uchumi supermarkets limited (registration...

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UCHUMI SUPERMARKETS LIMITEDIncorporated in Kenya under the Companies Act (Cap. 486, Laws of Kenya)

(Registration Number C.6/92)

Lead Transaction Advisor

Faida Investment Bank Limited

Sponsoring Stock Brokers

Faida Investment Bank Ltd(Kenya), Faida Securities Rwanda (Rwanda), UAP Financial Services Ltd (Uganda),

Rasilimali Ltd (Tanzania)

Legal Advisor

Hamilton Harrison & Mathews

Reporting Accountant

Ernst & Young

Receiving Bank

Equity Bank Limited

Share Registrars

Funguo Registrars Limited

PR and Advertising Consultant

Hill & Knowlton Strategies

The date of this Information Memorandum is 7 November 2014

INFORMATION MEMORANDUMThe Rights Issue of 99,534,980 New

Ordinary Shares Fully Paid At An Offer Price of KShs 9.00 In The Ratio Of 3 New Ordinary

Shares For Every 8 Ordinary Shares Held

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TRANSACTION ADVISORSLEAD TRANSACTION ADVISOR

SPONSORING STOCK BROKERS

LEAD LEGAL ADVISOR REPORTING ACCOUNTANT

RECEIVING BANK REGISTRARS

PR & COMMUNICATION AND ADVERTISING CONSULTANT

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TABLE OF CONTENTS

1 CONTACT INFORMATION..................................................................................................................................... 4

2 IMPORTANT NOTICE ............................................................................................................................................ 7

3 DEFINITIONS AND INTERPRETATIONS............................................................................................................ 10

4 CHAIRPERSON’S STATEMENT.......................................................................................................................... 11

5 DIRECTORS’ STATEMENT ................................................................................................................................. 13

6 EXECUTIVE SUMMARY ...................................................................................................................................... 14

7 KEY FEATURES OF THE RIGHTS ISSUE .......................................................................................................... 21

8 DETAILS OF THE RIGHTS ISSUE ...................................................................................................................... 24

9 ECONOMIC OVERVIEW OF KENYA, TANZANIA, UGANDA &.......................................................................... 33

RWANDA ...................................................................................................................................................................... 33

10 RETAIL SECTOR OVERVIEW ............................................................................................................................. 39

11 UCHUMI’S BUSINESS OVERVIEW..................................................................................................................... 43

12 UCHUMI’S HISTORY & MILESTONES................................................................................................................ 46

13 CORPORATE GOVERNANCE, THE BOARD OF DIRECTORS AND................................................................. 51

SENIOR MANAGEMENT.............................................................................................................................................. 51

14 RISK FACTORS SPECIFIC TO UCHUMI’S BUSINESS..................................................................................... 57

15 GROUP FIVE YEARS FINANCIAL SUMMARY ................................................................................................... 59

16 CORPORATE STATUTORY AND GENERAL INFORMATION ........................................................................... 64

17 DOCUMENTS AVAILABLE FOR INSPECTION................................................................................................... 80

18 LEGAL OPINION .................................................................................................................................................. 81

19 REPORTING ACCOUNTANTS REPORT ............................................................................................................ 84

20 APPENDICES ..................................................................................................................................................... 132

21 LIST AND DETAILS OF AUTHORIZED AGENTS.............................................................................................. 141

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1 CONTACT INFORMATION

The Company:

UCHUMI SUPERMARKETS LIMITED

Registered Office:

KNTC Complex, Yarrow Road

P.O. Box 73167-00200, Nairobi

Name and title of Contact Persons: Office Contact:

Dr. Jonathan Ciano

Group Chief Executive Officer

Telephone: +254 20 650707

Email: [email protected]

Mr. John Wambugu

Company Secretary

Telephone: +254 20 650707


Professional Advisors:

LEAD TRANSACTION ADVISOR: FAIDA INVESTMENT BANK LIMITED

Registered Office:

Crawford Business Park, Gr. Floor

P.O. Box 45236-00100, Nairobi, Kenya.

Name and title of Contact Person: Office Contact:

Mr. David Mataen

Director, Corporate Finance

Telephone:+254 20 7606026


SPONSORING STOCK BROKER - KENYA: FAIDA INVESTMENT BANKRegistered Office:

Crawford Business Park, Gr. Floor

P.O. Box 45236-00100, Nairobi, Kenya.


Mrs. Rina Hicks

Director, Operations

Telephone:+254 20 7606026


SPONSORING STOCK BROKER - RWANDA: FAIDA SECURITIES RWANDA

Registered Office:

Centenary House, 4th Floor

P.O. Box 124 Kigali, Rwanda


Mr. Stephen Njoroge

Operations Manager

Telephone:+250 78 2859330/+250 78 4333734


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SPONSORING STOCK BROKER - UGANDA: UAP FINANCIAL SERVICES (U) LIMITEDRegistered Office:

Plot 1, Colville Street,

Communications House, 1st Floor

P.O. Box 1610, Kampala, Uganda.


Mr. Patrick Ndonye

General Manager

Telephone:+256 414 332 732


SPONSORING STOCK BROKER - TANZANIA: RASILIMALI LIMITEDRegistered Office:

CHC Building, Samora Avenue

P.O. Box 9373 Dar es-Salaam


Mr. Arphaxad Masambu

General Manager

Telephone:+255 22-2111711


REPORTING ACCOUNTANT: ERNST & YOUNG

Registered Office:

Kenya-Re Towers, Upper Hill

P.O. Box 44286 – 00100 , Nairobi


Mr. Joseph Cheboror

Partner, Assurance

Telephone:+254 20-2715300


LEAD LEGAL ADVISOR: HAMILTON HARRISON & MATHEWS

Registered Office:

ICEA Building, Kenyatta Avenue

P.O. Box 30333 – 00100, Nairobi


Mr. Richard Omwela

Partner

Telephone: +254 20 3258000


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RECEIVING BANK: EQUITY BANK LIMITED

Registered Office:

Equity Center, Ground Floor

Hospital Road, Upper Hill

P.O Box 75104 – 00200, Nairobi


George Mwangi

Senior Operations Manager

Telephone:+ 254 20 2262477/0711026477


PR & ADVERTISING CONSULTANT: HILL & KNOWLTON STRATEGIES

Registered Office:

Riverside Green Offices

Baobab Suite – 1st Floor, Riverside Drive

P.O. Box 34537 -00100 Nairobi


Mr. Samuel Karanja

Managing Director

Telephone: +254 20 444 0829


REGISTRAR: FUNGUO REGISTRARSRegistered Office:

Uchumi House, 17th Floor

P.O. Box 45519-00100 Nairobi


Mr. Richard C.K Ochoi

Senior Principal

Telephone:+254 20 2771227


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2 IMPORTANT NOTICE

The Directors, having made all reasonable inquiries, confirm that this Information Memorandum contains all information with respect to the Company and the Shares and which is material in the context of the Shares. The Directors further confirm that the information contained in this Information Memorandum is true and accurate in all material respects and is not misleading and that the opinions and intentions expressed in this Information Memorandum are honestly held by them and that there are no other facts, the omission of which, would make any of such information or the expression of any such opinions or intentions misleading. The Directors accept responsibility accordingly.

The professional advisors and other agents engaged by the Company to deal with the Rights Issue have relied on information provided by the Company.

