 3.5%.

Breaches 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL During the year, a breach was recorded for the Norfund and IFC facilities in UAP Properties South Sudan. The terms of the facilities require that the Debt Service Cover Ratio be greater than 1.4 times and the Liabilities to Tangible Net Worth be less than 1 time greater. As at 31 December 2018, both facilities had a Debt Service Cover Ratio of -1.44 times and a Liabilities to Tangible Net Worth Ratio of 1.1 times. The balance outstanding on the two facilities as at 31 December 2018 was USD 6 million split equally between both lenders. Repayments continue to be made on the loans timeously. To remedy the breach, management is engaging 3rd party lenders to facilitate the partial/full settlement of the USD 6 million debt.

38. Unearned premium

Unearned premium represents the liability for short term business contracts where the Group’s obligations are not expired at the year end.Movements in the reserve are shown below:

31-Dec-18 31-Dec-17 Gross Reinsurance Net Gross Reinsurance Net Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000

At beginning of the year 6,455,560 (1,254,963) 5,200,597 7,027,676 (2,119,258) 4,908,418 Increase in the year 59,560 (161,681) (102,121) (626,052) 882,382 256,330 Translation difference 506,698 (25,169) 481,529 567,702 (43,607) 524,095 At end of year 7,021,818 (1,441,813) 5,580,005 6,969,326 (1,280,483) 5,688,843 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 185

39. Other payables

(a) Group Restated 2018 2017 Kshs ’000 Kshs ’000 Deferred income 87,554 27,120 Accrued expenses 693,688 819,578 Accrued leave 67,423 70,496 Withheld taxes 350,574 444,378 Other liabilities 1,871,002 1,599,730 At end of the year 3,070,241 2,961,302 There are no individually significant items under other liabilities category.

(b) Company Restated 2018 2017 Kshs ’000 Kshs ’000 Accrued expenses 177,212 77,448 Accrued leave 15,481 21,586 Other liabilities 124,437 827,518 Total 317,130 926,552

Due to related parties (Note 44 (iv)) 1,489,970 495,204

There are no individually significant items under others category.

40. Creditors arising from reinsurance arrangements

2018 2017 Kshs ’000 Kshs ’000 At start of year 881,684 1,876,234 Additions/(repayments) 123,612 (879,381) Life balance 185,107 (111,604) Translation difference (14,840) (3,565) At end of the year 1,175,563 881,684 UAP Holdings Limited

186 Notes to the Financial Statements (continued)

41. Cash generated from operations

Reconciliation of profit before tax to cash generated from operations

(a) Group Restated 2018 2017 Kshs ’000 Kshs ’000 (Loss)/Profit before tax (479,751) 1,330,176

Adjustments for: Investment income (Note 6 (a)) (2,919,753) (3,668,108)

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Depreciation (Note 19) 236,012 201,131

Impairment loss (Note 19) 24,640 43,802 Amortisation (Note 20) 38,681 35,459 Interest costs (Note 37) 1,009,268 763,970

Profit on disposal of subsidiary - 38,833 Goodwill impairment (Note 18) 174,363 - Net impairment loss on financial assets (Note 2(b)) 779,922 -

Changes in: Insurance contract liabilities (net) 901,840 1,708,317 Deposit administration contracts (79,567) (743,381)

Unit-linked contracts (5,522) 9,231 Unearned premium (net) 52,492 (622,037) Re-insurance and other payables 402,818 (244,444)

Direct insurance, re-insurance and other receivables (including foreign exchange movements) (599,447) 402,234 Deferred acquisition costs 56,580 13,141 Retirement benefit asset 7,776 (46,575)

Cash generated from operations ( 399,648) (778,251) UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 187 41. Cash generated from operations (continued)

