Annual Report (2012) - Strathmore University

SU20ANNUAL REPORT ANDFINANCIAL STATEMENTS

UT OMNES UNUM SINT - THAT ALL MAYBE ONEMission: To provide all round quality education in an atmosphere offreedom and responsibility; excellence in teaching, research andscholarship; ethical and social development; and service to society.Vision: To become a leading out-come driven entrepreneurialresearch university by translating our excellence into a major contributionto culture, economic well-being, and quality of life.

Coat of ArmsThe Lion is the symbol of strength and courage, and of the determinedfight for excellence and justice. It also represents Kenya, our country, whichstrives to attain all the qualities mentioned above.The Rose in full bloom represents love, the source of all good desires andactions, even if at times this means loving sacrifice, as represented by the thorns.The rose has a supernatural meaning too. Love, with capital letters, is love ofGod. The rose also has a historical meaning associated with the life of SaintJosemaría Escrivá, founder of Opus Dei, who inspired and encouraged thepeople who started Strathmore: he once received a divine sign in the form of acarved gilded rose in a very trying moment of his life.The Three Hearts represent the three races which, in 1961 when the University started, weresegregated in the colonial system of education. The heart represents the person, since it is takenas the source of all our actions, and the source of love. The fact that the three hearts all have thesame colour shows the equality of all people and their aim to love and understand each other. Atthe beginning it clearly pointed at the target of racial unity. Today it symbolises the common aimof parents, teachers and students in the educational process of Strathmore.The Motto "Ut omnes unum sint" is Latin. It is a quotation from a passage of theGospel, and means "That all may be one". It expresses our desire to work togethertowards the same aim, in spite of personal differences or opinion, tastes and backgrounds.The colours in heraldry (the science dealing with coats of arms) have associated meaningsas follows:Yellow (Gold) Gold means eternity, perfection.Blue (Azure) Sky blue means high ideals, high aims.Red (Gules) Blood red means sacrifice, love, fortitude.

TABLE OF CONTENTS1. ABOUT STRATHMORE 32. STRATHMORE PROGRAMMES 53. LIST OF SCHOOLS/ FACULTIES AND COURSES OFFERED BY EACH 54. FIVE YEARS FINANCIAL PERFORMANCE REVIEW 85. GOVERNANCE AND MANAGEMENT 14a. University Council 16b. Management Board 21c. Statement of the Chairperson of the University Council 23d. Vice Chancellors Message 25e. Functional and Corporate Structure of the University 276. GENERAL INFORMATION 287. CORPORATE GOVERNANCE STATEMENT 308. SUSTAINABILTY STATEMENT 39a. Environment 39b. Education 42c. Our People 44d. Sports 469. TEACHING, RESEARCH AND INNOVATION 4712. UNIVERSITY COUNCIL REPORT 5113. STATEMENT OF UNIVERSITY COUNCIL’S RESPONSIBILITIES 5214. INDEPENDENT AUDITORS REPORT 5315. FINANCIAL STATEMENTS 54a. Statement of Comprehensive Income 55b. Statement of Financial Position 56c. Statements of Changes in Accumulated Fund 57d. Statement of Cash Flows 58e. Notes to the Financial Statements 592Strathmore University Annual Report 2012

ABOUTSTRATHMOREStrathmore University Annual Report 2012

ABOUT STRATHMOREStrathmore University is one of the leading private Universities in the East African region. Its historydates back to 1961, when it was established as the first multi-racial A’ level college in pre-independenceKenya. It later expanded to offer Accountancy courses, Professional courses such as those ofthe Institute for the Management of Information Systems (IMIS), and introduced degree programmesin the year 2001 under Jomo Kenyatta University, before finally being granted its own charter tooperate as a university in 2008. In line with its vision, it offers a variety of business oriented, academicand professional programmes.Phase 1 entrance at Strathmore University4Strathmore University Annual Report 2012

STRATHMORE PROGRAMMESStrathmore’s programme offering has rapidly increased over the years. Beginning from the flagshipprogrammes of Bachelor of Commerce and Bachelor of Business and Information Technology in theyear, 2001, the basket of programmes now comprises of Certificate Courses, Diploma courses,Undergraduate, Graduate, Post-Graduate and professional courses as well as Executive Education. All the courses are introduced, after market research is carried out to determine their need andrelevance in the market. An increase in courses has subsequently led to an increase in departmentsand schools under which the courses are run. The mode in which programmes are run is either fulltime, modular or part-time; the latter being weekend and evening sessions.Research is an integral part of any academic institution. To that end, the University has a special interestin areas of research mostly driven by its faculty. Whereas a research module is a compulsoryunit for most of its courses, the University has ensured that research centres continue to thrive andexpand. Partnerships in research have continued to grow as external institutions seek the researchexpertise from the University’s faculty bench. The University research centres have increased over theyears to the current 10 research centresLIST OF SCHOOLS/ FACULTIES AND COURSES OFFEREDSchool of Management and Commerce:a. Diploma in Business Management- Diplomab. Bachelor of Commerce- Undergraduatec. Bachelor in Leadership Management- Undergraduated. Master of Commerce - Graduatee. Doctor of Philosophy in Management - Post graduateSchool of Finance and Applied Economicsa. Bachelor of Science Actuarial Science - Undergraduateb. Bachelor of Science Finance - Undergraduatec. Bachelor of Science Financial Economics - UndergraduateStrathmore Law Schoola. Bachelor of Laws - UndergraduateFaculty of Information Technology5a. Diploma in Information Technology - Diplomab. Bachelor of Business Information Technology - Undergraduatec. Bachelor of Science Informatics - Undergraduated. Bachelor of Science Telecommunications - Undergraduatee. Master of Science in Information Technology - Graduatef. Master of Sci. in Computer- Based Information Systems- Graduateg. Master of Sci. in Mobile in Telecomm. and Innovation - GraduateStrathmore University Annual Report 2012

Centre for Tourism and Hospitalitya. Bachelor of Science in Hospitality Management - Undergraduateb. Bachelor of Science in Tourism Management - UndergraduateSchool of Humanities and Social SciencesPost Experience Diploma in Educational Management-Master of Applied Philosophy and Ethics-Master of Science in Educational Management-DiplomaGraduateGraduateSchool of Accountancya. Certified Public Accountants (CPA) -b. Association of Chartered Certified Accountants (ACCA)c. Chartered Financial Analysts (CFA)d. Certified Information Systems Auditor (CISA)e. Certified Information Security Manager (CISM)f. Institute of Chartered Accountants in England and Wales (ICAEW) Charted AccountantsStrathmore Business Schoola. Masters in Business Administration - Graduateb. Masters in Business Administration, Healthcare - Graduatec. Executive Education Courses - Executive TrainingResearch Centres@iLabAfrica Research Centre©IPIT Centre for Intellectual Property & Information Technology LawCREATES Centre for Research In Therapeutic SciencesTherapeuticCIC Climate Innovation Centre KenyaSDRC Strathmore Dispute Resolution CentreSGC Strathmore Governance CentreCARMS Centre for Applied Research in Mathematical Sciences6SEDC Strathmore Enterprise Development CentreSERC Strathmore Energy Research CentreStrathmore University Annual Report 2012

Students’ statistics1. EnrolmentThe student body has increased steadily subsequent to the increase in number ofprogrammes being offered.Year 2010 2011 2012No. of students 4234 4337 44492. Graduation Numbers:Year 2010 2011 2012No. Of students 628 716 7483. No. of academic programmes being offered in Strathmore UniversityYear 2010 2011 2012No. of degree programmes 19 20 217Strathmore graduandsStrathmore University Annual Report 2012

FIVE YEARS FINANCIALPERFORMANCE REVIEWStrathmore University Annual Report 2012

Strathmore UniversityFinancial StatementsFor the year ended 31 December 2012STRATHMORE UNIVERSITYSTATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBERBalance as at 31 December2008 2009 2010 2011 2012ASSETS Shs '000 Shs '000 Shs '000 Shs '000 Shs '000Non-current assetsProperty And Equipment 832,029 1,144,827 1,386,210 1,532,531 1,574,900Investment property - - - - 50,468Prepaid Operating Leases 1,118,154 1,105,004 1,680,800 1,658,596 2,000,408Intangible Assets 20,599 12,649 13,552 12,824 5,500Endowment Fund Deposits 45,631 49,860 59,175 52,624 70,441Designated Funds Deposits 56,340 113,667 82,673 87,794 109,1022,072,752 2,426,007 3,222,410 3,344,369 3,810,820Current assetsInventory 19,638 18,224 13,306 6,536 7,714Trade And Other Receivables 141,077 120,476 133,232 194,838 230,150Short Term Deposits 120,432 116,721 176,391 165,368 91,511Equity investment 821 1,198 1,478 1,026 1,680Amounts Due To RelatedParties 8,227 4,867 3,757 19 6,564Cash And Bank Balances 95,379 87,658 83,151 85,873 71,094385,573 349,144 411,314 453,661 408,712Assets held for sale - - - - 3,640- - - - 3,640TOTAL ASSETS 2,458,326 2,775,151 3,633,725 3,798,029 4,223,1729CAPITAL FUND ANDLIABILITIESCapital and reservesCapital Investment Fund 148,732 148,732 148,732 148,732 148,732Revaluation Reserve 1,037,018 997,096 1,561,584 1,533,193 1,894,672Designated Funds 49,026 78,481 80,679 82,186 90,392Accumulated Surplus 227,120 187,503 225,691 298,182 341,2051,461,896 1,411,812 2,016,685 2,062,293 2,475,001Non-current liabilitiesEndowment Funds 44,993 49,170 59,843 55,332 72,046Designated Funds 8,973 37,536 35,441 60,368 107,433Deferred Income-CapitalGrants 211,629 253,685 256,839 296,500 304,750Long Term Loans 357,854 650,970 762,774 732,962 659,095623,449 991,361 1,114,897 1,145,163 1,143,324Current liabilitiesTrade And Other Payables 305,190 306,404 396,474 471,069 477,523Contribution To Sert 14,428 8,285 21,829 13,981 21,341Overdraft And Short-TermLoans 53,363 57,287 83,839 105,524 105,983372,981 371,977 502,142 590,574 604,846TOTAL EQUITY ANDLIABILITIES 2,458,326 2,775,151 3,633,725 3,798,029 4,223,172Strathmore University Annual Report 2012

Ratios 2008 2009 2010 2011 2012Current Ratio 129% 141% 123% 117% 98%Return On Assets -0.2% -2.1% 0.8% 1.8% 0.7%Gearing ratio 17% 26% 23% 22% 18%Increase in total asset in 2,458 2,775 3,634 3,798 4,223(Shs Million)Current RatioThe University has ensured sustainable liquidity though decreasing. At the same time the current assetsare easily convertible into cash to meet current liabilities. The current liabilities have been adjusted fordeferred fees income which is not a payable (note 29)Movement in total assetIn order to achieve objective of improving teaching and learning facilities, the University has investedon physical facilities. This is shown by a consistent increase in total assets and by December 2012total assets was shs 4.223 billion. This represents 72% increase from December 200810Strathmore University Annual Report 2012

Return on AssetsThe University have used its assets productively to generate returns and maintaining the not for profitstatusGearing RatioTo finance expansion of physical facility, the University has borrowed wisely to ensure the liabilitiesdo not exceed half of the assets11Strathmore University Annual Report 2012

Million)Current RatioThe University has ensured sustainable liquidity though decreasing. At the same time the currentassets are easily convertible into cash to meet current liabilities. The current liabilities have beenadjusted for deferred fees income which is not a payable (note 29)STRATHMORE UNIVERSITYSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 December2008 2009 2010 2011 2012Shs '000 Shs '000 Shs '000 Shs '000 Shs '000Tuition fees 746,521 835,522 968,552 1,055,672 1,237,625Donations 9,777 17,472 45,358 32,816 31,822Deferred income 7,944 8,803 8,103 8,088 11,984Other operating income 51,525 49,942 96,129 113,983 114,03069,247 76,217 149,590 154,886 157,835Total income 815,768 911,739 1,118,142 1,210,558 1,395,460Administrativeexpenses (648,177) (852,149) (942,705) (989,790) (1,121,415)Establishmentexpenses (139,670) (109,140) (151,141) (160,719) (212,321)Total expenses (787,847) (961,288) (1,093,847) (1,150,508) (1,333,736)Operating surplus 27,921 (49,549) 24,296 60,050 61,724Finance costs (41,922) (12,613) (9,136) (30,417) (59,961)Finance Income 8,022 4,574 14,959 36,926 28,428Surplus (deficit) forthe year (5,979) (57,588) 30,118 66,559 30,191Movement in incomesKshs billion 824 916 1,133 1,247 1,424Movement in expensesKshs billion 830 974 1,103 1,181 1,39412Strathmore University Annual Report 2012

Movement in incomesThe University has an objective of increasing income. This has been done consistently and byDecember 2012 total incomes including Finance Income were shs 1.424 billion. This was 73%increase from December 2008Movement in incomes and expensesExpenses have increased at almost the same proportion as the income. They are used to enhanceproductivity; by December 2012 total expenses including Finance Cost were shs 1.394 billion.This was an increase of 68% from December 2008.13Strathmore University Annual Report 2012

GOVERNANCE ANDMANAGEMENTStrathmore University Annual Report 2012

GOVERNANCE AND MANAGEMENT‘The year 2012 saw most of the University council members’ terms come to an end. The StrathmoreEducational Registered Trustees (SERT) together with Kianda Foundation and the Pro-Chancellor’soffice worked tirelessly to reconstitute the University Council’.15Front Row: Mrs. Patricia Ithau, Mrs. Zipporah Wandera, Prof. John Odhiambo,Mrs. Bennadette Musundi, Ms. Belinda Rego,Middle Row: Mr. Fernando Aizpun, Dr. George NjengaBack Row: Mr. Martin Kisuu, Dr. Caeser MwangiStrathmore University Annual Report 2012

Mrs. Bernadette Musundi –ChairpersonMrs. Musundi was appointed the Chairperson ofthe University Council in September, 2012. She haspreviously been a member of the Council. She’s aformer Permanent Secretary in the Office of the VicePresident and Ministry of Home Affairs, Heritageand Sports. She was involved in spearheadingreforms in the Prison’s Department. She was instrumentalin the coordination of the administrative stepswhich established the Children’s Act. She representsAfrican Women Co-operators on the InternationalCooperative Alliance’s Global Women Committeeand she is the current Vice-President. She holds aB.A (Hon.) and M.A degrees in addition to extensiveprofessional training in Business Administrationand Co-operative Management, Adult Educationand Marketing from local and foreign institutions ofhigher learning.Dr. Caesar Mwangi –Vice ChairpersonDr Mwangi was appointed to the University Councilin September, 2012. He is a graduate of theUniversity of Johannesburg - PhD. in OrganizationalPerformance and Change Management (2004),the University of the Witwatersrand - Wits BusinessSchool in Johannesburg - MBA (1995) and theUniversity of Nairobi (Kenya) – BA Econ. (1988).Dr Mwangi is also a Certified Public Accountant (K)and an accredited Organizational Assessor withthe UK based Investors in People OrganizationalPerformance Standards. His career spanning aperiod of 25 years has been varied and enrichingin terms of management and leadership experience.He is currently the Managing Director of Sasini Ltd,a publicly listed Agribusiness Company involved inthe growing, processing and marketing of tea, coffeeand dairy products in Kenya. He brings to theCouncil his vast experience in consulting both locallyand internationally.16Strathmore University Annual Report 2012

Professor John Odhiambo -Secretary (Vice Chancellor)Professor John Odhiambo has been the Vice Chancellorof Strathmore University since 1st May 2003.Before this, he was a Professor of Mathematics andStatistics at the University of Nairobi and Chairmanof the Department of Mathematics of the Faculty ofScience. Professor Odhiambo received his Bachelorof Science, Master of Science and Doctor of Philosophydegrees in Mathematics and Statistics fromthe University of Nairobi. He has received differentprizes and awards. In addition to his duties at Strathmore,he has worked as a consultant for differentorganizations such as the Rockefeller Foundation’sAfrica Regional Programme.Mr. Fernando Aizpun -Member17Mr. Fernando Aizpun is an experienced Architectand has worked for several organisations such as,‘Arquitectura y Urbanismo’ in Spain, Imara EducationalFoundation, Tectura International and ArchtenArchitects in Kenya. He holds a Bachelor of Architecture& Town Planning from University of Navarraand is a Registered Architect from the Board of RegistrationArchitects & Quantity Surveyors in Kenyasince 1999. He is also a Corporate Member of theArchitectural Association of Kenya (A.A.K.). He wasa tutor at Strathmore College between 1993 and1999 and has been a trustee of Strathmore EducationalTrust, a Director of Hodari Boys Club andMbagathi Study Centre.Strathmore University Annual Report 2012