Neither this Information Memorandum nor any other information supplied in connection with the Rights Issue is intended to provide the complete basis of any credit or other evaluation. This Information Memorandum shouldnot be considered as a recommendation by the professional advisors to the Rights Issue that any recipient of this Information Memorandum or any other information supplied in connection with this Rights Issue should exercise or purchase the Rights. Each investor contemplating to exercise or purchase the Rights once they become available to the public should make his or her own independent investigation of the financial condition and affairs, and his or her own appraisal of the creditworthiness, of the Company.

The delivery of this Information Memorandum does not at any time imply that the information contained herein concerning the Company is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Rights Issue is correct at any time subsequent to the date indicated in the document containing the same.

No person has been authorised 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 authorised by or on behalf of the Company, the professional advisors, or the other agents (if any) to the Rights Issue.

Without limitation, this Information Memorandum cannot be sent or passed or otherwise be distributed outside East Africa and it is not intended to, constitute an offer for the Rights in any place outside East Africa. In that regard, this Information Memorandum may not be used for or in connection with any offer to, or solicitation by, anyone in any jurisdiction or in any circumstances where such offer or solicitation is unauthorised or is unlawful. The distribution of this Information Memorandum outside of East Africa may be restricted by law and persons who come into possession of this Information Memorandum should seek advice on and observe those restrictions. Any failure to comply with those restrictions may constitute a violation of applicable securities laws. Any such recipient must not treat this Information Memorandum as constituting an offer to him, unless in the relevant jurisdiction, such invitation or offer could be made lawfully to him without contravention of any unfulfilled registration or legal requirements.

Investors outside East Africa wishing to exercise or purchase the Rights must satisfy themselves as to the full observance of the laws of the relevant territory and governmental and other consents to ensure that all requisite formalities are adhered to, and pay any issue, transfer or other taxes due in such territory. Before exercising or purchasing the Rights, investors outside East Africa are advised to consult their own professional advisers as towhether they require any governmental or other approvals or need to observe any applicable legal or regulatory requirements.

Permissions and Approvals

A copy of this Information Memorandum together with the documents required to be attached hereto, have been delivered to the Capital Markets Authority of Kenya (CMA-Kenya), Capital Markets Authority of Uganda (CMA-Uganda), Capital Markets & Securities Authority of Tanzania (CMSA-Tanzania) and the Capital Market Authority of Rwanda (CMA-Rwanda) for approval and to the Registrar of Companies in Kenya for registration.

Permission has been granted by the Capital Markets Authority Kenya (CMA) to offer the New ordinary shares to the public, through a Rights Issue at the Nairobi Securities Exchange (NSE), The Rights Issue has not been approved nor disapproved by the CMA-Kenya, CMA-Uganda, CMSA-Tanzania or CMA-Rwanda. As a matter of

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policy, none of them assume responsibility for the correctness of any of the statements made or opinions or reports expressed or contained in this Information Memorandum.

Approval of this Information Memorandum by the CMA-Kenya, is not to be taken as an indication of the merits of Uchumi or of the Rights Issue.

Permission has been given by the NSE, to admit the New ordinary shares to the Official List of the NSE, comprising in aggregate 99,534,980 issued ordinary shares fully paid of Kshs. 5/- each. It is expected that Rights Issue will become effective and that dealings in the Shares on the NSE will commence on 29 December 2014.

The NSE assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed or contained or referred to in this Information Memorandum. Admission of the Shares to the Official List is not to be taken as an indication of the merits of Uchumi or of the Rights Issue.

Risk Factors

Each prospective investor should carefully consider the matters set forth under the caption Risk Factors in Section 14 of this Information Memorandum. Please consult your investment advisor, fund or asset manager, bank manager, stockbroker, lawyer, accountant or other professional advisor on the meaning and impact of the contents of this Information Memorandum, and as to what action to take.

Forward Looking Statements

This Information Memorandum contains forward-looking statements relating to the Company’s business. These forward looking statements can be identified by the use of forward-looking terminology such as believes, expects, may, is expected to, will, will continue, should, would be, seeks or anticipates or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussion of strategy, plans or intentions.

These statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements that may be expressed or implied by such forward-looking statements.

Some of these factors are discussed in more detail under Risk Factors in Section 14 of this Information Memorandum. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Information Memorandum as anticipated, believed, estimated or expected.

The Company does not intend, and does not assume any obligation, to update any industry information or forward looking statements set out in this Information Memorandum.

Financial Information

Financial information presented in this Information Memorandum is derived from the audited consolidated financial statements of the Company and its subsidiaries for the years ended 30 June 2010, 2011, 2012, 2013and 2014 respectively.

Consents

Faida Investment Bank Limited as the Lead Transaction Advisor and the Lead Sponsoring Stockbroker; Faida Securities Rwanda as the Sponsoring Stockbroker in Rwanda, UAP Financial Services as the Sponsoring Stockbroker in Uganda, Rasilimali Limited as the Sponsoring Stockbroker in Tanzania, Hamilton Harrison & Mathews as Legal Advisors; Ernst & Young Certified Public Accountants as Reporting Accountants; Equity Bank Limited as the Receiving Bank; Hill & Knowlton Strategies as PR and Advertising Consultants and Funguo

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Registrars as Registrar of the Company have consented in writing to act in the stated capacities and to their names being included in this Information Memorandum and have not withdrawn their consents prior to the publication of this Information Memorandum.

None of the above advisors have been employed on a contingent basis by Uchumi and none of them owns an amount of shares in Uchumi or its subsidiaries which is material to that person or has a material, direct or indirect economic interest in Uchumi.

Legal Opinion

Hamilton Harrison & Mathews have given and have not withdrawn their consent to the inclusion in this Information Memorandum of their Legal Opinion, and the references to their names, in the form and context in which they appear, and they have authorized the contents of the said Legal Opinion.

Reporting Accountant’s Opinion

This Information Memorandum contains statements from Ernst & Young, the Reporting Accountants, which constitute a statement made by an expert in terms of the relevant regulation in the respective jurisdiction. The Reporting Accountants have given and have not before delivery of this Information Memorandum withdrawn their consent to the issue of the said statements in the form and context in which they are included in the Information Memorandum.

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3 DEFINITIONS AND INTERPRETATIONS

In this Information Memorandum, unless otherwise stated and as the context allows therewith, the following expressions shall have the following meanings:

1.BNR The National Bank of Rwanda.

2.Board or Directors

The Board of Directors of the Company or the individual persons listed as directors of the

Company.

3.Business Day

Any day (other than a Saturday, Sunday or gazetted public holiday) on which the Company

is open for business in Kenya.

4.

Capital Markets Authority of

Kenya or CMA A statutory body incorporated under the Capital Markets Act, Chapter 485A, Laws of Kenya.

5.Capital Markets Legislation

The Capital Markets Act, Chapter 485A, Laws of Kenya, and the regulations made

thereunder.

6.CDS Account

A securities account opened on behalf of a shareholder with the Central Depository for

purposes of recording the deposits and dealing of immobilized shares.

7.Companies Act The Companies Act, Chapter 486, Laws of Kenya.

8.Existing Shares Kshs. 1,327,133,070 divided into 265,426,614 ordinary shares of Kshs. 5 each

9.

Government, Government of

Kenya (GoK) The Government of the Republic of Kenya.

10.Group Uchumi and its subsidiaries

11.ICDC

The Industrial and Commercial Development Corporation, incorporated under Chapter 445,

the Laws of Kenya

12.Information Memorandum This Information Memorandum dated 7 November 2014.

13.Kenya The Republic of Kenya.