(b) Company

Restated 2018 2017 Kshs ’000 Kshs ’000 (Loss)/Profit before tax (589,993) (45,279) Adjustments for: Investment income (Note 6 (b)) (957,383) (1,319,456) Depreciation (Note 19 (b)) 41,121 39,413 Amortisation (Note 20 (b)) 37,165 24,480 Interest Costs (Note 37 (b)) 705,893 615,085 (Loss)/gain on foreign exchange (Note 6(b)) (14,648) 22,897 Impairment of Investment in subsidiaries 597,962 304,558 Net impairment loss on financial assets (Note 2(b)) (2,438) - Changes in: Other payables 385,344 122,276 Other receivables(including foreign exchange movements) (239,822) (1,963,432) Adjusting closing impairment on Bank deposits and receivables (Note 4 (b)) (8,746) - Cash generated from operations (45,545) (2,199,458) UAP Holdings Limited

188 Notes to the Financial Statements (continued)

42. Contingent liabilities

Legal Proceedings The holding Company, UAP Holdings Limited has a pending legal suit against the Company seeking a declaration that the sale of the property known as Land Reference No. 209/13453 Upper hill, Nairobi and on which the development known as UAP Old Mutual Towers sits, as null and void.

The contingent liability is estimated at KShs 267 Million. Management, based on legal advice, do not foresee the suit being successful and has therefore made no provision in the financial statement.

Tax contingent liabilities In 2016, the Kenya Revenue Authority (KRA) carried out an audit of UAP Life Assurance Company Limited’s tax affairs for the periods January 2011 to December 2014 and issued an assessment of Kshs 68 million under the tax heads of Excise Duty, Pay As You Earn (PAYE) and Corporation Tax. UAP Life Assurance Company Limited resolved to pay the principal tax amounts of the Corporation Tax and Excise Duty but has objected on the PAYE assessment. 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

A provision for this amount (Kshs 20 Million) has been made in the financial statement in this regards though the matter is still in litigation and the exposures and assessments relate to industry-wide tax issues which are yet to be conclusively resolved.

In common with the insurance industry in general, the Group’s insurance subsidiaries are subject to litigation arising in the normal course of insurance business.The Directors are of the opinion that this litigation will not have a material effect on the financial position or profits of the Group.

43. Financial instruments by category

(a) Financial assets The Group’s financial assets are summarised by measurement category in the table below Restated 2018 2017 Kshs ’000 Kshs ’000 At amortised cost 29,650,847 28,403,539 At fair value 4,730,274 5,123,893 34,381,121 33,527,432 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 189 43. Financial instruments by category (continued)

(a) Financial assets (continued) 2018 2017 Kshs ’000 Kshs ’000 (i) Financial assets at amortised cost Government securities 13,775,433 11,583,261 Corporate bonds 484,834 721,885 Receivables arising out of direct insurance arrangements 1,850,411 1,698,966 Receivables arising out of reinsurance arrangements 1,294,978 1,241,402 Reinsurers’ share of insurance liabilities 3,276,959 3,388,445 Other receivables 2,063,583 2,051,839 Deposits with financial institutions 4,841,184 5,614,116 Cash and bank balances 1,757,053 1,746,851 Mortgage loans receivable 306,412 356,774 29,650,847 28,403,539 (ii) Financial assets at fair value Equity investments: At fair value through other comprehensive income - 1,684,260 At fair value through profit or loss 3,293,090 2,050,670 Corporate bonds 801,437 822,029 Government securities 635,747 566,934 4,730,274 5,123,893

(b) Financial liabilities Except for unit-linked investment contracts, which are measured at fair value, the Group’s financial liabilities are measured at amortised cost. The carrying value of the Group’s and the Company’s financial liabilities at the end of 2018 and 2017 is shown in note 4(b). UAP Holdings Limited

190 Notes to the Financial Statements (continued)

44. Related party transactions

The Group is controlled by UAP Holdings Company Ltd incorporated in Kenya being the ultimate parent of the Group. There are other companies that are related to UAP Holdings Limited through common shareholdings or common Directorships.

