Centum Investment Company Limited Annual Report and Financial Statements Year ended 31 March 2016 Our Vision Our Mission Our Values To be Africa’s foremost To create real, tangible We deliver to promise investment channel wealth by providing the We have unity of purpose channel through which We are partners investors access and We invest responsibly build extraordinary enterprises in Africa 2 Annual Report and Financial Statements | Year Ended 31 March 2016 Annual Report and Financial Statements | Year Ended 31 March 2016 1 TABLE OF CONTENTS Corporate Information 3 STATUTORY INFORMATION AND AUDITED FINANCIAL STATEMENTS Notice of the 49th Annual General Meeting 4 Directors’ Report 90 Notisi ya Mkutano wa Mwaka Makala 49 6 Statement of Directors’ Responsibilities 91 OVERVIEW OF THE BUSINESS Independent Auditors’ Report 92 Performance Highlights 8 Consolidated Income Statement 93 Our Business Model 9 Consolidated Statement of Comprehensive Income 94 Centum 3.0 Strategic Pillars 10 Company Statement of Comprehensive Income 95 Our Investments 11-12 Consolidated Statement of Financial Position 96 Performance against Centum 3.0 pillars 13-15 Company Statement of Financial Position 97 Five Years Performance Highlights 16 Consolidated Statement of Changes in Equity 98-99 Our Board 17-19 Company Statement of Changes in Equity 100-101 Leadership Team 20-23 Consolidated Statement of Cash Flows 102 Chairman’s Statement 24-27 Company Statement of Cash Flows 103 Taarifa ya Mwenyekiti 28-31 Notes to the Financial Statements 104-179 Chief Executive’s Review 32-35 Taarifa ya Afisa Mkuu 36-39 ADDITIONAL DISCLOSURES Financial Review 40-44 Historical Performance 181-182 Sector Review 45-69 SHAREHOLDER INFORMATION GOVERNANCE, RISK AND SUSTAINABILITY Information for Shareholders 183 Corporate Governance Report 71-76 Proxy Form / Fomu ya Uakilishi 185 Risk and Audit Report 77-81 Registrar Form 187 Sustainability Report 82-87 2 Annual Report and Financial Statements | Year Ended 31 March 2016 CORPORATE INFORMATION REGISTERED OFFICE LAWYERS INVESTMENT COMMITTEE International House Coulson Harney Advocates C J Kirubi-Chair Mama Ngina Street 5th Floor, West Wing, ICEA Lion Centre K Wanderi P.O.Box 10518-00100 Riverside Park, Chiromo Road J M Mworia Nairobi PO Box 10643-00100 L Macharia Nairobi I Khan COMPANY SECRETARY H C Njoroge Loise Gakumo Ndungu Njoroge & Kwach Advocates Certified Public Secretary (Kenya) 12th Floor, International House AUDIT AND RISK COMMITTEE International House P.O. Box 41546 – 00100 I Khan- Chair Mama Ngina Street Nairobi L Macharia P.O.Box 10518-00100 H C Njoroge Nairobi K N Associates M M Byama 3rd Floor, Ngong Lane Plaza, Ngong Lane J M Mworia AUDITOR Off Ngong Road PricewaterhouseCoopers P.O. Box 27547-00100 NOMINATION AND GOVERNANCE PwC Tower Nairobi COMMITTEE Waiyaki Way/Chiromo Road, Westlands L Macharia-Chair P. O. Box 43963-00100 Anjarwalla & Khanna K Wanderi Nairobi 3rd Floor, The Oval, J N Muguiyi Ring Rd Parklands/Jalaram Rd, Westlands C J Kirubi BANKERS PO Box 200-00606 J M Mworia Sidian Bank Limited Nairobi M M Byama K-Rep Center, Kilimani P.O. Box 25363-00603 BOARD OF DIRECTORS BRANDING COMMITTEE Nairobi J N Muguiyi-Chair H C Njoroge- Chair J B McFie- Deputy Chair C J Kirubi Co-operative Bank of Kenya Limited J M Mworia - Managing Director J M Mworia Co-operative Bank House, C J Kirubi Haile Selassie Avenue Industrial & Commercial Development ICT COMMITTEE P.O.Box 48231 – 00100 Corporation (ICDC) H C Njoroge- Chair Nairobi K Wanderi (Alternate to ICDC) J M Mworia H C Njoroge David Bunei Commercial Bank of Africa Limited The Permanent Secretary, Ministry of Chiota Wadzanai International House Trade Mama Ngina Street M M Byama (Alternate to Permanent P.O.Box 30437 – 00100 Secretary, Ministry of Trade) Nairobi I Khan L Macharia Annual Report and Financial Statements | Year Ended 31 March 2016 3 NOTICE OF THE 49TH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 49th Annual General Meeting of Centum a) THAT the incorporation of Zohari Leasing Limited (incorporated in Investment Company Limited (the “Company”) will be held on Thursday, Kenya) as wholly-owned subsidiary of the Company be ratified. 29th September 2016 from 11:00 am at Two Rivers Development, Limuru Road (please see map below), Nairobi. b) THAT the incorporation of Rea Power Company Limited (incorporated in Kenya) as wholly-owned subsidiary of the Company be ratified. AGENDA: c) THAT the incorporation of Le Marina Limited (incorporated in 1. CONSTITUTION OF THE MEETING Uganda) as wholly-owned subsidiary of Centum Development The Secretary to read the notice constituting the meeting and determine if Limited (a subsidiary of the Company) be ratified. a quorum is present. d) THAT the incorporation of Two Rivers Development Phase Two 2. CONFIRMATION OF MINUTES Limited (incorporated in Kenya) as a wholly-owned subsidiary of To confirm minutes of the AGM held on Tuesday, 29th September 2015. Two Rivers Development Limited (a subsidiary of the Company) be ratified. 