14.Kenya Revenue Authority

A statutory body established by the Kenya Revenue Authority Act, Chapter 469 of the Laws

of Kenya.

15.Kenya Shillings or KShs The lawful currency of the Republic of Kenya.

16.Bell Ringing Date

The date on which the New ordinary shares will be admitted for trading on the NSE being 29

December 2014.

17.Subscription Price

The price at which the New ordinary shares are being offered to existing shareholders as

determined in a manner set out in sub-section 7.6 of this Information Memorandum.

18.LR No. Land Reference Number

19.NSE

The securities exchange owned and operated by the Nairobi Securities Exchange Limited

and duly approved by the Capital Markets Authority (Kenya).

20.Re-listing The resumption of trading of the Shares at the NSE on the 31 May 2011

21.Retail Businesses

Collectively the retail stores businesses operated through Uchumi Supermarkets and its

subsidiaries in the region.

22.Rwandan Franc or Rwf The lawful currency of the Republic of Rwanda.

23.Shareholder Any person who holds a Share in the issued share capital of the Company.

24.Sterling Pound The official currency of the United Kingdom.

25.Shares 265,426,614 issued shares of Kshs .5 each in the issued share capital of the Company.

26. Tanzania Shillings or Tshs The lawful currency of the Republic of Tanzania

27.Uchumi or the Company or USL

Uchumi Supermarkets Limited, a public company incorporated in Kenya in accordance with the Companies Act with registration number C.6/92.

28. Uganda Shillings or Ushs The lawful currency of the Republic of Uganda

29. USD United States Dollar. The official currency of the United States of America

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4 CHAIRPERSON’S STATEMENT

Dear Investor,

On behalf of the Directors of Uchumi Supermarkets Limited, I have great pleasure in presenting to you this Information Memorandum for the Rights Issue of new ordinary shares in Uchumi Supermarkets at the Nairobi Securities Exchange, Uganda Securities Exchange, Dar es Salaam Stock Exchange and the Rwanda Stock Exchange.

BackgroundThis Rights Issue follows approval by the annual general meeting of the Company held on 11 December 2012 that the company seeks new capital from its existing shareholders to finance branch network expansion in Kenya and within the East African region as well as refurbishment and modernization of some existing branches in Kenya. This Rights Issue follows successful cross listing in the Rwanda Stock Exchange, the Uganda Securities Exchange and the Dar es Salaam Stock Exchange which were completed in the second part of 2013 and 2014.

Purpose of the Rights IssueThe purpose of the Rights Issue is to enable Uchumi meet working capital requirements necessitated by the planned opening of new branches in the region as follows: opening another 4 branches in Kenya, 1 in Ugandaand 3 in Tanzania all by 2014/15. And, also to refurbish and modernize 5 existing branches in Kenya.

Rights OfferThe company now offers, by way of rights up to 99,534,980 new ordinary shares at KShs 09.00 each payable in full upon acceptance not later than 3.00 pm on the 5 December 2014. The procedure for acceptance, payment or renunciation of the Rights is contained in this Information Memorandum and the Provisional Allotment Letter.

The Rights Issue will be on the basis of Three (3) new ordinary shares fully paid for every Eight (8) Existing Shares held by each shareholder on the register at 3.00 pm on 22 October 2014. The offer is subject to, and in accordance with, the terms and conditions contained in this Information Memorandum, the Provisional Allotment Letter and the Company’s Memorandum and Articles of Association.

The new ordinary shares fully paid will, when fully paid, rank pari passu in all respects with the Existing Shares. All rights attached to the Existing Shares with regard to voting, dividends, liquidation proceeds and the pre-emption in future capital increases are set out in the company’s Articles of Association and otherwise in accordance with the provisions of the Company’s Act.

Latest DevelopmentsUchumi is currently on the GROWTH phase having successfully completed its recovery.

Since 2006, we have opened a total of twelve new branches, namely: Thika Road Jipange, Embu, Nakuru,Kericho, Kisii, Taj Mall and Ongata Rongai in Kenya, Quality Mall in Tanzania and Gulu, Kabalagala, Natete and Freedom City in Uganda.

In addition, we have embarked on refurbishment of old (existing) stores in a re-merchandising exercise and ambience improvement. We are also replacing old equipment (e.g. in the bakeries) to enhance efficiency in operations.

All the above-mentioned developments were financed through internally generated funds due to the healthy cash position realized with progressive top-line and bottom-line growth since 2006.

In the 2011/12 financial year, we invested up to Kshs 513 million in new branches, existing stores refurbishment and old equipment replacement. Kshs 50 million was used for refurbishments/replacements while Kshs 463 million on opening new branches. The total fixed assets of the Company grew by Kshs 213 million during the 2011/12 financial year.

Uchumi shares are now trading at stock markets in the region through Cross Listing, starting with Rwanda Stock Exchange which was completed on the 14 October 2013, and subsequently at the Uganda Securities Exchange

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which was completed a month later on the 13 November 2013 and Dar es Salaam Stock Exchange on 15 August 2014.

Future Outlook

In the 2014/15 and 2015/16 financial years, we plan to open a minimum of sixteen (16) branches across East Africa in a bid to competitively position our business. We also intend to undertake detailed refurbishment of existing stores over the same period. This expansion and refurbishment will require substantial capital expenditure.

This Information Memorandum is designed to provide detailed information and disclosures on Uchumi and its subsidiaries. I invite you to read this Information Memorandum in its entirety and take appropriate action as you have the opportunity to participate in the growth of our Company through the regional exchanges where we are listed.

Recommendation

Please read in full the Information Memorandum and Provisional Allotment Letter and take action within the timetable as detailed therein.

It is important that you as a shareholder exercise your Rights to increase your investment in the Company. With the discount offered, you are being offered a good opportunity with resultant capital value should you wish to offload the shares in future. Should you not wish to take up your Rights, you can bequeath them to a close relative through private arrangement or sell them through the respective exchange. Do not, therefore, let your Rights lapse.

New investors from across the Region are also welcome and should be able to purchase Rights to the New ordinary shares fully paid that may be renounced through the NSE.

Conclusion

The Board of Directors considers the Rights Issue to be in the best interest of the Company and looks to the future with optimism that the Company will defend its rightful place as a market leader in the retail industry and achieve its vision as “Your Home of Value!”

Yours faithfully

Ms. Khadija MireCHAIRPERSON

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5 DIRECTORS’ STATEMENT

The Directors accept responsibility for the information contained in this Information Memorandum. 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 Information Memorandum is in accordance with facts and does not omit anything that is likely to affect the import of such information.

The Directors confirm that in their opinion the working capital available to the Company and its subsidiaries is sufficient for its present requirements. The Company is not in breach of any of its loan covenants.

Signed by:

Ms. Khadija Mire Dr. Jonathan CianoChairperson Chief Executive Officer

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6 EXECUTIVE SUMMARY

6.1 Company Overview

Uchumi Supermarkets Limited is a public limited liability company incorporated in Kenya under the Companies Act and with registration number C.6/92.

The Government of Kenya is the largest shareholder with a 13.4% stake. The rest of the shares in the Companyare owned by local and foreign retail and institutional investors.

Uchumi has four fully-owned subsidiaries namely Uchumi Supermarkets (Uganda) Limited; USL Tanzania Limited; Kasarani Mall Limited; and Uchumi Holdings Limited

The principal activity of Uchumi Supermarkets (Uganda) Limited and USL Tanzania Limited is the operation of retail supermarkets. The principal activity of Kasarani Mall Limited is property management. Uchumi Holdings Limited is dormant.