The following transactions were carried out with related parties:

2018 2017 Kshs ’000 Kshs ’000 i) Administration of staff pension scheme- Group Contributions paid 144,056 122,061

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Benefits paid 53,821 69,282

ii) Transactions with related parties - Company Interest paid to UAP Insurance Kenya 55,708 53,822 Interest received from UAPProperties South Sudan 24,250 30,186 Interest received from UAP Properties Uganda 166,381 83,853 Investment management fees paid to UAP Investments Kenya - -

iii) Outstanding balances with related parties - Group Nedbank loan (note 37) 3,154,181 3,197,135 Old Mutual Holdings Kenya short term financing (note 37) 4,623,299 4,026,610 Mortgage loans receivable (note 26) 306,412 356,774 8,083,892 7,580,819

Mortgages to staff are fully secured on the mortgage properties and are charged interest at 6% (2018: 6%). UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 191

44. Related party transactions (continued)

2018 2017 Kshs ’000 Kshs ’000 iv) Outstanding balances with related parties - Company Payable to related parties: UAP Insurance Kenya 1,349,549 449,691 UAP Insurance Uganda 44,256 45,513 UAP Investments Kenya 316 - Old Mutual Life Assurance Company Limited 51,552 - Faulu Micro Finance Bank 41,227 - Old Mutual Investment Group 3,070 - 1,489,970 495,204 Receivable from related parties: UAP Life Assurance Kenya 71,479 67,468 UAP Life Assurance Uganda 117 117 UAP Insurance South Sudan 15,126 13,013 UAP Properties Uganda 2,081,878 2,226,298 UAP Properties South Sudan 318,972 86,262 UAP Insurance Rwanda 22,596 1,485 UAP Investments Kenya - 1,091 UAP Global Services Mauritius 1,759,539 1,490,236 UAP AfricaMauritius 13,938 16,330 UAP Properties Limited (Mauritius) - 8 UAP Insurance Tanzania 5,356 478 Old Mutual Holdings Limited 9,125 - Old Mutual Investment Services 8,040 - 4,306,166 3,902,786

The amounts payable to related parties have no specific repayment date. UAP Holdings Limited

192 Notes to the Financial Statements (continued)

44. Related party transactions (continued)

2018 2017 Kshs ’000 Kshs ’000 v) Loan to Directors At start of year 21,752 23,795 Loan advanced during the year - - Loans repayments received (2,193) (2,043) At end of year 19,559 21,752 Loans to Directors are fully secured and are charged interest at 6% (2017: 6%). vi) Key management compensation (a) Group 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Salaries (Including executive Directors salaries) 588,416 622,639 Retirement benefits costs 49,094 39,508 637,510 662,147 (b) Company Salaries (Including executive Directors salaries) 145,079 94,974 Retirement benefits costs 7,810 7,178 152,889 102,152 vii) Directors’ emoluments (a) Group Executive salaries (included in key management compensation above) 111,862 105,132 Fees 80,811 75,627 Other remuneration 5,932 10,851 198,605 191,610 (b) Company Executive salaries (included in key management compensation above) - Fees 31,212 24,067 Other remuneration 8,766 7,616 39,978 31,683 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 193

45. Operating lease agreements

The Company as a lessor Rental income earned during the year was KShs 1,085,469,000– 2017 (KShs 996,621,000). At the reporting date, the Company had contracted with tenants for the following future lease receivables:

2018 2017 Kshs ’000 Kshs ’000 Within one year 757,741 449,822 In second to fifth year inclusive 1,906,512 1,245,896 After five years 135,698 142,244 Total 2,799,951 1,837,962

Leases are negotiated for an average term of 6 years and rentals are reviewed every two years. The leases are cancellable with a penalty when the tenants do not give three months’ notice to vacate the premises.