Mrs. Zipporah Wandera –MemberMrs. Wandera has many years of work experiencewith the City Council of Nairobi where she was employedin 1973 as a Counsel and rose through theranks to become Town Clerk from 1992 to 2000.She has been a member of Kenya Law Reform,the Law Society of Kenya and a life member ofAdvocate’s Benevolent Association. Mrs. Wanderais an advocate of High Court since 1972 and ispracticing law under the firm name Z.M. Wandera& Company Advocates. She holds a Bachelor ofLaw Degree from the University of East Africa Dares-salaam.She received a Silver Star award fromthe President of Kenya in 1993 for her distinguishedservice to the nation.Ms Belinda Rego -MemberMs. Asumpta Belinda Rego is a well experienced,widely travelled and dedicated educator committedto the education and training of the young and notso young professionals in Kenya and elsewhere. Shehas over 20 years teaching experience in primary,secondary and tertiary institutions in rural and urbanareas in Kenya since 1957. She has lecturing experienceof both undergraduate and post graduatelevels at the University of Nairobi, Kenyatta Universityand as a visiting Lecturer at Stockholm University,Sweden from 1990 to 2010. She has beeninvolved in training of in-service and pre-service ofteachers, supervisors and examiners. She is involvedin research and publications in areas of Environmentand Education.18Strathmore University Annual Report 2012

Mr. Martin Kisuu –MemberMr. Kisuu has over 20 year’s professional experiencein taxation and has served in the Public FinanceCommittee of Institute of Public Accountants ofKenya (ICPAK), heading its Technical sub-committee.He has also worked as an author and reviewerfor the International Bureau for Fiscal Documentation(IBFD) and as a member of the Kenya CustomsValuations Appeal Tribunal. Mr. Kisuu is the partnerin charge of the PKF Tax Services practice in EasternAfrica (Kenya, Uganda and Rwanda). He was previouslya Tax Partner with Deloitte, Kenya. He is aCertified Public Accountant and a member of ICPAK.Mrs. Patricia Ithau –Member19Patricia Ithau was appointed to the University Councilin September, 2012. She holds an MBA fromUnited States International University (USIU), hasattended the Advanced Management Programme(AMP) at Strathmore Business School and IESEBusiness School, Spain. She holds a Bachelor ofCommerce, from University of Nairobi. She beganher professional career at East Africa Industries Ltdafter completion of her undergraduate degree andhas over 15 years experience in various capacitiesand different countries culminating in her role as theMarketing Director, for the East African Business. In2005, she joined East African Breweries Ltd (EABL)as the Marketing Director and held this role for 3years before being appointed Managing Director –for Uganda Breweries Ltd for a year and then ManagingDirector of EABL International, both subsidiariesof the company. She left EABL in March 2011to head L’Oreal East Africa Ltd, the new subsidiaryof the French Multi-National Beauty Company as itsManaging Director. She is a Fellow of the MarketingSociety of Kenya, an Advisory Board Memberof Strathmore Business School, a Board Member ofthe Kenya Tourism Board and the Chairperson of theNairobi Women’s Hospital.Strathmore University Annual Report 2012

Dr. Charles Sotz –Ex Officio Member(University Secretary)Charles Sotz, PhD Education Management hasworked for Strathmore Educational Trust since 1983in various administrative tasks including, fundraising,planning and development, strategy and projectmanagement. He was Strathmore College Principal(1993-2003) and he has been Strathmore UniversitySecretary from 2003 until now in charge of Financeand Administration. He is a lecturer of Business Ethics,Governance and Education Management.Professor Izael Pereira Da Silva -Ex officio Member(Deputy Vice ChancellorAcademic Affairs)Prof. Izael Pereira Da Silva has a PhD in PowerSystems Engineering from the University of Sao Paulo(Brazil). He is also a Certified Energy Manager. Atpresent he is an Associate Professor at StrathmoreUniversity and the Deputy Vice Chancellor AcademicAffairs. He is the Director of Strathmore EnergyResearch Center, SERC. Prof Da Silva was theDirector of Makerere’s Centre for Research in Energyand Energy Conservation (CREEC) which undertakestraining, research and consultancy in energy relatedtopics before joining Strathmore University.Dr. Njenga –Ex officio Member(Deputy Vice Chancellor Research &Quality AssuranceDr. George N. Njenga is the Deputy Vice Chancellor,Research and Quality Assurance of StrathmoreUniversity. He is also the founding Dean of StrathmoreBusiness School and has a PhD in PoliticalPhilosophy from the University of Navarra, Spain.He has a Masters in Governance and Culture ofInstitutions (MGCI) from the same University anda Masters in Business Administration. He is also aCertified Public Accountant of Kenya. He has heldvarious directorships since 1993 and is a trainedBoard Member (non-governmental Institutions) atHarvard Business School.20Strathmore University Annual Report 2012

MEMBERS OF THE MANAGEMENT BOARDProf John Odhiambo -Vice ChancellorDr. Charles Sotz -University SecretaryProf Izael Da Silva -Deputy Vice Chancellor(Academic Affairs)Dr. George Njenga -Deputy Vice Chancellor(Research)Mr. Daniel Kiilur –Director, Support Services21Ms Stella Mwangi –Director, AdministrativeServicesMs. Naomi May Mwangi– Director, HumanResourcesMs. Dorina Telaide – SpecialAdvisor in the Officeof the Vice Chancellor(from 1st May, 2012)Strathmore University Annual Report 2012

Deans and Directors at Strathmore University1. Dr. David Wang’ombe- Dean, Strathmore School of Management2. Dr. Reuben Marwanga- Dean, Faculty of Information Technology3. Dr. Luis Franchesci- Dean, Strathmore Law School4. Prof. Ruth Kiraka- Dean, School of Graduate Studies5. Prof. Christine Gichure- Dean, School of Humanities and Social Sciences6. Dr. George Njenga- Dean, Strathmore Business School7. Mr. Geoffrey Injeni- Director, Strathmore School of Finance and Applied Economics8. Mr. Paul Ochieng- Dean of Students9. Prof. Onyango- Director, Centre for Research in Applied Mathematics10. Dr. Jim McFie- Director, School of Accountancy11. Dr. Joseph Sevilla- Director, @iLabAfrica Research Centre12. Dr. Antoinette Kankindi- Director, Strathmore Centre for Governance13. Mrs. Harriet Koyoson- Director, Strathmore Medical Services14. Ms. Stella Mwangi- Director, University Administrative Services15. Mr. Daniel Kiilur- Director, Support Services16. Mr. Nephat Njengw’a- Director, Finance17. Mr. Martin Njogu- Director , ICT department18. Mr. Marcos Migeri- Director, Admissions Services19. Mr. Bernard Shiundu- Director, Library Services20. Ms. Joy Goopio- Director, Centre for Tourism and Hospitality21. Mrs. Betty Ngala- Director, University Relations and Communications22The University LibraryStrathmore University Annual Report 2012

STATEMENT FROM THE CHAIRPERSONOF THE UNIVERSITY COUNCILI feel honored to present to our stakeholders the Annual Report and Financial Statements of StrathmoreUniversity for the financial year ended 31st December 2012. This annual report helps us toreflect on our performance for the year giving us an opportunity to celebrate our success and at thesame time identify areas of improvement.General Economic Overview 2012The year 2012 had some remarkable improvement in various macroeconomic factors. The inflationrate reduced from almost 20% at the beginning of the year to about 3.2% at the close of theyear. The interest rates continued to reduce during the year with 91 days Treasury bill rate closingat around 8% at the end of the year compared to 20% at the close of the year 2011.The Kenyashilling gained significantly against the hard currencies (Euros and US dollars) and was more stablethan last year. These favourable Macroeconomic factors contributed favourably to the positivegrowth of economy in 2012 with an estimated growth in GDP at 4.3%. We hope the economywill continue to improve for a considerable period of time for the operations of the University tocontinue in a sustainable manner.23Education Sector OverviewWe continue to see growth in demand for high education in Kenya in the year 2012. The numberof KCSE candidates who attained a mean grade of C+, which is the minimum grade to enroll ina university in Kenya increased by 4,046 students to 123,704 from 119,658 in 2011. In 2011,the number had risen by 16,086 candidates compared to 2010 when 91,137 students attainedC+ and above.The number has been steadily rising for the last ten years. Only 53,010 candidates who sat KCSEin 2012 will find places in public universities leaving 70,694 qualified students to join privateuniversities locally and abroad. A total of 436,349 students sat for KCSE in 2012 compared toStrathmore University Annual Report 2012

411,783 in 2011. This trend is expected to rise especially with continuous support of free primaryeducation and free tuition for secondary schools by the Government. The University remains committedto playing a vital role in the higher education sector by providing high quality and all roundeducation as enshrined in its mission.Overall PerformanceThe year 2012 financial performance was satisfactory as a result of concerted effort by theUniversity Council, Management Board and the entire staff of Strathmore University. The totalincome increased from Shs 1.211 billion in 2011 to Shs 1.395 billion in 2012. The net surplusfor the year decreased from Shs 66.5 million in 2011 to Shs 30.1 million in 2012. The net assetsgrew from Shs 2.062 billion in 2011 to Shs 2.475 billion in 2012. This was a good performanceand the Council is pleased to confirm that the University is operating in a sustainable manner.The University continued to perform well in other areas as detailed in the sustainability report. It isworth mentioning the desire of the university to invest in green energy. About half of the buildings ofthe university are green buildings and the University Council has approved plans to invest in solarenergy and reduce carbon emission. The University continues to be counted as a responsible citizenthrough the activities of its corporate outreach programmes that carries out activities in marginalizedareas such as planting trees, cleaning the slums, refurbishing and renovating buildings amongothers. I take this opportunity to most sincerely thank our donors, the students and staff memberswho continue to support our Community Outreach Programme.I am also humbled by the sports teams that continue to raise the flag of the University much higherin the world of sports. The performance of our teams as analyzed in the sustainability report ishumbling. This is part of the all-round education that Strathmore promises to offer. I call upon all thestakeholders of the University not to relent in their efforts in ensuring that we continue to improve thisperformance.ConclusionThe Council will continue working closely with management especially in the next strategic planningcycle. The University has been operating on a ten-year strategic plan that is reviewed afterevery five years. The current ten years plan will come to an end in the year 2014 and the Councilis bracing itself for the next planning cycle that we believe will take Strathmore University to the nextlevel of academic excellence and continue playing a significant role in serving society.Mrs. Bernadette MusundiUniversity Council Chairperson24Strathmore University Annual Report 2012

VICE CHANCELLOR’S MESSAGEI am delighted to see our institution come to the end of another successful year. Just like any otheryear, the year 2012 had its own unique challenges but with dedicated members of the UniversityCouncil, the Management Board and the entire staff of the University, the challenges were surmountable.Many changes took place during the year. The most significant changes were in relation toappointment of new members of the University Council, commencement of revision of the Statutes,joining the Strategic Management Programme for quality benchmarking under the auspices of theAssociation of Commonwealth Universities, and introducing long term loans for students.In the year 2012 most of the University Council members’ terms came to an end. The Board ofTrustees, after a structured nomination and selection process as spelt out in the Statutes appointednew Council members and reconstituted the University Council in September 2012. The Committeesof the University Council were also reconstituted as detailed in the corporate statement toensure that they are more aligned to the strategic vision of the University and steer the Universitytowards achievement of its mission.I take this opportunity to most sincerely thank the former chairperson of the University Council, ProfTerry Ryan who retired on 31st August 2012. He served the University in this role with rare commitmentexemplary leadership for two consecutive five years-terms. His wise counsel and wide experiencein both academia and public service proved to be a most valued asset during his tenure. Ialso thank all the members who retired from the Council at the same time as the Chairperson. All ofthem gave very dedicated and selfless service to the University during their tenure.25The Management Board commenced the revision of the statutes in November 2012 to incorporatechanges that have taken place in the University policies over the last four years. The Statutes werelast reviewed in 2008 when the University received its Charter. The University remains committedto reviewing the Statutes every five years to ensure it is responsive to changes taking place in theeducational environment at global, regional and local levels. The revised Statutes were approvedby the University Council on 19th June 2013 in compliance with the Strathmore University Charter2008.Strathmore University Annual Report 2012

In the year 2012, Strathmore University changed in the way it manages its quality moving from theparadigm of quality assurance through compliance under ISO certification, to a new paradigm ofquality enhancement through an integrated quality assurance system centred on academic processeswhich dove tail with academic support process of the University. The integrated quality systemis fully supported by an internal self-assessment mechanism as well as an external peer assessmentthrough an international benchmarking system of institutions of higher learning under the auspices ofthe Association of Commonwealth Universities (ACU). This allows the University to benchmark withbest practices from other member universities of ACU. The University has thus opted to migrate fromthe ISO quality management system.This new system allows teaching and non-teaching units to internally assess their quality and endeavourto improve and align with best practices as experienced in other universities under theumbrella of ACU. The University will be able to mutually share quality practices such as strategicplanning, facilities and infrastructure management, estates management, teaching and learning, ICTand automation, research management, among others with other member universities.Two years ago, Strathmore and Kiva discovered a sustainable alternative for financing student fees.Based in San Francisco, California, Kiva is a worldwide micro-lending organization accessibleonline. With 900,000 lenders, Kiva so far has distributed over $410 million worth of loans to onemillion people worldwide. In Kenya, it has offered a total of $20.5 million to 63,000 individuals.Kiva has strengthened this by connecting lenders to borrowers on the web platform and throughthe field partner. Strathmore is a field partner of Kiva. The model targets students who do not havea credit history and also takes into consideration the actual and full cost of the degree courses.There are three categories of Kiva loans: Full tuition, partial tuition and laptop loans. The full tuitionloan repayment starts one year after graduation, or the beginning of the sixth year to the 10th. Theinterest rate is at four per cent flat rate on total amount received. This interest is actually charged foradministrative work since Kiva does not collect any interest on the loans it facilitates. Kiva funds arepurely supported by grants, loans and donations from its users. The risk for this model is mitigatedthrough a rigorous selection process that ensures the student is talented, has potential to excel andfully understands that this is a loan not a grant.The University in pursuit of providing qualified Kenyans to achieve vision 2030 got approval fromthe University Council to start working towards mounting an engineering degree. The University isassembling necessary academic resources to enable it launch the degree programme in the academicyear 2014.The University has also embarked in reviewing its 5-year strategic plan that comes to an end in theyear 2014. The review entails re-analyzing the University Business Model to ensure there is necessarystrategic thrust in boosting and supporting the University core processes. We also look back toassess the strategic achievement we have made in the planning period. Some of the major milestonesinclude the charter, School of Finance, research, School of Law etc. I take this opportunity tothank all our stake holders for their unwavering support in helping us to achieve our great mission ofproviding all round education in an atmosphere of freedom and responsibility.Professor John Odhiambo26Vice ChancellorStrathmore University Annual Report 2012

University CouncilSCHEDULE I: FUNCTIONAL AND CORPORATE STRUCTURE OF THE UNIVERSITYA: Governance Structure of the UniversityCommittees of the CouncilManagement BoardCommittees of the Management BoardAcademic CouncilCommittees of the Academic CouncilFaculty BoardsDepartmental BoardsCommittees of the Faculty BoardDepartmental CommitteesB: Functional Structure of the UniversityVICE CHANCELLOR’SOFFICEAcademic &StudentAffairsDivisionAdministration,Finance, Planning& OperationsDivisionResearchDivisionAcademicAdministrationFacultiesandSchoolsStudentAffairsLibraryStrategy andQualityAssuranceResearchAdministrationGraduateStudies andResearchInternationalRelations27FinanceEstates andInstitutionalPlanningUniversityServicesICTServicesHumanResourcesAdvancementand AlumniRelationsCommunication andUniversityRelationsGovernanceSecretariatStrathmore University Annual Report 2012

GENERALINFORMATIONStrathmore University Annual Report 2012

PRINCIPAL PLACE OF BUSINESSStrathmore UniversityOle Sangale Road, MadarakaP.O. Box 59857 – 00200NAIROBIAUDITORPricewaterhouseCoopersCertified Public AccountantsP.O. Box 43963 – 00100NAIROBIBANKERSCommercial Bank of Africa LimitedIndustrial Area BranchP.O. Box 30437 – 00100NAIROBICFC Stanbic Bank LimitedUpper Hill Medical Centre BranchP.O. Box 2492 – 00200NAIROBIEquity Bank LimitedCommunity BranchP.O. Box 8181 – 00100NAIROBIStandard Chartered Bank Kenya LimitedKaren BranchP.O. Box 24601 – 00502NAIROBICitibank KenyaCitibank House, Upper HillP.O. Box 30711 – 01200NAIROBICo-operative Bank ofKenya LimitedUpper Hill BranchP.O. Box 30415 – 00100NAIROBII & M Bank LimitedIndustrial Area BranchP.O. Box 30238 – 00100NAIROBIChase Bank LimitedP.O. Box 66049 – 00800NAIROBI29Barclays Bank of Kenya LimitedBarclays Plaza BranchP.O. Box 46661 – 00200NAIROBILAWYERSA F Gross AdvocatesP.O. Box 57792 – 00200NAIROBINyiha, Mukoma and AdvocatesP.O. Box 28491 – 00200NAIROBISTRATHMORE MANAGEMENT BOARDProf. John Odhiambo - Vice Chancellor - ChairDr. Charles Sotz - University SecretaryProf. Izael Da Silva - DVC Academic AffairsDr. George Njenga - DVC ResearchMr. Daniel Kiilur - Head of Support ServicesMs. Stella Mwangi - Director AdministrationMs. Naomi Mwangi - Director Human ResourcesMs. Dorina Telaide - Special Advisor in the Officeof the Vice Chancellor (from1st May, 2012)Strathmore University Annual Report 2012