In addition to the abovementioned subsidiaries, Uchumi has registered a branch in Uganda, South Sudan and Tanzania.

6.2 Rights of Shareholders

The Shareholders exercise their rights by participating and voting at the general meetings of the Company. At these meetings the decisions that require the approval of Shareholders include: creation of new ordinary shares fully paid, increase in share capital, variation of shareholder rights, alteration of the Memorandum and Articles of Association, election of directors, appointment of auditors, fixing the remuneration of directors and the auditor, adoption of financial statements and declaration of dividends. These rights are enshrined in the Memorandum and Articles of Association and are more particularly set out in sub-section 16.4 of this Information Memorandum.

6.3 Legal Opinion

Hamilton Harrison & Mathews has given and have not withdrawn their consent to the inclusion in this Information Memorandum of their Legal Opinion, and the references to their names, in the form and context in which they appear, and have authorized the contents of the said Legal Opinion.

6.4 Directors’ Information

As disclosed in sub-section 11.5 of this Information Memorandum, the Board of Directors of the Company is comprised of six members, drawn from different areas of Kenya and having diverse skills and experience.

6.5 Share Capital of Uchumi

The authorised share capital of the Company is Kshs. 3,000,000,000 divided into 500,000,000 ordinary shares of Kshs. 5 each and 25,000,000 redeemable preference shares of Kshs. 20 each.

The issued share capital of the Company is Kshs. 1,327,133,070 divided into 265,426,614 ordinary shares of Kshs. 5 each.

Uchumi has an unissued share capital of Kshs. 1,672,866,930 divided into 234,573,386 ordinary shares of Kshs. 5 each and 25,000,000 redeemable preference shares of Kshs. 20 each.

6.6 Debt of Uchumi

By a loan agreement dated 1 November 2006 and made between the Government of Kenya (GoK) and Uchumi, the Government acting in public interest and as an indirect shareholder agreed to advance Kshs. 675,000,000 in accordance with the Framework Agreement dated 7 July 2006. This loan has now been paid back fully as of 30June 2014. The Framework Agreement was made between Eastern and Southern African Trade and Development Bank (PTA), Kenya Commercial Bank (KCB), the government of Kenya and Uchumi. This Framework Agreement related to the business recovery plan of Uchumi and provided for, among other things,

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Uchumi Supermarkets Limited*

Uchumi Supermarkets

(Uganda) Limited

USL Tanzania Limited

Kasarani MallLimited

Uchumi Holdings Limited

the provision of a loan by GoK, the restructuring of the bank loans and the establishment of an advisory committee to work with a special receiver manager.

By a subsequent loan restructuring agreement that commenced on 30 June 2010 and made between GoK and Uchumi, the loan agreement dated 1 November 2006 was restructured and partially repaid with Kshs. 407,000,000 being retained as a term loan for a period of 5 years with interest calculated on the outstanding principal amount at the rate of 9.5% per annum.

Kenya Commercial Bank gave a facility of Kshs. 800,000,000 to Uchumi. This facility involves an overdraft facility of Kshs. 200,000,000/- and short term loan facility of Kshs. 600,000,000/-. This facility is secured by a charge dated 23 May 2014 over property land reference number 209/399/3. The charge is duly executed, stamped and registered at both the lands and companies registries. KShs 150 million was paid in August 2014, and the balance now stands at KShs 650 million.

Uchumi has also borrowed Kshs. 300,000,000 from ICDC for short term financing. The interest rate for this facility is ICDC’s base rate. This facility is secured by a charge issued by Uchumi to ICDC over Land Reference No. 209/12593 dated 9 September, 2013. The charge is duly executed, stamped and registered at both the lands and companies registries. KShs 109 million has since been paid and the balance stood at KShs 191 million as at 30 September 2014.

6.7 Risk Factors

Uchumi conducts retail business operations in Kenya, Uganda and Tanzania. It therefore faces both macro and micro-economic risks such as social-political, weather, exchange rate fluctuations, pricing risks amongst others.

The company’s risk profile and mitigation strategies are set out in Section 14.0

6.8 Transaction Overview

Transaction Rights Issue of 99,534,980 New Ordinary Shares at a ratio of 3 for every 8 heldIssuer Uchumi Supermarkets LimitedStatus Upon listing, freely transferable ordinary shares ranking pari passu with each otherTrades Only of Rights immobilised prior to tradingCompliance The Capital Markets Legislation.Rights Issue Date 10 November 2014Governing Law The Laws of Kenya

6.9 Group Corporate Structure

The Group Structure is as follows:

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* In addition to the abovementioned subsidiaries, Uchumi has registered a branch in Uganda, South Sudan

and in Tanzania.

All subsidiaries are owned 100% by Uchumi.

6.10 Description of the Company’s Business and Products

Uchumi deals in retail trade and provides consumers with a wide range of goods and services through a network of supermarket stores in Kenya, Uganda and Tanzania.

The products are broadly categorized into five divisions including:-

i. Foods (food stuff for human consumption);ii. Non-Food groceries (non-food fast moving consumer goods);iii. General merchandise (non-food general products);iv. Textiles (clothing and fabric-made products); and v. Services (specialty products & services offered by the Company and/or partners).

The divisions are broken down into a number of categories which are made up of similar or related products as perceived by customers and these are managed as strategic business units through the category management principle.

6.11 Company Profile

Registered OfficeThe Company has its registered office at KNTC Complex, Yarrow Road, off Nanyuki Road, P.O. Box 73167-00200 Nairobi, Kenya.

Company SecretaryThe company secretary is Mr. John Wambugu, of KNTC Complex, Yarrow Road, off Nanyuki Road, P.O Box 73167-00100 Nairobi, Kenya.

AuditorThe auditors of the Company are Ernst & Young, of Kenya Re Towers at Upper Hill, P.O. Box 44286–00100 Nairobi, Kenya.

Shares RegistrarThe shares registrar of the Company is Funguo Registrars Limited of Uchumi House, Moi Avenue, P.O. Box 1133-00200 Nairobi, Kenya.

Legal AdvisorsThe legal advisors of the Company are Hamilton Harrison & Mathews, of ICEA Building Kenyatta Avenue, P.O. Box 30333 - 00100 Nairobi, Kenya.

BankersThe bankers to the company are shown in the table below:Country Bank Branch Postal Address Kenya Kenya Commercial Bank Limited Moi Avenue P.O. Box 48400-00100 Nairobi

Barclays Bank of Kenya Limited Westlands P.O. Box 30120-00100 NairobiEquity Bank Limited Community P.O. Box 75104-00200 NairobiCommercial Bank of Africa Limited Mama Ngina St. P.O. Box 30437-00100 NairobiCooperative Bank of Kenya Enterprise Rd P.O. Box 17928-00500 Nairobi

Tanzania KCB – Tanzania Oyster P.O. Box 804 Dar es SalaamEquity Bank – Tanzania Quality Centre P.O. Box 110183 Dar es Salaam

Uganda Barclays Bank Uganda Limited Jinja Road P.O. Box 7101 KampalaStanbic Bank Uganda Limited Garden City P.O. Box 7131 Kampala

Source: USL

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Principal ActivitiesThe principal activity of the Company is that of operating retail supermarkets.