The Company as a lessee At the reporting date, the Company had outstanding commitments under operating leases which fall due as follows: 2018 2017 Kshs ’000 Kshs ’000 Within one year 258,947 203,299 In second to fifth year inclusive 437,403 540,231 After five years 15,945 111,529 Total 712,295 855,059

Operating lease payments represent rentals payable by the Company for its branch premises. Leases are negotiated for an average term of 5 years.

46. Restatement of prior year results For the year ended 31 December 2017, the financial statements of UAP Life Assurance Uganda were qualified due to unreconciled balances that impacted revenue, premium debtors and bank balances. Subsequently, the reconciliations have been performed and the financial statements for 2017 restated accordingly. In addition, a KShs 529m liability relating to the final certificate for the construction of the UAP Tower in Nairobi was incorrectly reported as a capital commitment. The impact of these restatements on the 2017 financial position and profit and loss is as follows: UAP Holdings Limited

194 Notes to the Financial Statements (continued) 46. Restatement of prior year results (continued)

(a) Group

Restatements and adjustments

Impact on comprehensive Impact on Net income assets KShs’000 KShs’000

As previously reported 1,389,854 18,980,177

1 Investment property restatements: Gross under accrual for liabilities – Other payables - (529,000) Tax Benefit 62,575 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Net under accrual for liabilities – Other Payables (466,425) Additional costs – Property investments - 381,725 Additional costs - Expenses (84,700) - Reversal of overstated FV gains – Property investments - (381,725) Reversal of overstated FV gains – investment income (381,725) -

2 UAP Uganda Life Assurance Company restatements: Overstated earned premiums – Net earned premiums (180,880) - Understated net claims payable – Net claims payable (56,405) - Overstated operating expenses – expenses 28,188 - Understated liabilities - insurance contracts liabilities (61,717) Overstated cash balances - Cash & cash equivalents (3,399) Understated receivables – Other receivables 20,722 Unearned revenue - Other payables (162,614)

3 Taxation impact: Deferred tax on income 30,946 - Deferred tax asset - 18,299 Deferred tax liability - 12,522

4 Impact on OCI relating to translation of Uganda restatements 1,964 -

As restated 747,242 18,337,565 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 195 46. Restatement of prior year results (continued)

a) Group (continued)

Restated statement of profit or loss Effects of As previously Restatement and As restated reported Adjustments Kshs’000 Kshs’000 Kshs’000 Gross written premium 19,292,575 (181,458) 19,111,117 Gross earned premium 19,894,538 (181,458) 19,713,080 Reinsurance ceded (4,396,985) (4,097) (4,401,082) Net earned premium 15,497,553 (185,555) 15,311,998 Investment income 3,983,486 (315,378) 3,668,108 Commissions earned 799,451 - 799,451 Other income 243,879 - 243,879 Total Income 20,524,369 (500,933) 20,023,436 Claims and policy owners’ benefits payable (10,867,551) (56,405) (10,923,956) Less: Amount recoverable from reinsurers 1,477,310 - 1,477,310 Net claims payable (9,390,241) (56,405) (9,446,646) Operating and other expenses (6,073,447) (75,610) (6,149,057) Commissions payable (2,294,754) - (2,294,754) Total expenses & commissions (8,368,201) (132,015) (8,443,811) Finance costs (763,970) - (763,970) Profit before tax from continuing operations 2,001,957 (639,948) 1,369,009 Loss of control Loss on disposal of subsidiary (38,833) - (38,833) Profit before tax 1,963,124 1,330,176 Income tax expense (753,607) 30,946 (722,661) Profit for the year 1,209,517 (602,002) 607,515 Profit attributable to: Owners of the parent 1,172,248 (509,670) 662,578 Non-controlling interest 37,269 (92,332) (55,063) Profit for the year 1,209,517 (602,002) 607,515 Basic and diluted EPS 5.54 3.13 UAP Holdings Limited

196 Notes to the Financial Statements (continued) 46. Restatement of prior year results (continued)

a) Group (continued)

