Information Memorandum 2015

In respect of the offer to the public and listing of Kenya Shillings six billion (Kes.6,000,000,000) senior unsecured fixed rate notes and senior unsecured equity linked notes

14 May 2015 ii Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Serial Number: Information Memorandum i Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Centum Investment Company Limited

Incorporated in Kenya under the Companies Act (Chapter 486, Laws of Kenya) (Registration Number C.8/67)

Information Memorandum in respect of the offer to the public and listing of Kenya Shillings six billion (Kes.6,000,000,000) senior unsecured fixed rate notes and senior unsecured equity linked notes

14 May 2015 ii Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Contents

1. IMPORTANT NOTICES AND STATEMENTS 1 2. EXECUTIVE SUMMARY 4 3. DEFINITIONS AND ABBREVIATIONS 11 3.1 DEFINITIONS 11 3.2 ABBREVIATIONS 15 4. SUMMARY OF CORPORATE INFORMATION 17 5. ADVISERS TO THE ISSUER ON THE NOTE ISSUE 19 6. TIMETABLE 21 7. SUMMARY OF THE OFFER 22 7.1 SUMMARY OF THE PROPOSED NOTES 22 8. USE OF PROCEEDS 28 8.1 FINANCIAL SERVICES 29 8.2 ENERGY 30 8.3 REAL ESTATE 31 8.4 OFFER RELATED EXPENSES 31 9. ABOUT THE ISSUER 32 9.1 COMPANY OVERVIEW 32 9.2 VISION, MISSION AND STRATEGY 32 9.3 BUSINESS MODEL 33 9.4 TRACK RECORD 34 9.5 OPERATING STRUCTURE 37 9.6 CENTUM’S PORTFOLIO AND SECTOR FOCUS 38 9.6.1 Financial Services (FS) Sector 38 9.6.2 FMCG Sector 39 9.6.3 Energy Sector 40 9.6.4 Real Estate Sector 42 9.6.5 Education and Healthcare Sector 49 9.6.6 Agriculture Sector 49 9.6.7 Quoted Private Equity (“QPE”) Portfolio 49 9.6.8 Other Portfolio 50 9.7 DIVIDEND POLICY 50 9.8 PRINCIPAL SHAREHOLDERS 50 9.9 SHAREHOLDING BY DIRECTORS 51 9.10 DISTRIBUTION OF SHAREHOLDING 51 9.11 EMPLOYEES 51 10. TERMS AND CONDITIONS OF THE NOTES 52 11. KEY INVESTMENT CONSIDERATIONS 62 11.1 BUSINESS MODEL 62 11.2 TRACK RECORD OF CONSISTENT PERFORMANCE AND LONG TERM GROWTH 63 Information Memorandum iii Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

11.3 UNUTILISED DEBT CARRYING CAPACITY 64 11.4 STRONG CASH FLOWS 65 11.5 A WELL-DIVERSIFIED INVESTMENT PORTFOLIO 65 11.6 STRONG CORPORATE GOVERNANCE 66 11.7 STRONG BRAND NAME 67 12. ECONOMIC OVERVIEW 68 12.1 KENYA MACRO - ECONOMIC OVERVIEW 68 12.2 UGANDA MACRO - ECONOMIC OVERVIEW 70 13. INDUSTRY OVERVIEW 73 13.1 POWER SECTOR 73 13.1.1 Overview of the East African Power Sector 73 13.1.2 Power Sector in Kenya 73 13.2 FAST MOVING CONSUMER GOODS (FMCG) SECTOR 78 13.2.1 About FMCG 78 13.2.2 Key Drivers of FMCG in Africa 78 13.3 FINANCIAL SERVICES SECTOR 82 13.3.1 Kenya Banking Sector Overview 82 13.3.2 Industry Performance 82 13.3.3 Challenges 83 13.3.4 Opportunities 83 13.3.5 Overview of Kenya Insurance Industry 84 13.3.6 Industry Performance 84 13.3.7 Kenya Insurance Market Outlook 84 13.3.8 Performance Overview 85 13.4 RECENT PRIVATE EQUITY TRANSACTIONS IN EAST AFRICA 85 13.5 THE ASSET MANAGEMENT INDUSTRY 86 13.5.1 Traditional Asset Managers 86 13.5.2 Pension Industry 86 13.5.3 Individual Retirement Benefits Schemes and Service Providers 87 13.6 REAL ESTATE INDUSTRY IN AFRICA 88 13.7 REAL ESTATE INDUSTRY IN KENYA 89 13.7.1 Property Market Segment 89 13.8 REAL ESTATE INDUSTRY IN UGANDA 90 13.8.1 Property Market Segment 90 13.8.2 Retail market 90 13.8.3 Industrial market 91 13.8.4 Residential market 91 13.9 EDUCATION SECTOR 91 13.9.1 Overview 91 13.9.2 Key Drivers for Growth of the Education Sector in Kenya 91 13.9.3 Rising disposable income 93 13.10 HEALTHCARE SECTOR 93 13.10.1 Healthcare in Africa 93 13.10.2 Healthcare in Kenya 93 13.10.3 Pharmaceutical 94 13.10.4 Private Healthcare Sector in Kenya 94 13.11 INFORMATION AND COMMUNICATIONS TECHNOLOGY(ICT) SECTOR 95 13.11.1 Industry Overview 95 13.11.2 Kenya ICT Sector 95 13.11.3 Opportunities in ICT 96 iv Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.12 AGRICULTURAL SECTOR OVERVIEW 96 13.12.1 Agriculture in Africa 96 13.12.2 Agriculture in Kenya 97 13.12.3 Factors Driving Agriculture Business in Kenya 97 13.12.4 Opportunities 97 13.12.5 Challenges 97 13.12.6 Technology 97 14. SUMMARY OF FINANCIAL INFORMATION AND OTHER SELECTED DATA 98 14.1 AUDITORS 98 14.2 COMPANY STATEMENT OF COMPREHENSIVE INCOME 98 14.3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 99 14.4 COMPANY STATEMENT OF FINANCIAL POSITION 100 14.5 STATEMENT OF CASH FLOWS (INTERNALLY GENERATED FUNDS) 101 14.6 COMPANY STATEMENT OF TOTAL RETURN 102 14.7 PROFORMA FINANCIAL INFORMATION 103 14.7.1 Projected consolidated statement of comprehensive income 103 14.7.2 Projected company statement of comprehensive income 104 14.7.3 Projected consolidated statement of financial position 105 14.7.4 Projected company statement of financial position 106 15. RISK FACTORS AND MITIGATION MEASURES 108 15.1 INVESTMENT RISKS 108 15.1.1 Investment Decisions 108 15.2 INVESTMENT PERFORMANCE 108 15.3 INVESTMENT CONCENTRATION 108 15.4 INVESTMENT VALUATIONS AND EXIT OPPORTUNITIES 108 15.5 FINANCIAL RISKS 109 15.5.1 Liquidity risks 109 15.5.2 Interest rate risk 109 15.5.3 Inflation risk 109 15.5.4 Foreign Exchange Risk 109 15.5.5 Credit Risk 109 15.5.6 Commodity Risk 110 15.6 OPERATIONAL RISKS 110 15.7 EXTERNAL RISKS 110 15.8 REPUTATIONAL RISK 110 15.9 PROJECT RISK 110 15.10 EXECUTION RISK 111 15.11 FINANCE RISK 111 15.12 MARKET RISK 111 16. CORPORATE GOVERNANCE 112 17. LEGAL AND CORPORATE INFORMATION 121 17.1 NAME, PLACE AND DATE OF REGISTRATION 121 17.2 CAPITAL STRUCTURE 121 17.3 VOTING RIGHTS AND CONTROL 121 17.4 LISTING 121 17.5 ISSUES OF SHARES IN THE THREE YEARS IMMEDIATELY PRECEDING THE DATE OF THIS INFORMATION MEMORANDUM 121 17.6 PRINCIPAL OBJECTS (AS CONTAINED IN THE MEMORANDUM OF ASSOCIATION) 121 17.7 PROVISIONS OF THE ARTICLES RELATING TO BORROWING 122 17.8 THE ISSUER’S SUBSIDIARIES AND ASSOCIATED COMPANIES 122 Information Memorandum v Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.8.1 Direct Subsidiaries 122 17.8.2 Issuer’s indirect subsidiaries 122 17.8.3 Other companies that Issuer has shareholding in: 124 17.9 MATERIAL AGREEMENTS (OTHER THAN AGREEMENTS MADE IN THE ORDINARY COURSE OF BUSINESS) 124 17.10 ONEROUS COVENANTS AND DEFAULT 125 17.11 RELATED PARTY AGREEMENTS (LOAN AGREEMENTS WITH SUBSIDIARIES, ETC WITH DETAILS ON AMOUNTS, PURPOSE, INTEREST RATES, ETC) 125 17.12 LOAN/FINANCE AGREEMENTS 125 17.12.1 Senior Unsecured Fixed Rate Notes and Senior Equity Linked Notes 125 17.12.2 Facilities from Co-operative Bank of Kenya Limited 126 17.12.3 Facility from FirstRand Bank Limited 126 17.13 RELEVANT SUBSIDIARY LOAN/FINANCE AGREEMENTS 127 17.14 LOANS TO DIRECTORS AND SENIOR MANAGEMENT 127 17.15 LICENSES AND PERMITS 127 17.15.1 The Issuer 127 17.15.2 Subsidiaries 127 17.16 PROPERTY AND INFORMATION ON VENDORS ON MATERIALS ASSETS ACQUIRED IN THE LAST THREE YEARS 127 17.17 PROVISIONS OF THE ARTICLES WITH RESPECT TO DIRECTORS 128 17.18 MATERIAL LITIGATION 128 17.19 OTHER DISCLOSURES 129 18. GENERAL INFORMATION 130 18.1 EXPENSES OF THE OFFER 130 18.2 DOCUMENTS AVAILABLE FOR INSPECTION 130 18.3 MINIMUM SUBSCRIPTION LEVEL 131 18.4 APPLICATION PROCEDURE 131 18.5 TRADING OF THE NOTES 131 18.6 CHANGES IN SENIOR MANAGEMENT 131 18.7 INTERRUPTIONS IN GROUP’S BUSINESS 131 18.8 MATERIAL CHANGES 131 18.9 DIRECTORS STATEMENT AS TO LIQUIDITY REQUIREMENT 131 18.10 DIRECTORS’ DECLARATION 131 19. FREQUENTLY ASKED QUESTIONS ON EQUITY LINKED NOTES 132 20. APPENDIX 135 20.1 LEGAL OPINION 135 20.2 REPORTING ACCOUNTANTS REPORT 147 20.3 FORM OF LETTER OF UNDERTAKING FOR REQUESTED ALLOCATION 258 20.4 FORM OF THE NOTE APPLICATION FORM 259 vi Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Joint Transaction Advisers

Placing Agents and Joint Sponsoring Stock-brokers

Receiving Banks

Reporting Accountants Legal Advisers

Fiscal Agent and Registrar Note Trustee

Information Memorandum 1 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

1. IMPORTANT NOTICES AND STATEMENTS

The Note Issue: This information memorandum is issued by Centum in compliance with the requirements of the Companies Act and a copy of this Information Memorandum together with the documents required under section 43(1) of the Companies Act have been delivered to the Registrar of Companies at the State Law Office for registration. This Information Memorandum has been prepared in compliance with the Capital Markets Act and the Public Offer Regulations in connection with the offer to the public and listing on the fixed income market segment (“FISMS”) of the Nairobi Securities Exchange Limited (“NSE”) of Kenya Shillings six billion (Kes.6,000,000,000) senior unsecured fixed rate notes and senior unsecured equity linked (the “Notes”).

Approvals The CMA has approved the public offering and listing of the Notes on the FISMS of the NSE.

As a matter of policy, the CMA assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Information Memorandum. Approval of the Note Issue and/or listing is not to be taken as an indication of the merits of Notes or the Issuer.

The NSE has authorised the Issuer to list the Notes on the FISMS. The Notes have not been and will not be registered or issued under any jurisdiction outside Kenya. The NSE assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed or referred to in this Information Memorandum. Admission to the FISMS of the NSE is not to be taken as an indication of the merits of the Notes or the Issuer.

The Notes will be issued in book entry form as a dematerialized security under section 24 of the Central Depositories Act. The sale or transfer of Notes by Noteholders will be subject to the rules of the NSE, and where applicable, the CDSC Rules, the Terms and Conditions of the Notes and the provisions of the Agency Agreement. The register for the Notes will be the record of depositors maintained by the Central Depository and Settlement Corporation (“CDSC”) in accordance with the Central Depositories Act.

There are currently no restrictions on the sale or transfer of Notes under Kenyan law. In particular, there are no restrictions on the sale or transfer of Notes by or to non-residents of Kenya.

Responsibility The Directors whose names appear on page 17 of this Information Memorandum accept responsibility for the information contained in this Information Memorandum. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this Information Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors, having made all reasonable enquiries, confirm that this Information Memorandum contains or incorporates all information which is material in the context of the Note Issue, that the information contained or incorporated in this Information Memorandum is true and accurate in all material respects and is not misleading in any material respect, that the opinions and the intentions expressed in this document are honestly held and that there are no other factual omissions which would make this document, or any such information or expression of any such opinions or intentions, misleading in any material respect and that all proper enquiries have been made to verify the foregoing.

Important Notices The Joint Lead Transaction Advisers and the other advisers to the Issue have relied on the information provided by the Issuer and the Issuer’s professional advisers and have not verified the information contained in this Information Memorandum. Accordingly, the Joint Lead Transaction Advisers and the other Advisers to the Issue make no representations as to the accuracy or completeness of the information contained in this Information Memorandum. The Joint Lead Transaction Advisers and the other agents and advisers to the Issue do not accept any liability or responsibility in relation to information contained in this Information Memorandum.

Neither this Information Memorandum nor any other information supplied in connection with the Notes is intended to provide the 2 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

complete basis of any credit or other evaluation, nor should it be considered as a recommendation by the Joint Lead Transaction Advisers or the other agents or advisers to the Issue that any recipient of this Information Memorandum or any other information supplied in connection with this Note Issue should subscribe for or purchase the Notes. Each investor contemplating subscribing for or purchasing the Notes should make their own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness of the Issuer. Investors are advised to consult their professional advisers before making an investment decision. The attention of prospective investors is drawn to the Risk Factors set out in Section 15 of this Information Memorandum. The delivery of this Information Memorandum does not at any time imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Notes is correct as of any time subsequent to the date indicated in the document containing the same.

No person has been authorized to give any information or make any representation other than those contained in this Information Memorandum and if given or made, such information or representation should not be relied upon as having been authorized by or on behalf of the Issuer, the Joint Lead Transaction Advisers or the other advisers and Agents to the Note Issue.

Selling Restrictions The Notes may not be offered or sold, directly or indirectly, and neither this document nor any other supplemental Information Memorandum or any prospectus, form of application, advertisement, other offering material or other information relating to the Issuer or the Notes may be issued, distributed or published in any jurisdiction, other than Kenya.

The distribution of this Information Memorandum and the offer for subscription or sale of the Notes may be restricted by law in certain jurisdictions. Persons into whose possession this Information Memorandum or any Notes may come must first inform him or herself about and observe any such restrictions.

Supplemental Information Memorandum The Issuer will, for so long as any Note remains outstanding and listed on any exchange, publish a supplement to the Information Memorandum where there has been: (a) a material adverse change in the condition (financial or otherwise) of the Issuer; or (b) any modification of the terms of the Note Issue which would then make the Information Memorandum inaccurate or misleading. The Issuer shall seek the prior approval of the CMA in connection with any amendment or supplement to this Information Memorandum and the Issuer shall, in addition, supply to the Joint Lead Transaction Advisers and other Agents and the CMA such number of copies of such supplement to this Information Memorandum as the Joint Lead Transaction Advisers and other advisers and agents and the CMA may reasonably require or as may be required to be provided by law. If the terms of the Issue are modified or amended in a manner which would make this Information Memorandum, as supplemented, inaccurate or misleading, a new Information Memorandum will be prepared by the Issuer after seeking the approval of the CMA and the NSE.

Forward Looking Statements Some statements in this Information Memorandum may be deemed to be “forward-looking statements”. Forward-looking statements include statements concerning the Issuer’s plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward-looking statements. When used in this Information Memorandum, the words “anticipates”, “estimates”, “believes”, “intends” “plans”, “may”, “will”, “should” and any similar expressions are used to identify forward-looking statements. The Issuer has based these forward-looking statements on the current view of its Board of Directors with respect to future events and financial performance. These views reflect the best judgement of the Issuer’s Board of Directors but involve uncertainties and are subject to certain risks the occurrence of which could cause actual results to differ materially from those predicted in the Issuer’s forward-looking statements and from past results, performance or achievements. Although the Issuer believes that the estimates and the projections reflected in its forward-looking statements are reasonable, if one or more of the risks or uncertainties materialise or occur, including those which the Issuer has identified in this Information Memorandum, or if any of the Issuer’s underlying assumptions prove to be incomplete or incorrect, the Issuer’s actual results of operations may vary from those expected, estimated or projected.

These forward-looking statements apply only as at the date of this Information Memorandum. Without prejudice to any requirements under Applicable Laws and regulations, the Issuer expressly disclaims any obligations or undertaking to disseminate after the date of this Information Memorandum any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based. A prospective purchaser of the Notes should not place undue reliance on these forward-looking statements. Information Memorandum 3 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Rounding Some numerical figures included in this Information Memorandum have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain figures may not be an arithmetic aggregation of the figures that preceded them.

The Issuer will provide, free of charge, to each person to whom a copy of the Information Memorandum has been delivered, upon request of such person, a copy of any of the documents deemed to be incorporated herein by reference, unless such documents have been modified or superseded.

Requests for such documents should be directed to: Centum Investment Company Limited 5th Floor International House Mama Ngina Street P.O. Box 10518-00100 Nairobi GPO

For the kind attention of the Company Secretary. The information may also be obtained from the Issuer’s website: www.centum.co.ke.

Legal Adviser’s Opinion In compliance with disclosure requirement under disclosure F.08 of the Public Offer Regulations, Coulson Harney, the Legal Advisers, have given and not withdrawn their written consent to the inclusion in this Information Memorandum of their Legal Opinion (attached as Appendix 20.1), in the form and context in which the Legal Opinion appears and the references to their names, and have authorised the contents of the said Legal Opinion.

Reporting Accountants’ Opinion In compliance with disclosure requirement under disclosure F.08 of the Public Offer Regulations, PricewaterhouseCoopers, the Reporting Accountants, have given and not withdrawn their written consent to the inclusion in this Information Memorandum of their statements (attached as Appendix 20.2), in the form and context in which their statements appear and the references to their names, and have authorised the contents of the said statements.

THIS INFORMATION MEMORANDUM HAS BEEN APPROVED BY THE BOARD OF DIRECTORS OF CENTUM INVESTMENT COMPANY LIMITED AND HAS BEEN ISSUED IN COMPLIANCE WITH THE REQUIREMENTS OF THE CAPITAL MARKETS ACT (CAP 485A), THE CAPITAL MARKETS (SECURITIES) (PUBLIC OFFERS, LISTING AND DISCLOSURES) REGULATIONS, 2002, THE RULES OF THE NAIROBI SECURITIES EXCHANGE LIMITED AND THE COMPANIES ACT (CAP 486).

James Mworia Fred Murimi Director Corporate Affairs Director & Group Company Secretary 4 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2. EXECUTIVE SUMMARY

Centum is one of East Africa’s largest1 quoted investment companies with total assets of Kes.36.8 billion as at 31 December 2014 and managing an additional Kes.140 billion of third party funds, through its fund management subsidiaries, Genesis Kenya Investment Management Limited and Nabo Capital Limited.

Centum’s vision is “To be Africa’s foremost investment channel”

Centum works towards this vision by playing the role of a creator of investment grade opportunities. Within the strategy period 2014/19, Centum will focus its development activities in eight key sectors: (i) financial services, (ii) fast moving consumer goods (“FMCG”), (iii) real estate (iv) power (v) agriculture, (vi) education, (vii) healthcare and (viii) information communication technology (“ICT”). The decision to focus on these sectors was informed by the size of the market, growth potential and our ability to develop and build Centum’s capabilities in the development of investment grade assets.

Within the sectors, we look to develop opportunities of scale and attract third party investors to participate in high quality investment grade opportunities. By way of illustration, Centum has successfully executed this strategy in the development of its Two Rivers real estate project, which has attracted Kes.6.75 billion of equity capital and an additional Kes.7.2 billion of debt capital.

Focus on the eight sectors as highlighted below is a key theme of our 2014/19 strategy. Other themes for the strategy period are highlighted below. • Delivery of market beating returns. In this regard we have set an annualized return target of 35% over the strategy period • Scale up of the Group by growing Centum’s total asset value to Kes 120 Billion by 2019 and total Assets under management(AUMs) to Kes 720 Billion • Building the Centum brand by delivering to promise through people hence developing teams with sector expertise • Management of operating costs at below 2% of total assets

In the following sections of the executive summary, we highlight four (4) key points: (1) Our track record of delivery. (2) The current Kes.6 billion issue of debt will be a component of the funding to be applied to the development of proprietary opportunities that are in the deal pipeline that we have created; (3) Centum has an unutilized debt carrying capacity: and (4) Centum has strong cash flows to service the current and new debt.

2.1. Track record of delivery

2.1.1. A review of performance against our 2009/14 strategic targets.

During the strategy period 2009/14, we defined our business as an investment channel that sought to provide investors access to an otherwise inaccessible, quality and diversified portfolio of investments. To this end we focused on five strategic objectives. i. To deliver a return on shareholder funds consistently above market returns. Prior to this time Centum’s returns were strongly correlated to the NSE; ii. To scale up assets under management with a target of Kes 30 Billion by 2014 from Kes 6 Billion in 2009. iii. To increase our geographical footprint to the rest of Africa with a target of at least 50% of the portfolio outside Kenya; iv. To enhance Centum’s brand by developing processes, systems, controls and human capital to ensure the company would consistently deliver to its promises; v. To maintain portfolio costs at below 2.5% of assets under management.

1Nairobi Securities Exchange Limited Market Capitalisation stock data Information Memorandum 5 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Our performance against the above objectives is highlighted below. i. Delivery of market beating returns We have over the last 5 years (the 2009-2014 strategy period) delivered an average return of 33% per annum. This performance represented a 19% outperformance to the NSE 20 Share Index and a 19% outperformance against to the MCSI Frontier Market index.

The tables below highlight the performance of Centum against the MCSI Frontier Market index in United States Dollars (USD):

The table below highlights the performance of Centum against the NSE 20 share index in Kenya Shillings (KES): 6 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The table below highlights Centum’s book value against the Market Capitalisation.

ii. Growth in assets under management Centum’s portfolio grew by Kes. 27.8 Billion from Kes. 9 Billion in March 2010 to Kes. 36.8 Billion in December 2014. Total assets under management stood at Kes 177 Billion in December 2014 representing a 19.5 times growth since March 2010.

iii. Geographical and asset class diversification During the strategy period 2009/14, the diversification target was to have 50% of the portfolio outside of Kenya. We progressively increased our exposure outside of Kenya from less than 1% as at March 2010 to 19% as at March 2014. In line with our mission of providing access to inaccessible portfolio, our exposure to private equity and real estate increased from 59% to 83% at the close of that period.

iv. Brand at Centum is defined as consistent delivery to promise. Throughout the 2009/14 strategy period we built capacity in the organization through the recruitment of competent and experienced team members as well as through leadership development. As a result of the strong team, we were able to deliver over and above our ambitious strategy targets.

v. The cost to asset ratio (excluding third party funds) was maintained below 2.3% within the 2009/14 strategy period. Information Memorandum 7 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2.1.2. Our track record in developing investment grade assets and realizing value at significantly higher multiples Over the last six years, Centum has had a lot of success in developing investment-grade opportunities and realizing significant return at expanded multiples on its initial investment. Some examples are highlighted below:

Investment Description Stages Deal Sourcing Centum has developed an extensive network of relationships within the region. This has enabled identification of high-value early stage opportunities and high-potential acquisitions which have delivered significant growth in Centum’s NAV. Examples of such investments are: a) Amu Power – A Gulf Energy/Centum Consortium that won the award of tender to construct a 1,050MW coal-fired power plant in Lamu, Kenya. b) Akiira One Geothermal – Centum is part of the consortium developing Sub-Saharan Africa’s first independent geothermal development, which when complete is expected to generate 140MW. c) Two Rivers – A 100 acres development in Nairobi, acquired in 2010. d) KRep Bank – Acquisition of 65.7% shareholding in the Bank in 2014. e) PlatCorp – Acquisition of 35% shareholding in PlatCorp Holdings in 2012. PlatCorp Holdings is the holding company of Platinum Credit Kenya, Platinum Credit Uganda and Platinum Credit Tanzania. f) Genesis Kenya – Acquisition of 73.35% shareholding in Kenya’s second largest2 fund manager in 2013. Value Addition Through active execution of value creation strategies, Centum has improved the underlying performance of its portfolio companies, which has resulted in an increase in profit attributable to Centum.

Value Centum has been able to secure critical and well timed value realizations from its portfolio that have enhanced Realization return. a) Carbacid Investments - Acquired 23% of the company in 2009 for USD 5M at a time when the company’s shares had been suspended indefinitely from trading on the NSE. Centum exited in 2010 a year later at more than 2x money back. b) UAP - Invested in the year 2001, drove the expansion of the business in to South Sudan, Rwanda, DRC and Tanzania. In 2012 drove the USD 50M capital raise from 3 PE funds at 10x Centum’s entry valuation. Divested from the business in 2015 at 32x entry valuation. c) Two Rivers – Centum invested US$20M in acquiring 100 acres of land in Nairobi in 2010. Master planned secured approvals and attracted $75m in equity capital at significant value uplift to Centum’s capital. d) RVR - Exited the underperforming asset in a secondary buyout to two PE funds in 2009, thereby recording a gain of 4.4 times the carrying value of the investment.

2Retirement Benefits Authority Industry Performance Report, December 2013 to June 2015, published on 31 March 2015 8 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2.2. The Kes. 6,000,000,000 issue of debt will be a component of the funding applied to develop proprietary opportunities Centum has developed a pipeline of attractive investment opportunities in the energy, financial services, real estate and agriculture sectors. The table below highlights the deal pipeline.

Table 1: Deal Pipeline Sector Target Companies Nature of Description Deal value Investment (Kes. M) Financial Services K-Rep Bank Limited Equity Acquisition of majority shareholding of 3,600 investment* K-Rep Bank and additional investment in the Bank to increase its core capital so as to enable the Bank to increase its ability to attract deposits as well as increase its loans and advances. Energy (i) Akiira One Geothermal Equity Finance Centum’s equity investment in 2,100 Limited investment Centum’s current opportunities in the (ii) Amu Power Limited energy sector. Real Estate Pearl Marina Estates Limited Equity The construction of Phase 1 of the Pearl 1,100 investment Marina Development commenced in March 2015. Phase 1 is estimated to cost Kes 2.75Bn. Centum intends on funding this with 60% debt and 40% equity. Therefore, the equity investment at phase 1 is Kes 1.1Bn. Real Estate Vipingo Development Equity Centum is in the process of acquiring 2,100 Limited Investment 9,646 acres of land in Vipingo at a price of Kes. 180,000 per acre and Vipingo Estates Limited, a subsidiary of Rea Vipingo Plantations Limited, which owns approximately 900 acres of land at approximately Kes. 340 Mn. Quoted private Centum Exotics Equity Increase the proportion of listed 2,000 equity Investment investments held by Centum. Total 10,900

In line with Centum’s capital structure, these opportunities will be financed through a mix of internally generated funds (dividend and interest income, as well as realizations of existing investments) and debt. This is highlighted in the table below. Sources of funding Amount (Kes. M) Internally generated funds (dividends, interest and investment realisations ) 4,978 Debt 5,922 Total 10,900 The debt component of funding will be through the issuance of Kenya Shillings six billion (Kes.6, 000,000,000) senior unsecured fixed rate notes and senior unsecured equity linked notes.

The investment opportunities to be funded by the bond issue are highlighted below: Sector Target Companies Nature of Investment % Bond proceeds (Kes. M) Financial Services K-Rep Bank Limited Equity investment* 60.0 3,600 Energy Akiira One Geothermal Limited Equity investment 35.0 2,100 Amu Power Limited Real Estate Pearl Marina Estates Limited Equity investment 3.7 221 Offer Expenses 1.3 79 Total 100 6,000 *Centum has already made a Kes. 2,355,000,000 investment in K-rep funded by a short-term facility. The proceeds from this Note issue will be applied in refinancing the short-term facility. Information Memorandum 9 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

A. Financial services Centum completed the acquisition of 65.6% shareholding in K-Rep Bank in November 2014. The acquisition was funded through a bridge facility of USD 35 Mn. Centum intends to utilize part of the proceeds of the bond towards refinancing this short-term facility Centum further intends on increasing the capitalization of the bank and has committed to invest an additional Kes 1.2 Billion towards this capitalization. This will allow the bank to attract higher deposits as well as enable the bank to offer more loans and advances.

B. Energy Centum has identified two opportunities in the energy sector. i. Akiira One Geothermal Akiira One Geothermal, founded in 2012, is the first private sector Greenfield geothermal private development in SSA. Centum owns 37.5% of the equity in the project company that is prospecting for geothermal and when complete, it will generate 70MW of geothermal electricity with this being the first phase of the planned total 140MW.

ii. Amu Power Amu Power is Special Purpose Vehicle (SPV) set up by the consortium that was awarded the tender to construct a 1050 MW coal-fired power plant in Lamu County, Kenya. Centum is the lead project equity sponsor in the consortium.

C. Real Estate Pearl Marina Estates Limited (Uganda) owns 385 acres of prime land situated between Entebbe International Airport and Kampala with 4km of lake frontage. The vision of Pearl Marina is to develop a premium world-class water front destination recognized in East Africa and beyond.

Centum has commenced on Phase 1 construction of 102 villas, a gatehouse and supporting infrastructure for the Pearl Marina project. Phase 1 is estimated to cost Kes. 2.75Bn, which will be funded 40% by equity and 60% by debt.

Outcome of development of the proprietary opportunities in the pipeline

With these opportunities to be funded by the issue of additional debt, which are in addition to existing opportunities and current investments that are funded from internally generated funds, Centum’s NAV is set to grow at between 30% to 35% p.a. in the current strategy period (2014-2019) and see Centum’s NAV grow to Kes.120 billion by the close of the period.

2.3. Unutilized debt carrying capacity Centum has a relatively low level of gearing, with debt to shareholder funds ratio at 15% as at 31 March 2015 as shown below: Kes. M 2010 2011 2012 2013 2014 2015 Net Debt (Total debt less cash) - 1,988 678 2,647 4,649 3,763 Gearing 16% 5% 20% 23% 15%

With the current debt issue of Kes.6 billion being fully subscribed, the level of gearing will increase to 31%, which is still relatively low and within Centum’s existing debt covenants of a ceiling gearing ratio of 50%.

The level of gearing at Centum excludes debt at the subsidiary company level. At subsidiary level, project specific funding at no recourse to Centum is procured. Therefore, the value at risk for Centum in relation to the debt at subsidiary levels is limited to the extent of Centum’s equity investment in the respective subsidiary.

2.4. Strong cash flows to service the current and new debt Centum has strong cash flows from dividend, interest and exits from its portfolio of assets. The table below highlights the cash generated from operations over the last six years. With our dual focus on cash return and investment value appreciation, Centum is set to maintain healthy cash flows into the future. Kes. M 2010 2011 2012 2013 2014 Dec 2014 Operating inflows 1,722 2,349 6,619 2,547 4,146 4,112 Operating outflows (199) (305) (309) (380) (463) (565) Cash from Operations 1,523 2,044 6,310 2,167 3,683 3,547 Interest paid 44 148 230 344 660 391 Debt service coverage 34.61 13.81 27.43 6.30 5.58 9.07

A minimal average of 14% of our cash inflows goes towards servicing of operating expenses at Centum Investment Company Limited. 10 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

To better manage our cost structure, we have created operational subsidiaries in the following lines of business:

Business line Operational Subsidiary Real estate - development management and project management Athena Properties Limited Fund management of quoted securities Nabo Capital Limited Shared Services (Finance, HR, ICT, Legal, Company Secretarial, Tax, Risk, Marketing Centum Business Solutions Limited & Communications)

Each of the operating subsidiaries provides services to Centum, its subsidiaries and associates companies at a fee. In addition, they have third party clients from whom additional fees are generated. Each of the subsidiaries have revenues that exceed their cost structure, which means that they do not add to the cost structure of Centum but rather each make a contribution to the bottom line of Centum as they are run as separate businesses.

This therefore means that the bulk of cashflows generated from operations by Centum are available to service additional debt as well as repay our current Kes 4.2 Bn bond in 2017.

Over the period, Centum has maintained debt service coverage way above the bond covenant of 1.5 times.

Centum is rated for credit quality by the Global Credit Rating Company (GCR). Centum received an initial rating of A- in 2012. Its current rating is A for both short term and long term credit quality, well above the minimum investment grade rating.

Forecast debt service capacity Given current cash flows from operations and an assumption of no growth, Centum will still be in a position to adequately service the additional Kes.6 billion debt. This is illustrated below.

Assuming that cash from operations is at the focused Kes 3.2 Bn and an additional annual debt service of approximately Kes 800 million from the bond raise, the debt service coverage will be 2.0 times which is within the bond covenant target.

Kes. M 2015E 2016E Cash from Operations 8,352 2,706 Interest paid 730 1,344 Debt service coverage 11.44 2.01 Minimum debt service coverage ratio 1.5 1.5

CONCLUSION We invite you to partner with Centum in this exciting journey of developing local institutions of scale that will attract foreign and local investors searching for investment-grade assets in this region and will further serve to deepen our capital markets. Information Memorandum 11 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

3. DEFINITIONS AND ABBREVIATIONS 3.1 Definitions Subject Definition Agency Agreement the agreement dated 14 May 2015 between the Issuer and the Fiscal Agent in relation to the Notes Agents the Note Trustee, Registrar and Fiscal Agent or any one of the them and includes any successor agents appointed by the Issuer from time to time in accordance with the Agency Agreement Applicable Laws any laws or regulations (including any foreign exchange rules or regulations) of any governmental or other regulatory authority which may govern the Issue, the Conditions of the Notes and the Notes issued there under in accordance with which the same are to be construed Basis Point or BPS unit that is equal to one hundredth of one per cent (1% of 1/ 100) Business Day a day (other than a Saturday or Sunday or public holiday) when banks in Nairobi are open for ordinary business Capital Markets Act Capital Markets Act (Chapter 485A of the Laws of Kenya) Capital Markets Authority or CMA the Capital Markets Authority set up pursuant to the provisions of Capital Markets Act Centum Centum Investment Company Limited Company Centum Investment Company Limited CD Act Central Depositories Act (Act 4 of 2000) CDS means the central depository system maintained by the CDSC CDSC means the Central Depository and Settlement Corporation Limited established under the CD Act CDSC Account means an account opened and maintained with a Central Depository in accordance with the CD Act and the rules and regulations issued thereunder; CDSC Rules means the operational and procedural rules issued or to be issued by the CDSC with respect to operation of CDS Accounts and trading in immobilised securities; Companies Act the Companies Act (Chapter 486 of the Laws of Kenya) Commencement Date the date upon which the Notes are issued Conditions the terms and conditions in relation to the Note as set out Trust Deed and Section 7.1 of this Information Memorandum Cross-Default any one of the circumstances described in Condition iii(d). Directors the Directors of the Issuer, whose names appear in Section 4 of this Information Memorandum. Due Date in relation to any Unpaid Amount, the date on which that Unpaid Amount fell due for payment (if a scheduled or accelerated payment of interest) or repayment (if a scheduled or accelerated repayment of principal) by Centum in accordance with the terms of the Conditions or the Agency Agreement. Enforcement Notice a notice issued by the Note Trustee to the Issuer pursuant to Section 10 (Terms and Conditions) Condition 13.2 (Acceleration) declaring all amounts payable under the Notes to be immediately due and repayable; and demanding that the Issuer immediately repay the outstanding principal amount of the Notes (together with all accrued interest thereon) 12 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Subject Definition Event of Default any one of the circumstances described in Section (Terms and Conditions) Condition 13.1 (Events of Default). Extraordinary Resolution has the meaning set out in Section 10 (Terms and Conditions) Condition 16 (Meeting of Noteholders) Fair Value It is the amount at which the asset could be bought or sold in a current transaction between willing parties, or transferred to an equivalent party, other than in a liquidation sale Final Due Amount the amount due and owing from Centum under each of the Notes as determined by the Agent on or after the Maturity Date Final Net Asset Value the Net Asset Value, in Kenya Shillings, of Centum as reported in Centum’s Company Statement of Financial Position as at 31st March 2020, subject to adjustments for secondary issue of shares during the tenor of the Notes Fiscal Agent the institution initially appointed by the Issuer pursuant to the conditions of the Agency Agreement Holders the Noteholders and/or the Variable Return Holders (as the case may be) Independent Director a director who: i. has not been employed by Centum in an executive capacity within the last five years; ii. is not associated to an adviser or consultant to the Company or a member of Centum’s senior management or a significant customer or supplier of Centum or with a not-for-profit entity that receives significant contributions from Centum; or within the last five years, has not had any business relationship with Centum (other than service as a director) for which Centum has been required to make disclosure; iii. has no personal service contract(s) with Centum, or a member of Centum’s senior management; iv. is not employed by a public listed company at which an executive officer of Centum serves as a director; v. is not a member of the immediate family of any person described above; or vi. has not had any of the relationships described above with any affiliate of Centum. Information Memorandum this Information Memorandum dated 14 May 2015 Initial Net Asset Value the Net Asset Value, in Kenya Shillings, of Centum as reported in Centum’s Statement of Financial Position as at 31 December 2014 Insolvency Event (a) The completion of the winding-up or liquidation of Centum with it ceasing to exist; or (b) Any of the following which has the effect of permanently preventing the payment or repayment by Centum of all of its liabilities under the Notes and the Agency Agreement: i. a war, revolution, riot or other similar event in Kenya; ii. an earthquake, volcanic eruption, tidal wave or other act of God; or, iii. action taken by the GoK to intervene in the business of Centum Interest the amount of interest payable in respect of each Principal Amount of the Notes as determined in accordance with Condition 6 (Interest) of Section 10(Terms and Conditions) Interest Payment Date the dates which interest is payable as Condition 6 (Interest) of 10 (Terms and Conditions) Interest Rate means 13% for the Senior Unsecured Fixed Rate Note and 12.5% for the Senior Unsecured Equity Linked Note Issue the total sums raised from the Notes Issue and Paying Agent the Fiscal Agent Issue Price the price at which the Notes are issued by the Issuer (being, at the election of the Issuer, at par or at a discount to, or premium over their nominal amount as specified) Issuer Centum Investment Company Limited Joint Lead Arrangers or Joint Lead Equity Investment Bank Limited, Dyer & Blair Investment Bank Limited Transaction Advisers Kenya The Republic of Kenya and “Kenyan” shall be construed accordingly Information Memorandum 13 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Subject Definition Kes or Shilling Kenya Shillings being the lawful currency of the Republic of Kenya Late Payment Rate Interest Rate plus a margin of 2.0% per annum Liabilities or Liability any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding or other liability whatsoever (including, without limitation, in respect of taxes, duties, levies, imposts and other charges) and including any value added tax or similar tax charged or chargeable in respect thereof and legal fees and expenses on a full indemnity basis Maturity Date 8 June 2020 Month a period from and including a particular day in a calendar month to and excluding the numerically corresponding day in the next calendar month, except that: (a) (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; (b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and (c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end NAV Net Asset Value calculated as total assets of a company less all its liabilities including loan capital and preference shares, divided by the number of outstanding shares. NAV Upside difference between the Initial Net Asset Value and the Final Net Asset Value Note Documents the Trust Deed and the Agency Agreement Note Issue means the issue by the Company of medium term notes denominated in Kenya Shillings in an aggregate amount of up to Kenya Shillings six billion (Kes.6,000,000,000). Note Trustee the person appointed to act as such in relation to the Note in pursuant to the Agency Agreement Noteholder a person in whose name a Note is registered in the relevant Register as at the relevant date or, in the case of joint holders, the first-named thereof Notes Kenya Shillings six billion (Kes. 6,000,000,000) 13% Senior Unsecured Fixed Rate Notes and 12.5% Senior Unsecured Equity Linked Notes issued pursuant to this Information Memorandum and the Agency Agreement. Principal Amount the nominal amount of each Note credited in the CDSC Account in respect of that Note Public Offer Regulations Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 Record Date in the case of payments of Interest or Principal, 1700 hrs Nairobi time 15 calendar days before the relevant date for payment or such other date as may be agreed between the Trustee (on behalf of the Noteholders), Centum and the relevant Agents Redemption Price Payment at the Maturity Date for the ELN Register means the respective official records of Noteholders and the Variable Return Holders in the CDS as maintained by the CDSC pursuant to section 25 of the CD Act; Registrar the person appointed by the Issuer or acting as registrar pursuant to the Conditions and the Agency Agreement Repay, Redeem and Pay shall each include both the others and cognate expressions shall be construed accordingly Security a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect Senior Unsecured Equity Linked a Note which is issued pursuant to the Agency Agreement and this Information Note Memorandum whose return comprises Interest and a variable return based on the NAV Upside as provided in Condition 7(Computation of Variable Return) of Section 10 (Terms and Conditions) Senior Unsecured Fixed Rate Note a Note which is issued pursuant to the Agency Agreement and this Information Memorandum whose return comprises of Interest to be calculated and paid on a fixed rate basis Shareholder Funds a firm's total assets minus its total liabilities 14 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Subject Definition Specified Office in relation to any Note Agent, either the office identified with its name in the Conditions or any other office notified to any relevant parties pursuant to the Agents agreement with the Issuer Strategy Period Either of Centum’s strategy periods between years 2009-2014 and 2014-2019 Subsidiary in respect of any person, company or corporation, any other person, company or corporation who is controlled, directly or indirectly, by the first-mentioned person, company or corporation or more than half the issued share capital of which is beneficially owned, directly or indirectly, by the first-mentioned person, company or corporation. or which is a subsidiary of another subsidiary of the first-mentioned person, company or corporation and, for these purposes, a company or corporation shall be treated as being controlled by another person, company or corporation if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body Successor in relation to the Agents, such other or further person, as may from time to time be appointed as an Agent Tax any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) Total Assets Centum’s portfolio of investments Trust Deed the trust deed dated 14 May 2015 between Issuer and Ropat Trust Company Limited in relation to the Notes Unpaid Amount that part of: (a) a scheduled payment of Interest under the Notes; or (b) a scheduled repayment of Principal under the Notes; or (c) a scheduled repayment of the Variable Return; or (d) any repayment of Principal by way of early redemption; or (e) the outstanding Principal Amount of the Notes (together with all interest thereon) or outstanding Variable Return following delivery of an Enforcement Notice in accordance with the Agency Agreement, which, in each case, is not paid by Centum to the Fiscal Agent in accordance with the Agency Agreement by the applicable Due Date US$ or USD or Dollars or $ United States of America dollars being the lawful currency of the United States of America Variable Return the variable return in relation to the equity linked component of the ELN as provided in Condition 7(Computation of Variable Return) of Section 10 (Terms and Conditions) Variable Return Holder a person in whose name a Variable Return is registered in the relevant Register as at the relevant date or, in the case of joint holders, the first-named thereof Written Resolution a resolution in writing signed by or on behalf of holders of Notes who for the time being are entitled to receive notice of a meeting in accordance with the provisions of the Trust Deed and who together hold not less than three-quarters in value of the principal amount of the Notes then outstanding whether contained in one document or several documents in like form, each signed by or on behalf of one Information Memorandum 15 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

3.2 Abbreviations

Subject Definition AUM Assets Under Management which include total assets and third party funds BA Bachelors of Arts Bcom Bachelors of Commerce BSc Bachelors of Science Bn or bn Billion CAIA Chartered Alternative Investment Analyst CAGR Compounded Annual Growth Rate CBK Central Bank of Kenya CFA Chartered financial Analyst CIMA Chartered Institute of Public Finance and Accountancy CMA Capital Markets Authority CDS Central Depository System CFA Chartered Financial Analyst COD Commercial Operating Date CPA (K) Certified Public Accountant of Kenya CPS (K) Certified Public Secretary of Kenya CIMA Chartered Institute of Management Accountants EFT Electronic Funds Transfer ELN Senior Unsecured Equity Linked Note FCCA Fellow of the Association of Chartered Certified Accountants FMCG Fast moving consumer goods FISM Fixed Income Securities Market Segment FRN Senior Unsecured Fixed Rate Note FTE Full time employee GDP Gross Domestic Product GoK Government of Kenya ICDC Industrial Commercial Development Corporation ICT Information and communications technology IFRS international accounting standards within the meaning of the IAS Regulations 1606/2002 ICPAK Institute of Certified Public Accountants of Kenya IMF International Monetary Fund IRR Internal Rate of Return JSD Doctor of Juridical Science KenGen Kenya Electric Generating Company Limited Km Kilometre KPLC Kenya Power and Lighting Company Limited LLB Bachelor of Laws LLM Master of Laws MA Master of Arts MBA Master Business Administration Mn Million MW Megawatts NAV Net Asset Value calculated as total assets of a company less all its liabilities including loan capital and preference shares, divided by the number of outstanding shares. 16 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Subject Definition NAV Upside difference between the Initial Net Asset Value and the Final Net Asset Value NSE Nairobi Securities Exchange Limited PE Private Equity Ppp Public Private Partnership PS Permanent Secretary PhD Doctor of Philosophy QPE Quoted Private Equity RE&I Real Estate and Infrastructure REIT Real Estate Investment Trust RTGS Real Time Gross Settlement sq ft Square feet SQM or sq m Square metres SSA Sub Sahara Africa USA United States of America USE Ugandan Securities Exchange Limited Information Memorandum 17 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

4. SUMMARY OF CORPORATE INFORMATION

Name of Issuer: Centum Investment Company Limited Registration Number C8/67 Registered Office and Head Office International House Mama Ngina Street P. O. Box 10518 – 00100 Nairobi, Kenya Tel: +254 (20) 2286000 Fax: +254 (20) 2223223 Mobile: +254 722 205339 Contact Persons James Mworia Group Chief Executive Officer Email: [email protected]

Risper Mukoto Managing Director; Centum Business Solutions Limited Email: [email protected]

Fred Murimi Corporate Affairs Director & Company Secretary Email: [email protected]

BOARD OF DIRECTORS OF THE COMPANY Name Position Address James Muguiyi Chairman P.O. Box 10518, 00100 Nairobi, Kenya Non Executive Director Dr. James McFie Deputy Chairman P.O. Box 10518, 00100 Nairobi, Kenya Independent Director James Mworia Chief Executive Officer P.O. Box 10518, 00100 Nairobi, Kenya Executive Director Christopher Kirubi Non Executive Director P.O. Box 10518, 00100 Nairobi, Kenya Peter Kimurwa Non Executive Director P.O. Box 10518, 00100 Nairobi, Kenya (Alternate Director representing ICDC) Laila Macharia Independent Director P.O. Box 10518, 00100 Nairobi, Kenya Margaret Byama Non Executive Director P.O. Box 10518, 00100 Nairobi, Kenya (Alternate Director representing the PS Ministry of EA Affairs, Commerce & Tourism) Imtiaz Khan Independent Director P.O. Box 10518, 00100 Nairobi, Kenya Henry Njoroge Independent Director P.O. Box 10518, 00100 Nairobi, Kenya 18 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

OTHER CORPORATE INFORMATION

Secretary Fred Murimi Company Secretary/ Corporate Affairs Director International House Mama Ngina Street P.O. Box 10518-00100 Nairobi, Kenya

Legal Advisers Coulson Harney 5th Floor, ICEA Lion Centre West Wing Riverside Park Chiromo Road P.O. Box 10643-00100 Nairobi, Kenya

Auditor PricewaterhouseCoopers PwC Tower Waiyaki Way/Chiromo Road Westlands P. O. Box 43963-00100 Nairobi, Kenya

Registrars Custody and Registrars Services Limited 6th Floor, Bruce House Standard Street P.O. Box 8484-00100 Nairobi, Kenya

Bankers Co-operative Bank of Kenya Limited Co-operative Bank House Haile Selassie Avenue P.O. Box 48231–00100 Nairobi, Kenya

Commercial Bank of Africa Limited International House Mama Ngina Street P.O. Box 30437–00100 Nairobi, Kenya Information Memorandum 19 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

5. ADVISERS TO THE ISSUER ON THE NOTE ISSUE Joint Lead Transaction Advisers

Equity Investment Bank Limited Dyer & Blair Investment Bank Limited 6th Floor, Equity Centre 10th Floor, Pension Towers Hospital Road Loita Street Upperhill. P.O. Box 45396-00100 P.O. Box 75104-00200 Nairobi, Kenya Nairobi, Kenya Tel:+254 20 3240104 Tel:+254 719 056 501 Fax: 020 3240 114 Fax: 020-2737276 Contact Person: Paul M. Nyaga Contact Person: Irungu Nyakera Email: [email protected] Email: [email protected] Placing Agents and Joint Sponsoring Stock-brokers Equity Investment Bank Limited Dyer & Blair Investment Bank Limited 6th Floor, Equity Centre 10th Floor, Pension Towers Hospital Road Loita Street Upperhill. P.O. Box 45396-00100 P.O. Box 75104-00200 Nairobi, Kenya Nairobi, Kenya Tel:+254 20 3240104 Tel:+254 719 056 501 Fax: 020 3240 114 Fax: 020-2737276 Contact Person: Paul M. Nyaga Contact Person: Irungu Nyakera Email: [email protected] Email: [email protected]

Receiving Banks K-Rep Bank Limited Co-operative Bank of Kenya Limited K-Rep Center Co-operative House Wood Avenue, Haile Selassie Kilimani P.O. Box 48231 - 00100 P.O. Box 25363-00603 Nairobi, Nairobi Nairobi, Kenya Tel: : +254 20 3906000/1-7 Tel: +254 20 3276000 Fax : +254 20 219831 Contact Person: Judy Githae Email: [email protected] Contact Person: Jacqualine Waithaka Email: [email protected]

Reporting Accountant Legal Adviser PricewaterhouseCoopers Limited Coulson Harney PwC Tower 5th Floor, ICEA Lion Centre, West Wing Waiyaki Way/Chiromo Road Riverside Park Westlands Chiromo Road P. O. Box 43963-00100 P.O. Box 10643-00100 Nairobi, Kenya Nairobi, Kenya Tel: +254 20 2855525 Tel: +254 20 289 9000 Fax: +254 20 2855001 Fax: +254 20 2899100

Contact: Richard Njoroge Contact: Kamami Christine Mweti Email: [email protected] Email: [email protected] 20 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Fiscal Agent and Registrar Note Trustee Custody and Registrars Services Limited Ropat Trust Company Limited 6th Floor, Bruce House Kenya Re Towers, off Ragati Road Standard Street P.O. Box 1243, 00100 P.O. Box 8484-00100 Nairobi, Kenya Nairobi, Kenya Tel: +254 20 2723322 Tel : +254 20 2230518 Fax: +254 20 2723474 Fax: +254 20 2211773 Contact Person: Patrick Gacheru Contact Person: Kerry-Anne Makatiani Email: [email protected] Email: [email protected] Information Memorandum 21 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

6. TIMETABLE

The timetable for the Note Issue is as provided below:

Table 1: Timetable Event Date 1. Application Lists Open Monday, 18, May 2. Application Lists Close Friday, 5 June 3. Date of Allocation Thursday, 11 June 4. Announcement Date to Investors Thursday, 11 June 5. Settlement Date Monday, 15 June 6. Announcement of results to CMA Wednesday, 17 June 7. Public Announcement Friday, 19 June 8. Crediting of notes to CDS accounts Monday, 22 June 9. Listing on NSE and Commencement of Trading Tuesday, 30 June

These dates are subject to change and are indicative only. Centum reserves the right to amend this indicative timetable, a supplementary timetable will be issued. In particular, Centum reserves the right, to close the Offer early, to extend the Closing Date or to withdraw the Offer. Any extension of the Closing Date will have a consequential effect on the issue date. Any early or late closure decision will require the approval from CMA. 22 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

7. SUMMARY OF THE OFFER

7.1 Summary of the Proposed Notes

The following summary does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Information Memorandum. Words and expressions defined in “Description of the Notes” below shall have the same meanings in this summary of the offering.

Table 2: Summary of the Note

1. Issuer Centum Investment Company Limited. 2. Joint Lead Transaction Advisers Dyer & Blair Investment Bank Limited Equity Investment Bank Limited 3. Joint Sponsoring Stock Brokers Dyer & Blair Investment Bank Limited and Placing Agents Equity Investment Bank Limited 4. Registrar/Fiscal Agent Custody and Registrars Services Limited 5. Note Trustee Ropat Trust Company Limited 6. Legal Adviser Coulson Harney 7. Reporting Accountant PricewaterhouseCoopers 8. Receiving Banks Co-operative Bank of Kenya Limited K-Rep Bank Limited 9. Issue Description Up to Kenya Shillings six billion (Kes.6,000,000,000) comprising Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes both due 8 June 2020 and the subsequent listing of the Notes on the FISM of the NSE. The Senior Unsecured Fixed Rate Notes are issued with a fixed interest rate of 13%. The Senior Unsecured Equity Linked Notes are made up of two components: a) a fixed rate bond of 12.5% (the “12.5% Coupon”); and b) an equity linked component (the “Variable Return”), the value of which will be determined by the growth of the Issuer’s NAV upto a maximum of twenty five per cent (25%) appreciation of the Initial NAV and which will earn the coupon holders up to ten (10%) of the Principal Amount if the maximum twenty five per cent (25%) NAV appreciation is achieved. The Variable Return will be issued and traded as units. It will be issued in the ratio of 1:1 with respect to the Equity Linked Notes. The Variable Return will be detachable and transferable at the option of the Noteholder in accordance with the Conditions. The Variable Return does not constitute a Note and its holder shall therefore not be deemed to be a Noteholder by mere holding of the Variable Return. 10. Issuance in Series The Issuer will issue Senior Unsecured Fixed Rate Notes in one series and Senior Unsecured Equity Linked Notes in another series. Within each series, the Issuer may issue Notes subject to terms identical to those series Notes. 11. Status of Senior Unsecured The Senior Unsecured Fixed Rate Notes constitute Senior, unsubordinated, unsecured and Fixed Rate Notes unconditional obligations of the Issuer ranking paripassu among themselves and with all its other present and future unsecured obligations (other than any secured debt obligations and those preferred by mandatory provisions of law). Information Memorandum 23 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

12. Status of Senior Unsecured The Senior Unsecured Equity Linked Notes constitute Senior unsubordinated, unsecured, Equity Linked Notes direct, and unconditional obligations of the Issuer ranking paripassu among themselves and with all its other present and future unsecured obligations (other than any secured debt obligations and those preferred by mandatory provisions of law). 13. Allotment of Notes A maximum of Kes 6,000,000,000 (six billion, Kenya Shillings) in Notes will be made available for subscription. The Issuer and the Joint Lead Arrangers will determine the allotment of Notes at their sole discretion. Of particular note however is that FRN applications will be given preference over ELN applications. Centum reserves the right, whether the Issue is over-subscribed or not, to reject any application in whole or in part and may therefore allot less than the amount applied for. In the event that the total number of Notes subscribed for by applicants is equal to or less than the Issue Amount, all subscriptions will be allocated in full as per the number of Notes applied for by applicants. Successful applicants will be notified by the Placing Agent of the amount allotted to them no later than the date and time specified in Section 6 (Timetable). 14. Currency The Notes will be denominated in Kenya Shillings (“Kes”). 15. Issue Price The Notes will be issued on a fully paid basis at par. 16. Tenor Five years. 17. Purpose The proceeds of the Notes will be used for investments in the following sectors: • Financial services; • Energy; • Real Estate. 18. Senior Unsecured Notes Fixed 13.0% per annum payable semi-annually in arrears on 100% of each specified denomination Interest Rate of the principal amount. 19. Senior Unsecured Equity 12.5% per annum payable semi-annually in arrears on 100% of each specified denomination Linked Notes Fixed Interest of principal amount. Rate 20. Late Payment Interest Rate The interest rate plus 2% per annum. 21. Cross Default Cross-default: any present or future indebtedness of Centum in connection with moneys borrowed or raised exceeding in aggregate Kenya Shillings five hundred million (Kes.500,000,000/=) (or its equivalent): i) Is not satisfied when due, or at the end of any originally applicable grace period; or ii) Becomes prematurely payable following delivery of an Enforcement Notice by the Note Trustee to Centum, as the case may be, as a result of a default by Centum except to the extent in any instance that the existence or enforceability of the relevant obligation is being disputed in good faith by it by appropriate proceedings; or iii) Any encumbrance over any assets of Centum or any Subsidiary of Centum becomes enforceable. 22. Interest Payment Frequency Semi-annually in arrears. 23. Day Count Fraction Actual/364 24. Interest Commencement Date The Interest payment commencement date shall be six (6) months after the Settlement Date 25. Interest Periods Each period commencing on (and including) an interest payment date (or the interest commencement date) and ending on (but excluding) the next, or first, interest payment date (as the case may be). 26. Minimum success level 50% of the aggregate issue amount for the Issue 27. Final Maturity • The final maturity of the Senior Unsecured Fixed Rate Notes will be five (5) years after the Settlement Date • The final maturity of the Equity Linked Notes will be five (5) years after the Settlement Date 24 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

28. Redemption and Purchase Condition 9 (Redemption and purchase).

Redemption at Maturity Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Due Amount on the Maturity Date.

Redemption at the option of the Issuer The Issuer may upon giving not less than thirty (30) and not more than sixty (60) days’ prior notice in writing to the Noteholders and the Trustee in accordance with condition 15 (Notices) to redeem all or some of the Senior Unsecured Fixed Rate Notes outstanding; The Early Redemption Notice shall specify the date on which the redemptions is to be effected which date shall be an Interest Repayment or Principal Repayment Day; then and upon expiration of such notice, the Issuer shall redeem such Notes.

If the Issuer redeems only some of the Senior Unsecured Fixed Rate Notes, the partial redemption shall be of an aggregate principal amount of not less than Kenya Shillings one billion (Kes 1,000,000,000) and integral multiple of Kenya Shillings one hundred million (Kes 100,000,000).

Senior Unsecured Fixed Rate Notes may only be redeemed after the third anniversary of their issuance and at a premium of 1% (one per cent).

Senior Unsecured Equity Linked Notes will be eligible for early redemption, in which case the Final NAV will be calculated based on the Issuer’s latest publicly issued financial statements, being either half year accounts or full year accounts as the case may be.

Purchases The Issuer may at any time purchase Notes at any price in the open market or otherwise, subject to any approvals required from the CMA or the NSE or to any other restrictions under applicable law. In the event of the Issuer purchasing Notes, such Notes may be held or resold, or at the discretion of the Issuer, cancelled. All Notes which are redeemed or purchased by or on behalf of the Issuer may be cancelled by giving notice to that effect to the Registrar, the Fiscal Agent and the CDSC 29. Form of the Notes The Notes will be registered in the CDS Account of each Noteholder held with the CDSC in accordance with the CD Act. 30. Denomination of the Notes The Notes will be issued in denominations of Kes 100,000 and integral multiples of Kes 100,000 in excess thereof, subject to a minimum subscription amount of Kes 1,000,000. 31. Security The Notes shall be unsecured. 32. Payment All amounts payable by the Issuer in respect of each Note or Variable Return (as the case may be) shall be paid by EFT or RTGS transferred to the account of the Holder as set forth in the relevant Register maintained by the Registrar, made available to the Holders or a person nominated by the Holder and sent to the registered address of the Holder or such person. 33. Compliance The placement and transfer of the Notes shall comply with the following: • the requirements of the Companies Act with respect to issuance and subscription; • the requirements of the CMA with respect to issuance and subscription; • the requirements of the CMA and NSE with respect to the listing of the Notes on the NSE; • the CMA and NSE reporting requirements from time to time; and • any other applicable provisions of the law in Kenya relating to companies and debt capital markets that is in existence or that may be passed before the issue of the Notes or during the pendency of the issue of the Notes. Information Memorandum 25 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

34. Events of default Condition 13 (Events of Default)

Other than as a result of a Force Majeure Event, each of the events set out below is an Event of Default: (a) Non-payment: Centum fails to pay any amount due in respect of all the Notes or some of the Notes or the Variable Return on the Due Date for payment and such default continues for a period of seven (7) Business Days unless; (i) the failure to pay is caused by administrative or technical error; (ii) payment is made within three (3) Business Days thereafter; or (iii) the failure to pay is in order to comply with any Applicable Laws or order of any court of competent jurisdiction or in case of doubt as to the validity or applicability of any such law, regulation or order, in accordance with advice as to such validity or acceptability given at any time during such period by independent advisers acceptable to the Fiscal Agent; or (b) Breach of other obligations: Centum defaults in the performance or observance of any of its other covenants and obligations under the Note Documents and (except where such default is incapable of remedy) such default continues for a period of thirty (30) Business Days following service of a notice by the Note Trustee requiring the same to be remedied; or (c) Misrepresentation: any representation, warranty or statement made or repeated in, or in connection with the Agency Agreement or in any accounts, certificate, statement, opinion or the Information Memorandum delivered by or on behalf of Centum or in connection with the Notes or the Note Documents is incorrect to a material extent when made or deemed to be repeated; or (d) Cross-default: any present or future indebtedness of Centum in connection with moneys borrowed or raised exceeding in aggregate Kenya Shillings five hundred million (Kes.500,000,000/=) (or its equivalent): (i) is not satisfied when due, or at the end of any originally applicable grace period; or (ii) becomes prematurely payable following delivery of an Enforcement Notice by the Note Trustee to Centum, as the case may be, as a result of a default by Centum except to the extent in any instance that the existence or enforceability of the relevant obligation is being disputed in good faith by it by appropriate proceedings; or (iii) any encumbrance over any assets of Centum or any Subsidiary of Centum becomes enforceable; or (e) Insolvency: an Insolvency Event occurs in respect of Centum; or (f) Winding up: a petition is presented or an application is made (which is not challenged by Centum within thirty (30) days of such petition or application) in respect of or any order is made or a resolution is passed for or any notice is issued to convene a meeting for the purpose of passing such resolution for the winding up or dissolution of Centum; or (g) Compositions: Centum stops payment or becomes unable to pay its debts within the meaning of Section 220 of the Companies Act or any steps are taken with a view to proposing, under any enactment or otherwise, any kind of composition, scheme of arrangement, compromise or arrangement involving Centum and its creditors generally, or any class of them; or 26 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

(i) Legal process: a lawful distress, sequestration, execution or attachment either by virtue of any court order, decree or process or otherwise howsoever for a sum that equal to or exceeding the 20% (twenty per cent) of the total assets of Centum is levied or enforced upon or issued against any part of the property and assets of Centum and which shall not be removed or discharged within sixty (60) days of it being so levied; or (j) Cessation of business: Centum ceases, or threatens to cease, to carry on all or a substantial part of its business or sells or threatens to sell or otherwise disposes of or shall threaten to sell or dispose of all or a material part of its assets (other than in the normal course of trading it being acknowledged and agreed that Centum’s business entails the acquisition and disposal, inter alia, shares, equity, undertakings and businesses and such activities will not therefore constitute an Event of Default) whether by one or a series of transactions related or not or changes the mode of conduct of its trading in any respect so that its ability to meet its obligations under and in respect of the Notes is materially affected; or (k) Authorisation: any authorisation, approval, consent, license, exemption, filing, registration or notarization or other requirement necessary to enable Centum to comply with any of its obligations under the Note Documents or to carry on business as presently carried on is modified (to the extent that its ability to meet its obligations under and in respect of the Notes is materially affected), revoked or withheld or does not remain in full force and effect and Centum is unable to obtain the same within fourteen (14) days of such modification; revocation or extinction; or (l) Unlawfulness: at any time it is unlawful for Centum to perform any of their respective obligations under the Agency Agreement; or (m) Material adverse change: any other event or series of events whether related or not, including, without limitation, any material adverse change in the business, assets or financial condition of Centum in an amount equal to or exceeding 20% (twenty per cent) of the total assets of Centum, occurs that, in the opinion of the Fiscal Agent (such Fiscal Agent being so instructed pursuant to an Extraordinary Resolution), may affect the ability or willingness of Centum to comply with all or any of its obligations under the Note Documents; or (n) Documents Void: any of the Notes is or becomes wholly or partly void, voidable or unenforceable or is claimed to be so by Centum or the Fiscal Agent.