CORPORATE GOVERNANCE STATEMENT1. OwnershipStrathmore University is a body corporate duly incorporated under the Universities Act (Cap 210Bof the Laws of Kenya). It was granted a charter on 23rd April 2008.The University is owned byStrathmore Educational Trust, Nairobi in collaboration with Kianda Foundation Educational Trust,Nairobi. Both trusts are not for profit body corporate with perpetual succession, established underthe Trustee (Perpetual Succession) Act (Chapter 164 of the Revised Laws of Kenya 1962 edition).The Trusts were formed for the advancement of education and alleviation of poverty.The Trustees of Strathmore Educational Trust in the financial year 2012 were as follows:• Prof. Terrence C. Ryan – Chairman (Retired 19thSept. 2012)• Dr. Caesar Mwangi – Chairperson (Appointed 20th Sept. 2012)• Mr. Matthew Njogu - Member• Mr. Andrew Olea - Member• Mr Fernando Aizpun - Member• Mr Maurice D’Souza - Member• Mr Charles Kanjama - AdministratorThe Trustees of Kianda Foundation were as follows:• Dr. Olga Emily Marlin-Chair• Prof. Christine Gichure-Member• Ms. Wilfreda Chepkoech-Member• Ms. Seraphina Mwangi-Member• Ms. Dorothy Khamisi-Member2. Current Constitution and Appointment of University Council MembersThe Trustees, pursuant to section 13 of the Strathmore University Charter, establishes and appointsthe University Council to govern the University and assist in promoting its foundational and educationalaims. The Membership of the University Council is as follows:(a)(b)(c)(d)(e)two persons appointed by the Trustees of Strathmore Educational Trust from amongits members;two persons nominated by the Trustees of Kianda Foundation Educational Trust;two senior academicians, appointed by the Board of Trustees with experience inhigher education, and none of whom are employees of the University; Two personsappointed by the Board of Trustees, from public and private sectors in Kenya;The Vice-Chancellor, who is the Secretary to the Council;The Deputy Vice-Chancellors and the University Secretary who are ex-officiomembers with no voting rights at Council meetings.30The Chairperson and a Vice-Chairperson of the Council are appointed by the Council itself by electionthrough secret ballot from among the two members of Strathmore Educational Trust and the twomembers nominated by Kianda Foundation sitting in the Council. Members of the University Councilare appointed as follows:Strathmore University Annual Report 2012

(a)(b)(c)Nominations for membership on the Council are reviewed by the NominationsCommittee set up by the Board of Trustees for this purpose.Selected candidates are recommended to the Board of Trustees for approval andappointment.The Chair of the Board of Trustees informs the Vice Chancellor of the membersappointed to the Council.A member of the University Council other than an ex-officio member shall normally hold office fora term of three years, upon expiry of which the member shall be eligible for re-appointment. Nomember may be appointed to the Council for more than three consecutive terms unless such a memberis the Chair of the Council. A member who is ineligible to be appointed to the Council due toservice for the maximum consecutive terms shall become eligible to be nominated after a lapse ofone year from the conclusion of his or her last term in the Council.The office of a member of the University Council shall become vacant: if not being an ex-officiomember, he/she resigns his office in writing addressed to the Vice Chancellor; If the Board of Trusteesis satisfied that the member is, by reason of physical or mental infirmity or otherwise, unable toexercise the functions of his office; and upon his death.Where the office of a member of the University Council becomes vacant under above circumstances,the Vice-Chancellor notifies the vacancy to the Board of Trustees. The following criteria areemployed in selecting individuals for appointment to the University Council:(a)(b)(c)(d)(e)Knowledge of, and/or strong evidence of interest in Strathmore as a leadingUniversity in Africa;Ability to commit time and effort to the work of the Council and its committees,including fundraising and external representation;Possession of particular qualifications or skills and competencies that may helpstrengthen the Council;Commitment to the values of university education and the specific role of StrathmoreUniversity;Not employed by the University nor shall they have been so employed within thepreceding two years, except for the Vice Chancellor.The profile of the University council members is provided in page 16.3. Responsibility of the University CouncilThe University Council is ultimately responsible for;31(a)(b)(c)(d)(e)(f)(g)(h)(i)The mission and vision of the University;Promoting the aims and objectives of the University;Setting strategic directions for the University;The appointment and performance management of the Vice-Chancellor;Oversight of management;Setting and monitoring broad budget and planning framework, ensuring that theUniversity finances are sound, and taking major financial decisions;Monitoring University performance against strategic objectives;Setting and critically monitoring Council policy and risk management;Extending links and communication between the University and the widercommunity;Strathmore University Annual Report 2012

(j)(k)(l)Legislative roles, including ensuring that the University is acting ethically and inconformity with all legal requirements;Fundraising and resource mobilization;Council performance and succession planning.In the year 2012, the University Council commenced the review of the University Statutes whichwere first enacted in the year 2008. The proposed statutes include an age limit of 75 years for theCouncil members.4. Remuneration of the University Council members.The University Council members other than the Vice Chancellor and the ex-official members do notreceive a salary. They are however paid a sitting allowance for every meeting attended. The sittingallowance paid to the council members is disclosed in note 9 of the financial statements.5. University Council meetingsThe meetings of the University Council are held at least once every quarter in a calendar year. Inorder to facilitate the smooth running of its affairs, the University Council establishes such committeeswith membership and with such terms of reference as it may deem fit. A calendar of UniversityCouncil and its committees is prepared before the beginning of each financial year. The Chairpersonmay at any time call a special meeting of the University Council after giving a two-week noticeto all its members. The Chairperson shall be required to call a meeting within twenty-eight days ofreceiving a request for that purpose addressed to him and signed by at least a third of the membershipof the Council. During the year 2012 no special University Council meetings were held. TheUniversity Council members were however invited by management for an orientation meeting afterappointment of new Council members in September 2012 to replace the members who were retiringfrom the council. The record of meetings attendance of the University Council and its committeesfor the year 2012 is as tabulated in page 38.6. Committee of the University CouncilIn the financial year 2012, the University Council established the following committees:a. Oversight Committeeb. Finance Committeec. Audit and Compliance Committeed. Fundraising & External Relations Committeee. Human Resources Policy and Strategy CommitteeThe University Council nominates the Chairperson of each committee of the Council provided that inthe absence of the Chairperson of any committee, the members present and constituting a quorummay elect a person from among them to chair the meeting. The Chairperson of the University Counciland the Vice Chancellor are ex-officio members of every committee of the Council.a. Oversight Committee32The Committee is responsible for Long term strategic development of the University. The Committeereceives and considers annual reports from the Management Board on the progress and implementationof the strategic plan and, will carry out annual review of performance of the Universityregarding attainment of the strategic goals, and report to Council. The committee monitors andreviews policies related to management strategies including efficient planning, decision makingStrathmore University Annual Report 2012

processes and models for continuous improvement; and reporting to the Council. Other responsibilitiesincludes• Monitoring the University’s governance arrangements, for policies relating toreporting and disclosing information about the University and, for generalsupervision of University policies, statutes and regulations; and reporting to Council.• Receiving and considering proposals from the Academic Council through theManagement Board on policies, strategies and regulations governing recruitmentand admission of students; development of new academic programs; academicstaff development; learning and teaching; academic quality assurance;scholarships and bursaries; student mentoring, student discipline, Student Council;research management, innovation, and intellectual property; honorary degrees andhigher doctorates.• Monitoring and reviewing academic processes and related academic resourceswith a view to assuring and safeguarding the University’s mission and vision,educational philosophy, educational aims, policies and standards, in respectof quality of students, access and equity, curriculum design, student support,academic resources (lecturers, learning and information resources, ICT resources),research and innovation and, the enhancement of good practice in highereducation.b. Finance CommitteeThe Finance committee was responsible for finance, audit and compliance issues upto August2012. The role of audit and compliance was separated from Finance Committee in line with thebest practice and also to give special attention to audit and compliance issues which are key to theuniversity. The Finance Committee is responsible for the following:• Overseeing the preparation and annual review of five-year rolling budgets for allaspects of the academic services and other activities of the University and reportingto the Council• Making recommendations to the Council on annual budgets in the light of theoverall plan, the annual operating budgets from the academic units and other costcentres, and other relevant information;• Giving advice to the Council on the needs of the University as established by itsplans, and in order that the Council can take these views into account whenestablishing investment policy;33• Reviewing the University’s financial strategy for approval by the Council;• Dealing with strategic issues concerning financial risk management and advisingthe Council appropriately• Reviewing the University’s annual financial statements and reporting to the Council• Reviewing the University’s financial regulations from time to time and recommendingany necessary changes in those regulations to CouncilStrathmore University Annual Report 2012

• Reviewing University’s investment policy from to time and reporting to Council• Overseeing the University’s financial management and financial control systemsand making quarterly reports to Council• Such other action on behalf of the University Council in relation to the University’sfinancial business as may be required from time to time.c. Audit and Compliance CommitteeThis Committee was formed in September 2012 and only had one meeting during the year. Thecommittee is responsible for the following:• Providing leadership and advising Council on strategic issues related to riskmanagement, quality assurance, and compliance with benchmark standards andstatutory regulations.• Reviewing and monitoring the effectiveness of the University’s risk managementpolicies and strategies in mitigating against identified potential risks and inimproving management and control.• Receiving and considering proposals from the Chief Internal Audit & ComplianceOfficer on the internal audit and compliance work plans, and makingrecommendations to Council for approval.• Receiving and considering quarterly internal audit and compliance reports submittedby the Chief Internal Audit & Compliance Officer and, making recommendations toCouncil.• Receiving and considering annual external audit reports submitted by ExternalAuditors and, making recommendations to Council.• Receiving and reviewing quarterly reports on the progress of the implementationof recommendations in the action plans contained in both the internal audit andcompliance reports, and the external audit reports.• Reviewing and monitoring the effectiveness of the University’s quality assurancepolicies, strategies, and procedures in enhancing quality of academic and auxiliaryprocesses in the University.• Receiving and considering proposals on quality review cycle and internal qualityassessment plans from the Management Board and making recommendations toCouncil for approval.• Receiving and considering annual quality assurance reports submitted by theManagement Board and making recommendations to Council.34• Receiving and reviewing quarterly reports on the progress of the implementationof recommendations in the action plans contained in annual quality assessmentreports.Strathmore University Annual Report 2012

d. Fundraising & External Relations CommitteeThe Committee is responsible for the following:• Reviewing and monitoring the effectiveness of the University’s fundraising strategiesand policies and making recommendations to Council• Receiving and considering proposals from the Management Board on policies,strategies and regulations governing the planning, execution and management offundraising initiatives in the University, and making recommendations to Council• Providing leadership and strategic guidance in the identification of individualdonors and organisations for purposes of soliciting development funds.• Reviewing on a quarterly and annual basis the performance of the Universityagainst the fundraising goals and targets, and making reports to the Council.• Providing leadership and strategic guidance in engaging the external stakeholdersincluding the University’s alumni and, industry and business partners, in thefundraising initiatives of the University.• Monitoring and reviewing the University’s communications policies and strategies inconnection with managing its relationships with external stakeholders, enhancingthe corporate image of the University, and attaining distinguished positioning in thehigher education market place both locally and internationally.• Reviewing and monitoring the effectiveness of the University’s communityengagement policies and strategies, and the effectiveness of the CommunityOutreach Program (COP) as the University’s social responsibility initiative; andproviding strategic guidance and support on how to leverage COP for fundraising.e. Human Resources Policy and Strategy CommitteeThe Committee oversees the formulation and subsequent monitoring and review of policies andstrategies on employment of all University staff, including policies on recruitment and selection, staffdevelopment and training, performance management schemes and salaries and other conditions ofservice. The Committee is responsible for the following matters:35a) Reviewing and monitoring the implementation and effectiveness of the University’semployment policies through regular reports provided by the Management Boardb) Overseeing the relations between the University and its employees.c) Reviewing and making recommendations to the University Council, the salariesand other terms and conditions of service of the Vice Chancellor, the Deputy ViceChancellors, the University Secretary, and such other senior officers of the Universityas the Council may from time to time determine.d) Monitoring key performance indicators as agreed by the Council.e) Receiving and considering proposals on strategy and policy in all matters relatingto the recruitment, reward, retention, motivation and development of the University’sstaff, and make recommendations to the University Council.f) Receiving reports from the Management Board relating to promotion, re-grading,the award of additional salary increments and contribution payments tosalaried staff.Strathmore University Annual Report 2012

g) Receiving reports from the Management Board of all honorary titles and personaltitles awarded.h) Receiving and considering reports, at least annually, from the Management Boardconcerning the terms and conditions of service of employees of the University, andmake recommendations to the University Council.7. The Management BoardSection 15 of Strathmore University Charter provides for the formation of the Management Board.The management board members are appointed by the University Council. The membershipconsists of the Vice Chancellor and a number of other members as determined by the statutes. Themembers of the Management Board in the year 2012 were as follows;a) The Vice Chancellor – Chairperson,b) The University Secretary – Secretaryc) The Deputy Vice Chancellor Academic Affairsd) The Deputy Vice Chancellor Researche) Director Support servicesf) Director Administration Servicesg) Director Human Resourcesh) Special Advisor in the Office of the Vice Chancellor.The Management Board is responsible for the following:(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)Oversees the day to day running of the University.Coordinate and control the development, planning, management andadministration of the University and its resources in accordance with approvedpolicies, rules and regulations.Propose to the University Council rules and regulations for the administration of theUniversity and for the execution of its programs and plans.Prepare master and strategic development plans and formulate developmentpriorities, and submit proposals to the University Council.Formulate and monitor the effectiveness of the University’s financial regulationsand submit proposals to the University CouncilFormulate, and monitor the effectiveness of, the University’s financial strategy andsubmit proposals to the University Council.Monitor the effectiveness of the University’s financial management and financialcontrol systems and make quarterly reports to the University Council.Prepare five-year rolling budgets for all aspects of the academic services and otheractivities of the University and submit proposals to the University Council.Submit proposals to the University Council on annual budgets in the light of theoverall plan, the annual operating budgets from the academic units and other costcentres.Formulate, and monitor the effectiveness of strategies and procedures for risk management in all processes and operations in the University and, submit proposals tothe University Council.Submit annual financial statements to the University Council for reviewFormulate the University’s investment policy and submit proposals to the UniversityCouncil.Submit proposals to the University Council concerning strategic plans, annualbudgets, development priorities, staff development plans, academicprograms, research programs, terms and conditions of service, fund-raisingstrategies, student welfare, public relations policies, academic partnerships and36Strathmore University Annual Report 2012

(n)(o)(p)linkages with other universities, collaborations with industry, as well as any policiesand any matters related to the development, management and administration of theUniversity.Enter into, vary, carry out or cancel contracts on behalf of the University Council,including contracts of employment with academic or administrative Staff of theUniversity.Review methods of instruction and teaching, promote research within the Universityand require reports on such research to be made from time to time.Authorize the initiation of legal proceedings or defend or compromise legalproceedings in the name of and on behalf of the University Council.CONFLICT OF INTERESTClause 3 of the University’s staff handbook documents the institution’s policy dealing with conflict ofinterest. This policy which is titled ‘POLICY ON CONFLICT OF INTEREST AND DUTY OF LOYALTY’applies to all members of the University community, including members of the University Council,academic, administrative and support staff and, where appropriate, students who are also employedby the University. The policy constitutes part of the formal relationship between all membersof the University Community and the institution.The policy states that members of the University community may become involved in situationswhere their loyalties are divided or where their personal interest may conflict with their duty to theUniversity. Situations may also arise in which members may be tempted to act in violation of theirduty of loyalty to the University. This policy sets standards to govern conduct in such situations. Thispolicy is in addition to other University regulations, policies, and guidelines relating directly or indirectlyto conflict of interest and the duty of loyalty owed by members to the University.Risk ManagementThe Council is responsible for risk management and has an approved policy and procedure documentfor risk management. The Council conducts risk assessment on a regular basis which informsthe internal audit plan. A risk assessment was conducted in January 2012and approved by theUniversity council.37The University conducts legal compliance reviews which are reported to the council. A comprehensivelegal audit was conducted in the year 2012 and the University Council has been followingup on closure of gaps identified through the Audit and Compliance Committee. The University hasan in-house legal officer and has appointed advocates and other consultants to advice on litigationrisks.The identification and management of risk is a continuous process linked to the achievement of theUniversity’s objectives. The University Council has outsourced the internal audit service to KPMG(Certified Public Accountants) to carry out risk based internal audit on a quarterly basis. The UniversityCouncil through its Audit and Compliance Committee received regular reports during the yearon internal controls and risks.Strathmore University Annual Report 2012