Restated statement of other comprehensive income Effects of As previously Restatement and As restated reported Adjustments Kshs’000 Kshs’000 Kshs’000 Profit for the year 1,209,517 (602,002) 607,515 Other comprehensive income Items that will be recycled to profit or loss Movement in exchange differences on translating foreign operations (494) 1,964 1,470 Items that will not be recycled to profit or loss

2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Gains/(losses) on revaluation of equity instruments Listed ordinary shares 362,926 - 362,926 Unlisted ordinary shares (3,553) - (3,553) Remeasurement of retirement benefit obligation’ (291,783) - (291,783) Gains on revaluation of PPE 72,559 (42,574) 29,985 Elimination of translation reserve on disposal of subsidiary 40,682 - 40,682 Total comprehensive income for the year 1,389,854 (642,612) 747,242

Total comprehensive income attributable to: Owners of the parent 1,383,971 (557,110) 826,861 Non-controlling interest 5,883 (5,502) (79,619) Total comprehensive income 1,389,854 (642,612) 747,242 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 197 46. Restatement of prior year results (continued)

(a) Group (continued)

Effects of As previously Restatement and As restated reported Adjustments Restated statement of financial position CAPITAL EMPLOYED Kshs’000 Kshs’000 Kshs’000 Retained earnings 9,583,236 522,235 9,061,001 Translation reserve (4,533) (1,040) (3,493) Statutory reserve 397,347 (6,659) 404,006 Revaluation Surplus 72,559 42,574 29,985 Net movement in shareholders’ funds 557,110 Non-controlling Interest 1,303,427 85,502 1,217,925 Net movement in equity 642,612

Assets Property and equipment 2,740,256 (61,673) 2,678,583 Investment properties 20,298,744 61,674 20,360,418 Deferred income tax asset 647,560 18,299 665,859 Other receivables 2,031,117 20,722 2,051,839 Deposits with financial institutions 5,616,369 (2,253) 5,614,116 Cash and bank balances 1,747,997 (1,146) 1,746,851 Net movement in assets 35,623

Liabilities Deferred income tax liability 902,780 12,522 890,258 Insurance contract liabilities 11,407,431 (61,717) 11,469,148 Other payables 2,332,262 (629,040) 2,961,302 Net movement in liabilities (678,235)

Net asset movement 642,612 UAP Holdings Limited

198 Notes to the Financial Statements (continued) 46. Restatement of prior year results (continued)

a) Group (continued)

Restated statement of cash flows Effects of As previously Restatement and As restated reported Adjustments Kshs’000 Kshs’000 Kshs’000 Cash flow from operating activities Cash generated from operations (1,151,605) (373,354) (778,251) Tax paid (385,383) (299) (385,084) Net movement in cash generated from operating activities (373,653) Cash flow from investing activities 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL Additions to investment properties (121,635) 381,725 (503,360) Rent, interest and dividends received 3,255,388 (4,673) 3,260,061 Net movement in cash used in investing activities 377,052

Net Increase in cash and cash equivalents 3,399

(b) Company

(i) Restated statement of profit and loss Effects of As previously Restatement and As restated reported Adjustments Kshs’000 Kshs’000 Kshs’000 Investment income 1,701,181 (381,725) 1,319,456 Other income 801,163 - 801,163 Total income 2,502,344 (381,725) 2.120,619 Operating and other expenses (1,466,113) (84,700) (1,550,813) Finance cost (615,085) - (615,085) Profit before tax 421,146 (466,425) (45,279) Income tax expense 164,429 18,299 182,728 Profit after tax 585,575 (448,126) 137,449 UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes to the Financial Statements (continued) 199 46. Restatement of prior year results (continued)

(b) Company (continued)

(ii) Changes to statement of financial position Effects of restatement As previously reported As restated and adjustments Kshs’000” Kshs’000” Kshs“000” Movement in capital employed Retained earnings 1,988,395 (448,126) 1,540,269