Acceleration In the case of any such event as is mentioned in Condition 13.1 (Events of Default), and at any time thereafter if any such event shall then be continuing, the Note Trustee shall if so directed by an Extraordinary Resolution, issue an Enforcement Notice to Centum declaring that any outstanding Notes are immediately due and payable, whereupon the same shall become immediately due and payable together with all interest accrued thereon and all other amounts payable under the Note Documents.

Rectification The right to declare Notes due terminates if the situation giving cause to it has been cured or is otherwise no longer continuing before such right is exercised and any notice or demand issued by the Fiscal Agent in accordance with this Condition 13 (Default) shall be of no effect. Information Memorandum 27 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

35. Taxation: All payments in respect of the Notes will be made subject to withholding or deduction for or on account of any taxes imposed within the Republic of Kenya by the Issuer where such taxes are applicable. 36. Listing: Approval has been given to list the Notes on the FISM of the NSE.

The Senior Unsecured Equity Linked Notes will be listed on the FISM and trading will be limited to qualified institutional investors.

Separate Registers will be maintained for the 12.5% Coupon and the Variable Return. 37. Negative Pledge: The Issuer agrees that, so long as any Notes remain outstanding, it shall not create or permit to subsist any mortgage, charge, lien, pledge or other security interest upon or with respect to any of its undertakings, assets or revenues to secure any future indebtedness evidenced by notes, bonds or other securities which are or which are capable of being, at the request of the Issuer quoted, listed or dealt in for the time being on any stock exchange or any other similar generally recognized market for securities unless (a) the Notes are secured equally and rateably therewith; or (b) by providing such other security or arrangement as may be approved by Extraordinary Resolution of the Noteholders; unless the provision of any such security is waived by an Extraordinary Resolution of the Noteholders. 38. Governing Law: The Notes will be governed by, and construed in accordance with, Kenyan Law. 28 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

8. USE OF PROCEEDS

Centum has developed a pipeline of attractive investment opportunities in the energy, financial services, real estate and agriculture sectors. The table below highlights the deal pipeline.

Table 1: Deal Pipeline

Sector Target Companies Nature of Description Deal value Investment (Kes. M) Financial K-Rep Bank Limited Equity Acquisition of majority shareholding of 3,600 Services investment* K-Rep Bank and additional investment in the Bank to increase its core capital so as to enable the Bank to increase its ability to attract deposits as well as increase its loans and advances. Energy (i) Akiira One Equity Finance Centum’s equity investment in 2,100 Geothermal investment Centum’s current opportunities in the energy Limited sector. (ii) Amu Power Limited Real Estate Pearl Marina Estates Equity The construction of Phase 1 of the Pearl 1,100 Limited investment Marina Development commenced in March 2015. Phase 1 is estimated to cost Kes 2.75Bn. Centum intends on funding this with 60% debt and 40% equity. Therefore, the equity investment at phase 1 is Kes 1.1Bn. Real Estate Vipingo Development Equity Centum is in the process of acquiring 9,646 2,100 Limited Investment acres of land in Vipingo at a price of Kes. 180,000 per acre and Vipingo Estates Limited, a subsidiary of Rea Vipingo Plantations Limited, which owns approximately 900 acres of land at approximately Kes. 340 Mn. Quoted Centum Exotics Equity Increase the proportion of listed investments 2,000 private equity Investment held by Centum. Total 10,900

In line with Centum’s capital structure, these opportunities will be financed through a mix of internally generated funds (dividend and interest income, as well as realizations of existing investments) and debt. This is highlighted in the table below.

Sources of funding Amount (Kes. M) Internally generated funds (dividends, interest and investment realisations ) 4,978 Debt 5,922

The debt component of funding will be through the issuance of Kenya Shillings six billion (Kes.6, 000,000,000) senior unsecured fixed rate notes and senior unsecured equity linked notes. Information Memorandum 29 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The investment opportunities to be funded by the bond issue are highlighted below:.

Sector Target Companies Nature of Investment % Bond proceeds (Kes. M) Financial K-Rep Bank Limited Equity investment* 60.0 3,600 Services Energy Akiira One Geothermal Limited Equity investment 35.0 2,100 Amu Power Limited Real Estate Pearl Marina Estates Limited Equity investment 3.7 221 Offer 1.3 79 Expenses Total 100 6,000

*Centum has already made a Kes. 2.4 Billion investment in K-rep funded by a short-term facility. The proceeds from this Note issue will be applied in refinancing the bridge facility.

8.1 Financial Services

In November 2014, Centum completed the acquisition of 65.6% shareholding in K-Rep Bank. The acquisition of the bank was funded through Centum-company level bridge facility of USD 35 Million from South African–based Rand Merchant Bank (RMB). Centum intends to utilize part of the proceeds of the bond towards refinancing this short-term facility. Kes 2.4 Billion of the proceeds from the borrowing was utilized in the acquisition of the bank. Centum further intends on increasing the capitalization of the bank and has committed to invest an additional Kes 1.2 Billion towards this capitalization. This will allow the bank to attract higher deposits as well as enable the bank to offer more loans and advances. Centum intends to allocate 60.0% of the bond proceeds towards refinancing the short-term facility as well as in capitalizing the bank.

# Project Name K-Rep Bank 1 Size Kes 3,600,000,000 2 Shareholding-target 67% 3 Geography Kenya 4 Sector Financial Services 5 Value Creation IPO Listing on NSE or sale to a strategic investor 6 Deal type Buyout 7 Instrument Equity 8 Return on capital 31% assuming a 5-year holding period

Centum’s decision to invest in K-Rep Bank was informed by the following factors: a) Growth potential: The average banking sector growth has historically been strong and is expected to continue. In particular, K-rep is a Tier IV bank playing in the microfinance and in the SME space and therefore presents a huge opportunity to grow the bank to a full-service Tier II Bank b) Infrastructure: K-Rep, with 36 branches, has an expansive branch network. c) Shareholding: K-Rep acquisition offered the opportunity to acquire a controlling stake in a bank. d) Pricing: The acquisition pricing for the bank offered was ideal as it was at a discount relative to market valuation of banks e) Timing: The acquisition saved time when compared to the time it would have taken to obtain a banking license, establish a new bank and build out a branch network. 30 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Centum Value-Add

With growing regional activities across the Centum’s subsidiaries, Centum is in a strong position to drive an aggressive value creation strategy to help position K-Rep Bank as a top performing bank. Further, the association with Centum has changed market perception and brand positioning allowing for strong market traction from the onset.

Regional activities across the Group will allow for an accelerated growth and allow for the development and a phased expansion in to a full service specialist bank.

Centum – K-Rep Bank Synergies

Brand Enhancement

New products: Investment & Insurance

New clients: Investee Companies

New Markets: Sectors & Countries

New partnerships: International & Local

Raising additional financing

8.2 Energy

i. Akiira Geothermal Akiira One Geothermal Limited, founded in 2012, is the first private sector Greenfield geothermal private development in SSA. Centum is part of the consortium prospecting for geothermal energy and build the power plant, which when complete will generate 70MW of geothermal electricity in the first phase of the planned total 140MW.

In Akiira Geothermal, Centum has committed to invest at least USD 37 Million in this project. Centum plans to use 20% of the bond proceeds to finance part its equity stake in the Akiira Geothermal project. Further investments into the project will be funded from internally generated funds. Information Memorandum 31 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Table 4: Akiira Geothermal Development Investment Thesis # Project Name Akiira Geothermal Development 1 Size At least US$ 37Mn 2 Shareholding At least 25% 3 Geography Kenya 4 Sector Energy 5 Value Creation Value uplift upon financial close after de-risking project 6 Deal type Geothermal plant 7 Instrument Equity & Debt 8 Target IRR • Attractive US$ Returns • Base case IRR above 12% ii. Amu Power Centum currently has a ready investment opportunity in Amu Power Limited, a Special Purpose Vehicle (SPV) set up by the consortium that was awarded the tender to construct a 1050 MW coal-fired power plant in Lamu County, Kenya. Centum is the lead project equity sponsor in the consortium.

In Amu Power, Centum has committed to invest at least USD 100 Million in this project, or 25% of the total equity requirement by the project. Centum plans to use 15% of the bond proceeds to finance part its equity stake in the Amu Power project. Further investments into the project will be funded from internally generated funds.

Table 5: Amu Power Development Investment Thesis # Project Name Amu Power 1 Size At least US$ 100Mn 2 Shareholding At least 25% 3 Geography Kenya 4 Sector Energy 5 Value Creation Value uplift upon financial close after de-risking project 6 Deal type Coal Fired Plant Construction 7 Instrument Equity & Debt 8 Target IRR • Attractive US$ Returns • Base case IRR above 12%

8.3 Real Estate In the real estate sector, Centum’s strategy is to create new urban nodes for cities across Africa, Currently, Centum has two main real estate projects: 1. Two Rivers (Kenya) -Two Rivers is a new urban node set on 100 acres of prime land 20 minutes from the current Central Business District and in Nairobi’s diplomatic blue zone. Two Rivers is a master planned municipality with urban management, top notch infrastructure and landscaping. It seeks to fill the need for an urban node which provide residents with the opportunity to live, work and play within the city. Creating a better quality of life for the residents. The anchor development, the Two Rivers Retail, Entertainment & Lifestyle Centre, set to open in October 2015 will offer a unique blend of retail, entertainment and lifestyle facilities with 220 shops on 62,000 square metres of lettable area. This project is fully funded by both debt and equity and requires no additional funding from Centum.

2. Pearl Marina (Uganda) - a satellite city in Uganda on 385 acres of prime land situated between Entebbe International Airport and Kampala with 4km of Lake Frontage. The vision of Pearl Marina is to develop a premium world-class water front destination recognized in East Africa and beyond.

Centum has commenced Phase 1 construction of 102 residential villas, a gatehouse and supporting infrastructure for the Pearl Marina project. Phase 1 is estimated to cost Kes. 2.75 billion, which will be funded 40% by equity and 60% by debt.

Centum plans to use 3.7% of the bond proceeds to finance its equity stake in Phase 1 development of the Pearl Marina project. A further Kes 0.7 billion will be injected from internally generated funds.

8.4 Offer Related Expenses In addition, proceeds of the Issue will be utilized to meet third party costs and expenses of the Issue which are calculated at approximately Kes. 79,266,000 set out in the expenses of the Issue in section 18.1 (Expenses of the offer). 32 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9. ABOUT THE ISSUER

9.1 Company Overview

Centum was established in 1967 as an affiliate of the Kenyan government-owned ICDC as a Limited Liability Company. Centum is listed on the NSE and cross-listed on the USE and is now one of the largest2 listed investment companies in Kenya with a market capitalisation of Kes. 41 Bn. As at 31st December 2014, Centum’s assets under management were worth over Kes. 176.8 Bn which includes its own assets worth Kes. 36.8 Bn and third party funds worth over Kes. 140 Bn

Centum has interests in four key sectors: financial services, fast moving consumer goods, real estate and energy. In its 2014-2019 strategy period dubbed Centum 3.0, Centum intends to invest in the following sectors as part of its strategic plan: agriculture, healthcare, education and ICT. The sector interests are driven by Africa’s growing middle class and each sector is set to benefit from this segment.

The company’s current investment portfolio consists of over 20 investee companies which include wholly and partly owned subsidiaries, associate companies and investments in listed securities. Through these investments, the Issuer is able to offer its shareholders access to quality and diversified investments and generate market beating returns to its investors.

9.2 Vision, Mission and Strategy

Centum’s vision and mission are premised on Africa’s economic renaissance and its key objective is to consistently generate market beating returns by building extraordinary enterprises throughout Africa.

Vision “To be Africa’s foremost investment channel”.

Mission “To create real tangible wealth by providing the channel through which investors access and build extraordinary enterprises in Africa”.

Strategic Themes Five key strategic themes were identified for Centum 3.0 are highlighted below:

i. Return Generate in excess of thirty five per cent (35%+) annualized return over the strategic period: In the 2009/14 strategy period, Centum’s average annualized return on opening NAV was 31%. Over the next five years (2014/19 strategy period), we intend to enhance the average return on our portfolio to at least 35% on opening NAV.

ii. Focus Focus by developing, scale and growing investment capabilities in the eight new sectors: Based on the success brought about by Centum’s increased focus in the past strategy period, even greater focus is to be achieved by developing sector approaches to investment in 8 sectors: (i) Real estate, (ii) Financial Services, (iii) Fast Moving Consumer Goods (FMCG), (iv) education, (v) healthcare, (vi) power, (vii) agriculture, and (viii) ICT. Within the sectors, we look to develop opportunities of scale and attract third party investors to participate in high quality investment grade opportunities.

Scale up the Group by growing Centum’s own asset total value to Kes 120 Billion by 2019 and total Asset under management (AUMs) to Kes 720 Bn: Centum intends to increase its own total asset value from Kes 29 Bn to Kes 120 Bn by the end of 2019. This significant increase will enable Centum to build opportunities of scale that can attract significant amounts of capital into future projects. Centum further intends on scaling its total Assets under Management (AUM) from Kes 147Bn to Kes 720Bn. These third party funds of Kes. 600 billion will be managed by its asset management subsidiaries.

2Nairobi Securities Exchange Limited Market Capitalisation stock data Information Memorandum 33 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

iii. Brand To Build the Centum brand by delivering through people and hence develop teams with sector expertise: Centum intends to continue to build its brand through continuous alignment of internal processes, leadership development and through the delivery of the various projects it will undertake in the various sectors. Centum also maintains effective oversight through its board of directors. iv. Costs To maintain total operating costs at below 2.0% of assets under management: Centum intends to maintain operating costs below the ceiling of 2.0% of total assets.

9.3 Business Model

Centum’s business is to create investment grade opportunities of scale that will attract investment at significant return to initial capital. Centum is currently focusing its development activities in several key sectors: (i) financial services, (ii) fast moving consumer goods (FMCG), (iii) real estate and (iv) power (v) agriculture, (vi) education, (vii) healthcare and (viii) ICT. The table below highlights the route to entry into the various sectors.

Focus Sectors Sector Route to Entry Existing Deal Pipeline Value Realization Timing of Investment Financial Services Brownfield Turnaround Present Future growth fundraising 0-1 year FMCG Franchises and Joint Ventures with Present Growth Capital & Direct Exit 1-3 years Multinational Corporations Real Estate Greenfield & Joint Ventures Present Financial close & REITs 1-3 years Energy Greenfield Present Financial Close and 0-1 year securitisation Agriculture Greenfield & Joint Ventures Work in Progress Project Expansion 1-3 years Education Real Estate Play & Joint Ventures Work in Progress REITs 2-3 years Healthcare Real Estate Play & Joint Ventures Work in Progress REITs 2-3 years ICT Greenfield & Joint Ventures Work in Progress Project Expansion & Exits 2-3 years

As a developer and promoter, Centum realizes early-stage value by creating investment-grade opportunities for down-stream investors as illustrated in the chart below: 34 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Centum funds these opportunities during development phase with the aim to invite financial investors after de-risking projects. The projects funding cycle is illustrated in the chart below:

9.4 Track Record

9.4.1. A review of performance against our 2009/14 strategic targets

During the strategy period 2009/14, we defined our business as an investment channel that sought to provide investors access to an otherwise inaccessible, quality and diversified portfolio of investments. To this end we focused on five strategic objectives.

i. To deliver a return on shareholder funds consistently above market returns. Prior to this time Centum’s returns were strongly correlated to the NSE; ii. To scale up assets under management with a target of Kes 30 Billion by 2014 from Kes 6 Billion in 2009. iii. To increase our geographical footprint to the rest of Africa with a target of at least 50% of the portfolio outside Kenya; iv. To enhance Centum’s brand by developing processes, systems, controls and human capital to ensure the company would consistently deliver to its promises; v. To maintain portfolio costs at below 2.5% of assets under management.

Our performance against the above objectives is highlighted below.

i. Delivery of market beating returns We have over the last 5 years (the 2009-2014 strategy period) delivered an average return of 33% per annum. This performance represented a 19% outperformance to the NSE 20 Share Index and a 19% outperformance against to the MCSI Frontier Market index.

The tables below highlight the performance of Centum against the MCSI Frontier Market index in Unites States Dollars (USD): Information Memorandum 35 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The table below highlights the performance of Centum against the NSE 20 share index in Kenya Shillings (KES):

Centum’s Net Asset Value grew by 357% from Kes. 5.9 Billion in April 2009 to Kes. 26 Billion in December 2014. This represents growth or at a rate of 30% compounded annually. Market value of shareholder funds grew from Kes. 5.6 Bn in April 2009 to Kes. 40.6 Bn in December 2014 representing 625% growth in value generated to shareholders.

The table below highlights Centum’s book value against the Market Capitalisation.

ii. Growth in assets under management Centum’s portfolio grew by Kes. 27.8 Bn from Kes. 9 Bn in March 2010 to Kes. 36.8 Bn in December 2014. Total assets under management stood at Kes 176 Bn in December 2014 representing a 19.5 times growth since March 2010.

Assets Under Management Portfolio Value 36.8

iii. Geographical and asset class diversification During the strategy period 2009/14, the diversification target was to have 50% of the portfolio outside of Kenya. We progressively increased our exposure outside of Kenya from less than 1% as at March 2010 to 19% as at March 2014. In line with our mission of providing access to inaccessible portfolio, our exposure to private equity and real estate increased from 59% to 83% at the close of that period. vi. Brand at Centum is defined as consistent delivery to promise. Throughout the 2009/14 strategy period we built capacity in the organization through the recruitment of competent and experienced team members as well as through leadership development. As a result of the strong team, we were able to deliver over and above our ambitious strategy targets. vii. The cost to asset ratio (excluding third party funds) was maintained below 2.3% within the 2009/14 strategy period. 36 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.4.2. Over the last six years, Centum has had a lot of success in developing investment-grade opportunities and realizing significant return at expanded multiples on its initial investment. Some examples at various stages of the investment process are highlighted below

9.4.2.1. Deal Sourcing Centum has developed an extensive network of relationships within the region. This has enabled identification of early stage opportunities. Examples of such investments include:

a) Amu Power – consortium led by Centum and Gulf Energy Limited won the award of tender to construct a 1,050MW coal-fired power plant in Lamu, Kenya

b) Akiira One Geothermal – Centum is part of the consortium developing Sub-Saharan Africa’s first independent geothermal development, which when complete is expected to generate 140MW.

c) Two Rivers – A 100 acres development in Nairobi, acquired in 2010.

d) KRep Bank – Acquisition of 65.7% shareholding in the Bank in 2014

e) PlatCorp – Acquisition of 35% shareholding in PlatCorp Holdings in 2012. PlatCorp Holdings is the holding company of Platinum Credit Kenya, Platinum Credit Uganda and Platinum Credit Tanzania.

f) Genesis Kenya – Acquisition of 73.35% shareholding in Kenya’s second largest3 fund manager in 2013.

9.4.2.2. Value Addition Through active execution of value creation strategies, Centum has improved the underlying performance of its portfolio companies.

This is highlighted in the graph below.

Examples of investments where Centum has led value addition strategies are highlighted below.

a) Almasi Bottlers Limited - In 2012/13, Centum led and completed a complex merger of the 3 bottlers which saw Centum increase its effective shareholding from 32% to 43%. Centum is actively participating in driving post-merger integration as well as driving distribution and scale efficiencies and has subsequently increased its shareholding to 51%. b) Nairobi Bottlers Limited (“NBL”) - In 2010, renegotiated NBL’s shared services agreement with South African Bottling Company (“SABCO”) significantly reducing management fees and enhancing profitability c) Kenya Wine Agencies Limited (“KWAL”) - Active participation in the privatization process that resulted in the sale of 26% shareholding to Distell South Africa. d) General Motors E.A. Limited – Through board participation, Centum has been instrumental in treasury oversight and in the development of the current 5-year strategy which has resulted in an improvement in earnings and return on assets.

3Retirement Benefits Authority Industry Performance Report, December 2013 to June 2015, published on 31 March 2015 Information Memorandum 37 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.4.2.3. Value Realization

Centum has been able to secure critical and well timed value realizations from its portfolio that have enhanced return. Examples include: a) Carbacid Investments - Acquired 23% of the company in 2009 for USD 5M at a time when the company’s shares had been suspended indefinitely from trading on the NSE. Centum exited in 2010 a year later at more than 2x money back. b) UAP - Invested in the year 2001, drove the expansion of the business in to South Sudan, Rwanda, DRC and Tanzania. In 2012 drove the USD 50M capital raise from 3 PE funds at 10x Centum’s entry valuation. Divested from the business in 2015 at 32x entry valuation. c) Two Rivers – Centum invested US$20M in acquiring 100 acres of land in Nairobi in 2010. Master planned secured approvals and attracted $75m in equity capital at significant value uplift to Centum’s capital. d) RVR - Exited the underperforming asset in a secondary buyout to two PE funds in 2009, thereby recording a gain of 4.4 times the carrying value of the investment.

9.5 Operating Structure Centum has adopted an operating structure that allows the company to effectively execute strategy. Led by the Group Chief Executive Officer and supported by the Centum Capital division, Centum develops and invests in sector specific assets and operating subsidiaries in the group.

Centum’s operating 100% owned subsidiaries are highlighted below.

Each of the subsidiaries provide services to Centum, its subsidiaries and associate companies at a fee. In addition they have third party clients from whom additional fees are generated. The subsidiaries have revenues that exceed their cost structure, which means that they are self funding and do not rely on Centum Investment Company Limited to fund their operations.

• Nabo Capital Limited Nabo Capital is a fund and REIT Manager licensed and regulated by the Capital Markets Authority. Nabo manages Centum’s Quoted Private Equity (“QPE”) portfolio as well as the portfolios of third parties.

• Athena Properties Limited To effectively manage its Real Estate business, Centum established Athena Properties Limited, a wholly owned subsidiary in 2013. Athena’s mandate is to develop in-house capability to execute real estate developments on behalf of the Group as well as offer project management and development management services to third parties.

• Centum Business Solutions Limited Centum Business Solutions is a wholly owned subsidiary of Centum that supports growth of the entire Group through provision of shared services. The services CBS offers include; financial, legal & tax, risk, marketing & communications, human resources and ICT.

Figure 1: Centum’s Operating Structure

Centum

Centum Capital

Centum Business Nabo Capital Ltd. Athena Properties Ltd. Solutions Ltd. 38 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.6 Centum’s Portfolio and Sector Focus As at December 2014, Centum’s Portfolio Value was valued at Kes. 37.6 billion. The sector allocation of the portfolio is highlighted below:

Centum Investment Company Limited Portfolio Value - Kes 36.8 Bn

Financial Services FMCG Energy Others Real Estate Quoted Private Kes 9.1 Bn Kes 6.0 Bn Kes 0.7 Bn Kes 3.4 Bn Kes 12.9 Bn Equity Kes 4.7 Bn

9.6.1 Financial Services (FS) Sector

Sector Strategy: Centum will look for brownfield opportunities to access opportunities in the banking, insurance and asset management sectors. Centum’s current investments in this sector are listed below in detail:

Company Description Sector: FS • K-Rep was established in 1984 to support NGOs with grants and technical assistance. Stake: 67.54% • In 1987, it started advancing loans to the NGOs by establishing a micro- credit lending program and established this as the core business and growth area. • K-rep has 36 Branches located all over the country and offers Micro-finance, business and personal banking.

Platcorp • Platinum Credit Limited is a Micro Finance Company licensed in Kenya under the Companies Act in Sector : FS 2002. Stake: 35.6% • Platinum Credit is a non deposit taking Micro Finance Companies with operations in Kenya, Uganda and Tanzania. • Platinum Credit has more than 50 branches in the region. • Platinum prides itself on a swift disbursement of loans, all within 24 hours. AON • AON Kenya Insurance Brokers Ltd (AON) is a market leader offering insurance broking, risk Sector: FS management, actuarial consulting, medical scheme administration and medical fund management, Stake: 21.5% life and pension’s administration, and employee benefits consulting services to medium and large organizations in Kenya. • AON has a large portfolio of corporate clients to whom it provides brokerage services for coverage of some of the most complex risks. Aon is a service driven organization which aspires to meet the highest standards of its clients. Genesis • Genesis Kenya was established in 1996, with the aim of providing high quality investment management Sector: FS services to Kenyan institutional investors. Stake: 73% • Genesis Kenya is a registered fund and asset manager with over 18 years’ experience in the Kenyan market and is the second2 largest Asset Manager in the country. • It specializes in investment management and pension scheme advisory services and has a track record of delivering superior returns to our clients. • Services include, Pension Fund Management: Flexible, market-linked investment offering a segregated portfolio ideally suited to pension fund schemes. Nabo Capital • Established in 2013, Nabo Capital, (formerly Centum Asset Managers Limited) is a wholly owned Sector: FS subsidiary of Centum. Stake: 100% • Its core business revolves around the management of traditional asset classes such as equities, money markets and fixed-income portfolios while traversing alternative asset classes such as real estate, securitizations and private instruments. • The operations of Nabo Capital as a fund and REIT manager is licensed and regulated by the Capital Markets Authority. In addition, it is registered under the Retirement Benefits Authority to manage pension funds, providing ample security for our clients. • Nabo Capital manages well over USD 100 million (as at September 2014) worth of assets in both internal and third party funds. For all clients, our aim is to ensure investors understand the risks they face and tailor investment solutions to mitigate such risks.

4Retirement Benefits Authority Industry Performance Report, December 2013 to June 2015, published on 31 March 2015 Information Memorandum 39 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.6.2 FMCG Sector

Africa has a fast growing middle class, with disposable income to spend on consumer goods and services. Urbanization and increased use of technology is the biggest revolution in Africa making the consumers easier to reach and encouraging spending.

The main challenge for investors seeking entry to SSA is to obtain a better understanding of the market and its consumers, which Centum can be well placed to add value to investors as a local partner.

Centum’s current investments in this sector are listed below: Company Description Almasi Beverages • Centum has invested in Almasi, the holding company of three bottlers in Kenya: Rift Valley Bottlers, Sector: FMCG Mount Kenya Bottlers and Kisii Bottlers. Stake: 50.95% • Rift Valley Bottlers Limited is a Coca Cola bottling company whose franchise territory spans across the Rift Valley and Western provinces in Kenya. • Mount Kenya Bottlers Limited is a Coca Cola bottling company whose franchise territory spans across the Central and north eastern provinces in Kenya. • Kisii Bottlers Limited is a Coca Cola bottling company whose franchise territory spans across Western province. • It has a 29% market share in the carbonated drinks market segment. • Centum recently acquired a controlling stake in the company in 2015. Nairobi Bottlers Limited • Nairobi Bottlers Limited is one of the Coca Cola franchises in Kenya.. Sector: FMCG • Its territory spans across the whole of Nairobi and parts of the Central, Eastern and Rift Valley provinces Stake: 27.6% in Kenya. • It has a 48% market share in the carbonated drinks market segment.

KWAL • KWAL was incorporated in May 1969 with the objective of consolidating importation and distribution Sector: FMCG of Wines and Spirits from foreign owned companies and enable indigenous Kenyans take control Stake: 26.4% the importation and distribution of Wines and Spirits in the country from hitherto foreign owned companies. • Kenya Wine Agencies Limited is a manufacturer, distributor and importer of wines and spirits in east Africa with operations in Kenya, Uganda and Rwanda. • The Company was privatized by the Government of Kenya in 2014 when ICDC sold 26% out of its 72% shareholding in the Company to Distell Group.

King Beverage Limited • King Beverage Limited is a wholly owned subsidiary of Centum with mandate to distribute premium Sector: FMCG beer, specifically, Carlsberg, in Kenya and Uganda. Stake: 100% • There is intention to extend the distribution of Carlsberg to the greater East Africa region. King Beverage is desirous of setting up a brewery in the short to medium term.

40 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.6.3 Energy Sector

Sector Strategy: The Power sectors across the region have been characterized by chronic under investment over the past two to three decades. Kenya presents an equity investment opportunity worth USD 4.5Bn derived from the Government’s policy to increase generation capacity by 5,000MW by 2018. Opportunities exist primarily in geothermal and coal generation.

Centum’s strategy will be to acquire independent power producer development expertise to enter the sector and deploy early capital as a project sponsor.

Centum’s current investments in this sector are listed below in detail: Company Description Akiira One • Akiira One Geothermal, founded in 2012, is the first private sector Greenfield geothermal private Sector: Energy development in SSA. • When complete, it will generate 70MW of geothermal electricity with this being the first phase of the planned total 140MW.

Amu Power • Amu Power, a consortium bringing together Gulf Energy Limited and Centum is set to construct a coal Sector: Energy power plant. • When complete, it will generate 1050 MW of coal fired electricity, this being part of the Government of Kenya (“GoK”) Least Cost Development Plan for power generation to bring down the cost of power via a more stable, reliable platform.

Amu Power

Introduction In 2013, the Government of Kenya (“GOK”) through the Ministry of Energy & Petroleum (“MEP”) held an international competitive bidding process for the construction of a 1,050 MW coal-fired thermal power plant under the Public Private Partnership (“PPP”) framework. The tender attracted significant international interest from over 26 reputable bidders from 7 countries. After a rigorous evaluation process, a consortium led by Centum and Gulf Energy Limited (“GEL”) was awarded the tender to construct a 1,050 MW plant at the Kenyan coast in Lamu County, on a 25 year Build-Own-Operate (“BOO”) concession (“the Project”).

Business Model Overview: The project’s fundamental business model is anchored in three critical project documents: a) Revenues - PPA: This agreement will allow the PC to sell power to the off-taker, in this case KPLC, at a pre-agreed tariff in USD over the 25 year PPA term. The tariff is also indexed to the US CPI index to protect against inflation. It is estimated that over the project life, the plant will on average generate revenues of USD 575.5Mn/ year. The pre-agreed tariff has 3 main components (more particularized below) which cater for the following: i. The recovery of the fixed capital investment in the plant made by debt and equity investors. ii. The cost of fuel of generating power plant on the basis of a pre-specified fuel consumption rate – this is treated as a direct pass- through in the PC’s financial statements. iii. The cost of maintaining and operating the plant.

b) Operating Costs – FSA, O&MC: These long term agreements anchor the project costs related to fuel and the operating and maintenance of plant equipment. It is estimated that over the project life, and assuming a cost of coal USD 50 / tonne, these costs will average USD 212.6 Mn/ year.

c) Financing Costs & Debt Repayment – Financing Documents: These agreements provide for the cost of financing with regards to interest and other associated hedging costs and also the terms of repayment of debt. It is estimated that over the project life, on average USD 33.28 Mn/ year will be paid to the project lenders in both interest and principal until the debt is fully extinguished 12 years after COD.

Once the project meets its core funding obligations as described in b and c above, and as long as the project is in good financial health as prescribed by the lenders debt covenants and distribution lock-up ratios, the remainder of the project cash flows / profits are available for distribution to shareholders. Prior to the repayment of debt, it is estimated that on average USD 101 million/ year will be paid to equity shareholders as dividends, rising to on average USD 267 million / year after the repayment of the debt. Information Memorandum 41 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Overview of Investment Returns

Figure 5 below provides for an overview of an investors potential return profile assuming a USD 1M investment held for the entire project life of 29 years. What can be seen is that: • An investor is not due to earn any returns over the first 4 years of investment during the plant construction period up until COD. • Thereafter, the investors will earn average annual dividends estimated at USD 149,000 providing for an investment Pay Back Period (“PBP”) of 6.7 years after COD. • Annual dividends are expected to increase by approximately 163% to an average of USD 380,000 after year 15 once the project debt has been fully paid-off all project finance related debt. • Over the 29 year project life, and after COD and investor is expected to earn 6.9 Times Money Back (TMB), with their investment value on the original principal investment on average doubling every 4.2 years. • It is important to note that the investment will amortize over the Project life as the Project approaches end of the PPA term, and hence the residual value of investment will be zero at the end of the PPA term.

Figure 5: Investor return profile for a USD 1M investment over the project life

The investment in this project will yield significantly better returns as compared to other available market opportunities while providing stable returns that are not exposed to market volatility. The Issuer’s investment in Amu Power shall offer excellent diversification in its current portfolio especially from a currency and return stability point of view. As an investor, Centum shall also enjoy an investment instrument with a very long tenor and therefore minimize re-investment risks.

Figure 6: Illustration of return comparison against various benchmarks 42 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Funding Structure

The project is to be financed on a debt to equity ratio of 75:25. The debt will be issued on a non-recourse basis. The debt funding is coming in as a package along with the EPC Contractor. The equity will be provided primarily by the Sponsors, GEL and Centum. Long term debt is being sought from a consortium of banks.

9.6.4 Real Estate Sector

Sector Strategy: Centum will focus in the development of large mixed use developments. There is demand for this type of developments and we are among the best placed in the market to deliver. Smaller mixed use developments in very prime locations will also be considered. These projects are less capital intensive, easier to execute and require the same skills as the large mixed use developments. Centum will be primarily focused on the development phase but open to follow attractive opportunities along the property value chain to yield exceptional returns.

Centum’s current investments in this sector are listed below: Company Description Two Rivers • Mixed use development where people live, work, play set on a 100 acre parcel of land neighbouring Sector: Real Estate the diplomatic area of Runda, Gigiri and Limuru Road in Kenya. Stake:58% • Two Rivers Development will provide a premium large-scale mixed-use development that will offer premium retail, commercial, residential and hospitality facilities set out in a modern urban environment. • Anchor development is Two Rivers Mall which consist of 62,000 SQM of retail space and 22,000 SQM of office space. • It will be constructed in phases fully capitalize on the value created by each phase and will have a total build up area of about 851,000 SQM when completed • In 2014, Centum secured the equity investment from two institutional investors, who invested Kes 6.5 Billion (US$ 75 Million) for a 42% equity stake in Two Rivers Development. Consequently Centum’s shareholding in the company is now 58%. Pearl Marina • Pearl Marina is a mixed use development set on 385 acres of pristine and untouched land with 3km Sector: Real Estate lake frontage on the Garuga Peninsular in Uganda. Stake: 100% • Pearl Marina will provide premium tourism and residential facilities including hotels, conference facilities, luxury apartments, villas, marinas, hospital, international school, modern office park, retail center, a wide range of sports and recreational activities. • The development will be constructed in phases and when complete will have a built up area of 1,400,000 SQM.

Athena Properties • Athena Properties offers clients a comprehensive solution for mixed use property developments, from Sector: Real Estate local urban nodes to large scale new city development throughout SSA. Stake: 100% • It manages Centum’s two flagship real estate projects (Two Rivers and Pearl Marina) along with 3rd party developments.

Broll • Broll Kenya was established in 2013 and is a joint venture between Broll Property Group (Mauritius) Sector: Real Estate and Centum. Stake: 30% • It represents clients in the rapidly growing economic block of Kenya, Uganda, Tanzania and South Sudan. • Its services include: Property Management; Asset Management; Facilities and Project Management; Retail Property Management; Corporate Real Estate Services; Commercial, Industrial And Investment Broking; Research; Valuation And Advisory Services.

The Real Estate & Infrastructure business line was established in line with Centum’s central mission to offer investors access to inaccessible, quality, and diversified investments. This business line has grown from Kes 36 Million in 2010 to Kes 12.9 billion at the end of 31 December 2014. Information Memorandum 43 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

To effectively manage its Real Estate business, Centum established Athena Properties Limited, a wholly owned subsidiary in 2013. Athena’s mandate was to develop in-house capability to execute real estate developments on behalf of the Group as well as offer project management and development management services to third parties. Athena has been able to recruit an experienced management team with international experience and prides itself on having a team with over 100 years cumulative work experience in the Real Estate sector. This remarkable team is currently managing Centum’s Two Rivers and Pearl Marina projects as well as other third party projects.

Opportunities for Centum in Real Estate In Real Estate, Centum seeks opportunities that leverage our ability to quickly mobilise funds for investment as well as our sector experience, thereby unlocking attractive development opportunities that will lead to the creation of new communities and address shortages in the commercial and residential real estate markets.

Centum’s Real Estate investments are guided by the following major regional trends: • Demographics – It is estimated that 40% or 300 million of Africa’s population live in cities. This number will rise to 800 million by 2030. Africa’s population is also young and 60% are under the age of 25 and it is expected that the majority will live in cities yet to be conceived. • Improving Living Standards - Africa’s economies have been growing consistently and have seen a population of 85 million households earn over $ 5000 per annum. This is expected to rise to 130 million households by year 2020. Locally, Kenyans are increasingly purchasing items from formal retailers. This has seen informal shopping outlets sink by 29% while modern distribution outlets have grown by more than 34%. • Growing Economies – Africa’s GDP is expected to almost double from USD 1.6 trillion in 2008 to USD 2.6 trillion in 2020. Consumer spending power will increase from USD 860 billion in 2008 to USD 1.4 trillion by 2020.

Centum’s successful execution of its real estate strategy in Two Rivers Development and Two Rivers Lifestyle Centre has seen Centum’s stake increase from an initial investment of Kes 2.3 billion to Kes 9.0 billion, a 390% increase in value. In Pearl Marina, the value of Centum’s investment has increased through acquisition of additional land parcels in addition to obtaining various planning and physical interventions relating to the land since acquisition.

Two Rivers The Two Rivers property measures 100 acres and is located in the diplomatic blue zone in the Gigiri/Limuru Road area of Nairobi which provides a key target market close to the subject property. The site is only about 10 minutes drive from United Nations Complex; about 20 minutes drive from Nairobi Central Business District and 30 minutes to the Jomo Kenyatta International Airport. It is bordered by key access roads (Northern By Pass, Limuru road and the proposed North-South link road). These provide easy access to existing urban nodes (Westlands, Lavington and Loresho) and key points like the Airport and the growing residential areas Limuru, Kiambu, Ruiru and Thika. These factors render the site a very ideal location for the development of a mixed used commercial development. The property has two rivers traversing through it and that is the inspiration for naming this development “Two Rivers”.

It is bordered by, and has access from, the Northern By-Pass and Limuru road, and is located within the most affluent suburbs in Kenya with an annual spend of USD 500 million within a 50 kilometre radius. The development is set to become East Africa’s premier destination and address.

44 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Two Rivers Master Plan

Vision The vision of Two Rivers Development is to develop a premium world class master planned urban address set that will be premier regional destination and address in East Africa and beyond for a long time to come.

The development is set to be one of the most attractive and prestigious destinations in Eastern Africa that will compete economically and culturally with other premier developments in SSA and the Middle East.

The development will create value by optimizing on the uniqueness of the site that has undulating terrain covered by a blend of indigenous trees and is traversed by two rivers. This landscape will not only provide key attraction for visitors and residents, but also offer exceptional recreational space, entertainment, leisure and lifestyle facilities. The site will be developed in an environmentally sustainable manner that will seek to protect and preserve the unique physical features including the water resources and the riparian reserve. Facilities Provided at Two Rivers

The facilities provided at Two Rivers will include: • Retail, Entertainment and Lifestyle: A diverse and unique retail, entertainment and lifestyle mix covering a broad variety of premium local and international brands, indoor/ outdoor activities and offering a wide selection of entertainment venues and activities. This will be the anchor development for Two Rivers. • Residential: Residential units will comprise of a prestigious mix of medium and high density apartments which will offer maximum convenience, luxury and a high quality of life. • Office Parks: Modern office parks will place Two Rivers as the number one destination for corporate and create a sought after address for those working in the development. • Hotels: Hotels will have high end rooms with modern conference facilities with a mix of short and long stay serviced apartments to supplement the hotels. • School: A recognized international school which will offer a recognized curriculum and a day care center. Information Memorandum 45 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

• Medical and Emergency Services: Health security will be provided by developing an executive medical facility affiliated to a major recognized hospital. • First World Infrastructure: The development will have first world infrastructure that will be managed centrally.

Two Rivers Mall

The construction of the Mall is on schedule and is set to open in October 2015.

The mall has a Gross Leasable Area (GLA) of 62,000 square meters In addition, the Centre will have 20,000 square metres of office GLA. Two Rivers Lifestyle Centre has the following competitive advantage over other malls in the region: a) The mall will have over 220 shops and thus will offer the public unparalleled access to a wide variety of retail outlets b) The mall has over 40% international outlets thus offering bringing premium international outlets to Kenya c) Significant entertainment offering has been planned in the development which will offer interactive fountains, climbing walls, outdoor theatres, exhibition areas, play pool, picnic sites and a jogging track. d) The mall also offers adequate parking facilities comprising a total of 1,600 parking bays and an additional 2,000 parking bays in the adjacent parking silo.

The strength of the above offering has been validated by the fact that the Mall is already more than half let with the anchor tenant, Carrefour, a retail giant, opening its first and flagship store in SSA at Two Rivers Mall. Other tenants include: Chandarana Food plus, Zucchini, Mr Price, Woolworths, Essentials, Bosini, Sandstorm, Samsonite, Adidas, Bose, Funscapes as well as variety of Local banks including Commercial Bank of Africa.

On the Two Rivers Mall construction, the key milestones as per the project plan are: Milestone Planned Status Earliest tenant beneficial occupation March 2015 Done Completion of Retail Mall October 2015 On track Completion of construction including office towers January 2016 On track

Financing Centum secured the equity investment from two institutional investors, AVIC and ICDC, who have invested a total Kes 6.75 Billion (US$ 75 Million) for a 42% equity stake in Two Rivers Development. Further, we have secured debt funding of Kes 5.4 billion (USD 60 Million) in 10-year long term debt from Cooperative Bank of Kenya. As a result of this investment and debt funding, the Two Rivers project now fully funded 46 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Pearl Marina Pearl Marina, is set on 385 acres on the Garuga Peninsula on the shores of Lake Victoria in Entebbe, Uganda. The site is situated between Entebbe international airport and Kampala, about 22 km from the airport and about 32 KM from Kampala. The property will be developed as a premium integrated water front destination, resort town, and a premier Uganda tourist destination. The development provides premium tourism and residential facilities including hotels, conference facilities, luxury apartments, villas, marinas, hospitals, international schools, modern office park and a retail center.

The site enjoys beautiful views of the lake with over 3.5 kilometers of Lake Frontage. This has been the inspiration behind the Pearl Marina concept and vision. It is an ideal location for a water front resort town attracting local Ugandans, visiting Diaspora and tourists from all over the world.

Vision The vision of the Pearl Marina Development is to develop a premium world class waterfront destination recognized in East Africa and beyond. The development will to provide first world experience to locals and foreigners alike, with the advantage that there is no other development of its kind planned in Uganda.

Facilities Provided at Pearl Marina The Pearl Marina Development will incorporate: • Hotels and Market Resorts: Hotels with high end rooms and a market resort. • Retail, Entertainment and Lifestyle: The development will comprise a vibrant commercial square with restaurants, entertainment arena, a retail centre covering a broad variety of premium local and international brands and a public marina with ferries, jetty for fishing and water related leisure and lifestyle activities. • Office Parks: Modern office parks that will place Pearl Marina as the number one destination for those wishing to work in the development. • Residential: High End residential apartments and villas which will offer maximum convenience and a high quality of life. • Medical and Emergency Services: Health security will be provided by developing an executive medical facility affiliated with a major recognized hospital. • School: A recognized International School offering internationally recognized curriculum. • First world infrastructure: The development will have first world infrastructure that will be managed centrally. Information Memorandum 47 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

To achieve the vision stated the following master plan has been created for Pearl Marina.

Phasing Plan Due to the size of the property the development will be done in phases. This allows for smoother financing processes as well as easier introduction to the market. a) Phase I: Phase I will consist of residential houses, an international school, a hospital and a hotel. b) Residential Component A total of 128 residential houses will be developed in the first phase. Consisting of a mix of 72 two bedroom duplexes, 40 three bedroom villas and 16 five bedroom villas. The 128 units will be built in clusters, each cluster containing approximately 10 houses. The clusters are designed to provide both exclusivity and an element of community at the same time. As each cluster looks away from the other while each house has views of both the lake and the common lawn at the center. Below is a view of phase one and the arrangement of the clusters. The construction of the development commenced in March 2015. 48 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The houses are designed to feel light and undaunting. Pearl Marina is the hidden gem in nature that integrates the landscaped gardens and views of the lake into the architecture. Some of the concept designs are shown below:

c) Club House Development of a club house for the villa owners to host guests and for the public to have conference facilities; • The club house will be run by an international hotel brand • Private Square for private functions such as weddings. • Conference facilities • Swimming pool & Spa

The resort will be operated by an international brand hotel operator.

The apartments will be offered for sale to investors and managed by the resort operator.

d) International School Uganda has a high demand for good schools. Uganda has a large young population and coupled with a rising middle class this inherently creates a demand for good schools. Investors realize that Pearl Marina is a great site for a school as it provides enough space to create a serene learning environment. In addition the development will be managed privately giving parents assurance of security.

In this regard, Centum leveraging on its strong brand is in discussions with various investors to bring an International School to the development. In this we are seeking to partner with an international brand. That will be attractive to the Ugandans and the expatriates in the region

e) An International Hospital According to the Health Ministry of Uganda, the hospitals country wide have only 61% of the staff required. In addition to this, Uganda’s disease burden is increasing especially lifestyle related illnesses. This creates a gap for good healthcare provision in Uganda.

To this end Centum is in talks with major health care providers in the world to come into Pearl Marina on a partnership basis in an effort to relieve this burden. The Hospital will provide health care services to Ugandans at large.

In Phase II of the project, the following will be included in the development: i) Office Space: set in an office park environment this will contribute to maximization of synergies of other mixed uses like retail, hotels, serviced apartments and leisure and thus help in opening up the development as a commercial destination. ii) Marina: the development will take advantage of the water frontage to develop a marina that will provide a variety of water activities that will provide unique experience to residents and visitors. It will have a jetty for fishing, jet skiing, fish market, boat launching and berthing facilities. iii) Sporting & Recreational Activities: A wide range of activities including kids club, fitness centre, spa, tennis, cycling, tennis, swimming, fishing, basketball, mini-soccer, and bird watching . iv) Ferry/ boat service: A boat and ferry service is planned that will provide alternative connection between: a. Entebbe and Pearl Marina, which is 10 km by water and b. Between Port Bell (near Kampala) and Peal Marina, which is 26 km by water.

The objective is to reduce commuter time, enhance the quality of the experience and promote convenience

Vipingo Development Limited Following a settlement agreement entered into between the Issuer and Rea Trading Limited, the Issuer is in the process of acquiring 9,646 acres of land in Vipingo at a price of Kes. 180,000 per acre and Vipingo Estates Limited, a subsidiary of Rea Vipingo Plantations Limited, which owns approximately 900 acres of land at approximately Kes. 340 Mn. The total transaction prices total to approximately Kes. 2.1Bn. Information Memorandum 49 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.6.5 Education and Healthcare Sector

Sector Strategy: Critical to the success of any mixed used development is the provision of the full suite of social amenities to secure a captive catchment to drive commercial activity and boost the attractiveness of the destination. Two of such amenities are high quality hospitals and schools.

A viable opportunity, therefore, exists to enter into the Education & Healthcare sector through synergies with our current activities in Real Estate on mixed use developments. Critical success factor of this model is entering into joint ventures with high quality hospital and school operators and signing long term leases with them on property to be financed and developed by Centum.

Centum’s currently does not have any investments in this sector.

9.6.6 Agriculture Sector

Sector Strategy: Kenya has high agricultural potential with high land quality and soil resilience ratings. Varied agro-climatic conditions favour the production of a wide range of crop and livestock.The lack of commercial investment in farming and agro-processing is a huge opportunity. Current commercial farms are on average far smaller than world averages.

Centum will acquire agro-project development expertise to enter the agribusiness sector and deploy early capital as project sponsor.

9.6.7 Quoted Private Equity (“QPE”) Portfolio The QPE asset class leverages on Centum’s private equity expertise to invest and create value in quoted companies that exhibit private- equity like traits. This business line focuses on making investments in listed entities that are under-researched, illiquid, with significant growth potential and where Centum can obtain a significant equity stake.

The second mandate of the QPE business line is to provide liquidity management for the overall portfolio. The QPE business line provides an avenue to deploy surplus funds and is also a source of liquidity by providing collateral for borrowing or by the disposal of marketable securities. The QPE business line also allows Centum to compare the valuations of entities in the private markets against those of entities in public markets across the continent. This flexibility has contributed greatly to more efficient asset allocation.

In each of the last five years of the 2009-2014 Strategy Period, the QPE business line has outperformed the NSE Index by an average of 18%. As at 31 December 2014, the QPE business line had Kes 5.02 Billion of assets under management, which represents 13% of total assets. Year QPE Return NSE 20 Return Centum Outperformance 2010 56% 43% 13% 2011 10% -4% 14% 2012 0% -13% 13% 2013 53% 44% 9% 2014 43% 2% 41% Dec-2014 20% 3% 17% Geometric Average 29% 11% 18% 50 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.6.8 Other Portfolio

Other investments within the Centum portfolio are described below: Others Longhorn • Longhorn Publishers was incorporated in Kenya in May 1965 as Longmans of Kenya a wholly owned Sector: Publishers subsidiary of Longman Group International of the United Kingdom. Stake: 31.4% • Longhorn Kenya Ltd. is a leading regional publisher of educational books and books for general readership. • Longhorn ranks second in market share for both primary and secondary level textbooks. • It has subsidiaries in Uganda and Tanzania and is also exploring opportunities in other African countries such as South Sudan, Rwanda and Zambia. GMEA • General Motors East Africa Ltd, was founded in 1975 as a joint venture between the Government of Sector: Automotive Kenya and General Motors Corporation. Stake: 17.8% • GM East Africa (GM) markets and sells Chevrolet, Opel and Isuzu vehicles and parts. It locally assembles the Isuzu and Chevrolet vehicles. • Majority of GM’s sales are domestic. GM also exports to neighboring countries in the COMESA region: Uganda, Tanzania, Rwanda, Burundi, Zambia, Zimbabwe, Mozambique and Ethiopia. • GM East Africa has over 30 years’ experience in the local assembly and services industry.

NAS Servair • NAS Servair is an on-site airport catering facility supplying over 30 International airlines that fly into

Sector: FMCG and out of Jomo Kenyatta International Airport (JKIA) in Nairobi and Moi international Airport (MIA) Stake: 15% in Mombasa. • It supplies high quality in-flight products and services and is recognized for both its professional standards and in-depth knowledge and understanding of local and international aviation hospitality requirements. • NAS has clear leadership credentials within its market.

Source: Centum Annual Report 2014

9.7 Dividend Policy

In 2009/2010 the Board of Directors of Centum made a decision not to recommend the payment of dividend and instead direct internally generated funds to growing shareholder value. In the new strategy period from 2014-19, the board of directors has maintained the no dividend policy.

9.8 Principal Shareholders

As at 31st December 2014, the top ten shareholders of Centum were as follows:

Table 8: Principal Shareholders Shareholder No. of Shares % of Shareholding Christopher J.Kirubi 160,023,688 24.05% Industrial & Commercial Development Corporation 152,847,897 22.97% CfC Stanbic Nominees Ltd A/C R48701 26,664,124 4.01% Standard Investment Bank Standard Inv Dealing 8,438,922 1.27% Uganda Securities Exchange 5,949,035 0.89% John Kibunga Kimani 5,908,221 0.89% CfC Stanbic Nominees Ltd A/C Nr1030685 5,643,273 0.85% The Jubilee Insurance Company Of Kenya Limited 5,581,385 0.84% Standard Chartered Nominees Non-Resd A/C 9537 5,425,300 0.82% International House Limited A/C 275204 5,394,237 0.81% Total Top Ten Shareholders 369,205,115 57.40% Information Memorandum 51 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.9 Shareholding by Directors

The Directors shareholding as at 31st December 2014 is as follows:

Table 9: Shareholding by Directors Shareholder No. of Shares % of Shareholding Christopher J. Kirubi 160,023,688 24.05% Industrial & Commercial Development Corporation 152,847,897 22.97% James M. Mworia 324,294 0.05% Henry C. Njoroge 256,028 0.04% James N. Muguiyi 46,096 0.01% Total 313,498,003 47.11%

9.10 Distribution of Shareholding

Centum’s range of shareholding as at 31st December 2014 is as shown in the following table:

Table 10: Distribution of Shareholding Volume Shares % Holders 1-500 2,314,393 0.35% 11,372 501-5,000 37,885,874 5.69% 18,548 5,001-10,000 24,146,416 3.63% 3,382 10,001-100,000 91,206,627 13.71% 3,686 100,001-1,000,000 91,376,857 13.73% 357 >1,000,000 418,511,547 62.89% 38 Total 665,441,714 100.00% 37,381

Table 11: Shareholder Profile Domicile Shares % Holders Foreign Institutions 39,475,757 5.93% 30 Foreign Individuals 1,454,589 0.22% 168 Local Institutions 276,721,400 41.58% 1,775 Local Individuals 347,789,968 52.26% 34,672 Total 665,441,714 100% 36,645

9.11 Employees

At Centum, our greatest asset and key driver behind our exception performance is our team of youthful, entrepreneurial, ambitious and highly focused individuals. Our entrepreneurial and high performance culture is enhanced by a relatively flat organizational structure that promotes a free flow of ideas and communication across the different levels of the organization; board, management and teams.

The standards of behaviour at Centum are guided by our core values; • Delivery to promise; • Unity of purpose; • Partnership; and • Investing responsibly

We believe that every team member is a leader and focus on enhancement of leadership capacity through our leadership development program. Our ultimate goal is to grow an adequate bench of leaders who will steer and drive the growth of the extraordinary enterprises we create across the African continent.

Centum and its wholly owned operating subsidiaries (Nabo Capital Ltd, Athena Properties Ltd and Centum Business Solutions Ltd) currently has a combined team of 84 members of staff. 52 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

10. TERMS AND CONDITIONS OF THE NOTES

1. The Issued Notes

The issue within the Republic of Kenya of up to Kenya Shillings six billion (Kes 6,000,000,000) constituting Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes, by the Issuer was duly authorized by the board of directors by way of a resolution dated 24 April 2015.

The Notes are available to the general public through subscription.

The Notes are issued with the benefit of, and are subject to the Information Memorandum, the Agency Agreement and the Trust Deed. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement and the Trust Deed. Noteholders are deemed to have notice of all the provisions of the Agency Agreement, copies of which are available for inspection at the Specified Offices of the Fiscal Agent in accordance with the provisions of the Agency Agreement.

The following is the text of the terms and conditions (the “Conditions”) of the Issued Notes.

2. Form, Denomination and Title

(a) Form of Notes and denominations. The Notes are issued in registered form and denominated in Kenya shillings in denominations of Kes 100,000 each and integral multiples of Kes 100,000 thereof (the “Specified Denomination”). The Notes will be registered in the CDSC Account of each Noteholder held with the CDSC in accordance with the CD Act.

The Variable Return in relation to the ELN is, at the option of the Noteholder, detachable from the ELN and is transferrable in accordance with the Conditions. The Variable Return shall not therefore constitute a Note nor shall its holder be deemed a Noteholder by mere holding of the Variable Return.

The Registrar shall maintain a Register with respect to the Notes and a separate Register with respect to the Variable Return in a location within Kenya.

(b) Listing: Approval has been given to list the Notes on the Fixed Income Securities Market Segment of the NSE.

The Senior Unsecured Equity Linked Notes will be listed on the Fixed Income Securities Market Segment and trading will be limited to qualified institutional investors.The Issuer shall use all reasonable endeavours to maintain the listing on the official list of the NSE of the Notes and the Variable Return or if it is unable to do so, the Issuer will, subject to the approval of the CMA and the Trustee, provide alternative mechanisms to facilitate trading of the Notes.

(c) Title. Title to the Notes will be evidenced by means of a book-entry in the CDSC Account of a Noteholder in accordance with the CD Act.

Title to the Variable Return will also be evidenced by means of a book-entry in the CDSC Account of a Variable Return Holder in accordance with the CD Act.

The Issuer, the Fiscal Agent and the Registrar may (to the fullest extent permitted by Applicable Laws) deem and treat the registered owner of any Note or Variable Return as the absolute owner thereof (whether or not the Note or Variable Return (as the case may be) shall be overdue and notwithstanding any notice of ownership or other interest therein and neither the Issuer, nor any agent of the Issuer, shall be affected by notice to the contrary).

Information Memorandum 53 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

“Noteholder” or “Variable Return Holder” when used with respect to any Note or Variable Return (as the case may be), means the person in whose name the Note or Variable Return (as the case may be) is registered with the CDSC for the Notes or, as the case may be, Variable Return (or in the case of joint holders, the first-named thereof).

“Holders” means the Noteholders and/or the Variable Return Holders (as the case may be) and “Holder” shall be construed accordingly.

(d) Transfer. A Note may be transferred in whole or in part in a Specified Denomination and title to such Notes shall pass upon the registration of book-entry transfers in accordance with the CD Act and; subject to the detailed regulations concerning transfers of Notes set forth in the Agency Agreement (the “Regulations”). The Regulations may be changed by the Issuer with the prior written approval of the Registrar.

The Variable Return may be transferred in whole or in part in a Specified Denomination and title to such Variable Return shall pass upon the registration of book-entry transfers thereof in accordance with the CD Act and subject to the Regulations. The Variable Return Holders may from time to time trade the Variable Return subject to the CD Act and the Regulations.

(e) Registration and transfer. The transfers will be subject to such charges as may be levied by the CDSC, CMA, NSE or any other regulatory authority or agency and market intermediary through whom the order is made.

3. Status of the Notes

The Notes constitute direct, general, unconditional, unsubordinated and, subject to the provisions of Condition 4 (Negative Pledge), unsecured obligations of the Issuer and will at all times rank paripassu in all respects (including in priority of payment) among themselves and with all other present and future direct, general, unconditional, unsubordinated and unsecured obligations of the Issuer, except for any obligations that may be preferred by provisions of law that are both mandatory and of general application.

4. Negative Pledge

The Issuer agrees that, so long as any Notes remain outstanding, it shall not create or permit to subsist any mortgage, charge, lien, pledge or other security interest upon or with respect to any of its undertakings, assets or revenues to secure any future indebtedness evidenced by notes, bonds or other securities which are or which are capable of being, at the request of the Issuer quoted, listed or dealt in for the time being on any securities exchange or any other similar generally recognized market for securities unless (a) the Notes are secured equally and rateably therewith; or (b) by providing such other security or arrangement as may be approved by Extraordinary Resolution of the Noteholders; unless the provision of any such security is waived by an Extraordinary Resolution of the Noteholders.

5. Allocation Policy

A combined maximum of Kes 6,000,000,000 (six billion Kenya Shillings) (the “Issue Amount”) in Notes will be made available for subscription.

The Issuer and joint lead transaction advisors will determine the allotment of Notes at their sole discretion. Of particular note however is that FRN applications will be given preference over ELN applications.

Centum reserves the right, whether the Issue is over-subscribed or not, to reject any application in whole or in part and may therefore allot less than the amount applied for.

6. Interest

(a) Payment of interest The Notes bear interest on their outstanding principal amount from the Commencement Date at the Interest Rate as determined below in accordance with the Payment Interest Dates indicated in Table 12 below.

If any Interest Payment Date would otherwise fall on a day, which is not a Business Day, the next following Business Day shall be substituted for such day, unless such Business Day falls in the next calendar month, in which case the immediately preceding Business Day shall be substituted therefore.

The period beginning on and including the date of the issue and purchase of the Notes (the “Commencement Date”) to but excluding the first Interest Payment Date, and each successive period from and including an Interest Payment Date to but excluding the next Interest Payment Date is herein called an “Interest Period”. The Interest Period for each Interest Payment Date will be as follows: 54 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Table 7: Payment of Interest Dates for the ELN and FRN

Interest payment dates 1 Monday, 14 December 2015 2 Monday, 13 June 2016 3 Monday, 12 December 2016 4 Monday, 12 June 2017 5 Monday, 11 December 2017 6 Monday, 11 June 2018 7 Monday, 10 December 2018 8 Monday, 10 June 2019 9 Monday, 9 December 2019 10 Monday, 8 June 2020

(b) Accrual of interest Interest on each Note will cease to accrue in respect of any redeemed principal, unless payment of principal on the relevant Principal Repayment Date (as defined below) or, where applicable the due date for early redemption, is improperly withheld or refused. In such event, each Note shall continue to bear interest in accordance with the provisions of this Condition 6 and Condition 9(b) (Payment on Business Days and late payments) until whichever is the earlier of (i) the date on which all sums due in respect of such Note have been paid; and (ii) five days after the date on which the full amount of monies payable has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders in accordance with Condition 15 (Notices).

(c) Calculation of the Interest Rate The rate of interest from time to time payable in respect of the Notes (the “Interest Rate”) shall be 13% for the FRN and 12.5% for the ELN.

(d) Calculation of Interest Amounts The Fiscal Agent will as soon as practicable, but in any event no later than two Business Days prior to the date on which interest for a particular Interest Payment Date begins to accrue (the “Interest Determination Date”), compute the amount of interest payable (the “Interest Amount”) for the relevant Interest Period.

For each Interest Payment Date, the Interest Amount shall be calculated by applying the Interest Rate to the outstanding principal amount of the Notes, multiplying such sum by the actual number of days in the relevant Interest Period divided by 364, rounding the relevant figure to the nearest Shilling (fifty cents being rounded upwards).

The computation of each Interest Amount by the Fiscal Agent shall (in the absence of manifest error) be final and binding upon all parties.

(e) Notification of Interest Rate and Interest Amounts The Fiscal Agent will cause each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and the Noteholders in accordance with the Agency Agreement and Condition 15 (Notices) as soon as possible, but in any event no later than the fourth Business Day after the Interest Determination Date.

7. Computation of Variable Return

The Equity Linked Note will in addition to the coupon payment, have a variable return (the “Variable Return”) in the event of an increase in the Issuer’s Net Asset Value (“Initial NAV”) over the life of the Notes.

Increase in NAV will be arrived at by subtracting the Initial NAV from the Final NAV. The Initial Net Asset Value is Kes 26,950,614,000 as disclosed in the reviewed financial statements for the period ended 31 December 2014. The Final NAV will be determined from (i) the Issuer’s audited financial statements as at 31 March 2020 or, (ii) in case of early redemption of the ELN, the Issuer’s latest publicly issued financial statements, being either half year accounts or full year accounts as the case may beThe formula for computing the final redemption price will be: Par Value + [Par Value *(min [max [25%*Centum’s company Net Asset Value Change, 0], 10%].

The increase in NAV for purposes of computing the final redemption price will be capped at 10% of par value. In the event that the final NAV is lower than the initial NAV, the final redemption price will be at par value. Information Memorandum 55 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Please refer to Section (5)(Frequently asked Questions). 8. Payment of Variable Return

The Issuer shall pay an amount equal to the Variable Return to each registered holder of the Variable Return (the “Variable Return Holder”) on the Maturity Date (or such other relevant date in the case of an early redemption) as notified by the Fiscal Agent in the Final Due Amount Notice.