6.12 Board of Directors

As disclosed in sub-section 13.6 of this Information Memorandum, the Board consists of the following members, drawn from different areas of Kenya and having diverse skills and experience:

Name Position

Ms. Khadija Mire Chairperson; Non-executive and Independent

Dr. Ibrahim Mohamed(with Mrs Joyce A.Ogundo as alternate to the PS)

Director; Non-executive. Representing the Ministry of East Africa Affairs, Commerce & Tourism

Ms. Mbatha Mbithi Director; Non-executive. Representing the ICDC

Mr. James R. Murigu Director; Non-executive and Independent

Mr. Bartholomew Ragalo Director; Non-executive and Independent

Dr. Jonathan Ciano Managing Director/ Chief Executive Officer; Executive

Source: USL

6.13 Senior Management Team

As detailed in sub-section 13.11, Uchumi’s senior management team consists of the following:

Name Position

Dr. Jonathan Ciano Managing Director/Chief Executive Officer

John Wambugu Company Secretary/ Legal Officer

Chadwick Okumu Finance Manager

Owino Ayodo General Manager Operations

Benson Sila Procurement/Merchandise Manager

John Peter Kariuki Security Services Manager

Michael Kibbe Human Resource Manager

David Mboya Internal Auditor

Sam Murigi IT ManagerSource: USL

6.14 Employee Numbers

The aggregate number of permanent and contract staff in Uchumi has grown as follows in the last five years:

2010 2011 2012 2013 20142,028 2,549 3,125 3,349 4,503

Source: USL

6.15 Uchumi’s Corporate Milestones

Strategic growth across the East African region – Branch Network – From 25 supermarkets in the year 2012 it has grown to a total of 37 shops currently, with another 5 supermarkets to be opened shortly.

Strategic growth in its Operations - Uchumi accepts payment in all its forms - plastic, paper and virtual money. It has upgraded its system to include online local purchase order processing and payments to promote efficiency in ordering and stock management levels.

Improving the living standards of more than 4,500 people across East Africa - Uchumi is the proud employer of more than 4,500 Kenyan, Ugandan and Tanzanian nationals.

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Increased shareholder value – Uchumi’s shares rose to a high of Kshs 21.50/- over the past 12 months. The Company’s revenue grew to Kshs. 14.5 billion by close of financial year 2013/2014.

Customer loyalty – U-Card & Gift Card - Uchumi shops see an average of 70,000 customers walking through its doors every day. Currently the loyalty programme has over half a million active members and continues to grow every day.

Efficient supplier channel to distribute goods and services - Uchumi handles more than 4,000 suppliers from multi-national firms and large local manufacturers to small and medium-sized enterprises (SME’s). The Company’s pride remains being devoted to SME’s.

6.16 Key Success Factors

Uchumi’s success factors are attributable to three overall points;

Branda) Uchumi enjoys strong loyalty in East Africa. b) Uchumi has a policy of engaging local suppliers and entrepreneurs as the main part of its supply chain.c) Uchumi marshals all its stakeholders in its operation with an endeavour to maintain brand positioning/equity.

Corporate Governancea) Uchumi is the only listed supermarket in the East Africa regionb) Uchumi operates with principles of integrity and transparency as part of its core valuesc) Uchumi pays taxes in an open and timely manner.d) Uchumi prioritises giving back to the community in and around its areas of operations.

Operational Policy

a) Uchumi has improved inventory management; shrinkage is below 1% compared to global industry average of 4.0%.

b) Uchumi undertakes research useful for making decisions for outlet strategic locations, competitive rental rates, purchasing equipment and product profit margins mixes.

c) Uchumi takes customer service and dialogue seriously.d) The Company’s investment in an ERP system has led to business process improvements, customer service,

and streamlined inventory management.e) Value in pricing driven by customer need and trust and overall shareholder valuef) Specialty business model that promotes small and medium entrepreneurs, giving them a fair chance through

their participation in the formal retail business value chain.

6.17 Drivers of Change in the Company

There are a number of factors driving change in the Company: Demographic Dynamics

Increasing population, increasing purchasing power and infrastructural development has resulted in an increased demand for formal retail shopping outlets.

Competitive PricingUchumi prides itself in offering value for money, thus enhancing customer trust – home of value.

Shopping Experience and Convenience Uchumi endeavours to competitively position its outlets in line with the demographic movement, creating convenience for its customers.

Varied Range of MerchandiseUchumi offers its customers a varied range of merchandise.

Robust Training Program

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The Company has put a robust human resource training program to enhance service delivery.

Technology and InnovationInvestment in the ERP and its continued enhancement contributes to efficiency and innovation in management of customer service, inventory management and suppliers interface.

6.18 Uchumi’s Competitive Positioning

Product Categories Depending on LocationUchumi’s long history in formal retail gives it an edge in appreciating the local retail market. Consequently, the Company makes available different products and services in different geographical locations to meet the varied needs of customers.

Uniform PricingThe Company prides itself in offering value for money through a practice of uniform national pricing.

Focus on Locally Produced ProductsThe Company’s supplies are locally sourced thereby promoting local entrepreneurs and service providers, which was the founding objective of the Uchumi Supermarket chain.

Improving Shareholder ValueThe growth and sustainability of the Company is managed with the objective of increasing shareholder value.

6.19 Summary of Shareholding Structure

The Company had a total of 17,835 shareholders in the register as at 31 August 2014. The composition of the shareholding at that date was as follows:-

Classification Shares % Holding

Local Companies 79,724,735 30.0%

Local Individuals 102,839,515 38.7%

Foreign Companies 79,182,357 29.8%

Foreign Individuals 3,680,007 1.4%

Total 265,426,614 100.0%Source: USL

6.20 Summary of Group 5 Years Financial Performance

The Group’s profit and loss account for each of the last five years to 30 June 2014 is summarized below:

Group Financial Summary30-Jun-10 30-Jun-11 30-Jun-12 30-Jun-13 30-Jun-14Kshs '000 Kshs '000 Kshs '000 Kshs '000 Kshs '000

Gross sales 9,559,682 10,770,961 13,802,191 14,270,598 14,364,844Net sales 9,608,926 10,840,728 13,918,530 14,368,643 14,457,687

Cost of sales (7,912,857) (8,943,513) (11,407,227) (11,600,148) 11,643,604 Profit from operating activities 536,750 518,463 428,425 501,964 517,389Finance costs (103,558) (3,630) (25,082) (16,062) (64,640)Profit before tax 433,192 514,833 403,343 485,902 452,749Income tax credit/(expense) 431,907 (124,408) (129,366) (128,892) (68,461)Profit for the year 865,099 390,425 273,977 357,010 384,288

Source: USL annual reports

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Group Balance Sheet Summary

The Group’s audited Balance Sheet for each of the five years to 30 June 2014 is shown in the table below:

Kshs '000 30-Jun-10 30-Jun-11 30-Jun-12 30-June-13 30-Jun-14

Non-current assets

1,959,944

2,607,070

3,347,742 3,848,218 4,634,417

Current assets

1,193,567

1,397,650

1,594,146 1,725,315 2,250,436

Total assets

3,153,511

4,004,720

4,941,888 5,573,533 6,884,853

Non-current liabilities

320,140

183,368

80,309 200,000 177,370

Current liabilities

1,294,438

1,542,187

2,203,769 2,448,121 3,350,169

Total liabilities

1,614,578

1,725,555

2,284,078 2,649,347 3,527,539

Shareholders' funds

1,538,933

2,279,165

2,657,810 2,925,412 3,357,314Source: USL annual reports

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7 KEY FEATURES OF THE RIGHTS ISSUE

This Section contains a synopsis of the Rights Issue. You should read this Information Memorandum in full before deciding to participate in the Rights Issue.