UniversityCouncilFinanceCommitteeHumanresourcecommitteeOversightcommitteeFundraisingcommitteeAudit &compliancecommitteeMembership √ √ √ √Attendance 2/2 4/5 2/2 0/1Membership √ √ √ √ √ √Attendance 4/4 1/1 2/2 0/1 1/1 1/1Membership √ √ √ √ √ √Attendance 4/4 4/8 2/2 1/1 1/1 1/1Membership √ √ √Attendance 1/4 0/1 1/1Membership √ √ √Attendance 3/4 6/8 0/2Membership √ √ √Attendance 4/4 1/1 1/1Membership √ √ √Attendance 4/4 1/1 1/1Membership √ √Attendance 4/4 3/3Membership √ √Attendance 2/2 1/1Membership √ √Attendance 0/2 0/1Membership √ √Attendance 2/2 8/8Membership √Attendance 2/2Membership √ √ √ √ √Attendance 1/4 4/8 1/2 0/1 1/1Membership √ √ √Attendance 1/4 3/7 0/1Membership √Attendance 2/429 | P ageResponsibilityDate ofAppointment/Reappointment/ StatusCouncilMembersProf. TerrenceRyan Retired Former ChairpersonMrs. BernadetteMusundi 1st September 2012 Current ChairpersonProf. JohnOdhiambo 1st May 2008 Vice ChancellorDeputy Chairperson andaudit & compliancecommittee chairFirst Appointment 1st September2012Dr. CeaserMwangiMr. Martin Kisuu Reappointed 1st September 2012 Finance Committee ChairMrs. ZipporahWandera Reappointed 1st September 2012 MemberMember, Chair OversightMs. Belinda Rego Reappointed 1st September 2012 Committee.Mr. FernandoMember, FinanceAizpun First Appointment 1st March 2009 CommitteeMrs Patricia First Appointment 1st September Member, Chair Fund raisingIthau2012CommitteeDr. Olga Marlin RetiredMember FinanceCommitteeMr. Vitalis Ojode RetiredProf. DominicOduor RetiredMember FinanceCommitteeDr. Charles Sotz 1st May 2008Deputy Vice ChancellorAcademic & Ex officiomember, SecretaryOversight CommitteeDeputy Vice ChancellorResearch Ex officioMemberProf. Izael DaSilva 1st July 2010Dr. GeorgeNjenga 1st September 201238Strathmore University Annual Report 2012

SUSTAINABILITY STATEMENTFor Strathmore University, it is an integral part of its mission to serve the environment in which it operatesas well as educate its students to carry on this responsibility even after they have completedtheir studies. For this reason, among the students’ clubs and activities, aspects of supporting sustainabilityin education, environment or in sports are very well catered for. In 2012, a few of the manyactivities are highlighted as follows:1. ENVIRONMENTGreen Technology: Strathmore has made a deliberate effort towards the conservationof environment and for this reason buildings in the new expansion phase of the University,the Students’ Center, Strathmore Business School, Management Sciences Building and theUniversity Medical Center; have been designed and constructed using green buildingtechnology. In 2012, Strathmore Business School participated and won in the ContinentalAfrican Real Estate and Housing Finance (AREHF) Academy Awards in the category of theBest Green Development in Africa. Some of the features of the new ultra-modern buildingsinclude natural light to save on cost of lighting; natural cooling using fountains, harvestingrain water as well as using natural stone to minimise maintenance costs.39New green buiilding: Student CentreStrathmore University Annual Report 2012

Climate Innovation Center, Kenya (CIC): In 2012, Strathmore University becamea host and a partner for the first Climate Innovation Center in the country. CIC is not onlya research center, but it also received seed capital from World Bank to provideincubation services for entrepreneurs in clean energy projects. CIC is focused to work withinnovators, entrepreneurs and new ventures operating or intending to operate in Kenyadeveloping innovative renewable energy, water and sanitation and agribusinesstechnologies. These include off-grid technologies, water management and purificationsolutions, micro-hydropower projects, technologies for adaptation (flood or droughtcontrol), sustainable agribusiness and bio-energy solutions. CIC partners include; GVEPInternational, PriceWaterHouse Coopers, Strathmore University, and KIRDI, these form theconsortium members. Other partners include; Oxford Energy Associates, LTS International,UNIDO, Adelphi, KIPPRA and Techno Serve.The Former Assistant Minister for Industrialization Hon Nderitu Mureithi (fourth from left) is joined by representatives from World Bank,infoDev, Strathmore University, DANIDA, DFID and Mr. Edward Mungai, the Chief Executive Officer Kenya Climate Innovation Center(fourth from right) during the launch of Kenya Climate Innovation Center at Strathmore University. Hon Mureithi was the Chief Guest duringthe eventStrathmore Energy Research CentreSteered by its Academic Director, Prof. Izael da Silva, (DVC Academic Affairs), 2012saw the formation of a research center to drive research projects in energy, the StrathmoreEnergy Research Center (SERC). The centre seeks to be the link between academia,government and the private sector in renewable energy and sustainable development. Thecentre’s mandate is to ensure greater adoption and penetration of Renewable EnergyTechnologies (RETs) as well as efficient use of energy in Africa. SERC will fulfill its mandatein various ways; providing training, carry out research and providing consultancy.Among other research projects, SERC won a grant to carry out a Kerosene Free Kenyapilot research project in a selected rural area of about 500 homes in which solar homesystems will replace the traditional kerosene lamps. (Image of the grant award)40Strathmore University Annual Report 2012

CEO of National Council forScience and Technology, Prof.A. Abdulrazak (Right, seated)and DVC Academic AffairsStrathmore University, Prof. Izaelda Silva (Left, seated), signingceremony for the research grant.Solar Panels ProjectIn 2012, the University Council approved a project which will see Strathmore generate itsown solar energy, of about 0.5 Mega Watt. Strathmore plans to become the firstzero carbon emission university in Sub-Sahara Africa by installing a grid-connectedsolar system which will cater for the electricity needs of the university. The technologychampions have already been selected and funds to see the actualisation of the projectwill be a soft-loan by the French government, which has created a green line for fundingrenewable energy projects in partnership with Co-operative Bank. The system will alsoserve as a hands-on training facility to empower technicians to design, install and maintainsuch power generating systems. Strathmore currently spends close to Kes. 2 million permonth in electricity bills. (Any image that can suit like what ypu put in the SERC brochureMaking the environment a better placeStrathmore’s students are heavily involved in ensuring a clean environment both at thecampus and its surroundings. In 2012, one of the students’ clubs, Community OutreachProgramme (COP) was involved in activities that have to do with making the environmenta better place to live in. The activities included tree planting, garbage collection in slumsand also refurbishing and renovating buildings in remote areas.41Building a classroom in KitaleTree Planting dayStrathmore University Annual Report 2012

2. EDUCATION• Financial Aid to needy studentsStrathmore University provides several means of financial aid, ranging from scholarships,loans, work-study models for students to ensure that as many students as possible gainaccess to its programmes in line with its mission of service to society. The graph and tablebelow represent the various forms of financial aid that were offered to students in the 2012financial year.Students onWork StudyStudents on Work StudyComparative statistics over the years on scholarships is as below;Year 2009: 91, number of scholarships.Year 2010: 233, number of scholarships.Year 2011: 335, number of scholarships.Year 2012: 365, number of scholarshipsKIVA: Low interest student loansIn recognition that it is not possible to get enough funds for scholarships, in 2012, Strathmore formed a unique partnership with an American non-profit organization, KIVA, whosemission is to connect people through lending to alleviate poverty, offers a unique studentloan which will enable low income students to obtain full tuition fee loans to pursue degreeprogrammes. Strathmore and Kiva see this as a valuable partnership that has potential togive many Kenyan students, who otherwise might not have had the chance, an opportunityto attend and excel in higher education. This introduces a first of its kind scheme in Africawhere loans are granted to students who show that their parents/guardians areexperiencing cash flow problems and can manage to payback the loans. (Image of KIVAbeneficiaries with founders)42Strathmore University Annual Report 2012

Matt Flannery and Premal Shah with Strathmore students who are KIVA loans beneficiariesUniversity students mentoring secondary school students inKibera slums:Assistance does not necessarily have to be of a financial nature and it is with this in mindthe Community Outreach Programme (COP) runs Macheo; an after-school mentoringeducation support programme targeting the less privileged who are growing up in difficultor hostile city environments. It is an innovative project that provides an alternative approachto the normal learning process in order to improve academic performance. The programmeis structured to encompass three main facets in its vision: personal mentoring, academictutoring and character development. The programme incorporates educational fieldtrips/community service and excursions. In 2012, Macheo had at least 52 students Form Twoand Three students being mentored by the Strathmore University students,Assisting inmates of Naivasha Maximum Security Prison with studyguides and CPA exams:The prisons project has been going on for more than a decade now. Since its inception,numerous inmates have managed to directly benefit from scholarships, stationery,mentoring and other donations in kind. In 2012, Community Outreach Program volunteersand members paid CPA and examination fees for two students and registered 11others, both for CPA and ATC, who sat for their examinations. Additionally, becauseinmates are not able to attend CPA classes, COP raised funds to buy 43 books (23 CPA,20 ATC) to be shared among the inmates who were studying for the course.43Strathmore Students visit inmates atNaivasha Maximum Security PrisonStrathmore University Annual Report 2012

• Elimisha Stratizen, An initiative ‘for students by the students’:Elimisha Stratizen is an innovative student-for-student initiative that was derived from theidea and strategic plan of the 4th Students Council. Launched on 3rdAugust 2012, theaim of this initiative was financial aid to Strathmore students via short term bursaries. Withina few months, a number of projects ranging from coin box collection to parents seminarsales had been implemented and have so far raised Kes 158,000 with 6 students asbeneficiaries of these collections. The highest amount given to one student wasKes 54, 000to offset his fee balance, while the lowest amount given isKes 3, 400 towards CPA examination fees.• Encouraging use of ICT through seminars and workshops.1. @iLabAfrica hosted CSH4S Teachers Conference - a national Computer StudiesPrincipals and Teachers workshop that sought to address opportunities andchallenges of Computer Studies in Kenya.2. In the same year, @iLabAfrica hosted female students from high schools acrossKenya in a conference where successful female personalities in the technology andcomputing world encouraged them to take up careers in technology andcomputing.3. Teaching with technology teachers’ workshop in Eldoret-@iLabAfrica incollaboration with computer Aid facilitated a workshop dubbed “Teaching withTechnology” that aimed to entrench adoption of technology in teaching andlearning among teachers and in the classroom.High School teachers being trained on “Teaching with Technology”Strathmore Students attend an Apps bootcamp3. OUR PEOPLENumber of people working in Strathmore University44Full TimePart TimeTemporary staffConsultantsTotal4082064212668Strathmore University Annual Report 2012

Full Time Staff ProfileAcademic Admin TotalFemale 59 156 215Male 68 125 193127 281 408Women in managementDeans 2Directors 9Managers 14SU staff who attained PhD’s in 2012Dr. Hellen Otieno - PhD in ManagementDr.Elizabeth Gachenga - PhD in LawStaff training in 2012In 2012, the University carried out a Culture and Corporate Values residential seminar for all staff.This was with a view to educate new staff and remind the rest of the founding principles and valuesof the institution as well as create an environment of team work for the increasing staff numbers from386 in 2011 to 408 full time staff in 2012.In the same year, several departments carried out training suited to the needs of each department.Strathmore Business School carried out a performance appraisal training for its staff while StrathmoreLaw School conducted a team building seminar for its staff.Two female academic staff members were added to the PhD faculty bench upon completion of theirdoctoral studies. The University encourages staff members to enroll in PhD programmes as a wayof growth in academic circles and also to increase research output of the University. 25 membersof staff are currently involved in doctoral studies in various disciplines and in varied institutions ofhigher learning. The University continues to offer training to its staff in various undergraduate andmaster’s programmes. In the financial year 2012 a total of thirty four staff were enrolled in variousundergraduate and masters degree programmes.The Center for Research on Organisations, Work and Family (CROWF)45The Center for Research on Organizations, Work and Family (CROWF) is a research institute withinStrathmore Business School that has, as one of its objectives, the task of developing strategies thathelp organizations in Kenya improve employee retention, commitment and personality throughenabling employee engagement. The Vision of CROWF is to assist companies manage peopleand their organizations through sound and well researched corporate policies and the mission isto assist organizations improve employee retention, commitment and engagement thus enhancingorganizational productivity.Program for Family Development (PFD) is a Trust that runs the International Federation for FamilyDevelopment (IFFD) courses in Kenya. PFD collaborates with CROWF in Strathmore BusinessSchool. IFFD recognizes the family is important and irreplaceable for the happiness of its members,for peace and social cohesion, for general welfare and educational development, for economicgrowth and for integration into society.Strathmore University Annual Report 2012

PFD runs the courses each year at Strathmore Business School. In the financial year 2012, PFDgraduated several people in its several programmes as tabulated below.ProgrammeNumber1 Maisha the Personal Project 40 Singles2 Married Love 23couples3 First Steps 12 couples4 First Letters 42 couples5 Adolescence 7 couplesDr. George Njenga congratulates Lizand Phillip Ngomi at the Graduationceremony of a PFD course for couplesat Strathmore Business School.4. SPORTSThe University team sports and individual sports continued to excel in 2012. Nurturing of sportstalent is one of the ways of forming an all round character in a person. Strathmore University teamsplay in the club leagues thanks to the professionally managed teams and sports facilities.The 2012 performances were as follows:Sport Competition RankingRugby Kenya Cup 2ndHockey Men Kenya Hockey Premier League 3rdHockey Women Kenya Premier League 2ndBasketball Men Kenya Basketball Premier League 4thBasketball Women Kenya Basketball Premier League 4thVolleyball Men Kenya Universities League 1stVolleyball Women Kenya Universities League 1stSwimming Overall National tournaments 4thKarate Overall National tournaments 2ndTable tennis Kenya Table Tennis National Circuits 4th46Strathmore University Annual Report 2012

Leos,Strathmore Rugby team during one of the gamesSwords Ladies Basketball teamTEACHING, RESEARCH ANDINNOVATIONTeaching and research are core activities of Strathmore University. Best practices and current pedagogicalskills are emerging in the higher education sector, mostly driven by technology and this hasnecessitated that for an institution seeking to remain relevant and a market leader, it must invest inthe right technology both in terms of human capacity and resources. Strathmore University has keptpace with these developments and has consequently kept its place as a premier institution being theleading university in Kenya in ICT use.Top in ICT use in East AfricaIn 2012, a survey of 250 East African universities was carried out by CPS ResearchInternational, between April and October; Strathmore University was ranked first in Kenyaand second overall in the use of Information and Communication Technologies (ICTs)in teaching and enhancing quality in East Africa. Makerere University Business Schoolemerged top followed by Strathmore University in second position.Strathmore has over the years made sizeable ICT investments, ranging from the AcademicManagement system, Financial Management system, e-Learning Management system, andwireless Internet access virtually in every corner of the campus. The University has a robustcomputer network linking all the buildings on campus providing connectivity to offices andlecture rooms.47One of the well- equipped ICT laboratories in StrathmoreStrathmore University Annual Report 2012

InnovationIn keeping with developments in technology, the launch of an academic and very practicalprogramme, Master of Science in Mobile Telecommunications and Innovation, under theFaculty of Information Technology and run by @iLabAfrica Research Center continued toexcel throughout the year.Through high level partnerships with corporate organisations such as Safaricom Ltd,Google, IBM Africa, IDEA Foundation, Computer Aid and Deloitte, @iLabAfricahas managed to achieve its objectives within a very short time. Students in the Mastersprogramme have gained recognition by participating in ‘apps’ competitions andchallenges both nationally and internationally. A few of these are worth mention in theactivities in research and mobile technology innovations;oooooDavid Lemayian won a USD 25,000 prize in the Google Apps DeveloperChallenge,@iLabAfrica facilitated mobile boot camps in Uganda and Kenya.@iLabAfrica facilitated girls only Diva Droid mobile boot-camp to promote ICTamong girls in Kenya@iLabAfrica hosted the nationwide Safaricom App Star Challenge.Google trained faculty of IT staff on Google apps for education and Googleapp EnginePartnerships (Local and International)The University continues to forge partnerships that assist in furthering its vision and mission.These partnerships are beneficial either in teaching or in research; the core mandate of theUniversity. In 2012, Memorandums of Understanding signed under various departmentsincluded, SBS/Samsung,School/ Department Partnerships in 2012Strathmore Law School@iLabAfrica Research CenterStrathmore Business SchoolSLS signed and MOU with DisputeResolution CentreSLS signed an MOU with University ofJohannesburgSLS formed a partnership with Institute forWar Reporting@iLabAfrica signed MOUs with Samsung,Ericsson, Mustek and CIOCity Clock Ltd in support of the newStrathmore Business School Building.48Strathmore University Annual Report 2012