9. Payments

(a) Method of payment i. Payment to the Holder will be made according to the particulars recorded in the Register at 3.00 p.m. (Nairobi Time) on the relevant Record Date. ii. Payments of amounts due on the final redemption of the Notes (the “Final Due Amount(s)”) will be made by the Fiscal Agent in accordance with the Agency Agreement and subject to the provisions of the CD Act to the holder of the Note thereof as appearing on the Register as at the Maturity Date. iii. The amounts due on any prepayment of the Notes (the “Early Redemption Amounts”) will be paid to the Noteholders appearing on the Register on the applicable redemption date and in accordance with the terms of the Agency Agreement and subject to the provisions of the CD Act. iv. Payments will be made by EFT or RTGS to a designated Kenya Shilling bank account belonging to the Holder with a bank in Kenya which bank account details have been advised by the Holder to the Registrar in writing and are recorded in the relevant Register held by the Registrar on the Business Day not later than the relevant due date for payment.

(b) Payments on Business Days and late payments i. If any day for payment of any Principal or Interest in respect of any Note or the Variable Return is not a Business Day, then the Holder shall not be entitled to payment until the next Business Day or if the next Business Day falls in the following calendar month the previous Business Day, nor be entitled to any interest or other sums in respect of such postponed payment. ii. If (otherwise than by reason of the application of paragraph (i) above) (a) any payment of principal is withheld or refused when due in respect of any Note, or (b) any Interest is not paid when due or (c) the Variable Return is not paid when due (the defaulted amounts mentioned in (a), (b) and (c) above being referred to in this Condition as “Defaulted Amounts”) then interest shall accrue on each such Defaulted Amount at the Late Payment Rate and shall be paid against presentation of a Note if the Defaulted Amount is an amount of principal, and to a person who is shown as the Holder on the relevant Record Date if the Defaulted Amount is an amount of interest or Variable Return (as the case may be).

(c) Currency of account and payment. The currency of account and for any sum due from the Issuer hereunder is the Kenya Shilling.

(d) Interpretation of principal. Any reference in these Conditions to Principal in respect of the Notes shall be deemed to include, as applicable any premium and any other amounts, excluding interest, which may be payable by the Issuer under or in respect of the Notes.

9.1. Redemption and Purchases

9.1.1. Redemption at Maturity Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Due Amount on the Maturity Date.

9.1.2. Redemption at the option of the Issuer 9.1.2.1. The Issuer may upon giving not less than thirty (30) and not more than sixty (60) days’ prior notice in writing to the Noteholders and the Trustee (the “Early Redemption Notice”) in accordance with Condition 15 (Notices) redeem all or some of the Notes outstanding;

9.1.2.2. The Early Redemption Notice shall specify the date on which the redemption is to be effected which date shall be an Interest Repayment or Principal Repayment Day; then and upon expiration of such notice, the Issuer shall redeem such Notes.

9.1.2.3. If the Issuer redeems only some of the Senior Unsecured Fixed Rate Notes, the partial redemption shall be of an aggregate principal amount of not less than Kes 1,000,000,000 (Kenya Shillings one billion) and integral multiple of Kes 100,000,000 (Kenya Shillings one hundred million).

9.1.2.4. Senior Unsecured Fixed Rate Notes may only be redeemed after the third anniversary of their issuance and at a premium of 1% (one per cent).

9.1.2.5. Senior Unsecured Equity Linked Notes will be eligible for early redemption, in which case the Final NAV will be calculated based on the most recent audited financial statements (being not more than six (6) months old). 56 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

9.1.3. Purchases The Issuer may at any time purchase Notes and/or the Variable Return at any price in the open market or otherwise, subject to any approvals required. In the event of the Issuer purchasing Notes and/or the Variable Return, such Notes and/or the Variable Return (as the case may be) may be held or resold, or at the discretion of the Issuer, cancelled. All Notes and/or Variable Return which are redeemed or purchased by or on behalf of the Issuer may be cancelled by giving notice to that effect to the Registrar, the Fiscal Agent and the CDSC.

9.2. General All Notes and/or Variable Return, which are redeemed and surrendered for cancellation will forthwith be cancelled and all Notes so cancelled shall be forwarded to the Fiscal Agent and cannot be reissued or resold.

10. Financial Covenants

10.1. Financial definitions In this Condition:

“Borrowings” means, at any time, the aggregate outstanding principal, capital or nominal amount (and any fixed or minimum premium payable on prepayment or redemption) of any indebtedness of members of the Group for or in respect of: (a) moneys borrowed and debit balances at banks or other financial institutions; (b) any acceptances under any acceptance credit or bill discount facility (or dematerialised equivalent); (c) any note purchase facility or the issue of bonds (but not trade instruments), notes, debentures, loan stock or any similar instrument; (d) any Finance Lease; (e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); (f) any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument (but not, in any case, trade instruments) issued by a bank or financial institution in respect of (i) an underlying liability of an entity which is not a subsidiary of Centum which liability would fall within one of the other paragraphs of this definition or (ii) any liabilities of any subsidiary of Centum relating to any post-retirement benefit scheme; (g) any amount raised by the issue of shares which are redeemable (other than at the option of Centum) before the Maturity Date or are otherwise classified as borrowings under IFRS; (h) any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind the entry into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than one hundred and eighty (180) days after the date of supply; (i) any amount raised under any other transaction (including any forward sale or purchase agreement, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under IFRS; and (j) (without double counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

“Cash” means, at any time, cash in hand or at bank and (in the latter case) credited to an account in the name of Centum and to which Centum is alone beneficially entitled and for so long as: (a) that cash is repayable on demand; (b) repayment of that cash is not contingent on the prior discharge of any other indebtedness of any member of the Group or of any other person whatsoever or on the satisfaction of any other condition; (c) there is no security over that cash (except for any security for any Borrowings) constituted by a netting or set-off arrangement entered into by members of the Group in the ordinary course of their individual banking arrangements; and (d) the cash is freely and immediately available to be applied in repayment or prepayment of the Notes.

“Cash Equivalent Investments” means at any time any investment made by Centum in the ordinary course of business in such securities or other instruments as Centum considers prudent. (a) certificates of deposit maturing within one year after the relevant date of calculation; (b) any investment in marketable debt obligations issued or guaranteed by the Government of Kenya, or any other country where our investments are domiciled or by an instrumentality or agency of any of them having an equivalent credit rating, maturing within one year after the relevant date of calculation and not convertible or exchangeable to any other security; (c) commercial paper not convertible or exchangeable to any other security: i. for which a recognised trading market exists; ii. issued by an issuer incorporated in Kenya, Mauritius, Tanzania or any other country where its investment could be domiciled; and iii. which matures within one year after the relevant date of calculation. (d) in each case, to which Centum is alone beneficially entitled at that time and which is not issued or guaranteed by any subsidiary of Centum or subject to any security. Information Memorandum 57 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

“Consolidated Net Finance Charges” means, for any Relevant Period, the aggregate amount of the accrued interest, commission, fees, discounts, prepayment penalties or premiums and other finance payments in respect of Borrowings whether paid, payable or capitalised by Centum in respect of that Relevant Period: (a) including the interest element of leasing and hire purchase payments; (b) deducting any accrued interest owing to any subsidiary on any deposit or bank account.

“Consolidated Total Net Debt” means, at any time, the aggregate amount of all obligations of Centum for or in respect of Borrowings but: (a) including, in the case of Finance Leases, only the capitalised value therefore; (b) deducting the aggregate amount of freely available cash at bank and Cash Equivalent Investments held by any member of the Group as permitted hereunder at such time and in relation to which there are no impediments (contractual or otherwise) to the ability of a member of the Group to pay such cash at bank or the proceeds of Cash Equivalent Investments to any Company, and so that no amount shall be included or excluded more than once.

“Internally generated funds or “IGF” means cash inflows from, dividend, interest, rent, other investment income and proceeds on investment disposals net of operating expenses.

“Equity” means the Fair Value of the Issuer.

“Finance Lease” means any lease or hire purchase contract which would, in accordance with the IFRS, be treated as a finance or capital lease.

“Relevant Period” means each period of twelve (12) calendar months.

10.2. Financial conditions Centum shall ensure that: (a) Interest coverage: The ratio of internally generated funds to finance charges in any Relevant Period is equal to or more than 1.5:1; (b) Net debt to Equity Cover: The ratio of Consolidated Total Net Debt to Equity in respect of any Relevant Period shall not exceed 1:2.

Below is a historical representation of the Issuer’s relevant ratios: Kes. M 2010 2011 2012 2013 2014 HY2015 Debt Service Coverage 34.61 13.81 27.43 6.3 5.58 6.9 Net Debt to Equity - 16% 5% 20% 23% 19%

10.3. Financial testing The financial covenants set out in Condition 10 (Financial condition) shall be calculated in accordance with IFRS and tested by reference to each of the financial statements provided that the first testing date shall occur on or after the first anniversary of the Commencement Date.

11. Taxation

The Issuer (or the Fiscal Agent, as the case may be) will deduct withholding tax at the prescribed rate on all interest payments to Noteholders other than any Noteholder who (a) is exempt from such deduction under the provisions of the Income Tax Act (Chapter 470 of the Laws of Kenya) and (b) has provided evidence of such exemption to the reasonable satisfaction of the Issuer.

12. Prescription

The Notes and the Variable Return will become void unless a claim is made for payment within a period of six (6) years in the case of principal or the Variable Return (as the case be) and six (6) years in the case of interest after the Relevant Date (as defined below). As used herein, the “Relevant Date” means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Fiscal Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Holders in accordance with Condition 15 (Notices). 58 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13. Default

13.1 Events of Default Unless as result of the occurrence of a Force Majeure Event, each of the events set out below is an Event of Default: (a) Non-payment: Centum fails to pay any amount due in respect of all the Notes or some of the Notes or the Variable Return on the Due Date for payment and such default continues for a period of seven (7) Business Days unless: (i) the failure to pay is caused by administrative or technical error; (ii) payment is made within three (3) Business Days thereafter; or (iii) the failure to pay is in order to comply with any Applicable Laws or order of any court of competent jurisdiction or in case of doubt as to the validity or applicability of any such law, regulation or order, in accordance with advice as to such validity or acceptability given at any time during such period by independent advisers acceptable to the Fiscal Agent; or

(b) Breach of other obligations: Centum defaults in the performance or observance of any of its other covenants and obligations under the Note Documents and (except where such default is incapable of remedy) such default continues for a period of sixty (60) Business Days following service of a notice by the Note Trustee requiring the same to be remedied; or

(c) Misrepresentation: any representation, warranty or statement made or repeated in, or in connection with the Agency Agreement or in any accounts, certificate, statement, opinion or the Information Memorandum delivered by or on behalf of Centum or in connection with the Notes or the Note Documents is incorrect to a material extent when made or deemed to be repeated; or

(d) Cross-default: any present or future indebtedness of Centum in connection with moneys borrowed or raised exceeding in aggregate Kes.500,000,000/= (Kenya Shillings five hundred million) (or its equivalent): i) Is not satisfied when due, or at the end of any originally applicable grace period; or ii) Becomes prematurely payable following delivery of an Enforcement Notice by the Note Trustee to Centum, as the case may be, as a result of a default by Centum except to the extent in any instance that the existence or enforceability of the relevant obligation is being disputed in good faith by it by appropriate proceedings; or iii) Any encumbrance over any assets of Centum or any Subsidiary of Centum becomes enforceable; or

(e) Insolvency: an Insolvency Event occurs in respect of Centum; or

(f) Winding up: a petition is presented or an application is made (which is not challenged by Centum within thirty (30) days of such petition or application) in respect of or any order is made or a resolution is passed for or any notice is issued to convene a meeting for the purpose of passing such resolution for the winding up or dissolution of Centum; or

(g) Compositions: Centum stops payment or becomes unable to pay its debts within the meaning of Section 220 of the Companies Act or any steps are taken with a view to proposing, under any enactment or otherwise, any kind of composition, scheme of arrangement, compromise or arrangement involving Centum and its creditors generally, or any class of them; or

(h) Appointment of receivers and managers: an encumbrancer takes possession or exercises or purports to exercise any power of sale or if a receiver or liquidator is appointed by any court or by any other person over the property and assets of Centum; or

(i) Legal process: a lawful distress, sequestration, execution or attachment either by virtue of any court order, decree or process or otherwise howsoever for a sum equal to or exceeding the 20% (twenty per cent) of the Total Assets of Centum is levied or enforced upon or issued against any part of the property and assets of Centum and which shall not be removed or discharged within sixty (60) days of it being so levied; or

(j) Cessation of business: Centum ceases, or threatens to cease, to carry on all or a substantial part of its business or sells or threatens to sell or otherwise disposes of or shall threaten to sell or dispose of all or a material part of its assets (other than in the normal course of trading it being acknowledged and agreed that Centum’s business entails the acquisition and disposal, inter alia, shares, equity, undertakings and businesses and such activities will not therefore constitute an Event of Default) whether by one or a series of transactions related or not or changes the mode of conduct of its trading in any respect so that its ability to meet its obligations under and in respect of the Notes is materially affected; or

(k) Authorisation: any authorisation, approval, consent, license, exemption, filing, registration or notarization or other requirement necessary to enable Centum to comply with any of its obligations under the Note Documents or to carry on business as presently carried on is modified (to the extent that its ability to meet its obligations under and in respect of the Notes is materially affected), revoked or withheld or does not remain in full force and effect and Centum is unable to obtain the same within fourteen (14) days of such modification; revocation or extinction; or Information Memorandum 59 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

(l) Unlawfulness: at any time it is unlawful for Centum to perform any of their respective obligations under the Agency Agreement; or

(m) Material adverse change: any other event or series of events whether related or not, including, without limitation, any material adverse change in the business, assets or financial condition of Centum in an amount equal to or exceeding 20% (twenty per cent) of the Total Assets of Centum, occurs that, in the opinion of the Fiscal Agent (such Fiscal Agent being so instructed pursuant to an Extraordinary Resolution), may affect the ability or willingness of Centum to comply with all or any of its obligations under the Note Documents.

13.2 Acceleration In the case of any such event as is mentioned in Condition 13.1 (Events of Default), and at any time thereafter if any such event shall then be continuing, the Note Trustee shall if so directed by an Extraordinary Resolution, issue an Enforcement Notice to Centum declaring that any outstanding Notes are immediately due and payable, whereupon the same shall become immediately due and payable together with all interest accrued thereon and all other amounts payable under the Note Documents.

13.3 Rectification The right to declare Notes due terminates if the situation giving cause to it has been cured or is otherwise no longer continuing before such right is exercised and any notice or demand issued by the Fiscal Agent in accordance with this Condition 13 (Default) shall be of no effect.

14. Agents

The names of the Note Trustee, Fiscal Agent and Registrar and its initial Specified Office are set out below. Table 8: Note Trustee, Fiscal Agent and Registrar Party Name of Party Specified Office of Party Note Trustee Ropat Trust Company Limited Ropat Trust Company Limited Kenya Re Towers off Ragati Road P.O. Box 1243-00100 Nairobi, Kenya Tel: +254 20 2723322 Fax: +254 20 2723474

Contact Person: Patrick Gacheru Email: [email protected] Fiscal Agent Custody and Registrars Services Limited Custody and Registrars Services Limited 6th Floor, Bruce House, Standard Street P.O. Box 8484-00100 Nairobi, Kenya Tel : +254 20 2230518 Fax: +254 20 2211773

Contact Person: Kerry-Anne Makatiani Email :[email protected] Registrar Custody and Registrars Services Limited Custody and Registrars Services Limited 6th Floor, Bruce House, Standard Street P.O. Box 8484-00100 Nairobi, Kenya Tel : +254 20 2230518 Fax: +254 20 2211773

Contact Person: Kerry-Anne Makatiani Email :[email protected] 60 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Issuer is entitled to amend or terminate the appointment of the Fiscal Agent or the Registrar and to appoint another fiscal agent or registrar provided that it will at all times while any Note is outstanding maintain a fiscal agent and a registrar having a Specified Office in Nairobi.

Any variation, termination or appointment shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than thirty (30) nor more than forty five (45) days’ prior notice thereof shall have been given to the Holders in accordance with Condition 15 (Notices).

In acting under the Agency Agreement and in connection with the Notes, each of the Agents is acting solely as agent of the Issuer and does not assume any obligation toward or relationship of agency or trust for or with any Holder or the owner of any interest therein.

The Trust Deed states the manner in which the appointment of Note Trustee may be amended or terminated.

15. Notices

Notices to the Holders will be deemed to be validly given if made by fax, delivered to them, or sent by registered mail or (if posted to an overseas address) by airmail to them, or electronic mail, or posted on the Issuer’s official website or published in a newspaper with national circulation and: i. in the case of any communication made by fax, will be deemed to have been validly given when dispatched with a fax transmission report showing that the entire communication was received by the intended recipient in legible form at its fax number as recorded on the Register (to be confirmed by letter but failure to send or receive the letter of confirmation shall not invalidate the original communication); ii. in any other case, will be deemed to have been validly given when such communication or document is left with or, as the case may be, ten (10) days after its being posted to the intended recipient at its address as recorded on the Register; iii. in case of electronic transmission , the notice will be deemed to have been validly given when such electronic communication is sent to the intended Holder; iv. in case of a notice posted on the Issuer’s official website, the notice will be deemed to have been validly given when such notice is so posted; or v. in case of a notice published in a newspaper, the notice shall be deemed to have been validly given on the date of publication of the newspaper, provided that a communication or document which is received after 5:00 p.m. on a Business Day, or on a day which is not a full Business Day, in the place of receipt shall be deemed to be delivered on the next full Business Day in that place.

Notices given by any Holders shall be in writing and given by lodging the same with the Fiscal Agent.

16. Meetings of Noteholders; Modifications and Waiver

The Trust Deed and the Agency Agreement contain provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including, without limitation, the sanctioning by Extraordinary Resolution of a modification of the Notes or certain provisions of the Trust Deed. Such a meeting may be convened by the Issuer or Noteholders holding not less than 20% (twenty per cent) in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing more than fifty (50%) in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes (including modifying the date of maturity of the Notes or any date for payment of interest or principal thereof, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes), the necessary quorum for passing an Extraordinary Resolution will be one or more persons holding or representing not less than three-quarters in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders must be carried by a majority of not less than three-quarters present and entitled to vote and, if so carried, shall be binding on all the Noteholders, whether or not they are present at the meeting, and whether or not they vote in favour. A Noteholder may appoint a proxy or representative in accordance with the provisions of the Trust Deed. The quorum for passing any resolution (other than an Extraordinary Resolution) at a meeting of Noteholders shall be any two or more Noteholders (not being the Issuer or any Representative of the Issuer) present in person or by proxy or representative and representing in the aggregate more than one third of the aggregate Principal Amount of the Notes for the time being outstanding. Such resolution shall be decided by a majority of votes of the Noteholders present and entitled to vote. Information Memorandum 61 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Note Trustee and the Issuer may agree, without the consent of the Noteholders, to: i. any modification (except as mentioned above) of the Agency Agreement which is not prejudicial to the interests of the Noteholders; or ii. any modification of the Notes or the Agency Agreement, which is of a formal, minor or technical nature or is made to correct a manifest error to comply with mandatory provisions of Kenyan law; or iii. listing of the Notes on the NSE.

Any such modifications shall be binding on the Noteholders and any such modification shall be notified to the Noteholders in accordance with the Trust Deed as soon as practicable.

17. Governing Law

The Notes, the Trust Deed and the Agency Agreement shall be governed by, and construed in accordance with, the laws of Kenya.

18. Jurisdiction

The Issuer hereby agrees, for the benefit of the Holders, (i) that any suit action or proceedings (together referred to as “Proceedings”) arising out of or in connection with the Notes, Variable Returns or the Agency Agreement may be brought before any competent court in the Republic of Kenya and irrevocably submits to the jurisdiction of such court; (ii) agrees that a judgment in any such Proceedings brought in any such court shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction; (iii) hereby agrees that nothing contained in this condition shall limit the rights of any Holder to take Proceedings against the Issuer in any other court of competent jurisdiction, nor shall be taking of Proceedings in one or more jurisdiction preclude the taking of proceedings in any other jurisdiction, whether concurrently or not.

Service of any writ, judgment or other notice of legal process shall be received by the Issuer at its office in Nairobi, presently at International House, 5th Floor, Nairobi, Kenya.

Nothing in this Condition 18 shall affect the right of any Holder to serve any writ, judgment or other notice of legal process in any manner permitted by Applicable Law and the Issuer hereby consents to service being effected in any such manner, whether by mail or otherwise. To the extent that the Issuer may in any jurisdiction claim for itself or its assets immunity (to the extent that such immunity may now or hereafter exist, whether on the ground of sovereign immunity or otherwise) from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process (whether through service or notice or otherwise), and to the extent that in any such jurisdiction there may be attributed to itself or its assets such indemnity (whether or not claimed), the Issuer irrevocably agrees for the benefit of the Holders not to claim, and irrevocably waives, such immunity to the full extent permitted by the laws of such jurisdiction. 62 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

11. KEY INVESTMENT CONSIDERATIONS

The investment considerations below do not constitute a guarantee neither are they indicative of future returns. Potential investors are advised to consult with their investment, legal and tax advisers to determine the suitability of an investment in the Notes, and the appropriate amount, if any, of an investment of this nature

11.1 Business Model

Centum’s business model is to create investment grade opportunities of scale that will attract investment at significant return to initial capital. Centum is currently focusing its development activities in several key sectors: (i) financial services, (ii) fast moving consumer goods (FMCG), (iii) real estate and (iv) power (v) agriculture, (vi) education, (vii) healthcare and (viii) ICT.

The proceeds from the bond issue will be applied to funding these early stage opportunities and are expected to deliver significant value to Centum at the growth phase (as illustrated below) especially given the increase in competition for the few investment grade assets available in the region.

As a developer and promoter, Centum realizes early-stage value by creating investment-grade opportunities for down-stream investors as illustrated in the chart below. Information Memorandum 63 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Centum funds these opportunities during development phase with the aim to invite financial investors after de-risking projects. The projects funding cycle is illustrated in the chart below:

11.2 Track Record of Consistent Performance and long term growth

In the period from April 2009 to 31 December 2014, we have delivered consistent performance and growth:

1. During the period, we delivered an annualized return of 30% against NSE 20 share index performance of 11%, representing a 19% outperformance.

64 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2. The value of Centum’s portfolio grew by Kes 27.8 Billion from Kes 9 Billion in March 2010 to Kes 36.8 Billion in December 2014. Total assets under management (including third party funds) stood at Kes 176Billion in December 2014, representing a 19.5 times growth since March 2010. This is illustrated in the charts below:

Assets under Management Portfolio Value

36.8

Source: Company reports

Centum’s Net Asset Value grew by 357% from Kes. 5.9 Billion in April 2009 to Kes. 26 Billion in December 2014. This represents growth or at a rate of 30% compounded annually. Market value of shareholder funds grew from Kes. 5.6 Billion in April 2009 to Kes. 40.6 Billion in December 2014 representing 625% growth in value generated to shareholders.

Net Asset Value Growth

Kes. Billion

Source: Company reports

11.3 Unutilised debt carrying capacity

Centum has a relatively low level of gearing, with debt to shareholder funds ratio at 15% as at 31 March 2015 as shown below:

Kes. M 2010 2011 2012 2013 2014 2015 Net Debt (Total debt less cash) - 1,988 678 2,647 4,649 3,763 Gearing 16% 5% 20% 23% 15%

With the current debt issue of Kes.6 billion being fully subscribed, the level of gearing will increase to 31%, which is still relatively low and within Centum’s existing debt covenants of a ceiling gearing ratio of 50%.

The level of gearing at Centum excludes debt at subsidiary company level. At subsidiary level, project specific funding at no recourse to Centum is procured. Therefore, the value at risk for Centum in relation to the debt at subsidiary levels in limited to the extent of Centum’s equity investment in the respective subsidiary. Information Memorandum 65 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

11.4 Strong cash flows

Centum has strong cash flows from dividend, interest and exits from its portfolio of assets. The table below highlights the cash generated from operations over the last six years. With our dual focus on cash return and investment value appreciation, Centum is set to maintain healthy cash flows into the future.

Kes. M 2010 2011 2012 2013 2014 Dec 2014 Operating inflows 1,722 2,349 6,619 2,547 4,146 4,112 Operating outflows (199) (305) (309) (380) (463) (565) Cash from Operations 1,523 2,044 6,310 2,167 3,683 3,547 Interest paid 44 148 230 344 660 391 Debt service coverage 34.61 13.81 27.43 6.30 5.58 9.07

A minimal average of 14% of our cash inflows goes towards servicing of operating expenses at Centum Investment Company Limited. This therefore means that the bulk of cashflows generated from operations by Centum are available to service additional debt as well as repay our current Kes 4.2Bn bond in 2017.

Over the period, Centum has maintained debt service coverage way above the bond covenant of 1.5 times.

Centum is rated for credit quality by the Global Credit Rating Company (GCR). Centum received an initial rating of A- in 2012. The Company’s current rating is A for both short term and long term credit quality, well above the minimum investment grade rating.

Diversified income streams The diversified nature of Centum’s portfolio helps diversify risks associated with liquidity. Centum’s investments in marketable securities were valued at Kes. 4.2Bn as at 31st December 2014. Centum expects to maintain its investments in marketable securities at approximately 10-15% of total assets for the medium term.

Forecast debt service capacity Given current cashflows from operations and an assumption of no growth, Centum will still be in a position to adequately service the additional Kes.6 billion debt. This is illustrated below.

Assuming that cash from operations is at the focused Kes 3.2 Bn and an additional annual debt service of approximately Kes 800 million from the bond raise, the debt service coverage will be 2.0 times which is within the bond covenant target.

Kes. M 2015E 2016E Cash from Operations 8,352 2,706 Interest paid 730 1,344 Debt service coverage 11.44 2.01 Minimum debt service coverage ratio 1.5 1.5

11.5 A well-Diversified Investment Portfolio

In its 48 year history, Centum has diversified its portfolio into different industries to help manage sector specific volatility and give its stakeholders market beating returns. In addition, through a well-managed sector diversification strategy, Centum has given its stakeholders access to a wide range of economic sectors helping to broaden participation in the economy as well as minimize the impact of market fluctuations on their portfolio returns.

As at 31 December 2014, Centum’s portfolio of Kes 36.8 billion was invested across several sectors as summarized below:- 66 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Source: Company reports In line with its Pan African Vision , Centum continues to diversify geographically giving its stakeholders access to other geographical markets as well as manage overall macro-economic risks. The company presently has a presence in 12 countries as summarized below:-

Morroco

Egypt

Ivory Coast Nigeria Ghana Uganda

Kenya

Tanzania

Zambia

Zimbabwe

Botswana

Current Exposure

The above approach has given Centum key presence outside the Kenyan market. Presently over 19% of its portfolio is held outside Kenya representing assets in excess of Kes 5.3 billion. This has given investors access to opportunities in fast growing markets while insulating them against the impact of country specific fluctuations.

11.6 Strong Corporate Governance

Centum’s success is anchored on the practice of world class corporate governance. The Company’s Board of Directors is committed to ensuring that the business is run in a professional, transparent, just and equitable manner so as to protect and enhance shareholder value whilst satisfying the interests of all other stakeholders. The principles and standards established by the Board have been developed with close reference to guidelines on corporate governance issued by the Centre for Corporate Governance, the Capital Markets Authority for publicly listed companies in Kenya, the Central Bank of Kenya for the banking industry and other best practices. The Board members have a broad range of skills, expertise and experience and each brings independent judgment and valuable contribution to the business.

Centum’s success is founded on a team of young, professional and highly experienced individuals. Centum has endeavored to preserve its entrepreneurial culture through a relatively flat organization culture that enables deliberate yet quick decision making. Centum intends to organize itself around projects at hand rather than traditional corporate charts. Information Memorandum 67 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The company has won the following Awards in the recent past from, inter alia, the Champions of Governance (COG) Awards by the Institute of Certified Public Secretaries of Kenya and the Financial Reporting Excellence (FIRE) Awards by the Institute of Certified Public Secretaries of Kenya:

In addition, Centum Group CEO, Mr James Mworia served on the Capital Market’s Steering Committee on Corporate Governance that drafted the Kenya Corporate Governance Blue Print.

11.7 Strong Brand Name

Founded in 1967 as ICDC Investment Company Limited, Centum has grown to be one of the largest5 investment companies in East Africa. It is listed on the Nairobi Securities Exchange (NSE) and cross listed on the Uganda Securities Exchange (USE). It presently has over 36,000 shareholders spread all over the world and is one of the most recognizable brands, with over 93% of the shareholders spread over East Africa.

Its investments are in leading companies in Africa in its quest to become Africa’s foremost investment channel. Centum is Kenya’s biggest publicly traded investment company. It has over the years availed a quality diversified pool of assets to institutional investors, which they would otherwise not have.

Recently, Centum was able to attract a US$ 70 million investment in its Two Rivers project from a Chinese corporation and US$5 million from a local corporation. This investment was significant not only for Centum, but also for the country, as it is one of the foreign direct investments (FDI) by a Chinese corporation into a private sector led enterprise. For Centum, the investment further confirmed the company’s ability to create investment-grade assets that attract considerable investment from local and foreign sources.

5BloombergBusiness, “Centum of Kenya in Talks on Healthcare, Education Ventures” http://www.bloomberg.com/news/articles/2014-11-26/centum-of-kenya-in-talks-on-healthcare-education-partnerships 68 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

12. ECONOMIC OVERVIEW

12.1 Kenya Macro - Economic Overview

Selected Macro Economic Indicators

The table below summarizes the key macroeconomic indicators in Kenya: Indicators 2011 2012 2013 2014 2015F GDP (Current prices) – USD ‘Billions 34.3 40.7 45.1 51.8 59.2 Real GDP Growth 4.4% 4.6% 5.7% 5.7% 6.9% Inflation 14.0% 9.6% 5.7% 6.9% 5.0% Population 42.0 mn 43.2mn 44.2mn 45.3mn 46.4mn

Source: Kenya National Bureau of Statistics, IMF World Outlook Database

**Kenya rebased its GDP figures in 2014 leading an increase of 25.3%

Economic Outlook In 2014, Kenya’s economic growth improved significantly with Gross Domestic Product (GDP) growth estimated at 5.7%.This growth has greatly been supported by infrastructure developments. According to the Kenya budget policy document 2015, Kenya’s GDP is projected to grow by 6.9% in 2015 and by 7.0% over the medium term. This robust broad based growth will be underpinned by improved performance in the agricultural, manufacturing, construction, retail, financial and insurance industries.

The main impediment to economic growth in the recent past have been the upsurge of security risks associated with terrorism attacks which has adversely affected the output from Kenya’s Tourism industry. Other factors that may impede expected growth are drought and the continuous fiscal expansion.

Kenya Annual GDP Growth

Source: World Bank and Kenya Budget Policy Document Information Memorandum 69 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Inflation Overall inflation remained largely stable through 2014 on the back of prudent monetary policies by CBK. In January 2014, inflation stood at 7.2% rising to a year high of 8.2% in August and closing the year at 6.0%.

Kenya Overall Inflation

Source: Kenya National Bureau of Statistics

Overall inflation declined to 5.5% in January and marginally increased to 5.6% in February of 2015. The increase was a result of increase in food prices. However, inflation is relatively low and well within the CBK medium term target of between 2.5% and 7.5%. The low inflation comes on the back of low global oil prices.

Going forward, the main risk to the inflation outlook is the expected drought in some parts of the country which may result in a decline in agricultural output prompting food imports. However, low fuel prices occasioned by the global decline in the price of crude oil is expected to maintain downward pressure on the rate of inflation.

Interest Rates All through 2014 and in Quarter 1 of 2015, the short term interest rates generally remained stable. This has been occasioned by high liquidity as well as general convergence of the short term rates in line with the Central Bank Rate (CBR) which has been retained at 8.5% since May 2013. In the first week of January, the 91 day T-bill, 182 day T-bill and 364 day T-bill rates were at 8.5%, 10.2% and 10.7% respectively and closed the week ending 18th March 2015 at 8.5%, 10.3% and 10.6% respectively.

Interest Rates

Source: Kenya National Bureau of Statistics

The average lending rate in 2014 was 16.5%, the average overdraft rate was 15.5% and the average deposit rate was 6.6%. As of end of January 2015 the average deposit rate was 6.5% and lending rate was 15.9%. 70 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Exchange Rates The Kenya shilling exchange rate remained stable against major world currencies all through 2014 supported by increased remittances from the Diaspora, IMF disbursements under the Extended Credit Facility programme and the Central Bank’s activities in the Foreign Exchange markets.

Exchange Rates

Source: Central Bank of Kenya

Although stable, the Kenya Shilling exchange rate has demonstrated mixed performance against major international currencies through Q1 of 2015.The Kenya shilling appreciated against both the Sterling pound and Euro to trade at Kes 137.05 and 96.77 on 12th March 2015 from Kes 141.00 and Kes 109.39 respectively in January 2015. Against the dollar, the Kenya shilling depreciated to trade at Kes 91.72 on 12th March 2015 from Kes 90.70 in January 2015.

12.2 Uganda Macro - Economic Overview

The table below summarizes the key macroeconomic indicators in Uganda Indicators 2011 2012 2013 2014F 2015F GDP ( Current Prices )– USD ‘Billions 18.1 21.1 23.05 25.6 27.2 Real GDP Growth 5.9% 2.8% 4.7% 6.0% 6.6% Inflation 18.7% 14.2% 5.5% 4.3% 5.4 % Population - millions 32.9 34.1 35.4 36.6** 37.6

Source: IMF World Economic Outlook, October 2014, Uganda Bureau of Statistics.

**actual population count in 2014 returned a figure of 34.9 million.

Uganda Economic Outlook The Uganda economy saw the consolidation of macroeconomic stability and a continued, albeit modest recovery of economic activities. The country’s Gross Domestic Product (GDP) is estimated to have grown at 6.0% in 2014 on the back of a fiscal and monetary policy stance focused on containing inflationary pressures, while ensuring debt and exchange rate stability.

The forecast for 2015 is positive with GDP growth expected to be around 6.6% on the back of steadily improving economic conditions. However, the ongoing conflict in South Sudan (one of Uganda’s key trade partners) is expected to negatively impact exports. Information Memorandum 71 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Uganda plans to hold Presidential and Parliamentary elections in early 2016. Expectations are that the increased government expenditure relating to these elections will expand monetary supply leading to inflationary pressures and consequently a reduction in real GDP growth. Below is a summary of GDP growth rates for the period 2011 – 2015

Source: Uganda Bureau of Statistics

Inflation Overall inflation in Uganda was on a downward trend in 2014. The Bank of Uganda statistics show that while 2014 began with core inflation of around 3.9%, this declined to end the year at 2.7%. There is however evidence of an upward creep in core inflation with Central Bank data recording this at 3% as at February 2015.

The diagram below summarizes core inflation and electricity, fuel and utilities (EFU) inflation for the period February 2014 to February 2015.

Source: Bank of Uganda

In the short term Uganda is likely to face inflationary pressure mainly due to three factors:- • Increased government borrowing and spending on the planned presidential and parliamentary elections to be held in in 2016 which is expected to expand monetary supply; • The uncertainties surrounding elections are likely to see a cut back on spending by businesses. It is expected that the declining investments in manufacturing capacity will see a decline in output which will lead to increase in general prices. • Speculative activities in the foreign exchange markets which are expected to negatively impact foreign exchange reserves 72 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Interest Rates The interest rate environment in Uganda remained largely stable in 2014 against a background of increasing market liquidity. The Central Bank Rate (CBR) began the year at 11.5% but was cut to 11% in June 2014 where it has remained since. The Treasury bill rates however showed modest increase as shown below:-

Source: Bank of Uganda A Standard Chartered Bank report forecasts an increase in the Central Bank Rate to around 13% levels due to expected inflationary pressure in 2015. The inflationary pressure is expected to arise out of increased government borrowing and expenditure on election related activities. This is in turn expected to further increase Uganda’s traditionally high lending rates. Information Memorandum 73 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13. INDUSTRY OVERVIEW

13.1 Power Sector

Selected Macro Economic Indicators

13.1.1 Overview of the East African Power Sector The East African governments have been actively addressing the energy problem in the region, which until recently, severely constrained economic development. Several new projects have been initiated with the aim of increasing the region’s electricity production. In 2011, Ethiopia’s prime minister announced that the country was working towards increasing its renewable energy output five-fold within the next five years. State-owned Ethiopian Electric Power Corporation (EEPCo) recently announced a revised 25-yearpower-sector strategy, aiming to boost power generating capacity to 37,000MW by 2037. A substantial amount is intended to be surplus power earmarked for export mainly to East African countries. The vast natural resources and favourable climate could place Ethiopia at the centre of an emerging electricity network across the region, driven largely by renewable energy.

Construction of the Lake Turkana Wind Power project in Kenya started in the first quarter of 2014. The project had been delayed for years due to funding concerns, but it finally reached financial close in 2014. If the construction timeline is adhered to as planned, the first 50MW of power could be generated by the first quarter of 2016, and the ramp-up to full capacity of 300MW by Q4 2016. When completed, Lake Turkana could be the largest wind power project in Africa.

The Tanzanian government recently released a document emphasising that the domestic market will be prioritised over the export market with regard to gas supply, and as a result, all liquefied natural gas (LNG) and other processing facilities will be located onshore. The government also plans to facilitate the establishment of industrial parks where natural gas will be utilised. Additionally, Tanzania plans to start exporting power in 2015 to neighbouring countries. Completion of a new gas pipeline should double the country’s electricity generating capacity to about 3,000MW.

The East African Power Pool aims to connect the power grids of at least 10 countries, including Ethiopia, Kenya, Rwanda, Uganda, Burundi, Tanzania, the DRC, Sudan, Libya and Egypt. It may also extend to northern and southern Africa.

13.1.2 Power Sector in Kenya 13.1.2.1 Structure of the Power Sector The power sector in Kenya has been undergoing restructuring and reform since the mid-1990s, culminating with the Energy Act 2006. Under the Energy Act, the Ministry of Energy is responsible for formulation of policies through which it provides an enabling environment to all operators and other stakeholders in the energy sector.

As a result of the Energy Act, the Energy Regulatory Commission (ERC) was established in 2007 as an autonomous, independent energy sector regulator with powers to formulate licensing procedures, issue licenses and permits, make recommendations on regulation (to be implemented by the Minister of Energy), formulate, enforce and review environmental, health, safety and quality codes and standards, set, review and adjust electricity tariffs, approve power purchase and network service contracts, investigate complaints between parties, protect stakeholders interests and prepare an indicative national energy plan. On recent Independent Power Producers (IPPs), the ERC has also issued a comfort letter to assist with the requirements of project finance lenders.

KenGen is the an electrical power generation company in Kenya, supplying the country with about 80% of its electricity. KenGen is a publicly listed company and is majority-owned by the Government. KenGen provides electricity from numerous energy resources, such as hydropower, wind, geothermal and thermal.

KPLC is a publicly listed company that transmits, distributes and retails electricity to customers throughout Kenya. KPLC is also responsible for ensuring that there is adequate line capacity to maintain power supply and quality over the Kenyan electricity network, covering approximately 41,486 km. 74 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Kenya Electricity Transmission Company (KETRACO) is the Kenyan national grid operator and its main business is to plan, design, build, operate and maintain new electricity transmission lines and associated substations.

Geothermal Development Company Limited (GDC) is a 100% state owned special purpose company set up to fast-track the development of geothermal resources. Part of its mandate is to enhance geothermal exploration in Kenya. GDC has a 10-year US$2.6 billion exploration plan which will involve drilling 566 wells and locating 2,336MW of geothermal energy. These potential energy reserves have been located in 14 “high-potential” areas and estimates of their value are around US$30 billion. Whilst the GDC has this mandate of “exploration”, it also tenders contracts for IPPs, such as a recent expression of interest regarding the development of a power plant to process 400MW of reserves in the Menengai field and an open tender for an 800MW geothermal plant at Bogoria- Silai. GDC will harness steam discovered and this will be sold on to IPPs who will construct power plants to process it.

13.1.2.2 Power Generation & Supply The Kenyan electricity market is structured as a single buyer market with KPLC, the transmission and distribution utility, buying electricity from all generators on the basis of negotiated Power Purchase Agreements (PPAs) for onward transmission, distribution and retail to consumers. Kenya’s energy generation market is rather liberalised, with several IPPs contributing to the national grid, a collective installed capacity of 507MW and KenGen as the dominant market player with an installed capacity of 1,268MW.

Power generation mix Sources Installed Capacity (MW) % Share Hydro 797.5 44.9% Thermal 587.5 33.1% Geothermal 348.0 19.6% Co-generation 21.5 1.2% Wind 5.1 0.3% Isolated Grid 15.0 0.8% Total 1,774.6 100.0%

Source: KPLC 2014 Annual Report

The Ministry of Energy and Petroleum is focused on deregulating both the supply and demand in the power value chain to create a more competitive market in the future. The Kenya government has set forth its “Vision 2030,” a programme to transform Kenya into an industrialised middle-income country. However, Kenya has less than 2,000MW of generation capacity to serve its population of over 44 million. Kenya aims to increase generation capacity to 5,000MW by 2017 and by 15,000MW by 2030. While these are aggressive targets, the Kenya government is focused on achieving this through: • Sustaining a stable investment climate for private sector participation in the sector; • Developing expanded transmission and distribution networks to deliver power to customers; • Maintaining a creditworthy off-taker in the country’s transmission and distribution utility – KPLC; • Continuing to enforce cost-reflective tariffs; and • Reducing inefficiency in the sector to support more affordable end-user tariffs

The planned capacity expansion drive will be largely met through the exploitation of clean energy resources such as geothermal, wind and biomass in the medium to long-term. The country possesses over 10,000MW of undeveloped geothermal energy resources found in fields situated in the country’s Great Rift Valley. Geothermal Development Company Ltd (GDC) intends to exploit these untapped resources for base load power generation. If the government’s targets are realised, Kenya’s power sector is set to undergo a dramatic change in the energy mix by 2030, with non-hydro renewables set to overtake hydro power as the dominant source of electricity.

Centum is in the process of building a 140MW geothermal power plant in Olkaria, Naivasha as part of the company’s move into the energy sector. Information Memorandum 75 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected power generation mix (2014-2017)

Source: KPLC 2014 Annual Report, MoEP

Over-dependence on hydro power generation has resulted in supply disruptions during periods of drought, with costly oil-fired sources being used to boost output. As a result, the government aims to introduce coal, as well as gas-fired capacity, into the power generation mix.

In 2014, the Kenya government invited bids for the construction of a 1,050MW coal power plant in Lamu County which was won by a consortium led by Centum on a Build-Own-Operate model. Other players in the consortium included Gulf Energy and Sichuan Electric Power Design and Consulting Company Limited (SEDC).

The government’s Vision 2030 strategy also stipulates the development of nuclear energy as a viable means of providing the much- needed reliable and affordable electricity.

To date, over 4,000MW of projects are in progress, with most of these expected to be completed by 2016.

40 Month Government 5000+ MW Strategy (Start date: 2013)

Time in months 6 12 18 24 30 36 40 Total (MW) Hydro 24 ------24 Thermal 87 163 - - - - - 250 Geothermal 90 176 190 50 205 150 785 1,646 Wind - - 20 60 300 250 - 630 Coal - - - - 1,050 - 960 2,010 Natural Gas - - - 700 350 - - 1,050 Co-generation - - 18 - - - - 18 Total 201 339 228 810 1,905 400 1,745 Cumulative additions (MW) 201 540 768 1,578 3.483 3,883 5,628

Source: KPLC 2014 Annual Report

Kenya’s power supply has been growing at CAGR of 6% over the last 5 years mainly driven by increased investor activity in the power sector with IPPs playing a pivotal role, particularly in the renewable power sub-sector. Much of the growth was catalysed by the reforms in the Energy sector through the Energy Act, 2006 which among other changes included pre-negotiated pricing and procedures for renewable energy projects. 76 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Power Supply (GWh)

Source: KPLC 2014 Annual Report, KNBS Economic Survey

13.1.2.3 Power Transmission In light of the power generation plans of increasing power generation by approximately ten times in approximately 14-15 years, there needs to be a corresponding increase in transmission and distribution infrastructure to ensure government’s objectives of increasing electrification rates at affordable prices are to be realised. In line with its mandate, Kenyan Electricity Transmission Co. Ltd (KETRACO), has identified for implementation on a priority basis, a total of 18 projects of 1,471km of 132KV lines, 645km of 220KV lines, 608km of 400KV lines and 686km of 500KV HVDC lines to be implemented over the next 3-4 years. The Kenya government, jointly with the Tanzania Government, will also undertake the implementation of the 330KV transmission line between Arusha (Tanzania) and Nairobi. Funding for this already secured. Similarly, the Kenya government in conjunction with the Ethiopian government are in the advanced stages of implementing the 1,070km power line that will export power from Ethiopia to Kenya. The World Bank and AfDB are expected to lend US$684 million and US$338 million respectively towards the project.

13.1.2.4 Power Demand KPLC’s key mandate is to plan for sufficient electricity generation and transmission capacity to meet demand; building and maintaining the power distribution and transmission network and retailing of electricity to its customers. The company is currently on an expansion programme to extend power connectivity to the majority of Kenyans with a goal of connecting 70% of Kenyans by 2020 from the current 32%. They have connected more customers in the last 5 years, than they had since independence with power connections having grown by CAGR of 16% since 2010.

Customers connected to the grid

Source: KPLC 2014 Annual Report, KNBS Economic Survey

Power demand continues to grow steadily at CAGR 6% - slightly higher than annual GDP growth - exerting pressure on power producers to ensure there is adequate increase of power supply to meet the increasing demand.

Power demand

Source: KPLC 2014 Annual Report, KNBS Economic Survey Information Memorandum 77 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected power demand to the year 2030

Source: KenGen, MoEP

Nairobi remains the largest consumer of power by region due to its huge urban population accounting for over 50% of total power consumed. With devolution however, this share is expected to decrease as economic activities in the counties increase and as KPLC and Rural Electrification Authority (REA) extend the national power grid to the rural areas.

Power consumption by region

Source: KPLC 2014 Annual Report, KNBS Economic Survey 78 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.2 Fast Moving Consumer Goods (FMCG) Sector

13.2.1 About FMCG FMCG are quick to package, move and sell. They include toiletries, processed food stuffs and alcohol. FMCG is a low profit margin, high volume industry. Given their fast-paced, traceable nature, they are an excellent litmus test for assessing the state of many other variables in the markets including transport, trade and consumer sentiment. FMCG trends allow economists to track the rise of the emerging consumer class on the African continent, and the consumer price index (CPI) is a largely accepted statistical gauge of inflation.

Africa’s consumer-facing industries are expected to grow by more than $400 million by 2020. The economic growth accelerated in the years following 2000, making it the world’s second fastest growing region after emerging Asia and equal to the Middle East. Resources contributed less than a third of total GDP growth in the 2000s, while 45% of growth came from consumer-facing or partially consumer- facing sectors. The African market opportunity is concentrated, with 10 of 53 countries (Algeria, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Sudan and Tunisia) accounting for 81% of Africa’s private consumption in 20111 .

According to McKinsey & Co. GDP per capita is the single most important driver of global growth in the consumption of fast-moving consumer goods, accounting for an average of around 73% of total growth across 60 product categories. While the influence of other factors, such as education and local customs, varies between categories, GDP per capita dominates how much money people spend in Africa because most markets are in the early stages of development.

The graph below shows the expected consumer spending growth in selected African countries:

Source: Euromonitor Africa Consumer Spending

As a result, Africa presents a solid opportunity for producers and retailers of FMCG but requires strategies tailored and executed market- by-market to account for different rates of economic growth and local consumer needs and preferences. In addition, speed is very important. Companies that can quickly establish a foothold or expand their presence will be well positioned to capture the value at stake as the continent’s consumers increase their spending in the years to come2.

13.2.2 Key Drivers of FMCG in Africa 13.2.2.1 Market Size FMCG retailers generally operate in a low-margin environment. As a result, the existence of a large market is crucial to the success of these companies. Despite Africa having a population of around one billion, the continent remains relatively under-served by FMCG companies3.

1Ventures Africa

2McKinsey & Company

3KPMG Africa Information Memorandum 79 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The graphs below show the 10 African countries with the largest population sizes in 2013 and 20304:

Source: United Nations Population Division

Nigeria’s estimated population size in 2013 was roughly equal to the sum of the next two most populated nations on the continent, Ethiopia and Egypt. On the forecast, the top two countries remain unchanged, although Nigeria is forecast to widen the gap with Ethiopia due to the former’s fertility rate, which is projected to decline at a slower pace. For the same reason, the DRC is expected to surpass Egypt in population numbers while Tanzania is expected to rise above South Africa, which is expected to fall from the fifth to the eighth position. Kenya and Uganda are also expected to move up the rankings due to high population growth rates.

13.2.2.2 Urbanization The UN forecasts that SSA’s urbanization rate will reach 45.9% by 2030 and 56.7% by 2050 from just 36.3% in 2010. The urbanization rate of East Africa is much lower than the rest of SSA. In 2010, East Africa’s urbanization rate was almost 17 percentage points lower than the second least urbanized region on the continent, namely the Francophone. East Africa’s low level of urbanization can be ascribed to the substantial importance of subsistence agriculture in most of these countries. Central and West Africa are expected to have higher urbanization levels than North Africa by 20255.

13.2.2.3 Market Concentration FMCG retailers need a steady flow of consumers purchasing their products on a daily basis, so they have to operate in a local market with a large enough size. In 2010, there were 50 urban agglomerations in Africa with a population of one million or more, of which three had a population of five million or more. By 2025, the UN expects there to be 93 agglomerations in Africa of at least one million, of which 12 are forecast to have a population of five million or more.

13.2.2.4 Distribution Channels It is important for FMCG to have predictable and trustworthy distribution channels, as such related industries like agricultural and manufacturing sectors are key. This is also why many retailers opt for vertical integration, and this is particularly relevant for African countries, where distribution channels are generally weak. The strength of local agriculture and manufacturing, the quality of transport infrastructure, and the scope and extent of tariffs on imported goods are crucial issues in FMCG sectors.

International FMCG companies in the region commonly use one of the following two ways to distribute their products: • Distribution through Importers: In this model, FMCG companies send their shipments to importers who, in turn, sell them to distributors or wholesalers. FMCG companies play an inactive role and do not participate in any operational activities within the destination country. All the marketing and distribution-related activities are undertaken by importers, based on mutual agreement with FMCG companies. FMCG companies select this distribution model to minimize their risks, make short-term gains, or understand the market and gauge market response for their products before making significant investments. • Distribution through “Key” Distributors: In this model FMCG companies distribute their products to wholesalers or retailers through one or several “key” distributors. FMCG companies play an active role in this model. They are involved in marketing, consumer research and distribution coverage. FMCG companies opt for this model when they want to invest and develop a market from a long-term perspective6.

4United Nations Population Division

5KPMG Africa

7Arthur D Little, FMCG Opportunities and Challenges in Africa 80 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.2.2.5 Spending Power Since FMCG retailers generally sell products that can be classified as necessities, income per person is a less important consideration than for retailers of luxury or durable products. The trend in income levels is however still important in order to establish what types of FMCG products can be offered to a specific market. In addition, over time, retailers would want to benefit from shifts in consumer spending patterns as they move up the income chain, so a high growth market is still preferable.

The graph below illustrates that 184.8 million Africans had daily per capita expenditure of between US$2 and US$4 in 2010, while 77.9 million spent between US$4 and US$107.

Source: AfDB

13.2.2.6 Buying Habits Since FMCGs are generally similar within categories, retailers have to compete on the basis of price. In a market with fierce competition, margins are squeezed to their minimum levels and the least efficient companies are pushed out of business. However, companies that can convince consumers to purchase their brand name rather than that of a competitor can maintain market share without necessarily having to offer lower prices. Key strategies in this regard are loyalty programmes, enhancing the shopping experience, advertising, promotions, offering products in smaller packages to make them more affordable and adapting to local needs. Convincing a consumer that your product is somehow superior to that of a competitor offering a similar product is crucial in ensuring long-term success in a given market. A well-known example is Coca-Cola vs. PepsiCo soft drinks: the products taste similar and fulfill the same need, but consumers generally have a very clear preference for one or the other.

13.2.2.7 FMCG Industry in Kenya Kenya has a total population of approximately 44 million, and the middle class is approximately 45%. Kenya has a total food and beverage consumption of approximately US$11 billion per annum, and expected GDP per-capita growth of 3% (until 2025). The Kenyan FMCG market is similar to the Nigerian market in terms of consumer preferences and distribution network, except that modern trade has grown faster in Kenya due to the growth of the tourism sector. Modern trade comprises 10–15% of total retail sales in Kenya. In addition, an increasing number of FMCG companies are setting up local manufacturing units to cater to the needs of local as well as neighboring countries’ markets7.

13.2.2.8 Food Kenya’s food retail sector is well developed in an African context. Foreign retailers are yet to break into the market with four local players (Nakumatt, Tuskys, Uchumi, and Naivas) dominating the scene. Nakumatt has the biggest market share, although Tuskys has a larger number of branches. Stores of these companies are also very prevalent in other East African countries, especially Uganda.

In January 2014, it was revealed that Nakumatt was looking to buy three of Shoprite’s stores in Tanzania, where Kenyan retailers still have only a limited presence. Kenyan retailers are expected to increase the range of their product offerings over the outlook period in

7AfDB

8Arthur D Little, FMCG Opportunities and Challenges in Africa Information Memorandum 81 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

order to build market share. They will also be looking to expand further in the region, especially in countries where their presence is still relatively limited such as Tanzania, Rwanda and South Sudan.

13.2.2.9 Beer While still the dominant producer in Kenya, East African Breweries Limited (EABL, a subsidiary of Diageo) has seen competition intensify in recent years from small local brewers and imports of international brands such as Heineken and SABMiller. Still, East African Breweries controls around 90% of the Kenyan beer market, and continues to expand into the rest of East Africa. A glance at the company’s subsidiaries acts as confirmation of this: Kenya Breweries Limited, Uganda Breweries Limited, Serengeti Breweries Limited, United Distiller Ventnor, Central Glass Industries, and East African Malting Limited. EABL is listed on the Nairobi, Uganda, and Dar es Salaam stock exchanges. The company has invested in new supply chain capacity, including a new canning line, in order to boost production levels. East African Breweries has 26,000 local partners across the value chain, and sources 10,000 tonnes of sorghum in Kenya (from only 400 tonnes four years ago), while two new varieties of high-yielding barley seed were recently launched9.

Although EABL clearly dominates, competition in Kenya’s beer industry has increased in recent years, as both macrobrewers and microbrewers attempt to take advantage of naturally expanding markets. At the end of 2012, Keroche Breweries (Kenya’s only local brewery) stated that it plans to raise its share of the beer market in Kenya to 20% (from around 3% then) in two years, and is increasing capacity to meet that target. This includes the construction of a brew house with an annual capacity of one million hectolitres, which is expected to be completed an estimated cost of US$29.4million. Apart from boosting production of existing brands, the company also plans to start producing other products that are not currently in its portfolio, such as stouts and non-alcoholic drinks. Keroche also plans to expand into Tanzania, Rwanda, and Uganda over the medium term.

Centum through its subsidiary, King Beverage Limited, entered the Kenyan beer market in 2015 with the signing of a local distribution contract with Danish brewer, Carlsberg. The contract also gives Centum distribution rights for Carlsberg products in Uganda.

13.2.2.10 Soft Drinks Kenya has a strong domestic soft drinks manufacturing sector. Soft drinks production increased notably during 2007 to 2009, rising by an annual average of 4.9%. Production stagnated somewhat in 2010, before increasing by 2.8% in the subsequent year and falling again in 2012.

Data for 2013 indicates that production has once again increased. In fact, during the first 11 months of 2013, Kenya’s soft drinks production increased by 19.1% year-on-year, while domestic sugar production rose by 18.9% year-on-year over the same period. It is estimated that Kenya’s soft drinks consumption increased from 306.8 million litres in 2007 to 350.7 million litres in 2011. Over this period, per capita consumption of soft drinks rose from 8.13 litres per person per year to 8.35 litres. Per capita consumption of soft drinks in Kenya is projected to reach 14 litres p.a. by 2030, and 30 litres by 2050.

13.2.2.11 Coca-Cola Coca-Cola has dominated the soft drinks industry in Kenya for a number of years. Coca-Cola’s dominance may in fact have contributed to the industry not growing at such robust levels as in some neighboring countries where there is more competition. Pepsi has tried to re-enter the Kenyan market since 2010, and has quite a bit of lost ground to make up, having exited Kenya in the 1970s. Coca Cola has six bottling plants in Kenya, and has been operating in the country for 65 years. Following Pepsi’s move, Coca Cola recently injected some US$50 million into its manufacturing plants in Kenya. Consumption of Coca-Cola products has shown moderate growth in recent years, with per capita consumption of company beverage products (in units of 237 ml of a finished product) falling from 35 in 1992 to 31 in 2002, before increasing to 39 (approximately 9.2 litres) in 2012. In comparison, per capita consumption was 26 servings (6.2 litres) in Nigeria, 39 in China, and 87 (20.6 litres) in Morocco. According to Coca-Cola, it is facing rising competition from fruit juices due to consumers becoming increasingly averse to carbonated drinks for health reasons. This also contributed to higher imports in recent years, in turn forcing local carbonates manufacturers to cut production levels. In response, Coca-Cola recently launched its Coke Zero brand in Kenya, as well as its Minute Maid fruit juice. The company also cut its price for a 300 ml soda from Kes25 (US$0.3) to Kes23 (US$0.27) in June 2012 in order to boost demand. Other players in Kenya’s juice industry include Kevian Kenya and Del Monte.

One of the Coca Cola bottling companies in Kenya is Nairobi Bottlers Limited in which Centum has a 27.6% stake. Centum through its subsidiary, Almasi Beverages Limited, also has interest in another coca-cola bottling company in Kenya. Almasi is a holding company for 3 Coca Cola bottling companies: • Mount Kenya Bottlers Limited • Rift Valley Bottlers Limited • Kisii Bottlers Limited

9A KPMG Africa 82 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.3 Financial Services Sector

13.3.1 Kenya Banking Sector Overview The banking sector comprised of 43 commercial banks, 1 mortgage finance company, 9 microfinance banks, 7 representative offices of foreign banks, 94 foreign exchange bureaus, 7 money remittance providers and 2 credit reference bureaus as at 30th September 2014.

Banking industry structure

Source: Central Bank of Kenya

The Kenyan Banking Sector registered improved performance with the size of net assets standing at Kes 3.1 trillion, loans and advances worth Kes 1.9 trillion, while the deposit base was Kes 2.3 trillion and profit before tax of Kes 104.5 billion as at 30th September 2014. Over the same period, the number of bank customer deposit and loan accounts stood at 26.6 million and 4.0 millionrespectively.

13.3.2 Industry Performance 13.3.2.1 Asset base The banking sector total assets stood at Kes 3.08 trillion as at September 2014. The major items on the balance sheet were loans and advances, government securities and placements, which accounted for 59.9%, 20.5% and 4.7% of total assets respectively.

13.3.2.2 Loans and Advances The sector’s gross loans and advances grew from Kes 1.8 trillion in June 2014 to Kes1.9 trillion in September 2014, translating to a growth of 7.3 percent. The growth was in 10 out of 11 sectors as shown in below. Tourism, Restaurants and Hotels sector registered a decline due to higher repayments than the new loans granted during the period.

Lending to the different economic sectors as at 30 September 2014

Source: Central Bank of Kenya Information Memorandum 83 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.3.2.3 Deposit Liabilities Deposits were the major source of funding for the banking sector, accounting for 73.1% of total funding liabilities. The deposit base increased by 4.7% from Kes 2.2 trillion in June 2014 to Kes 2.3 trillion in September 2014 supported by branch expansion, remittances and receipts from exports. The increased use of alternative delivery channels of banking services such as agency banking model has also contributed to increased deposits. The number of bank deposit accounts increased from 25.3 million in June 2014 to 26.6 million in September 2014 representing a growth of 1.3 million accounts or 5.1%

13.3.2.4 Capital and Reserves The banking sector registered enhanced capital levels in September 2014 with total capital increasing by 4.9% from Kes 436.6 billion in June 2014 to Kes 458.1 billion in September 2014, whereas shareholders’ funds increased by 6.4% from Kes 459.4 billion in June 2014 to Kes 488.7 billion in September 2014. Similarly, the ratios of core and total capital to total risk-weighted assets increased from 15.0 % and 17.5% to 15.1% and 17.8% respectively. The increase in capital adequacy ratios is due to a higher growth in capital base than the growth in total risk weighted assets during the period under review.

13.3.2.5 Assets Quality The stock of gross non-performing loans (NPLs) increased by 2.0% from Kes101.7 billion in June 2014 to Kes 103.7 billion in September 2014. The quality of assets, measured as a proportion of net non- performing loans to gross loans improved from 2.1% to 1.9% over the same period. Similarly, the ratio of gross NPLs to gross loans declined from 5.7% in June 2014 to 5.4% in September 2014. Moreover, banks have adopted enhanced appraisal standards to mitigate credit risk.

13.3.2.6 Profitability During the 3rd quarter of 2014, the sector recorded Kes 33.5 billion pre-tax profits, which was a decrease of 10.9% from Kes 37.6 billion registered in the quarter ending June 2014. Total income stood at Kes 104.0 billion in the third quarter which was similar to what was registered in the second quarter of 2014. The total expenses increased by 5.7% from Kes 66.6 billion in June 2014 quarter to Kes 70.4 billion in September 2014 quarter. On an annual basis, the profitability of the sector increased by 13.0% from the Kes 92.5 billion registered in September 2013 to Kes 104.5 billion in September 2014. Interest on loans and advances, fees and commissions and government securities were the major sources of income accounting for 59.2%, 18.7% and 15.1% of total income respectively. On the other hand, interest on deposits, staff costs and other expenses were the main components of expenses, accounting for 32.7%, 28.2% and 24.1% respectively.

13.3.2.7 Liquidity of the Banking Sector For the period ended 30th September 2014, average liquid assets stood at Kes 816.3billion while average liquid liabilities were worth Kes 2,180.9 billion, resulting to an average liquidity ratio of 37.4%, against 38.7% registered in June 2014, which was well above the minimum statutory limit of 20.0%.

13.3.3 Challenges 13.3.3.1 Increased competition Competition within the banking sector is becoming more aggressive both from conventional and non-conventional banking players. Substitute products and services have emerged to a great extent in the banking industry mostly in the form of money transfer services provided by mobile telephony companies. Consequently, this development is likely to revolutionize how the banking industry players perform their financial intermediation services.

13.3.3.2 Money laundering Persons who are engaged in criminal activities are seeking ways of concealing the origins of illegally generated funds. However the government has come up with The Proceeds of Crime and Anti Money Laundering Act, 2009. The Act seeks to create a comprehensive legislative framework to combat the offence of money laundering in Kenya and to provide for the identification, tracing, freezing, seizure and confiscation of the proceeds of crime among other measures.

13.3.4 Opportunities 13.3.4.1 A growing SME market The Small and Medium Enterprises (SMEs) in Kenya have developed considerably over the last ten years both in numbers and in economic scale. This growth provides the banks with a perfect opportunity as a number of SMEs continually demand financial services.

13.3.4.2 Agency Banking Agency Banking is a concept introduced to the banking sector by Central Bank of Kenya in 2010. This concept allows banks to offer limited services through business outlets that are not banks and not necessarily financial services e.g. supermarkets, chemists etc. This will enable banks to extend banking services to a wider population in areas where physical bank branches may not be viable. 84 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.3.4.3 Technology General technological advancement and stiff competition in the banking industry has led to major implementation of technology such as internet banking and mobile banking applications. This has impacted positively on the industry, that is, transaction time as well as better customer experience. Banks are increasingly using social media not only in advertising but also for receiving customer feedback.

