Family Bank Limited Incorporated in Kenya under the Companies Act, 2015 (Registration Number 34/2007) INFORMATION MEMORANDUM JUNE 2021 In respect of Up to Kenya Shillings Eight Billion (KES 8,000,000,000) Subordinated Multicurrency Medium Term Note Programme INFORMATION MEMORANDUM, JUNE 2021 Lead Arranger and Placing Agent Co-arranger and Co-placing Agent Reporting Accountants Legal Advisors Receiving Bank Registrar Note Trustee Media & Public Relations INFORMATION MEMORANDUM, JUNE 2021 This Information Memorandum has been approved by the Board of Directors of Family Bank Limited who hereby declare that to the best of their knowledge, the information contained in this Information Memorandum relating to the company’s financial position, operations and future prospects is true and fair and that in the event that the said information changes, based on the prevailing circumstances of the company, a supplemental disclosure document shall be submitted to the Authority for approval. This Information Memorandum 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, 2015. ……………………………………… ……………………………………… Dr. Wilfred Kiboro Ms. Rebecca Mbithi Chairman Managing Director & Chief Executive Officer INFORMATION MEMORANDUM, JUNE 2021 Mission “We positively transform people’s lives by providing quality financial services through innovative, efficient and reputable practices.” Our Corporate Values Vision Winning Together “To be the financial institution Self Belief that leads in the positive Transparency transformation of people’s Humility lives in Africa.” INFORMATION MEMORANDUM, JUNE 2021 TABLE OF CONTENTS 1 Preface 5 2 Disclaimer and Statements 6 3 Caution Statement 7 4 Documents Incorporated by Reference 8 5 Selling Restrictions 9 6 Corporate Information 10 6.1 List of Contacts 10 6.2 Board of Directors of the Issuer 10 6.3 Other Corporate Information 10 6.4 Transaction Advisors 10 7 Definitions and Abbreviations 13 - 15 8 Summary of the notes 16 8.1 Summary of the Issue 16 8.2 Use of Proceeds 18 8.3 Timetable 18 8.4 Frequently Asked Questions 18 9 Key Investment Considerations 20 9.1 Track Record of Growth 20 9.2 Key Partnerships 21 9.3 Liquidity 21 9.4 Diversification of Asset Classes 21 9.5 Long-standing Heritage 21 9.6 Competent Board and Senior Management 22 9.7 Low Leverage Levels 22 9.8 Wide Geographic Coverage 22 9.9 Innovative Service Delivery 22 10 Terms and Conditions of the Note 23 - 31 11 Economic Outlook and Overview of the Kenyan Banking Sector 32 11.1 Kenya Economic Performance 32 11.1.1 Kenya Economy Outlook 32 11.1.2 Macro-Economic Overview 32 11.2 Kenyan Banking Sector Overview 36 11.2.1 Industry Structure 36 11.2.2 Asset Base 37 11.2.3 Market Share 38 11.2.4 Industry Performance 38 11.2.5 Recent Developments 41 11.2.6 Future Outlook 41 12 Family Bank Limited Business Overview 42 12.1 History and Background 42 12.2 Key Milestones 43 12.3 Accolades 43 12.4 Branch Network 44 12.5 Products and Services 45 12.5.1 Personal Banking 45 12.5.2 Diaspora Banking 46 Family Bank is regulated by the Central Bank of Kenya 1 INFORMATION MEMORANDUM, JUNE 2021 12.5.3 Business Banking 46 12.5.4 Treasury Services 47 12.5.5 Mortgages 48 12.5.6 Bancassurance 48 12.5.7 Digital Financial Products 49 12.6 Organisation Structure 49 12.7 Employees 49 12.8 Board of Directors 50 12.9 Senior Management 53 12.10 Competence and Suitability of Directors and Management 56 12.11 Corporate Governance 56 12.11.1 Board Committees 56 12.11.2 Board of Directors Meetings Attendance 57 12.11.3 Shareholding Structure 58 12.12 Subsidiaries 58 12.12.1 Family Bank Insurance Agency Limited 58 12.12.2 Family Group Foundation 59 12.12.3 Family Bank (Kenya) Limited 59 12.12.4 Pesa Pap Digital Limited 59 12.13 Strategy and Prospects 59 13 Group Financial Performance and Statutory Ratios 61 13.1 Consolidated Statement of Profit or Loss 61 13.2 Consolidated Statement of Financial Position 62 13.3 Prudential Ratios 63 14 Risk Factors 64 14.1 Risks Relating to the Bank 64 14.1.1 Credit Risk 64 14.1.2 Liquidity Risk 65 14.1.3 Market Risk 66 14.1.4 Operational Risk 67 14.1.5 Compliance Risk 67 14.1.6 Reputational Risk 68 14.1.7 Strategic Risk 68 14.1.8 Regulatory Risk 69 14.1.9 Political Risk 70 14.2 Risks Relating to the Notes Generally 70 14.2.1 Modification, Waivers and Substitution 70 14.2.2 Legal Investment Considerations May Restrict Certain Investments 70 15 Taxation 71 15.1 Tax Considerations 71 15.1.1 Interest Payments 71 15.1.2 Stamp Duty 71 15.1.3 Tax Treaties 71 16 Subscription and Sale 72 16.1 Application Procedure 72 16.2 Payment