CONFERENCES IN 2012All institutions of higher learning aspire to create an environment conducive for research discussionsamong scholars, bringing new knowledge into academia and challenging existing data andtheories. To this end, the University departments have over the years organised annual conferences.Additionally, in 2012 the University hosted the following conferences:1. Strathmore International Mathematics Research meeting:This Inaugural Mathematics Research was organised by the Centre for Applied Research in Mathematics(CARMS), and it sought to bring together scholars in Mathematics. The theme was ‘Enhancingmathematics research in African universities, through international collaborations,’ It wasattended by over 130 participants drawn from various nationalities including UK, SA, Botswana,Nigeria and Tanzania among others.2. 9th Annual Ethics Conference:Organised by the Ethics Committee, this conference has over the years sought to have scholarsdiscuss pertinent issues on ethics, integrity from various angles. In 2012, the theme was, ‘‘Bioethics,medical, legal, environmental and cultural aspects in healthcare ethics’’3. 13th Strathmore University Annual ICT Conference:The theme of this conference was “ICT and Society: Adaptive Computing and Technologies”. Itsought to discuss how ICT Innovations and technologies is critical to the current dynamism andglobalization in day-to-day activities. The ICT conference is managed by the Faculty of InformationTechnology and is now the oldest conference of the University.4. SBS hosts Kenya Top100 Mid-Sized Companies Conference;Strathmore Business School is a knowledge partner in the Kenya Top 100 Mid-Sized CompaniesSurvey which is now in its 5th year, SBS brings to the this partnership the academic/training anglefor entrepreneurs in the East African region. For the second year running, SBS hosted the Conferencewhose theme was ‘ Getting Better, Growing Stronger, Going Higher’5. SBS hosts European Foundation for Management Development- AfricaConference:Africa as an emerging market is increasingly gaining academic attention by established and globaluniversities from America and Europe. The European Foundation for Management Development(EFMD), a Brussels based organisation, held its 3rd Annual International Africa conference hostedby Strathmore Business School. The attendees were deans from African and European businessschools whose deliberations were centered on the theme ‘Sustainable Business Education Appropriatefor Africa.’49Participants attendEFMD conference inStrathmore BusinessSchoolStrathmore University Annual Report 2012

UNIVERSITYCOUNCIL’S REPORT,STATEMENT OF THEUNIVERSITY COUNCIL’SRESPONSIBILITIES &REPORT OF THEINDEPENDENT AUDITORSTO THE MEMBERS OFSTRATHMORE UNIVERSITYStrathmore University Annual Report 2012

Strathmore UniversityUNIVERSITY COUNCIL’S REPORTFinancial StatementsFor the year ended 31 December 2012The University Council submit their report together with the audited financial statementsThe for the University year ended Council 31 submit December its report 2012, together which disclose with the audited the state financial of affairs statements of Strathmore for the yearended University 31 (the December "University"). 2012, which disclose the state of affairs of Strathmore University (the"University").PRINCIPAL ACTIVITIESPRINCIPAL ACTIVITIESThe The principal principal activity activity of of the the University University continues continues to be to the be provision the provision of higher of higher education. education.RESULTSThe surplus for for the the year year of of Shs Shs 30,191,000 (2011: (2011: Shs 66,559,000) Shs 66,559,000) has been has added been to added accumulated tosurplus. accumulated surplus.UNIVERSITY COUNCILUNIVERSITY COUNCILThe members of the University Council who held office during the year and to the dateThe members of the University Council who held office during the year and to the date of this reportof this report were:were:Mrs. Bernadette Musundi Musundi Chair Chair w.e.f w.e.f 1 st September 1 st September 2012 2012Dr. Caesar Mwangi Vice Vice Chair Chair - appointed - appointed on 1st on September 1st September 2012 2012Prof. John OdhiamboVice Vice Chancellor and and Secretary SecretaryMr. Martin KisuuMs. Belinda RegoMrs. Zipporah WanderaMr. Fernando AizpunMrs. Patricia Ithau Ithau appointed appointed on 1st on September 1st September 2012 2012Prof.Prof.TerryTerryRyanRyanChairChair- retired- retiredon 31ston 31stAugustAugust20122012Prof. Dominic Oduor retired on 31st August 2012Prof. Dominic Oduor retired on 31st August 2012Dr. Olga Marlin retired on 31st August 2012Dr. Olga Marlin retired on 31st August 2012Mr. Vitalis Ojode retired on 31st August 2012Dr. Mr. Charles Vitalis Ojode Sotz University retired on Secretary 31st August – Ex-Official 2012 MemberProf. Dr. Charles Izael Da Sotz Silva DVC University Academic Secretary Affairs – Ex-Official – Ex-Official Member MemberDr. Prof. George Izael Njenga Da Silva DVC DVC Research Academic – Ex-Official Affairs – Member Ex-Official MemberDr. George Njenga DVC Research – Ex-Official MemberAUDITORAUDITORThe University’s auditor, PricewaterhouseCoopers, continues in office in accordanceThe with University’s Section 33(2) auditor, of the PricewaterhouseCoopers, University Charter. continues in office in accordance with Section33(2) of the University Charter.By order of the University CouncilBy order of the University Council51Professor John OdhiamboSECRETARYProfessor John OdhiamboSECRETARY3 rd April 20133 rd April 2013Strathmore University Annual Report 201240 | P age

STATEMENT OF UNIVERSITY COUNCIL’S RESPONSIBILITIESFor the year ended 31 December 2012It is the responsibility of the University Council to prepare financial statements for eachfinancial year that give a true and fair view of the state of affairs of the University as at theend of the financial year and of its operating result. The University Council is also responsiblefor ensuring that the University keeps proper accounting records that disclose, withreasonable accuracy, the financial position of the University. The University Council is alsoresponsible for safeguarding the assets of the University.The University Council accepts responsibility for the annual financial statements, which havebeen prepared using appropriate accounting policies supported by reasonable estimates, inconformity with International Financial Reporting Standards. The University Council is of theopinion that the financial statements give a true and fair view of the state of the financialaffairs of the University and of its operating result in accordance with International FinancialReporting Standards. The University Council further accepts responsibility for themaintenance of accounting records that may be relied upon in the preparation of financialstatements, as well as designing, implementing and maintaining internal control relevant tothe preparation and fair presentation of financial statements that are free from materialmisstatement.Nothing has come to the attention of the University Council to indicate that the University willnot remain a going concern for at least twelve months from the date of this statement.ChairmanCouncil Member3 rd April 201352Strathmore University Annual Report 201241

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF STRATHMOREUNIVERSITYReport on the financial statementsWe have audited the accompanying financial statements of Strathmore University (the"University") as set out on pages 54 55 to 88. These financial statements comprise the statementof financial position at 31 December 2012 and the statement of comprehensive income,statement of changes in accumulated capital fund and the statement of cash flows for theyear then ended, and a summary of significant accounting policies and other explanatorynotes.University Council’s responsibility for the financial statementsThe University Council is responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial Reporting Standards and forsuch internal control, as the University Council determine necessary to enable the preparationof financial statements that are free from material misstatements, whether due to fraud orerror.Auditor’s responsibilityOur responsibility is to express an opinion on the financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform our audit toobtain reasonable assurance that the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’sjudgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theUniversity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by theUniversity Council, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.OpinionIn our opinion the accompanying financial statements give a true and fair view of the state ofthe financial affairs of the University at 31 December 2012 and of the surplus and cash flowsof the University for the year then ended in accordance with International Financial ReportingStandards.53Certified Public AccountantsNairobi3 rd April 2013Strathmore University Annual Report 201242 | P age

FINANCIALSTATEMENTSFOR THE YEARENDED 31STDECEMBER 201254Strathmore University Annual Report 2012

Strathmore UniversityFINANCIAL Financial Statements STATEMENTSFor For the the year ended 31 31 December 2012Statement of comprehensive income incomeYear Year ended 31 31 December2012 2012 2011 2011Note Note Shs Shs '000 '000 Shs Shs '000 '000Tuition fees fees 55 1,237,625 1,055,672Donations 66 31,822 31,822 32,816 32,816Deferred income 77 11,984 11,984 8,088 8,088Other Other operating income 88 114,030 113,983 113,983Total Total income 1,395,460 1,210,558Administrative expenses 99 (1,121,415) (989,790) (989,790)Establishment expenses 10 10 (212,321) (212,321) (160,719) (160,719)Operating surplus surplus 61,724 61,724 60,050 60,050Finance Finance costs costs 11(a) 11(a) (59,961) (59,961) (30,417) (30,417)Finance Finance Income Income 11(b) 11(b) 28,428 28,428 36,926 36,926Surplus Surplus for for the the year year 30,191 30,191 66,559 66,559Other Other comprehensive comprehensive income incomeRevaluation Revaluation surplus surplus on on Intangible AMS intangible & SIMS Assets assets15 15 - - 4,050 4,050Revaluation Revaluation surplus surplus on on Leasehold Leasehold land land 14 14 367,446 367,446 - -RevaluationRevaluationsurplussurplusononBuildingBuilding 1212 41,39241,392 -TotalTotalcomprehensivecomprehensiveincomeincomeforforthetheyearyear439,029439,02970,60970,60955The notes on pages 59 58 to 88 are an integral part of these financial statementsStrathmore University Annual Report 201243