13.3.4.4 Banking Sector Outlook The banking sector is expected to maintain its growth momentum mainly driven by the rollout of full file credit information sharing, regional in¬tegration initiatives, advances in information and communication tech¬nology and the introduction of the devolved governance system in Kenya.

13.3.5 Overview of Kenya Insurance Industry Data from the Insurance Industry regulator, the Insurance Regulatory Authority, indicates that as at December 2014, there were 49 insurance companies, 84 licensed insurance brokers and 22 Medical Insurance providers (MIPS). Other licensed insurance players included 129 investigators, 96 motor assessors, 20 loss adjusters, 1 claims settling agent, 8 risk managers, 26 insurance surveyors and more than 4,600 insurance agents.

13.3.6 Industry Performance 13.3.6.1 Industry Premiums The industry’s insurance premiums grew by 20.4% during the year 2014. The annual premiums stood at Kes 157.8 billion growing from Kes 131.0 billion. The premium income reported under life insurance business amounted to Kes 56.5 billion while general business premiums were Kes 101.3 billion. The Kenyan insurance industry continues to be non-life business driven.

13.3.6.2 Claims experience and underwriting expenses The claims incurred under general insurance business were Kes 41.9 billion by the end of 2014 increasing by 25.3% from Kes 33.4 billion recorded in year 2013. Total policyholder benefits under life business amounted to Kes 17.0 billion during the same period. The change in claims experience was consistent with the industry business volume expansion. Underwriting expenses included business acquisition costs (commissions) and expenses of management. The commissions paid by the insurers during the year amounted to Kes 9.3 billion compared to Kes 7.4 billion reported during the previous year. Management expenses amounted to Kes 30.4 billion compared to Kes 24.4 billion reported in 2013, an increase of 24.8%.

13.3.6.3 Shareholder Funds The increasing capitalization in the insurance industry saw common stock holders’ equity grow significantly during the year. As at 31st December 2014, the shareholders’ funds amounted to Kes 122.5 billion representing a growth of 24.8% from Kes 98.2 billion as at the end of 2013.Stronger balance sheet position of insurance companies is likely to improve confidence in the industry with more capital resources being available to cover losses.

13.3.6.4 Assets and Liabilities The insurance industry asset base was Kes 426.3 billion as at 31st December 2014. This was a growth of 19.1% from Kes 358.0 billion held as at the end of 2013. The liabilities amounted to Kes 303.8 during the same period.

13.3.6.5 Investments The insurers held a total of Kes 352.4 billion of their assets in income generating investments as at the end of December 2014. These had grown by 19% during the last twelve months. The investments constituted 82.7% of the total industry assets. The investments under life insurance business amounted to Kes 225.3 billion (63.9% of total industry investments) while general business investments were Kes 127.1 billion (36.1% of total investments for the industry).

13.3.7 Kenya Insurance Market Outlook The Kenyan insurance industry’s attractiveness has been the reason for the recent entry of multinational insurance groups that are acquiring local insurance firms to set up operations in the local market. Factors that are contributing to this interest include: the increasing ease of doing business in Kenya, a growing middle class that is appreciating the need for insurance, and the emerging oil and gas sector in the country.

Kenya is the focus of large scale Private Equity (PE) activity in East Africa, mostly on the back of improving infrastructure, a fairly diversified economy compared to its regional peers, and steadily improving regulatory regime. Some notable funds operating in the region include Centum Investments Company (formerly ICDC), which is listed on the Nairobi Securities Exchange, Catalyst Partners, Fanisi Fund, Abraaj, Actis Fund, and Emerging Capital Partners (ECP). Information Memorandum 85 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Kenyan companies have the most regional outlook, expanding their footprints in East Africa in sectors such as financial services, hotels, airlines and agro business. Most of these companies look beyond being leaders in the Kenyan economy, but have broader ambitions of tapping into new geographies to scale their products and services. This aggressive nature of Kenyan companies offers exciting opportunities for PE firms.

Kenya accounted for 46% of the total number of deals in Eastern Africa and 69% of total reported values in 2013. Key to this was the Norway’s Norfund and Africa Infrastructure Investment Manager (AIIM) investment of US$60 Mn in equity to build a wind power project in Kenya worth US$150Mn (US$90 Mn will be funded by debt from Standard Bank Group).

Tanzania had three deals valued at US$5m in 2013. Two large deals were completed by Carlyle and Standard Chartered PE. Kenyan investment firm TransCentury sold their entire stake in Tanzanian Chai Bora Ltd, a tea manufacturer, to Catalyst Principal Partners. The deal value, however, was not disclosed.

Rwanda saw a surprising increase in number of deals, with five deals with a reported value of US$41.3m. These deals mainly involved Fusion Capital’s US$34 Mn investment in a real estate development project in Kigali and a US$2 Mn investment in Rusororo, a stone extraction mining company. Another deal was Fanisi Capital’s first investment made outside Kenya, US$2 Mn in Sophar Limited, a pharmaceutical wholesaler.

13.3.8 Performance Overview Kenya accounted for 46.0% of the total number of deals in Eastern Africa and 69.0% of the total reported value as summarized below:-

Sources: EMPEA

13.4 Recent Private Equity Transactions in East Africa

The table below summarizes recent PE transactions in East Africa: No. Private Equity Fund Year Target Company Sector Region Value Deal 1 Centum 2014 K-rep Bank Financial Services Kenya O/S 2013 Almasi Beverages Food and beverage Kenya $5m 2 Pearl Capital Partners 2013 Freshco Kenya Ltd Agribusiness Kenya $ 600,000 2014 Eldoville Dairies Limited Food and beverage Kenya Kes 200m 2014 Meru Greens Horticulture Ltd Agribusiness Kenya Kes 210m 3 East Africa Capital Partners 2014 Wananchi Group Telecommunication Kenya n/a 4 Acumen 2014 MilikiAfya Health Kenya $ 600,000 2013 Sanergy Water Kenya n/a 5 Helios Investment Partners 2014 Wananchi Group Holdings Telecommunication East Africa $40.0m 6 Proparco 2014 Lake Turkana Wind Power Power and Energy Kenya Euros 50.0m Project (LTWP) 86 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

No. Private Equity Fund Year Target Company Sector Region Value Deal 7 Catalyst Principal Partners 2014 Mimosa Pharmacy Limited Health Kenya n/a 2013 Yes Brands Food and beverage Ethiopia n/a 2013 Chai Bora Food and beverage Tanzania n/a 8 Norfund 2013 Ascent Rift Valley Fund SME Fund East Africa n/a 2013 Asilia Tourism Kenya & n/a Tanzania 2014 Housing Finance Company Ltd Financial services Kenya n/a 9 Amethis Finance 2013 Chase Bank Banking Kenya $10.5m 10 8 Miles Fund 2013 Eleni LLC Logistics Kenya $5m 11 Fusion Capital 2013 Rusororo Aggregate Mining Rwanda $2m

Source: East Africa PE confidence survey, 2014, EIB Analysis

13.5 The Asset Management Industry

The asset management industry comprises of the portfolio management of funds for private clients and institutional funds such as pension funds and provision of investment funds such as unit trusts and other collective investment schemes. The key driver for growth in the recent past has been industry reforms in both Kenya and Uganda.

The enactment of the Retirement Benefits Authority (RBA) legislation in 1998 in Kenya opened space for more players in the Industry. The legislation requires pension funds and retirement benefit schemes to appoint licensed, professional fund managers to manage the assets of the pension schemes and other retirement benefit schemes. A similar legislation, the Uganda Retirement Benefits Regulatory Authority Act, 2011 is now under implementation in Uganda whose expected outcome is an expansion of the pension sector beyond the National Social Security Fund (NSSF), the Public Service Pension Scheme and a few occupational voluntary savings schemes which presently cover less than 5% of the Uganda population. The proposed Retirement Benefits Sector Liberalization law is expected to improve governance and lead to long term sustainability through building of trust and confidence in the pension industry as well as an increase in the number of players and overall growth of the industry.

The Issuance, in Kenya of the regulations for Collective Investment Schemes (CIS) by the CMA in 2001 also assisted in spurring the development and growth of collective investment schemes such as unit trusts. Additionally, increased economic development in the region has led to growth of a new class of high net worth individuals seeking out the services of personal wealth management firms to protect their assets.

13.5.1 Traditional Asset Managers Traditionally Asset Managers have focused on listed equity, privately placed corporate debt, government debt and money market instruments. Most of the Traditional Asset Managers within East Africa are off balance sheet investors.

The industry comprises the portfolio management of funds for private clients and institutional funds such as pension funds, and provision of investment funds such as unit trusts and other collective investment schemes. The current market size is estimated at over 8,000 clients with total assets under management in excess of Kes 400 billion. Growth in the industry has mainly been fuelled by sustained economic growth, increasing appreciation of the importance of saving and investing within the population and the growth of the middle class segment of the population.

As at the end of 2014, there were 24 fund managers and 18 unit trust funds licensed in Kenya. The number continues to grow as more players seek licencing.

13.5.2 Pension Industry 13.5.2.1 Pension Industry Performance The Retirement Benefits Authority (RBA) implemented various policies and initiatives geared towards enhancing development and growth of the pensions subsector. The target was increased pension coverage; promote good governance and ensure better risk management for licensees. Total industry assets grew by 26.9% between December 2012 and December 2013. Information Memorandum 87 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Overall Industry Investment Portfolio (Kes, Billions)

Source: RBA

Actual assets grew from Kes 548.7 billion to Kes 696.7 billion in the between December 2012 and December 2013. Of the total fund managers and insurance firms held Kes564.8 billion; National Social Security Fund (NSSF) internally administered Kes92.9 billion and Kes39 billion of property investments directly managed by scheme trustees. In terms of portfolio allocations, fund managers preferred Government Securities and Quoted Securities, which accounted for 59.2 % of the total industry assets under management. All asset classes recorded market growth except for the cash and property asset classes which registered divestiture of 16.4% and 1.2%, respectively.

Allocation of Investment Assets (December 2013)

Source: RBA

13.5.3 Individual Retirement Benefits Schemes and Service Providers Individual retirement benefits schemes membership grew steadily from 88,509 in December 2012 to 113,316 registered members in December 2013. Total assets on the other hand grew from Kes 13.7 Billion to Kes 17.4 billion in the period under review. The growth is attributed to the public awareness undertaken by the RBA and various service providers. For example, the Blue MSME‘s Jua Kali retirement benefit scheme popularly known as - Mbao Pension Plan which caters mainly for the individuals in the informal sector grew significantly, from 39,013 members in December 2012 to 50,057 members in December 2013. Its assets grew from Kes 39.8 million to Kes 64.4 million during the period. Real Estate Industry 88 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.6 Real Estate Industry in Africa

Africa’s growth over the last decade has, to a large extent, been driven by rising commodity prices. Most notably, the oil producing nations of West Africa have benefitted greatly from soaring oil prices, while growth in Zambia has been boosted by its copper industry, which accounts for around 75% of the country’s export earnings. However, the commodity boom has not been the sole engine of Africa’s growth, and countries with fewer natural resources, such as Rwanda and Ethiopia, have also grown strongly in recent years. Increased political stability, reduced trade barriers and improved governance have all been important factors aiding growth in many countries.

The International Monetary Fund expects Africa’s growth story to continue, forecasting annual GDP growth of 5-6% over the next five years. This should not, however, disguise the fact that Africa still only accounts for about 4% of global GDP and that living standards remain low in much of the continent.

Forecasted GDP Growth Rates For East African Economies

Source: World Bank

The growing urbanisation of Africa has aided economic growth, by bringing large numbers of people close together, it helps to create more efficient labour markets and bigger customer bases, and reduces transport costs. According to UN-HABITAT data, the proportion of Africans living in urban areas grew from 32% in 1990 to 40% in 2010, and is expected to rise to 47% by 2025. Many of the largest cities in Africa are growing rapidly. Nairobi, Kinshasa and Dar es Salaam, for example, are expected to see population growth of over 70% by 2025. Africa’s mega-cities, which include Lagos, Cairo, Luanda and Johannesburg, are increasingly the engines of its economic growth.

Proportion of Population Living In Urban Areas in SSA By 2050

Source: Department of Economic and Social Affairs, United Nations

Africa’s city dwellers generally earn more and spend more than their rural counterparts, and the urban middle class is growing across much of the continent. This is helping to create dynamic consumer markets and attracting overseas investors. A recent survey by the Economist Intelligence Unit found that institutional investors now regard the emergence of Africa’s middle class and its growing consumerism as the most attractive aspect of investing in Africa, rather than its commodities.

African retail markets are developing as the demand for consumer goods grows. In SSA, the most well developed and sophisticated retail market by far is South Africa, with numerous large shopping centre across the country. Elsewhere, there are many countries where Information Memorandum 89 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

modern shopping malls are a relatively new phenomenon; The Palms in Lekki, Lagos, regarded as Nigeria’s first modern shopping centre, was opened in 2006, while Accra Mall, the first of its type in Ghana, opened in 2008. Nairobi has also seen the development of modern malls with the most notable one being the Westgate mall that was destroyed during a terrorist attack in September 2013.

Nigeria and Ghana, along with other SSA countries including Kenya, Angola and Zambia, have all seen additional shopping centres either completed or commenced in recent years, although their scale is generally smaller than the mega-malls of South Africa and Northern Africa. The construction of further, and larger, shopping centres can be expected, as developers seek to meet the demand for high quality retail space from increased numbers of international retailers entering SSA markets and major South African chains such as Shoprite and Pick n Pay pursuing expansion plans in the rest of Africa. Development activity is, however, likely to be concentrated on the biggest and wealthiest cities. In smaller African cities and less well-off countries, small-scale local trading may continue to be the dominant form of retail activity.

13.7 Real Estate Industry in Kenya

The real estate sector has remained vibrant and has lately been one of the key contributors to economic growth. With the introduction of devolved governments as envisioned in the new constitution (The Constitution of Kenya, 2010), more opportunities for real estate development as well as property values are likely to be on the rise in the medium term. Demand for land for the establishment of public utilities and construction of housing units will also sustain increased property values.

Currently, Kenya’s annual housing deficit is estimated at 300,000 units. The country’s state run, National Housing Corporation (NHC), estimates that the current urban housing needs are 150,000 units per year to cater for the backlog. However, it is estimated that the current production of new housing in urban areas is only about 30,000 units annually, a shortfall of 80%.

13.7.1 Property Market Segment 13.7.1.1 Retail, Entertainment and Lifestyle market The Kenyan retail market is diverse ranging from roadside shops to large world-class styled enclosed shopping malls. The improving macroeconomic environment in Kenya has seen significant increase in suburban retail nodes supported by increasing consumer spending and purchasing power.

The market has shown strong growth. New retail centers’ in the market include Galleria Mall and T-Mall (opened ±2010), Ridgeways (2011), New Greenspan Mall (opened 2012), Thika Road Mall (2013). Furthermore, there is a host of upcoming retail malls namely: Garden city mall (60,000 sq m), Karen (35,000 sq m), Rosslyn Riviera (13,000 sq m), Rosslyn Park (7,000sq m) and Two Rivers Mall (82,000 sq m) currently under construction.

Kenya is set for a major retail boom with the entry of four global retail chains. Retailers such as Carrefour, Wal-Mart (represented by its South African subsidiary, Massmart), Game Stores, Jet and Edgars plan to open retail outlets in Kenya while local formal retailers Nakumatt, Tuskys, Uchumi and Naivas continue to expand.

13.7.1.2 Office market The office market in Kenya has moved from a position of oversupply to one of stability over the last twelve months, as Nairobi reinforces its position as the regional commercial hub of SSA. A significant proportion of the recent take-up has been due to large corporates setting up regional headquarters in Nairobi, in preference to the traditional regional hub of Johannesburg, mainly because of new routes opened up by Kenya Airways which enable direct flights to Central and West Africa and the increasing push to make Nairobi both an aviation and financial hub.

The total effective demand is over 1.3 million sq ft. of office space and average effective demand of 8,000 sq ft. per requirement. In Q2 of 2014 marked a decline in office space take up of Grade A& B with a 6% drop in office space absorbed from Q1. The most notable decline was experienced in Nairobi Upper Hill financial district that registered a 90% drop in Q2. This was mainly attributed to ongoing road and infrastructure works. 90 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The table below summarizes the cost of office space in selected parts of Nairobi.

Location Avg. Prime Rental Rate per Sq Meter Westlands $15 Upperhill $13 Kilimani $11 CBD $10

Source: Knight Frank, 2013

13.7.1.3 Residential market The Kenyan residential market has seen significant growth over the past decade leading to a more than fourfold growth in the prices of both land and houses. Increased demand and supply of residential units has been largely driven by economic growth, improving purchasing power, access to mortgages, policy changes that have seen significant improvements in infrastructure and increased remittances from diaspora.

According to the global real estate firm, Knight Frank, there is a discernible shift in demand from three and four bedroom apartments to smaller units such as studio, one and two bedroom apartments. This is thought to be due to the former’s saturation in the market. Market activity in the lower to middle price bracket remains positive.

13.7.1.4 Industrial market Kenya has not traditionally experienced a high degree of speculative industrial development, with most occupiers tending to own their property. However, this market is now beginning to emerge, particularly along the Mombasa Road in Nairobi. Rents are very low and take-up is slow, so it will be some time before this becomes an established sector in Kenya’s property market. Some developers are looking at purpose - built speculative logistics parks which may see a migration of light industrial occupiers from the traditional industrial center to new locations on the periphery of Nairobi, thereby taking advantage of the new road infrastructure. Nairobi prime rents and yields

Segment Prime rents Prime yields Offices US$ 15 per sq m per month 9% Retail US$ 31 per sq m per month 10% Industrial US$ 4 per sq m per month 12% Residential US$ 4,400 per month 6%

Source: Knight Frank, 2013

13.8 Real Estate Industry in Uganda

13.8.1 Property Market Segment Much of Kampala’s office stock falls below international construction standards, so major companies seeking space in the capital have fairly limited options. Good quality space is therefore at a premium and tends to be leased quickly. Currently, the biggest source of demand for offices is from the oil, gas and telecoms sectors. In addition, recent years have seen increased interest in modern serviced rental accommodation within a 5 km radius of Nakasero Hill, the CBD.

However, 2014 experienced increased construction activity with most of buildings expected to be completed in 2015.o a price war that has exerted downward pressure on rental rates in Kampala. Huge exposure to debt is another major reason that is contributing to declining rates as developers rush to have their properties occupied to ensure they have income to meet their debt obligations.

13.8.2 Retail market The quantity and quality of retail provision is gradually improving, as domestic developers respond to rising demand from established national and international operators who were becoming frustrated at the lack of suitable space. Two new shopping centres were completed in Kampala in 2014, namely the Acacia Mall in Kisementi (16,192 sq m) and the Village Mall in Bugolobi (9,707 sq m). The longer term outlook for the city’s retail sector is generally positive, on the back of continued growth in disposable incomes and increasing consumer demand for better quality shopping facilities. Information Memorandum 91 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.8.3 Industrial market The capital’s main industrial location is the Kampala Industrial and Business Park, which lies approximately 15 km to the east on the Kampala-Jinja highway. To date, the park has seen only a handful of new businesses. However, the government is encouraging factories and industries who have acquired plots to relocate to the business park or run the risk of losing their land. The growth of the park has boosted the area’s critical mass and industrial land values along the main road have risen steadily. A number of large manufacturers such as Riley Packaging, APDL and Chinese companies have been attracted to the area and have built state of the art factories on vast plots of land to accommodate their future expansion plans.

13.8.4 Residential market Interest rates in Uganda have averaged over 20% in the last few years. This, and more stringent lending criteria, has led to a very sluggish housing market for much of the past year, particularly in the mid-price bracket, with a sharp reduction in the number of purchases. In addition, there has been an increase in the number of houses for sale from owners unable to cope with higher repayments. Kampala prime rents and yields:

Segment Prime rents Prime yields Offices US$ 18.50 per sq m per month 10% Retail US$ 25 per sq m per month 14% Industrial US$ 10 per sq m per month 14% Residential US$ 5,000 per month 9%

Source: Knight Frank

Centum recently entered the Uganda real estate market with its Pearl Marina project. Pearl Marina, which broke ground in February 2015 is an integrated golfing estate and water front development set on 385 acres of prime land located on the Garuga Peninsula, on the shores of Lake Victoria. In addition to residential housing, the development will comprise of European standard 9-hole golf course, a public marina, water related leisure activities such as water transport, sporting activities among others. This will create a vibrant public place on the water edge that will accommodate a range of activities which will include shops, restaurants, fresh produce and craft markets, entertainment as well as festivals and marine related events.

13.9 Education Sector

13.9.1 Overview While there has been progress towards education for all since 2000 in the SSA region, it has been uneven. The pace of progress towards Universal Primary Education (UPE) in the region has been faster than during the 1990s, with the average primary net enrolment ratio (NER) increasing from 57% to 76% between 1999 and 2013. However, some countries have lagged behind and some goals – such as early childhood care and education (ECCE), the learning needs of young people and adults, adult literacy and the quality of education –have received insufficient attention. The region is still home to 33 million children not enrolled in school. Imbalances in the way many education systems are developing have both created and reinforced disparities. These must be redressed if children, youth and adults are to benefit equally from the opportunities education provides.

The Kenyan education sector has witnessed tremendous growth since the turn of the millennium. In the 1990s, the country was faced with declining enrolment levels, increasing cost of education due to the introduction of cost sharing policies between government and households and general lack of investment in the sector. However, since the year 2003, the government sought to dramatically increase access to primary education through abolition of fees charged to parents. This resulted in a massive increase in enrolment with Net Enrolment Rate (NER) reaching 95.9% in 2013, above the SSA average of 76%. Nonetheless, critics point out that the increased enrolment has come at the price of compromised quality of education due to overcrowding and a high student-teacher ratio. Comparative growth rates.

Source: Kenya National Bureau of Statistics 92 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.9.2 Key Drivers for Growth of the Education Sector in Kenya 13.9.2.1 Favourable demographics Kenya is in the middle of a demographic transition with the population growing at a much slower pace than at the time of independence, mortality rates that are falling rapidly and declining birth rates. The country adds an estimated 1 million inhabitants per year resulting in the need for an expanded education system to absorb the surge in student numbers.

13.9.2.2 Government intervention Kenya’s education sector has greatly benefitted through government intervention especially since 2003 when the then President Mwai Kibaki introduced Free Primary Education (FPE) programme. The resultant effect of this was a dramatic increase in student enrollment at the primary school level where there was an estimated increase of 1 million new students. The abolition of school fees increased access significantly albeit with teething problems of overcrowding and high student-teacher ratio which has led to decline in the quality of primary school education. In 2008, the government introduced Free Day Secondary Education (FDSE) with the goal of increasing the transition rate from primary to secondary education. By 2012, the transition rate from primary to secondary education stood at 75% up from 46% in 2002

Source: KNBS, Ministry of Education

13.9.2.3 Increased private sector participation Kenya’s private sector has played a key role in supporting the government’s efforts for universal access to education. Many private schools have been opened to cater for the increased numbers of student enrolled in all levels of education particularly in the urban areas. The emergence of low cost private schools especially in low income areas has played a key role in promoting access to education as the public schools alone cannot accommodate all the students. There is also a perception that the quality of education in private schools is higher than public schools, a fact that is demonstrated by the better rankings private schools get in national examinations.

Source: KNBS, Ministry of Education Information Memorandum 93 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.9.3 Rising disposable income In 2014, Kenya crossed the threshold to become a low-middle income economy following the rebasing its GDP figures with GDP growing 25% to US$55.2 billion and per capita GDP increasing from $994 to $1256. The country’s growing middle class has led to a significant increase in discretionary spending which has led to the growth of private schools as more parents prefer them over government run schools. This in turn has resulted in the growth of an eco-system around private education which includes, training colleges and universities, education material publishers, e-learning etc.

13.10 Healthcare Sector

13.10.1 Healthcare in Africa Africa needs to reassess its health care systems to ensure that they are viable over the next decade. Unlike other regions, however, Africa must carry out this restructuring while grappling with uniquely broad range of healthcare, political and economic challenges. The continent is confronting multiple epidemiological crises simultaneously. High levels of communicable and parasitic disease are being matched by growing rates of chronic conditions. Although the communicable diseases (malaria, tuberculosis, HIV/AIDS) are the best known, it is the chronic conditions such as obesity and heart disease that are looming as the greater threat. These are expected to overtake communicable diseases as Africa’s biggest health challenge by 2030.

Additionally, continued high rates of maternal and child mortality and rising rates of injuries linked to violence, particularly in urban areas, are weighing down the system. Healthcare delivery infrastructure is insufficient; skilled healthcare workers and crucial medicines are in short supply; and poor procurement and distribution systems are leading to unequal access to treatment10 .

The below graph shows the leading causes of deaths in the African region (2004):

Source: The Economist Intelligence Unit Ltd.

*The disability adjusted life year (DALY) provides a consistent and comparative description of the burden of diseases and injuries needed to assess the comparative importance of diseases and injuries in causing premature death, loss of health and disability in different populations.

Public spending on health is insufficient. In the absence of public health coverage, the poorest Africans have little or no access to care. What is more, they frequently also lack access to the fundamental prerequisites of health: clean water, sanitation and adequate nutrition.

Considering these challenges, several major reforms will be required continent-wide to ensure their viability over the long-term: • Shifting focus of health care delivery from curing to preventive care. • Giving local communities more control over healthcare resources. • Improving access to health care via mobile technologies. • Tightening controls over medicines, medical devices and improving their distribution. • Reducing reliance on international aid organizations to foster development of more dependable local supplies. • Extending universal health insurance coverage to the poorest Africans.

13.10.2 Healthcare in Kenya Kenya has made great efforts in controlling diseases such as Malaria, TB, Cholera and actively fighting the HIV/AIDS pandemic. Similar efforts have been made in controlling communicable diseases such as poliomyelitis, neonatal tetanus and measles. Kenya has committed to spending 15% of its national budget on healthcare amid plans to transform itself into a middle income nation by 2030. With public-private partnerships (PPPs) shaping the healthcare market and membership of the East African Community trading bloc

10The Economist Intelligence Unit Ltd. 94 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

reducing regulatory hurdles to entry, Kenya is forecast to have a CAGR of 17% through 2016. This reflects opportunities in both communicable diseases, such as Malaria and HIV, and NCDs which are a growing challenge in the country. The rapid increase in Diabetes, for example, has seen the launch of a major Diabetes treatment and management pilot project sponsored by Novo Nordisk.

13.10.3 Pharmaceutical Kenya has the most well-established pharmaceutical manufacturing industry in the region. The pharmaceutical industry consists of three segments namely the manufacturers, distributors, and retailers. All these play a major role in supporting the country’s health sector, which is estimated to have near 5,000 health facilities countrywide. Kenya is currently the largest producer of pharmaceutical products in the Common Market for Eastern and Southern Africa (COMESA) region. Out of the region’s estimated 50 recognized manufacturers, approximately 30 are based in Kenya. The industry compounds and packages medicines, repack formulated drugs, and process bulk drugs into doses using predominantly imported active ingredients and excipients. The bulk of the locally manufactured preparations are non-sterile over-the-counter products. The local industry has further greatly benefited from licensing agreements with MNCs11.

13.10.4 Private Healthcare Sector in Kenya The private health care market in Kenya is estimated at Kes 27 billion, or $318 million annually, contributing to 22% of all health services12. In the last three years there has been rising disposable income, regulatory changes, and market developments in the healthcare sector each having invigorated an industry increasingly dominated by the private sector. This period has seen investments and successes in all parts of Kenya’s health sector, from health provision and insurance to pharmaceutical production. This is consistent with research that states that Kenyan consumers spend more of their shillings on health care. At the same time, 33 million Kenyans lack any form of basic insurance, and are treated in ill-equipped and poorly staffed facilities.

Due to the poor quality of the public sector offering, Kenyans increasingly look to the private sector for quality and value for their money. Regardless of the specific business models, success in Kenyan private health insurance and service delivery will depend on capital-intensive solutions. It is estimated that private expenditure on healthcare will range $1.8 - $3.1 billion by 2025 (depicted in the graph below):

Source: Open Capital Advisors

This translates into capital requirements exceeding $1 billion. Investors have noticed rising demand and are turning their attention to this space through recent investments in medical insurers, medical facilities, and other Kenyan healthcare companies. The race to serve the untapped mass market has accelerated thanks to increased innovation and investments and recent changes in the regulatory space, including a new policy covering Medical Insurance Providers (MIPs) and general insurers13.

To serve the Kenyan mass market, private health care players require innovative business models that can supply consistent quality and coverage at lower prices with higher volumes. Many of these emerging private sector players are Small and Medium Enterprises (SMEs) that seek capital to grow. The expected capital needs for the private healthcare sector by 2025 are as shown in the figure:

11T IMS Health, Pharmaceutical Measurement Unit

12US AID

13Open Capital Advisors Information Memorandum 95 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Source: Open Capital Advisors

13.11 Information and Communications Technology(ICT) Sector

13.11.1 Industry Overview ICT has been an important driver of East Africa’s economic growth over the last 15 years. In the year 2000, East Africa (Kenya, Uganda and Tanzania) had approximately 250,000 internet users, and accounted for 5% of the total internet uses in the continent. By the end of the year 2014, the region had a total of 29 million internet users, accounting for 10% of the total internet users in Africa. Kenya accounted for 74% of the total internet users in East Africa. The exponential growth began approximately in 2002 – 2004, when governments realized the potential impact of ICT on Economic Growth. Kenya has stood out as one of the most dominant frontier market countries in terms of ICT growth and development.

13.11.2 Kenya ICT Sector Kenya continues to have a marquee story when it comes to ICT growth and development. The number of Kenyans using new forms of communication has increased rapidly in recent years, with mobile telephony providing the biggest gauge of penetration of new technologies. This is evidenced by the mobile penetration rate hitting 80.5% in Q3 2014, according to the sector statistics report by the Communications Authority of Kenya (CAK) shows. Internet penetration stands at 47%, well above the Africa average of 26%. These statistics are among the highest for any frontier market nation across the globe. Growth in the sector has been driven by a culture of innovation, championed by ICT innovations such as the mobile money transfer service- M-Pesa - by the mobile telephone company, Safaricom.

Kenya is also seen as an ICT hub, with a multitude of ICT conglomerates such as CISCO, SAP, Microsoft, Google, IBM, and Oracle, establishing regional offices in Nairobi. The culture of innovation has also led to the emergence of local ICT companies, such as Seven SeasTechonology, Cellulant, Craft Silicon, and Africaonline, which have grown to become regional powerhouses. 96 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

13.11.3 Opportunities in ICT Kenya’s ICT sector is set to contribute up to 8 per cent to the country’s GDP through IT-enabled services (ITES) and create 180,000 jobs by 2017. Forecasts show the sector will attract up to USD 500 M in Private Equity (PE) and Venture Capital (VC) funds to catalyze growth and development in the sector. Strong population growth, development of ICT infrastructure by the public sector, and increasing data penetration, are all key factors that will drive revenues in the sector. Additionally, ICT transactions have proven to be very lucrative for investors, with a majority of investments yielding IRR’s greater than 30%. Sectors within ICT that continue to attract PE investment are Fiber communication, Software Development, Supply Chain management, and Public Sector ICT projects.

13.12 Agricultural Sector Overview

13.12.1 Agriculture in Africa Africa is characterised with an abundance of agricultural potential with high land quality and soil resilience ratings but with low productivity occasioned by unused or degraded land, low global fertilizer application and low irrigation rates.

Going forward, it is expected that developing countries will supply majority of additional land required to meet growth in global food demand. Worldwide increase in population will require increased import of staple and other produce. According to Faostatbook (2004- 2010) much of the increased production will come from SSA and Latin America. (SSA accounts for ~32% of global unused arable land). With increases in arable land use, cropping intensity and yield productivity, crop production in SSA is projected to grow at quicker rate than any other region. Factors such as low cost of land and labour cost in SSA, as well as improving investment environment, will result in increased capital flow into primary agriculture and agro processing.

13.12.2 Agriculture in Kenya Agriculture is the leading economic sector in Kenya, accounting for a significant share of the country’s GDP, 65.0% of total exports and provides more than 18.0% of formal employment.

The agricultural sector is heavily dependent on rain with very little acreage under irrigation. A large proportion of the country, accounting for more than 80.0%, is semi-arid and arid with an annual rainfall average of 400 mm.

Kenya’s agriculture is predominantly small-scale farming mainly in the high-potential areas. Production is carried out on farms averaging 0.2–3 ha, mostly on a commercial basis. This small-scale production accounts for 75.0% of the total agricultural output and 70.0% of marketed agricultural produce.

Key Crop Production Commodity Volumes 2012 2013 % change Tea (‘000 Tonnes) 369.4 432.4 17.1 Coffee (‘000 Tonnes) 49.0 39.8 -18.8 Fresh horticultural produce (‘000 Tonnes) 205.7 213.8 3.9 Maize (‘million Tonnes) 3573 3501 -2.0 Wheat (‘000 Tonnes) 162.7 194.5 19.5 Rice (‘000 Tonnes) 83.6 90.5 8.3

Source: Economic Survey 2014

Earnings from Agricultural Output Information Memorandum 97 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Source: KNBS Economic Survey 2014 13.12.3 Factors Driving Agriculture Business in Kenya 13.12.3.1 Rapid Urbanization and increasing demand for processed foods Up to thirty percent of Kenyans live in urban areas and the rate of urbanization is high at 4.2% per year. As people get richer and more live in towns and cities, this offers great business opportunities for agriculture if well-harnessed. Urban consumers will demand better quality, packaged, processed and more diverse food products: the products of agribusiness. Recent consumption of dairy and meat products provides evidence of this trend. This demand could create jobs, especially for young people.

13.12.3.2 High world food prices Surging world prices have highlighted Kenya’s dependence on food imports: more than half of the country’s rice, oranges, wheat and vegetable oils are imported. This trend is set to continue and provides plenty of reasons to support and strengthen local production through sector support.

13.12.4 Opportunities 13.12.4.1 Gallana Irrigation Scheme Gallana- Kulalu is a US $3bn irrigation project launched in Kenya’s Coastal region, to increase food security in the country. The development of the one million acre irrigation scheme will be undertaken under the public-private partnership. The Kenyan government will invest US$1.4bn in infrastructure development with US$2.9bn coming from the private sector

13.12.5 Challenges 13.12.5.1 Infrastructure Poor road network and other key physical infrastructure have led to high transportation costs for agricultural inputs and products. It also leads to spoilage of perishable commodities during transportation. This causes high losses to farmers.

13.12.6 Technology Although Kenya has a well-developed agricultural research system, use of modern science and technology in agricultural production is still limited. Inadequate research–extension–farmer linkages to facilitate demand-driven research and increased use of improved technologies continue to constrain efforts to increase agricultural productivity as farmers continue to use outdated and ineffective technologies. This brings the need of extension services that can link research and the farmers. 98 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14. SUMMARY OF FINANCIAL INFORMATION AND OTHER SELECTED DATA

14.1 Auditors

As at the date of this Information Memorandum, the auditors of the Issuer were PricewaterhouseCoopers, Certified Public Accountants located at PWC Tower, Waiyaki Way/ Chiromo Road, Westlands, P.O. Box 43963-00100, Nairobi Kenya. The auditors have audited the Issuer’s annual accounts for the years ended 31 March 2011 to 31 March 2014.

The financial statements for the year ended 31 March 2010 were audited by Deloitte & Touche.

The last audited accounts and financial statements were in respect of the 12-month period ending 31 March 2014, whereupon the auditors gave an unqualified audit opinion. The auditors have also carried out a limited review of the nine (9) month management accounts up to 31 December 2014.

14.2 Company Statement of Comprehensive Income

For the Year ended 31 March 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Income 1,988,227 1,913,776 764,460 1,684,796 1,121,464 Expenses Administration expenses (282,580) (364,482) (136,368) (201,853) (122,154) Other operating expenses (148,097) ( 77,649) (90,707) (89,113) (76,897) Finance costs (461,954) (400,697) (49,979) (154,697) (46,940)

Total expenses (892,631) (842,828) (277,054) (445,663) (245,991)

Profit before tax 1,095,596 1,070,948 487,406 1,239,133 875,473 Income tax (expense)/credit (48,323) (36,850) (41,264) (1,950) 12,967

Profit for the year 1,047,273 1,034,098 446,142 1,237,183 888,440

Other Comprehensive Income Reserves released on disposal of investment (133,208) (1,423,723) (127,243) ( 833,339) (626,700) Fair value in subsidiaries 3,636,745 1,657,737 13,619 902,681 565,992 Fair value in associates 421,153 382,919 882,934 1,990,419 1,867,270 Fair value gain in unquoted investments 1,852,303 371,936 114,597 12,165 18,961 Fair value gain/ (Loss) in quoted investments (24,759) 428,270 (196,952) 86,192 583,711

Total other Comprehensive Income 5,752,234 1,417,139 686,955 2,158,118 2,409,234 Total Comprehensive Income 6,799,507 2,451,237 1,133,097 3,395,301 3,297,674 Information Memorandum 99 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.3 Consolidated Statement of Financial Position

As at 31 March 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Assets Deferred income tax - - - 30,443 29,477 Prepaid operating lease rentals - - - - 35,940 Current income tax - - - 2,654 3,075 Investment property 10,845,392 5,456,057 3,992,754 3,525,578 - Motor vehicle and equipment 59,954 43,999 26,467 26,813 11,347 Intangible assets 988,756 5,298 1,926 5,404 601 Investment in associates 3,900,851 3,659,198 3,614,550 3,377,305 2,948,585 Unquoted investments 7,569,310 4,306,221 1,427,206 1,338,664 1,251,209 Quoted investments 3,036,299 2,732,872 1,666,309 3,208,611 2,967,876 Bonds at fair value through profit or loss 1,071,046 995,313 480,000 539,188 505,371 Receivables and prepayments 1,071,947 260,825 36,079 240,140 108,849 Cash and cash equivalents 843,648 1,501,769 322,410 6,776 393,641

Total assets 29,387,203 18,961,552 11,567,701 12,301,576 8,255,971

Capital and reserves Share capital 332,721 332,721 332,721 302,474 274,976 Share premium 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 6,170,187 2,828,301 1,736,198 2,443,738 3,032,911 Retained earnings 12,912,168 9,891,966 7,382,570 6,223,412 3,958,527 Non-controlling interest 268,008 - - - -

Total equity 20,272,837 13,642,741 10,041,242 9,559,377 7,856,167

Liabilities Borrowings 4,201,029 4,149,532 1,000,000 1,000,000 - Bank overdraft 1,291,101 - - 987,980 - Payables and accrued expenses 1,840,552 287,858 355,956 719,170 357,154 Unclaimed dividends 28,987 32,504 34,437 35,049 42,650 Current income tax 210,913 19,254 5,114 - - Deferred income tax 1,541,784 829,663 130,952 - -

Total Liabilities 9,114,366 5,318,811 1,526,459 2,742,199 399,804

Total Equity & liabilities 29,387,203 18,961,552 11,567,701 12,301,576 8,255,971 100 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.4 Company Statement of Financial Position

As at 31 March 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Assets Deferred income tax 5,317 7,354 5,150 30,539 29,477 Prepaid operating lease rentals - - - - 35,940 Current income tax - - - 832 3,044 Investment property - - - 265,000 - Motor vehicle and equipment - 43,999 26,467 26,754 11,347 Intangible assets - 1,720 1,926 3,052 601 Investment in subsidiaries 8,159,156 3,442,759 1,784,954 1,753,506 850,163 Investment in associates 6,594,340 6,152,947 7,128,721 6,230,521 4,240,102 Unquoted investments 5,495,272 3,539,417 1,427,206 1,338,664 1,251,209 Quoted investments 686,348 1,088,778 1,289,540 2,422,116 2,080,599 Bonds at fair value through profit or loss - 105,560 480,000 539,188 505,371 Due from subsidiary companies 7,668,573 5,969,488 3,104,780 2,221,780 412,623 Receivables and prepayments 27,499 123,796 155,344 165,745 26,658 Cash and cash equivalents 174,932 930,896 317,340 5,903 393,168

Total assets 28,811,437 21,406,714 15,721,428 15,003,600 9,840,302

Capital and reserves Share capital 332,721 332,721 332,721 302,474 274,976 Share premium 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 15,962,362 10,210,128 8,792,989 8,106,034 5,947,916 Retained earnings 6,051,372 5,004,099 3,970,001 3,554,106 2,344,421

Total equity 22,936,208 16,136,701 13,685,464 12,552,367 9,157,066

Liabilities Borrowings 4,201,029 4,149,532 1,000,000 1,987,980 - Bank overdraft 1,291,101 - - - - Payables and accrued expenses 204,467 230,182 134,078 144,332 356,906 Due to subsidiary companies 121,846 838,300 862,303 283,872 283,680 Unclaimed dividends 28,987 32,504 34,437 35,049 42,650 Current income tax 27,799 19,495 5,146 - -

Total Liabilities 5,875,229 5,270,013 2,035,964 2,451,233 683,236

Total Equity & liabilities 28,811,437 21,406,714 15,721,428 15,003,600 9,840,302 Information Memorandum 101 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.5 Statement of Cash Flows (Internally Generated Funds)

As at 31 March 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Operating Inflows: Dividends receivable 661,481 523,715 430,892 410,222 407,957 Rent income 17 7,062 6,136 6,276 2,259 Interest receivable 225,480 222,211 45,446 77,950 6,022 Other income 307,183 (148,714) 31,172 55,099 45,551 Proceeds from disposal of investments 2,678,770 3,286,280 6,105,779 1,799,547 1,271,422 3,872,931 3,890,554 6,619,425 2,349,094 1,733,211 Operating outflows: Operating & Administrative expenses (106,852) (297,496) (299,181) (302,784) (197,999) Taxes paid (50,825) (25,726) (9,897) (2,591) (603) (157,677) (323,222) (309,078) (305,375) (198,602)

Internally generated cash flows 3,715,254 3,567,332 6,310,347 2,043,719 1,534,609

Cash flows from investing activities: Investments in equity (4,951,105) (5,095,520) (4,769,396) (4,240,959) (920,632) Investment in motor vehicle & equipment (45,209) (27,406) (4,303) (26,944) (10,000) (4,996,314) (5,122,926) (4,773,699) (4,267,903) (930,632) Cash flows from financing activities: Net proceeds from borrowings - 4,149,532 - 1,000,000 - Dividends paid to Company’s shareholders (3,517) (1,933) (612) (1,392) (5,728) Dividends paid to non-controlling interests (41,739) - - - - Loan Repayment - (1,000,000) - - - Interest paid (622,558) (400,763) (229,872) (147,914) (44,758) (667,814) 2,746,836 (230,484) 850,694 (50,486)

Net increase/(decrease) in cash (1,948,874) 1,191,242 1,306,164 (1,373,490) 553,491

Movement in cash and cash equivalents At start of year 1,501,769 322,410 (981,204) 393,641 (159,850) Increase/(decrease) (1,948,874) 1,191,242 1,306,164 (1,373,490) 553,491 Exchange losses on cash equivalents (348) (11,883) (2,550) (1,355) -

At end of year (447,453) 1,501,769 322,410 (981,204) 393,641

The statement of cashflows as presented in the Accountant’s Report has been reformatted to conform to Centum Investment Company Limited’s business model. Refer to Appendix 20.2 of the Accountant’s Report. 102 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.6 Company Statement of Total Return

As at 31 March 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Dividend income 1,788,646 283,468 404,347 509,797 455,548 Interest income 39,784 107,979 52,143 77,950 6,022 Other income 11,189 79,686 52,177 24,842 33,195 Realized value movements 15,401 9,360 83,913 131,091 87,735 Unrealized value movements 5,885,438 2,850,422 858,835 3,099,234 2,948,198 Gross return 7,740,458 3,330,915 1,451,415 3,842,914 3,530,698

Finance costs (461,954) (400,697) (49,979) (154,697) (46,940) Portfolio costs (430,677) (442,131) (227,075) (290,966) (199,051) (892,631) (842,828) (277,054) (445,663) (245,991)

Net return 6,847,827 2,488,087 1,174,361 3,397,251 3,284,707 Tax (48,323) (36,850) (41,264) (1,950) 12,967

Total return 6,799,504 2,451,237 1,133,097 3,395,301 3,297,674

Gross return (%) 48.0% 24.34% 11.6% 42.0% 60.3% Total return (%) 42.1% 17.91% 9.0% 37.1% 56.3%

Opening net asset value: Portfolio value 19,307,445 14,694,418 14,462,892 9,014,620 5,930,043 Other net assets 978,788 (8,954) 77,455 142,446 99,330 Borrowings (4,149,532) (1,000,000) (1,987,980) - (169,981)

16,136,701 13,685,464 12,552,367 9,157,066 5,859,392

Closing net asset value Portfolio value 29,371,500 19,307,445 14,694,418 14,462,892 9,014,620 Other asset/(liabilities) (943,165) 978,788 (8,954) 77,455 142,446 Borrowings (5,492,130) (4,149,532) (1,000,000) (1,987,980) -

22,936,205 16,136,701 13,685,464 12,552,367 9,157,066 Information Memorandum 103 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.7 Proforma Financial Information

14.7.1 Projected consolidated statement of comprehensive income

At 31 March 2016 Kshs’000

Dividends from Unquoted Investments 378,290 Dividends from Quoted Investments 248,680 Interest Income 2,716,407 Fund Management Income 691,884 Gains on disposal of Investments 1,814,593 Fair value gains on Investment Property 7,168,690 Sales Revenue 7,589,723 Rental income 462,469 Other Income 947,053

Total Income 22,017,789

Cost of sales (5,020,383)

Administrative & Operating Expenses (5,165,086) Finance costs (1,856,236)

Share of associate profits 386,270

Profit Before Tax 10,362,353

Tax (2,897,848)

Profit After Tax 7,464,505

Other Comprehensive income 9,940,683

Total Comprehensive Income 17,405,188 104 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.7.2 Projected company statement of comprehensive income

At 31 March 2016 Kshs’000

Dividend income 1,751,222 Interest income 158,420 Gain on disposal of investments 1,186,094 Directors Fees 6,800

Income 3,102,536

Expenses Administrative & operating expenses (471,203) Finance costs (1,344,224)

(1,815,428)

Profit before tax 1,287,108

Income tax expense (59,645)

Profit for the year 1,227,463

Other comprehensive income; net of deferred tax 8,525,373

Total comprehensive income 9,752,836 Information Memorandum 105 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.7.3 Projected consolidated statement of financial position

At 31 March 2016 Kshs’000

Assets Investment property 38,035,316 Property, plant & equipment 4,753,078 Intangible assets 92,782 Prepaid operating lease rentals 9,513 Investment in associates 5,351,001 Unquoted investments 14,069,160 Quoted investments 5,828,901 Equity linked note assets 7,091,037 Government securities and Bonds at fair value through profit or loss 2,331,763 Loans and advances 15,509,031 Tax recoverable 135,950 Inventories 944,336 Deferred income tax asset 88,820 Receivables and prepayments 2,909,186 Cash and cash equivalents 9,590,105

Total Assets 106,739,979

Capital and reserves Share capital 332,721 Share premium 589,753 Investment revaluation reserve 13,864,003 Retained earnings 19,615,508

Shareholders equity attributable to Equity holders of the company 34,401,986 Non-controlling interest 10,643,459

Total equity 45,045,444

Liabilities Borrowings 21,108,950 Shareholder Loans 6,834,606 Equity linked note liability 7,091,037 Customer deposits 17,089,637 Deferred income 158,838 Payables and accrued expenses 2,552,858 Dividends payable to non-controlling interests 42,863 Current income tax 287,896 Deferred income tax 6,527,850

Total liabilities 61,694,535

Total equity & liabilities 106,739,979 106 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

14.7.4 Projected company statement of financial position

At 31 March 2016 Kshs’000

Assets Investment in subsidiaries 36,235,826 Investment in associates 5,351,001 Unquoted investments 10,088,959 Quoted investments 345,201 Other assets 7,491 Cash and cash equivalents 734,546

Total Assets 52,763,024

Capital & reserves Share capital 332,721 Share premium 589,753 Investment revaluation reserve 27,318,735 Retained earnings 11,894,835

Total equity 40,136,044

Liabilities Borrowings 10,830,000 Bank overdraft 0 Deferred tax 1,405,704 Current income tax 59,645 Payables & other liabilities 331,631

Total liabilities 12,626,980

Total equity & liabilities 52,763,024 Information Memorandum 107 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected statement of company Cash flows

Year Ending 31 March 2016 Kshs’000

Operating Activities Kshs’000

Inflows Dividends and interest 1,902,151 Proceeds from disposal of equity 1,422,794

3,324,945

Outflows Cost of sales & Portfolio costs (558,531) Tax paid (59,645)

(618,176)

Internally generated Cash flows 2,706,769

Investing Activities Purchase of equity and Investment Property (7,596,199) Capital expenditure (18,870)

Investing Cash flows (7,615,069)

Financing Activities Proceeds from borrowings 6,550,000 Repayment of borrowings (3,150,000) Interest on borrowings (1,344,224)

Financing Cash flows 2,055,776

Opening Cash 3,587,070

Closing Cash 734,546 108 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

15. RISK FACTORS AND MITIGATION MEASURES

Prospective Noteholders should carefully consider the risk factors set out below before making the decision whether or not to invest in the Notes. These are however not intended to be exhaustive

15.1 Investment Risks

15.1.1 Investment Decisions The ability to originate deals on a proprietary basis and the pricing of assets could have a significant effect on the Issuer’s competitive position and on the sustainability of returns.

The Issuer’s ability to originate, evaluate and execute high quality investments is dependent upon a range of factors. The most important of these include: • the ability to attract and develop people with the requisite investment experience and cultural fit; • organization of teams whose structure is market-adapted and whose compensation is results-oriented; and • effective application of collective knowledge and relationships to each investment opportunity.

The Issuer’s investment appraisal process is rigorous as it includes approval by relevant managers and the Investment Committee.

15.2 Investment Performance

The performance of Centum’s portfolio is dependent upon a range of factors. These include, but are not limited to: • the quality of the initial investment decision; • the ability of the investment to successfully execute its business strategy and generate positive cash flow; and • actual outcomes against the key assumptions underlying the investments financial projections.

Any one of these factors could have an impact on the valuation of a portfolio company and on the Issuer’s ability to make a profitable exit from the investment within the desired timeframe.

A rigorous process is put in place for managing investments from inception through to realization. This includes regular asset reviews and, in many cases, representation on the board of the investee companies by an Issuer investment executive. Portfolio diversification also mitigates the risk of underperformance of any of the portfolio companies.

15.3 Investment Concentration

The Issuer invests across a range of economic sectors. Over-exposure to a particular sector could increase the impact of adverse changes in macroeconomic or market conditions on the Issuer. An increase in the average size of investments over time could also increase the exposure of the Issuer to the performance of a small number of large investments, albeit in different sectors.

Sectoral investment limits have been defined and the portfolio is subject to periodic reviews by the Investment Committee in order to monitor exposure to any one sector and larger investments.

15.4 Investment valuations and exit opportunities

Private-equity holdings are valued according to private-equity and venture capital guidelines, which set out the methodology for fair valuation. The valuation is relatively subjective and may vary from time to time.

Since valuation of the Issuer’s portfolio and opportunities for realizations depend to some extent on stock market conditions, changes in market or macroeconomic conditions could impact the valuation of portfolio assets and the ability to exit those investments profitably within the desired timeframe. Information Memorandum 109 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Quoted securities are valued at market prices, thus, are subject to adverse market movements.

Valuation risks are mitigated by comprehensive reviews of the underlying investment by management every quarter. The appropriateness of the valuation is then considered by the audit committee and the internal auditor.

The risk of fluctuation of the prices of quoted securities is mitigated by choice of defensive stocks with strong fundamentals.

15.5 Financial Risks

15.5.1 Liquidity risks This is the risk that the Issuer will be unable to meet its financial obligations as and when they fall due. This risk may materialize due to lack of cash reserves when required or the inability to convert assets to cash quickly and at a good price. This can result in failure to repay Noteholders and fulfil commitments to lenders. Liquidity risk may also cause the Issuer to miss out on attractive investment opportunities due to lack of funding.

The Issuer has adopted prudent liquidity risk management measures including: • consistently maintaining sufficient cash flows to facilitate day-to-day running of Centum’s operations; • pre-arranged open lines of credit with its panel of banks in order to bridge the timing difference between available opportunities and expected cash inflows; • maintaining a ‘marketable securities’ asset class which constitutes highly liquid available-for-sale listed equity and debt securities; • continuous forecasting and monitoring the Group’s liquidity needs against expected cash flows in order to identify and guard against liquidity gaps. • matching maturity profiles of financial assets and liabilities.

15.5.2 Interest rate risk The Issuer from time to time temporarily holds excess cash in a variety of money-market instruments waiting to be redeployed in the next most attractive opportunity. The interest rates on the cash deposits are fixed and agreed upon in advance. There is the risk that the value of the Issuer’s fixed interest-bearing assets will fall due to variability in interest rates.

The Issuer also faces the risk of incurring a higher cost of borrowing on its short term borrowings which are usually floating rate based. Interest rates on short term borrowings are usually pegged on the relevant bank’s base lending rate or prevailing Treasury Bills rates.

In the absence of material contractual liabilities, the Issuer’s exposure to interest rate risk has been minimal and only limited to its liquidity management assets. Nevertheless, management closely monitors the interest rate environment in order to lock-in favourable interest rates for both short term borrowings and deposits. The Issuer works with a panel of banks to ensure competitive rates.

15.5.3 Inflation risk There is a risk that the Issuer’s portfolio holdings may decline due to unexpected changes in inflation rate. This risk may also occur when investee companies are unable to pass on inflation costs in full to its customers due to price sensitivity.

This risk will be partially mitigated through the Real Estate and Infrastructure asset class, which is considered to provide inflation hedge benefits as rental yields have a tendency to adjust to take into account inflation. Returns from investments in equities also provides a good buffer for inflation.

15.5.4 Foreign Exchange Risk This is the Issuer’s exposure to fluctuations in the foreign currency rates relating to conversion rates for valuation of overseas holdings. This risk can also arise if the Issuer acquires a foreign subsidiary which maintains financial statements in its local currency which is different from the reporting currency of the consolidated group.

Impact of fluctuations in exchange rates on the value of assets and investments is closely monitored through mark to market evaluations. Hedging strategies are applied where necessary.

15.5.5 Credit Risk This is the risk arising from a borrower’s inability to repay loans/advances as per agreed lending terms. Credit exposures for the Issuer may arise from onward lending activities to Subsidiaries and investee companies.

The Issuer seeks a controlling stake in order to be actively involved in the management of its investee companies. 110 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

15.5.6 Commodity Risk Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by fluctuation in the prices of commodities. This risk will be relevant with the Issuer’s participation in the Energy and Agricultural sectors. The development of the derivatives market in Kenya will provide stability and enable prediction of commodity prices.

15.6 Operational Risks

Risk of financial loss arising from failed internal controls, people and systems. These risks are highlighted below: • a perceived failure to meet ethical and governance principles regulating Centum’s conduct and activities may lead to a loss of business reputation, erosion of market confidence and inability to close business deals; • resourcing inefficiencies, especially lack of qualified investment professionals could lead to loss of competitive advantage and intellectual edge; • information technology failures and breaches could lead to transaction failures, loss of business records and potential financial and legal exposures; and • external events resulting from natural disasters, crime, social unrest, civil war and terrorism could harm both Centum’s staff and assets.

Operational risks have been mitigated through detailed operational procedures provided in relevant manuals supported with Business Continuity and Disaster Recovery plans. The Issuer has a framework of core values and a code of conduct that influence its organizational culture. An outsourced internal audit function provides independent assurance that internal controls are in check.

15.7 External Risks

These are risks that are outside of the Issuer’s control. Some of the risks are: • political risks - changes to the political climate and any negative political events may have a direct effect on the value of the Issuer’s investments; • changes in legislation, taxation, regulation and the expropriation of property including matters relating to land tenure, titles, securities, pricing, environmental protection, trade sanctions, cancellation of licenses and agreements, social impact and repatriation of profits can cause investment losses to the Issuer; • cross border investment risk arising from delays in acquiring approvals and consents to undertake cross border transactions as well as foreign exchange fluctuations; and • competitive rivalry within the investment industry can significantly reduce the number of investment prospects.

The risks are largely mitigated by best business practice operations. Perils arising out of natural disasters are mitigated by Business Continuity Planning and insurance. Risk arising from cross border investment risk is mitigated by the fact that Uganda has been a favorable investment destination for investors compared with other East African countries. It is politically and economically stable as it is growing at a reasonable rate. The Uganda Securities Exchange runs on a Securities Central Depository platform and aims to have an automated trading system. The Bank of Uganda has foreign exchange rate policies to control the fluctuation of the currency.

15.8 Reputational Risk

Reputational risk is the risk of damage to Centum’s image through negative publicity, which may affect its shareholder value and its ability to retain and generate business.

Centum’s management strives to conduct the business affairs of the company according to international best practice. Environment, Social and Corporate Governance (ESG) are key pillars of the business operations. Additionally, the Issuer maintains compliance with the relevant regulatory requirements.

15.9 Project Risk

The Issuer’s strategy has shifted from being a portfolio manager looking for growth capital and consolidation opportunities to become an active promoter and developer of high quality investment grade opportunities. Project risk will be particularly prevalent in the Real Estate and Infrastructure sectors in which the Issuer is actively operating. Project risk has three components as explained below Information Memorandum 111 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

15.10 Execution Risk

This risk emanates from managing of various players and roles required to see the project through mainly from a planning and actual construction perspective.

In the Real Estate Sector, the Issuer has formed Athena Properties, whose role is the development management of the current and future real estate projects. Athena boasts of top class skill sets with international experience.

In power generation, the Issuer will rely on competent and experienced Engineering, Procurement, Construction and Maintenance (EPCM) firms.

15.11 Finance Risk

These projects by their very nature are capital intensive as evidenced in the portfolio weighting and project highlights. Project finance is consequently a primary concern.

The Issuer prioritizes the structuring of project funding. The objective is to optimize capital utilization by reducing weighted average cost of capital while maximizing the equity return. Centum has used a mix of both core developer, direct equity and senior and mezzanine debt initiatives to anchor these investments.

15.12 Market Risk

This risk refers to the timing and realization of a price for the project’s output. While the power generation projects carry a ready off take agreement in the form of a Power Purchase Agreement (PPA) with KPLC, the Real Estate Projects would carry market risk.

The Issuer has embarked on various initiatives including off plan sales as well as engaging anchor and ancillary tenants at various stages of the real estate developments.

An in house risk and compliance management team is actively involved in continuous and proactive risk management of emerging risks. 112 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

16. CORPORATE GOVERNANCE

As a leading institutional investor and public listed company, Centum appreciates the value of strong corporate governance. The Issuer upholds best practices in corporate governance. Centum’s culture is a reflection of the commitment of its Board to the principles of transparency, professionalism and high performance for the benefit of our shareholders and Centum’s stakeholders.

Centum’s governance structure is as shown below:

Shareholders in General meeting

Nomination and Governance Committee

Branding Committee

Board of Directors Audit and Risk Committee

Investment Committee

ICT Committee

Management Internal Audit

The Board is the principal governance organ of the Issuer. The key roles of the Board are: a) To provide leadership and direction: the Board leads the strategy development process. It has contributed to the realization of short- term and long-term strategies for the business by ensuring adequate resourcing, target setting and following up on implementation. b) To act as the steward of the Issuer’s resources: the Board acknowledges that the fiduciary responsibility over the assets and actions of the Issuer lies with the Board. c) To grow capital: the Board is actively involved in the evaluation of the Issuer’s growth agenda and steers the approval of investment opportunities, capital allocation and divestures. d) To oversee risk management: the Board is primarily responsible for the management of risk and ensures that business is conducted responsibly. The internal control framework facilitates the identification and mitigation of all risks. e) To ensure high compliance with relevant laws and regulation. f) To ensure observance of environmental, social and governance best practices: the Board acknowledges and strives to ensure a holistic model for value creation that covers social, economic and environmental performance. g) To review and approve financial statements and ensure accountability to the Issuer’s shareholders and responsibility to all stakeholders.

The Board Centum maintains a unitary Board structure. The current Board comprises one (1) Executive Director and eight (8) Non-Executive Directors, four of whom are Independent Directors. Therefore, almost the entire Board is made up of independent directors. In reviewing its composition, the Board consistently seeks to ensure that its size, diversity and demographics contribute to robust decision making and make it effective. Directors develop strategy, review the performance of management, monitor performance and ensure accountability. The Board seeks assurance on the integrity of the financial information that the financial controls and systems of risk management are robust and defensible.

The roles of Chairman and Managing Director/Chief Executive Officer are separate. The Chairman leads the Board while the Managing Director and Chief Executive Officer has the direct charge of day to day business of the Issuer. Information Memorandum 113 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Currently, the Board of Centum is made up as explained below.

Mr. James N. Muguiyi Chairman & Non Executive Director Age: 71 years • Joined the Board in December, 2003. • Immediate former Group Managing Director of UAP Holdings Limited. • He is a fellow of ICPAK, a member of CIMA and the Chartered Institute of Public Finance and Accountancy. • He is a Non Executive Director of UAP Insurance Company Limited, UAP Insurance (Uganda) Limited, UAP Insurance Sudan Limited, UAP Properties Limited, UAP Financial Services Limited, One Network Limited, Aimsoft Kenya Limited, One Solution Limited and Mount Kenya Bottlers Limited.

Mr. James M. Mworia Group Chief Executive Officer & Managing Director Age: 37 years • Was appointed Chief Executive Officer of Centum Investment Company Limited and its subsidiaries in October, 2008. • He has fifteen years experience and he is the recipient of many regional and international awards in recognition of his outstanding business leadership. The most recent of this was the Africa Business Leader of the Year award by the Corporate Council on Africa in Washington DC. • He is a CFA Charter holder, CPA(K), a Global Chartered Institute of Management Accountant, a holder of LLB from the University of Nairobi and an Advocate of the High Court of Kenya. He is a Fellow of the Archbishop Desmond Tutu African Leadership Institute. • He is the Chairman of K-Rep Bank and a non-executive director of the Lewa Conservancy.

Dr. James McFie (68yrs) Vice Chairman & Non Executive Director Age: 68 years • Dr. McFie is currently the Director of the Strathmore School of Accountancy, where he has served as a lecturer since 1978 and trained generations of accountants in Kenya. • He also serves as the Chairman of the Board of Directors of Sasini Limited and as a non-executive director of The Standard Group Limited. He has previously served as a Director of the Capital Markets Authority (Kenya) and as a Member of the Value Added Tax Tribunal of Kenya, amongst numerous other responsibilities. • Dr. McFie holds a PhD from Graduate School of Business, University of Strathclyde, Glasgow, Scotland,an MA (Mathematics) degree from Balliol College, Oxford University, England and a BA (Mathematics) degree from Balliol College, Oxford University, England.

Mrs. Margaret M. Byama Non Executive Director Age: 59 years • Mrs. Byama is the representative of the PS Ministry of Trade on the Board since January, 2009. • She is the Chief Finance Officer in the Ministry of Trade with over 20 years’ experience in public financial management. • Mrs. Byama holds a BA from the University of Nairobi and Certificate in Public Financial Management from Manchester University. • She is the Chairperson of the Wildlife Clubs of Kenya and was the immediate former Chief Executive Officer of the National Humanitarian Fund for Internally Displaced Persons. 114 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Dr. Christopher Kirubi Non Executive Director Age: 72years • Dr. Kirubi has been a Director since December 1997. He served as Chairman of the Board between 1998 and 2003. He is the Chairman of Centum Investment Committee. • A well-known Kenyan industrialist with interest in fast moving consumer goods, media and communications; Dr. Kirubi is a graduate of INSEAD and the Harvard Business School. • He was appointed a Director Harvard Business School in 2012, and also serves as the Chairman of DHL World Wide Express Limited, Haco Industries Kenya Limited, Kiruma International Limited, International House Limited, Nairobi Bottlers Limited, Sandvik East Africa Limited and Capital FM. • He is a Non-Executive Director of Bayer East Africa Limited and Beverage Services of Kenya Limited.