Movement in assets Deferred tax asset 333,400 18,299 351,699

Movement in liabilities Other payables 460,127 466,425 926,552

Net assets movement (448,126)

(iii) Changes to statement of cashflows

As previously reported Restatement As restated Kshs’000” Kshs“000” Kshs’000”

Movement in cash generated from operations (2,604,079) 381,725 (2,222,354)

Movement in cash flow from investing activities Additions to investment properties (261,321) (381,725) (643,046)

Movement in net cash used in investing activities -

47. Holding Company

The ultimate holding company is Old Mutual Limited, a company incorporated and domiciled in South Africa.

48. Subsequent Events

There were no material events after the reporting period, which would require disclosure or adjustment to the financial statements for the year ended 31 December, 2018. UAP Holdings Limited

200 Notice of the 11th Annual General Meeting

UAP HOLDINGS LIMITED: NOTICE OF THE 11TH ANNUAL GENERAL MEETING i. Dr. Peter Wanyaga Muthoka retires by rotation at the dissolution of the meeting and does not offer himself for re-election. NOTICE IS HEREBY GIVEN that the Eleventh Annual General Meeting of the ii. Mr. Paul Truyens retires by rotation at the dissolution of the meeting and does shareholders of UAP Holdings Limited will be held on Friday, 14 June 2019 at 11.00 a.m. not offer himself for re-election. at the UAP Old Mutual Tower, Upper Hill, Nairobi to transact the following business: 8. Board Audit Committee 1. Reading of Notice In accordance with the provisions of Section 769 of the Companies Act, 2015, the The Secretary to read the notice convening the meeting, table the proxies and to following Directors being members of the Board Audit Committee be elected to confirm the presence of quorum. continue to serve as members of the said Committee:

2. Confirmation fo Minutes i. Mr. Robert Mbugua – Chairman Confirmation of the Minutes of the 10th Annual General Meeting held on 13 June 2018. ii. Mr. Vincent Rague iii. Ms. Susan Omanga 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL ORDINARY BUSINESS iv. The Chairman of the Board Risk Committee once a replacement for Mr. Truyens is appointed 3. Consideration of Reports To receive, consider and if thought fit, adopt the Audited Financial Statements for 9. Appointment of External Auditor the year ended 31 December 2018 and the Reports of the Chairman, Directors’ To note that the auditors Messrs KPMG Kenya, being eligible and having expressed and Auditors’ thereon. their willingness, will continue in office in accordance with Section 721(2) of the Companies Act, 2015 and to authorize the Directors to fix their remuneration in 4. Declaration of Dividend accordance with Section 724(2) of the Companies Act, 2015. To consider and adopt the recommendation of the Directors that no dividend be declared or paid in respect of the financial year ended 31 December 2018. SPECIAL BUSINESS

5. Remuneration Report 10. Amendments to the Articles of Association of the Company To approve the Directors’ remuneration for the year ended 31 December 2018 as That the following Articles of Association of the Company be amended so as to provided for in the Financial Statements. read as follows:

6. Election of Directors i) Article 139 To approve that Mr. Mike Harper who retires at the dissolution of the meeting and “A meeting of the Board may be held by means of conference call, internet, voice being eligible offers himself for re-election in accordance with Articles 119, 120 over internet protocol, electronic or other communication facilities or channels and 121 of the Company’s Articles of Association, be re-elected and appointed as permitting all person participating in the meeting to hear and speak to each other a Director of the Company. simultaneously and such participation shall constitute a presence of a quorum at a meeting of the Directors as if those participating were present in person. Such 7. Retirement of Directors meeting shall be deemed to take place where the largest group of those participating In accordance with Articles 119 and 120 of the Company’s Articles of Association; and is assembled or if there is no such group, where the Chairman of the meeting is.” pursuant to Paragraph 2.5.1 of the CMA Code of Corporate Governance Practices for Issuers of Securities to the Public 2015; to note the retirement of the Directors mentioned below: UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notice of the 11th Annual General Meeting (continued) 201