7.1 Rights Issue Statistics

Subscription Price KShs 9.00Total number of new ordinary shares fully paid being issued 99,534,980Gross amount to be raised KShs 895,814,820Ratio of entitlement 3 for every 8

7.2 Reasons for the Rights Issue

The purpose of the Rights Issue is to raise funds to meet working capital requirements necessitated by the planned opening of new branches in the region as well to refurbish and modernize some of the existing stores. Uchumi’s growth plans anticipate: a) The opening of up to 5 new branches in Kenya by the end of 2014/15 financial yearb) The opening of up to 3 new branches in Tanzania by the end of 2014/15 financial yearc) The opening up of 1 new branch in Uganda by the end of 2014/5 financial yeard) The opening up of 2 new branches in Rwanda by end of 2014/15 financial yeare) The refurbishment and modernization of 5 existing branches in Kenya by end of 2014/15 financial year.

7.3 Timetable of Principal Events

Event Date and Time1 Record Date (Register Closure Date) 3.00 pm 22 Oct 20142 Upload of rights into CDSC system and distribution of

Information Memorandum and PALs to Uchumi shareholders07 Nov 2014

3 Issue Opens and commencement in trading of rights at the NSE 9.00 am 10 Nov 20144 Last date of renunciation (by way of private transfer)/ Last date

for splitting3.00 pm 21 Nov 2014

5 Last date for trading in Rights 3.00 pm 28 Nov 20146 Last date and time for acceptance and payment for new

ordinary shares3.00 pm 05 Dec 2014

7 Announcement of Rights Issue results 17 Dec 20148 Last date and time for payment for Additional Shares for

applications using irrevocable bank guarantee19 Dec 2014

9 Electronic crediting of CDS accounts for new ordinary sharesand processing of refunds (applicable if applications are received in excess of the number of untaken Rights) from

24 Dec 2014

10 Date of listing and commencement of trading of new ordinary shares at the NSE

29 Dec 2014

7.4 Minimum Success

The Rights Issue is subject to a minimum subscription level of fifty percent (50%) of the New Shares that is Kshs 447,907,410 or 49,767,490 New Shares. The Directors reserve the right not to proceed with the final allotment of the New Shares unless this minimum threshold is achieved. Also, should there be an under-subscription on the offer, but one above the minimum subscription threshold, the Directors will seek to utilize the funds raised in a manner that will still achieve the objectives set out in the Information Memorandum.

7.5 Major Shareholder Undertaking and Underwriting

The Government of Kenya has undertaken in writing to take up in full all the shares it will qualify for under this Rights Issue. The Rights Issue is not underwritten.

7.6 Basis of Subscription Price

The Subscription Price has been determined from the trading history at the NSE of Uchumi and the following factors:

a) Recent performance of the index and turnover at the NSE;

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b) Recent announcements of financial results of Uchumi and the proposed Rights Issue;c) Past performance of Rights Issues at the NSE;d) Current political environment;e) Current macro-economic environment;f) Retail sector environment;g) Uchumi`s unique competitive strengths;h) Uchumi`s strategic plan

The Subscription Price of Kshs 09.00/- represents a discount of 12.6% of the closing price of Uchumi at the NSE on Friday 17 October 2014 of Kshs 10.30, as well as a discount of 27.3% to the six months average market price of KShs 12.38.

7.7 Uchumi Share Price Vs NSE 20 Share Index

7.7.1 The following chart illustrates the performance of Uchumi share price against the NSE 20 Share Index.

Monthly Performance Share Price

NSE 20 Index

Quarterly Performance

Share Price NSE 20 Index

30-Apr-12 14.25 3546.66 30-Sep-11 8.55 3284.06

31-May-12 17.40 3650.85 30-Dec-11 7.70 3205.02

29-Jun-12 15.90 3703.94 30-Mar-12 12.20 3366.89

31-Jul-12 15.35 3832.42 29-Jun-12 15.90 3703.94

31-Aug-12 15.25 3865.76 28-Sep-12 17.85 3972.03

28-Sep-12 17.85 3972.03 31-Dec-12 19.10 4133.02

31-Oct-12 19.65 4147.28 29-Mar-13 22.00 4860.83

30-Nov-12 19.50 4083.52 28-Jun-13 19.90 4598.16

31-Dec-12 19.10 4133.02 30-Sep-13 19.90 4793.2

31-Jan-13 19.15 4416.60 31-Dec-13 19.45 4926.97

28-Feb-13 19.30 4518.59 31-Mar-14 14.55 4945.78

29-Mar-13 22.00 4860.83 30-Jun-14 12.30 4885.04

30-Apr-13 19.75 4765.23 30-Sep-14 10.40 5255.62

31-May-13 20.50 5006.96

28-Jun-13 19.90 4598.16

31-Jul-13 19.60 4787.56

30-Aug-13 19.15 4697.75

30-Sep-13 19.90 4793.20

31-Oct-13 21.25 4992.88

29-Nov-13 20.25 5100.88

31-Dec-13 19.45 4926.97

31-Jan-14 17.95 4856.15

28-Feb-14 18.10 4933.41

31-Mar-14 14.55 4945.78

30-Apr-14 14.20 4948.97

30-May-14 12.80 4881.56

30-Jun-14 12.30 4885.04

31-July-14 12.10 4906.09

29-Aug-14 12.45 5139.39

30-Sep-14 10.40 5255.62Sources: NSE, Bloomberg

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7.7.2 Graph of Uchumi share price vs. NSE 20 Share Index

Uchumi’s shares were suspended from trading on the NSE on 2 June 2006. The Company’s suspension from the NSE was subsequently lifted and trading of the Company’s shares resumed on 31 May 2011.

The following chart illustrates the performance of Uchumi’s share price against the NSE 20 share index sinceRe-listing up to 30 September 2014.

Source: Bloomberg

7.8 Pertinent Financial Data

1 Total number of authorized shares of Uchumi 500,000,0002 Total number of issued and fully paid before rights issue 265,426,6143 Per value of each share KShs 5/=4 Fully paid up share capital of Uchumi before the rights issue Kshs 1,327,133,0705 Net profits for the year ended 30 June 2014 KShs 384,288,0007 EPS for the year ended 30 June 2014 KShs 1.459 DPS for year ended 30 June 2014 KShs 0.3010 Net Asset Value for the year ended 30 June 2014 KShs (1,099,733,000)11 Implied historic P/E based on the offer price and EPS for year ended 30

June 20146.2x

12 Market capitalization based on the closing price of KShs 10.30 at the NSE on 17 October 2014

KShs 2,733,894,124

13 Total number of issued and fully paid up shares after the rights issue assuming full subscription

364,961,594

14 Fully paid up share capital of Uchumi after rights issue assuming full subscription

KShs 1,824,807,970

15 Post rights issue EPS (adjusted 2014) assuming full subscription KShs 1.05

7.9 Acceptance and application procedures

Eligible Shareholders may take up all, some or none of their Rights. Eligible Shareholders wishing to take up all of their Rights are required to observe the procedures set out in paragraph 7 (Acceptance Procedure) of Section 8 (Details of the Rights Issue).

Eligible Shareholders wishing to renounce some or all of their Rights are invited to follow the steps set out in paragraph 9 (Renunciation of Rights) of Section 8 (Details of the Rights Issue). Please note that Eligible Shareholders may renounce their Rights by way of private transfer or selling the same in accordance with the said paragraph.

Eligible Shareholders wishing to apply for Additional Shares must do so in the manner set out in paragraph 8 (Additional Shares) of Section 8 (Details of the Rights Issue).