3. ORDINARY BUSINESS e) THAT the acquisition of 100% shares of Vipingo Estates Limited by i. Report of the Auditors and Consolidated Financial Statements for the Vipingo Development (a subsidiary of the Company) be ratified. financial year ended 31st March 2016 To receive, consider and approve the Consolidated Financial Statements f) THAT the acquisition of a 29% additional shareholding in Longhorn for the financial year ended 31st March 2016, together with the Directors’ Publishers Limited (resulting in Longhorn Publishers Limited and Auditors’ report thereon. becoming a subsidiary in which the Company holds an aggregate of 60.29% of the issued share capital) be ratified. ii. Declaration of Dividend To declare a first and final dividend of KShs. 1.00 per ordinary share for B. Special Resolutions the financial year ended 31st March 2016, payable on or about the 31st To consider and if found fit, to pass the following resolutions as special of October 2016, net of withholding tax, to shareholders on the Register resolutions: and to approve the closure of the Register of Members as of the close of business on 3rd October 2016. i. “That the name of the Company be and is hereby changed from “Centum Investment Company Limited” to “Centum Investment iii. Remuneration of Directors Company Plc” with effect from the date set out in the Certificate of To confirm the remuneration of the Directors for the year ended 31st Change of Name issued in that regard by the Registrar of Companies. March 2016. ii. That Article 6 be deleted and replaced with the following new Article: iv. Election of Directors a. In accordance with Article 86 and 88 of the Company’s Articles of “Subject to the Act and to any rights attaching to existing shares, Association, Dr. Laila Macharia, an independent director retires by any share may be issued which can be redeemed or is liable to be rotation, and being eligible, offers herself for re-election. redeemed at the option of the Company or the holder. The Board b. In accordance with Articles 86 and 88 of the Company’s Articles of may determine the terms, conditions and manner of redemption of Association, Mr. James Muguiyi, a director retires by rotation and any redeemable shares which are issued. Such terms and conditions although eligible, does not offer himself for re-election. shall apply to the relevant shares as if the same were set out in these c. In accordance with Articles 86 and 88 of the Company’s Articles of Articles.” Association, the Principal Secretary – Ministry of Industry, Trade and Cooperatives, a director retires by rotation and although eligible iii. That Articles 43 to 46 (both inclusive), be deleted in their entirety. does not offer itself for re-election. iv. That Articles 51 and 52 be deleted and replaced with the following v. Appointment and Remuneration of Auditors new Articles: To appoint PricewaterhouseCoopers (PWC) as Auditors for the Company in accordance with sections 721 (2) and 724 of the Companies Act, No. 17 of “51. An annual general meeting shall be held once a year, at such 2015 and to authorize the directors to fix their remuneration. time (consistent with the terms of the Act) and place as may be determined by the Board. All General Meetings other than annual 4. SPECIAL BUSINESS general meetings shall be called Extraordinary General meetings. A. Ordinary Resolutions 52. The Board may, whenever it thinks fit, and shall on requisition in To consider and if thought fit, to pass the following resolutions as ordinary accordance with the Companies Act, proceed to convene a general resolutions: meeting.” i. Approvals under Regulation G.06 of the Fifth Schedule of the Capital v. That Article 53 be deleted and replaced with the following new Markets (Securities) (Public Offers, Listing and Disclosures) Regulations Articles: 2002. For the purposes of Regulation G.06 of the Fifth Schedule of the Capital “53. A general meeting shall be called by at least such minimum Markets (Securities) Public Offers, Listing and Disclosures) Regulations notice as is required or permitted by the Act. The period of notice 2002 to consider, and if thought fit, to pass the following resolutions as shall in either case be exclusive of the day on which it is served or Ordinary Resolutions in regard to the business of the Company, and in the deemed to be served and of the day on which the meeting is to be interests of the Company: held and shall be given to all members other than those who are not entitled to receive such notices from the Company. The Company 4 Annual Report and Financial Statements | Year Ended 31 March 2016 NOTICE OF THE 49TH ANNUAL GENERAL MEETING shall give notice of a general meeting either in hard copy form, in to effect such delivery or payment.