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Statement of financial positionBalance as at as 31 December at 31December2012 2011ASSETS NOTES Shs '000 Shs '000Non-current assetsProperty And Equipment 12 1,574,900 1,532,531Investment property 13 50,468 -Prepaid Operating Leases 14 2,000,408 1,658,596Intangible Assets 15 5,500 12,824Endowment Fund Deposits 16 70,441 52,624Designated Funds Deposits 17 109,102 87,7943,810,820 3,344,369Current assetsInventory 18 7,714 6,536Trade And Other Receivables 19 230,150 194,838Short Term Deposits 20 91,511 165,368Equity investment 21 1,680 1,026Amounts Due To Related Parties 22(a) 6,564 19Cash And Bank Balances 20 71,094 85,873408,712 453,661Assets held for sale 23 3,640 -3,640 -TOTAL ASSETS 4,223,172 3,798,029CAPITAL FUND AND LIABILITIESCapital and reservesCapital Investment Fund 24 148,732 148,732Revaluation Reserve 25 1,894,672 1,533,193Designated Funds 26 90,392 82,186Accumulated Surplus 341,205 298,1822,475,001 2,062,293Non-current liabilitiesEndowment Funds 27 72,046 55,332Designated Funds 26 107,433 60,368Deferred Income-Capital Grants 7 304,750 296,500Long Term Loans 28 659,095 732,9621,143,324 1,145,163Current liabilitiesTrade And Other Payables 29 477,523 471,069Contribution To Sert 22(b) 21,341 13,981Overdraft And Short-Term Loans 28 105,983 105,524604,846 590,574TOTAL EQUITY AND LIABILITIES 4,223,172 3,798,029The notes on pages 58 59 to 88 are an integral part of these financial statements.The financial statements on pages 54 55 to 88 were approved by the University Council on 3 rd April2013 and signed on its behalf by:-56ChairmanCouncil Member44 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Statement of changes in accumulated capital fundNotes CapitalinvestmentfundAccumulatedsurplusRevaluationsurplusDesignatedFundsTotalequityShs '000 Shs '000 Shs '000 Shs '000 Shs '000Year ended 31December 2011At start of year 148,732 225,691 1,561,584 80,679 2,016,685Surplus for the year - 66,559 - - 66,559Other comprehensiveincome-Revaluation surpluson AMS 14 - - 4,050 - 4,050-Movement indesignated fund 26 - - - 1,507 1,507-Excess depreciationon revaluation 25 - 32,440 (32,440) - -Total comprehensiveincome for the year - 98,999 (28,390) 1,507 72,116Contributions totrustees declared 22(b) - (26,508) - - (26,508)At 31 December 2011 148,732 298,182 1,533,193 82,186 2,062,293Year ended 31December 2012At start of year 148,732 298,182 1,533,193 82,186 2,062,293Surplus for the year - 30,191 - - 30,191Otherincomecomprehensive-Revaluation surpluson Building 12 - - 41,392 - 41,392-Revaluation surpluson Leasehold land 14 - - 367,446 - 367,446-Movement indesignated fund 26 - - - 8,205 8,205-Excess depreciationon revaluation 25 - 47,359 (47,359) - -57Total comprehensiveincome for the year - 77,550 361,479 8,205 447,235Contributions totrustees declared 22(b) - (34,527) - - (34,527)At 31 December 2012 148,732 341,205 1,894,672 90,392 2,475,001The notes on pages 58 to 88 are an integral part of these financial statements5945 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Statement of cash flowsNote 2012 2011Shs '000 Shs '000Cash flows from operating activitiesNet cash from operating activities 32 80,061 197,095Interest received 11(b) 26,837 9,534Interest paid 11(a) (42,884) (3,044)Net cash generated from operating activities 64,014 203,586Cash flows from investing activitiesPurchase of Leasehold Land 14 (1,526) -Purchase of Property and equipment 12 (89,665) (214,860)Purchase of Computer Software 15 (1,855) (6,061)Proceeds on disposal of equipment 5,007 1,972Purchase of equity investment 21 (654) 452Decrease in Designated & Endowment fund 26,27 32,858 23,353Net cash used in investing activities: (55,834) (195,144)Cash flows from financing activitiesCapital Grants received 7 20,234 47,749Loan received 28 - 105,161Loans repaid 28 (103,875) (134,074)Contribution to trustees 22 (27,167) (34,357)Net cash from financing activities (110,808) (15,521)Net increase in cash and cash equivalents (102,629) (7,079)Cash and cash equivalents at the beginning of theyear 250,167 257,246Cash and cash equivalents at the end of the year 20 147,538 250,16758The notes on pages 58 59 to 88 are an integral part of these financial statements46 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes1 General informationStrathmore University (the "University") was awarded a charter under the University Act (Cap210B) on 23 April 2008. It is sponsored by Strathmore Educational Registered Trust (SERT), acharitable non-profit making Trust incorporated in Kenya for the advancement of education, religion,social welfare and relief from poverty and distress. The address of its registered office and principalplace of business is:Ole Sangale Road, Madaraka EstatePO Box 59857Nairobi 002002 Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these financial statements are setout below. These policies have been consistently applied to all years presented, unlessotherwise stated.(a) Basis of preparationThe financial statements have been prepared in accordance with International Financial ReportingStandards (“IFRS”). The measurement basis applied is the historical cost basis, except whereotherwise stated in the accounting policies below. The financial statements are presented inKenya Shillings (Shs), rounded to the nearest thousand.The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires the University Council to exercise its judgement in theprocess of applying the University’s accounting policies. The areas involving a higher degree ofjudgement or complexity, or where assumptions and estimates are significant to the financialstatements, are disclosed in Note 3.Changes in accounting policy and disclosures(i) New and amended standards adopted by the UniversityThere are no IFRSs or IFRIC interpretations that are effective for the first time for the financial yearbeginning on 1 January 2012 that would be expected to have a material impact on the University.(ii) New standards and interpretations that are not yet effective and have not been early adopted59A number of new standards and amendments to standards and interpretations are effective forannual periods beginning after 1 January 2012, and have not been applied in preparing thesefinancial statements. None of these is expected to have a significant effect on the financialstatements of the University, except the following set out below:Amendment to IAS 1, ‘Presentation of Financial Statements’ regarding other comprehensiveincome. The main change resulting from these amendments is a requirement for entities togroup items presented in ‘other comprehensive income’ (OCI) on the basis of whether they arepotentially reclassifiable to profit or loss subsequently (reclassification adjustments). Theamendments do not address which items are presented in OCI.The application of thisamendment will mainly impact the presentation of the primary statements.Strathmore University Annual Report 201247 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(a)Changes in accounting policy and disclosures(continued)(i) New and amended standards adopted by the University (continued)IFRS 13, ‘Fair value measurement’, aims to improve consistency and reducecomplexity byproviding a precise definition of fair value and a single source of fairvalue measurement anddisclosure requirements for use across IFRSs. Therequirements, which are largely alignedbetween IFRSs and US GAAP, do not extendthe use of fair value accounting but provideguidance on how it should be appliedwhere its use is already required or permitted by otherstandards within IFRSs or USGAAP. The application of IFRS 13 may enhance fair valuedisclosures in certain circumstances.IAS 19, ‘Employee benefits’, was amended in June 2012. The impact on the University will be asfollows: to immediately recognise all past service costs; and to replace interest cost andexpected return on plan assets with a net interest amount that is calculated by applying thediscount rate to the net defined benefit liability (asset). The University Council is yet to assessthe full impact of the amendments.IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition offinancial assets and financial liabilities. Issued in November 2009 and October 2011, it replacesthe parts of IAS 39 that relate to the classification and measurement of financial instruments.IFRS 9 requires financial assets to be classified into two measurement categories: thosemeasured as at fair value and those measured at amortised cost. The determination is made atinitial recognition. The classification depends on the entity’s business model for managing itsfinancial instruments and the contractual cash flow characteristics of the instrument. For financialliabilities, the standard retains most of the IAS 39 requirements. The main change is that, incases where the fair value option is taken for financial liabilities, the part of a fair value changedue to an entity’s own credit risk is recorded in other comprehensive income rather than theincome statement, unless this creates an accounting mismatch. The University Council is yet toassess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting periodbeginning on or after 1 January 2015. The University Council is will also consider the impact ofthe remaining phases of IFRS 9 when completed by the IASB.IFRS 10, Consolidated financial statements’, builds on existing principles by identifying theconcept of control as the determining factor in whether an entity should be included within theconsolidated financial statements of the parent. The standard provides additional guidance toassist in the determination of control where this is difficult to assess. The University Council isyet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accountingperiod beginning on or after 1 January 2013.6048 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(a)Changes in accounting policy and disclosures(continued)(i) New and amended standards adopted by the University (continued)IFRS 12, ‘Disclosures of interests in other entities’, includes the disclosure requirements for allforms of interests in other entities, including joint arrangements, associates, special purposevehicles and other off balance sheet vehicles. The University Council is yet to assess IFRS 12’sfull impact and intends to adopt IFRS 12 no later than the accounting period beginning on orafter 1 January 2013.There are no other IFRSs or IFRIC interpretations that are not yet effective that would beexpected to have a material impact on the University.(b)Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale ofservices in the ordinary course of the University’s activities. Revenue is shown net of rebates anddiscounts.The University recognises revenue when the amount of revenue can be reliably measured, it isprobable that future economic benefits will flow to the University and when specific criteria havebeen met for each of the University’s activities as described below. The University bases itsestimates on historical results, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.Revenue is recognised as follows:(i) Revenue from tuition fees are accounted for over the period in which they relate. Fees paidin advance are carried forward under trade and other payables.(iii) Interest income is recognised on a time proportion basis using the effective interest method.(c) Foreign currency translation(a) Functional and presentation currencyItems included in the financial statements are measured using the currency of the primaryeconomic environment in which the University operates (‘the Functional Currency’). The financialstatements are presented in Kenya Shillings (“Shs”) which is the University’s FunctionalCurrency.61(b) Transactions and balancesForeign currency transactions are translated into the Functional Currency of the respectiveentity using the exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from the translation atyear-end exchange rates of monetary assets and liabilities denominated in foreign currenciesare recognised in profit and loss. Foreign exchange gains and losses that relate to borrowingsand cash and cash equivalents are presented in the income statement within ‘finance incomeor cost’. All other foreign exchange gains and losses are presented in the income statementwithin ‘other income’ or ‘other expenses.Strathmore University Annual Report 201249 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(d) Property and equipmentLand and buildings are shown at fair value, based on periodic, but at least triennial, valuations byexternal independent valuers, less subsequent depreciation for buildings and amortisation ofleasehold land. Any accumulated depreciation at the date of revaluation is eliminated against thegross carrying amount of the asset and the net amount is restated to the revalued amount of theasset. All other property, plant and equipment are stated at historical cost less depreciation.Historical cost includes expenditure that is directly attributable to the acquisition of the items.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow tothe University and the cost of the item can be measured reliably. The carrying amount of the replacedpart is derecognised. All other repairs and maintenance are charged to the income statement duringthe financial period in which they are incurred.Increases in the carrying amount arising on revaluation of land and buildings are credited to othercomprehensive income and shown as a revaluation reserve in equity. Decreases that offsetprevious increases of the same asset are charged in other comprehensive income and debitedagainst the revaluation reserve; all other decreases are charged to the income statement. Eachyear the difference between depreciation based on the revalued carrying amount of the asset (thedepreciation charged to the income statement) and depreciation based on the asset’s original costis transferred from the revaluation reserve to retained earnings.Leasehold land is amortised. Depreciation on other assets is calculated using the straight-linemethod to allocate their cost or revalued amounts to their residual values over their estimated usefullives. Annual depreciation rates are as follows:Buildings 2%Motor vehicles- Buses 7%- Other motor vehicles 10%Library books- IT books 20%- Other books 14.3%Furniture, fittings and other equipment- Computers 33.3%- Computer accessories 20%- Kitchen equipment 15%- Telephone and shredders 10%- Graduation gowns 20%- Furniture, fittings and equipment 7%The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the endof each reporting period.62Property and equipment are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.For the purposes of assessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows (cash-generating units). Non-financial assets that sufferedimpairment are reviewed for possible reversal of the impairment at each reporting date.50 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(d) Property and equipment (continued)Gains and losses on disposals are determined by comparing the proceeds with the carryingamount and are included in the income statement. When revalued assets are sold, the amountsincluded in the revaluation reserve relating to that asset are transferred to retained earnings.(e) LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by thelessor are classified as operating leases. Payments made under operating leases (net of anyincentives received from the lessor) are charged to the income statement on a straight-line basisover the period of the lease.(f)Intangible assetsCosts associated with maintaining computer software programmes are recognised as an expenseas incurred. Development costs that are directly attributable to the design and testing of identifiableand unique software products controlled by the University are recognised as intangible assetswhen the following criteria are met:(i) it is technically feasible to complete the software product so that it will be available for use;(ii) management intends to complete the software product and use or sell it;(iii) there is an ability to use or sell the software product;(iv) it can be demonstrated how the software product will generate probable future economicbenefits;(v) adequate technical, financial and other resources to complete the development and to use orsell the software product are available; and(vi) the expenditure attributable to the software product during its development can be reliablymeasured.Directly attributable costs that are capitalised as part of the software product include the softwaredevelopment employee costs and an appropriate portion of relevant overheads.Other development expenditures that do not meet these criteria are recognised as an expense asincurred. Development costs previously recognised as an expense are not recognised as an assetin a subsequent period.Computer software development costs recognised as assets are amortised over their estimateduseful lives, which does not exceed five years.Acquired computer software licences are capitalised on the basis of the costs incurred to acquireand bring to use the specific software. These costs are amortised on the basis of the expecteduseful lives. Software has a maximum expected useful life of 5 years.Software is amortised on a straight line basis over the expected/estimated useful life.(g) Inventories63Costs are determined using the weighted average cost method. Net realisable value is theestimated selling price in the ordinary course of business, less estimated costs of completion andthe estimated costs necessary to make the sale.51 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(h) Financial assets(i) ClassificationFinancial assets of the University are classified as short term deposits, based on the purpose forwhich the financial assets were acquired.Deposits are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. They are included in current assets, except for maturities greaterthan 12 months after the end of the reporting period. These are classified as non-current assets.Equity investments are quoted in securities market and are held for capital gain.(ii) Recognition and measurementRegular purchases and sales of financial assets are recognised on the trade-date. Short termdeposits are subsequently carried at amortised cost using the effective interest method.(iii) Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement offinancial position when there is a legally enforceable right to offset the recognised amounts andthere is an intention to settle on a net basis or realise the asset and settle the liabilitysimultaneously.(iii) ImpairmentThe University assesses at the end of each reporting period whether there is objective evidencethat a financial asset or group of financial assets is impaired. A financial asset or a group offinancial assets is impaired and impairment losses are incurred only if there is objective evidenceof impairment as a result of one or more events that occurred after the initial recognition of theasset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cashflows of the financial asset or group of financial assets that can be reliably estimated.The amount of the loss is measured as the difference between the asset’s carrying amount andthe present value of estimated future cash flows (excluding future credit losses that have notbeen incurred) discounted at the financial asset’s original effective interest rate. The carryingamount of the asset is reduced and the amount of the loss is recognised in the consolidatedincome statement. If a loan has a variable interest rate, the discount rate for measuring anyimpairment loss is the current effective interest rate determined under the contract.(i)(j)Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in theordinary course of business from suppliers. Accounts payable are classified as current liabilities ifpayment is due within one year or less (or in the normal operating cycle of the business iflonger). If not, they are presented as non-current liabilities. Trade payables are recognisedinitially at fair value and subsequently measured at amortised cost using the effective interestmethod.BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortised cost; any differences between proceeds (net of transaction costs)and the redemption value is recognised in the income statement over the period of the borrowings,using the effective interest method.6452 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(j) Borrowings (continued)Fees paid on the establishment of loan facilities are recognised as transaction costs of the loanto the extent that it is probable that some or all of the facility will be drawn down. In this case, thefee is deferred until the draw-down occurs. To the extent there is no evidence that it is probablethat some or all of the facility will be drawn down, the fee is capitalised as a pre-payment forliquidity services and amortised over the period of the facility to which it relates.Borrowings are classified as current liabilities unless the University has an unconditional right todefer settlement of the liability for at least 12 months after the end of the reporting period.(k) ProvisionsProvisions are recognised when: the University has a present legal or constructive obligation asa result of past events; it is probable that an outflow of resources will be required to settle theobligation; and the amount has been reliably estimated. Restructuring provisions comprise leasetermination penalties and employee termination payments. Provisions are not recognised forfuture operating losses.Provisions are measured at the present value of the expenditures expected to be required tosettle the obligation using a pre-tax rate that reflects current market assessments of the timevalue of money and the risks specific to the obligation. The increase in the provision due topassage of time is recognised as interest expense.(l)Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call with banks, other short termhighly liquid investments with original maturities of three months or less, and bank overdrafts.Bank overdrafts are shown within borrowings in current liabilities on the statement of financialposition.(m) Employee benefits(i) Retirement benefit obligationsThe University operates a defined contribution staff provident scheme. The University and all itsemployees also contribute to the appropriate National Social Security Fund, which is also adefined contribution scheme.The University has no legal or constructive obligations to pay further contributions if the fund doesnot hold sufficient assets to pay all employees the benefits relating to employee service in thecurrent and prior periods.The University’s contributions to the defined contribution schemes arerecognised as an employee benefit expense in the year which it relates.65(ii) Other entitlementsAll employees are expected to take their annual leave as and when it matures during the year,otherwise, forfeit it. Hence there is no accrued annual leave at the statement of financial positiondate.Employee’s entitlements to gratuity are recognised when they accrue to contractual employees.A provision is made for the liability for such entitlements as a result of services rendered byemployees up to the statement of financial position date. Such employees become entitled to thegratuity on completion of their contracts and the payments out of this are charged to the accruedgratuity account.Strathmore University Annual Report 201253 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(n) Capital grantsCapital grants specific to acquisition or construction of assets are recognised as a long termliability and recognised in the income statement over the life of the related asset.(o)Investment propertyProperty held for long-term rental yields that is not occupied by the University is classified asinvestment properties.Investment property comprises of buildings. It is carried at fair value. Fair value is based onactive market prices, adjusted, if necessary, for any difference in the nature, location or conditionof the specific asset. These valuations are reviewed regularly by an independent valuationexpert.Changes in fair values are recorded in profit or loss.Property located on land that is held under an operating lease is classified as investmentproperty as long as it is held for long-term rental yields and is not occupied by the University. Theinitial cost of the property is the lower of the fair value of the property and the present value ofthe minimum lease payments. The property is carried at fair value after initial recognition.If an investment property becomes owner-occupied, it is reclassified as property and equipment,and its fair value at the date of reclassification becomes its cost for subsequent accountingpurposes.If an item of property and equipment becomes an investment property because its use haschanged, any difference arising between the carrying amount and the fair value of this item at thedate of transfer is recognised in other comprehensive income as a revaluation of property andequipment. However, if a fair value gain reverses a previous impairment loss, the gain isrecognised in the income statement. Upon the disposal of such investment property, any surpluspreviously recorded in equity is transferred to retained earnings; the transfer is not made throughprofit or loss.(p) Assets held for saleNon-current assets (or disposal groups) are classified as held for sale if the carrying amount willbe recovered principally through sale rather than through continuing use. This condition isregarded as met only when the sale is highly probable, the assets (or disposal groups) areavailable for immediate sale in its present condition and management is committed to the salewhich should be expected to qualify for recognition as a completed sale within one year from thedate of the classification.Immediately prior to being classified as held for sale the carrying amount of assets and liabilitiesare measured in accordance with the applicable standard. After classification as held for sale it ismeasured at the lower of the carrying amount and fair value less costs to sell. An impairmentloss is recognised in profit or loss for any initial and subsequent write-down of the asset anddisposal group to fair value less costs to sell. A gain for any subsequent increase in fair valueless costs to sell is recognised in profit or loss to the extent that it is not in excess of thecumulative impairment loss previously recognised.66Non-current assets or disposal groups that are classified as held for sale are not depreciated.54 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)2 Summary of significant accounting policies (continued)(q)ComparativesWhere necessary, comparative numbers have been adjusted to conform to changes inpresentation in the current year.(3) Critical accounting estimates and judgementsThe University makes estimates and assumptions concerning the future. The resultingaccounting estimates will, by definition, seldom equal the related actual results. The estimatesand assumptions that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are addressed below.Useful lives of equipmentThe University determines the estimated useful lives and related depreciation charges for itsequipment. This estimate is based on projected asset life for its assets. Management willincrease the depreciation charge where useful lives are less than previously estimated lives, or itwill write-off or write-down technically obsolete or non-strategic assets that have beenabandoned or sold.Were the actual useful lives of the equipment to differ by 5% from management’s estimates, thecarrying amount of the equipment would be an estimated Shs 2,673,000 higher or Shs 2,954,000lower.(4) Capital managementCapital represent the non -current assets that were transferred from the trustees when thecurrent campus was being set up.The University’s objectives when managing capital are tosafeguard the University’s ability to continue as a going concern in order to maintain an optimalcapital structure to reduce the cost of capital. In order to maintain or adjust the capital structure,the University may sell assets to reduce debt.The University monitors capital on the basis of the gearing ratio. This ratio is calculated as netdebt divided by total capital. Net debt is calculated as total borrowings less cash and cashequivalents. Total capital is calculated as equity plus reserves, as shown in the statement offinancial position, plus net debt. The University’s strategy, which was unchanged from 2011, wasto maintain a gearing ratio between 0% and 50%.The gearing ratios at 31 December 2012 and 2011 were as follows:2012 2011Shs’000 Shs’00067Total borrowings (Note 28) 765,078 838,486Less: cash and cash equivalents (Note 20) 147,538 250,167Net debt 617,540 588,319Total equity 2,475,001 2,062,293Total capital 3,092,541 2,650,612Gearing ratio 20% 22%Strathmore University Annual Report 201255 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)5 Financial risk management objectives and policiesThe University’s activities expose it to a variety of financial risks: market risk (including foreignexchange risk and interest rate risk), credit risk and liquidity risk. The University’s overall riskmanagement programme focuses on the unpredictability of financial markets and seeks tominimise potential adverse effects on its financial performance. The University does not hedgeany of its risk exposures.Financial risk management is carried out by the finance department under policies approved bythe University Council.Market risk(i) Foreign exchange riskForeign exchange risk arises from recognized assets and liabilities. The University operates whollywithin Kenya and its assets and liabilities are denominated in Kenya shillings. The University haslimited transactions in foreign currency. The Council believes there is minimal risk of significantlosses due to exchange rate fluctuations.The University has transactional currency exposures. Such exposure arises from foreign currencydenominated borrowings and cash and bank balances.The University manages foreign exchange risk by converting its foreign currency collections intolocal currency on an ongoing basis to cater for its operational requirements. As a result, theUniversity does not hold large amounts of foreign currency deposits. In addition, the Universityraises some bills in foreign currency and receives the settlements in the same currency to avoidthe effect of swinging currency exchange rates. The University also negotiates its purchases inKenya shillings and settles the equivalent in foreign currency.At 31 December 2012, if the Shilling had weakened/(strengthened) by 5% (2011: 5%) against theUS dollar with all other variables held constant, surplus for the year would have been Shs305,953 (2011: Shs 1,071,544) higher/(lower), mainly as a result of US dollar receivables andbank balances.At 31 December 2012, if the Shilling had weakened/(strengthened) by 5% (2011: 5%) against theSterling pound with all other variables held constant, surplus for the year would have beenShs 13,030 (2011: Shs 14,236) higher, mainly as a result of Sterling pounds bank balances.At 31 December 2012, if the Shilling had weakened/(strengthened) by 5% (2011: 5%) against theEuro with all other variables held constant, surplus for the year would have been Shs 3,201,742(2011: Shs 2,796,023) higher, mainly as a result of Euro bank and loan balances.The following table sets out the carrying amount of the University’s financial instruments that areexposed to foreign currency exchange risk:Currency risk2012 2011Shs’000 Shs’00068Assets in foreign currency 15,759 8,740Liabilities in foreign currency (558,583) (588,127)Net foreign currency exposure as at 31 December (542,824) (509,060)56 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)5 Financial risk management objectives and policies (continued)Market risk (continued)(ii) Price riskThe University does not hold any financial instruments subject to price risk.(iii) Cash flow and fair value interest rate riskThe University’s interest rate risk arises from long-term borrowings. Borrowings issued at variablerates expose the University to cash flow interest rate risk which is partially offset by cash held atvariable rates. The University regularly monitors financing options available to ensure optimuminterest rates are obtained.At 31 December 2012, an increase/decrease of 15 basis points (2011: 15 basis points) would haveresulted in a decrease/increase in surplus of Shs 7,579,000 (2011: Shs 8,429,000).The table sets out the carrying amount of the University’s financial instruments withpredetermined terms and are thus not exposed to interest rate risks.Effective2012 2011interestrate% Shs’000 Shs’000Cooperative Bank of Kenya Limited loan:Non-current portion 16.25% 148,571 191,429Current portion 16.25% 42,857 42,857The interest rates disclosed above represent the rates prevailing at 31 December. The principalterms applicable to the long term loans are disclosed in Note 28.Credit riskCredit risk arises from cash and cash equivalents and deposits with banks and financial institutionsas well as credit exposures to students, including outstanding receivables and committedtransactions. Credit risk is the risk that counterparty will default on its contractual obligationsresulting in financial loss to the University.69Credit risk is managed by the finance director, except for credit risk relating to accounts receivablebalances. The credit controller is responsible for managing and analysing credit risk for each newclient before standard payment and delivery terms are offered. The University does not have anysignificant concentrations of credit risk.For banks and financial institutions, only reputable well established financial institutions areaccepted. For trade receivables, the credit controller assesses the credit quality of thecustomer, taking into account its financial position, past experience and other factors. TheUniversity does not grade the credit quality of receivables. The utilisation of credit limits isregularly monitored. The University has negotiated and guaranteed a student loan scheme withthe Commercial Bank of Africa Limited on behalf of the students of Shs 14 million. The studentsare thus able to procure student loans from the Bank at competitive rates thus ensuringreduced default risk on their fees balances.Strathmore University Annual Report 201257 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)5 Financial risk management objectives and policies (continued)Credit risk (continued)The amount that best represents the University’s maximum exposure to credit risk at 31December is made up as follows:2012 2011ShsShsCash at bank and short term bank deposits 162,605 84,799Trade receivables 181,509 162,576Receivables from related companies 6,564 19Other receivables 16,121 13,504Endowment fund 118 59Designated fund 109,102 87,794476,019 348,751Liquidity riskLiquidity risk is the risk that the University will not be able to meet its financial obligations as theyfall due. Prudent liquidity risk management includes maintaining sufficient cash balances, and theavailability of funding from an adequate amount of committed credit facilities. Due to the dynamicnature of the underlying businesses, the finance department maintains flexibility in funding bymaintaining availability under committed credit lines.Management perform cash flow forecasting and monitor rolling forecasts of the University’sliquidity requirements to ensure it has sufficient cash to meet its operational needs whilemaintaining sufficient headroom on its undrawn committed borrowing facilities (Note 28) at alltimes so that the University does not breach borrowing limits or covenants (where applicable) onany of its borrowing facilities. The University's approach when managing liquidity is to ensure, asfar as possible, that it will always have sufficient liquidity to meet its liabilities when due, withoutincurring unacceptable losses or risking damage to the University's reputation.The maturity period for the University’s financial obligations as at the reporting date is as disclosedbelow in Shs ‘000.At 31 December 2012BorrowingsTrade andotherpayablesContributionto SERTTotalno later than three months; 22,729 316,896 - 339,6253 months - one year; 83,254 102,190 21,341 206,784one year - five years; and 306,835 58,437 - 365,273after five years 352,260 - - 352,26070Total 765,078 477,523 21,341 1,263,94258 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)5 Financial risk management objectives and policies (continued)Liquidity risk (continued)The University’s current liabilities exceed the current assets by Shs 196,134,000 (2011: Shs136,913,000). Trade and other payables above include deferred fees totalling Shs 184,962,000(2011 : Shs 201,484,000) which, based on management’s experience, do not result in cashoutflows as these are recognised in income statement after the fees are earned by the University.When excluded, the University is in a net current asset position.The maturity analysis excluding deferred fees within the next year is as below:At 31 December 20120 – 3 months 3 months – 1TotalyearShs '000 Shs '000 Shs '000Expected outflows from obligations (154,663) (83,254) (237,917)Expected inflows from:- Cash and cash equivalents 79,077 83,528 162,605- Equity investment - 1,680 1,680- Inventories 2,199 - 2,199- Amounts from related parties - 6,564 6,56481,276 91,771 173,047Net inflows (Outflows) (73,387) 8,517 (64,870)At 31 December 20110 – 3 months 3 months – 1TotalyearShs '000 Shs '000 Shs '000Expected outflows from obligations (109,458) (79,411) (188,869)Expected inflows from:- Receivables 98,711 96,127 194,838- Cash and cash equivalents 251,241 - 251,241- Equity investment - 1,026 1,026- Inventories 1,285 - 1,285- Amounts from related parties - 19 19Total expected inflows 351,237 97,172 448,40971Net inflows 241,779 17,761 259,540Strathmore University Annual Report 201259 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)5 Tuition fees2012 2011Shs '000 Shs '000Certificate course 7,926 10,279Professional courses 117,655 130,981Diploma programmes 32,069 38,057Degree programmes 830,631 656,886Executive programmes 120,592 125,284Masters programmes 69,298 50,740Executive MBA programmes 59,453 43,4461,237,625 1,055,6726 Donations receivedShs '000 Shs '000Strathmore University Endowment Fund 856 260Guinness Scholarship 9,818 9,569Rattansi Education Trust 468 752Mckinney Rogers Scholarship 2,632 3,134Fundacion Recari Garcia Scholarship 2,312 6,384Michael Adams Memorial Scholarship 47 337I & M Bank Scholarship 3,346 3,605Shah Ranmal Raja Charitable Trust Fund 1,421 1,345Teacher Enhancement Programme donations 1,791 5,898Geminia Insurance Scholarship Fund 293 297Enrique and Balet 2,200 -Winton Scholarship 464 -Koinange scholarsip fund 345 -Quest merit scholarship 484 -Trust Africa 2,871 -Other donations 2,474 1,08131,822 32,8167 Deferred incomeShs '000 Shs '000At 1 January 296,500 256,839Received during the year 20,234 47,749Less: transferred to income statement (11,984) (8,088)72At 31 December 304,750 296,50060 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)7 Deferred income (continued)Deferred income Capital Grants relates to grants/donations that were received in respect ofcapital projects which are now complete. The entire amount is recognized as a long termliability in the statement of financial position and recognized in the income statement over thelife of the related asset.8 Other operating income2012 2011Shs '000 Shs '000Cafeteria income 20,577 20,229Bookshop & printroom gross income 199 4,400Profit on disposal of equipment 1,625 727Business school short courses 29,173 65,549Rental income 4,084 2,556Sundry income 58,371 20,522114,030 113,9839 Administrative cost expenses(a) Staff costs 2012 2011Shs '000 Shs '000Salaries and wages academic staff 341,222 279,461Salaries and wages administrative staff 152,188 134,288Gratuity 8,173 7,378Provident fund contributions 19,604 12,967NSSF contributions 1,218 1,197Medical expenses 18,109 15,585Staff welfare 20,355 12,843The average number of employees during the period was 404 (2011 – 390).Key management compensation560,868 463,720Key management includes University Council Members (executive and non-executive) andmembers of senior management. The compensation paid or payable to key management foremployee services is shown below:732012 2011Shs '000 Shs '000Salaries and other short-term employment benefits 60,209 53,855Sitting allowance for University Council Members 1,577 1,42561,786 55,281No provisions for impairment losses have been required in 2012 and 2011 for any related partyreceivables.Strathmore University Annual Report 201261 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)Administrative expenses (Continued)(b) Other administrative expenses 2012 2011Shs '000 Shs '000Consultancy fees 162,296 157,621Auditors’ remuneration 3,500 (776)Legal fees 189 950Food, cleaning and laundry services 34,264 26,584Scholarship 94,396 81,648Bursaries and staff training 12,398 5,177Telephone, Internet and Postage 17,759 15,815Stationery and Supplies 34,745 20,277Bus Expenses 5,014 3,998Bad and doubtful debts expense 11,529 20,136Auditors’ remuneration - External auditors 2,756 2,500Cost of books purchases for resale 5,039 22,060Advertising expenses 17,892 13,673Administration transport expenses 13,612 12,535Miscellaneous administrative expenses 145,158 143,875560,547 526,070Total administrative expenses 1,121,415 989,7902012 201110 Establishment expenses Shs '000 Shs '000Depreciation 90,992 67,294Water and Electricity 29,234 23,540Amortisation of operating lease prepayments 27,160 22,204Amortisation of intangible assets 10,870 10,839Repairs & Maintenance 19,624 9,610Security expenses 16,810 12,837Insurance expenses 9,800 8,720Miscellaneous establishment expenses 7,831 5,675212,321 160,71911 Finance cost / income 2012 2011(a) Finance costs:Shs '000 Shs '000Interest on loan 42,884 3,044Unrealised exchange loss– Euro loan 17,076 27,373Realised exchange loss– Euro loan - -Other bank exchange loss - -59,961 30,41774(b) Finance income:Unrealised exchange gain– Euro loan - -Realised exchange gain– Euro loan 602 5,365Other bank exchange gain 989 22,027Interest receivable 26,837 9,53428,428 36,92662 | P ageStrathmore University Annual Report 2012