Ms. Laila Macharia Non Executive Director Age: 44 years • Ms. Macharia joined the Board in October, 2013. • She is the Founder and Chief Executive Officer of Scion Real Estate Limited, a property investment company based in Nairobi that provides financing for builders in Africa’s rapidly growing cities through its Africa Metro Property Facility. • Laila has vast experience managing multi-currency portfolios and transactions in the United States of America and East Africa. While at the New York office of Clifford Chance, a global law firm, she coordinated a US$9 billion multi-currency bond program. • Prior to that, she headed the Africa Initiative at the Global Fund for Women in the San Francisco Bay Area. • Laila is currently the Vice Chairman, Kenya Private Sector Alliance (KEPSA) and a member of Capital Markets Tribunal. She has previously served as the Chairman, Kenya Property Developers Association.

Mr. Imtiaz Khan Non Executive Director Age: 46 years • Mr. Khan joined Centum in November 2008 and serves as the Chairman of the Audit and Risk Committee. He is a qualified accountant and holds a MBA with distinction from The London Business School and a Bcom from the University of Nairobi. • He is a specialist in corporate finance and private equity investments with over 20 years’ experience undertaking projects in 18 countries across four continents, including Brazil, Russia, India, China and South Africa which are widely regarded as some of the world’s leading emerging markets. • He is a founding partner and Executive Co-Director of Cassia Capital Partners Limited, which focuses on private equity investments in East Africa and chairs Oltepesi Properties Limited and represents Cassia Capital Partners Ltd on the board of EA-Power Limited.

Mr. Peter Kimurwa Non Executive Director Age: 44 years • Mr. Kimurwa represents the Industrial Commercial and Development Corporation (ICDC) on the Board of Centum. He has been on the Board since May 2011. • He serves as the Chairman of The Nomination and Governance Committee and Centum Business Solutions Limited. • He is the Executive Director at ICDC and is a specialist in strategy and financial management with extensive and varied business experience spanning over 15 years in senior positions at PricewaterhouseCoopers (PWC), British American Tobacco (BAT), BOC Kenya Limited, East African Breweries Limited (EABL) and Linksoft Communications System Limited. • He is a CPA (K) and holds a MBA from INSEAD and Bachelor of Commerce degree from Kenyatta University. • He represents ICDC as a Non-Executive Director on the boards of Eveready Batteries E.A Limited, Rift Valley Bottlers Limited, Mount Kenya Bottlers.

Mr. Henry Njoroge Non Executive Director Age: 46 years • Joined the Board in October 2005 and serves as the Chairman of the Centum Branding Committee. • He is currently Executive Director of Xtranet Communications Limited. Prior to this, he was the Managing Director of Open View Business Systems and UUNET Kenya respectively. He worked at Telcorp and Fintech Kenya both as General Manager. • He is a Non Executive Director of X&R Technologies Limited; the sole authorized XEROX distributor and Global Equity Ventures Limited. He is also a Trustee of the Kenya Youth Business Trust, a non-profit organization which empowers youth entrepreneurs through mentorship and micro business loans. Information Memorandum 115 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Board Structure

The complementary roles of and responsibilities of the Board and the boards of Subsidiaries are formally documented in their respective board charters. The implementation and adoption of policies, processes or procedures across the entire Group are considered and approved by each of the Subsidiaries.

The Board has delegated certain functions to committees with formal terms of reference which are reviewed yearly. The chairpersons of the committees appraise the full Board of their activities on a quarterly basis through oral and/or written reports. The Board committees are: Audit and Risk Committee, Investment Committee, Branding Committee, Nominations and Governance Committee. The ICT Committee is currently being constituted to oversee key projects on automation of business processes for efficiency.

The details of the Committees are as summarized below:

Audit and Risk Committee • Membership The Audit and Risk Committee (ARC) consists of four non-executive directors, the majority of who are independent directors. The Managing Director, the Finance Manager and the lead audit partner in charge of the internal and external audit are in attendance at meetings.

The Chairman of the ARC is an Independent Director.

• Mandate The role of the ARC is to assist the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems, control processes and the preparations of accurate financial statements in compliance with all applicable legal requirements and accounting standards.

Nomination and Governance Committee • Membership The Nomination and Governance Committee (NGC) consists of five directors who are all non-executive directors.

• Mandate The role of the NGC is to develop and implement policies with respect to both the strategic priorities of the Board on issues of human resources and matters of governance.

Investment Committee • Membership The Investment Committee (IC) is made up of six directors and includes the Group Chief Executive Officer and Managing Director in addition to non-executive directors.

• Mandate The key role of the IC is to review and recommend investment opportunities to ensure attractive returns on investment. The committee provides clear guidelines on investment policies that a consistent and structured, research-based and risk sensitive approach to value investing. The IC exercises oversight on the implementation of the investment strategy and policy of Centum.

Branding Committee • Membership The Branding Committee (BC) comprises of a four members being a mix of the executive and non-executive directors.

• Mandate The role of the BC is to oversee the development of the brand of the Group ensuring consistency with the group’s strategic direction necessary for creating tangible wealth.

Board Appointments and continuous improvement The Nominations and Governance Committee is charged with the responsibility of appointment of Directors through a well outlined process. Appointment of directors is geared towards bringing on board the right skill set and zeal to ensure maximum value for shareholders. Newly appointed directors are taken through a rigorous induction program managed by the Chairman, Chief Executive Officer and Company Secretary. The programme is aimed at imparting relevant organizational knowledge for an in-depth understanding of the Centum culture. The induction also provides awareness for relevant policies such as disclosure of conflict of interest and obligation to declare interests, the insider trading policy and code of ethics and business Conduct. 116 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Continuous improvement is key in ensuring the Board keeps abreast with the economic environment that Centum operates. The Issuer ensures continuing exposure to directors on topical issues on soft skills and technical trainings to cover investment strategies and portfolio management.

Re-election of Directors A third of directors retire by rotation annually, and if eligible their names are submitted for re-election at the Annual General Meetings. Also all director appointments to fill casual vacancies are subject to confirmation by shareholders at the subsequent annual general meeting.

Evaluation of Board performance At Centum, feedback is integral in continuous improvement for peak performance. The Board undertakes an evaluation of its performance annually at a retreat at which candid discussions and feedback on Board performance are had. The evaluation covers among other matters: • Individual understanding of the role of director at the respective Committee and Board level; • General understanding of the Group’s vision, mission and strategy; • Personal initiative and development to keep abreast with trends and topical issues affecting the business of the Group; • Skill set of each member and the match of skills with the expectations for value addition to the Group; • Adequate preparation and active participation in meetings at the Committee as well as Board level; • Attendance of Board and Committee meetings; and • Awareness and adherence to regulations and policies on Corporate Governance and Ethics.

Company Secretary The Company Secretary provides guidance to the Board on the duties of the directors and good governance, ensures Board and Committee charters are kept up to date, prepares and circulate board papers, elicit responses, input, feedback for board and Board Committee meetings, assist in drafting yearly board work plans and ensure preparation and circulation of minutes of board and committee meetings.

Remuneration of Directors The Board remunerates directors and executives fairly and responsibly based on a compensation structure aligned with the strategy of the company and linked to individual performance. The Shareholders at every Annual General Meeting approve the director’s remuneration.

Compliance with Laws, Rules, Codes and Standards Compliance is an ethical imperative. Compliance with applicable laws is understood not only in terms of the obligations that they create, but also for the rights and protection that they afford.

The Board through the guidance of the Company Secretary ensures that the Issuer complies with applicable laws and considers adherence to non-binding rules codes and standards. Exceptions permitted in law, shortcomings and proposed changes expected are handled ethically.

Code of Conduct The Code of has outlined the ethical standards which the directors, employees and other stakeholders who come into contact with the Issuer would adhere to when conducting the affairs of the Group.

The Board ensures that the Issuer’s ethics are managed effectively. Annually all directors, employees and other stakeholders renew their written commitment to abide to the Code of Conduct. The Issuer builds and sustains an ethical corporate culture in the company through recognition of ethical staff. The Issuer is looking into ways of measuring ethical standards.

Insider Trading Policy Centum complies with the rules of the securities exchanges on which they are listed in respect of insider trading. The Insider Trading policy provides the guidelines in dealing in securities by directors, officers and selected employees. Centum’s Policy and Guidelines on Insider Trading is a reflection of the Capital Markets restrictions on transactions of the Company’s directors, employees, agents and consultants in relation to its securities as well as the securities of other companies where it is a corporate director or insider. Such covered persons have an open period to transact on restricted securities so as to avert any occurrence of insider trading. The open period runs thirty days after the making of any public announcement and disclosure of all material non-public information.

Closed Period The closed period is the time between the completion of financial results and the announcing of these results to the public. The closed period is intended to prevent trading in a company’s shares by its insiders ahead of the public dissemination of its financial results. In the closed period, all the investor interaction is limited to discussions on publicly available information. Information Memorandum 117 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Conflict of interest policy and independent advice The Board has implemented a conflict of interest policy that requires utmost honesty and adherence to the code of conduct and code of ethics for directors, management and employees.

The directors or the Board or Committees are permitted to take independent advice in connection with their duties at the cost of the Issuer subject to an approved process being followed. The committee is permitted to consult with specialists or consultants subject to board-approved process.

Subsidiaries To ensure that the policy and decisions of Centum are emulated and carried out at the subsidiary level, Centum ensures that it has adequate representation in all the boards of its subsidiaries.

Details of the directorship of its key subsidiaries is provided below:

K- Rep Bank Limited Genesis Kenya Nabo Capital James Mworia James Mworia Imtiaz Khan Tom Kariuki Charles Ogalo Pius Muchiri Mary Ann Musangi Mukite Musangi Robert Bunyi Donald B Kipkorir Patrick Kariuki Robert Mbugua Henry Chege Fahima Zein Kimanthi Mutua Catherine Mturi - Wairi Polycarp Igathe Albert Ruturi

Amu Power Company Limited Platcorp Holdings Limited Francis Koome Njogu Imtiaz Khan Ahmed Bajaber Ignatius Obara Dr. Christopher Kirubi Brett Sievwright Centum Investment Co. Ltd Centum Investment Co. Ltd (rep. James Mworia) (rep. James Mworia) Control Services Corporation 118 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Senior Management Centum’s senior management is made up as explained below.

Mr. James M. Mworia Group Chief Executive Officer & Managing Director Age: 37 years • Was appointed Chief Executive Officer of Centum Investment Company Limited and its subsidiaries in October, 2008. • He has fifteen years experience and he is the recipient of many regional and international awards in recognition of his outstanding business leadership. The most recent of this was the Africa Business Leader of the Year award by the Corporate Council on Africa in Washington DC. • He is a CFA Charter holder, CPA(K), a Global Chartered Institute of Management Accountant, a holder of LLB from the University of Nairobi and an Advocate of the High Court of Kenya. He is a Fellow of the Archbishop Desmond Tutu African Leadership Institute. • He is the Chairman of K-Rep Bank and a non-executive director of the Lewa Conservancy.

James Kaguchia Director Private Equity; Centum Capital Age: 40 • Joined Centum in March 2013 having previously worked with Kewberg Cables in South Africa as Managing Director and Chief Executive Officer. • He is currently the Director; Centum Capital; the business unit within Centum that is responsible for executing the sector strategies. • He holds Bcom (Accounting option) from the Kenyatta University, and is a CPA (K).

Mrs. Risper Mukoto Managing Director Centum Business Solutions Limited Age: 40 years • Mrs. Mukoto is the Managing Director of Centum Business Solutions (CBS) which provides non-investment related business solutions across Centum. She also serves as the Director, Finance & Operations. • She has over 14 years experience in Financial and operations management, most of which she served in various positions within Centum. • She is a member of ICPAK and a Fellow of the Association of Certified Chartered Accountants (FCCA). She holds a BA in Business Management from Moi University as well as an MBA from the United States International University-Africa (USIU-A). • She is a Fellow of the Archbishop Desmond Tutu African Leadership Institute.

Mr. Fred Murimi Director Corporate Affairs and Company Secretary Age: 35 years • Mr. Murimi is the Corporate Affairs Director & Group Company Secretary. He acts as the Group’s general counsel and additionally oversees the Group’s investor relations, company secretarial and risk functions. • He has over 10 years’ experience in the investment industry. Prior to joining Centum in January 2013, he worked with Dyer & Blair Investment Bank and later with Renaissance Capital as Vice President – Legal & Compliance. • He holds a Bachelor of Laws degree (LL.B), a Master of Business Administration (MBA) degree, is a Certified Public Accountant (CPA) and as a Certified Public Secretary (CPS) and is a member of the Law Society of Kenya (LSK) and Institute of Certified Public Secretaries of Kenya (ICPSK). • In 2014, he was awarded Certified Secretary of the Year in the Champions of Governance Awards by ICPSK.

Mrs. Nelly Kanja Director Marketing & Communications Age: 41 years • Mrs. Kanja joined Centum in March 2015 as the Marketing and Communications Director. She has over 15 years experience in Marketing and Communication. • Prior to Centum, she worked for Scanad and rose through the ranks to become the Business head of Scanad Kenya. • Mrs. Kanja holds a Master of Business Administration (MBA) from Strathmore University and a BA in Government & Public Administration from Moi University. She also holds certificates in Public Relations Management from Kenya Institute of Management and the Marketing Society of Kenya. Information Memorandum 119 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Managing Directors of our other subsidiaries

Nicholas Macharia Managing Director, King Beverage Limited Age: 39 years • Nicholas joined King Beverage Limited (KBL) as Managing Director in 2014. KBL is currently the sole distributor of Carlsberg in Kenya and is a 100% subsidiary of Centum. • Prior to joining KBL, Nick was the Regional Commercial Manager at Weetabix East Africa. He has over 14 year’s leadership experience in the FMCG sector. He also worked at Coca Cola Sabco as Country Finance Manager in Uganda, Finance Manager & Acting Country Manager in Mozambique and later as Country Commercial Manager in Kenya. • Nick holds a MBA from Hertfordshire University in the U.K, a Diploma in Business Management from Herriot Watt University and is a member of the Association of Certified Chartered Accountants (ACCA).

Charles Orony Ogalo Managing Director, Genesis Kenya Investment Management Limited Age: 57 Years • Charles serves Genesis Kenya as the Managing Director, a position he has held since joining the entity in 1996. Genesis Kenya the second largest Asset Manager in the country, specializing in investment management and pension scheme advisory services. Centum holds a 73% stake in Genesis. • Prior to taking this position, he served in key senior positions at KCB with his last posting as Chief Manager, Correspondent Banking and International Trade. During his 11 years’ service with KCB, he spent four years as the first London Representative, developing business in Europe and America. He has over 15 year’s leadership experience in the banking sector and fund management. • Charles holds a masters degree in Economics from Rutgers University and a Bachelor of Arts degree from State University of New York.

Mr. Pius Muchiri Managing Director Nabo Capital Limited Age: 39 years • Mr. Muchiri is the Managing Director of Nabo Capital Limited, a wholly owned fund management subsidiary of Centum. Prior to this appointment, he served as the Investment Manager in charge of the quoted investment portfolio. • He has over twelve (12) years investment management experience gained in various roles within Centum, Toyota East Africa and AAR Healthcare. • He is a member of East African Investment Professionals and holds a Bcom from the University of Nairobi. He is CPA(K) finalist and CFA. • He is a Fellow of the Archbishop Desmond Tutu African Leadership Institute

Mr. Chris Ochieng Managing Director Athena Properties Limited Age: 34 years • Mr. Ochieng is the Managing Director of Athena Properties Limited, the subsidiary that provides real estate development and project management services to Centum and third parties. • He is a certified Project Management Professional (PMP) and holds a Bachelor of Science in Civil Engineering from Egerton University. • Prior to this appointment in January 2015, he served as the Deputy Director for Athena Properties. Previously, he worked for Lordship Group, Dubai Sports City and Hedley Engineering. He has over eight years experience in real estate development. 120 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Management Operating Structure is highlighted below

Centum Investment Company Ltd. James Mworia; Group CEO

Centum Capital Athena Properties Ltd. Nabo Capital Ltd. Centum Business Solutions Ltd. (A division of Centum) Chris Ochieng; Pius Muchiri; Risper Mukoto; James Kaguchia; Managing Director Managing Director Managing Director Director & Head FMCG

Energy Division; Project Delivery Director; Product Structuring; Corporate Affairs Director & Job Muriuki Tim Hitchen Teresia Muthoni Group Company Secretary; Fred Murimi

Financial Services Division; Architecture & Urban Marketing & Communications Francis Nasyomba Planning Director; Director; Arthur Adeya Nelly Kanja

Agribusiness Division; Project Finance; Legal Services; Steve Chege Karumba Kinyua Lois Gakumo

Finance Services; Gideon Maina

Risk Management Services; Charlene Kavulani

ICT Services; Steve Karechio

HR Services; Doris Ndanu Information Memorandum 121 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17. LEGAL AND CORPORATE INFORMATION

17.1 Name, Place and Date of Registration

The Issuer was incorporated in Kenya as ICDC Investment Company Limited, a public company limited by shares on 13 April 1967 under the Companies Act (Chapter 486) with registration number C 8/67. The initial name - ICDC Investment Company Limited - was changed to ‘Centum Investment Company Limited’ following the passing of a special resolution of the shareholders dated 21 February 2008. This was effected by a Certificate of Change of Name issued by the Registrar of Companies dated the 25 February 2008, in the name of Centum Investment Company Limited.

The Issuer is registered as a branch in Uganda under the Companies Act (Cap.110 Section 371(1) of the Laws of Uganda) (Registration No F 2158).

The Issuer’s registered office is at 5th Floor, International House, Mama Ngina Street, Nairobi, Kenya.

17.2 Capital Structure

The Issuer’s nominal share capital is Kes 400,000,000 divided into 800,000,000 ordinary shares of Kes 0.50 cents each. The Issuer has 665,441,714 issued ordinary shares.

17.3 Voting Rights and Control

All the issued shares in the company have equal voting rights. Article 66 of the Issuer’s Articles of Association provides: “Subject to any special terms as to voting upon which any shares may be issued or may for the time being be held, on a show of hands every Member who (being an individual) is present in person or (being a corporation) is present by a representative duly authorized pursuant to these Articles, shall have one vote and on a poll every Member shall have one vote for each share of which he is the holder.”

17.4 Listing

The Issuer’s shares are listed on the NSE and the USE.

17.5 Issues of shares in the three years immediately preceding the date of this Information Memorandum

The Issuer has not issued any new shares in the three years immediately preceding the date of this Information Memorandum:

17.6 Principal objects (as contained in the Memorandum of Association)

The Issuer’s principal objects are listed below. 1) To carry on the business of an investment company, unit trust, mutual fund and to raise and borrow money by the issue of shares, debentures, debenture stock, bonds, obligations, deposit notes and otherwise howsoever and to underwrite any such issue. 2) To invest the money so borrowed and raised and other moneys of the Issuer in the purchase or upon the security of shares, stocks, debentures, debenture stock, bonds, mortgages, obligations and securities of any kind issued or guaranteed by any company, corporation or undertaking existing, formed or to be formed or registered and carrying on business of whatever nature and howsoever constituted and in shares, stocks, debentures, debenture stocks, bonds, mortgages, obligations and other securities issued or guaranteed by any Government or by any municipal, local or other authority or body of whatever nature. 3) To acquire any such shares, stocks debentures, debenture stocks, bonds, mortgages, obligations and other securities by original subscription, syndicate participation, tender, purchase, exchange or otherwise and to subscribe for the same either conditionally or otherwise and to guarantee the subscription thereof. 122 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

4) To vary the investments of the Issuer from time to time. 5) To make advances upon, hold in trust, issue on commission, sell or dispose of any of the investments aforesaid and to act as agent for any of the above or the like purposes. 6) To purchase or otherwise acquire, develop, improve, manage, use, turn to account and dispose of immovable and moveable property of any description. 7) To carry on all kinds of promotion business and, in particular, to form, constitute, float, lend money to, assist, manage and control any companies, associations or undertakings of any kind, incorporated, established or constituted in Kenya or elsewhere. 8) To carry on and undertake any business transaction or operation commonly carried on or undertaken by promoters of companies, financiers, concessionaires and contractors for public and other works and to carry on any other business which may seem to the Company to be capable of being conveniently carried on in connection with the above objects or any of them or to be likely, directly or indirectly, to enhance the value of or render profitable or more profitable any of the Company’s assets, property or rights or to develop any branch of the Issuer’s business.

In addition, the Memorandum of Association also includes an all-encompassing object which permits the Issuer “To do all such other things as may be deemed incidental or conductive to the attainment of the above objects or any of them”.

17.7 Provisions of the Articles relating to borrowing

Under the provisions of Clauses 3(1) and (2) of the Memorandum of Association of the Issuer, the Issuer has the power to: 1) raise and borrow money by the issue of shares, debentures, debenture stock, bonds, obligations, deposit notes and otherwise howsoever and to underwrite any such issue; and 2) invest the money so borrowed and raised and other moneys of the Company in the purchase or upon the security of shares, stocks, debentures, debenture stock, bonds, mortgages, obligations and securities of any kind issued or guaranteed by any company, corporation or undertaking existing, formed or to be formed or registered and carrying on business of whatever nature and howsoever constituted and in shares, stocks, debentures, debenture stocks, bonds, mortgages, obligations and other securities issued or guaranteed by any Government or by any municipal, local or other authority or body of whatever nature.

Under the provisions of Article 112 of the Issuer’s Articles of Association: 112. The board of directors may exercise all powers of the Issuer to borrow or raise money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof and to issue income notes, bonds, debentures and other securities whether outright or as security for any debt, liability or obligation of the Issuer or of any third party.

17.8 The Issuer’s Subsidiaries and Associated Companies

The Issuer invests through its wholly owned subsidiaries and special purpose vehicles tailored to suit each investment.

The following is a list of the Issuer’s subsidiaries:

17.8.1 Direct Subsidiaries

17.8.1.1 Real estate, infrastructure and related business Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Athena Properties Limited 100% C.7147 Kenya Development and Project Company 1. Two Rivers Development Limited 58.33% CPR/2009/9831 Kenya Property Holding Company 3. Centum Development Limited 100% C.104002 Mauritius Property Holding Company 4. Amu Power Company Limited 51% CPR/2013/121381 Kenya Special purpose vehicle for investment in the Lamu coal project Information Memorandum 123 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.8.1.2 Investment holding, trading and management Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Rasimu Limited 100% C.157384 Kenya Investment Holding Company 2. Investpool Holdings Limited 100% C. 109667 Mauritius Investment Holding Company 3. Shefa Holdings 100% C114013355 Mauritius Investment Holding Company 4. Almasi Beverages Limited 50.95% CPR/2012/64390 Kenya Investment holding company for Centum interest in Kisii Bottlers, Mount Kenya Bottlers and Rift Valley Bottlers 5. Bakki Holdco Limited 100% CPR/2013/121272 Kenya Non-operating holding company for investment in K-Rep Bank. 6. Centum Exotics Limited 100% C.104001 Mauritius Investment Trading Company

17.8.1.3 Other services Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Nabo Capital Limited 100% CPR/2010/66999 Kenya Fund Management 2. King Beverage Limited 100% CPR/2014/144664 Kenya Calsberg beer distribution 3. Centum Business Solutions Limited 100% CPR/2013/92108 Kenya Service Company 4. Genesis Kenya 73.35% C.67440 Kenya Fund Management 5. Vipingo Development 100% CPR/2015/179224 Kenya Agribusiness

17.8.1.4 Dormant subsidiaries Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Centum Investment (BVI) Limited 100% 1552404 British Virgin Islands Dormant 2. Crested Heights Limited 100% 128409 Ugandan Dormant 3. Uhuru Heights Limited 100% CPR/2009/9851 Kenya Dormant

17.8.2 Issuer’s indirect subsidiaries Centum Investment Company Limited owns 58.33% of Two Rivers Development Limited (“TRDL”). Subsidiaries of TRDL include:

Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Two Rivers Lifestyle Centre Limited 100% 109668 Mauritius Property Holding (with registered Kenyan Branch) Company 2. Two Rivers Power Company 100% CPR/2015/173376 Kenya Power utility company Limited 3. Two Rivers Water & Sanitation 100% CPR/2015/173495 Kenya Water and sanitation Company Limited utility company 4. Two Rivers ICT Company Limited 100% CPR/2014/172514 Kenya ICT utility company 5. Two Rivers Luxury Apartments 100% CPR/2015/179483 Kenya Real estate development Limited 6. Two Rivers Property Owners 100% CPR/2014/130020 Kenya Management company Company Limited

Centum Investment Company Limited owns 100% of Investpool Holdings Limited (“Invetpool”)

Subsidiaries of Investpool: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Mvuke Power Limited 100% 109607 Mauritius Investment Holding Company 2. Kilele Holdings Limited 79% 109609 Mauritius Investment Holding Company 124 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Centum Investment Company Limited owns100% of Investpool Holdings Limited which in turns owns 100% of Mvuke power Limited (“Mvuke”)

Subsidiaries of Mvuke Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Akiira Geothermal Limited 37.5% 122565 Mauritius Project Company for exploration of geothermal energy.

Centum Investment Company Limited owns100% of Bakki Holdco Limited (“Bakki”)

Subsidiaries of Bakki: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity K-Rep Bank Limited14 65.87% C.77202 Kenya Financial services

Centum Investment Company Limited owns 100% of Investpool Limited which in turn owns 79% Kilele Holdings Limited (“Kilele”)

Subsidiaries of Kilele: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Platcorp Holdings Limited 45% Mauritius Investment Holding company and parent company of Platinum Credit Limited (Kenya, Uganda and Tanzania)

Centum Investment Company Limited owns 100% of Centum Development Limited (“CDL”)

Subsidiaries of CDL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Pearl Marina Estates Limited 51% 118623 Uganda Real Estate Development company. (The remainder 49% is held under Centum).

Centum Investment Company Limited owns100% Centum Exotics Limited (“CEL”)

Subsidiaries of CEL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Oleibon Investments 100% 86609 Tanzania Investment holding company for QPE Limited portfolio - Holds shares of Tanzania Breweries Limited.

17.8.3 Other companies that Issuer has shareholding in: Portfolio Companies % Holding 1. Nairobi Bottlers Limited 27.6% 2. KWA Holdings E.A. Limited 26.7% 3. Aon Minet Insurance Brokers Limited 21.5% 4. General Motors East Africa Limited 17.8% 5 . Longhorn Publishers Limited 31.4% 6. NAS Air Services and SIA Holdings 15% 7. Broll Kenya Limited 30%

17.9 Material Agreements (other than agreements made in the ordinary course of business)

The Issuer has not entered into any material agreements (being an agreement entered into outside the ordinary course of business) as at the date of this Information Memorandum.

14An additional 1.67% interest is held directly by the Issuer. Information Memorandum 125 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.10 Onerous Covenants and Default

The Issuer has not entered into any agreements with third parties that contain onerous covenants as at the date of this Information Memorandum.

The Issuer has issued several debentures in favour of Cooperative Bank as detailed in 18.12.2 below. The Issuer is not in default of any terms of the debentures.

17.11 Related Party Agreements (loan agreements with subsidiaries, etc with details on amounts, purpose, interest rates, etc)

The Issuer has in place a transfer pricing policy created under the requirements of the Income Tax (Transfer Pricing) Rules 2006. The schedule below shows the amounts owed to and owing from the Issuer’s subsidiaries and associate Companies.

Table 14: Related Party Agreements March 15 March 14 Kes’000 Kes’000 DUE FROM Centum Investment (BVI) Limited NIL 97 Pearl Marina Properties Limited NIL NIL Two Rivers Development Limited 1,717,806 2,509,749 e-Tranzact Limited NIL 7,025 Centum Exotics Limited 1,231,375 2,009,557 Centum Development Limited 2,279,153 1,881,838 Nabo Capital Limited 355,797 363,504 Centum Business Solutions Limited NIL 29,278 Mvuke Limited 248,261 51,944 Genesis Kenya Investment Management Limited NIL 47,000 Two Rivers Lifestyle centre NIL 43 King Beverage Limited 33,909 136 Uhuru Heights Limited 5 NIL Kilele Holdings Limited 829,310 768,402 Investpool Limited 139 NIL Total

DUE TO NIL NIL Athena Properties Limited NIL 117,538 Centum Development Limited NIL NIL Rasimu Limited 6,473 1,764 Uhuru Heights Limited NIL 2,544

17.12 Loan/Finance Agreements

17.12.1 Senior Unsecured Fixed Rate Notes and Senior Equity Linked Notes Centum issued notes on the basis of an information memorandum dated 23rd August 2012 and a subsequent information memorandum dated 7 December 2012 raising an aggregate amount of Kenya Shillings four billion, one hundred and sixty seven million, nine hundred thousand (Kes.4,167,900,000) by way of a placement and listing of unsecured fixed rate notes and unsecured equity linked notes. The notes are currently in issue and listed on the NSE.

The Issuer has sought and obtained approval of the holders of the existing notes and the Authority for this Note Issue. 126 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.12.2 Facilities from Co-operative Bank of Kenya Limited (a) Centum has an overdraft and guarantee facility with Co-operative of Kenya Bank Limited. The details of these credit facilities are detailed below: Facility Amount Security Overdraft/ KES 2,700,000,000 All the securities provided have the benefit of several security instruments issued by Guarantee facility Centum some of which overlap and act as security for other facilities.

These securities are inter alia: • Debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES 1.2 billion dated 26 January 2010; • Further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES500 million dated 12 October 2010; • 2nd further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES 500 million dated 16 December 2011; and • 3rd further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES 500 million dated 14October 2014.

17.12.3 Facility from FirstRand Bank Limited The Issuer has a facility with FirstRand Bank Limited (the “Facility”) (acting through its Rand Merchant Bank Division acting as Agent) (the “Bank”) for the sum USD 35,000,000. Facility Key Terms Parties (a) The Issuer (“Borrower”) (b) Centum Exotics Limited; Rasimu Limited; Oleibon Investments Limited; Investpool Holdings Limited (“Original Guarantors”) (c) Rand Merchant Bank (“Arranger”) (d) Rand Merchant Bank (“Original Lender”) (e) Rand Merchant Bank (“Agent”) (f) Rand Merchant Bank (“Security Agent”) Principal amount US$ 35,000,000 Purpose Making investments and general corporate purposes Interest Rate Margin at 5.75% plus US LIBOR (as defined) per annum. Default interest rate 2% per annum above the applicable rate. Security Security include: a) Charge over shares held by the Obligors in the Charged Portfolio Companies (details of the Charge are set out below); b) Charge over the Custodial Accounts and Proceeds Accounts maintained by Centum Exotics Limited and Oleibon Investment Limited with the Custodian (CfC Stanbic Bank Limited); c) Assignment of any loans made to the Charged Portfolio Companies or other non-Obligor; d) Custodian Agreement and Acknowledgement between the Custodian, Centum Exotics Limited and Oleibon Investment Limited in respect of the holding of Listed Investments by the Custodian for Centum Exotics Limited and Oleibon Investment Limited and the acknowledgement by the Custodian in favour of the Agent. “Charged Portfolio Companies” means the Portfolio Company whose shares are subject to security provided (and as at the date of the Agreement include Almasi Beverages Limited and Nairobi Bottlers Limited). Guarantees and Centum Exotics Limited; Rasimu Limited; Oleibon Investments Limited; Investpool Holdings Limited have indemnity guaranteed the obligations of the Borrower’s obligations in relation to the facility. Repayment or The Facility is to be repaid in full on the earlier of (a) the Maturity Date (12 months after the first utilization duration date, subject to an extension of six months at the discretion of the Lenders), or (b) the date on which an Event of Default is triggered. Information Memorandum 127 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Facility Key Terms Charge over Shares Charge over shares in favour of the Security Agent as trustee for the Secured Parties. Parties a) Centum Investment Company Limited (“Chargor”); and b) FirstRand Bank Limited acting through its Rand Merchant Bank Division (“Security Agent”) Principal amount US$ 35,000,000 Purpose Security for the facility from FirstRand Bank Limited Charged Shares Shares registered in the name of the Chargor from time to time in the capital of the Almasi Beverages Limited and Nairobi Bottlers Limited and any entity in which any member of the Group acquires an investment after the date of the Charge. As at the date of the Charge, the Charged Shares were: a) 365,036,394 shares of Almasi Beverages Limited b) 981,971 shares in Nairobi Bottlers Limited. General Comment The proceeds of the Notes Issue will partly be utilised to refinance the above facility obtained from the Lenders and the Lenders have consented to issue of the Notes Issue.

17.13 Relevant subsidiary loan/Finance agreements

The Issuer has provided a guarantee dated 18 December 2014 for Kes. 45,992,700 in favour of K-Rep Bank Limited (the Issuer’s subsidiary) in connection with an asset financing facility availed by K-Rep Bank Limited to King Beverage Limited (another Subsidiary of the Issuer).

17.14 Loans to directors and senior management

As at 31 March 2015, there were no outstanding loans to Directors or Senior Management.

17.15 Licenses and Permits

17.15.1 The Issuer The Issuer is incorporated under the Companies Act (Chapter 486 of the Laws of Kenya). The Issuer is subject to the provisions of the Capital Markets Act (Chapter 485A of the Laws of Kenya) and the Capital Markets Authority Act, (Chapter 84 Laws of Uganda) because it is a listed company in both jurisdictions.

Due to the nature of the Issuer’s business, the Issuer does not require specific licensing by any regulatory authority in Kenya or Uganda. The Issuer has a current single business permit issued by the City Council of Nairobi under activity code 630 – Financial Services.

17.15.2 Subsidiaries The following subsidiaries of Centum require specific licenses under the following regulatory regimes: No. Subsidiary and activity Licence Licence No. Regulator 1. Nabo Capital Limited Fund Manager 029 CMA 2. Nabo Capital Limited REIT Manager 076 CMA 3. Nabo Capital Limited Fund manager for retirement benefit schemes RBA/SUP/213/031 RBA 4. Genesis Kenya Investment Fund Manager 25/13 CMA Management Limited 5. Genesis Kenya Investment Fund manager for retirement benefit schemes RBA/SUP/213/002 RBA Management Limited 6. K-Rep Bank Limited Bank CBK/BSD/01/78/2015 CBK

17.16 Property and information on Vendors on materials assets acquired in the last three years

Other than disclosed in this information memorandum, the Issuer has not directly acquired the any material assets over the last three years. 128 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.17 Provisions of the Articles with respect to directors

Number (Article 78) Not less than 2 and not more than 9 Quorum (Article 96) The quorum necessary for the transaction of business of the Board may be fixed by the Board and, unless so fixed at any other number, shall be two directors present either personally or by alternate provided that one person, whether a Director or not, although duly appointed alternate for another Director or for any number of Directors shall not constitute a Quorum. Voting on interested matters A Director who is in any way, whether directly or indirectly, interested in a contract or (Article 84 (b) and (c) arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the meeting if the Board at which the question of entering into the contract or arrangement is first taken into consideration, if his interest then exits, or in any other case at the first meeting of the Board after he becomes so interested, A general notice to the Board, given by a Director to the effect that he is a member of a specified company or firm and is to be regarded as interested in all transactions with such company or firm, shall be a sufficient declaration of interest under this Article and, after such general notice, it shall not be necessary to give any special notice relating to any subsequent transaction with such company or firm, provided that either the notice is given at a meeting of the Board or the Director giving the same takes reasonable steps to secure that it is brought up and read at the next board meeting after it is given.

A Director who shall have declared his interest as aforesaid may attend, be counted in the quorum of and vote at any meeting of the Board which may consider or pass any resolution in respect of any contract or arrangement in which he is interested. Remuneration (Article 81) Directors are entitled to such remuneration as shall form time to time be determined by the Company in a general meeting and such remuneration shall be divided among the Directors as the Board may by resolution determine or failing such determination, equally except in such event, any Director holding office for less than a year shall only rank in such division in proportion to the period during which he has held office during such year. The Directors (including alternate Directors) shall also be entitled to be paid their reasonable travelling, hotel and incidental expenses incurred while engaged on the business of the Company. Rotation/Retirement (Article 87) The Directors to retire in every year shall be those who have been longest in office since their last election but as between persons who became Directors on the same day, those to retire shall, unless otherwise agreed among themselves, be determined by lot.

17.18 Material Litigation

There are no legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have had or had in the past twelve (12) months preceding the date of this Information Memorandum a significant adverse effect on the financial position or the operations of the Group. Information Memorandum 129 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

17.19 Other Disclosures

1. The Board of Directors has passed all necessary resolutions and taken all necessary corporate actions to approve and authorise the Issuer to issue the Notes. 2. As at the date of this Information Memorandum and for a period of at least two (2) years prior to the date of this Information Memorandum, no director of the Issuer has- a. had any petition under bankruptcy or insolvency in any jurisdiction pending or threatened against the director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); b. had any criminal proceedings in which the director was convicted of fraud or any criminal offence, or be named subject of pending criminal proceeding, or any other offence or action either within or outside Kenya; or c. been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or temporarily prohibits such director from acting as an investment adviser or as a director or employee of a stockbroker, dealer or any financial institution or engaging in any type or business practice or activity. 3. At least one third of the Issuer’s board of directors are non-executive directors. 4. There was no change in Directors’ interests between the end of the Issuer’s financial year and the date of publication of this Information Memorandum. 5. As at the date of this Information Memorandum, there are no contractual arrangements with a controlling shareholder that would render the Issuer incapable at all times of carrying on its business independently of any controlling shareholder. 6. There has been no significant change in the Issuer’s major shareholders during the past three financial years. 7. As at the date of this Information Memorandum, none of the Issuer’s senior management employees have committed any serious offence that may be considered inappropriate for the management of a listed company. 8. A copy of this Information Memorandum has been delivered to the Registrar of Companies. 9. The Issuer is a publicly listed company and its shares are freely transferable. 10. As at the date of this Information Memorandum, there are no arrangements, known to the Issuer the operation of which may at a subsequent date result in a change in control of the Issuer. 130 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

18. GENERAL INFORMATION

18.1 Expenses of the Offer

The expenses of the Note Issue which will be borne by the Issuer. These are estimated at Kes. 79,266,000. Details of these expenses are as hereunder:

Table 15: Expenses of the offer Professional fees and other related costs Kes Joint Transaction Advisers fees 54,000,000 Reporting Accountants fees 5,500,000 Legal fees 5,000,000 Receiving Banks fees 2,320,000 Note Trustee fees 348,000 Registrar fees 348,000 CMA Approval fees 6,000,000 NSE listing fees 750,000 Miscellaneous expenses 5,000,000 Total 79,266,000 Total issue costs as a % of Total Issue 1.3%

18.2 Documents Available for Inspection

As long as any Note remains outstanding, copies of the following documents will, when published, be available for inspection at the Specified Offices of the Issuer in Nairobi, Kenya: 1. the certificate of incorporation of the Issuer; 2. the Memorandum and Articles of Association of Issuer; 3. the following financial accounts of the Issuer: 3.1. the limited review of the nine month accounts as at 31 December, 2014; and 3.2. the audited financial statements of Issuer in respect of the 3 years financial years ended 31 March 2012, 2013 and 2014; 4. the board resolution approving the Issue; 5. a copy of this Information Memorandum; 6. the following documents issued by the relevant experts which are included or referred to in this Information Memorandum; 6.1. the Reporting Accountants’ report as reproduced in this Information Memorandum and their written consent to the issue of this Information Memorandum with their report included herein in the form and context in which it is so included; 6.2. the legal opinion of the Legal Adviser as reproduced in this Information Memorandum and their written consent to the issue of this Information Memorandum with their opinion included herein in the form and context in which it is so included; and 6.3. the credit rating report issued by Global Credit Rating; 7. a copy of the Agency Agreement; 8. a copy of the Trust Deed; 9. certified copies of the appraisals or valuations relative to the properties owned by the Issuer; 10. a copy of the approval of the Capital Markets Authority in respect of this issue; and 11. a copy of the approval of the Nairobi Securities Exchange for the listing of the Notes. Information Memorandum 131 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

18.3 Minimum Subscription Level

The directors of the Issuer have resolved that the minimum aggregate amount to be raised by the issue of the Notes is fifty per cent (50%) of the offer amount of the Notes.

18.4 Application Procedure

Application forms for issues of Notes may be obtained from the Placing Agents. Applications must be submitted directly to the Fiscal Agent. Successful applicants will be notified either by the Fiscal Agent on behalf of the Issuer, or by the Placing Agents on behalf of the Issuer, of the amount of Notes allotted to them immediately after the date of allotment.

18.5 Trading of the Notes

Fiscal Agents, acting as principal or agent of the Issuer, may facilitate market trading of the Notes through purchases and/or sales of such Notes on a best effort basis. The transfer of a Note from a seller to a purchaser will be carried out in accordance with the transfer regulations set out in the Agency Agreement and subject to the Conditions.

18.6 Changes in Senior Management

There are no planned or expected changes in the Issuer’s senior management during the twenty four months following this Issue.

18.7 Interruptions in Group’s Business

There have been no interruptions in the Issuer’s business, which may have or have had during the recent past (covering at least the previous four months prior to the issuance of this Information Memorandum) a significant effect on the Issuer’s financial position.

18.8 Material Changes

Save as disclosed in this Information Memorandum, there has been no material change in the business of the Issuer in the five years up to 31 March 2015.

18.9 Directors statement as to liquidity requirement

To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the working capital available to the Issuer is sufficient for the Issuer’s present requirements.

18.10 Directors’ declaration

The Directors of the Issuer whose names appear on page 17 of this Information Memorandum accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with facts and does not omit anything likely to affect the import of such information. 132 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

19. FREQUENTLY ASKED QUESTIONS ON EQUITY LINKED NOTES

Potential investors are advised to consult with their investment, legal and tax advisers to determine the suitability of an investment in the Senior Unsecured Equity Linked Note, and the appropriate amount, if any, of an investment of this nature.

Potential investors are advised to consult with their investment, legal and tax advisers to determine the suitability of an investment in the Senior Unsecured Equity Linked Note, and the appropriate amount, if any, of an investment of this nature.

(1) What is an “Equity Linked Note”? An An “Equity Linked Note” is an investment product that consists of three components: (1) an undertaking based on the credit of the Issuer, that the Noteholder will receive on maturity not less than 100% of the principal amount invested; (2) coupon payment; and (3) an investment opportunity that offers the Noteholder potential returns based on the performance of an underlying investment that is often linked to the performance of an equity, equity index, commodity index, currency, mutual fund or hedge fund or any other metric that can reflect the performance of the Issuer.

The Senior Unsecured Equity Linked Note is linked to the performance of the NAV of Centum on a fair value basis. Centum’s unconsolidated or company statement of financial position NAV is presented on a fair value basis.

(2) What are the investment objectives of the ELN? The primary objectives of the ELN are to provide the Noteholder with principal protection (based on the creditworthiness of Centum, as the ELN are unsecured) and coupon payment and, if held to maturity, provide a potential return that is linked to the volatility of Centum’s equity. The level of the equity is monitored from the Commencement Date up to and including the Final Net Asset Value Date.

(3) Who should invest in an ELN? You may be suited to become a Noteholder if, among other benefits, you: (1) are looking for safety of principal if held to maturity; (2) want the safety of a definite coupon payment while at the same time want the potential to earn a return that may be greater than what is available from a traditional fixed term deposit but with similar risks to your principal investment; and (3) want exposure to an investment that is linked to the performance of an equity.

(4) How is the return (if any) under the ELN linked to the performance of the Equity? The ELN has three repayment components: principal, coupon and a variable return. The variable return will be calculated and realized based on the performance on Centum’s NAV. The variable return will be detachable from the ELN and may be transferred in whole or in part and title to the variable return shall pass upon registration of book-entry transfers thereof in accordance with the CD Act.

Centum’s NAV change will be calculated as follows: (Final Net Asset Value – Initial Net Asset Value)/ Initial Net Asset Value. The Initial Net Asset Value as per the Centum’s reviewed financial statements as of 31st December 2014 is Kes 26,950,614,000 while the Final Net Asset Value will be from (i) the Issuer’s audited financial statements as at 31 March 2020 or, (ii) in case of early redemption of the ELN, the Issuer’s latest publicly issued financial statements, being either half year accounts or full year accounts as the case may be.

(5) How will Final Redemption of the Equity Linked Note be computed? Final Redemption will be computed as Par Value + [Par Value *(min [max [25%*Centum’s company Net Asset Value Change, 0], 10%].

In the event Centum’s NAV appreciates by more than 25.0%, this will imply [100 + 100 * 10%], giving a Redemption Price of Kes 110 (Redemption Price will be Kes 110). Information Memorandum 133 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

To note is that the Redemption Price will be capped at 110% such that even if Centum’s Net Asset Value appreciates by more than 25%, the investors will not receive a Redemption Price greater than 110% of Par Value. On the other hand, should Centum’s Net Asset Value slide to below its Initial Net Asset Value, the investors will get a Redemption Price equal to Par Value. In essence, despite its rather involving pricing mechanism, the ELN is a principal protected instrument, that is backed by the creditworthiness of Centum (although the Equity Linked Note is unsecured).

(6) How will the Variable Return be detachable from the ELN? The variable return will be issued and traded as units. It will be issued in the ratio of 1:1 with respect to the Equity Linked Notes. For example, if KSH 1 million of Equity Linked Notes are issued, there will be 1 million units of Variable Return issued.

These units can be detached and will be freely tradeable on the NSE.

(7) Will the variable return have its own register separate from the ELN register? Yes. The variable return will have its own register with a separate ISIN and Code

(8) Will the variable return holders have the same rights as the ELN noteholders? Yes, save for the right to attend and vote at Noteholder’s meetings.

(9) How has the Centum’s Net Asset Value performed over the past five years? The Centum’s Net Asset Value has increased from Kes 5.96Bn in 2009 to Kes 26.95Bn as at 31 December 2014.

Using Centum’s Net Asset Value change calculated as: (Final Net Asset Value – Initial Net Asset Value)/ Initial Net Asset Value, it translates to a return of 352% over the 6 year period.

Please refer to Section 0 (10.5.Track Record of Consistent Growth) Centum’s NAV performance highlights.

(10) What is the implied per annum pre-tax Yield for the ELN? The Implied per annum pre-tax yield gives an indication of the “annual return” that the investor will be enjoying based on the various points highlighted above. For the purposes of our running illustration, should Centum’s Net Asset Value appreciate by 25%, the implied pre-tax IRR would be 13.95%. It is worth noting that this return is above the 5-year Treasury yield of 11.76% (as at 13th March 2015) by 219BPS. On the other hand, if Centum’s company Net Asset Value either slips below Initial Net Asset Value or does not change from Net Asset Value, the implied p.a. pre-tax yield will be equal to 12.50%, the coupon payment.

The tables below shows by way of illustration the development in the percentage pay out in respect of the ELN dependent on the performance of Centum’s company NAV: Table 11: Development in Percentage Pay Out Centum NAV Change % Final Redemption Price (Cap 10%) Total Returns Yield p.a 0.00% 100 163 12.50% 2.50% 101 164 12.65% 5.00% 102 165 12.80% 7.50% 103 166 12.95% 10.00% 104 167 13.09% 12.50% 105 168 13.24% 15.00% 106 169 13.38% 17.50% 107 170 13.52% 20.00% 108 171 13.67% 22.50% 109 172 13.81% 25.00% 110 173 13.95% 27.50% 110 173 13.95% 30.00% 110 173 13.95% 32.50% 110 173 13.95% 35.00% 110 173 13.95% 37.50% 110 173 13.95% 40.00% 110 173 13.95% 134 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

(11) If I decide to sell my ELN, could I get less than Par Value per Note? Yes. Prior to maturity, the ELN could trade below or above Par Value per Note in the secondary market. The price of the ELN in any secondary market will be set by such market. See “General Information –Trading of Notes”.

(12) What factors may affect the trading value of my Senior Unsecured Notes in any secondary market? The value of the ELN in a secondary market, if any, will be affected by a number of complex and inter-related factors. The effect of any one factor may be offset or magnified by the effect of another factor. The following list, although not exhaustive, describes some of the factors that may impact the trading value of the ELN: • how much the level of the Net Asset Value has risen or fallen since the Commencement Date; • what the outlook on Centum and its sector is; • the volatility of the Net Asset Value; • prevailing market conditions; • lack of liquidity or lack of market demand for the ELN; and • time remaining to Maturity Date of the ELN. The relationship among these factors is complex and may also be influenced by various political, economic and other factors that can affect the trading price of the ELN in any secondary market. For a more detailed description of various risk factors affecting the ELN, see “Risk Factors”.

(13) Will I have any voting rights as a result of owning the ELN? No. The ELN will not entitle a Noteholder to any equity interest in Centum and a Noteholder will not be entitled to the rights and benefits of a shareholder, including the right to receive dividends and vote at or attend meetings of shareholders.

The Noteholder will have voting rights in a meeting convened for other Noteholders.

(14) What about tax? A Prospective Investor should consult with its, his or her own tax adviser with respect to his or her individual tax position. This Information Memorandum is not intended to provide, nor should it be relied upon as, tax advice to any particular Prospective Investor.

(15) How will I receive notice of significant events affecting the ELN? If notice is required to be given to Noteholders, Centum and the Note Trustee will take reasonable steps to effect such notice to the Noteholders in accordance with the Conditions. Information Memorandum 135 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

20. APPENDIX

20.1 Legal Opinion

Our Reference: KCM/di/6143240 Your Reference: Direct Line: +254 20 2899305 Date: 14 May 2015 E-mail Address: [email protected] [email protected]

The Directors Centum Investment Company Limited International House Mama Ngina Street P.O. Box 10518 – 00100 Nairobi

Dear Sirs Legal opinion issued pursuant to regulation 6(3) of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations 2002 in respect of the offer of unsecured medium term notes of up to Kenya Shillings six billion (KES6,000,000,000.00) by Centum Investment Company Limited

We have acted as the legal advisers to Centum Investment Company Limited (the “Issuer”) in connection with the offer to the public and subsequent listing of Kenya Shillings six billion (KES6,000,000,000) worth of Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes due on 8 June 2020 (the “Notes”).

The Issuer is a Kenyan incorporated holding company with a number of subsidiaries owned directly by the Issuer or through other subsidiaries (collectively the “Subsidiaries” and each a “Subsidiary”) listed in Part B of Appendix 1 hereto (where the context requires the Issuer and the Subsidiaries are referred to in this opinion as the “Group”). A corporate structure of the Group is set out in Part B of Appendix 1 hereto. The information on the Group is contained, inter alia, in the Information Memorandum dated 14 May 2015 (the “Information Memorandum”) that has been prepared for the purposes of the offer of the Notes to the public.

Terms defined in the Information Memorandum have the same meanings in this opinion.

This opinion is addressed to the Issuer, and may only be relied upon for the purposes of the issue of the Notes, by (i) the Issuer, (ii) Equity Investment Bank Limited, Dyer & Blair Investment Bank Limited and Esham Park Limited in their capacity as the Transaction Advisers; and (iii) the subscribers for the Notes. It may not be relied upon by any other person or used for any other purpose.

1. Documents 1.1. In arriving at the opinions expressed below, we have only examined and relied on the following documents: 1.1.1. the agency agreement (the “Agency Agreement”); and 1.1.2. the trust deed (the “Trust Deed”), (collectively the “Issue Documents”).

1.2. We have also examined: 1.2.1. a final proof of the Information Memorandum; and 1.2.2. such other documents and made such investigation, as we have considered necessary for the purposes of giving this opinion. (all such documents examined by us hereinafter collectively referred to as the “Examined Documents”, which Examined Documents are listed in Part A of Appendix 2 hereto).

1.3. We have also undertaken only the searches and enquiries referred to in Part B of Appendix 2.

1.4. The opinions given in this letter are strictly limited to the matters stated in paragraph 3 (Opinions) and do not extend to any other matters. The statements in this letter do not purport to be an analysis of all the rights and obligations of the parties to the Notes and/or the Issue Documents under Kenyan law, but are merely opinions regarding the effectiveness of, and the limitations Kenyan law imposes on, the express terms of the Notes and the Issue Documents. 136 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2. Assumptions 2.1. We have assumed: 2.1.1. that all the information supplied to us by the Issuer, the Transaction Advisers and by their respective officers and advisers is true, accurate and up to date; 2.1.2. the authenticity of documents submitted as originals, the conformity with the original documents of all documents submitted as copies and the authenticity of the originals of such latter documents; 2.1.3. that all signatures, stamps and seals on all documents and instruments submitted to us for the purpose of this opinion are genuine and authentic; 2.1.4. that the certified resolution of the board of directors of the Issuer as examined by us was duly passed at a properly convened meeting of duly appointed directors of the Issuer; 2.1.5. the capacity, power and authority of the parties to the Issue Documents (other than the Issuer) to enter into those documents and the due execution and delivery of the Issue Documents by such parties; 2.1.6. that the Issue Documents have been duly authorised, executed and delivered by the parties to those documents (other than the Issuer); 2.1.7. that there is no other fact, matter or document which would, or might, affect this opinion and which was not revealed by the Examined Documents, searches and enquiries made; 2.1.8. that all information contained in the Information Memorandum and all information in respect of the Issuer and the Subsidiaries supplied to us by the Issuer, its officers and advisers is true, accurate and is up to date as of the date hereof; and 2.1.9. that the Information Memorandum examined is in the final form and will be registered in that form.

2.2. With respect to matters of fact, we have relied on the representations contained in the Issue Documents and the representations of the Issuer and its officers and advisers.

2.3. This opinion is given on the basis of all documents provided to us by the Issuer in respect of the Group.

3. Opinions Based upon and subject to the foregoing and to the qualifications set out below, we are of the following opinion. 3.1. The Issuer is a public (non-private) limited liability company duly incorporated in Kenya under the Companies Act (Chapter 486 Laws of Kenya) under company number C.8/67. The Issuer’s registered office is at International House, Mama Ngina Street, P. O. Box 10518-00100, Nairobi.

3.2. The Issuer is registered as a branch in Uganda under the Companies Act (Cap.110 Section 371(1) of the Laws of Uganda) (Registration No F 2158).

3.3. The Issuer is listed on the Nairobi Securities Exchange and cross-listed on the Ugandan Securities Exchange.

3.4. The existing authorized nominal share capital of the Issuer is KES 400,000,000.00 divided into 800,000,000 ordinary shares of KES 0.50 each, of which 665,441,714 ordinary shares of KES 0.50 each are in issue. The existing capital of the Issuer is in conformity with Kenyan law and has received all necessary authorizations.

3.5. All the licenses and consents required to perform the business or proposed business of the Issuer have been obtained.

3.6. The Issuer (through its subsidiaries) owns or leases all of the material assets, land and the property listed in Appendix 3 hereto, required for the purposes of the Issuer’s business and we are satisfied, after such enquiry as we deemed necessary for the purposes of this opinion, that the Issuer has good and valid title or rights to or in such property for the purposes of the business of the Issuer as carried on at the date hereof.

3.7. As at the date of this opinion and for a period of at least two (2) years prior to the date of this opinion no director of the Issuer has: 3.7.1. had any petition under bankruptcy or insolvency in any jurisdiction pending or threatened against the director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); 3.7.2. had any criminal proceedings in which the director was convicted of fraud or any criminal offence, or be named subject of pending criminal proceeding, or any other offence or action either within or outside Kenya; or 3.7.3. been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or temporarily prohibits such director from acting as an investment adviser or as a director or employee of a stockbroker, dealer or any financial institution or engaging in any type or business practice or activity.

3.8. To the best of our knowledge, information and belief after due enquiry, there are no legal or arbitration proceedings (including any proceedings which are pending or threatened of which the Issuer is aware) which may have had or had in the past twelve (12) months preceding the date of this legal opinion a significant adverse effect on the financial position or the operations of the Group.

3.9. To the best of our knowledge, information and belief, and after due enquiry, there has been no material prosecution or other civil or criminal legal action in which the Issuer or any of its directors is involved;

3.10. The Issuer has the corporate capacity, power and authority to: 3.10.1. issue the Notes and enter into and deliver the Issue Documents; and 3.10.2. exercise its rights and perform its obligations under the Notes and the Issue Documents.

3.11. The public offer and listing of the Notes has been duly authorised by the Board of Directors of the Issuer.

3.12. The Information Memorandum and the public offer and listing of the Notes has been approved by the Capital Markets Authority (the “CMA”) through the issue of a letter of approval dated 14 May 2015.

3.13. The listing of the Notes has been approved by the Nairobi Securities Exchange (the “NSE”) through the letter of approval dated 15 May 2015. Information Memorandum 137 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

3.14. The Notes have been prescribed as a dematerialized security under the Central Depositories Act, 2000.

3.15. The Issue Documents have been duly authorised, executed and delivered by the Issuer and are valid and legally binding upon the Issuer in accordance with their terms except as the same may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and by general principles of equity.

3.16. The Notes and the Issue Documents are in proper legal form for enforcement against the Issuer and contain no provision which is contrary to law or public policy in Kenya or, which would not for any reason be upheld by the Kenyan courts.

3.17. The issue of the Notes has been duly authorised and when issued, the Notes will constitute valid, legally binding, direct and unconditional obligations of the Issuer in accordance with their terms except as the same may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and by general principles of equity.

3.18. Neither the execution and delivery of the Issue Documents or issuance of the Notes nor the consummation of the transactions therein contemplated nor compliance with their terms and conditions will contravene: 3.18.1. any existing law, governmental rule, regulation or order of Kenya; or 3.18.2. any provision of the constitutional documents of the Issuer; or 3.18.3. the terms of the Examined Documents to which the Issuer is a party; or 3.18.4. the terms of any loan or other credit facility granted to the Issuer.

3.19. Upon the assumption that permission is granted to list the Notes on the NSE before they are issued, no stamp duty will be payable in Kenya in respect of the issue, or on transfers, of the Notes.

3.20. Save for (i) stamping of the Issue Documents with stamp duty (ii) registration of the Information Memorandum at the Companies Registry under section 43(1) of the Companies Act (Chapter 486 of the Laws of Kenya) and (iii) the approvals of the CMA and NSE referred to in paragraphs 3.12 and 3.13 above, there are no governmental or regulatory consents, approvals, authorisations or orders registration, filing or similar formalities required to be carried out in Kenya by the Issuer in connection with the issuance of the Notes and the performance by the Issuer of its obligations under the Issue Documents.

3.21. The Notes constitute direct, general, unconditional, unsubordinated and unsecured obligations of the Issuer and will at all times rank pari passu in all respects (including in priority of payment) among themselves and with all other present and future direct, general, unconditional, unsubordinated and unsecured obligations of the Issuer, except for any obligations that may be preferred by provisions of law that are both mandatory and of general application.

3.22. Interest (including any commission or discount) payable in respect of the Notes is subject to income tax in Kenya. Unless the payee enjoys specific exemption, payments of interest are subject to withholding tax at the rates from time to time in force. At present, the applicable rate is 15%. The rate of withholding tax may be limited by applicable double taxation treaties, which may also permit the payee to obtain relief outside Kenya. The Notes do not provide for interest to be grossed up where withholding tax applies.

3.23. With effect from 1 January 2015 any capital gain which accrues on a disposal of the Notes will constitute a chargeable gain in accordance with the applicable requirements of the Eighth Schedule of the Income Tax Act (Chapter 470 of the Laws of Kenya) and may be taxable accordingly.

3.24. Except as noted below it is not necessary under Kenyan law (a) in order to enable any person to exercise or enforce its rights under any of the Issue Documents or the Notes or (b) by reason of any such person being or becoming the holder of any of the Notes or a party to the Issue Documents, or the performance by any such person of its obligations there under, that any such person should be licensed, qualified or otherwise entitled to carry on business in Kenya, nor will any such performance violate any law applicable in Kenya. Brokers, dealers and investment advisers carrying on business as such in Kenya require a license from the CMA.

3.25. No holder of the Notes and none of the parties to the Issue Documents is or will be deemed to be resident, domiciled or carrying on business in Kenya by reason only of its execution, performance or enforcement of the Notes or the Issue Documents.

3.26. The company searches carried out in relation to the Issuer and the Subsidiaries revealed that no resolution, orders or applications has been made for the winding-up of the Issuer or any Subsidiary.

3.27. Each Subsidiary is a limited liability company, duly incorporated and validly existing under the laws of the country where it was incorporated and has the power to own its assets.

3.28. The material loans and credit facilities taken by the Issuer are listed in Appendix 4 hereto respectively (the “Facilities”).

3.29. All authorisations, approvals or consents required to be obtained in connection with the Notes from any lender of the Issuer in relation to the Facilities have been obtained and no other authorisation, approval or consent is required from any lender of the Issuer in relation to the Facilities to enable the Issuer to enter into, exercise its rights or perform its obligations under Notes and the Issue Documents.

3.30. The Issuer is not entitled to claim any immunity from legal action or proceedings, execution, attachment or other legal process in Kenya.

3.31. The choice of Kenyan law to govern the Issue Documents would be recognised and upheld as a valid choice of law in any proceedings on the courts of Kenya and applied by such courts in proceedings in relation to the Issue Documents as the governing law thereof. 3.32. The submission to the jurisdiction of the Kenyan courts by the Issuer in relation to the Issue Documents is valid, legally binding and enforceable on the Issuer and would be recognised and upheld by the Kenyan courts. 138 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

4. Qualifications 4.1. The Issue Documents must be stamped in accordance with the Stamp Duty Act (Chapter 480 of the Laws of Kenya) within thirty (30) days of their execution in order to be admissible in evidence in a Kenyan court. We will attend to stamping within the prescribed period.

4.2. Any provision requiring any party to pay default interest may be unenforceable in the Kenyan courts on the grounds (i) that such default interest would constitute a penalty and (ii) that penalties are not generally enforceable under common law. We consider it likely that the Kenyan courts would now follow the decision by the High Court in England in Lordsvale Finance plc v. Issuer of Zambia [1996] Q.B. 752, permitting recovery by a creditor of default interest, such decision being of persuasive value in Kenya.

4.3. If any provision of any Issue Documents is held to be illegal, invalid or unenforceable by the Kenyan courts, severance of such provision from the remaining provisions of the Issue Documents would be subject to the exercise of the discretion of the Kenyan courts.

4.4. Any provision to the effect that certain calculations or certificates will be conclusive and binding will not be effective if such calculations or certificates are fraudulent or erroneous on their face and will not prevent judicial enquiry by the Kenyan courts into the merits of any claim by an aggrieved party.

4.5. If any party is vested with any discretion or may determine a matter in its opinion, the Kenyan courts may require that such discretion be exercised reasonably or that such opinion be based on reasonable grounds.

4.6. A Kenyan court may refuse to give effect to a provision to pay the costs of another party in respect of any successful action brought against that party before a Kenyan court and the Kenyan court may not award by way of costs all of the expenditure incurred by a successful litigant in proceedings brought before that court.

4.7. Service of legal process on the Issuer by post in connection with any proceedings in the Kenyan courts would be effective only if made in accordance with the applicable court rules or with the leave of the court.

4.8. Payments between residents and non-residents of Kenya must be made through authorised banks in Kenya in accordance with the provisions of the Central Bank of Kenya Act (Chapter 491 of the Laws of Kenya).

4.9. Nothing in this opinion is to be taken as indicating that the remedy of an order for specific performance or the issue of an injunction would be available in a Kenyan court in respect of the obligations arising under any agreement since such remedies are available only at the discretion of the court. Specific performance is not usually granted and an injunction is not usually issued where damages would be an adequate alternative.