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8 DETAILS OF THE RIGHTS ISSUE

1. Offer

1.1. Uchumi hereby offers to Eligible Shareholders, by way of renounceable Rights, a total of 99,534,980 new ordinary shares at the Subscription Price of Kshs 9.00/- per New Share payable in full on acceptance in the terms set out below. The New ordinary shares will be duly listed.

1.2. Persons who are not Eligible Shareholders as of the Record Date will not be entitled to participate in the Offer.

1.3. The Rights Issue is on the basis of a ratio of Three (3) New Shares for every Eight (8) Existing Shares, being the Entitlement Ratio. The Entitlement Ratio, once declared, will not be altered.

1.4. The number of New ordinary shares that an Eligible Shareholder is entitled to (i.e. your Entitlement or your number of Rights) is shown on the PAL.

1.5. Rights are renounceable and may be sold or transferred to third parties subject to the provisions of this Information Memorandum. Information on how Rights may be sold or transferred is set out in paragraph 9 below.

1.6. Eligible Shareholders may also, at their option, choose not to take any action at all and untaken Rights will be allocated by the Directors in accordance with the Allocation Policy.

2. Reasons for the Rights Issue

The purpose of the Rights Issue is to raise funds to meet working capital requirements necessitated by the planned opening of new branches as well to refurbish and modernize some of the existing stores. Uchumi’s growth plans anticipate:

a) The opening of up to 5 new branches in Kenya by the end of 2014/15 financial yearb) The opening of up to 3 new branches in Tanzania by the end of 2014/15 financial yearc) The opening up of 1 new branch in Uganda by the end of 2014/5 financial yeard) The opening up of 2 new branches in Rwanda by end of 2014/15 financial yeare) The refurbishment and modernization of 5 existing branches in Kenya by end of 2014/15 financial year.

3. Status of the New ordinary shares

The New ordinary shares will rank pari passu in all respects with the Existing Shares including the right to receive in full all dividends and other distributions declared, made or paid in respect of Uchumi shares, in the subsequent periods.

4. Opening and Closing Date of the Rights Issue

The Rights Issue will open at 9.00 am on 10 November 2014 and close at 3.00 pm on 28 November 2014.

5. Entitlement

5.1 Your Entitlement is shown on the accompanying PAL.

5.2 The number of New ordinary shares offered to Eligible Shareholders has been calculated pro rata on the basis of the Entitlement Ratio and no restrictions are placed on the number of Existing Shares to be held before your Entitlement accrues. However, mathematically, this might result in fractional entitlements to New ordinary shares and in such an event; fractions will be rounded downwards to the nearest whole number. Kindly therefore note that where this occurs, the Eligible Shareholder will be allotted the number of New ordinary shares after rounding down.

5.3 Fractions of New ordinary shares that result from applying the Entitlement Ratio will form part of the Untaken Rights.

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5.4 Eligible Shareholders with CDS Accounts will have such accounts credited with the applicable Entitlement. In this regard, the Registrar will notify the Eligible Shareholders of their credited Entitlement through the PAL.

5.5 Eligible Shareholders without CDS Accounts will be notified of their Rights by the Registrar through the PAL.

5.6 Investors who wish to become shareholders in Uchumi via this Rights Issue can purchase Rights being sold on the NSE by Eligible Shareholders. Such investors will be issued with a Form E (see below) from their Authorized Agent which requires to be duly completed, accepted and fully paid for as per the Acceptance Procedure below. These investors can apply for Additional Shares provided they take up their Entitlement in full.

5.7 Eligible Shareholders and other investors are required to note that if they wish to take any action other than (a) full acceptance of their Entitlement or (b) to allow their Entitlement to lapse in full are asked to note that the following further documents are available for collection and due completion from Authorized Agents:

Form R Form of renunciation for Private Transfers to be used by Eligible Shareholders renouncing or transferring their rights by way of private transfer and by renouncing to take up their new ordinary shares

CDS Form 7 To be used in connection with a private transfer by eligible shareholders with CDS Accounts

Form Z To be completed by Eligible Shareholders wishing to appoint third party as their lawful attorney or agent to act on their behalf in connection with the Rights Issue

Form E Form of entitlement for purchased Rights to be used in the case of Rights purchased on the NSE by any person and issued in favor of such a person

CDS Form 5 To be used by investors utilizing loan facilities to subscribe for new ordinary shares

6. Effect of not having a CDS Account

It is now mandatory for all investors in the NSE to have CDS Accounts because of the implementation of dematerialisation. Without a CDS Account, Eligible Shareholders will not be able to trade his or her Rights on the NSE. Eligible Shareholders who do not already have CDS Accounts are requested to submit duly completed and signed CDS Account opening forms, together with their PAL to the Authorized Agents to enable crediting of Entitlements to the newly opened accounts. Renouncees in whose favour Rights may have been renounced would be subject to the same constraints. However, it is not mandatory for investors to have a CDS account in the other markets where Uchumi shares are currently trading as they have not dematerialised their listed securities.

7. Acceptance ProcedureAcceptance of the Offer, once given is irrevocable. Full details of the procedure for acceptance and payment are set out below:

7.1 Acceptance may only be communicated by submitting a duly completed Entitlement and Acceptance Form together with Application Money for the number of New ordinary shares applied for, which form cannot be withdrawn and constitutes a binding application for the number of New ordinary shares(including any Additional Shares) specified in the Entitlement and Acceptance Form on the terms set out in this Information Memorandum. The Entitlement and Acceptance Form must be signed so as to be binding.

7.2 If the Entitlement and Acceptance Form is not completed correctly, Uchumi may in its absolute discretion reject it or treat it as valid, and Uchumi’s decision as to whether to accept or reject, or how to construe, amend or complete an Entitlement and Acceptance Form shall be final.

7.3 The Entitlement and Acceptance Form, once duly completed and signed, must be returned to the Receiving Bank either directly or through any Authorized Agent, together with the Application Money for the number of New ordinary shares. Payment of the Application Money by all Eligible Shareholders must be made by way of banker’s or stockbroker’s cheque or Electronic Funds Transfer (“RTGS”) and must be received by the Receiving Bank or the relevant Authorized Agent not later than 3.00 pm on 5December 2014

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7.4 New ordinary shares in respect of which duly completed and signed Entitlement and Acceptance Forms together with the Application Money, paid in accordance with paragraph 7.3 above, which are not received by the Receiving Bank or an Authorized Agent by the dates and times stipulated in paragraph 7.3 above will be deemed not to have been duly subscribed for and any rights in connection with the same will have lapsed.

7.5 Eligible Shareholders who wish to take up their full Entitlement are required to duly complete the section entitled “Full Acceptance of New ordinary shares” as well as other relevant sections of the PAL. Eligible Shareholders wishing to accept only part of their entitlement are required to duly complete the section of the PAL entitled “Partial Acceptance of New ordinary shares” as well as other relevant sections of the PAL. Please note that partial acceptance will not be permitted for less than One hundred(100) New ordinary shares.

8. Application for Additional Shares and Allocation Policy

8.1 Eligible Shareholders (except in the case of those that wish to effect payment in the manner set out in 8.2 below) who have taken up all their Entitlement may apply for Additional Shares by completing the section for Application for Additional Shares on their Entitlement and Acceptance Form and signing and returning the duly completed and signed Entitlement and Acceptance Form together with the Application Money. These should be received by the Receiving Bank or the relevant Authorized Agent not later than 3.00 pm on 5 December 2014.