75Strathmore UniversityFinancial StatementsFor the year ended 31 December 2012Notes (continued)12 Property, plant and equipmentAs at 31 December 2012Furniture,fittings &otherequipment TotalBuildings Motor vehicles Library booksShs '000 Shs '000 Shs '000 Shs '000 Shs '000At 1 January 2011Cost / revaluation 1,408,118 29,856 99,623 296,739 1,834,336Accumulated depreciation (65,792) (12,438) (64,011) (159,565) (301,806)Net book amount 1,342,326 17,418 35,612 137,174 1,532,531Year ended 31 December 2011Opening net book amount 1,342,326 17,418 35,612 137,174 1,532,531Additions 13,363 - 11,691 14,142 39,197Disposals - (4,649) - (58) (4,707)Transfer to assets held for sale (2,762) (520) - (358) (3,640)Revaluation surplus (loss) (21,592) - - - (21,592)Depreciation charge for the year (23,770) (1,998) (12,051) (53,173) (90,992)Depreciation eliminated on disposals - 1,317 - 8 1,325Depreciation eliminated on transfers - - - 59,794 59,794Depreciation eliminated on revaluation 62,983 - - - 62,983Closing net book amount 1,370,550 11,569 35,252 157,530 1,574,900At 31 December 2012Cost / revaluation 1,397,128 24,687 111,314 310,466 1,843,595Accumulated depreciation (26,578) (13,119) (76,062) (152,936) (268,695)Net book amount 1,370,550 11,569 35,252 157,530 1,574,900Strathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)12 Property, plant and equipment (continued)Buildings were revalued in August 2012 by Regent Valuers International Limited. Furniture and equipments were revalued in 2008 by Safety Surveyors Limited.Valuations are made on the basis of the recent market transactions on arm’s length terms (i.e. open market value). The book values of the properties were adjustedto the revaluations and the resultant surplus was credited to other comprehensive income and is shown in the revaluation reserve in accumulated fund. If the costmodel had been used to measure property, plant and equipment, the carrying amount would have been Shs 869,810,000.Borrowing costs amounting to Shs 0 (2011: Shs 34,219,000) were capitalised during the period. They related to the interest expense on the Cooperative Bank loanthat was used to finance the Phase 3 project.Bank borrowings are secured on properties to the value of Shs 989,447,348 (2011: Shs 849,968,891) (Note 28).65 | P age76Strathmore University Annual Report 2012