ii) Article 161 i. publishing such notice in two daily newspapers with nationwide circulation; or “Any dividend, interest or other sum payable in cash to the holder of shares may be ii. sending such notice through the post addressed to such Member at his postal paid by bank transfer or by any other approved electronic money transfer system address as appearing in the Register of Members or the Company’s other records; in accordance with a Member’s written mandate or by cheque or warrant sent or through the post addressed to such holder at his registered address or, in the case iii. by electronic mail to such member at his email address as appearing in the of joint holders, addressed to the holder whose name stands first on the Register Company’s records or as shall be notified by such Member to the Company from of Members in respect of the shares. Every such cheque or warrant shall, unless the time to time. holder otherwise directs, be made payable to the order of the registered holder or, in the case of joint holders, to the order of the holder whose name stands first v) Article 174 on the Register of Members in respect of such shares and shall be sent at his or “Any notice or other document addressed to a member at his registered address their risk. Any one of two or more joint holders may give effectual receipts for any or address ‘for service’ shall, if sent by post, be deemed to have been served dividends or other moneys payable in respect of the shares held by such joint holders.” or delivered on the third day after the day on which it was posted, if addressed within Kenya, and on the fifth day after the day on which it was posted if addressed iii) Article 171 outside Kenya. In proving such service or sending, it shall be sufficient to prove that “A copy of every balance sheet, including every document required by law to be the cover containing the notice or document was properly addressed and put into annexed thereto, which is to be laid before the Company in General Meeting, the post office as a prepaid letter or prepaid airmail letter. Any notice or document together with a copy of the Auditor’s report, shall, not less than twenty-one days not sent by post but left at a registered address or address for service in Kenya shall before the date of the Meeting, be sent to every Member of and every holder of be deemed to have been served or delivered on the day it was so left. Where a income notes or debentures of the Company. The Accounts may be sent by post notice is sent by telegram, telex, fax, email or other electronic mail delivery system, or otherwise made available by electronic means. This Article shall not require it shall be deemed to have been served at 9.00 a.m. on the business day following a copy of these documents to be sent by post or otherwise made available by the date when transmitted or sent. Where notice is published in a daily newspaper, electronic means to any person of whose postal address or electronic address the it shall be deemed to have been served on the day on which it was first published. Company is not aware of, nor to more than one of the joint holders of any shares In proving the giving of a notice or document, it shall be sufficient to prove that the or debentures. The Company may also send the Accounts to all persons entitled notice was published in a daily newspaper of nationwide circulation, or that the thereto by publishing the Accounts on the Company’s official website provided that envelope containing the notice or document was properly addressed and put into the Company shall publish a summary of the Accounts in two daily newspapers the post office as a prepaid letter or prepaid airmail letter, or that the applicable with national circulation for one day drawing attention to the website on which means of telecommunication or electronic communication was properly addressed the Accounts in full may be read and upon any such publication the Accounts shall and transmitted, dispatched or sent. The failure by any person or entity to receive be deemed to have been sent to every Member or other person entitled to receive any notice served shall not in any way invalidate any proceedings or actions taken a copy of the Accounts.” by the Company for which the notice was given.” iv) Article 173 Every notice or other document given by the Company shall be in writing. To the extent permissible by law, the Company may serve any notice to be given to its Members by: UAP Holdings Limited

202 Notice of the 11th Annual General Meeting (continued)

ANY OTHER BUSINESS

11. Any Other Business To transact any other business which may be properly transacted at an annual general meeting and for which a valid notice has been issued in accordance with the Articles of Association of the Company

By Order of the Board Nkirote Mworia Njiru Secretary 21 May 2019 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL

NOTE In accordance with Section 298(1) of the Companies Act, 2015 every member entitled to vote at the above meeting is entitled to appoint a proxy to attend and vote on his/her behalf. A proxy need not be a member of the Company. To be valid, a form of proxy must be duly completed by the member and either returned to the Group Company Secretary, P.O. Box 43013 – 00100, Nairobi, email: [email protected] or the Shares Registrars, CDSC Registrars Limited 1st Floor, Occidental Plaza, Muthithi Road, P O Box 6341-00100 Nairobi, Kenya so as at to arrive no later than 48 hours before the meeting or any adjournment thereof. The Annual Report can be found at our website through this link: http://www.uapoldmutual.com/about-us/investors UAP Holdings Limited | 2018 Annual Report and Financial Statements 203

PROXY FORM

I/We------being a member*/members of UAP HOLDINGS LIMITED hereby appoint:

------

------of P. O. Box ------and failing him/her the Chairman of the meeting to be my/our Proxy, to vote for me/us at an

Annual General Meeting of the company to be held on Friday, 14th June 2019 at the Company’s Registered Offices at11:00 a.m. or at any adjournment thereof. As witness by my/our hands this ------day of------2019.

Signed------

Notes:

In accordance with section 298(1) of the Companies Act, 2015, every member entitled to vote at the above meeting is entitled to appoint a proxy to attend and vote on his/her behalf. A proxy need not be a member of the Company.

To be valid, a proxy form must be duly completed by the member and either returned to the Group Company Secretary, P.O. Box 43013 – 00100, Nairobi, email: Secretariat@ uap-group.com or the Shares Registrars, CDSC Registrars Limited 1st Floor, Occidental Plaza, Muthithi Road, P O Box 6341-00100 Nairobi, Kenya so as at to arrive no later than 48 hours before the meeting or any adjournment thereof. UAP Holdings Limited

204 Notes 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes 205 UAP Holdings Limited

206 Notes 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL UAP Holdings Limited | 2018 Annual Report and Financial Statements

Notes 207 UAP Holdings Limited

208 Notes 2018 ANNUAL REPORT & FINANCIAL STATEMENTS 2018 ANNUAL UAP Holdings Limited | 2018 Annual Report and Financial Statements

OUR CONTACTS 209

UAP HOLDINGS LIMITED UAP Insurance Company UAP Life Assurance Limited UAP Properties Limited UAP Old Mutual Tower, Upper Hill Road Tel: +254 (020) 2829 000 Mobile: +254 711 010 000 / 800 / 1 or +254 732 101 000 / 800 / 1 Email: [email protected] www.uapoldmutual.com UAPOldMutual @uapoldmutual

UAP OLD MUTUAL INSURANCE UGANDA UAP INSURANCE SOUTH SUDAN LIMITED UAP Old Mutual Financial Services Limited UAP Properties South Sudan Limited UAP Old Mutual Properties UAP Equatoria Tower UAP Nakawa Business Park P.O Box 201 Juba, South Sudan Plot 3-5 New Portbell Road, Kampala - Uganda Tel: +211 922 550 040 / +211 22 550 049 Tel: +256 414 332 700 Email: [email protected] Fax: +256 414 256 388 Email: [email protected]

UAP INSURANCE RWANDA LIMITED UAP INSURANCE TANZANIA LIMITED Grand Pension Plaza - 7th Floor Barclays House, 4th Floor, Ohio Street Avenue de la Paix P.O. Box 71009 Dar es Salaam, Tanzania. B.P 6644 Kigali, Rwanda, Tel: +255 22 213 7324 / 5 Tel: +250 25 2500 905-7 Fax: +255 22 213 7308 Fax: +250 25 2500 908 Email: [email protected] Email: [email protected] Follow us on www.twitter.com/uapoldmutual www.facebook.com/UAPOldMutualGroup www.uapoldmutual.com www.instagram.com/uapoldmutual