for Notes and Delivery 72 16.3 Secondary Market Trading of the Notes 72 2 Family Bank is regulated by the Central Bank of Kenya INFORMATION MEMORANDUM, JUNE 2021 17 Legal Information and Contracts 73 17.1 Principal objects (as contained in the Memorandum of Association) 73 17.2 Provisions of the Articles 73 17.3 Authorised and Issued Share capital 76 17.4 Material Agreements (material contracts to which Family Bank is a party) 76 17.5 Related Party Agreements (loan agreements with subsidiaries, etc. with details on amounts, purpose, interest rates, etc.) 77 17.6 Loan/Finance Agreements 77 17.7 Other Contracts 78 17.8 Licenses and Permits 78 17.9 Material Litigation and Disputes 78 17.10 Property and information on Vendors on materials assets acquired in the last five years 78 17.11 Expenses of the offer 79 17.12 Directors declaration 79 17.13 Directors statement as to funding for payment obligations 79 17.14 Directors statement as to liquidity requirement 79 17.15 General Information 79 17.15.1 Documents Available for Inspection 79 17.15.2 Changes in Senior Management 80 17.15.3 Voting Rights and Control 80 17.15.4 Directors’ Interest 80 17.15.5 Minimum Subscription Level 80 17.15.6 Application Procedure 80 17.15.7 Secondary Market Trading of the Notes 80 17.15.8 Material Changes in the business 80 17.15.9 Material Change in the Financial Information 80 17.15.10 Principal Investments 80 17.15.11 Dealing with Shareholders 81 17.15.12 Other Issues 81 18 Appendix Appendix A: Accountants Report 82 Appendix B: Legal Opinion 193 Family Bank is regulated by the Central Bank of Kenya 3 INFORMATION MEMORANDUM, JUNE 2021 LIST OF TABLES Table 1: Family Bank Historical Performance (Total Income and Profit before Tax) 20 Table 2: Family Bank Historical Performance (Total Assets, Customer Deposits, Shareholders Funds and Loans and Advances) 21 Table 3: Number of Branches per County 37 Table 4: Family Bank Branch Network 44 Table 5: Family Bank Employees 49 Table 6: Family Bank Board of Directors 50 Table 7: Family Bank Senior Management 53 Table 8: Board of Directors Meeting Attendance during FY 2020 57 Table 9: Major Shareholders 58 Table 10: Change in Major Shareholders 58 TABLE OF FIGURES Figure 1: Family Bank Leverage Levels 22 Figure 2: Eastern Africa Countries Annual GDP Growth 32 Figure 3: Kenya 12-Month Inflation 33 Figure 4: Kenya Treasury Bill Rates 33 Figure 5: Kenya Interest Rates 34 Figure 6: Yield Curve 34 Figure 7: USD/KES Exchange Rate 35 Figure 8: Kenya Government Debt, Current Account and Budget Deficit 36 Figure 9: Kenya Banking Industry 36 Figure 10: Kenya Banking Industry Market Snapshot 38 Figure 11: Loan Distribution by Sector (KES Billion) 39 Figure 12: Banking Industry Proportion of NPL to Gross Loans 39 Figure 13: Composition of Gross Income 40 Figure 14: Composition of Gross Expenses 40 Figure 15: Family Bank’s High-Level Organisation Structure 49 4 Family Bank is regulated by the Central Bank of Kenya INFORMATION MEMORANDUM, JUNE 2021 1 Preface Under this Medium Term Note programme (the “Programme”), the Issuer may, from time to time, issue debt securities (the “Notes”). The Notes will rank as subordinated obligations of the Issuer. The aggregate principal amount of Notes outstanding will not at any time exceed Kenya Shillings Eight Billion (“KES 8,000,000,000”) at the date of issue. It is proposed that the Issue will be in tranches, with the first tranche of Kenya Shillings Four Billion (“KES 4,000,000,000”) being issued in 2021 and the balance within the next five years in various tranches/series. Interest on the Notes of a particular series shall be calculated and paid as per the Terms and Conditions of the Notes as outlined in the relevant Pricing Supplement. The Notes, unless previously redeemed, will be redeemed in full in accordance with the provisions of the relevant Pricing Supplement. The Notes will be issued as Dematerialized Notes in denominations of KES 100,000 and in integral multiples of KES 100,000 in excess thereof, subject to a minimum subscription amount of KES 100,000. The Notes shall rank as specified in the Summary of the Programme and as specified under the Terms and Conditions of the Notes. The register of Noteholders will be maintained by Family Bank as Fiscal Agent and Registrar (the “Issue and Paying Agent, Calculation Agent and Registrar”). The sale or transfer of Notes by Noteholders will be subject to the rules of the Nairobi Securities Exchange (“NSE”), and where applicable, the prevailing CDSC Rules and the Terms and Conditions of the Notes.