77Strathmore UniversityFinancial StatementsFor the year ended 31 December 2012Notes (continued)12 Property, plant and equipmentAs at 31 December 2011TotalFurniture,fittings &otherequipmentMotor vehicles Library booksCapital workin progressBuildingsShs '000 Shs '000 Shs '000 Shs '000 Shs '000 Shs '000At 1 January 2010Cost / revaluation 691,282 546,690 29,856 85,126 267,944 1,620,898Accumulated depreciation (51,931) - (10,363) (53,091) (119,303) (234,688)Net book amount 639,351 546,690 19,493 32,035 148,641 1,386,210Year ended 31 December 2010Opening net book amount 639,351 546,690 19,493 32,035 148,641 1,386,210Additions 170,146 1,135 - 14,497 29,082 214,860Disposals - (1,135) - - (288) (1,423)Transfer 546,690 (546,690) - - - -Depreciation charge for the year (13,861) - (2,076) (10,920) (40,437) (67,294)Depreciation eliminated on disposals - - - - 177 177Closing net book amount 1,342,326 - 17,417 35,612 137,175 1,532,530At 31 December 2011Cost / revaluation 1,408,118 - 29,856 99,623 296,738 1,834,335Accumulated depreciation (65,792) - (12,439) (64,011) (159,563) (301,805)Net book amount 1,342,326 - 17,417 35,612 137,175 1,532,530Strathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)13 Investment property2012 2011Shs '000 Shs '000At beginning of year - -Additions 50,468 -Fair value gain - -At end of year 50,468 -The properties were independently valued by Regent Valuers International Limited in August 2012 onthe basis of determining the open market value of the investment property. The open market value ofall properties was determined using recent market prices.14 Prepaid operating leases2012 2011Shs '000 Shs '000CostAt 1 Jan 2012 1,733,082 1,733,082Additions 1,526 -Revaluation surplus 292,961 -At 31 Dec 2012 2,027,568 1,733,082AmortisationAt 1 Jan 2012 74,485 52,282Depreciation eliminated on revaluation (74,485) -Amortisation charge for the year 27,160 22,204At 31 Dec 2012 27,160 74,485Net book valueAt 31 Dec 2012 2,000,408 1,658,59715 Intangible assets Computer Computersoftwaresoftware2012 2011Shs '000 Shs '000CostAt 1 Jan 2012 67,394 57,282Additions 1,855 6,061Revaluation surplus - 4,050At 31 Dec 2012 69,248 67,394AmortisationAt 1 Jan 2012 54,569 43,730Depreciation eliminated on transfer (1,691) -Amortisation charge for the year 10,870 10,839At 31 Dec 2012 63,748 54,569Net book valueAt 31 Dec 2012 5,500 12,8247868 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)15 Intangible assets (continued)Academic Management System (AMS) software was revalued in December 2010 by management.Under the cost model, the carrying amount that would have been recognised is nil. Revaluation surplusat the beginning and at the end of the period was Shs 11,950,715. This was credited to othercomprehensive income and is shown in the revaluation reserve in accumulated fund. Due to lack ofsimilar systems, the valuations were made by estimating the extended useful life that the software willhave, the capacity to handle University’s transactions and technological change. If the cost model hadbeen used to measure the computer software, the carrying amount would have been nil (2011: Shs5,405,000).16 Endowment fund deposita) European Union2012 2011Shs '000 Shs '000Cash and demand deposit 118 59Term deposits 12,225 11,892Corporate Notes and Commercial Paper 4,094 2,956Government paper 41,164 30,087Quoted domestic equities 2,431 4,667Offshore investment 2,479 -At 31 Dec 2012 62,511 56,338Held as follows:Fair value through profit & loss 4,910 4,667Held to maturity 57,483 44,935Cash & demand deposit 118 5962,511 49,661b) Other endowment fundsDrakard E Fund 939 953Kamaljeet Fund 2,949 2,010Nyeri High Strath Alumni 383 -Msgr Clemente Faccani 3,659 -Total Endowment fund investment 70,441 52,62479The endowment fund investments represent a grant received from the European Union for the purposeof generating interest income for award of bursaries to financially needy students under StrathmoreUniversity Endowment Fund. These funds are managed by Old Mutual Asset Managers and areinvested in various financial instruments69 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)17 Designated fund deposit2012 2011Shs '000 Shs '000Staff development fund 12,099 10,113Staff medical fund 12,974 11,865Research fund 25,464 21,273Capital contribution fund 7,069 6,15057,607 49,40140 Anniv. E Fund 1,485 1,257Auditorium Pa System 1,985 30Land Development 9,346 9,231Asset Replacement Fund 14,769 12,214KIVA Fund 8,898 -Collateral For Student Loan Scheme 15,013 15,66151,496 38,392Total Designated funds deposits 109,102 87,794These are funds held in various current and fixed deposit accounts with various banks. Included inthese funds is a balance of KShs 14 million held at CBA Bank being a collateral for student loansguaranteed by the University.Maturity analysis of designated fund deposits2012 2011Shs '000 Shs '000a) Within 30 days 15,013 -b) Within 60 days 18,243 9,261c) Within 90 days 59,402 25,773d) After 90 days 16,444 52,759109,102 87,79418 Inventories 2012 2011Shs '000 Shs '000General stores 2,500 2,063Distance Learning Centre - 547Catering 2,199 737SBS stocks 3,015 3,188807,714 6,53670 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)19 Trade and other receivable2012 2011Shs '000 Shs '000Student fees debtors 181,285 157,479Other debtors - corporate receivable 55,565 49,220Provision for bad and doubtful debts (55,340) (44,123)Trade receivables - Net 181,509 162,576Prepayments 17,161 18,758Staff receivables 15,305 10,581Utilities Deposits 2,859 2,859Medical float 634 634Other receivable 12,681 (570)230,150 194,838Movements on the provision for impairment of trade receivables are as follows:2012 2011Shs '000 Shs '000At start of year 44,123 42,967Release/(provision made) in the year 5,646 (3,594)Receivables written off during the year as uncollectible 5,570 4,750At end of year 55,340 44,12320 Cash and cash equivalentFor the purposes of the statement of cash flows, cash & cash equivalents comprise of the followingstatement of financial position amounts:-2012 2011Shs '000 Shs '000Bank and Cash Balances 71,094 85,873Short term deposits 91,511 165,368162,605 251,241Bank overdraft (15,066) (1,074)81147,538 250,167Short term deposits were held by various banks at an average effective interest rate of 12.78% (2011:4.86%).Strathmore University Annual Report 201271 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)20 Cash and cash equivalent (continued)2012 2011Maturity analysis of short term deposits Shs '000 Shs '000a) On call - -b) Within 30 days 7,983 -c) Within 60 days 63,629 27,109d) Within 90 days 19,898 138,260e) After 90 days - -91,511 165,36821 Equity investment2012 2011Shs '000 Shs '000Quoted domestic entities 1,680 1,026This category has financial assets held for trading. A financial asset is classified as held for trading if itis acquired or incurred principally for the purpose of selling it in the short term; part of a portfolio ofidentified financial instruments that are managed together and for which there is evidence of a recentactual pattern of short term profit taking; or if so designated by management. Quoted investments, arevalued at market valuation as at year end. Gains or losses arising are dealt with in the statement ofcomprehensive income.22 Related party transaction 2012 2011Shs '000 Shs '000(a) Balances due from related parties :-(i) Strathmore Research & Consultancy CompanyBalance as at 1 Jan 19 67Net payments during the period 6,544 (47)6,564 19(ii) Strathmore University FoundationBalance as at 1 Jan - 3,690Books capitalised - (1,230)Books disposed - (2,460)- -6,564 19Strathmore Research & Consultancy Centre (SRCC) is an advisory centre of the University. The centrecoordinates research and consultancy work of the University and ensures that clients receive highquality advice under generally accepted commercial arrangements. The mandate is to promoteresearch and consulting activities within the University by leveraging faculty members. In addition, thecentre is charged with the responsibility of commercializing the University's innovation and in so doingsupport entrepreneurship. The company is limited by share capital and the University owns 0.2%(2010: 0.2%) while 99.8% (2010: 99.8%) is owned by Strathmore Educational Registered Trust(SERT). The transactions above relates to expenses incurred by the University on behalf of SRCC. It isnot secured and it is refundable to the University in cash.82Strathmore University Foundation (SUF) is an independent entity in America formed to assist infundraising in America. They also assist the University in procuring library books.In 2011, provisions for doubtful debts and the expense recognised during the period in respect ofdoubtful debts relating to the amount of outstanding SRCC balance was nil (2010: Shs 8,776,000).There were no provisions for doubtful debts for balances due from SUF.72 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)22 Amounts due to/from related parties (continued)No other commitment was due from SRCC or SUF.2012 2012(b) Due to trustee Shs '000 Shs '000At 1 Jan 13,981 21,829Contributions for the year 34,527 26,508Less: paid during the year (27,167) (34,357)At 31 Dec 21,341 13,981SERT is the trust that owns the University and appoints the University council members to run theUniversity. The contributions above are meant for SERT office administration and are payable in cash. Nosecurity and other commitment is due to SERT.23 Noncurrent assets held for saleBuildingmaterialMotorvehiclesFurnitureand FittingsTotalShs '000 Shs '000 Shs '000 Shs '000Opening balance - - - -Transfers from Property, Plant and equipment(note11) 2,762 520 358 3,640Disposals - - - -Closing balance 2,762 520 358 3,640Building material relate to raw material that was used during expansion of the University, these havebeen deemed to be of no further use by the management. Furniture fittings and motor vehicle were theassets that will have no future use as a result of the management partly outsourcing printing andtransport services. The assets were sold through bidding to the highest bidder but the managementreserve the right to sell where the price is way below expected market price.24 Capital investment fundCapital investment fund represent the non -current assets that were transferred from SERT whenStrathmore college moved from Lavington to Madaraka campus in 1993 separating Strathmore schooland Strathmore college.25 Revaluation reserveThis arose from the revaluation of land, building, furniture and fittings and software.832012 2011Shs '000 Shs '000At beginning of year 1,533,193 1,561,584Revaluation gains - gross 408,838 4,050Depreciation transfer - gross (47,359) (32,440)At end of year 1,894,672 1,533,193Strathmore University Annual Report 201273 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued26 Designated funds(a) 2012 2011Shs '000 Shs '000Sfaff Development Fund 11,764 9,778Staff Medical Fund 13,559 12,449Research Fund 30,152 25,961Capital Contribution Fund 34,917 33,99890,392 82,186Held as follows:-Invested in term deposit 57,607 49,401Designated Funds not invested / (not set aside)Staff development Fund (335) (335)Staff medical fund 584 584Research Fund 4,688 4,688Capital Contribution Fund 27,848 27,848Designated funds 90,392 82,18626 Designated funds(b) 2012 2011Shs '000 Shs '00040 Anniv. E Fund 1,725 1,497Auditorium Pa System 542 379Land Development Reserve 3,281 1,823Asset Replacement Fund 4,969 2,414KIVA Loan 677 -Collateral On Students Loans - 1,203Ford Foundation 74 4,490Water Consortium Research 3,142 4,410Global Business School Network-Gbsn - 2,166SELEPTraining 1,024 2,405Rockefeller Foundation - 2,170Creates 7,158 1,029CIC Project 5,232 -Trust Africa 1,388 -Ilabafrica funds 66,606 24,365Other funds 11,614 12,017107,433 60,3688474 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSStrathmore UniversityFor the year ended 31 Financial December Statements 2012For the year ended 31 December 2012Notes (continued)26 Designated funds (continued)26 Designated funds (continued)2012Shs '0002011Shs '000Held as follows:-Invested in term deposit Held as follows:-51,496 38,392Designated Funds Invested not invested term / deposit (not set aside)51,496 38,39240 Anniv. E Fund Designated Funds not invested / (not set aside)241 241Auditorium Pa System 40 Anniv. E Fund (1,443) 241 349 241Land Development (6,065) (7,408)Auditorium Pa System (1,443) 349Asset Replacement Fund (9,800) (9,800)Land Development (6,065) (7,408)KIVA Fund (8,221)Asset Replacement Fund (9,800) (9,800)Collateral For Student Loan Scheme (15,013) (14,458)KIVA Fund (8,221)Other funds 96,239 53,052Collateral For Student Loan Scheme (15,013) (14,458)Designated funds Other funds 107,433 96,239 60,368 53,052Designated funds 107,433 60,368These are funds set aside as strategic reserve for future University projects such as capital projects,research, and collateral for student loans, staff development and welfare. These funds are held in variousThese are funds set aside as strategic reserve for future University projects such as capitalcurrent and fixed depositprojects,accountsresearch,inandbanks.collateral for student loans, staff development and welfare. These funds areheld in various current and fixed deposit accounts in banks.27 Endowment funda) European Union 2012 2011Shs '000 Shs '000Strathmore University Endowment Fund 52,161 57,297Additions to fundInterest capitalised - -Bursaries paid (856) 1,541Bursaries not liquidated (1,643) (2,500)Market revaluation gain/loss 12,850 (6,677)62,511 49,661Bursaries paid 1,643 2,50064,155 52,161b) Other endowment fundsDrakard E Fund 472 953Kamaljeet fund 3,379 2,219Nyeri High Strath Alumni 386Msgr Clemente Faccani 3,655At 31 December 2012 72,046 55,33285The endowment fund represents a grant received from the European Union, Drakard, Kamaljeet, Nyerihigh Strath alumni and Msgr Clemente Faccani for the purpose of generating investment income foraward of bursaries to financially needy students.Strathmore University Annual Report 201275 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)28 Borrowings 2012 2011Shs '000 Shs '000Non- CurrentEuro loan 510,524 541,534Cooperative Bank loan 148,571 191,429659,095 732,962CurrentEuro loan 48,060 46,593EADB loan - 15,000Cooperative Bank loan 42,857 42,857Overdraft 15,066 1,074105,983 105,524765,078 838,486The following loans amounting to Euro 4,920,356 (2011: Euro 5,343,695) from Euro loan are repayablein quarterly installments:-Loan 1 Euro 83,396 over a period of 2 yearsLoan 2 Euro 1,196,686 over a period of 13 yearsLoan 3 Euro 196,533 over a period of 3 yearsLoan 4 Euro 1,656,241 over a period of 13 yearsLoan 5 Euro 1,787,,500 over a period of 18 yearsThey are unsecured and non-interest bearing.The loan amounting to KShs 191,428,571 from Co-operative Bank of Kenya Ltd is repayable in monthlyinstallments over seven years. It is secured by the University’s leasehold land LR. No. 209/10587 andLR. No. 209/11613, interest is payable at a rate of 16.25% per annum.The bank overdraft is a book overdraft representing unpresented payments as at the statement offinancial position date.The carrying amount of the bank borrowings and overdraft approximates to the fair value, as the impactof discounting is not significant.8676 | P ageStrathmore University Annual Report 2012

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)29 Trade and other payables 2012 2011Shs '000 Shs '000Student payables 102,190 129,223Deferred fees 184,962 201,484Supplier payables 74,625 38,258Accruals 22,206 10,979Staff payables 35,103 34,109Other payables 58,437 57,018477,523 471,069The carrying amounts of the above trade and other payables approximate their fair values.30 Contingent liabilitiesThere were no significant contingent liabilities as at 31 December 2012 and 2011.31 CommitmentsCapital commitmentsCapital expenditure contracted for at the statement of financial position date but not recognized in thefinancial statements is as follows:2012 2011Shs '000 Shs '000Property, plant and equipment 9,614 56,98487Strathmore University Annual Report 201277 | P age

Strathmore UniversityFINANCIAL STATEMENTSFor the year ended 31 December 2012Notes (continued)32 Cash from operating activities2012 2011Shs '000 Shs '000Surplus/(deficit) for the year 30,191 66,559Adjustments for:Deferred income (note 7) (11,984) (8,088)Depreciation (note 12) 90,992 67,294Depreciation eliminated on transfer (note 12) (61,485) -Amortisation of prepaid operating leases (note 14) 27,160 22,204Amortisation of intangible assets (note 15) 10,870 10,839Loss/(profit) on disposal of equipment (1,625) (727)Foreign exchange (gain)/loss 16,474 22,008Interest received (note 11a) (26,837) (9,534)Interest paid (note 11b) 42,884 3,044Operating surplus before working capital changes 116,641 173,599Increase in inventories (note 18) (1,177) 6,770Decrease/(increase) in trade and other receivables (note 19) (35,312) (61,606)Decrease/(increase) in Due from related parties (note 22a) (6,544) 3,737(Decrease)/increase in trade and other payables (note 29) 6,454 74,595Net cash from operating activities 80,061 197,095-----------000-----------8878 | P ageStrathmore University Annual Report 2012

STRATHMORE PROGRAMMES(For Full-time and Part-time)WHY STRATHMOREHigh Graduate Job PlacementQuality EducationStudent MentoringRigorous StandardsInternational InternshipsInternational FacultyPowerful NetworksScholarships, Financial aid & LowInterest LoansWorld - Class Learning FacilitiesWireless connectivity and high-techcomputer laboratoriesDigital and fully equipped libraryModern lecture theatersNew state-of-the-art students’ centreSCHOOL OF MANAGEMENTAND COMMERCEUndergraduate Programmes• Bachelor of Commerce (Bcom)Minimum Entry QualificationsKCSE C+ with a minimum of C inMathematics and English OR2 A Level Principal Passes or any otherequivalent qualification• Bachelor of Commerce(Bcom Exempt)Minimum Entry QualificationsCPA or ACCA FinalistDiploma Programmes• Diploma in BusinessManagement (DBM)Minimum Entry QualificationsKCSE C English C Maths CSCHOOL OF FINANCE ANDAPPLIED ECONOMICS• Bachelor of Business Science (BBS)Actuarial Science• Bachelor of Business Science (BBS)Finance• Bachelor of Business Science (BBS)Financial EconomicsMinimum Entry QualificationsKCSE aggregate of B+ with a minimumgrade of A- in both Mathematics andEnglishFACULTY OF INFORMATIONTECHNOLOGYUndergraduate Programmes• Bachelor of BusinessInformation Technology (BBIT)Minimum Entry QualificationsKCSE C+ with a minimum of C inMathematics and English OR 2 A LevelPrincipal Passes or any other equivalentqualification• Bachelor of BusinessInformation TechnologyBBIT Exempt, BTC, BIF ExemptMinimum Entry QualificationsDiploma in Business InformationTechonology• Bachelor of Science inInformatics (BIF)• Bachelor of Science inTelecommunications (BTC)Minimum Entry QualificationsKCSE aggregate of B with a minimumof B in Mathematics and English OR2 A Level Principal Passes or any otherequivalent qualification.Diploma ProgrammeDiploma in BusinessInformation Technology (DBIT)Minimum Admission RequirementKCSE C English C Maths CCertificate Courses• Certificate in ComputerApplications (CCA)• International Computer DrivingLicence (ICDL)• Cisco Networking Academy(CCNA)SCHOOL OF HUMANITIES ANDSOCIAL SCIENCESSHSS serves undergraduate, postgraduatesand professional programmes witha focus in Business Ethics, Politics,Business Communication, Literature andForeign Languages.

STRATHMORE LAW SCHOOLUndergraduate Programmes• Bachelors of Laws (LL.B)Minimum Entry QualificationsKCSE aggregate of B+ with a minimumgrade of A- in both Mathematics andEnglishCENTRE OF TOURISM ANDHOSPITALITYUndergraduate Programmes• BSc in Hospitality Management• BSc in Tourism ManagementMinimum Entry QualificationsKCSE C+ with a minimum of C inMathematics and English OR 2 A LevelPrincipal Passes or any other equivalentqualification• Special 2-Year BSc in HospitalityManagement and BSc in Tourismmanagement (Exempt)Minimum Entry QualificationsHolders of Relevant Diplomas with over2 years working ExperienceGRADUATE PROGRAMMES• Master of Science in InformationTechnology (MSc.IT)• Master of Science in MobileTelecommunications and Innovation(MSC.MTI)• Master of Arts in Applied Philosophyand Ethics• Master of Business AdministrationEntry QualificationsHolders of First Class or Upper SecondClass degree OR Holders of LowerSecond Class degrees plus PostgraduateDiplomas or Certificates incomputer science or IT working• Master of Science inComputer-Based InformationSystems (MSc.CIS)• Master of Commerce (MCOM)Entry QualificationsHolders of First Class or Upper SecondClass degree OR Holders of LowerSecond Class degrees plus PostgraduateDiplomas or Relevant CertificatesSCHOOL OF ACCOUNTANCY• Association of Chartered CertifiedAccountants (ACCA)• Certified Public Accountants (CPA)Entry QualificationsKCSE with an average of at leastgrade C+ and C+ in both Mathematicsand English• Chartered Financial Analyst®(CFA®)Entry QualificationsA Bachelor’s degree in any field. Or aprofessional course with at least fouryears work experience.• Certified Information SystemsAuditor® (CISA®)• Certified Information SecurityManager® (CISM®)Entry QualificationsStudents to provide documentaryevidence of at least 6 months workexperience or a Degree CertificateINTERVIEWS & ENTRANCE EXAMInterviews and Entrance ExaminationsApplicants are required to sit anentrance Exam that tests English andMathematical Aptitude.They must alsopass a personal interviewInterview DaysUndergraduate Courses and Diplomas-Tuesdays and Thursdays at 8 a.mLaw Applicants-Wednesdays at 8 a.mGraduate Students-Wednesdays andFridays at 2 p.m.Interview Requirements2 passport-Size PhotosOriginals and Copies of Academic andProfessional CertificatesCopy of passport, National ID or BirthCertificateInterview fee of Kshs 1500 forUndergraduate, Kshs 1000 forDiploma and 2000 for Graduatecourses

Annual Report & Financial Statements 2012