5. Effective Date 5.1. This letter and the opinions given in it are governed by Kenyan law and relate only to Kenyan law as applied by the Kenyan courts as at today’s date. We express no opinion in this letter on the laws of any other jurisdiction.

5.2. To the extent any opinion expressed in this letter and the opinions given in it relates to a future event, it is expressed on the assumption that Kenyan law will remain the same on any relevant future date as that in existence as at the date of this letter and, accordingly, no opinion is given that the future or continued performance of the obligations of any of the parties to the Notes and/ or the Issue Documents or the consummation of the transactions contemplated in any of the Notes and/or the Issue Documents will not contravene Kenyan law if such law is altered.

6. Miscellaneous As legal advisers to the Issuer, we have issued and have not withdrawn our consent to the inclusion in the Information Memorandum of this legal opinion in the form and context in which it appears.

Coulson Harney 14 May 2015 Information Memorandum 139 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes 140 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Part B

Subsidiaries of the Issuer

1. Direct Subsidiaries

1.1 Real estate, infrastructure and related business Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Athena Properties 100% C.7147 Kenya Development and Project Company Limited 2. Two Rivers 58.33% CPR/2009/9831 Kenya Property Holding Company Development Limited 3. Centum 100% C.104002 Mauritius Property Holding Company Development Limited 4. Amu Power 51% CPR/2013/121381 Kenya Special purpose vehicle for Company Limited investment in the Lamu coal project

1.2 Investment holding, trading and management Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Rasimu Limited 100% C.157384 Kenya Investment Holding Company 2. Investpool Holdings 100% C. 109667 Mauritius Investment Holding Company Limited 3. Shefa Holdings 100% C114013355 Mauritius Investment Holding Company 4. Almasi Beverages 50.95% CPR/2012/64390 Kenya Investment holding company for Limited Centum interest in Kisii Bottlers, Mount Kenya Bottlers and Rift Valley Bottlers 5. Bakki Holdco 100% CPR/2013/121272 Kenya Non-operating holding company for Limited investment in K-Rep Bank. 6. Centum Exotics 100% C.104001 Mauritius Investment Trading Company Limited

1.3 Other services Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Nabo Capital 100% CPR/2010/66999 Kenya Fund Management Limited 2. King Beverage 100% CPR/2014/144664 Kenya Calsberg beer distribution Limited 3. Centum Business 100% CPR/2013/92108 Kenya Service Company Solutions Limited 4. Genesis Kenya 73.35% C.67440 Kenya Fund Management Investment Managent Limited 5. Vipingo 100% CPR/2015/179224 Kenya Agribusiness Development Limited

1.4 Dormant subsidiaries Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Centum Investment 100% 1552404 British Virgin Dormant (BVI) Limited Islands 2. Crested Heights 100% 128409 Ugandan Dormant Limited 3. Uhuru Heights 100% CPR/2009/9851 Kenya Dormant Limited Information Memorandum 141 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2. Issuer’s indirect subsidiaries

2.1 Centum Investment Company Limited owns 58.33% of Two Rivers Development Limited (“TRDL”) Subsidiaries of TRDL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Two Rivers Lifestyle 100% 109668 Mauritius Property Holding Company Centre Limited (with registered kenyan Branch) 2. Two Rivers Office 100% CPR/2015/179563 Kenya Real estate development related Suites Limited 3. Two Rivers Power 100% CPR/2015/173376 Kenya Power utility company Company Limited 4. Two Rivers Water & 100% CPR/2015/173495 Kenya Water and sanitation utility company Sanitation Company Limited 5. Two Rivers ICT 100% CPR/2014/172514 Kenya ICT utility company Company Limited 6. Two Rivers Luxury 100% CPR/2015/179483 Kenya Real estate development Apartments Limited 7. Two Rivers Property 100% CPR/2014/130020 Kenya Management company Owners Company Limited

2.2 Centum Investment Company Limited owns 100% of Investpool Holdings Limited (“Invetpool”) Subsidiaries of Investpool: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity 1. Mvuke Power 100% 109607 Mauritius Investment Holding Company Limited 2. Kilele 79% 109609 Mauritius Investment Holding Company Holdings Limited

2.3 Centum Investment Company Limited owns100% of Investpool Holdings Limited which in turns owns 100% of Mvuke power Limited (“Mvuke”) Subsidiaries of Mvuke: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Akiira Geothermal 37.5% 122565 Mauritius Project Company for exploration of Limited geothermal energy.

2.4 Centum Investment Company Limited owns100% of Bakki Holdco Limited (“Bakki”) Subsidiaries of Bakki: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity K-Rep Bank Limited 65.87% C.77202 British Virgin Dormant Islands

2.5 Centum Investment Company Limited owns 100% of Investpool Limited which in turn owns 79% Kilele Holdings Limited (“Kilele”) Subsidiaries of Kilele: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Platcorp Holdings 45% Mauritius Investment Holding company Limited and parent company of Platinum Credit Limited (Kenya, Uganda and Tanzania) 142 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2.6 Centum Investment Company Limited owns 100% of Centum Development Limited (“CDL”) Subsidiaries of CDL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Pearl Marina Estates 51% 118623 Uganda Real Estate Development company. Limited (The remainder 49% is held under Centum).

2.7 Centum Investment Company Limited owns100% Centum Exotics Limited (“CEL”) Subsidiaries of CEL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Oleibon Investments 100% 86609 Tanzania Investment holding company for Limited QPE portfolio - Holds shares of Tanzania Breweries Limited.

Appendix 2

Part A

Index of Examined Documents

PROPERTY

Centum property i. Lease of Premises on 5th Floor in International House, L.R. No. 209/6871 dated 30th November 2007

Subsidiaries’ property ii. Title Number Dagoretti/Riruta/3907 registered in the name of K-Rep Bank iii. Lease of Premises to Centum Business Solutions Limited on 5th Floor in International House iv. Lease of Premises to Nabo Capital Limited on 7th Floor in International House v. Grant Number I.R. 144326/1 (L.R. No. 22/365 [Original Number 22/360]) registered in the name of Two Rivers Development Limited vi. Lease in respect of a portion of property L.R. No. 22/365 (Original Number 22/360) between Two Rivers Development Limited (as Lessor) and Two Rivers Lifestyle Limited (as Lessee) dated 7th October 2014 vii. Lease in respect of Site Number 10 on a portion of Land Reference Number 22/365 (Fairview Hotel Lease) viii. Deed of Easement in respect of a portion of property L.R. No. 22/365 (Original Number 22/360) from Two Rivers Lifestyle Centre Limited (as Grantor) to Two Rivers Development Limited (as Grantee) dated 7th October 2014 ix. Lease in respect of Site Number 14 on a portion of Land Reference Number 22/365(Original Number 22/360) between Two Rivers Development Limited (as Lessor) and Victoria at Two Rivers Limited (as Lessee)

ASSETS OTHER THAN LAND AND BUILDINGS i. Asset Register for Nabo Capital Limited ii. Asset Register for Genesis Investment Management Limited – Kenya Office iii. Asset Register for K-Rep Bank Limited

MATERIAL CONTRACTS Centum related material contracts i. Settlement Agreement between Centum Investment Company Limited and Rea Vipingo Plantations Limited and R.E.A. Trading Limited ii. Share Purchase Agreement in respect of 100% of the share capital of Vipingo Estate Limited

FINANCE AND BORROWINGS Centum related Finance and borrowings documents i. Audited financial statements of 2012, 2013 and 2014 ii. Letter of commitment in respect of Centum’s investment in Two Rivers Development REIT iii. Letter of confirmation from Centum’s finance director dated 4 May 2015 iv. Facility letter between Rand Merchant Bank and Centum including: a. a charge over shares issued by Centum in favour of Rand Merchant Bank v. Facility letters of 24 October 2011, 29 May 2013, 8 October 2013 and 5 August 2014 between Co-operative Bank of Kenya Limited (the “Co-op”) and Centum including, relating to these facilities: a. Various debentures as follows: i. a debenture issued by Centum in favour of Co-op ii. a further debenture issued by Centum in favour of Co-op iii. a second further debenture issued by Centum in favour of Co-op iv. a third further debenture issued by Centum in favour of Co-op b. Various guarantees as follows: v. Two (2) Guarantees from Centum Exotics Limited in favour of Co-op vi. Two (2) Guarantees from Rasimu Limited in favour of Co-op Information Memorandum 143 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Subsidiary related Finance and borrowings documents vi. Letter of offer between K-Rep and King Beverage Limited (related parties) including the following other documents in relation to this facility: a. Specific Debenture by King Beverage Limited in favour of K-Rep Bank b. Deed of Guarantee and Indemnity between Centum and K-Rep Bank vii. Guarantee issued by Co-op to Vivo Energy Kenya Limited to make payments on behalf of King Beverage Limited viii. Financing agreement between K-Rep Bank Limited and the European Investment Bank ix. Loan agreement between K-Rep Bank Limited and Oikocredit, Ecumenical Development Co-operative Society x. Loan/credit agreement between K-Rep Bank Limited and the Government of Kenya (through the Ministry of Finance) xi. Loan agreement between Centum Asset Managers Limited (now Nabo Capital Limited) and Platcorp Holdings Limited xii. Term sheet for financing between Two Rivers Lifestyle Centre Limited and Co-operative Bank of Kenya Limited and the following other documents in relation to this facility: a. Corporate Guarantee issued by Two Rivers Dvelopment Limited on behalf of Two Rivers Lifestyle Limited in favour of Co-op Bank b. Escrow agreement between Co-operative Bank of Kenya Limited, Two Rivers Lifestyle Centre Limited and Co-operative Bank c. Deed of assignment of receivables from Two Rivers Lifestyle Centre Limited to Co-operative Bank of Kenya Limited xiii. Charge over a portion of Land Reference Number 22/365 (Original Number 22/360).

CORPORATE Centum related corporate documents i. Confirmation letter from company secretary dated 23 April 2015 ii. Certificate of Change of Name from ICDC Investment Company Limited to Centum Investment Company Limited iii. Certificate of Incorporation of ICDC Investment Company Limited iv. Resolutions amending Memorandum and Articles of Association of Centum Investment Company Limited v. Resolution for change of name from ICDC Investment Company Limited to Centum Investment Company Limited vi. Memorandum and Articles of Association of Centum Investment Company Limited vii. Form CR12 in respect of Centum as at 18th March 2015 viii. Information on Centum subsidiaries ix. Centum Investee Companies x. 2012 Annual Returns in respect of Centum and filing receipt xi. 2013 Annual Returns in respect of Centum and filing receipt xii. 2014 Annual Returns in respect of Centum and filing receipt xiii. Information on Directors provided by Centum xiv. Share Register Analysis Periodic Report for January 2015 (Centum) xv. Senior Management Profiles xvi. Form 203A in respect of appointment of Dr. Laila Macharia as Director and resignation of Maina Mwangi as Director; and filing receipt xvii. Form 203A in respect of appointment of Fredrick Murimi Ngari as Company Secretary and resignation of Naomi Nyamongo as Company Secretary xviii. Form 203A in respect of the resignation of Robert Bunyi and the appointment of Dr. James Mcfie; and filing receipt xix. AGM minutes effecting appointment of Dr. Laila Macharia as Director xx. AGM poll results effecting appointment of Dr. James McFie as Director xxi. Minutes of the Board of the Directors reviewed ON SITE and held on the following dates: a) Minutes of the Board of Directors’ Meeting held on 12th February 2013; b) Minutes of the Board of Directors’ Special Meeting held on 4th June 2013; c) Minutes of the Board of Directors’ Special Meeting held on 25th August 2013; d) Minutes of the Board of Directors’ Special Meeting held on 12th November 2013; e) Minutes of the Board of Directors’ Special Meeting held on 25th November 2013; f) Minutes of the Board of Directors’ Meeting held on 30th January 2014; g) Minutes of the Board of Directors’ Meeting held on 26th March 2014; h) Minutes of the Board of Directors’ Meeting held from 14th – 16th April 2014; and i) Minutes of the Board of Directors’ Special Meeting held on 19th November 2014.

Subsidiary related corporate documents i. Memorandum and Articles of Association of Rasimu Limited ii. Resolutions amending Memorandum and Articles of Association of Rasimu Limited and filing receipt iii. Memorandum and Articles of Association of Bakki Holdco Limited iv. Memorandum and Articles of Association of Genesis Kenya Investment Management Limited v. Memorandum and Articles of Association of Nabo Capital Limited vi. Memorandum and Articles of Association of Two Rivers Development Limited vii. Memorandum and Articles of Association of Athena Properties Limited viii. Memorandum and Articles of Association of King Beverage Limited ix. 2015 Annual returns in respect of Almasi Beverages Limited x. 2014 Annual Returns in respect of Rasimu Limited and filing receipt xi. 2014 Annual Returns in respect of Athena Properties Limited and filing receipt xii. 2014 Annual Returns in respect of Bakki Holdco Limited and filing receipt xiii. 2015 and 2014 Annual Returns in respect of Genesis Kenya Investment Management Limited and filing receipt xiv. 2014 Annual Returns in respect of King Beverage Limited and filing receipt xv. 2014 Annual Returns in respect of Nabo Capital Limited and filing receipt xvi. 2014 Annual Returns in respect of Two Rivers Development Limited and filing receipt xvii. 2014 Annual Returns in respect of Uhuru Heights Limited and filing receipt xviii. 2014 Annual Returns in respect of K-Rep Bank Limited and Filing Receipt 144 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

CONSENTS AND LICENSES Centum related consents and licences i. Single Business Permit ID: 1192194. Centum Investments limited

Subsidiary consents and licences ii. Single Business Permit ID: 1000574 Genesis Kenya Investment management limited iii. Single Business Permit ID: 1333417 Nabo Capital Limited iv. Single Business permit ID:1333418. Athena Properties Limited v. Single Business permit ID:1344014. King Beverage Limited vi. Single Business permit ID: 44085. Rift Valley Bottlers vii. Licence to Conduct the Business of REIT Manager to Centum Asset Managers Limited viii. Licence to Conduct Business of Fund Manager Centum Asset Managers Limited ix. Licence to Conduct the Business of Collective Investment Scheme to Centum Unit Trust Umbrella Scheme

REGULATORY AND OPERATIONAL INFORMATION Centum related regulatory and operational information i. Letter from Centum Investment Company Ltd on Financial Results for year ended 31st March 2012 ii. Letter from Capital Markets Authority regarding Financial Result for year ended 31st March 2012 iii. Letter to NSE regarding Financial Results for year ended 31st March 2012 iv. Letter to Capital Markets Authority regarding Financial Results of Centum Investment Company Limited Financial Results for year ended 31 March 20120 v. Letter from Capital Markets Authority to Centum Investment Limited Financial Results for the year ended 31st March 2012 vi. Letter to Capital Markets Authority regarding Centum Investment Company Limited Financial Results for Year ended 31st March 2012

Subsidiary related regulatory and operational information vii. Letter from the Central Bank of Kenya- K-Rep Bank Limited viii. Certificate of Registration Nabo Capital Limited

LITIGATION Centum related litigation i. Centum litigation report made up to March 2015 ii. Centum litigation report made up to November 2014

Subsidiary related litigation iii. K-Rep Bank Limited litigation report (undated) iv. Rift Valley Bottlers Limited litigation report made up to 11 February 2015

Part B

Searches and Enquiries

Search conducted

Official Companies Registry search Centum Investment Company Limited

Almasi Beverages Limited

AMU Power

Bakki Holdco Limited

Centum Business Solutions Limited

Genesis Kenya Investment Management Limited

King Beverage Limited

KRep Bank Limited

Nabo Capital Limited

Rasimu Limited

Two Rivers Development Limited

Two Rivers ICT Company Limited

Two Rivers Lifestyle Centre Limited

Two Rivers Luxury Apartment Limited Two Rivers Office Suites Limited

Two Rivers Power Company Limited

Uhuru Heights Limited

Vipingo Development Limited

Official search at the Lands Registry Property title number Dagoretti/Riruta/3907 Registered proprietor - K-rep Bank Limited Information Memorandum 145 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

2.6 Centum Investment Company Limited owns 100% of Centum Development Limited (“CDL”) Subsidiaries of CDL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Pearl Marina Estates 51% 118623 Uganda Real Estate Development company. Limited (The remainder 49% is held under Centum).

2.7 Centum Investment Company Limited owns100% Centum Exotics Limited (“CEL”) Subsidiaries of CEL: Subsidiaries Shareholding % Registration Number Jurisdiction Business Activity Oleibon Investments 100% 86609 Tanzania Investment holding company for Limited QPE portfolio - Holds shares of Tanzania Breweries Limited.

Appendix 3

Land and Material Assets and Property

Property known as title number Dagoretti/Riruta/3907– whose registered proprietor is K-rep Bank Limited

Appendix 4

Material Borrowings by the Issuer

Lender Facility Purpose Term Interest Rate Security Co-operative Bank a) Overdraft/ (a) working 12 months 14.5% per The facilities are secured by Kenya Limited Guarantee of KES capital from date of annum the following securities inter 2,700,000,000. requirements; limit loading alia: (renewable) • Debenture over the (b) issuance corporate bonds and of guarantee, quoted equities held bid bond and at Custodial Services performance Department for KES 1.2 bonds required billion dated 26 January in the ordinary 2010; course of business. • Further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES500 million dated 12 October 2010;

• 2nd further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES 500 million dated 16 December 2011; and

• 3rd further debenture over the corporate bonds and quoted equities held at Custodial Services Department for KES 500 million dated 14October 2014. 146 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Lender Facility Purpose Term Interest Rate Security FirstRand Bank US$ 35,000,000 Making 12 months Margin at • Charge over shares held Limited (acting investments after the first 5.75% plus in the Charged Portfolio through its Rand and general Utilisation US LIBOR (as Companies and other Merchant Bank corporate Date, defined) per entities in which members Division acting as purposes subject to an annum of the Group may in Agent) extension of 6 future acquire an interest; months at the discretion of • Charge over the Custodial the Lenders Accounts and Proceeds Accounts maintained by Centum Exotics Limited and Oleibon Investment Limited with the Custodian (CfC Stanbic Bank Limited);

• Assignment of any loans made to the Charged Portfolio Companies or other non-Obligor;

• Custodian Agreement and Acknowledgement between the Custodian, Centum Exotics Limited and Oleibon Investment Limited in respect of the holding of Listed Investments by the Custodian for Centum Exotics Limited and Oleibon Investment Limited and the acknowledgement by the Custodian in favour of the Agent in terms acceptable to the Agent.

“Charged Portfolio Companies” means include Almasi Beverages Limited and Nairobi Bottlers Limited Information Memorandum 147 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Directors Centum Investment Company Limited International House Mama Ngina Street P.O Box 10518-00100 Nairobi

15 May 2015

Accountant’s report – Centum Investment Company Limited

Dear Sirs

We are pleased to submit our Accountant’s Report in accordance with Section 19 of the Third Schedule of the Companies Act 486, and Part C of the Third Schedule of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 as amended in 2012 and the NSE listing requirements (hereafter referred to as “the Regulations”).

We confirm that PricewaterhouseCoopers has been the auditor of Centum Investment Company Limited (“the Company”) and its subsidiary companies (together “the Group”) and have reported on the financial statements of the Company and Group without qualification for the accounting periods ended 31 March 2014, 2013, 2012, 2011. The financial statements for the year ended 31 March 2010 were audited by Deloitte.

Responsibility of the directors

As directors of Centum Investment Company Limited (“the Company” or ‘’the Group’’), you are responsible for the Information Memorandum to be issued on or about 15 May 2015 and for all information contained therein, and for the financial statements and information to which this Accountant’s Report relates and from which it has been prepared.

The financial information included in this report was based on the audited consolidated financial statements of the Group for the accounting periods ended 31 March 2014, 2013, 2012, 2011 and 2010.

Our responsibility

You required us to prepare and produce an Accountant’s Report to be included in the Information Memorandum to be issued to support the Notes Issue of Centum Investment Company Limited.

Our responsibility is detailed in our letter of engagement dated 3 March 2015. The objective of the engagement was to enable us to state whether, on the basis of our review procedures which do not provide all the evidence that would be required in an audit, anything has come to our attention that causes us to believe that the financial statements were not prepared, in all material respects, in accordance with International Financial Reporting Standards.

Criteria and procedures used

The financial information set out in this report has been compiled in accordance with the International Standard on Related Services 4410 – Engagements to Compile Financial Statements (“ISRS 4410”) and the International Standard on Review Engagements 2410 – Review of interim financial information performed by the independent auditor of the entity conforming amendments (“ISRE 2410”).

To enable us prepare an Accountant’s Report, we carried out procedures to satisfy ourselves that the information presented in the financial statements was in accordance with Section 19 of the Third Schedule of the Companies Act 486, and Part C of the Third Schedule of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 as amended in 2012. To this end we carried out the following procedures:

• reviewed the financial statements of the Group for each of the five years ended 31 March 2014, 2013, 2012, 2011 and 2010 for compliance with International Financial Reporting Standards (IFRS) and consistency of application of accounting policies; • made enquiries of the Group’s management with respect to significant matters relevant to the financial information; • reviewed other evidence relevant to the Group’s financial statements;

PricewaterhouseCoopers CPA. PwC Tower, Waiyaki Way/Chiromo Road, Westlands P O Box 43963 – 00100 Nairobi, Kenya T: +254 (20)285 5000 F: +254 (20)285 5001 www.pwc.com/ke

Partners: A Eriksson K Muchiru M Mugasa F Muriu P Ngahu A Njeru R Njoroge B Okundi K Saiti R Shah 148 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

• reviewed the assumptions on which the prospective financial information is based and that the prospective financial information is properly prepared on the basis of the assumptions and are consistent with historical financial statements; • reviewed the ratios agreed with Capital Markets Authority (CMA) to ensure that they have been calculated reliably and they have been disclosed; and • reviewed the Information Memorandum for consistency with the financial information covered by our Accountant’s Report and with all circumstances known to the auditor that could influence the evaluation by the investors of the assets, liabilities, financial position, results and prospects of the client.

A review carried out in accordance with ISRS 4410 and ISRE 2410 is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

In respect of the prospective financial information, we reviewed the Directors’ assumptions with regard to the assumed utilisation of proceeds from the Notes Issue. We conducted our review in accordance with International Standard on Assurance Engagements (ISAE) 3400 –The Examination of Prospective Financial Information. The objective of this examination is to enable us obtain sufficient appropriate evidence as to whether management’s best estimate assumptions on which the prospective financial information is based are not unreasonable and that the prospective financial information is properly prepared on the basis of the assumptions and are consistent with historical financial statements. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the prospective financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the prospective financial information.

Financial information

We have presented the consolidated financial statements of the Group and of the Company for each of the five years ended 31 March 2014, 2013, 2012, 2011, and 2010, including notes to the financial statements. We identified the following matters during the course of our review:

1. Presentation of financial information A number of International Financial Reporting Standards have been amended or introduced in the period under review as summarised in the table below:

Standard Years affected Impact Amendment to IAS 1, 2010-2013 The main change resulting from these amendments is a requirement for entities Presentation of items to group items presented in ‘other comprehensive income’ (OCI) on the basis of other comprehensive of whether they are potentially classifiable to profit or loss subsequently income (OCI) (reclassification adjustments). (effective 1 July 2012) The presentation of the financial statements for periods ended 31 March 2010, 2011, 2012 and 2013 have been amended to comply with the amendment. IFRS 10. ‘Consolidated 2010-2013 IFRS 10 builds on existing principles by identifying the concept of control as the financial statements’ determining factor in whether an entity should be included within the consolidated (effective 1 January 2013) financial statements of the parent company. Additional guidance is given to explain when an investor has control over an investee.

The application of this standard has had no material impact on the financial statements of the Group. Information Memorandum 149 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Standard Years affected Impact IFRS 12, ‘Disclosure of 2010-2013 IFRS 12 sets out the required disclosures for entities reporting under IFRS 10 and interests in other entities’ IFRS 11 and it replaced the disclosure requirements previously found in IAS 28, (effective 1 January 2013) ‘Investments in associates’. IFRS 12 requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities.

The additional disclosures required by the standard for entities with material non- controlling interests have been added to the financial statements for the years 2010 to 2013. IFRS 13, ‘Fair value 2010 -2013 The standard aims to improve consistency and reduce complexity by providing a measurement’ precise definition of fair value and a single source of fair value measurement and (effective 1 January 2013) disclosure requirements for use across IFRSs.

The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The adoption of IFRS 13 has increased the extent of fair value disclosures in the financial statements. This has no material impact on the financial statements of the Group. Amendments to IAS 36, 2010 -2013 This amendment removed certain disclosures of the recoverable amount of CGUs ‘Impairment of assets’ on which had been included in IAS 36 by the issue of IFRS 13. the recoverable amount The amendment has no material impact on the financial statements of the Group. disclosures for non- financial assets (effective 1 January 2013)

IFRS 11, ‘Joint 2010-2013 IFRS 11 focuses on the rights and obligations of the parties to the arrangement arrangements’ rather than its legal form. There are two types of joint arrangements: joint (effective 1 January 2013) operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted.

The application of this standard has no material impact on the financial statements of the Group.

IAS 24 (Revised) ‘Related 2010-2011 The revised standard clarifies and simplifies the definition of a related party party disclosures’ and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. (effective 1 January 2011) The revised standard requires, the subsidiaries of the Group to disclose any transactions between itself and associates of its parent Company. The additional disclosures required by the standard have no material impact on the financial statements of the Group and Company. 150 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Standard Years affected Impact The amendments to IFRS 2010-2011 The amendments emphasises the interaction between quantitative and qualitative 7, ‘Financial Instruments - disclosures about the nature and extent of risks associated with financial Disclosures’ instruments. The amendment removed the requirement to disclose maximum exposure to credit risk if the carrying amount best represents the maximum (effective 1 January 2011) exposure to credit risk; Fair value of collaterals; and renegotiated assets that would otherwise be past due but not impaired. The Group and Company has maintained the disclosure for maximum exposures. No impact is expected in terms of collateral and renegotiated assets.

The financial information set out in this report is based on the audited financial statements after making the adjustments, we considered appropriate, to make all the financial statements compliant with International Financial Reporting Standards applicable for the accounting period ended 31 March 2014.

Review conclusion

A review carried out in accordance with ISRS 4410 and ISRE 2410 is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. However based on our review, nothing has come to our attention that causes us to believe that the audited financial statements of Centum Investment Company Limited for the five accounting years to 31 March 2014 do not give a true and fair view in accordance with International Financial Reporting Standards.

We have reviewed the Capital Market Authority’s eligibility ratios set out in Appendix B in Section 20.22 and confirm that these ratios are based on the audited financial statements of the Group of the respective period ends.

In respect of the prospective financial information contained in Appendix C in Section 20.23, based on our examination and the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the prospective financial information.

In our opinion the prospective financial information has been properly compiled on the basis stated and such basis is consistent with the accounting policies of the group.

Actual results may be different from the prospective financial information since anticipated events may not occur as expected and the variation may be material.

We also confirm that other than as disclosed in our Accountants Report, we are not aware of any material circumstances not mentioned in the Information Memorandum regarding the Notes Issue, represented to us by the directors or otherwise known to us as auditors, which would influence the evaluation by investors of the assets, liabilities, financial position and prospects of Centum Investment Company Limited.

Consent

We consent to the inclusion of this report in the Information Memorandum in support of Notes Issue of Centum Investment Company Limited to be issued on or about 18 May 2015 in the form and context in which it appears.

Certified Public Accountants Nairobi, Kenya

15 May 2015 Information Memorandum 151 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

20.2 Reporting Accountants Report

20.2 .1 Centum Five Year Financial Statements

Consolidated statement of comprehensive income

For the Year ended 31 March Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Income 6(a) 4,883,200 3,905,657 1,272,313 2,261,431 1,038,257

Expenses Administration expenses 7(a) (575,485) (379,960) (148,094) (205,980) (122,326) Other operating expenses 7(b) (220,341) (140,220) (121,709) (93,259) (77,988) Finance costs 8(i) (469,355) (400,763) (229,872) (154,697) (46,940)

Total expenses (1,265,181) (920,943) (499,675) (453,936) (247,254)

Share of profit in associate companies 393,432 263,259 594,037 486,934 289,787 Profit before tax 4,011,451 3,247,973 1,366,675 2,294,429 1,080,790 Income tax (expense)/credit 10(a) (956,081) (738,577) (177,270) (2,046) 12,967

Profit for the year 3,055,370 2,509,396 1,189,405 2,292,383 1,093,757

Other Comprehensive Income Reserves released on disposal of investment 11 (287,772) (791,726) (562,349) (964,613) (854,626) Share of other comprehensive income /(loss) of associates 19(a) 32,761 41,918 (91,117) 165,053 (29,980) Fair value gain/ (Loss) in unquoted investments 20 2,965,632 1,018,737 114,597 12,165 18,961 Fair value gain/ (Loss) in quoted investments 21(a) 865,064 835,057 (166,121) 199,577 1,312,022 Currency translation differences - (11,883) (2,550) (1,355) -

Total other Comprehensive Income/ (Loss) 3,575,685 1,092,103 (707,540) (589,173) 446,377

Total Comprehensive Income/ (Loss) 6,631,055 3,601,499 481,865 1,703,210 1,540,134

Earnings Per share – Basic & Diluted 12(a) Kshs 4.54 Kshs 3.77 Kshs 1.79 Kshs 3.44 Kshs1.64 152 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of comprehensive income

For the Year ended 31 March Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Income 6(b) 1,988,227 1,913,776 764,460 1,684,796 1,121,464

Expenses Administration expenses 7(a)(ii) (282,580) (364,482) (136,368) (201,853) (122,154) Other operating expenses 7(b) (148,097) ( 77,649) (90,707) (89,113) (76,897) Finance costs 8(ii) (461,954) (400,697) (49,979) (154,697) (46,940)

Total expenses (892,631) (842,828) (277,054) (445,663) (245,991)

Profit before tax 1,095,596 1,070,948 487,406 1,239,133 875,473

Income tax (expense)/credit 10(a)(ii) (48,323) (36,850) (41,264) (1,950) 12,967

Profit for the year 1,047,273 1,034,098 446,142 1,237,183 888,440

Other Comprehensive Income Reserves released on disposal of investment 11 (133,208) (1,423,723) (127,243) ( 833,339) (626,700) Fair value in subsidiaries 18 3,636,745 1,657,737 13,619 902,681 565,992 Fair value in associates 19(b) 421,153 382,919 882,934 1,990,419 1,867,270 Fair value gain/ (Loss) in unquoted investments 1,852,303 371,936 114,597 12,165 18,961 Fair value gain/ (Loss) in quoted investments 21(b) (24,759) 428,270 (196,952) 86,192 583,711

Total other Comprehensive Income/ (Loss) 5,752,234 1,417,139 686,955 2,158,118 2,409,234

Total Comprehensive Income/ (Loss) 6,799,507 2,451,237 1,133,097 3,395,301 3,297,674 Information Memorandum 153 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of financial position

As at 31 March Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Assets Deferred income tax 13(a) - - - 30,443 29,477 Prepaid operating lease rentals 14 - - - - 35,940 Current income tax 10(c) - - - 2,654 3,075 Investment property 15(a) 10,845,392 5,456,057 3,992,754 3,525,578 - Motor vehicle and equipment 16 59,954 43,999 26,467 26,813 11,347 Intangible assets 17(a) 988,756 5,298 1,926 5,404 601 Investment in associates 19(a) 3,900,851 3,659,198 3,614,550 3,377,305 2,948,585 Unquoted investments 20 7,569,310 4,306,221 1,427,206 1,338,664 1,251,209 Quoted investments 21(a) 3,036,299 2,732,872 1,666,309 3,208,611 2,967,876 Bonds at fair value through profit or loss 22 1,071,046 995,313 480,000 539,188 505,371 Receivables and prepayments 24(a) 1,071,947 260,825 36,079 240,140 108,849 Cash and cash equivalents 25 843,648 1,501,769 322,410 6,776 393,641

Total assets 29,387,203 18,961,552 11,567,701 12,301,576 8,255,971

Capital and reserves Share capital 27 332,721 332,721 332,721 302,474 274,976 Share premium 27 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 28 6,170,187 2,828,301 1,736,198 2,443,738 3,032,911 Retained earnings 12,912,168 9,891,966 7,382,570 6,223,412 3,958,527 Non-controlling interest 268,008 - - - -

Total equity 20,272,837 13,642,741 10,041,242 9,559,377 7,856,167

Liabilities Borrowings 26 4,201,029 4,149,532 1,000,000 1,000,000 - Bank overdraft 25(a) 1,291,101 - - 987,980 - Payables and accrued expenses 29 1,840,552 287,858 355,956 719,170 357,154 Unclaimed dividends 30 28,987 32,504 34,437 35,049 42,650 Current income tax 10(c) 210,913 19,254 5,114 - - Deferred income tax 13(a) 1,541,784 829,663 130,952 - -

Total Liabilities 9,114,366 5,318,811 1,526,459 2,742,199 399,804

Total Equity & liabilities 29,387,203 18,961,552 11,567,701 12,301,576 8,255,971 154 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of financial position

As at 31 March Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Assets Deferred income tax 13(b) 5,317 7,354 5,150 30,539 29,477 Prepaid operating lease rentals 14 - - - - 35,940 Current income tax 10(c) - - - 832 3,044 Investment property 15(b) - - - 265,000 - Motor vehicle and equipment 16 - 43,999 26,467 26,754 11,347 Intangible assets 17(b) - 1,720 1,926 3,052 601 Investment in subsidiaries 18 8,159,156 3,442,759 1,784,954 1,753,506 850,163 Investment in associates 19(b) 6,594,340 6,152,947 7,128,721 6,230,521 4,240,102 Unquoted investments 5,495,272 3,539,417 1,427,206 1,338,664 1,251,209 Quoted investments 21(b) 686,348 1,088,778 1,289,540 2,422,116 2,080,599 Bonds at fair value through profit or loss - 105,560 480,000 539,188 505,371 Due from subsidiary companies 23(a) 7,668,573 5,969,488 3,104,780 2,221,780 412,623 Receivables and prepayments 24(b) 27,499 123,796 155,344 165,745 26,658 Cash and cash equivalents 25(b) 174,932 930,896 317,340 5,903 393,168

Total assets 28,811,437 21,406,714 15,721,428 15,003,600 9,840,302

Capital and reserves Share capital 27 332,721 332,721 332,721 302,474 274,976 Share premium 27 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 28 15,962,362 10,210,128 8,792,989 8,106,034 5,947,916 Retained earnings 6,051,372 5,004,099 3,970,001 3,554,106 2,344,421

Total equity 22,936,208 16,136,701 13,685,464 12,552,367 9,157,066

Liabilities Borrowings 26 4,201,029 4,149,532 1,000,000 1,987,980 - Bank overdraft 25 1,291,101 - - - - Payables and accrued expenses 29 204,467 230,182 134,078 144,332 356,906 Due to subsidiary companies 23(b) 121,846 838,300 862,303 283,872 283,680 Unclaimed dividends 30 28,987 32,504 34,437 35,049 42,650 Current income tax 10(c) 27,799 19,495 5,146 - -

Total Liabilities 5,875,229 5,270,013 2,035,964 2,451,233 683,236

Total Equity & liabilities 28,811,437 21,406,714 15,721,428 15,003,600 9,840,302 Information Memorandum 155 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated Statement of changes in equity

Share Share Investment Retained Total Non- Total Capital Premium Revaluation earnings equity controlling equity Reserve Interest Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2014 At start of year 332,721 589,753 2,828,301 9,891,966 13,642,741 - 13,642,741

Comprehensive income Profit for the year - - - 3,020,202 3,020,202 35,168 3,055,370

Other comprehensive income: Reserves released on disposal of investments 11 - - (287,772) - (287,772) - (287,772) Share of other comprehensive income of associates 19(a) - - 32,761 - 32,761 - 32,761 Fair value gain in unquoted investments - - 2,731,833 - 2,731,833 233,799 2,965,632 Fair value gain in quoted investments 21(a) - - 865,064 - 865,064 - 865,064 Currency translation differences ------

Total other comprehensive income - - 3,341,886 - 3,341,886 233,799 3,575,685

Total comprehensive income - - 3,341,886 3,020,202 6,362,088 268,967 6,631,055

Dividends paid by subsidiaries to non-controlling interest - - - - - (41,739) (41,739)

Non-controlling interest arising on business combination - - - - - 40,780 40,780

At end of year 332,721 589,753 6,170,187 12,912,168 20,004,829 268,008 20,272,837 Information Memorandum 156 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of changes in equity

Share Share Investment Retained Total Total Capital Premium Revaluation earnings equity equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2013 At start of year 332,721 589,753 1,736,198 7,382,570 10,041,242 10,041,242

Comprehensive income Profit for the year - - - 2,509,396 2,509,396 2,509,396

Other comprehensive income: Reserves released on disposal of investments 11 - - (791,726) - (791,726) (791,726) Share of other comprehensive income of associates 19(a) - - 41,918 - 41,918 41,918 Fair value gain in unquoted investments 20 - - 1,018,737 - 1,018,737 1,018,737 Fair value gain in quoted investments 21(a) - - 835,057 - 835,057 835,057 Currency translation differences - - (11,883) - (11,883) (11,883)

Total other comprehensive income - - 1,092,103 - 1,092,103 1,092,103

Total comprehensive income - - 1,092,103 2,509,396 3,601,499 3,601,499

At end of year 332,721 589,753 2,828,301 9,891,966 13,642,741 13,642,741 Information Memorandum 157 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated Statement of changes in equity

Share Share Investment Retained Total Total Capital Premium Revaluation earnings equity equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2013 At start of year 332,721 589,753 1,736,198 7,382,570 10,041,242 10,041,242

Comprehensive income Profit for the year - - - 2,509,396 2,509,396 2,509,396

Other comprehensive income: Reserves released on disposal of investments 11 - - (791,726) - (791,726) (791,726) Share of other comprehensive income of associates 19(a) - - 41,918 - 41,918 41,918 Fair value gain in unquoted investments 20 - - 1,018,737 - 1,018,737 1,018,737 Fair value gain in quoted investments 21(a) - - 835,057 - 835,057 835,057 Currency translation differences - - (11,883) - (11,883) (11,883)

Total other comprehensive income - - 1,092,103 - 1,092,103 1,092,103

Total comprehensive income - - 1,092,103 2,509,396 3,601,499 3,601,499

At end of year 332,721 589,753 2,828,301 9,891,966 13,642,741 13,642,741 Information Memorandum 158 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated Statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2012 At start of year 302,474 589,753 2,443,738 6,223,412 9,559,377

Comprehensive income Profit for the year - - - 1,189,405 1,189,405

Other comprehensive income: Reserves released on disposal of investments 11 - - (562,349) - (562,349) Share of other comprehensive loss of associates 19(a) - - (91,117) - (91,117) Fair value gain in unquoted investments 20 - - 114,597 - 114,597 Fair value loss in quoted investments 21(a) - - (166,121) - (166,121) Currency translation differences - - (2,550) - (2,550)

Total other comprehensive loss - - (707,540) - (707,540)

Total comprehensive income - - (707,540) 1,189,405 481,865

Transactions with owners

Issue of bonus shares 27 30,247 - - (30,247) -

30,247 - - (30,247) -

At end of year 332,721 589,753 1,736,198 7,382,570 10,041,242 Information Memorandum 159 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated Statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2011 At start of year 274,976 589,753 3,032,911 3,958,527 7,856,167

Comprehensive income Profit for the year - - - 2,292,383 2,292,383

Other comprehensive income: Reserves released on disposal of investments 11 - - (964,613) - (964,613) Share of other comprehensive income of associates 19(a) - - 165,053 - 165,053 Fair value gain in unquoted investments 20 - - 12,165 - 12,165 Fair value gain in quoted investments 21(a) - - 199,577 - 199,577

Currency translation differences - - (1,355) - (1,355) Total other comprehensive loss - - (589,173) - (589,173)

Total comprehensive income - - (589,173) 2,292,383 1,703,210

Transactions with owners Issue of bonus shares 27 27,498 - - (27,498) -

Total transactions with owners 27,498 - - (27,498) -

At end of year 302,474 589,753 2,443,738 6,223,412 9,559,377 Information Memorandum 160 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated Statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2010 At start of year 274,976 589,753 2,586,534 2,864,770 6,316,033

Comprehensive income

Profit for the year - - - 1,093,757 1,093,757

Other comprehensive income: Reserves released on disposal of investments 11 - - (854,626) - (854,626) Share of other comprehensive loss of associates 19(a) - - (29,980) - (29,980) Fair value gain in unquoted investments 20 - - 18,961 - 18,961 Fair value gain in quoted investments 21(a) - - 1,312,022 - 1,312,022

Total other comprehensive income - - 446,377 - 446,377

Total comprehensive income - - 446,377 1,093,757 1,540,134

At end of year 274,976 589,753 3,032,911 3,958,527 7,856,167 Information Memorandum 161 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended March 2014 At start of year 332,721 589,753 10,210,128 5,004,099 16,136,701

Comprehensive income

Profit for the year - - - 1,047,273 1,047,273

Other comprehensive income: Reserves released on disposal of investments 11 - - (133,208) - (133,208) Fair value gain in subsidiaries 18 - - 3,636,745 - 3,636,745 Fair value gain in associates 19 - - 421,153 - 421,153 Fair value gain in unquoted investments - - 1,852,303 - 1,852,303 Fair value loss in quoted investments 21 - - (24,759) - (24,759)

Total other comprehensive income - - 5,752,234 - 5,752,234

Total comprehensive income - - 5,752,234 1,047,273 6,799,507

At end of year 332,721 589,753 15,962,362 6,051,372 22,936,208 Information Memorandum 162 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2013 At start of year 332,721 589,753 8,792,989 3,970,001 13,685,464

Comprehensive income

Profit for the year - - - 1,034,098 1,034,098

Other comprehensive income: Reserves released on disposal of investments 11 - - (1,423,723) - (1,423,723) Fair value gain in subsidiaries 18 - - 1,657,737 - 1,657,737 Fair value gain in associates 19 - - 382,919 - 382,919 Fair value gain in unquoted investments - - 371,936 - 371,936 Fair value gain in quoted investments 21 - - 428,270 - 428,270

Total other comprehensive income - - 1,417,139 - 1,417,139

Total comprehensive income - - 1,417,139 1,034,098 2,451,237

At end of year 332,721 589,753 10,210,128 5,004,099 16,136,701 Information Memorandum 163 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2012 At start of year 302,474 589,753 8,106,034 3,554,106 12,552,367

Comprehensive income

Profit for the year - - - 446,142 446,142

Other comprehensive income: Reserves released on disposal of investments 11 - - (127,243) - (127,243) Fair value gain in subsidiaries 18 - - 13,619 - 13,619 Fair value gain in associates 19(b) 882,934 - 882,934 Fair value gain in unquoted investments 20 - - 114,597 - 114,597 Fair value gain loss in quoted investments 21(b) - - (196,952) - (196,952) Total other comprehensive income - - 686,955 - 686,955

Total comprehensive income - - 686,955 446,142 1,133,097

Transactions with owners Issue of bonus shares 27 30,247 - - (30,247) -

Total transactions with owners 30,247 - - (30,247) -

At end of year 332,721 589,753 8,792,989 3,970,001 13,685,464 Information Memorandum 164 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2011 At start of year 274,976 589,753 5,947,916 2,344,421 9,157,066

Comprehensive income

Profit for the year - - - 1,237,183 1,237,183

Other comprehensive income: Reserves released on disposal of investments 11 - - (833,339) - (833,339) Fair value gain in subsidiaries 18 - - 902,681 - 902,681 Share of other comprehensive income of associates 19(b) - - 1,990,419 - 1,990,419 Fair value gain in unquoted investments 20 - - 12,165 - 12,165 Fair value gain in quoted investments 21(b) - - 86,192 - 86,192

Total other comprehensive income - - 2,158,118 - 2,158,118

Total comprehensive income - - 2,158,118 1,237,183 3,395,301

Transaction with the owners Issue of Bonus 27 27,498 - - (27,498) - Total transaction with the owners 27,498 - - (27,498) -

At end of Year 302,474 589,753 8,106,034 3,554,106 12,552,367 Information Memorandum 165 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total Capital Premium Revaluation earnings equity Reserve Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Year ended 31 March 2010 At start of year 274,976 589,753 3,538,682 1,455,981 5,859,392

Comprehensive income

Profit for the year - - - 888,440 888,440

Other comprehensive income: Reserves released on disposal of investments 11 - - (626,700) - (626,700) Fair value gain in subsidiaries 18 - - 565,992 - 565,992 Share of other comprehensive income of associates 19(b) - - 1,867,270 - 1,867,270 Fair value gain in unquoted investments 20 - - 18,961 - 18,961 Fair value gain in quoted investments 21(b) - - 583,711 - 583,711

Total other comprehensive income - - 2,409,234 - 2,409,234

Total comprehensive income - - 2,409,234 888,440 3,297,674

At end of year 274,976 589,753 5,947,916 2,344,421 9,157,066 Information Memorandum 166 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of financial position

For the year ended 31 March Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Cash flows from operating activities Cash (used in)/generated from operations 31 953,706 (251,761) (216,890) 183,949 290,188 Interest paid 8(a) (660,082) (343,576) (179,243) (147,914) (44,758) Income tax paid 10(c) (50,825) (25,726) (9,897) (2,591) (603) Dividends received from associates 19(a) 204,780 217,072 280,941 223,267 197,214 Net cash (used in)/generated from operating activities 447,579 (403,991) (125,089) 256,711 442,041

Cash flows from investing activities Purchase of investment property 15(a) (2,111,258) (128,671) (111,016) (2,485,417) - Purchases of motor vehicles and equipment 16 (26,915) (22,594) (4,156) (21,330) (9,403) Proceeds from disposal of motor vehicle and equipment - - 112 257 - Purchases of intangible assets 17(a) (18,294) (4,812) (259) (5,871) (597) Acquisition of interest in subsidiary (1,079,453) - - - - Acquisition of subsidiary, net of cash acquired 128,436 - - - - Purchase of shares in associates 19(a) (20,240) (1,784,911) (15,266) - (45) Purchase of unquoted equity investments 20 (337,123) (837,929) (85,240) (382,433) (79,743) Purchase of quoted equity investments 21(a) (631,068) (1,112,066) (364,097) (1,670,399) (636,416) Purchase of corporate bonds 22 (934,052) (947,663) (3,879,824) - (505,371) Proceeds from disposal of unquoted investments 20 39,666 1,367,306 111,295 307,143 265,147 Proceeds from disposal of quoted investments 11 1,913,339 974,577 1,691,927 1,629,241 1,083,606 Proceeds on disposal of treasury and corporate bonds 11 725,765 529,397 4,088,389 - - Proceeds from disposal of investment property - 415,000 - - - Net cash generated from/(used in) investing activities (2,351,197) (1,552,366) 1,431,865 (2,628,809) 117,178

Cash flows from financing activities Net proceeds from borrowings 4,149,532 - 1,000,000 - Dividends paid to Company’s shareholders 30 (3,517) (1,933) (612) (1,392) (5,728) Dividends paid to non-controlling interests (41,739) Loan repayment - (1,000,000) Net cash (used in)/generated from financing activities (45,256) 3,147,599 (612) 998,608 (5,728)

Net increase/(decrease) in cash and cash equivalents (1,948,874) 1,191,242 1,306,164 (1,373,490) 553,491

Movement in cash and cash equivalents At start of year 1,501,769 322,410 (981,204) 393,641 (159,850) Increase/(decrease) (1,948,874) 1,191,242 1,306,164 (1,373,490) 553,491 Exchange losses on cash and cash equivalents (348) (11,883) (2,550) (1,355) - At end of year 25 (447,453) 1,501,769 322,410 (981,204) 393,641 Information Memorandum 167 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes

1 General informations

Centum Investment Company Limited is incorporated in Kenya under the Kenyan Companies Act as a public limited liability Company and is domiciled in Kenya. The Company’s shares are listed on the Nairobi Securities Exchange. The address of its registered office is:

International House 5th Floor, Mama Ngina Street P.O Box 10518 – 00100 Nairobi.

The Company has sixteen subsidiaries. Details of the business of the subsidiaries are highlighted in note 18 of the financial statements.

For Kenyan Companies Act reporting purposes, the balance sheet is represented by the statement of financial position and the profit and loss account by the statement of comprehensive income, in these financial statements.

2 Summary of significant accounting policies

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

(a) Basis of preparation

The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, available for sale financial assets and assets at fair value through profit or loss. The financial statements are presented in Kenyan Shillings (Kshs), rounded to the nearest thousand.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

Changes in accounting policy and disclosures

(i) New and amended standards adopted by the Company and the Group

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2013:

Amendment to IAS 1, ‘Presentation of Financial Statements’ regarding other comprehensive income is effective for accounting period beginning on or after 1 July 2012. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The application of the amendments has mainly impacted the presentation of the primary statements.

IAS 27 (revised 2012) includes the requirements relating to separate financial statements following the issue of IFRS 10, 11 and 12. The standard has been renamed and now deals solely with separate financial statements. The amended standard does not have any significant impact on the Company as the existing guidance and disclosure requirements for separate financial statements are unchanged.

IAS 28 (revised 2012) includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11. IAS 28 is renamed and the scope exception for venture capital organisations, or mutual funds, unit trusts and similar entities, including investment-linked insurance funds has been eliminated and has been characterised as a measurement exemption from the requirement to measure investments in associates and joint ventures using the equity method. The revised standard does not have any significant impact on the Company 168 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

Changes in accounting policy and disclosures (continued)

IFRS 10, Consolidated financial statements’, builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The adoption of IFRS 10 did not have a significant impact on the Company.

IFRS 12, ‘Disclosures of interests in other entities’, includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. With the adoption of IFRS 12 increased disclosures have been made in respect of the subsidiaries and associates in the financial statements.

IFRS 13, ‘Fair value measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The adoption of IFRS 13 increased disclosures around fair value in the financial statements.

There are no other IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 April 2013 that would be expected to have a material impact on the Company.

(ii) New standards and interpretations that are not yet effective and have not been early adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company, except the following set out below:

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. Issued in November 2009 and October 2010, it replaces the 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: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements.

The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The directors are yet to assess IFRS 9’s full impact and intend to adopt IFRS 9 no later than the accounting period beginning 1 April. The directors will also consider the impact of the remaining phases of IFRS 9 when completed by the IASB.

IFRS 10 (Amendment), ‘Consolidated financial statements’ (effective 1 January 2014) defines an investment entity and introduces an exception from consolidation. This will particularly benefit private equity funds, as those that qualify will fair value all of their investments, including those that are controlled. The amendment to IFRS 10 was also accompanied by amendments to IFRS 12 and IAS 27. The directors are yet to assess the impact of the amendment and intend to adopt it no later than the accounting period beginning 1 April 2014.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

Information Memorandum 169 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(b) Consolidation

(i) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control.

De-facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the control ceases.

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(ii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

170 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(b) Consolidation

(iii) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(iv) Associates

Investments in associates are accounted for by the equity method of accounting. These are undertakings in which the group has between 20% and 50% of the voting rights and over which the group exercises significant influence but which it does not control.

Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost plus share of subsequent profits and other comprehensive income less any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that associate are recognised only to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the associate. A listing of the Group’s associates is shown in note 19.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Investments in associates are accounted for as available-for-sale financial assets in the separate financial statements of the Company (and are stated at fair value).They are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the investments revaluation reserve.

Where a significant amount of new investment into a Company has been made within the financial year, the price at which the investment was made is considered the fair value unless there has been a significant change in conditions since the transaction took place. For all other investments, the earnings multiple method is employed. This method, which draws on market based measures of risk and return, involves the application of an earnings multiple to the earnings of the business being valued in order to derive a value for the business.

The earnings multiple that is applied is derived from comparable companies or transactions with similar prospects from a return and growth perspective. Where fair value cannot be reliably measured, the unquoted investment is carried at cost.

The difference between valuation and cost is recognised in other comprehensive income and accumulated in the investment revaluation reserve. Where valuation is below cost, the difference between valuation and cost is charged to profit or loss if, in the opinion of the directors, the reduction in value is not considered temporary. Where the investment is disposed of, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. Information Memorandum 171 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(c) Functional currency and translation of foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘Kenyan Shillings (Kshs), which is the Group’s presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income or cost’. All other foreign exchange gains and losses are presented in profit or loss within ‘other income’ or ‘other expenses’.

Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities, such as equities held at fair value through profit or loss, are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available-for-sale financial assets, are included in other comprehensive income.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period; (ii) income and expenses for each income statement amount are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity.

(d) Segment reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

The group organises its activity by business lines and these are defined as the Group’s reportable segments. The three business lines are; Private Equity, Quoted Equity and Real Estate & Infrastructure. Performance is reviewed from a total return perspective. 172 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(e) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of the Group’s activities.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s activities as described below.

Revenue is recognised as follows: (i) Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. (ii) Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable. (iii) Provision of services are recognised in the period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a percentage of the total services to be provided. (iv) Rental income is recognised as income in the period in which it is earned. All investment income is stated net of investment expenses.

(f) Investment property

Buildings, or part of a building, (freehold or held under a finance lease) and land (freehold or held under an operating lease) held for long term rental yields and/or capital appreciation and are not occupied by the Group are classified as investment property under non-current assets. Investment property is carried at fair value, representing open market value determined annually by external valuers. Properties under construction and development sites with projected use as Investment properties are valued at projected fair values taking into account current market conditions. Changes in fair values are included in investment income in the income statement.

(g) Motor vehicle and equipment

Motor vehicle and equipment are stated at cost less depreciation and any accumulated impairment losses.

Depreciation is calculated to write off the cost of the motor vehicle and equipment in equal annual instalments over their estimated useful lives.

The annual rates in use are: Motor vehicle and motor cycles 20% Furniture, fittings and office equipment 10% Computers 33.3%

(h) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill on subsidiaries is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. Information Memorandum 173 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(h) Intangible assets (continued)

(ii) Computer software

Costs incurred on computer software are initially accounted for at cost as intangible assets and subsequently at cost less any accumulated amortisation and accumulated impairment losses. Amortisation is calculated on the straight line basis over the estimated useful lives not exceeding a period of 3 years.

(i) Financial assets

Classification

The Group classifies its financial assets in the following categories: loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. The directors determine the classification of financial assets at initial recognition.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets and are carried at amortised cost.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets and are included in non-current assets unless the investment matures or the directors intend to dispose of the investments within 12 months of the end of the reporting period.

(iii) Financial assets at fair value through profit or loss

This category comprises two sub-categories: financial assets classified as held for trading, and financial assets designated by the Group as at fair value through profit or loss upon initial recognition.

A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.

Derivatives are also categorised as held for trading unless they are designated and effective as hedging instruments. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

The Group designates certain financial assets upon initial recognition as at fair value through profit or loss (fair value option). This designation cannot subsequently be changed and can only be applied when the following conditions are met: • the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise arise or • the financial assets are part of a portfolio of financial instruments which is risk managed and reported to senior management on a fair value basis or • the financial assets consists of debt host and an embedded derivatives that must be separated.

Financial assets at fair value through profit or loss are carried at fair value. Purchases and sales of financial assets at fair value through profit or loss are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. Fair value changes relating to financial assets designated at fair value through profit or loss are recognized in the statement of profit or loss in the year in which they arise. 174 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(i) Financial assets (continued)

Recognition and measurement

Regular purchases and sales of available-for-sale financial assets are recognised on the trade-date – the date on which the Company commits to purchase or sell the asset. Available-for-sale financial assets are initially recognised at fair value plus transaction costs and are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Changes in fair value are recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in profit or loss.

(j) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(k) Impairment of financial assets

Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in interest or principal payments; • The Company, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; • It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; • The disappearance of an active market for that financial asset because of financial difficulties; or • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) adverse changes in the payment status of borrowers in the portfolio; and (ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Company may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. Information Memorandum 175 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(k) Impairment of financial assets

Assets classified as available-for-sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss.

(l) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(m) Accounting for leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rental income from operating leases is recognised on a straight-line basis over the terms of the relevant leases.

Rentals payable under operating leases are charged to the profit or loss on a straight-line basis over the term of the relevant lease.

(n) Receivables

Receivables are amounts due from investments in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are a classified as current assets. If not, they are presented as non-current assets.

Receivables are recognised initially at fair value and subsequently recognised at amortised cost, less any provision for impairment.

(o) Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

(p) Share capital

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as ‘share premium’ in equity. 176 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(q) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts.

(r) Dividend distribution

Dividends payable to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Proposed dividends are shown as a separate component of equity until declared.

(s) Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

(t) Employee benefits

(i) Retirement benefit obligations

The Group operates a defined contribution pension scheme. The assets of the scheme are held in a separate trustee administered fund. The scheme is administered by independent fund managers and is funded by contributions from both the employer and the employees.

The Group also contributes to the statutory National Social Security Fund. This is a defined contribution pension scheme registered under the National Social Security Act. The Group’s obligations under the scheme are limited to specific obligations legislated from time to time and are currently limited to a maximum of Shs 200 per month per employee.

The Group contributions in respect of retirement benefit schemes are charged to profit or loss in the year to which they relate.

(ii) Performance Bonus

The Group has in place a performance bonus scheme. The scheme rewards employees of the Group based on achievement of certain set benchmarks of business success.

The Group’s performance bonus scheme is designed to enable achievement of consistent business growth that is tied to the increase in shareholder wealth, which is a primary business objective.

A target of 15% annual increase in opening shareholder funds has been set (hurdle rate).

Employees only qualify for the bonus after achievement of this percentage increase in shareholder wealth.

Actual award of the bonus is in three equal instalments over a period of three years. The annual payment is on condition that shareholder wealth is maintained at the same level or increased. Should there be a drop in shareholder wealth, payment will not be made and will be deferred until the year when shareholder wealth is restored. Should an employee leave employment of the Company before payment is due, he/she will forfeit payment. The amount payable is accrued over the period to the payment of each instalment.

The performance bonus for employees of Athena Limited is computed at 30% of profit after tax. Information Memorandum 177 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

2 Summary of significant accounting policies (continued)

(t) Employee benefits (continued)

(iii) Other entitlements

The estimated monetary liability for employees’ accrued annual leave entitlement at the reporting date is recognised as an expense accrual.

(u) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised 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 there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(v) Current and deferred income tax

The tax expense for the period comprises current and deferred income tax. Tax is recognised in the profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, if the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

(w) Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

178 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

3 Critical accounting estimates and judgements

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

Impairment losses

At the end of each reporting period, the group reviews the carrying amounts of its financial assets to determine whether there is any indication that those assets have suffered an impairment loss. A financial asset or a group of financial assets is impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that the loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Valuation of unquoted investments

For equity instruments for which no active market exists, the group uses the price of a recent investment or the earnings multiple to estimate the fair value of these investments. Management uses estimates based historical data relating to earnings of the investee Company and other market based multiples in arriving at the fair value. The primary assumption in employing the earnings multiple method is that the market has assigned an appropriate value to the benchmark Company. The methodology and assumptions used for arriving at the market based multiples are reviewed and compared with other methodologies to ensure there are no material variances.

Income taxes

The Group is subject to income taxes in various jurisdictions. Significant judgement is required in determining the Group’s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

4 Financial risk management

a) Market risks

Market risk is the risk arising from changes in market prices, such as interest rate, equity prices, and foreign exchange rates which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) Interest rate risk

The Group is exposed to interest rate risk as it borrows funds at floating interest rates in the form of short term loans (overdrafts) and also holds cash deposits with financial institutions. The interest rates on the cash deposits are fixed and agreed upon in advance while interest rates on overdrafts are pegged to the bank’s base lending rate or prevailing Treasury Bills rates.

Management closely monitors the interest rate trends to minimise the potential adverse impact of interest rate changes. Deposits are placed at fixed interest rates and management is therefore able to plan for the resulting income. For the facilities with variable rates, the Company is in regular contact with the lenders in a bid to obtain the best available rates.

As at 31 March 2014, Group and Company held deposits of Kshs 224,017,580 and Kshs 108, 850,547 respectively (Both Group and Company 2013: Kshs 902,499,873, 2012:Ksh 310,000,000, 2011: Ksh: Nil, 2010: Ksh 345,000,000) and had unutilised bank credit facilities of Kshs 708,898,947 (2013: Kshs 1,200,000,000, 2012: Kshs 1,200,000,000, 2011: Kshs 212,020,000, 2010: Ksh1,700,000,000). Information Memorandum 179 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

a) Market risks (continued)

(i) Interest rate risk (continued)

As at 31 March 2014, a 5% increase/decrease of the annual interest rate would have resulted in an increase/decrease in pre-tax profit and equity of Kshs 43,161,899 and Kshs 31,126,650 (2013: Kshs 45,124,993, 2012:Ksh 8,572,000, 2011: Ksh 7,323,000, 2010: Kshs 20,895,000) for both Group and Company resulting from interest paid on deposits.

The Group has invested in corporate bonds with fixed interest rate which is not affected by interest rate fluctuations.

(ii) Price risk

The Group’s private equity holdings are valued according to the International Private Equity and Venture Capital guidelines, which set out the valuation methodology for fair valuation. Valuation is relatively subjective and may change from time to time. In addition the valuation is also affected by the volatility of the stock prices since the Group uses the earnings multiple method which entails the use of the share prices of similar/comparable quoted companies among other components. Valuation risks are mitigated by comprehensive quarterly reviews of the underlying investments by management every quarter. The appropriateness of the investment valuations are then considered by the Audit and Risk committee.

Quoted equity are valued at their market prices. These values are subject to frequent variations and adverse market movements. This risk is mitigated by choice of defensive stocks with low price volatility, and weekly monitoring of the value changes.

At 31 March 2014, if the prices at the Nairobi Securities Exchange and other exchanges had appreciated/depreciated by 5% with all other variables held constant, the impact on the Group comprehensive income and revaluation reserves would have been Kshs 172,701,438 (2013: Kshs 186,409,000, 2012: Kshs 107,315,000 ,2011 : Kshs 527,602,000, 2010: Kshs 184,839,000) higher/ lower.

At 31 March 2013, if the prices at the Nairobi Securities Exchange and other exchanges had appreciated/depreciated by 5% with all other variables held constant, the impact on the Company comprehensive income and equity would have been Kshs 34,317,377 (2013: Kshs 59,717,000, 2012: Kshs 88,477,000, 2011:Ksh 488,277,000, 2010: Kshs 140,470,000) higher/lower.

(iii) Investment holding period risk

87% (2013: 81%, 2012: 60%, 2011: 60%, 2010:60%) of the Group and Company’s investments are not traded on any formal exchange. Disposal of these investments is constrained in many instances by pre-emptive rights, shareholder agreements and the absence of willing trade buyers or an active secondary market. The timing of realised proceeds on disposal may pose a risk to the Group.

The Group/Company mitigates this risk by seeking influence in the investee company’s operations through large shareholding or board representation. The Group/Company also seeks compensation for this risk through high return hurdles during the investment appraisal and laying emphasis on dividend generating potential.

However, the Group and Company have got no fixed time horizon for its investments, and does not enforce exit options on investments as it believes current practice makes it easier to acquire attractive investments.

(iv) Concentration risk

81% (2013: 80%, 2012:87%, 2011 :83%, 2010 :95%) of the Group’s assets are located in Kenya with over 13% (2013: 12%, 2012:11%, 2011:15%, 2010:5%) in the wider East African Region and 5% (2013: 8%, 2012:2%, 2011:2%, 2010: Nil) outside East Africa.

180 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

a) Market risks (continued)

Investment portfolio sectoral allocation

(a) Group 2014 2013 2012 2011 2010

Real Estate 38% 40% 35% 30% 2% Financial Services 27% 22% 25% 23% 28% Industrial and Allied 2% 4% 6% 17% 21% Alcoholic and Carbonated beverages 23% 24% 21% 17% 27% Automotive 7% 8% 8% 6% 13% Services 2% 2% 2% 5% 6% Publishing 1% 0% 3% 2% 2% Agriculture 0% 0% 0% 0% 1%

Total 100% 100% 100% 100% 100%

(b) Company 2014 2013 2012 2011 2010

Real Estate 0% 28% - 23% 2% Financial Services 37% 31% 35% 25% 29% Industrial and Allied 3% 4% 5% 14% 9% Alcoholic and Carbonated beverages 33% 28% 45% 26% 39% Automotive 19% 5% 9% 6% 12% Services 6% 3% 3% 4% 6% Publishing 3% 1% 3% 2% 2% Agriculture 0% 0% 0% 0% 1%

Total 100% 100% 100% 100% 100%

Each investment asset is considered independently by the Investment Committee and the board according to a structured process that includes extensive due diligence, industry analysis, consideration of existing assets and future capital commitments. Whereas sector limits are in place, concentration in the financial, beverages and industrial and allied sectors have mainly been brought about by organic growth and appreciation of market value. To reduce exposure to country risk the Group is actively looking for regional investment opportunities.

(v) Foreign exchange risk

The Group’s exposure to fluctuations in the foreign currency rates relate to conversion rates for valuation of overseas holdings. The Group does not have any foreign denominated financial liabilities.

The mean exchange rates ruling at 31 March 2014, 2013,2012,2011,2010 were:

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

1 US Dollar (Usd) 86.44 85.64 83.06 82.99 77.33 1 Ugandan Shilling (UgX) 0.034 0.033 0.033 0.035 0.027 1 Rwandese Franc (RwF) 0.127 0.135 0.138 0.014 - 1 Tanzania Shilling (Tshs) 0.053 0.053 0.052 - - 1 Nigerian Naira (NgN) 0.524 0.541 - - - 1 Ghana Cedi (GhC) 32.774 44.201 - - - Information Memorandum 181 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

a) Market risks (continued)

(v) Foreign exchange risk (continued)

Below is a summary of the financial assets denominated in foreign currencies at their carrying amounts:

(i) Group 2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Quoted investments (UgX) 30,527 13,118 10,048 5,158 2,350 Quoted investments (RwF) 221,993 212,984 87,506 47,516 - Quoted investments (Tshs) 1,135,104 540,161 99,074 - - Quoted investments (GhC) 686,234 1,137,169 - - - Quoted investments (NgN) 90,961 127,577 - - - Investment in Funds (Usd) 497,028 336,532 227,555 264,754 58,967 Investment property (Usd) 2,663,576 1,671,821 1,672,146 1,690,481 - Prepayments - - - 9,966 Cash and equivalents (Usd) 227,903 30,436 146 3,259 -

5,553,326 4,069,798 2,096,475 2,021,134 61,317

(ii) Company 2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Quoted investments (UgX) 30,527 10,882 10,048 5,158 2,350 Quoted investments (RwF) 221,993 212,984 87,506 47,516 - Quoted investments (Tshs) - - - - - Quoted investments (GhC) - - - - - Quoted investments (NgN) - - - - - Investment in Funds (Usd) 497,028 336,532 227,555 264,754 58,967 Investment property (Usd) - - - - - Prepayments - - 9,966 Cash and equivalents (Usd) - 30,436 129 3,060 -

749,548 590,834 325,238 330,454 61,317

If all other variables were held constant, at 31 March 2014, the impact on values and reserves of the Shilling weakening or strengthening by 5% against the above currencies would have been as below;

(i) Group 2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’00 Kshs’000 Kshs’000

1 US Dollar (Usd) 169,425 101,939 94,992 96,889 2,948 1 Ugandan Shilling (UgX) 1,526 655 502 258 118 1 Rwandese Franc (RwF) 11,100 10,649 4,375 2,376 - 1 Tanzanian Shilling (Tshs) 56,775 27,008 4,954 - - 1 Nigerian Naira (NgN) 4,548 6,378 - - - 1 Ghanian Cedi (GhC) 34,312 56,858 - - -

277,686 203,487 104,823 99,523 3,066

182 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

a) Market risks (continued)

(v) Foreign exchange risk (continued)

(ii) Company 2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’00 Kshs’000 Kshs’000

1 US Dollar (Usd) 24,851 101,939 11,384 13,889 2,948 1 Ugandan Shilling (UgX) 1,526 544 502 258 118 1 Rwandese Franc (RwF) 11,100 10,649 4,375 2,376 - 1 Tanzanian Shilling (Tshs) - - - - - 1 Nigerian Naira (NgN) - - - - - 1 Ghanian Cedi (GhC) - - - - -

37,477 113,132 16,261 16,523 3,066

(b) Liquidity risks

This is the risk that the Group will encounter difficulties in meeting its financial commitments from its financial liabilities. Prudent liquidity risk management includes maintaining sufficient cash to meet its obligations. Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Liquidity risk also relates to the risk that the Group would miss out attractive investment opportunities due to lack of funding. This risk is mitigated by the fact that the available for sale quoted investments can be converted to cash when funds are required. The risk is also minimised by use of annually renewable credit facilities.

As at 31 March 2014, over 21% (2013: over 28%, 2012: over 17%, 2011: over 30%, 2010: over 30%) of the Groups assets were held in assets that are quickly convertible to cash. The Group also had Kshs 708,848,947 (2013: Kshs 1,200,000,000, 2012: Kshs 1,200,000,000, 2011: Kshs 212,020,000, 2010: Kshs 1,700,000,000) unutilised credit facility.

The net liquid assets of the Group and Company as at 31 March 2013 as highlighted below.

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Assets Quoted investments 3,036,299 2,732,872 1,666,309 3,208,611 2,967,876 Corporate bonds 1,071,046 995,313 480,000 539,188 505,371 Due from subsidiary companies - - - - - Receivables 1,071,947 260,825 19,565 230,174 108,849 Deposits 224,018 902,500 310,000 - 345,000 Cash 619,630 599,269 12,410 6,776 48,641 Cash and cash equivalents 6,022,940 5,490,779 2,488,284 3,984,749 3,975,737

Liabilities Payables and accruals 1,840,552 287,858 355,956 719,170 357,154 Due to subsidiary companies - - - - - Unclaimed dividends 28,987 32,504 34,437 35,049 42,650 Overdraft 1,291,101 - - - - Borrowings 4,201,029 4,149,532 1,000,000 1,987,980 - 7,361,669 4,469,894 1,390,393 2,742,199 399,804 Net liquid assets (1,338,729) 1,020,885 1,097,891 1,242,550 3,575,933 Information Memorandum 183 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(b) Liquidity risks (continued)

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Assets Quoted investments 686,348 1,088,778 1,289,540 2,422,116 2,080,599 Corporate bonds - 105,560 480,000 539,188 505,371 Due from subsidiary companies 7,668,573 5,969,488 3,104,780 2,221,780 412,623 Receivables 27,499 123,796 152,360 155,779 26,658 Deposits 108,851 902,500 310,000 - 345,000 Cash 66,081 28,396 7,340 5,903 48,168

Cash and cash equivalents 8,679,198 8,218,518 5,344,020 5,344,766 3,418,419

Liabilities Payables and accruals 204,467 230,182 134,078 144,332 356,906 Due to subsidiary companies 121,846 838,300 862,303 283,872 283,680 Unclaimed dividends 28,987 32,504 34,437 35,049 42,650 Overdraft - - - - - Borrowings 5,492,130 4,149,532 1,000,000 1,987,980 -

5,847,430 5,250,518 2,030,818 2,451,233 683,236

Net liquid assets 2,831,768 2,968,000 3,313,202 2,893,533 2,735,183

The borrowings which are mainly utilised for investment purposes together with accruing interest are matched by expected future cash inflows. All financial liabilities are payable within 12 months except borrowings which are payable after the following period

Group and Company Less than 1 years Between 1 and 2 years Between 2 and 5 years Kshs’000 Kshs’000 Kshs’000

At 31 March 2014 Borrowings 553,136 553,136 4,576,179

At 31 March 2013 Borrowings 553,136 553,136 5,682,451

At 31 March 2012 Borrowings 533,333 466,000 400,000

At 31 March 2011 Overdraft 987,980 - - Borrowings - 389,993 781,008

At 31 March 2010 Overdraft - - - Borrowings - - - 184 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(c) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. The Group and the Company have adopted a policy of only dealing with credit worthy counterparties.

The credit risk exposures are classified in three categories: • Neither past due nor impaired • Past due • Impaired

Credit risk arises from cash and cash equivalents, deposits with banks, corporate bonds, loans advanced as well as trade and other receivables.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by the banking regulatory authority. The Group has adopted a policy of only dealing with creditworthy counterparties and only investing in reputable corporate.

None of the assets subject to credit risk are past due or impaired.

(d) Fair value hierarchy

The Group specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 Quoted prices in active markets for identical assets or liabilities. This level includes equity securities and debt instruments listed on the Nairobi Securities Exchange.

• Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly as prices or indirectly as derived from prices.

• Level 3 Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible. The following table shows an analysis of financial instruments reflected at fair value by level of the fair value hierarchy. Information Memorandum 185 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(d) Fair value hierarchy (continued)

Group Level 1 Level 2 Level 3 Total Note Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Financial assets: Unquoted equity instruments 20 - - 7,569,310 7,569,310 Quoted equity instruments 21 3,036,299 - - 3,036,299 Corporate bonds 22 1,071,046 - - 1,071,046

31 March 2013 Financial assets: Unquoted equity instruments 20 - - 4,306,221 4,306,221 Quoted equity instruments 21 2,732,872 - - 2,732,872 Corporate bonds 22 995,313 - - 995,313

31 March 2012 Financial assets: Unquoted equity instruments - - 1,427,206 1,427,206 Quoted equity instruments 1,666,309 - - 1,666,309 Corporate bonds 480,000 - - 480,000

31 March 2011 Financial assets: Unquoted equity instruments - - 1,338,664 1,338,664 Quoted equity instruments 3,208,611 - - 3,208,611 Corporate bonds 539,188 - - 539,188

31 March 2010 Financial assets: Unquoted equity instruments - - 1,251,209 1,251,209 Quoted equity instruments 2,967,876 - - 2,967,876 Corporate bonds 505,371 - - 505,371 186 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(d) Fair value hierarchy (continued)

Company Level 1 Level 2 Level 3 Total Note Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Financial assets: Investment in subsidiaries 18 - - 8,159,156 8,159,156 Investment in associates 19 - - 6,594,340 6,594,340 Unquoted equity instruments - - 5,495,272 5,495,272 Quoted equity instruments 21 686,348 - - 686,348

31 March 2013 Financial assets: Investment in subsidiaries 18 - - 3,442,759 3,442,759 Investment in associates 19 - - 6,152,947 6,152,947 Unquoted equity instruments - - 3,539,417 3,539,417 Quoted equity instruments 21 1,088,778 - - 1,088,778 Corporate bonds 22 105,560 - - 105,560

31 March 2012 Financial assets: Investment in subsidiaries - - 1,784,954 1,784,954 Investment in associates - - 7,128,721 7,128,721 Unquoted equity instruments - - 1,427,206 1,427,206 Quoted equity instruments 1,289,540 - - 1,289,540 Corporate bonds 480,000 - - 480,000

31 March 2011 Financial assets: Investment in subsidiaries - - 1,753,506 1,753,506 Investment in associates - - 6,230,521 6,230,521 Unquoted equity instruments - - 1,338,664 1,338,664 Quoted equity instruments 2,422,116 - - 2,422,116 Corporate bonds 539,188 - - 539,188

31 March 2010 Financial assets: Investment in subsidiaries - - 850,163 850,163 Investment in associates - - 4,240,102 4,240,102 Unquoted equity instruments - - 1,251,209 1,251,209 Quoted equity instruments 2,080,599 - - 2,080,599 Corporate bonds 505,371 - - 505,371 Information Memorandum 187 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(d) Fair value hierarchy (continued)

There were no transfers into or out of level 3 in 2014, 2013,2012, 2011 and 2010.

The following is a movement of financial assets classified under level 3.

(I) Group

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

At start of year 4,306,221 1,427,206 1,338,664 1,251,209 1,212,828 Additions 337,124 837,929 85,240 382,433 79,743 Disposals (39,666) (8,063) (111,295) (307,143) (60,323) Transfer from associates - 1,030,412 - - - Fair value gains/(loss) 2,965,631 1,018,737 114,597 12,165 18,961

At end of year 7,569,310 4,306,221 1,427,206 1,338,664 1,251,209

Total gains on level 3 financial assets held at the end of the year as recognised in other comprehensive income 2,965,631 1,018,737 114,597 12,165 18,961

(i) Company

At start of year 13,129,466 10,340,881 9,322,691 6,341,474 3,869,678 Additions 1,243,110 1,856,104 118,697 382,433 79,896 Disposals (39,666) (1,474,454) (111,657) (186,142) (60,323) Transfer from associates - - - - - Fair value gains/(loss) 5,866,222 2,406,935 1,011,150 2,784,926 2,452,223

At end of year 20,199,132 13,129,466 10,340,881 9,322,691 6,341,474

Total gains on level 3 financial assets held at the end of the year as recognised in other comprehensive income 5,860,663 2,406,935 1,011,150 2,784,926 2,452,223

Financial assets under level 3 are valued using earnings multiples that are based on the market prices of comparable entities. If the market prices of the comparable entities listed on the Nairobi Securities Exchange appreciated/(depreciated) by 5%, the fair values of the financial assets under level 3 would change by the following.

(a) Group 2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

5% change market value 44,905 16,576 49,533 42,474 50,238

(b) Company

5% change market value 113,673 383,745 356,436 341,113 212,005 188 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

4 Financial risk management (continued)

(d) Fair value hierarchy (continued)

There were no transfers into or out of level 3 in 2014, 2013,2012, 2011 and 2010.

The following is a movement of financial assets classified under level 3.

(a) Group

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Share capital 332,721 332,721 332,721 302,474 274,976 Share premium 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 6,170,187 2,828,301 1,736,198 2,443,738 3,032,911 Retained earnings 12,912,168 9,891,966 7,382,570 6,223,412 3,958,527 Non-controlling interest 268,008 - - - -

Equity 20,272,837 13,642,741 10,041,242 9,559,377 7,856,167

Total borrowings 5,492,130 4,149,532 1,000,000 1,987,980 - Less: Cash and bank balances (843,648) (1,501,769) (12,410) (6,776) (48,641) Net borrowings 4,648,482 2,647,763 987,590 1,981,204 (48,641)

Gearing (%) 22.93% 19.41% 9.84% 20.73% Nil

(b) Company

Share capital 332,721 332,721 332,721 302,474 274,976 Share premium 589,753 589,753 589,753 589,753 589,753 Investment revaluation reserve 15,962,362 10,210,128 8,792,989 8,106,034 5,947,916 Retained earnings 6,051,372 5,004,099 3,970,001 3,554,106 2,344,421

Equity 22,936,208 16,136,701 13,685,464 12,552,367 9,157,066

Total borrowings 5,492,130 4,149,532 1,000,000 1,987,980 - Less: Cash and bank balances (174,932) (930,896) (7,340) (5,903) (48,168) Net borrowings 5,317,198 3,218,636 992,660 1,982,077 (48,168)

Gearing (%) 23.18% 19.95% 7.25% 15.79% Nil Information Memorandum 189 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information

The Group’s chief operating decision maker is the executive management committee. The Group organises its activity by business lines and these are defined as the Group’s reportable segments under IFRS 8, Operating Segments. The three business lines are; Private Equity, Quoted Equity and Real Estate & Infrastructure. Performance is reviewed from a total return perspective.

Total return

Total return is the total value created in the period which includes cash value as well as unrealised movements in the portfolio. Total return is calculated as the gross portfolio return less portfolio and funding costs. Total return is expressed in absolute amount or as a percentage of opening portfolio value in the period.

Gross portfolio return

Gross portfolio return is equivalent to “revenue” for the purposes of IAS 1. It represents the overall increase in net assets from the investment portfolio. Gross return is analysed into the following components:

Portfolio income Portfolio Income is that portion of income that is directly related to the return from individual investments. It is recognised to the extent that it is probable that there will be economic benefit and the income can be reliably measured. Portfolio income includes; dividend income, interest income, rental income as well as fee income.

• Dividend income from investment in associates is included as portfolio income.

For the Group dividend income, the equity method of accounting is not applied and as such dividends received from associate investments are incorporated.

• Realised profits on the disposal of investments are the difference between the fair value of the consideration received less any directly attributable costs, on the sale of equity, and its carrying value at the start of the accounting period.

Although the net realised gains are similar to those in the statement of comprehensive income (SCI), the disclosure differs under the Group’s segment reporting.

In the SCI, the difference between the sales proceeds and cost of the investments are accounted for in the income statement, while the difference between the gains and the opening fair value is then disclosed under other comprehensive income as reserves released on disposal of investments.

• Unrealised profits on the revaluation of investments are the movement in the carrying value of investments between the start and end of the accounting year.

Under the Group’s segment reporting, there is no differentiation between fair value through profit or loss and fair value through other comprehensive income. All value movements are passed through the statement of total return.

Portfolio costs Portfolio costs include all expenses, operating and administrative incurred in the furtherance of investment activity during the accounting period.

Portfolio value Portfolio value includes the carrying value of equity investments as well as marketable securities.

The segment information provided to the executive management committee for the reportable segments for the year ended 31 March 2014 is as below. 190 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(a) Group Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Dividend income 421,352 264,832 0 686,184 Interest income 0 203,112 15,287 218,399 Other income 8,773 267,857 17 276,647 Realized gains 2,416 705,389 0 707,805 Unrealised value movements 3,164,883 747,522 3,049,918 6,962,323

Gross return 3,597,424 2,188,712 3,065,222 8,851,358

Finance costs (10,876) (7,400) (451,079) (469,355) Portfolio costs (272,119) (308,628) (215,079) (795,826)

(282,995) (316,028) (666,158) (1,265,181)

Net return 3,314,429 1,872,684 2,399,064 7,586,177 Tax (12,547) (91,097) (852,437) (956,081)

Total return 3,301,882 1,781,587 1,546,627 6,630,096

Gross return (%) 59.4% 41.7% 131.3% 64.9% Total return (%) 54.5% 33.9% 66.3% 48.6%

Opening net asset value: Portfolio value 7,812,006 3,728,185 5,456,057 16,996,248 Other net assets/(liabilities) (79,939) 1,522,649 (646,685) 796,025 Borrowings (1,674,336) - (2,475,196) (4,149,532)

6,057,731 5,250,834 2,334,176 13,642,741

Closing net asset value: Portfolio value 11,470,161 4,107,345 10,845,392 26,422,898 Other net asset/(liabilities) (219,626) 2,259,557 (2,697,862) (657,931) Borrowings (1,710,807) (1,008,247) (2,773,076) (5,492,130)

9,539,728 5,358,655 5,374,454 20,272,837

Value movement in the period/(total return) 6,630,096 Information Memorandum 191 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(b) Group Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2013 Dividend income 239,700 144,224 - 383,924 Interest income - 222,680 - 222,680 Other income 7,361 70,327 7,062 84,750 Realized gains 565,240 142,951 145,000 853,191 Unrealised value movements 1,240,546 883,178 1,592,750 3,716,474

Gross return 2,052,847 1,463,360 1,744,812 5,261,019

Finance costs (212,537) (90,859) (97,367) (400,763) Portfolio costs (177,895) (105,243) (237,042) (520,180)

(390,432) (196,102) (334,409) (920,943)

Net return 1,662,415 1,267,258 1,410,403 4,340,076 Tax (448) (36,972) (701,157) (738,577)

Total return 1,661,967 1,230,286 709,246 3,601,499

Gross return (%) 41.35% 59.15% 67.05% 52.39% Total return (%) 33.48% 49.72% 27.25% 35.87%

Opening net asset value: Portfolio value 5,041,756 2,146,309 3,992,754 11,180,819 Other net assets/(liabilities) (76,965) 327,880 (390,492) (139,577) Borrowings - - (1,000,000) (1,000,000)

4,964,791 2,474,189 2,602,262 10,041,242

Closing net asset value: Portfolio value 7,812,006 3,728,185 5,456,057 16,996,248 Other net asset/(liabilities) (79,939) 1,522,649 (646,685) 796,025 Borrowings (1,674,336) - (2,475,196) (4,149,532)

6,057,731 5,250,834 2,334,176 13,642,741

Value movement in the period/(total return) 3,601,499 192 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(c) Group Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2012 Dividend income 324,678 90,271 - 414,949 Interest income - 52,143 - 52,143 Other income 50,774 - 6,135 56,909 Realized gains - 56,389 - 56,389 Unrealised value movements 346,294 (121,484) 353,610 578,420

Gross return 721,746 77,319 359,745 1,158,810

Finance costs - (49,979) (179,893) (229,872) Portfolio costs (108,287) (67,557) (93,959) (269,803)

(108,287) (117,536) (273,852) (499,675)

Net return 613,459 (40,217) 85,893 659,135 Tax (18,340) (12,937) (145,993) (177,270)

Total return 595,119 (53,154) (60,100) 481,865

Gross return (%) 15.5% 2.0% 38.0% 12.1% Total return (%) 12.7% (1.3%) (6.3%) 5.0%

Opening net asset value: Portfolio value 4,715,969 3,723,790 3,525,578 11,965,337 Other net assets/(liabilities) (47,038) 219,996 (590,938) (417,980) Borrowings - - (1,987,980) (1,987,980

4,668,931 3,943,786 946,660 9,559,377

Closing net asset value: Portfolio value 5,041,756 2,146,309 3,992,754 11,180,819 Other net asset/(liabilities) (76,965) 327,880 (390,492) (139,577) Borrowings - - (1,000,000) (1,000,000)

4,964,791 2,474,189 2,602,262 10,041,242

Value movement in the period/(total return) 481,865 Information Memorandum 193 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(d) Group Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2011 Dividend income 419,430 109,996 - 529,426 Interest income - 77,950 - 77,950 Other income 14,220 8,575 6,276 29,071 Realized gains 121,001 34,132 - 155,133 Unrealised value movements 189,493 175,253 1,002,866 1,367,612

Gross return 744,144 405,906 1,009,142 2,159,192

Finance costs - - (154,697) (154,697) Portfolio costs (171,306) (84,324) (43,609) (299,239)

(171,306) (84,324) (198,306) (453,936)

Net return 572,838 321,582 810,836 1,705,256 Tax (545) (1,582) 81 (2,046)

Total return 572,293 320,000 810,917 1,703,210

Gross return (%) 17.4% 11.5% 2,757.4% 27.5% Total return (%) 13.4% 9.0% 2,215.0% 21.7%

Opening net asset value: Portfolio value 4,199,795 3,473,247 35,940 7,708,982 Other net assets 76,751 69,777 657 147,185

4,276,546 3,543,024 36,597 7,856,167

Closing net asset value: Portfolio value 4,715,969 3,723,790 3,525,578 11,965,337 Other net asset/(liabilities) (47,038) 219,996 (590,938) (417,980) Borrowings - - (1,987,980) (1,987,980)

4,668,931 3,943,786 946,660 9,559,377

Value movement in the period/(total return) 1,703,210 194 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(e) Group Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2010 Dividend income 247,527 45,839 - 293,366 Interest income - 6,022 - 6,022 Other income 21,711 9,699 2,910 34,320 Realised gains 201,998 113,663 - 315,661 Unrealised value movements 128,691 996,361 - 1,125,052

Gross return 599,927 1,171,584 2,910 1,774,421

Finance costs (28,761) (17,036) (1,143) (46,940) Portfolio costs (119,289) (64,757) (16,268) (200,314)

(148,050) (81,793) (17,411) (247,254)

Net return 451,877 1,089,791 (14,501) 1,527,167 Tax 496 11,010 1,461 12,967

Total return 452,373 1,100,801 (13,040) 1,540,134

Gross return (%) 14.9% 51.8% 8.1% 28.1% Total return (%) 11.3% 48.7% (36.4%) 24.4%

Opening net asset value: Portfolio value 4,101,600 2,305,043 36,560 6,443,203 Other net assets 27,253 16,315 243 43,811 Borrowings (108,206) (60,810) (965) (169,981)

4,020,647 2,260,548 35,838 6,316,033

Closing net asset value: Portfolio value 4,199,795 3,473,247 35,940 7,708,982 Other net asset 76,751 69,777 657 147,185 Borrowings - - - -

4,276,546 3,543,024 36,597 7,856,167

Value movement in the period/(total return) 1,540,134 Information Memorandum 195 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(f) Company Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Dividend income 519,352 1,218,294 51,000 1,788,646 Interest income - 39,784 - 39,784 Other income 11,189 - - 11,189 Realized value movements - 15,401 - 15,401 Unrealized value movements 3,395,076 479,834 2,010,528 5,885,438

Gross return 3,925,617 1,753,313 2,061,528 7,740,458

Finance costs (10,876) - (451,078) (461,954) Portfolio costs (282,819) (70,903) (76,955) (430,677)

(293,695) (70,903) (528,033) (892,631)

Net return 3,631,922 1,682,410 1,533,495 6,847,827 Tax (8,880) (38,770) (673) (48,323)

Total return 3,623,042 1,643,640 1,532,822 6,799,504

Gross return (%) 45.1% 35.2% 84.1% 48.0% Total return (%) 41.6% 33.0% 62.6% 42.1%

Opening net asset value: Portfolio value 10,459,172 3,748,424 5,099,849 19,307,445 Other net assets (79,939) 1,233,009 (174,282) 978,788 Borrowings (1,674,336) - (2,475,196) (4,149,532)

8,704,897 4,981,433 2,450,371 16,136,701

Closing net asset value Portfolio value 14,060,848 5,024,502 10,286,150 29,371,500 Other asset/(liabilities) (91,608) 1,213,962 (2,065,519) (943,165) Borrowings (1,710,807) (1,008,247) (2,773,076) (5,492,130)

12,258,433 5,230,217 5,447,555 22,936,205

Value movement in the period/(total return) 6,799,504 196 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(g) Company Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2013 Dividend income 239,700 43,768 - 283,468 Interest income - 107,979 - 107,979 Other income 9,623 70,063 - 79,686 Realized value movements (107,147) 116,507 - 9,360 Unrealized value movements 754,853 1,128,302 967,267 2,850,422

Gross return 897,029 1,466,619 967,267 3,330,915

Finance costs (212,537) (90,859) (97,301) (400,697) Portfolio costs (177,892) (104,023) (160,216) (442,131)

(390,429) (194,882) (257,517) (842,828)

Net return 506,600 1,271,737 709,750 2,488,087 Tax (448) (36,842) 440 (36,850)

Total return 506,152 1,234,895 710,190 2,451,237

Gross return (%) 10.42% 59.29% 37.16% 24.34% Total return (%) 5.88% 49.92% 27.29% 17.91%

Opening net asset value: Portfolio value 8,555,814 2,145,791 3,992,813 14,694,418 Other net assets 53,246 327,938 (390,138) (8,954) Borrowings - - (1,000,000) (1,000,000)

8,609,060 2,473,729 2,602,675 13,685,464

Closing net asset value Portfolio value 10,459,172 3,748,424 5,099,849 19,307,445 Other asset/(liabilities) (79,939) 1,233,009 (174,282) 978,788 Borrowings (1,674,336) - (2,475,196) (4,149,532)

8,704,897 4,981,433 2,450,371 16,136,701

Value movement in the period/(total return) 2,451,237 Information Memorandum 197 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(h) Company Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2012 Dividend income 324,678 79,669 - 404,347 Interest income - 44,740 7,403 52,143 Other income 50,179 - 1,998 52,177 Realized value movements - 83,913 - 83,913 Unrealized value movements 992,246 (152,936) 19,525 858,835

Gross return 1,367,103 55,386 28,926 1,451,415

Finance costs - (49,979) - (49,979) Portfolio costs (103,907) (53,026) (70,142) (227,075)

(103,907) (103,005) (70,142) (277,054)

Net return 1,263,196 (47,619) (41,216) 1,174,361 Tax (18,281) (18,155) (4,828) (41,264)

Total return 1,244,915 (65,774) (46,044) 1,133,097

Gross return (%) 17.8% 1.4% 3.1% 11.6% Total return (%) 16.2% (1.7%) (4.9%) 9.0%

Opening net asset value: Portfolio value 7,571,499 3,939,975 2,951,418 14,462,892 Other net assets 90,419 4,039 (17,003) 77,455 Borrowings - - (1,987,980) (1,987,980)

7,661,918 3,944,014 946,435 12,552,367

Closing net asset value Portfolio value 8,555,814 2,145,791 3,992,813 14,694,418 Other asset/(liabilities) 53,246 327,938 (390,138) (8,954) Borrowings - - (1,000,000) (1,000,000)

8,609,060 2,473,729 2,602,675 13,685,464

Value movement in the period/(total return) 1,133,097 198 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(i) Company Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2011 Dividend income 421,106 88,691 - 509,797 Interest income - 77,950 - 77,950 Other income 11,708 8,575 4,559 24,842 Realized gains 121,001 10,090 - 131,091 Unrealised value movements 1,879,642 220,564 999,028 3,099,234

Gross return 2,433,457 405,870 1,003,587 3,842,914

Finance costs - - (154,697) (154,697) Portfolio costs (164,916) (84,286) (41,764) (290,966)

(164,916) (84,286) (196,461) (445,663)

Net return 2,268,541 321,584 807,126 3,397,251 Tax (545) (1,486) 81 (1,950)

Total return 2,267,996 320,098 807,207 3,395,301

Gross return (%) 43.4% 11.5% 2,777% 42.0% Total return (%) 40.5% 9.1% 2,234% 37.1%

Opening net asset value: Portfolio value 5,491,311 3,487,361 35,948 9,014,620 Other net assets 110,903 31,358 185 142,446

Closing net asset value 5,602,214 3,518,719 36,133 9,157,066

Portfolio value 7,571,499 3,939,975 2,951,418 14,462,892 Other asset/(liabilities) 90,419 4,039 (17,003) 77,455 Borrowings - - (1,987,980) (1,987,980)

7,661,918 3,944,014 946,435 12,552,367

Value movement in the period/(total return) 3,395,301 Information Memorandum 199 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(j) Company Private equity Quoted equity Real estate Total & infrastructure Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2010 Dividend income 409,708 45,840 - 455,548 Interest income - 6,022 - 6,022 Other income 18,924 9,975 4,296 33,195 Realized gains - 87,735 - 87,735 Unrealized value movements 1,886,230 1,061,968 - 2,948,198

Gross return 2,314,862 1,211,540 4,296 3,530,698

Finance costs (28,761) (17,036) (1,143) (46,940) Portfolio costs (118,543) (64,364) (16,144) (199,051)

(147,304) (81,400) (17,287) (245,991)

Net return 2,167,558 1,130,140 (12,991) 3,284,707 Tax 496 11,010 1,461 12,967

Total return 2,168,054 1,141,150 (11,530) 3,297,674

Gross return (%) 65.3% 53.2% 11.9% 60.3% Total return (%) 61.1% 50.1% (31.9%) 56.3%

Opening net asset value: Portfolio value 3,588,440 2,305,043 36,560 5,930,043 Other net assets 60,105 38,609 616 99,330 Borrowings (102,860) (66,073) (1,048) (169,981)

3,545,685 2,277,579 36,128 5,859,392

Closing net asset value Portfolio value 5,491,311 3,487,361 35,948 9,014,620 Other net assets 110,903 31,358 185 142,446

5,602,214 3,518,719 36,133 9,157,066

Value movement in the period/(total return) 3,297,674 200 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(k) Reconciliation of total return to profit after tax for the year

Group

2014 2013 2012 2011 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Total return as per internal reporting 6,630,096 3,601,499 481,865 1,703,210 1,540,134 Adjustments for: Share of associate earnings 393,432 263,259 594,037 486,934 289,787 Share of other comprehensive income of associates 32,761 41,918 (91,117) 165,053 (29,980) Associate dividend income (225,983) (217,072) (280,941) (223,267) (150,077) Unrealised value movements net of dividend relating to associates (199,251) (88,105) (206,713) (428,720) (109,730) Additions in the year - - (15,266) - -

Total comprehensive income 6,631,055 3,601,499 481,865 1,703,210 1,540,134

Other comprehensive income (3,575,685) (1,092,103) 707,540 589,173 (446,377)

Profit for the year 3,055,370 2,509,396 1,189,405 2,292,383 1,093,757

(d) Reconciliation of Gross return to profit after tax for the year

Gross return as per internal reporting 8,851,358 5,261,019 1,158,811 2,159,192 1,774,421 Adjustments for: Associate dividend income (225,983) (217,072) (271,223) (353,658) (150,077) Unrealised value movements net of dividend relating to associates (199,251) (88,105) (216,432) (298,330) (109,730) Additions in the year - - (15,266) - -

Items dealt with on other comprehensive income in the financial statements: Reserves released on disposal of investments 287,772 791,726 562,349 964,613 854,626 Fair value gain in quoted securities (865,064) (835,057) (114,597) (12,164) (18,961) Fair value gain in unquoted securities (2,965,632) (1,018,737) 166,121 (199,577) (1,312,022) Currency translation differences - 11,883 2,550 1,355 -

Total income for the year 4,883,200 3,905,657 1,272,313 2,261,431 1,038,257 Information Memorandum 201 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(l) Other segment reporting disclosures Private Quoted Real estate Total equity equity & infrastructure Group Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Depreciation and amortisation 6,113 1,589 5,304 13,006 Motor vehicle and equipment 27,902 7,171 24,882 59,955 Intangible assets 9,687 970,334 8,735 988,756 Additions to motor vehicle and equipment 10,409 2,706 9,479 22,594 Additions to intangible assets - 985,504 - 985,504

31 March 2013 Depreciation and amortisation 1,600 1,280 3,622 6,502 Motor vehicle and equipment 11,000 8,800 24,199 43,999 Intangible assets 430 344 4,523 5,297 Additions to motor vehicle and equipment 5,648 4,519 12,427 22,594 Additions to intangible assets 283 226 4,303 4,812

31 March 2012 Depreciation and amortisation 1,153 1,922 2,748 5,823 Motor vehicle and equipment 5,762 9,452 11,343 26,557 Intangible assets 413 688 825 1,926 Additions to motor vehicle and equipment 891 1,484 1,781 4,156 Additions to intangible assets 55 92 112 259

31 March 2011 Depreciation and amortisation 2,114 987 767 3,868 Motor vehicle and equipment 13,971 7,224 5,618 26,813 Intangible assets 3,939 824 641 5,404 Additions to motor vehicle and equipment 11,123 5,742 4,465 21,330 Additions to intangible assets 4,281 894 696 5,871

31 March 2010 Depreciation and amortisation 1,138 723 7 1,868 Motor vehicle and equipment 6,912 4,390 45 11,347 Intangible assets 366 233 2 601 Additions to motor vehicle and equipment 5,728 3,638 37 9,403 Additions to intangible assets 364 231 2 597 202 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(M) Other segment reporting disclosures Private Quoted Real estate Total equity equity & infrastructure Company Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Depreciation and amortisation - - - - Motor vehicle and equipment - - - - Intangible assets - - - - Additions to motor vehicle and equipment - - - - Additions to intangible assets - - - -

31 March 2013 Depreciation and amortisation 1,600 1,280 3,520 6,400 Motor vehicle and equipment 11,000 8,800 24,199 43,999 Intangible assets 430 344 946 1,720 Additions to motor vehicle and equipment 5,648 4,519 12,427 22,594 Additions to intangible assets 283 226 623 1,132

31 March 2012 Depreciation and amortisation 1,153 1,922 2,322 5,397 Motor vehicle and equipment 5,672 9,452 11,343 26,467 Intangible assets 413 688 825 1,926 Additions to motor vehicle and equipment 891 1,484 1,781 4,156 Additions to intangible assets 55 92 112 259

31 March 2011 Depreciation and amortisation 1,901 987 767 3,655 Motor vehicle and equipment 13,912 7,224 5,618 26,754 Intangible assets 1,587 824 641 3,052 Additions to motor vehicle and equipment 11,058 5,742 4,465 21,265 Additions to intangible assets 1,722 894 696 3,312

31 March 2010 Depreciation and amortisation 1,138 723 7 1,868 Motor vehicle and equipment 6,912 4,390 45 11,347 Intangible assets 366 233 2 601 Additions to motor vehicle and equipment 5,728 3,638 37 9,403 Additions to intangible assets 364 231 2 597 Information Memorandum 203 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

5 Segment information (continued)

(n) Analysis of income by geographical segments is below

2014 2013 2012 2011 2010 (i) Group Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Kenya 3,459,999 3,662,561 1,292,486 1,838,960 998,438 Uganda 437,979 (59,246) (26,282) 421,676 - Tanzania 716,848 57,411 - - - Others 268,374 244,931 6,109 795 39,819

4,883,200 3,905,657 1,272,313 2,261,431 1,038,257

(ii) Company

Kenya 1,983,114 1,912,459 757,704 1,672,516 919,465 Uganda 72 1,103 647 - - Tanzania - - - - - Others 5,041 214 6,109 12,280 201,999

1,988,227 1,913,776 764,460 1,684,796 1,121,464

Non-current assets by country

(i) Group

Kenya Investment property 8,181,816 3,753,800 2,307,581 1,865,800 35,940 Motor vehicles and equipment 59,954 (43,999) 26,467 26,813 11,347 Intangible assets 988,756 5,297 1,926 5,404 601

Outside Kenya Investment property 2,663,576 1,702,257 1,685,172 1,659,778 - Motor vehicles and equipment - - - - -

(ii) Company

Kenya Investment property - - - 265,000 35,940 Motor vehicles and equipment - 43,999 26,467 26,467 11,347 Intangible assets 967,210 1,720 1,926 3,052 601

Outside Kenya Investment property - - - - - Motor vehicles and equipment - - - - - 204 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

6 Income

(a) Group

Total investment income Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Dividend income 460,201 300,557 143,725 175,768 143,289 Rent income 17 7,062 6,136 6,276 2,259 Interest income 218,399 222,680 52,143 77,950 6,022 Fund management income 266,673 - - - - Gain on disposal of investments 11 993,161 1,495,955 618,738 964,613 854,626 Gain on disposal of investment property - 145,000 - - - Unrealised gains on investment property 15 3,049,918 1,604,632 356,160 1,004,221 - Unrealised (loss)/gains on corporate bond 22 (117,309) 48,122 44,637 9,808 - Write back of long outstanding dividend - - - 6,209 25,485 Other income 12,140 81,649 50,774 16,586 6,873

4,883,200 3,905,657 1,272,313 2,261,431 1,038,554

Income from financial assets: Available for sale financial assets 1,680,535 2,019,192 821,907 1,223,906 1,009,275 At fair value through profit & loss (117,309) 48,122 400,797 9,808 - 1,563,226 2,067,314 1,227,704 1,233,714 1,009,275 Investment income earned on non-financial assets 3,319,974 1,838,343 49,609 1,027,717 28,982

4,883,200 3,905,657 1,272,313 2,261,431 1,038,257

Dividend income Subsidiaries - - - - 39,819 Associates - 28,742 - - - Unquoted investments 319,845 127,591 53,454 65,772 57,631 Quoted investments 140,356 144,224 90,271 109,996 45,839

460,201 300,557 143,725 175,768 143,289 Information Memorandum 205 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

6 Income (continued)

(b) Company

Total investment income Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Dividend income 1,788,646 283,468 404,347 509,797 455,547 Rent income - - 1,998 4,559 1,134 Interest income 39,784 107,979 52,143 77,950 6,022 Fund management income - - - - - Gain on disposal of investments 148,609 1,433,074 211,156 833,339 626,700 Gain on disposal of investment property - - - - - Unrealised gains on investment property 15 - - - 229,060 - Unrealised (loss)/gains on corporate bond 161 9,560 44,637 9,808 - Write back of long outstanding dividend - - - 6,209 25,485 Other income 11,027 79,695 50,179 14,074 6,576

1,988,227 1,913,776 764,460 1,684,796 1,121,464

Income from financial assets: Available for sale financial assets 1,977,039 1,824,521 674,947 1,426,659 1,093,607 At fair value through profit & loss 161 9,560 44,637 9,808 -

1,977,200 1,834,081 719,584 1,436,467 1,093,607

Investment income earned on non-financial assets 11,027 79,695 44,876 248,329 27,857

1,988,227 1,913,776 764,460 1,684,796 1,121,464

Dividend income Subsidiaries 1,343,720 - 271,223 353,658 150,077 Associates 225,983 112,109 - 1,676 201,999 Unquoted investments 195,369 127,591 53,455 65,772 57,632 Quoted investments 23,574 43,768 79,669 88,691 45,839

1,788,646 283,468 404,347 509,797 455,547 206 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

7 Expenses by nature

(a) Administrative

Notes 2014 2013 2012 2011 2010 (i) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Staff costs (Note 9) 513,525 335,333 104,393 177,521 106,778 Directors’ fees and expenses 12,891 14,129 13,928 8,461 4,430 Audit fees 5,177 4,822 4,194 2,805 2,020 Office rent & service charge 9,550 6,410 4,077 4,322 3,850 Depreciation & amortisation 11,008 6,502 5,818 3,868 1,868 Other administrative costs 23,334 12,764 15,684 9,003 3,380

575,485 379,960 148,094 205,980 122,326

(i) Company

Staff costs (Note 9) 245,590 327,637 102,548 177,206 106,778 Directors’ fees and expenses 11,921 14,129 13,928 8,461 4,430 Audit fees 3,540 3,744 3,092 2,805 2,020 Office rent & service charge 3,498 6,410 4,070 4,322 3,850 Depreciation & amortisation - 6,400 5,381 3,655 1,868 Other administrative costs 18,031 6,162 7,349 5,404 3,208

282,580 364,482 136,368 201,853 122,154

(a) Operating expenses

(i) Group

AGM & annual report printing 14,369 11,935 24,072 17,740 17,809 Business development costs 40,277 29,445 27,198 16,270 6,066 Capital raising costs - - 3,361 13,948 10,039 Legal and consultancy costs 80,154 66,487 - - - Advertising & PR costs 18,539 8,624 6,754 8,167 11,556 Share registration costs 3,410 3,453 3,391 5,886 4,089 Listing expenses 6,113 4,042 4,729 3,937 2,397 Other costs 57,479 16,234 52,204 27,311 26,032

220,341 140,220 121,709 93,259 77,988

(ii) Company

AGM & annual report printing 14,369 11,935 24,072 17,740 17,809 Business development costs 31,402 29,445 27,198 16,270 6,066 Capital raising costs - - 3,361 13,948 10,039 Legal and consultancy costs 42,864 10,136 - - - Advertising & PR costs 10,523 6,871 5,933 8,167 11,556 Share registration costs 3,410 3,453 3,391 5,886 4,089 Listing expenses 5,716 3,991 4,686 3,937 2,397 Other costs 39,813 11,818 22,066 23,165 24,941

148,097 77,649 90,707 89,113 76,897 Information Memorandum 207 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

8 Finance costs

Notes 2014 2013 2012 2011 2010 (i) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Interest on borrowings 660,082 343,576 179,243 147,914 44,758 Commitment fees 12,986 5,240 - 6,277 1,500 Forex loss 6,558 450 50,629 506 682 Bond related expenses 17,888 51,497 - - - 697,514 400,763 229,872 154,697 46,940

Less: amounts capitalised on qualifying assets 15 (228,159) - - - -

469,355 400,763 229,872 154,697 46,940

(i) Company

Interest on borrowings 431,897 343,543 - 147,914 44,758 Commitment fees 9,899 5,240 - 6,277 1,500 Forex loss 2,270 417 49,979 506 682 Bond related expenses 17,888 51,497 - - -

461,954 400,697 49,979 154,697 46,940

9 Employee benefits expense

(i) Group

Salaries 191,102 108,615 72,234 68,056 48,641 Performance bonus accrual 299,400 200,294 14,249 92,842 46,942 Retirement benefit scheme contributions 4,579 6,390 4,947 4,579 3,103 National Social Security Fund contributions (NSSF) 91 67 105 91 17 Movement in leave pay provision (789) 1,886 (789) 1,290 1,615 494,383 317,252 90,746 166,858 100,318 Staff medical expenses 8,405 7,301 2,685 1,766 1,980 Other staff welfare costs 10,737 10,780 10,962 8,897 4,480

513,525 335,333 104,393 177,521 106,778

(ii) Company

Salaries 85,492 100,919 70,389 67,741 48,641 Performance bonus accrual 144,652 200,294 14,249 92,842 46,942 Retirement benefit scheme contributions 4,579 6,390 4,947 4,579 3,103 National Social Security Fund contributions (NSSF) 91 67 105 91 17 Movement in leave pay provision (789) 1,886 (789) 1,290 1,615 234,025 309,556 88,901 166,543 100,318 Staff medical expenses 3,289 7,301 2,685 1,766 1,980 Other staff welfare costs 8,276 10,780 10,962 8,897 4,480

245,590 327,637 102,548 177,206 106,778 208 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

10 (a) Income tax expense

2014 2013 2012 2011 2010 (i) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Current income tax 240,084 39,866 15,875 3,012 3,115 Prior year tax - - - - 45 Deferred income tax (Note 13) 715,997 479,186 28,602 (3,188) (16,173) Under provision of deferred income tax liability in prior year (Note 13) - 219,525 132,793 2,222 46

956,081 738,577 177,270 2,046 (12,967)

(i) Company

Current income tax 46,286 39,054 15,875 3,012 3,115 Prior year tax - - - - 45 Deferred income tax 2,037 (2,204) 25,389 (3,284) (16,173) Under provision of deferred income tax liability in prior year (Note 13) - - - 2,222 46

48,323 36,850 41,264 1,950 (12,967)

10 (b) Reconciliation of taxation charge to expected tax based on accounting profit:

(i) Group

Accounting profit before taxation 4,011,451 3,247,973 1,366,675 2,294,429 1,080,790

Tax at the applicable rate of 30% 1,203,436 974,392 410,002 688,329 324,237 Tax effect of income not taxable (1,315,721) (961,178) (461,020) (816,061) (387,247) Tax effect of expenses not deductible for tax 1,068,366 505,838 95,495 127,556 49,952 Prior year current tax under(over) provision - - - - 45 Prior year deferred tax under provision - 219,525 132,793 2,222 46

956,081 738,577 177,270 2,046 (12,967)

(ii) Company

Accounting profit before taxation 1,095,597 1,070,948 487,406 1,239,133 875,473

Tax at the applicable rate of 30% 328,679 321,284 146,222 371,740 262,642 Tax effect of income not taxable (648,984) (520,002) (200,453) (499,568) (325,652) Tax effect of expenses not deductible for tax 368,628 235,568 95,495 127,556 49,952 Prior year current tax under(over) provision - - - - 45 Prior year deferred tax under provision - - - 2,222 46

48,323 36,850 41,264 1,950 (12,967) Information Memorandum 209 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

10 (a) Taxation payable/(recoverable)

2014 2013 2012 2011 2010 (i) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At start of year 19,254 5,114 (2,654) (3,075) (5,632) Tax payable on acquisition of subsidiary 2,400 - - - - Charge for the year 240,084 39,866 15,875 3,012 3,160 Current income tax receivable written off - - 1,790 - - Payments during the year (50,825) (25,726) (9,897) (2,591) (603)

At end of year 210,913 19,254 5,114 (2,654) (3,075)

(i) Company

At start of year 19,495 5,146 (832) (3,044) (5,601) Charge for the year 46,286 39,054 15,875 3,012 3,160 Payments during the year (37,982) (24,705) (9,897) (800) (603)

At end of year 27,799 19,495 5,146 (832) (3,044)

11 Gains on disposal of investments GROUP COMPANY Gain on Gain on Cost Proceeds disposal Cost Proceeds disposal Note Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2014 Quoted investments 21 904,933 1,913,339 1,008,406 244,463 392,917 148,454 Unquoted investments 20 39,666 39,666 - 39,666 39,666 - Treasury bonds 22 741,010 725,765 (15,245) 105,721 105,560 (161)

1,685,609 2,678,770 993,161 389,850 538,143 148,293

Reserves released on disposal Quoted investments 21 - - 287,772 - - 133,208 Gain during the year - - 705,389 - - 15,085

- - 993,161 - - 148,293

31 March 2013 Quoted investments 699,047 974,577 275,530 496,317 708,966 212,649 Unquoted investments 8,063 8,063 - 8,063 8,063 - Associates 187,743 1,359,243 1,171,500 187,743 1,359,243 1,171,500 Treasury bonds 480,472 529,397 48,925 480,472 529,397 48,925

1,375,325 2,871,280 1,495,955 1,172,595 2,605,669 1,433,074

Reserves released on disposal - Quoted investments - - 181,513 - - 145,075 - Associates - - 610,213 - - 1,278,648

- 791,726 - - 1,423,723 Gain during the year - - 704,229 - - 9,351

- - 1,495,955 - - 1,433,074 210 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

11 Gains on disposal of investments (continued) GROUP COMPANY Gain on Gain on Cost Proceeds disposal Cost Proceeds disposal Note Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

31 March 2012 Quoted investments 1,177,929 1,691,927 513,998 889,731 1,019,819 130,088 Unquoted investments 111,295 111,295 - 111,295 111,295 - Treasury bonds 3,444,461 3,562,111 117,650 2,793,645 2,887,623 93,978 Treasury bonds 539,188 526,278 (12,910) 539,188 526,278 (12,910)

5,272,873 5,891,611 618,738 4,333,859 4,545,015 211,156

Reserves released on disposal - - 562,349 - - 127,243 Gain during the year - - 56,389 - - 83,913

- - 618,738 - - 211,156

31 March 2011 Quoted investments 942,346 1,629,241 686,895 859,453 1,415,074 555,621 Unquoted investments 29,425 307,143 277,718 29,425 307,143 277,718

971,771 1,936,384 964,613 888,878 1,722,217 833,339

31 March 2010 Quoted investments 430,979 1,083,606 652,627 399,076 1,025,776 626,700 Unquoted investments 63,148 265,147 201,999 - - -

494,127 1,348,753 854,626 399,076 1,025,776 626,700

12 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in outstanding during the year.

2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Profit attributable to equity holders of the Company 3,020,202 2,509,396 1,189,405 2,292,383 1,093,757

Weighted average number of ordinary shares in issue (thousands) 665,442 665,442 665,442 665,442 665,442

Basic earnings per share (Kshs) 4.54 3.77 1.79 3.44 1.64

At the Annual General Meeting held on 23 September 2011, the shareholder approved a bonus issue of one ordinary share for every ten shares held by utilisation of revenue reserves. Also, at the Annual General Meeting held on 24 September 2010, the shareholder approved a bonus issue of one ordinary share for every ten shares held by utilisation of revenue reserves. Information Memorandum 211 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

13 Deferred income tax

Deferred income tax is calculated using the enacted income tax rate of 30%. The movement on the deferred income tax account is as follows:

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At start of year (829,663) (130,952) 30,443 29,477 13,350

(Charge)/ credit to Profit/Loss (Note 10) (715,997) (698,711) (161,395) 966 16,127 Current year deferred tax (715,997) (479,186) (28,602) 3,188 16,173 Under provision of deferred tax in prior year - (219,525) (132,793) (2,222) (46) Acquisition of subsidiary 3,876 - - -

At end of year (1,541,784) (829,663) (130,952) 30,443 29,477

(b) Company

At start of year 7,354 5,150 30,539 29,477 13,350 (Charge)/ credit to Profit/Loss (2,037) 2,204 (25,389) 1,062 16,127 Current year deferred tax (2,037) 2,204 25,389) 3,284 16,173 Under provision of deferred tax in prior year - - - (2,222) (46)

At end of year 5,317 7,354 5,150 30,539 29,477

Deferred income tax is calculated on all temporary differences under the liability method using the currently enacted tax rate of 30%.The deferred tax asset/ (liability) is attributable to the following items:

2014 2013 2012 2011 2010 (c) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Tax losses 122,121 - - 2,256 2,127 Performance bonus provision 84,781 6,423 5,037 27,852 14,083 General provision for doubtful debt - - - - 12,121 Exchange differences - - - - 181 Leave pay provision 1,582 124 89 387 831 Accelerated capital allowances 307 54 24 (52) 134 Other provisions 1,226 - - - - Fair value gain on investment property (1,751,801) (836,264) (136,102) - -

(1,541,784) (829,663) (130,952) 30,443 29,477

(d) Company

Tax losses - - - 2,256 2,127 Performance bonus provision 3,814 6,423 5,037 27,852 14,083 General provision for doubtful debt - - - - 12,121 Exchange differences - - - - 181 Leave pay provision 85 124 89 387 831 Accelerated capital allowances - 54 24 (52) 134 Other provisions 1,418 753 - - - Fair value gain on investment property - - (136,102) - -

5,317 7,354 (130,952) 30,443 29,477 212 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

14 Prepaid Operating lease rentals

Group &Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Cost At start of Year - - - 59,487 59,487 Transfer to Investment property - - - (59,487) -

At end of year - - - - 59,487

Amortisation Amortisation charge at start of year - - - 23,547 22,927 Charge for the year - - - - 620 Transfer to Investment property - - - (23,547) - Amortisation charge at end of year - - - - 23,547

Net book value - - - - 35,940

In 2011, land which was previously held as an operating lease was transferred to investment property and reported at fair value in line with the requirement of IAS 40 as the group now holds the land for the purposes of development of an investment property (Note 15)

15 Investment property

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At start of year Valuation 5,456,057 3,992,754 3,525,578 - - Transfer from operating lease rental - - - 35,940 - Additions 2,111,258 128,671 111,016 2,485,417 - Capitalized borrowing costs 228,159 - - - - Transfer out/disposals - (270,000) - - - Fair value gains 3,049,918 1,604,632 356,160 1,004,221 -

At end of year 10,845,392 5,456,057 3,992,754 3,525,578 -

(a) Company

At start of year Valuation - - 265,000 - - Transfer from operating lease rental - - - 35,940 - Additions - - - - - Transfer out/disposals - - (265,000) - - Fair value gains - - - 229,060 -

At end of year - - - 265,000 -

Capitalized borrowing costs relate to interest costs incurred during the development phase of Two Rivers Development Limited. An average cost of debt of 10% (2013: Nil) was used as a basis for capitalization.

The fair value model has been applied for the investment property. The Company commissioned an independent qualified valuer to determine the fair value of the investment property as at 31 March 2014 on the basis of open market value. The open market value of all properties was determined using recent market prices. Information Memorandum 213 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

16 Motor vehicle and equipment

Group Company Ksh’000 Ksh’000

At 1 April 2009 Cost 11,235 11,235 Accumulated depreciation (7,807) (7,807)

Net book amount 3,428 3,428

Year ended 31 March 2010 Opening net book amount 3,428 3,428 Additions 9,403 9,403 Disposals (1,008) (1,008) Depreciation charge (1,426) (1,426) Elimination on disposal 950 950

Closing net book amount 11,347 11,347

At 31 March 2010 Cost 19,630 19,630 Accumulated depreciation (8,283) (8,283)

Net book amount 11,347 11,347

Year ended 31 March 2011 Opening net book amount 11,347 11,347 Additions 21,330 21,265 Disposals (cost) (5,933)) (5,933) Depreciation charge (2,800) (2,794) Disposals (accumulated depreciation) 2,869 2,869

Closing net book amount 26,813 26,754

At 31 March 2011 Cost 35,027 34,963 Accumulated depreciation (8,214) (8,209)

Net book amount 26,813 26,754

Year ended 31 March 2012 Opening net book amount 26,813 26,754 Additions 4,156 4,156 Disposals (cost) (1,689) (1,625) Depreciation charge (4,012) (4,012) Disposals (accumulated depreciation) 1,199 1,194

Closing net book amount 26,467 26,467

At 31 March 2012 Cost 37,494 37,494 Accumulated depreciation (11,027) (11,027)

Net book amount 26,467 26,467

Year ended 31 March 2013 Opening net book amount 26,467 26,467 Additions 22,594 22,594 Depreciation charge (5,062) (5,062)

Closing net book amount 43,999 43,999

At 31 March 2013 Cost 60,088 60,088 Accumulated depreciation (16,089) (16,089)

Net book amount 43,999 43,999 214 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

16 Motor vehicle and equipment (continued) Group Company Ksh’000 Ksh’000

Year ended 31 March 2014 Opening net book amount 43,999 43,999 Additions 26,915 - Transfer - (43,999) Depreciation charge (10,960) -

Closing net book amount 59,954 -

At 31 March 2014 Cost 87,003 - Accumulated depreciation (27,049) -

Net book amount 59,954 -

17 Intangible assets 2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Cost At start of year 9,353 4,541 6,841 1,908 1,311 Additions 18,294 4,812 259 5,871 597 On acquisition of subsidiary-Goodwill 967,210 - - - - Transfer to subsidiary/Disposal - - (2,559) (938) -

At end of year 994,857 9,353 4,541 6,841 1,908

Amortisation At start of year 4,055 2,615 1,437 1,307 865 Charge for the year 2,046 1,440 1,811 1,068 442 Transfer to subsidiary/ Disposal - - (633) (938) - At end of year 6,101 4,055 2,615 1,437 1,307

Net book value 988,756 5,298 1,926 5,404 601

(a) Company

Cost At start of year 5,673 4,541 4,282 1,908 1,311 Additions - 1,132 259 3,312 597 Transfer to subsidiary/Disposal (5,673) - - (938) -

At end of year - 5,673 4,541 4,282 1,908

Amortisation At start of year 3,953 2,615 1,230 1,307 865 Charge for the year - 1,338 1,385 861 442 Transfer to subsidiary/Disposal (3,953) - - (938) - At end of year - 3,953 2,615 1,230 1,307

Net book value - 1,720 1,926 3,052 601

The goodwill recognised represents the excess of the consideration paid for the acquisition of 73.35% stake in Genesis Kenya Investment management Limited over the fair value of the acquired identifiable assets and liabilities (see note 33).

Given the proximity of the year end to the acquisition of the business at 1 December 2013, the fair values determined at that date were relied upon to support the carrying value of the goodwill recognised. The carrying amount of the goodwill is reviewed annually on the basis of forecast profits of the cash generating assets. Information Memorandum 215 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

18 Investment in subsidiaries

Company statement of changes in equity

COMPANY COST FAIR VALUE Ownership 01.04.13 Additions Disposals 31.03.14 31.03.14 31.03.13 31.03.12 31.01.11 31.03.10 % Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

Athena Properties Limited 100 114,735 - - 114,735 357,966 276,160 284,002 284,063 284,063 Rasimu Limited 100 100 - - 100 701,495 634,384 613,271 700,746 566,092 Centum BVI Limited 100 8 - - 8 (97) (97) (97) 8 8 Pearl Marina Estates Limited 100 ------417,839 - Two Rivers Development Limited 100 100 - - 100 3,142,604 1,513,539 576,196 352,663 - Uhuru Heights Limited 100 100 - - 100 159,564 149,213 1,960 27 - eTransact Limited 100 100 - - 100 (7,025) (7,024) (7,021) (1,840) - Centum Exotics Limited 100 100 - - 100 1,111,564 756,111 87,388 - - Centum Development Limited 100 91 - - 91 391,872 102,204 211,690 - - Centum Asset Managers Limited 100 18,000 - - 18,000 100,332 18,201 17,565 - - Kilele Holdings Limited 79 68 - - 68 1,113,444 68 - - - Genesis Kenya Investment Management Limited 73 - 1,079,452 - 1,079,453 1,079,454 - - - - Mvuke Limited 100 - - - - (20) - - - - Centum Shared Services Limited 100 - 100 - 100 8,182 - - - - Two Rivers Lifestyle Centre Limited 100 - 100 - 100 (43) - - - - King Beverage Limited 100 - - - - (136) - - - -

133,402 1,079,652 - 1,213,055 8,159,156 3,442,759 1,784,954 1,753,506 850,163

Subsidiary Country of Incorporation Principal activity Athena Properties Limited Kenya The principal activity of Athena Properties Limited is the management, ownership and development of property for rental purposes. During the year, the Company had no property but was actively prospecting for opportunities. Rasimu Limited Kenya Incorporated in July 2008 and principal activity is engagement in investment activities. The subsidiary has invested in Carbacid Investment Company Limited. Centum BVI Limited British Virgin Islands Incorporated in October 2009 and principal activity is engagement in infrastructure investments. Pearl Marina Estates Limited* Uganda Incorporated in September 2010 and principal activity is engagement in real estate investments. The subsidiary has invested in 345 acres of land in Entebbe Uganda. Two Rivers Development Limited Kenya Formerly known as Runda Closeburn Estates Limited incorporated in September 2010 and principal activity is engagement in real estate investments. Information Memorandum 216 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

18 Investment in subsidiaries (continued)

Subsidiary Country of Incorporation Principal activity eTransact Limited Kenya Incorporated in October 2010 and was engaged in mobile phone software advancement. Centum Exotics Limited Mauritius Incorporated in July 2011 and the principal activity is engagement investment in quoted private equity investments. Centum Development Limited Mauritius Incorporated in July 2011 and the principal activity is engagement in real estate. Centum Asset Managers Limited Kenya Incorporated in February 2012 and the principal activity is engagement in fund management. Uhuru Heights Limited Kenya Incorporated in July 2010 and the principal activity is engagement in real estate investments Oleibon Investment Limited* Tanzania Incorporated in October 2011 and the principal activity is to engage in investment in quoted private equity investments. Kilele Holdings Limited Mauritius Incorporated in December 2012 and the principal activity is engagement in private equity investments Centum Shared Services Limited Kenya Incorporated in July 2013 and the principal activity is to provide business solutions to Centum and its subsidiaries Mvuke Ltd Mauritius Incorporated in December 2013 as a special purpose vehicle to explore Geothermal opportunities In Africa. Genesis Kenya Investment Kenya The company acquired 73.17% shareholding in Genesis Kenya Investment Management Limited on 1 December 2013 and the Management Limited principal activity is to provide fund management services. Two Rivers Lifestyle Centre Mauritius Incorporated in 2013 and the principal activity is engagement in the management, ownership and development of property for Limited* rental purposes. King Beverage Limited Kenya Incorporated in 2014 and the principal activity is engagement in the importation, distribution and sale of alcoholic beverages.

*These subsidiaries are indirectly owned by Centum Investment Company Limited. Pearl Marina is a subsidiary of Centum Development Limited (Mauritius), Oleibon Investment Limited is a Subsidiary of Centum Exotics Limited (Mauritius) while Two Rivers Lifestyle Centre Limited is a subsidiary of Two Rivers Development Limited. Information Memorandum 217 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

18 Investment in subsidiaries (continued)

2014 2013 2012 2011 2010 Fair value movement – Company Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Opening valuation of subsidiaries 3,442,759 1,784,954 1,753,506 850,163 284,063 Additions 1,079,652 68 18,191 662 108 Disposals* - - (362) - - Fair value gain in subsidiaries 3,636,745 1,657,737 13,619 902,681 565,992

Closing valuation of subsidiaries 8,159,156 3,442,759 1,784,954 1,753,506 850,163

*During the period, Centum’s investment in Pearl Marina Estates Limited was transferred to its subsidiary Company; Centum Development Limited.

Summarised financial information for each subsidiary that has non-controlling interests that are material to the group are set out below. Kilele Limited Genesis Kenya 2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Income 124,476 - 114,359 - Profit after tax 124,228 - 34,072 -

Total comprehensive income 1,237,556 - 34,072 -

Total assets 1,943,883 - 222,972 - Total liabilities (829,635) - (88,169) -

Net assets 1,114,248 - 134,803 -

Genesis Kenya Investment Management Limited and Centum Asset Managers Limited have a different financial reporting period end from that of the Group; of 31 December. These subsidiaries, which are registered fund management companies, are regulated by the Capital Markets Authority and have a statutory year end of 31 December. The financial performance of the Group has however been prepared using financial statements of these subsidiaries for a period that corresponds with the reporting period of the Group.

Investments in subsidiaries are classified as non-current assets. 218 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

19 Investment in associates

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At start of year 3,659,198 3,614,550 3,377,305 2,948,585 2,885,947 Share of profits after taxation 393,432 263,259 594,037 486,934 289,787 Share of other comprehensive income 32,761 41,918 (91,117) 165,053 (29,980) Dividends received (204,780) (217,072) (280,941) (223,267) (197,214) Acquisitions during the year 20,240 1,784,911 15,266 - 45 Transfer to unquoted investment (Note 20) - (1,030,412) - - - Disposals at cost - (187,743) - - - Reserves released on disposal (Note 11) - (610,213) - - -

At end of year 3,900,851 3,659,198 3,614,550 3,377,305 2,948,585

(a) Company

At start of year 6,152,947 7,128,721 6,230,521 4,240,102 2,372,787 Fair value gain 421,153 382,919 882,934 1,990,419 1,867,270 Acquisitions during the year 20,240 1,784,911 15,266 - 45 Transfer to unquoted investment - (1,677,213) - - - Disposals at cost - (187,743) - - - Reserves released on disposal (Note 11) - (1,278,648) - - -

At end of year 6,594,340 6,152,947 7,128,721 6,230,521 4,240,102

Associates are accounted for under the equity method in the Group’s financial statements. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost plus share of subsequent profits and other comprehensive income less any impairment in the value of individual investments.

Associates are held at fair value in the Company’s separate financial statements.

The associates held at year end are as follows;

2014 2013 2012 2011 2010 Country Interest Interest Interest Interest Interest held % held % held % held % held %

AON Minet Insurance Brokers Limited Kenya 21.50 21.50 21.50 21.50 21.50 KWAL Holdings Limited Kenya 26.43 26.43 26.43 26.43 26.43 Nairobi Bottlers Limited Kenya 27.62 27.62 27.62 27.62 27.62 Longhorn Publishers Limited Kenya 35.00 35.00 35.00 35.00 35.00 UAP Financial Services Limited Uganda 29.00 29.00 29 - - Almasi Limited Kenya 43.00 42.00 - - - Mount Kenya Bottlers limited Kenya - - 27.80 27.80 27.80 Rift valley Bottlers limited Kenya - - 43.99 43.99 43.99 UAP Holdings Limited Kenya - - 24.23 24.23 24.23 Kisii Bottlers Limited Kenya - - 23.89 23.89 23.89

Information Memorandum 219 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

19 Investment in associates (continued)

2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Total assets 22,001,478 19,346,321 30,709,119 27,041,191 22,750,223 Total liabilities (11,467,297) (9,686,130) (17,276,117) (14,598,074) (12,371,340)

Net assets 10,534,181 9,660,191 13,433,002 12,443,117 10,378,883 Total revenue 23,385,784 21,125,799 26,565,307 22,426,120 17,483,461 Total profit for the year 1,358,278 1,311,505 1,633,250 2,582,613 1,110,356

20 Unquoted investments

Group & Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Opening valuation 4,306,221 1,427,206 1,338,664 1,251,209 1,212,828

Movements in the year: Additions 337,123 837,929 85,240 382,433 79,743 Disposals (39,666) (8,063) (111,295) (29,425) (60,323) Transfer in from associates (Note 19) - 1,030,412 - - - Released on disposal - - - (277,718) - Fair value gain /(loss) 2,965,632 1,018,737 114,597 12,165 18,961

3,263,089 2,879,015 88,542 87,455 38,381

Closing valuation 7,569,310 4,306,221 1,427,206 1,338,664 1,251,209

Unquoted investments are classified as non-current assets.

21 Quoted investments

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Opening valuation 2,732,872 1,666,309 3,208,611 2,967,876 2,305,043

Movements in the year: Additions 631,068 1,112,066 364,097 1,670,399 636,416 Disposals (904,933) (699,047) (1,177,929) (942,346) (430,979) Reserves released on disposal (287,772) (181,513) (562,349) (686,895) (854,626) Fair value gain/(loss) 865,064 835,057 (166,121) 199,577 1,312,022

303,427 1,066,563 (1,542,302) 240,735 662,833

Closing valuation 3,036,299 2,732,872 1,666,309 3,208,611 2,967,876 220 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

21 Quoted investments (continued)

2014 2013 2012 2011 2010 (b) Company Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Opening valuation 1,088,778 1,289,540 2,422,116 2,080,599 2,305,043

Movements in the year: Additions - 12,361 81,350 1,670,399 217,620 Disposals (244,463) (496,318) (889,731) (859,453) (399,075) Reserves released on disposal (133,208) (145,075) (127,243) (555,621) (626,700) Fair value gain/(loss) (24,759) 428,270 (196,952) 86,192 583,711

(402,430) (200,762) (1,132,576) 341,517 (224,444)

Closing valuation 686,348 1,088,778 1,289,540 2,422,116 2,080,599

Quoted investments are classified as non-current assets.

22 Corporate bonds at fair value through profit or loss

Group & Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Opening valuation 995,313 480,000 539,188 505,371 -

Movements in the year; Additions 934,052 947,663 3,879,824 - 505,371 Disposals (741,010) (480,472) (3,983,649) - - Interest receivable - - - 24,009 - Fair value (loss)/gain (117,309) 48,122 44,637 9,808 -

75,733 515,313 (59,188) 33,817 505,371

Closing valuation 1,071,046 995,313 480,000 539,188 505,371

Corporate bonds are classified as non current assets. Information Memorandum 221 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

23 Due from related party Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

(a) Due from Subsidiaries Centum BVI Limited 97 97 97 - 77,324 Rasimu Limited - - - 301,708 335,299 Pearl Marina Estates Limited - 1,433,766 1,115,998 667,883 - Two Rivers Development Limited 2,509,749 1,516,489 1,461,139 1,248,033 - eTransact Limited 7,025 7,021 6,909 4,156 - Uhuru Heights Limited - 267,008 269,662 - - Centum Exotics Limited 2,009,557 1,977,460 250,613 - - Centum Development Limited 1,881,838 362 362 - - Centum Asset Managers Limited 363,504 548 - - - Centum Shared Services 29,278 - - - - Mvuke Ltd 51,944 - - - - Genesis Kenya Investment Management Limited 47,000 - - - - Two Rivers Lifestyle centre 43 - - - - Centum beverages 136 - - - - Kilele Holdings Limited 768,402 766,737 - - -

7,668,573 5,969,488 3,104,780 2,221,780 412,623

(b) Due to Subsidiaries Athena Properties Limited 117,538 275,074 284,417 283,837 283,680 Centum BVI Limited - - - 8 - Centum Development Limited - 10 91 - - Rasimu Limited 1,764 563,216 560,172 - - Centum Asset Managers Limited - - 17,623 - - Uhuru Heights Limited 2,544 - - 27 -

121,846 838,300 862,303 283,872 283,680

7,546,727 5,131,188 2,242,477 1,937,908 128,943

The balances due to and due from the subsidiaries are interest free and have no specific repayment periods.

24 Receivables & prepayments

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Dividends receivable 3,500 - 6,086 12,312 23,499 Land investment prepayments - - - 9,966 - Disposal proceeds receivable - - - 214,168 77,331 Other receivables & prepayments 225,289 253,659 23,296 3,694 8,019 Equity-linked note – asset (Note 29) 843,073 - - - - Interest receivable 85 7,166 6,697 - -

1,071,947 260,825 36,079 240,140 108,849

The carrying amounts of the receivable and prepayments approximate to their fair values. 222 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

24 Receivables & prepayments (continued)

2014 2013 2012 2011 2010 (b) Company Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Dividends receivable 24,493 - 136,141 152,084 18,676 Land investment prepayments - 39,966 15 9,966 - Other receivables & prepayments 85 76,664 12,491 3,695 7,982 Interest receivable 2,921 7,166 6,697 - -

27,499 123,796 155,344 165,745 26,658

The carrying amounts of the receivable and prepayments approximate to their fair values.

25 Cash and cash equivalents

For the purpose of the statement of cash flows cash and cash equivalents comprise;

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Call deposits (maturing within 90 days) 224,018 902,500 310,000 - 345,000 Bank balances 619,630 599,269 12,410 6,776 48,641 Bank overdraft (1,291,101) - - (987,980) -

(447,453) 1,501,769 322,410 (981,204) 393,641

(a) Company

Call deposits (maturing within 90 days) 108,851 902,500 310,000 - 345,000 Bank balances 66,081 28,396 7,340 5,903 48,168 Bank overdraft (1,291,101) - - (987,980) -

(1,116,169) 930,896 317,340 (982,077) 393,168

At 31 March 2014 the Group had undrawn committed borrowing facilities amounting to Kshs 708,899,000 (2013: Kshs 1,200,000,000, 2012: Kshs 1,200,000,000, 2011: kshs 212,020,000, 2010: Kshs 1,700,000,000). The effective interest rate for the bank overdraft is 14.5% (2013: 20%,2012: 22%, 2011: 9,5%, 2010: 10.53%).

The overdraft facility is secured by a floating charge over all the listed Kenya securities. Information Memorandum 223 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

26 Borrowings Group & Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

The borrowings are made up as follows: Bank loan and overdraft At start of year - 1,000,000 1,987,980 1,987,980 - Repayment during the year - (1,000,000) (987,980) - -

At end of year - - 1,000,000 1,987,980 -

Corporate bond At start of year 4,149,532 - - - - Issue during the year - 4,167,900 - - - Accrued additional interest on Equity linked note 37,524 37,524 - - - Amortization of bond related expenses 13,973 (55,892) ------At end of year 4,201,029 4,149,532 - - -

Total borrowings 4,201,029 4,149,532 1,000,000 1,987,980 -

The company successfully issued a 5 year bond in 2012 and raised Kshs 4,167,900,000. This comprised of fixed rate notes of KShs 2,917,530,000 at an interest rate of 13.5% and equity linked note of Shs 1,250,370,000 at 12.75% with a maximum upside of 15% on the Company’s net asset value as at 31 March 2012.

27 Share capital & Premium

Year ended 31 March 2014 Year ended 31 March 2013 Group and Company Number Ordinary Share Number Ordinary Share of shares shares Premium of shares shares Premium (in thousands) Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

At start and end of year 665,442 332,721 589,753 665,442 332,721 589,753

Year ended 31 March 2012 Year ended 31 March 2011

At start of year 604,947 302,474 589,753 549,952 274,976 589,753 Issue of shares-bonus 60,494 30,247 - 54,995 27,498 -

At end of year 665,441 332,721 - 604,947 302,474 589,753

Year ended 31 March 2010

At start and end of year 549,952 274,976 589,753

The total authorised number of ordinary shares is 800,000,000 with a par value of Kshs 0.50 per share 665,441,714 shares (2013: 665,441,714 shares, 2012:665,441,714 shares, 2011:604,947,013, 2010:549,951,830 shares) are issued and fully paid up.

At the Annual General meeting held on 23 September 2011, the shareholder approved a bonus issue of one ordinary share for every ten shares held by utilisation of revenue reserves. As result, 60,494,701 bonus shares were issued on 2012 and 54,995,183 bonus shares were issued on 2011 224 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

29 Reserves

(a) Investment revaluation reserve The investment revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset, and is effectively realised, is reduced from the investment revaluation reserve and is recognised in profit or loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to that financial asset is recognised in profit or loss.

(b) Retained earnings The retained earnings represent amounts available to the shareholders of the Group. Retained earnings are utilised to finance business activity.

30 Payables and accruals

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Sundry payables and accruals 525,274 83,506 13,398 13,935 7,654 Equity-linked note – liability 843,073 - - - - Settlements in respect of investments 33,653 - 284,280 608,199 300,943 Leave pay provision 7,234 4,059 2,173 4,194 1,615 Performance bonus provision 431,318 200,293 56,105 92,842 46,942

1,840,552 287,858 355,956 719,170 357,154

(a) Company

Sundry payables and accruals (14,881) 25,830 12,296 13,644 7,406 Settlements in respect of investments 33,653 - 63,504 33,652 300,943 Leave pay provision 4,194 4,059 2,173 4,194 1,615 Performance bonus provision 181,501 200,293 56,105 92,842 46,942

204,467 230,182 134,078 144,332 356,906

The carrying amounts of the payables approximate to their fair values.

Centum Exotics Limited successfully issued a 5 year equity-linked note in 2014 and raised Kshs 843,073,578. The carrying value of the equity-linked note is linked to the fair value of an underlying asset held under receivables (Note 24).

30 Unclaimed dividends

Group and Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At the beginning of the year 32,504 34,437 35,049 42,650 73,863 Dividend paid (3,517) (1,933) (612) (1,392) (5,728) Write back of long outstanding dividends - - - (6,209) (25,485)

At the end of the year 28,987 32,504 34,437 35,049 42,650 Information Memorandum 225 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

31 Cash generated from operations

Group Notes 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Reconciliation of profit before income tax to cash generated from operations

Profit before income tax 4,011,451 3,247,973 1,366,675 2,294,429 1,080,790

Adjustments for: Interest expense 469,355 343,576 179,243 147,914 44,758 Depreciation on motor vehicle and equipment 16 10,960 5,062 4,012 2,800 1,426 Amortisation of intangible assets 17 2,046 1,440 1,811 1,068 442 Amortisation of prepaid operating lease rental 14 - - - - 620 Fair value loss/(gains) on corporate bonds 22 117,309 (48,122) (44,637) (33,817) - Fair value gains on investment property 15 (3,049,918) (1,604,632) (356,160) (1,004,221) - Loss on disposal of intangible assets - - 1,926 2,807 58 Loss on disposal of motor vehicle & equipment - - 378 - - Gains on disposal of quoted investments 11 (1,008,406) (275,530) (618,738) (686,895) (652,627) Gains on disposal of associates 11 - (1,171,500) (277,718) (201,99) Gain on disposal of investment property - (145,000) - - - Loss/ (gain) on disposal of corporate bonds 11 15,245 (48,925) - - - Share of profit from associates (393,432) (263,259) (594,037) (486,934) (289,787) Write-off of tax receivable 10 - - 1,790 - - Write back of long outstanding dividends - - - (6,209) (25,485) Accrued additional interest on Equity linked note 26 37,524 - - - - Changes in working capital − receivables and prepayments (811,122) (224,746) 204,061 (131,291) (15,100) − payables and accrued expenses 1,552,694 (68,098) (363,214) 362,016 347,092

Cash generated from/ (used in) operations 953,706 (251,761) (216,890) 183,949 290,188 226 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

32 Related party transactions

The Group transacts with companies related to it by virtue of common shareholding and also by virtue of common directors.

The following transactions were carried out with related parties:

Group and Company 2014 2013 2012 2011 2010 (i) Related party transactions Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Office rent (paid to entity controlled by a director) 10,697 7,184 3,648 3,945 3,153 Insurance premiums (paid to an associate) 13,810 8,222 2,435 2,804 3,970

24,507 15,406 6,083 6,749 7,123

(ii) Key management compensation

Key management includes executive directors and members of senior management. The compensation paid or payable to key management for employee services is shown below: Group and Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Salaries 86,717 59,576 45,301 41,227 33,124 Performance bonus 96,975 105,357 14,932 65,625 39,375 Retirement benefit scheme contribution 4,680 3,859 3,196 3,092 2,485

188,372 168,792 63,429 109,944 74,984

(iii) Directors’ remuneration

Fees for services as a non-executive director 12,891 14,129 13,928 8,461 4,430 Other included in key management compensation above 84,991 82,130 37,985 36,701 18,576

97,882 96,259 51,913 45,162 23,006

(iv) Outstanding related party balances

Performance bonus 155,955 173,264 14,932 65,625 39,375 - - - 5,717 -

155,955 173,264 14,932 71,342 39,375 Information Memorandum 227 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

33 Commitments

(i) Capital commitments

Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:

2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Equipment - 823 823 823 15,000

(ii) Operating lease commitments

At the end of the reporting year, the Group had outstanding lease commitments under lease obligations which fall due as follows;

Group and Company 2014 2013 2012 2011 2010 Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

Within one year 2,334 3,648 3,648 3,648 3,648 Within the second to fourth years inclusive 2,651 1,671 5,319 8,967 9,423

4,985 5,319 8,967 12,615 13,071 228 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes (continued)

34 Financial instruments by category

(a) Financial assets

2014 2013 2012 2011 2010 (a) Group Ksh’000 Ksh’000 Ksh’000 Ksh’000 Ksh’000

At fair value through profit or loss 1,071,046 995,313 480,000 539,188 505,371 Loans and receivables 1,815,488 1,762,594 358,489 246,916 502,310 Available for sale 10,605,609 7,039,093 3,093,515 4,547,275 4,219,085

13,492,143 9,797,000 3,932,004 5,333,379 5,226,766

Fair value through profit or loss Corporate bonds 1,071,046 995,313 480,000 539,188 505,371 Loans and receivables: Receivables 1,032,748 260,825 36,079 240,140 108,849 Deposits 224,018 902,500 310,000 - 345,000 Cash and cash equivalents 558,722 599,269 12,710 6,776 48,461

1,815,488 1,762,594 358,789 246,916 502,310 Available for sale: Unquoted investments 7,569,310 4,306,221 1,427,206 1,338,664 1,251,209 Quoted investments 3,036,299 2,732,872 1,666,309 3,208,611 2,967,876

10,605,609 7,039,093 3,093,515 4,547,275 4,219,085

(b) Company

At fair value through profit or loss - 105,560 480,000 539,188 505,371 Loans and receivables 7,882,235 7,024,180 3,577,464 2,393,428 419,826 Available for sale 20,885,480 14,277,901 11,633,647 11,744,807 8,422,073

28,767,715 21,407,641 15,691,111 14,677,423 9,347,270

Fair value through profit or loss Corporate bonds - 105,560 480,000 539,188 505,371 Loans and receivables: Receivables 27,499 123,796 155,344 165,745 26,658 Deposits 108,851 902,500 310,000 - 345,000 Cash and cash equivalents 66,081 28,396 7,340 5,903 48,168 Due from subsidiary Companies 7,679,804 5,969,488 3,104,780 2,221,780 412,623

7,882,235 7,024,180 3,577,464 2,393,428 832,449 Available for sale: Investment in subsidiaries 8,109,520 3,442,759 1,784,954 1,753,506 850,163 Investment in associates 6,594,340 6,152,947 7,128,721 6,230,521 4,240,102 Unquoted investments 5,495,272 3,593,417 1,427,206 1,338,664 1,251,209 Quoted investments 686,348 1,088,778 1,289,540 2,422,116 2,080,599

20,885,480 14,227,901 11,630,421 11,744,807 8,422,073

(b) Financial liabilities

All the Group’s financial liabilities are measured at amortised cost. The carrying value of the Group’s and the Company’s financial liabilities at the end of 2014, 2013, 2012, 2011 and 2010 is shown on note 4(b). Information Memorandum 229 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

APPENDIX

20.2.2 Financial ratios

2014 2013 2012

1 Earnings before interest and taxes interest cover (times) 9.55 9.10 6.95 2 Funds from operations to total debt (%) 77 139 422 3 Free cash flow to total debt (%) 76 137 422 4 Total free cash flow to short term obligation (%) 350 - - 5 Net profit margin (%) 63 64 93 6 Post tax return (before financing on capital employed) (%) 16 20 13 7 Long term debt to capital employed (%) 19 18 13 8 Total debt to equity (%) 28 22 15

20.2.3 Proforma financial information

Projected consolidated statement of comprehensive income

31 March 2016 Kshs’000

Dividends from Unquoted Investments 378,290 Dividends from Quoted Investments 248,680 Interest Income 2,716,407 Fund Management Income 691,884 Gains on disposal of Investments 1,814,593 Fair value gains on Investment Property 7,168,690 Sales Revenue 7,589,723 Rental income 462,469 Other Income 947,053

Total Income 22,017,789

Cost of sales (5,020,383) Administrative & Operating Expenses (5,165,087) Finance costs (1,856,236) Share of associate profits 386,270

Profit Before Tax 10,362,353

Tax (2,897,848)

Profit After Tax 7,464,505

Other Comprehensive income 9,940,683

Total Comprehensive Income 17,405,188 230 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected company statement of comprehensive income

31 March 2016 Kshs’000

Dividend income 1,751,222 Interest income 158,420 Gain on disposal of investments 1,186,094 Directors Fees 6,800

Total Income 3,102,536

Expenses Administrative & operating expenses (471,204) Finance costs (1,344,224)

(1,815,428)

Profit before tax 1,287,108

Income tax expense (59,645)

Profit for the year 1,227,463

Other comprehensive income; net of deferred tax 8,525,373

Total comprehensive income 9,752,836

Information Memorandum 231 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected company statement of comprehensive income

at 31 March 2016 Kshs’000

Assets Investment property 38,035,316 Property, plant & equipment 4,753,078 Intangible assets 92,782 Prepaid operating lease rentals 9,513 Investment in associates 5,351,001 Unquoted investments 14,069,160 Quoted investments 5,828,901 Equity linked note assets 7,091,037 Government securities and Bonds at fair value through profit or loss 2,331,763 Loans and advances 15,509,031 Tax recoverable 135,950 Inventories 944,336 Deferred income tax asset 88,820 Receivables and prepayments 2,909,186 Cash and cash equivalents 9,590,105

Total Assets 106,739,979

Capital and reserves Share capital 332,721 Share premium 589,753 Investment revaluation reserve 13,864,003 Retained earnings 19,615,508 Shareholders equity attributable to Equity holders of the company 34,401,985 Non-controlling interest 10,643,459

Total equity 45,045,444

Liabilities Borrowings 21,108,950 Shareholder Loans 6,834,606 Equity linked note liability 7,091,037 Customer deposits 17,089,637 Deferred income 158,838 Payables and accrued expenses 2,552,858 Dividends payable to non-controlling interests 42,863 Current income tax 287,896 Deferred income tax 6,527,850

Total liabilities 61,694,535

Total equity & liabilities 106,739,979

232 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected company statement of financial position

at 31 March 2016 Kshs’000

Assets Investment in subsidiaries 36,235,826 Investment in associates 5,351,001 Unquoted investments 10,088,959 Quoted investments 345,201 Other assets 7,491 Cash and cash equivalents 734,546

Total Assets 52,763,024

Capital & reserves Share capital 332,721 Share premium 589,753 Investment revaluation reserve 27,318,735 Retained earnings 11,894,835

Total equity 40,136,044

Liabilities Borrowings 10,830,000 Bank overdraft 0 Deferred tax 1,405,704 Current income tax 59,645 Payables & other liabilities 331,631

Total liabilities 12,626,980

Total equity & liabilities 52,763,024

Information Memorandum 233 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Projected statement of consolidated cash flowss

Year Ending 31 March 2016 Kshs’000

Operating Activities

Cash from generated from operations (1,063,293) Tax paid (472,029)

Internally generated Cash flows (1,535,322)

Investing Activities Purchase of equity and Investment Property (15,565,795) Proceeds from disposal of equity 2,044,494 Capital expenditure (1,418,870) Dividends to non-controlling interests (18,655)

Investing Cash flows (14,958,826)

Financing Activities Proceeds from borrowings 15,019,763 Repayment of borrowings (3,150,000) Issue of capital to non-controlling interests 7,327,000 Interest on borrowings (1,856,236)

Financing Cash flows 17,340,526

Opening Cash 8,743,726

Closing Cash 9,590,105 234 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

1. USE OF PROCEEDS

The funds received from the bond issue are targeted to be used by Centum Investment Company Limited in the following areas:

Sector Target Company Nature of Investment % Bond proceeds (KShs. M) Financial Services K-Rep Bank Limited Equity investment 60.0 3,600 Energy Akiira One Equity investment 35.0 2,100 Geothermal Limited Amu Power Limited Real Estate Pearl Marina Estates Equity investment 3.7 222 Limited Offer Expenses 1.3 78 Total 100 6000

2. ASSUMPTIONS

i. Income from dividends and interest for legacy investments are expected to grow by 2%, while the cash yield from new investments is expected at 18% for private equity investments and 5% for quoted equity investments. ii. Exits in the year are expected to realize Kshs 1,666 million. The resultant proceeds of Kshs 3,426 Bn will be re- invested in other opportunities in FMCG, Agriculture and Power. iii. A conservative unrealised value appreciation of 20% on the portfolio has been assumed. iv. Operating and administrative costs are expected to grow by 10% during the year v. Projected consolidated financial statements include the financial performance and financial position of Almasi Beverages Limited and K-Rep Bank Limited. vi. Third party assets under management (AUMs) are assumed to grow by 15% during the year. vii. Investment property is assumed to grow by 25% during the year on the basis of the planned investments in Two Rivers and Pearl Marina. viii. Sales revenue for Almasi Beverages Limited is assumed to grow by 13% based on historical sales volume growth. ix. Credit impairment is assumed to grow at the same rate as the K – Rep Bank loan book. x. The cost to income ratio is assumed to be 67% based on K – Rep Bank’s prior year averages. xi. The loan to deposit ratio is assumed to be 91% based on K – Rep Bank’s prior year averages. Information Memorandum 235 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

The Directors Centum Investment Company Limited International House 5th Floor Nairobi

15 May 2015

Report on the Interim financial statements for 9 Months ended 31 December 2014

Dear Sirs We have reviewed the accompanying financial statements of Centum Investment Company Limited, which comprise the consolidated statement of financial position at 31 December 2014, and the consolidated statements of comprehensive income, changes in equity and cash flows for the 9 months then ended, together with the statement of financial position of the company standing alone at 31 December 2014 and the statements of comprehensive income and changes in equity of the company for the period then ended.

Management’s Responsibility for the Interim financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Our Responsibility Our responsibility is to express a conclusion on the accompanying financial statements. We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 – Review of Financial Information Performed by the Auditor (“ISRE 2410”). ISRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework. This standard also requires us to comply with relevant ethical requirements.

A review of financial statements in accordance with ISRE 2410 is a limited assurance engagement. The practitioner performs procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluates the evidence obtained. The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these financial statements.

Conclusion Based on our review, nothing has come to our attention that causes us to believe that these financial statements do not present fairly, in all material respects, the financial position of Centum Investment Company Limited as at 31 December 2014, and its financial performance and cash flows for the 9 months then ended, in accordance with International Accounting Standard 34 - Interim Financial Reporting.

Other matters The corresponding figures covering the 9 month period ended 31 December 2013 were not subjected to the same review.

Certified Public Accountants Nairobi, Kenya

15 May 2015

PricewaterhouseCoopers CPA. PwC Tower, Waiyaki Way/Chiromo Road, Westlands P O Box 43963 – 00100 Nairobi, Kenya T: +254 (20)285 5000 F: +254 (20)285 5001 www.pwc.com/ke

Partners: A Eriksson K Muchiru M Mugasa F Muriu P Ngahu A Njeru R Njoroge B Okundi K Saiti R Shah 236 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of comprehensive income

Notes 9 month period ended 31 December 2014 2013 Kshs’000 Kshs’000

Income 4 2,416,516 1,238,591

Expenses

Administrative expenses (650,138) (223,357) Operating expenses (257,680) (115,098) Finance costs (541,801) (451,677) (1,449,619) (790,132)

Share of profits of associate companies 377,693 351,870

Profit before tax 1,344,590 800,329

Income tax expense 5 (78,024) (158,662)

Profit for the year 1,266,566 641,667

Attributable to:

Equity holders of the company 1,199,535 641,667 Non-controlling interest 67,031 -

1,266,566 641,667

Other comprehensive income Reserves released on disposal of investments (717,025) (217,963) Share of other comprehensive income of associates - 119,674 Fair value gain in unquoted investments 2,495,591 502,948 Fair value gain in quoted investments 499,101 1,375,736 Currency translation differences 173,795 502 Deferred tax on fair value gains on investments (438,529) -

Total other comprehensive income 2,012,933 1,780,897

Total comprehensive income 3,279,499 2,422,564

Attributable to: Equity holders of the company 3,148,978 2,422,564 Non-controlling interest 130,521 -

3,279,499 2,422,564

Earnings per share 6 1.80 0.96 Information Memorandum 237 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of comprehensive income

Notes 9 month period ended 31 December 2014 2013 Kshs’000 Kshs’000

Income 4 1,440,738 1,074,890

Expenses

Administrative expenses (123,595) (192,764) Operating expenses (236,158) (89,467) Finance costs (501,893) (448,106)

(861,648) (730,337)

Profit before income tax 579,090 344,553

Income tax expense 5 39,120 (13,587)

Profit for the year 618,210 330,966

Other comprehensive income for the year Reserves released on disposal of investments (304,404) (96,662) Fair value gain in subsidiaries 600,303 1,531,863 Fair value gain in associates 782,644 46,986 Fair value gain in unquoted investments 2,218,728 502,948 Fair value gain in quoted investments 537 (53,816) Deferred tax on fair value gains on investments (802,943) -

Total other comprehensive income 2,494,865 1,931,319

Total comprehensive income 3,113,075 2,262,285 238 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of financial position

Notes At 31 Dec At 31 Mar 2014 2013 Kshs’000 Kshs’000

Assets Investment property 7 12,002,511 10,845,392 Motor vehicle and equipment 451,914 59,954 Intangible assets 1,947,560 988,756 Investment in associates 4,232,222 3,900,851 Unquoted investments 8 10,753,578 7,569,310 Quoted investments 2,791,001 3,036,299 Equity linked note assets 9 9,591,922 843,073 Government securities and Bonds at fair value through profit or loss 2,335,978 1,071,046 Loans and advances 10 10,453,714 - Tax recoverable 236,389 - Inventories 23,418 - Deferred income tax 131,024 210,017 Receivables and prepayments 542,234 228,874 Cash and cash equivalents 11 4,830,012 843,648

60,323,477 29,597,220

Capital and reserves Share capital 12 332,721 332,721 Share premium 589,753 589,753 Investment revaluation reserve 8,119,632 6,170,187 Retained earnings 14,111,701 12,912,168 Non-controlling interest 1,151,197 268,008

Total equity 24,305,004 20,272,837

Liabilities Long term borrowings 13 8,544,400 4,201,029 Bank overdraft 11 2,114,197 1,291,101 Equity linked note liability 9 9,591,922 843,073 Customer deposits 14 12,065,178 - Payables and accrued expenses 1,485,006 997,479 Unclaimed dividends 66,483 28,987 Current income tax 16,254 210,913 Deferred income tax 2,184,453 1,751,801

36,018,473 9,324,383

60,323,477 29,597,220 Information Memorandum 239 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of financial position

Notes At 31 Dec At 31 Mar 2014 2013 Kshs’000 Kshs’000

Assets Deferred income tax asset - 5,317 Intangible assets 4,189 - Investment in subsidiaries 11,114,848 8,159,156 Investment in associates 7,527,045 6,594,340 Unquoted investments 8 7,354,804 5,495,272 Quoted investments 345,201 686,348 Tax recoverable 30,420 - Due from subsidiaries 9,813,355 7,668,573 Receivables and prepayments 7,491 27,499 Cash and cash equivalents 11 576,734 174,932

36,774,087 28,811,437

Capital and reserves Share capital 12 332,721 332,721 Share premium 589,753 589,753 Investment revaluation reserve 18,457,227 15,962,362 Retained earnings 6,669,582 6,051,372

Total equity 26,049,283 22,936,208

Non-current liabilities Long-term borrowings 13 7,552,193 4,201,029 Bank overdraft 11 2,114,197 1,291,101 Payables and accruals 193,347 204,467 Due to Subsidiary 7,483 121,846 Unclaimed dividends 66,483 28,987 Current Income tax - 27,799 Deferred income tax 791,101 -

10,724,804 5,875,229

36,774,087 28,811,437 240 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of financial position

Share Share Investment Retained Non- Total capital premium revaluation earnings controlling equity reserve interest Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Period ended 31 December 2014

At 1 April 2014 332,721 589,753 6,170,189 12,912,166 268,008 20,272,837

Comprehensive income Profit for the period - - - 1,199,535 67,031 1,266,566 Other comprehensive income - - 1,949,443 - 63,490 2,012,933 Non-controlling interest on acquisition of subsidiary - - - - 752,668 752,668

At 31 December 2014 332,721 589,753 8,119,632 14,111,701 1,151,197 24,305,004

Period ended 31 December 2013

At 1 April 2013 332,721 589,753 2,828,301 9,891,966 - 13,642,741

Comprehensive income Profit for the period - - - 641,667 - 641,667 Other comprehensive income - - 1,780,897 - - 1,780,897

At 31 December 2013 332,721 589,753 4,609,198 10,533,633 - 16,065,305 Information Memorandum 241 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Company statement of changes in equity

Share Share Investment Retained Total capital premium revaluation earnings equity reserve Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Period ended 31 December 2014

At 1 April 2014 332,721 589,753 15,962,362 6,051,372 22,936,208

Comprehensive income Profit for the period - - - 618,210 618,210 Other comprehensive income - - 2,494,865 - 2,494,865

At 31 December 2014 332,721 589,753 18,457,227 6,669,582 26,049,283

Period ended 31 December 2013

At 1 April 2013 332,721 589,753 10,210,128 5,004,099 16,136,701

Comprehensive income Profit for the period - - - 330,966 330,966 Other comprehensive income - - 1,931,319 - 1,931,319

At 31 December 2013 332,721 589,753 12,141,447 5,335,065 18,398,986 242 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Consolidated statement of cash flows

Notes Dec Dec 2014 2013 Kshs’000 Kshs’000

Cash generated from operations 1,210,573 474,185 Interest paid (548,833) (434,265) Taxation paid 10(c) (367,307) (50,625) Dividends received from associated companies 294,389 124,003

Net cash generated from operating activities 588,822 113,298

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment property (990,887) (1,063,087) Purchase of equipment (87,815) (62,005) Proceeds on disposal of equipment - 49,296 Acquisition of interest in subsidiary (2,355,028) - Acquisition of subsidiary, net of cash acquired 2,173,485 - Purchase of intangible assets (6,075) (7,517) Purchase of shares in associates (177,867) (19,396) Purchase of unquoted equity investments (1,148,827) (119,635) Purchase of quoted equity investments (762,954) (752,095) Purchase of corporate bonds - (377,726) Proceeds on disposal of unquoted investments 596,325 36,084 Proceeds on disposal of quoted investments 2,211,485 920,202 Proceeds on disposal of bonds - 105,721 Proceeds of shares in associates 50,188 -

Net cash used in investing activities (497,970) (1,290,158)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 3,151,463 - Dividends paid to non-controlling interests (71,331) - Repayment of loans (7,716) -

3,072,416 -

Net increase/(decrease) in cash and cash equivalents 3,163,268 (1,176,860)

MOVEMENT IN CASH AND CASH EQUIVALENTS At start of year (447,453) 1,501,769 Net increase/(decrease) in cash and cash equivalents 3,163,268 (1,176,860)

At end of period 2,715,815 324,909 Information Memorandum 243 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements

1 Basis of Preparation

The financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting.

2 Significant Accounting Policies

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group’s accounting policies.

Centum Investment Company Limited applies the same accounting policies and methods of computation in its interim consolidated financial statements as in its FY2014 annual financial statements. None of the new standards, interpretations and amendments, effective for the first time from 1 January 2014, have had a material effect on the financial statements.

The same accounting policies, presentation and methods of computation have been applied in these financial statements as were applied in the group’s audited financial statements for the year ended 31 March 2014.

3 Segment Information

The group’s chief operating decision maker is the executive management committee. The group organises its activity by business lines and these are defined as the group’s reportable segments under IFRS 8, Operating Segments. The three business lines are; Private equity, Quoted equity and Real Estate & Infrastructure. Performance is reviewed from a total return perspective. 244 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

3 Segment Information (continued)

(a) Group Private Quoted Real estate Total equity equity & infrastructure 31 December 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Dividend income 671,847 119,159 - 791,006 Interest income 185,550 139,646 - 325,196 Fund management fees - 402,053 - 402,053 Other income (56,170) 3,556 - (52,614) Realized gains 117,624 434,128 - 551,752 Unrealised value movements 2,646,034 460,804 121,440 3,228,278

Gross return 3,564,885 1,559,346 121,440 5,245,671

Finance costs (501,652) (7,606) (32,543) (541,801) Portfolio costs (415,138) (403,739) (88,942) (907,819)

Net return 2,648,095 1,148,001 (45) 3,796,051 Tax (353,069) (150,665) (12,818) (516,552)

Total return 2,295,026 997,336 (12,863) 3,279,499

Gross return (%) 37.37% 29.10% 2.26% 25.88% Total return (%) 24.06% 18.61% (0.24%) 16.18%

Opening net asset value: Portfolio value 11,470,161 4,107,345 10,845,392 26,422,898 Other net asset/(liabilities) (219,626) 2,259,557 (2,697,862) (657,931) Borrowings (1,710,807) (1,008,247) (2,773,076) (5,492,130)

9,539,728 5,358,655 5,374,454 20,272,837

Closing net asset value: Portfolio value 14,294,352 3,692,560 13,144,998 31,131,910 Other net asset/(liabilities) 378,064 1,792,833 1,660,794 3,831,691 Borrowings (5,343,624) (1,837,810) (3,477,163) (10,658,597)

9,328,792 3,647,584 11,328,629 24,305,004

Gross value movement in the period 4,032,167 Less: Non-controlling interest on acquisition of subsidiary (752,668) Net value movement in the period/(total return) 3,279,499 Information Memorandum 245 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

3 Segment Information (continued)

(b) Group Private Quoted Real estate Total equity equity & infrastructure 31 December 2013 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Dividend income 358,928 71,113 - 430,041 Interest income - 205,607 15,287 220,894 Other income 6,726 115,479 17 122,222 Realized gains 2,353 107,682 - 110,035 Unrealised value movements 811,365 1,305,979 371,634 2,488,978

Gross return 1,179,372 1,805,860 386,938 3,372,170

Finance costs (179,720) (111,410) 160,024) (451,154) Portfolio costs (138,969) (92,632) (107,817) (339,418)

Net return 860,683 1,601,818 119,097 2,581,598 Tax (4,099) (35,336) (119,599) (159,034)

Total return 856,585 1,566,482 (502) 2,422,564

Gross return (%) 19.47% 34.39% 16.58% 24.72% Total return (%) 14.14% 29.83% -0.02% 17.76%

Opening net asset value: Portfolio value 7,812,006 3,728,185 5,456,057 16,996,248 Other net asset/(liabilities) (79,939) 1,522,649 (646,685) 796,025 Borrowings (1,674,336) - (2,475,196) (4,149,532)

6,057,731 5,250,834 2,334,176 13,642,741

Closing net asset value: Portfolio value 10,331,248 5,177,121 6,975,545 22,483,914 Other net asset/(liabilities) (171,216) 796,341 (1,702,254) (1,077,129) Borrowings (1,707,720) (1,607,654) (2,026,108) (5,341,482)

8,452,312 4,365,808 3,247,183 16,065,305

Value movement in the period/(total return) 2,422,564 246 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

3 Segment Information (continued)

(c) Company Private Quoted Real estate Total equity equity & infrastructure 31 December 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Dividend income 611,946 532,275 - 1,144,221 Interest income - 22,457 - 22,457 Other income 6,791 - - 6,791 Realized gains 23,677 (60,813) - (37,136) Unrealised value movements 3,056,710 512,856 32,647 3,602,213

Gross return 3,699,124 1,006,775 32,647 4,738,546 Finance costs (304,962) (196,931) - (501,893) Portfolio costs (242,528) (53,378) (63,848) (359,753)

Net return 3,151,634 756,466 (31,201) 3,876,899 Tax (416,505) (77,948) (269,371) (763,824)

Total return 2,735,129 678,518 (300,572) 3,113,075

Gross return (%) 30.18% 19.25% 0.60% 20.66% Total return (%) 22.31% 12.97% (5.52%) 13.57%

Opening net asset value: Portfolio value 14,060,848 5,024,502 10,286,150 29,371,500 Other net assets (91,608) 1,213,962 (2,065,519) (943,165) Borrowings (1,710,807) (1,008,247) (2,773,076) (5,492,130)

12,258,433 5,230,217 5,447,555 22,936,205

Closing net asset value: Portfolio value 19,877,121 4,742,973 11,485,966 36,106,060 Other net assets (766,030) 491,430 (315,486) (590,085) Borrowings (5,343,624) (1,837,810) (2,285,258) (9,466,692)

13,767,467 3,396,593 8,885,222 26,049,283

Value movement in the period/(total return) 3,113,075 Information Memorandum 247 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

3 Segment Information (continued)

(d) Company Private Quoted Real estate Total equity equity & infrastructure 31 December 2013 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Dividend income 456,928 472,315 - 929,243 Interest income - 39,784 - 39,784 Other income 9,079 - - 9,079 Realized gains - 122 - 122 Unrealised value movements 549,483 1,240,301 238,198 2,027,982

Gross return 1,015,490 1,752,522 238,198 3,006,210

Finance costs (179,720) (108,362) (160,024) (448,106) Portfolio costs (137,455) (60,652) (84,125) (282,232)

Net return 698,315 1,583,507 (5,952) 2,275,872 Tax (4,098) (7,387) (2,099) (13,584)

Total return 694,217 1,576,120 (8,051) 2,262,286

Gross return (%) 11.67% 35.18% 9.72% 18.63% Total return (%) 7.98% 31.64% -0.33% 14.02%

Opening net asset value: Portfolio value 10,459,168 3,748,424 5,099,849 19,307,441 Other net assets (79,939) 1,233,009 (174,281) 978,789 Borrowings (1,674,336) - (2,475,196) (4,149,532)

8,704,893 4,981,433 2,450,372 16,136,698

Closing net asset value: Portfolio value 11,243,116 6,626,032 6,957,542 24,826,691 Other net assets (98,790) 264,378 (1,251,818) (1,086,231) Borrowings (1,707,720) (1,607,654) (2,026,108) (5,341,481)

9,436,606 5,282,756 3,679,616 18,398,978

Value movement in the period/(total return) 2,262,280 248 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

3 Segment Information (continued)

GROUP 31 December 2014 2013 Ksh 000 Ksh 000

(e) Reconcilliation of total return to profit for the year Total return as per internal reporting 3,279,499 2,422,564 Adjustment for share of associate earnings 377,693 351,870 Share of other comprehensive income of associates - 119,675 Associate dividend income (273,401) (190,483) Unrealised value movements net of dividend relating to associates (104,292) (281,061) Total comprehensive income 3,279,499 2,422,564 Other comprehensive income (2,012,933) (1,780,897)

Profit for the year 1,266,566 641,667

4 Income

(a) Total investment income

GROUP COMPANY 2014 2013 2014 2013 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Dividend income 517,606 266,102 1,144,221 929,243 Interest income 325,075 220,894 22,457 39,784 Fund management fees 402,053 - - - Gain on disposal of investments 1,267,865 325,645 267,268 96,784 Unrealised gains/(losses) on revaluation of property & bond portfolio (38,298) 301,375 - - Directors Fees 6,792 6,726 6,792 6,726 Other income (64,577) 117,849 - 2,353

2,416,516 1,238,591 1,440,738 1,074,890

(a) Dividend income GROUP COMPANY 2014 2013 2014 2013 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Associates - - 519,015 548,380 Subsidiary - - 273,401 163,559 Unquoted investments 398,447 195,369 338,545 195,369 Quoted investments 119,159 70,733 13,260 21,935

517,606 266,102 1,144,221 929,243 Information Memorandum 249 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

5 Current and deferred income tax

The interim period tax charge is based on the estimated average annual effective income tax rate of 30% (9 months ended 31 December 2013:30%) on the taxable revenue streams.

Deferred tax on fair value gains is based on 5% capital gains tax recently reintroduced in the Finance Act 2014. The amount recognised as at 31 December 2014 is the deferred tax on cumulative unrealised gains or losses on investments.

6 Earnings per share 31 December 2014 2013 Kshs’000 Kshs’000

Profit attributable to equity holders of the Company 1,199,535 641,667 Weighted average number of ordinary shares in issue(thousands) 665,442 665,442 Basic earnings per share (Kshs) 1.80 0.96

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in outstanding during the year.

7 Investment property GROUP Dec 2014 Mar 2014 Shs’000 Shs’000

At start of year 10,845,392 5,456,057 Additions 990,887 2,111,258 Capitalized borrowing costs 206,733 228,159 Fair value gains - 3,108,376 Translation differences (40,501) (58,458)

At end of year 12,002,511 10,845,392

The Company commissions an independent valuer to determine the fair value of investment property as at 31 March every year. The last valuation for the investment property was carried out as at 31 March 2014. No fair value gains have been recognised as at 31 December 2014 and the next valuation will be carried out as at 31 March 2015. Translation differences above relate to foreign exchange revaluation gains and losses on investment property as at the end of the period.

8 Unquoted investments GROUP COMPANY Dec 2014 Mar 2014 Dec 2014 Mar 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Opening valuation 7,569,310 4,306,221 5,495,272 3,539,417 Movements in the period: Additions 1,148,827 337,123 51,533 143,218 Disposals (320,117) (39,666) (320,117) (39,666) Reserves released on disposal of investments (90,613) - (90,613) - Fair value gain 2,495,591 2,965,632 2,218,729 1,852,303 3,233,688 3,263,089 1,859,532 1,955,855

Closing valuation 10,802,998 7,569,310 7,354,804 5,495,272

Unquoted investments are classified as non-current assets

250 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

9 Equity linked notes GROUP COMPANY Dec 2014 Mar 2014 Dec 2014 Mar 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Equity-linked note - asset & liability 9,591,922 843,073 - -

Centum Exotics Limited issued a 5 year equity-linked investment note in the period and raised Kshs 7,520,596 (2014: Kshs 843,073,578). The carrying value of the equity-linked note is linked to the fair value of an underlying asset.

10 Loans and advances GROUP Dec 2014 Mar 2014 Shs ‘000 Shs ‘000

(a) Term loans 10,325,815 - Overdrafts 819,135 -

Gross loans and advances 11,144,950 - Provision for impaired loans and advances – (note 12) (691,236) -

10,453,714 -

(b) Analysis of gross loans and advances by maturity Maturing within one year 2,778,520 - Between two and three years 4,087,509 - Over three years 4,278,921 -

11,144,950 -

The aggregate amount of non-performing advances was Shs 776,423,000 in K-Rep Bank against which specific provisions of Shs 609,979,000 have been made leaving a net balance of Shs 166,444,000 which is included in the statement of financial position in the loans and advances line item.

The weighted average effective interest rate on loans and advances as at 31 December 2014 was 21%.

The collateral held against these loans includes mortgages, motor vehicles, land and building, chattels, share certificates among other assets. Information Memorandum 251 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

11 Cash and cash equivalents

For the purpose of the statement of cash flows cash and cash equivalents comprise; GROUP COMPANY Dec 2014 Mar 2014 Dec 2014 Mar 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

Call deposits (maturing within 90 days) 2,015,588 224,018 112,476 108,851 Bank balances 2,814,424 619,630 464,258 66,081

4,830,012 843,648 576,734 174,932

Bank overdraft (2,114,197) (1,291,101) (2,114,197) (1,291,101)

2,715,815 (447,453) (1,537,463) (1,116,169)

At 31 December 2014 the Group had undrawn committed borrowing facilities amounting to Kshs 85,803,000 (Mar 2014: Kshs 708,899,000). The effective interest rate for the bank overdraft is 14.5% (2014: 14.5%).

The overdraft facility is secured by a floating charge over all the listed Kenya securities.

12 Share capital

The total authorised number of ordinary shares is 800,000,000 with a par value of Kshs 0.50 per share. 665,441,714 (2014: 665,441,714) are issued and fully paid up.

13 Borrowings GROUP COMPANY Dec 2014 Mar 2014 Dec 2014 Mar 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000

The borrowings are made up as follows:

Bank loan At start of year - - - - Proceeds from bank loans 3,151,463 - 3,151,463 - Borrowings, on acquisition of subsidiary 999,923 - - - Repayment during the period (7,716) - - - Accrued interest 22,794 - 22,794

At end of year 4,166,464 - 3,174,257 -

Corporate bond At start of year 4,201,029 4,149,532 4,201,029 4,149,532 Issue during the year - - - - Accrued additional interest on Equity linked note 28,143 37,524 28,143 37,524 Accrued interest 138,284 - 138,284 - Amortization of bond related expenses 10,480 13,973 10,480 13,973

At end of year 4,377,936 4,201,029 4,377,936 4,201,029

Total borrowings 8,544,400 4,201,029 7,552,193 4,201,029

The company successfully issued a 5 year bond in 2012 and raised Kshs 4,167,900,000. This comprised of fixed rate notes of KShs 2,917,530,000 at an interest rate of 13.5% and equity linked note of Shs 1,250,370,000 at 12.75% with a maximum upside of 15% on the Company’s net asset value as at 31 March 2012. 252 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

14 Customer Deposits GROUP Dec 2014 Mar 2014 Shs ‘000 Shs ‘000

Call and fixed deposits 6,664,424 - Current and demand accounts 2,822,360 - Savings accounts - micro savers 2,360,145 - - other 218,249 -

12,065,178 -

Analysis of customer deposits by maturity:

Payable within one year 9,300,835 - Between one year and three years 2,764,343 -

12,065,178 -

Included in ‘Customer deposits’ were deposits of Shs 559,584,000 that have been pledged to the Bank by the customers as securities for loans and advances.

The weighted average effective interest rate on interest bearing customer deposits for the period ended 31 December 2014 was 6.79 %. The weighted average interest rate on the deposits for the period ended 31 December 2014 was 8.86%.

15 Contingencies and commitments

There have been no significant changes in contingent liabilities and commitments since March 31 2014. Information Memorandum 253 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

16 Business Combinations

On 1 December 2014, the Group obtained control of K-Rep Bank Limited, a licenced banking institution by acquiring 65.6% of the shares and voting interests in the company.

The following table summarises the consideration paid for K-Rep Bank Limited, the fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.

Kshs’000

Cash consideration paid 2,355,028 Fair value of previous equity interests 59,707 Total Consideration 2,414,735 Fair value of assets acquired (see below) (2,318,754) Non-controlling interest at acquisition 752,667

Goodwill – included in intangible assets 848,648

Total assets Cash and cash equivalents 2,173,485 Government securities 1,828,383 Net Loans & advances to customers 10,312,847 Property & equipment 406,837 Deferred tax assets 39,380 Other assets 172,646

14,933,578

Total liabilities Customer deposits (11,297,701) Borrowed funds (999,923) Taxation (38,345) Total liabilities (278,855)

(12,614,824)

Total net assets acquired during the year 2,318,754

Non-controlling interest at acquisition 752,668

Majority interest at acquisition 1,566,086

Total net assets acquired during the year 2,318,754 254 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Notes to the financial statements (continued)

17 Events occurring after the reporting period

On 8 January 2015, the company announced that it has entered into an agreement with a member of the Old Mutual Group for the sale of Centum’s 13.75% shareholding in UAP Holdings Limited. The transaction was completed in February 2015.

On 8 December 2014, the company announced its intention to acquire an additional 3% shareholding in Almasi Beverages Limited bringing its shareholding to 50.95% of the share capital in the company. Following regulatory approvals, the acquisition was completed in March 2015.

On 27 March 2015, the company announced its intention to acquire 9,646 acres of land in Vipingo at a price of KES 180,000 per acre and also acquire Vipingo Estates Limited, a subsidiary of Rea Vipingo Plantations Limited, which owns approximately 900 acres of land at a price of approximately Kes.340 million. The transaction price totals to approximately KES 2.1 billion. Information Memorandum 255 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

20.4 Form of Letter of Undertaking for requested Allocation

The Directors Centum Investment Company Limited International Life House Mama Ngina Street P. O. Box 10518-00100 Nairobi Kenya

Date:

Dear Sirs UNDERTAKING IN RESPECT OF PAYMENT ON ALLOCATION OF NOTES TO [name of QII] WHEREAS[name of investor] (“the Investor”) has applied for Notes (Fixed Rate (delete as appropriate) and/or Equity Linked Note (Fixed Rate) worth Kes [ ] in Centum Investment Company Limited (Centum) being offered by you for subscription as set out in the Information Memorandum dated [ ] (Capitalised terms used in this letter of undertaking shall have the meaning and interpretation given to such terms in the Information Memorandum).

NOW at the request of the Investor and in consideration of Centum allotting to the Investor on the conditions set forth in Condition 5 (Allocation Policy) of the Information Memorandum as well as in AND in consideration of Centum allotting to the Investor Notes worth Kesxxx that we have applied for or such lesser amount as you shall in your absolute discretion determine, we hereby undertake to pay you without delay or argument and without the need to prove, forthwith upon your first written notice specifying how much has been provisionally allotted to the Investor, such sum requested not exceeding Kesxxx.

Should such payment not be made within two Business Days following the deemed service of such notice then Centum shall be entitled without further notice to either: treat the Investor’s application as having been repudiated and cancel the provisional allotment to it and re-allocate the provisionally allotted Notes on such terms and conditions as it shall think fit without prejudice to any rights to damages for such repudiation or; to allow us further time for payment on such terms and conditions as it shall think fit in which event we shall pay late payment interest on all sums outstanding at the Late Payment Rate calculated on daily balances and compounded monthly.

Any notice to be served on us shall be in writing and shall be deemed to have been properly served on us if delivered by hand or sent by fax or e-mail to us at the address specified in the Note Application Form.

Any notice shall be deemed to have been received, if delivered by hand, at the time of delivery or, if sent by fax, on the completion of transmission or if by email receipt of a confirmed delivery notice.

This undertaking shall be governed and construed in accordance with the laws of Kenya and we irrevocably submit to the non exclusive jurisdiction of the Courts of Kenya. If we are not a Kenyan entity or citizen and in addition to any other permitted means of service, we hereby irrevocably appoint the agent submitting our Application for the offered Notes as our agent for the receipt of any legal process.

IN WITNESS WHEREOF THIS LETTER OF UNDERTAKING HAS BEEN EXECUTED BY US THIS

______DAY OF ______2015.

Signed By:

1) Name ______Signature______Title ______

2) Name ______Signature______Title ______

Note: The Letter of Undertaking shall be executed by the Investor and delivered to the Joint Lead Arrangers simultaneously with the duly completed Note Application Form. 256 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Serial No:

Centum Investment Company Limited

Incorporated in Kenya under the Companies Act (Cap 486, Laws of Kenya) Reg. No C. 8/67

NOTE APPLICATION FORM In respect of the up to Kenya Shillings six billion (Kes.6,000,000,000) 13% Senior Unsecured Fixed Rate Notes and 12.5% Senior Unse- cured Equity Linked Notes

Offer opens at 9.00 am on the 18 May 2015 and Closes at 5.00 pm on the 5 June 2015

Please refer to the Information Memorandum and the instructions in the Application Form before completing this form.

The Board of Directors shall reject any application in whole or in apart if the instructions as set out in the Information Memorandum and the Application Form are not complied with.

APPLICANT’S STATEMENT

By signing the Application Form overleaf, I /We the applicant(s) herein state that:-

I/We hereby apply to purchase

SENIOR UNSECURED FIXED RATE NOTES Senior Unsecured Equity Linked Notes

Please tick the appropriate box for the type of Note being applied for

of the Notes (the “Notes”) to be issued by Centum (“the Issuer’) and for the amounts specified in Section C of this application form upon the terms and conditions set out in this application form and Trust Deed (the ‘Trust Deed”) dated 14 May 2015 between Ropat Trust Company (the ‘Note Trustee’) and the Issuer. I/We authorize Custody & Registrars Services Limited (the “Registrar”) to enter my/our name on the Reg- ister of Noteholders of the Notes that may be allotted to me/us and to register my/our address as given in Section H of this application form.

By signing this application form I/We represent and warrant that I/we have the necessary authority and power to purchase and hold the Notes in accordance with this application form and have taken all necessary corporate actions to approve such purchase and to authorize the person signing this application form to bind me/us in accordance to the terms thereof. Information Memorandum 257 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes A: (i) APPLICANT POOL: (Tick as applicable)

Applicant type: Retail Qualified Institutional Investor Corporate Other

Residence: Resident Non Resident Citizenship: Kenyan East African Foreigner

B: (i) PRIMARY APPLICANT DETAILS: (Name as per National ID / Passport) Surname (Last Name)

First Name and Other Names

Passport Number/ID Number/Alien ID Number Country of Issue

(ii) JOINT APPLICANT 1 DETAILS: (Names as per National ID / Passport) Surname (Last Name)

First Name and Other Names

Passport Number/ID Number/Alien ID Number Country of Issue

(iii) JOINT APPLICANT 2 DETAILS: (Names as per National ID / Passport) Surname (Last Name)

First Name and Other Names

Passport Number/ID Number/Alien ID Number Country of Issue

(iv) QUALIFIED INSTITUTIONAL INVESTOR /CORPORATE: (Name as per Certificate of Registration / Incorporation) Name

Registration/Incorporation No. Country of Registration/Incorporation

Qualified Institutional Investors are Fund Managers, Authorized Depositories and Investment Banks licensed under the Capital Markets Act and Insurance Companies who manage life funds and licensed by the Insurance Regulatory Authority

For Nominee Applicants Only: Account Name/Number

C: VALUE OF NOTES APPLIED FOR: Minimum Amount of Kshs.1,000,000; Additional Amount in Multiples of Kshs.100,000

SENIOR UNSECURED FIXED RATE NOTES AMOUNT IN WORDS (SENIOR UNSECURED FIXED RATE NOTES) 258 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

SENIOR UNSECURED EQUITY LINKED NOTES AMOUNT IN WORDS (SENIOR UNSECURED EQUITY LINKED NOTES)

D: Please credit my/our CDSC Account as detailed below to the extent of the Notes are allotted:

PARTICIPANT’S CDSC ACCOUNT NO:

E: PAYMENT DETAILS: Name of Bank Name of Branch (e.g. MOI AVENUE)

Bank code Amount of Payment Funds Transfer Reference Number.

GPS (Please tick If applicable)

F: WHERE PURCHASE IS FINANCED/GUARANTEED (Optional) – Attach financing/ guarantee letter from bank

Tick if applicable

Bank Code

G: REFUND / INTEREST PAYMENT AND PRINCIPAL REDEMPTION: Electronic Fund Transfer Only Name of Bank Name of Branch (e.g. MOI AVENUE)

Bank code Name of Account Holder

Branch Code Account Number

H: FULL MAILING ADDRESS AND CONTACT DETAILS FOR ALL APPLICANTS:

P.O. Box Postal Code Street Address (If Applicable)

Telephone Number Mobile Number

City/Town Email Address Information Memorandum 259 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

I: SIGNATURES: Signature 1 Signature 2 Company Seal

Date (DD / MM / YYYY)

J: FOR OFFICIAL USE ONLY: Authorized Placement Agent Stamp Name of Agent representative Signature

GENERAL INSTRUCTIONS ON COMPLETING THE APPLICATION FORM

Please note that Application Forms received by the Authorized Placement Agent after the Closing Date will be rejected..

Part A Tick the appropriate investor pool whether Retail, or Qualified Institutional Investor (QII).Tick appropriate residence and citizenship status. Part B Fill in the names as per the National ID/Passport Number. Trusts that have not been incorporated, a partnership or a deceased’s estate cannot be used. Trustees of unincorporated trusts, individual partners or executors may apply for Notes in their own name(s). Part C Fill in the value of Notes being applied for. All Notes shall be mailed to the address provided in Section F of this application form. Part D Please provide the details of the method of payment as requested. Banker’s cheques payments should accompany this Application Form. Personal cheques will not be accepted. Kindly indicate the full bank code as requested. The bank code is the 5 digit number found on the top right hand corner of your cheque, just under the date field, and above the amount field. Part E Where the purchase is financed, applicants must attach financing letter from the bank indicating the financing bank and the Authorised Placement Agent; and the original attached to this Application Form.. For guaranteed applications, please attach letter of guarantee from the bank to the Application Form. Part F Fill in your current mailing address, telephone number, mobile telephone number and email address. Part G For refunds (if any), interest payment and principal redemptions fill in your bank details i.e. name of bank, branch, bank code and correct account number. Refunds will be payable only via Electronic Funds Transfer (EFT). Any rejected EFTs will be defaulted to cheques and sent to Authorised Placement Agents for your collection. Part H QII applications must be signed by Authorised Signatories and the company seal appended in the space provided. Applicants signing by thumbprint must have the thumbprint witnessed next to it, and the witness should provide his/her full names and identification number in the space provided. Part I This section is reserved for the official use of the Authorised Placement Agent and the Receiving Agent. Part J This section is to be torn off and safely retained by the applicant after the Authorised Placement Agent has date-stamped in the space provided. Part K This section is to be torn off and safely retained by the applicant after the Authorised Placement Agent has date-stamped in the space provided.

Please note that Application Forms received by the Authorized Placement Agent after the Closing Date will be rejected. 260 Information Memorandum Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

This completed form should be forwarded by hand to the Arrangers or Placing Agents at the following address:

Equity Investment Bank Limited OR Dyer & Blair Investment Bank Limited 6th Floor, Equity Centre 10th Floor, Pension Towers Hospital Road Loita Street Upperhill. P.O. Box 45396-00100 P.O. Box 75104-00200 Nairobi, Kenya Nairobi, Kenya Tel:+254 20 3240104 Tel:+254 719 056 501 Fax: +254 0 20 3240114 Attention: Irungu Nyakera Attention: Paul M Nyaga or Cynthia Mbaru E-mail:[email protected] E-mail: [email protected]

• Application lists will close at 5:00 pm on 5 June 2015 • All alterations on this form must be authenticated by full signature. All applications must be made without any conditions stated by applicants. • Under no circumstances whatsoever may the name of the applicant be changed and it this is done then the application form will be invalid. • Applications are made subject to the provisions of the Information Memorandum with which this form is attached • Applications are irrevocable and may not be withdrawn or amended without the written consent of the Issuer. • Individual applicants must be 18 years of age or older.

1. Allotment procedure • The base of allotment will be determined by the Issuer and the Arranger and will be communicated by the Issuer to the Capital Markets Authority. • The right is reserved to accept or reject any application in whole or in part.

2. Settlement , Payment of the purchase price for the notes may be made: • By bank transfer/remittance of the funds for credit of the Issuer’s account below: such application and original transfer confirmation slip to reach the Authorized Placement Agent not later than 5:00 pm on 5 June 2015 for Retail Investors • By bank transfer/remittance of the funds for credit of the Issuer’s account below: not later than 3:00 pm on 15 June 2015 for Institu- tional Investors

Account Name Centum Investment Bond 2015 Bank Co-operative Bank Kenya Ltd Branch Hilton Account Number KES A/c 01150579192000 USD A/c 02150579192000

OR

Account Name CENTUM INVESTMENT COMPANY LIMITED BOND ACCOUNT Bank K-Rep Bank Limited Branch Kenyatta Avenue Branch Account Number KES-01003020034472 USD-01003020034482

3. Delivery of Notes • The Notes will be mailed to each successful applicant against cleared funds. No temporary documents of title will be issued. 4. General • Any acceptance of an application for the Notes shall be governed and constructed in accordance with the Kenyan Law Information Memorandum 261 Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Part J – Application Acknowledgement Receipt – for applicant to retain

APA Stamp & This Acknowledgement Receipt is evidence of an application released to the selected Authorized Placement Serial No Date Agent. It should be kept secure and must be produced when making an enquiry regarding the application refunds via EFT. This receipt is NOT evidence of an application received by the Receiving Agent. Thank you for investing in the Centum Investment Company Limited Notes Offer Information Memorandum iii www.centum.co.ke Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Champions of Governance the second time round... We always strive to adhere to the highest corporate governance practices and consistent focus on improving our reporting systems both as a financial company and listed firm hence success in winning these awards. Information Memorandum iv Senior Unsecured Fixed Rate Notes and Senior Unsecured Equity Linked Notes

Centum Investment Company Limited Tel: +254 20 2286000 / 316303 International House Mob: +254 722 205339 5th Floor, Mama Ngina Street Fax: +254 20 2223223 PO Box 10518-00100 Email: [email protected] Nairobi, Kenya. Web: www.centum.co.ke