8.2 Any eligible Shareholder applying for any Additional Shares may, in lieu of payment by cheque, providean irrevocable bank guarantee in the form stipulated in Appendix 20.5 to this Information Memorandum,for the full amount of the Additional Shares. Upon notification by the Registrar, such Eligible Shareholderwill be required to effect payment for Additional Shares to the Receiving Bank by 3.00 pm on 19 December 2014.Such payment may be made by RTGS to such bank account of Uchumi designated in the said notification.

8.3 Additional Shares applied for by Eligible Shareholders will be allocated by Uchumi in accordance with the Allocation Policy to the extent only of any Untaken Rights. The allocation of Additional Shares (if any) will be published on or about 17 December 2014. Please note that payment in respect of any Additional Shares applied for and not allocated will be refunded in accordance with paragraph 12 and will be free of interest. There will be no changes once the basis of allocation has been announced.

8.4 The press announcement publishing the result of the Rights Issue will include the basis of allocation of any Additional Shares and will be published on or about 17 December 2014.

8.5 Subject to paragraph 8.6 of this Section, the Untaken Rights will be allocated on a pro rata basis to Eligible Shareholders who have applied for Additional Shares in accordance with this paragraph 8 (Application for Additional Shares and Allocation Policy).

8.6 If any person applies for Additional Shares which might trigger the regulatory restrictions and obligations set out in paragraph 18 (Regulatory Restrictions) of this Section, the Directors reserve the right, at their sole discretion, not to allocate any Additional Shares to any such person unless all required regulatory approvals are duly obtained and attached with the PAL before 3.00 pm on 5 December 2014.

8.7 Eligible Shareholders wishing to take up Additional Shares are required to duly complete the section entitled “Application for Additional Shares” as well as other relevant sections of the PAL.

9. Renunciation of Rights

The Rights are renounceable. Accordingly, Eligible Shareholders may elect to (a) give up their Rights in full or in part or (b) to transfer their rights in full or in part or (c) sell their Rights in full or in part, all in accordance with the procedures set out below.

9.1 Renunciation by way of Trading in Rights

9.1.1 The Rights constitute a security in the form of an option and are tradable on the NSE for a value but only by Eligible Shareholders with CDS Accounts. The Rights shall be listed on the NSE under the MIMS.

9.1.2 Eligible Shareholders will be notified of their Rights through the PAL.

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9.1.3 In addition, Eligible Shareholders with CDS Accounts will have such accounts credited with their Rights.

9.1.4 Only Eligible Shareholders with CDS Accounts will be permitted to trade in Rights. In such an event, Eligible Shareholders who wish to renounce some or all of their Rights in this way may instruct any Authorized Agent to dispose of any or all of such Rights and must duly complete the section entitled “Immobilization for trading in the Rights” as well as other relevant sections of the PAL.

9.1.5 Eligible Shareholders without CDS Accounts who wish to trade in Rights in this way must first open CDS Accounts and immobilize such Rights prior to trading and must duly complete the section entitled “Immobilization for trading in the Rights” as well as other relevant sections of the PAL. The CDS Account opening forms may be obtained from any Authorized Agent.

9.1.6 Rights may be traded on the NSE from 10 November 2014 to 28 November 2014.9.1.7 Please note that trading of Rights on the NSE will attract a brokerage commission plus other

statutory costs payable by the seller and buyer of such Rights.9.1.8 The CMA-Kenya and the NSE have approved the trading of Rights.

9.2 Renunciation by way of Private Transfer

9.2.1 Eligible Shareholders wishing to transfer their Rights to a particular Renouncee may do so by way of private transfer, subject to (a) Section 31 of the Capital Markets Act (b) Regulations 57 to 61 of the Capital Markets (Licensing Requirements) General) (Amendment) Regulations 2002 and (c) Rule 31 of the Central Depository Rules, 2004. Regulation 57 allows a transfer, inter alia, of Rights by an Eligible Shareholder to a close relation in the form of a gift. In such a case, any Authorized Agent, being a stockbroker, is required to assess, endorse and submit to the NSE a written application for such a transfer with the required information and supporting documents stating the reason for the proposed private transfer. A close relation means arelationship supported by documentary evidence of a spouse, parent, sibling, child, father-in-law, son-in-law, daughter-in-law, mother-in-law, brother-in-law, son-in-law, grandchild or spouse of a grandchild.

9.2.2 In order to effect a private transfer, an Eligible Shareholder must duly complete a CDS Form 7 (in the case of Eligible Shareholders with CDS Accounts) as well as Form R. Both these forms are available from Authorized Agents. By executing the relevant form, an Eligible Shareholder is deemed to renounce subject to approval from the NSE and the CMA-Kenya, as applicable and, subject to paragraph 9.2.1, transfer the relevant Rights.

9.2.3 Eligible Shareholders who have CDS Accounts may only transfer Rights in favour of a Renouncee with a CDS Account.

9.2.4 The last date and time for renunciation by way of private transfer is 3.00 pm on 21 November2014.

9.2.5 Eligible Shareholders are advised to contact any Authorized Agent for the purposes of effecting the renunciation by way of private transfer.

9.2.6 If an Eligible Shareholder accepts some of his Rights and renounces the remainder by way of private transfer in the manner specified in this paragraph 9.2 (Renunciation by way of Private Transfer), such Eligible Shareholder shall be required to submit the Entitlement and Acceptance Form to the Receiving Bank or the relevant Authorized Agent not later than 3.00 pm on 21 November 2014 both duly completed and signed and accompanied with the Application Money in connection with the Accepted Rights.

9.3 Renunciation by declining

Eligible Shareholders who wish to decline their Rights need not do anything. Any Rights not taken up by such Eligible Shareholders will form part of the Untaken Rights.

10. Restriction on Renunciation of Rights

10.1 Paragraph 18 (Regulatory Restrictions) of this Section sets out certain regulatory restrictions and obligations that may be relevant to any Eligible Shareholder or Renouncee.

10.2 Please note that any renunciation by way of trading of Rights through the NSE or by way of private transfer of Rights in accordance with paragraph 9.1 (Renunciation by way of Trading in Rights) and paragraph 9.2 (Renunciation by way of Private Transfer) of this Section is only permitted if such renunciation does not trigger the said regulatory restrictions and obligations.

11. Application Money

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11.1 Payment for the New ordinary shares shall be made in the form of:a) A banker’s or stockbroker’s cheque or via RTGS for values less than Kenya Shillings one million

(KShs 1,000,000), (or equivalent in local currency). Such cheques must be in the currency of the respective country where the shares are listed and drawn on a licensed commercial bank that is a member of the Central Bank Clearing House in that country, and should be made payable to “Uchumi Supermarkets Limited Rights Issue-PAL No Insert No ” and be crossed “A/C Payee Only”. Each banker’s cheque received by the Receiving Bank will be deposited immediately for collection. Please note that no interest will be payable by Uchumi on money received.

b) RTGS for values exceeding Kenya Shillings one Million (KShs 1,000,000), (or equivalent in local currency) to a specific bank account as provided by Uchumi.

c) An Authorised Selling Agent on behalf of Eligible Shareholders (Global Payment System or GPS).

11.2 Any Banker’s cheque received by the Receiving Bank via the Registrar will be deposited immediately for collection. Any Eligible Shareholders applying for any Shares may provide an Irrevocable Bank Guarantee (IBG) in the form stipulated in Appendix 20.5: to this Information Memorandum, for the full amount of the Shares, provided that such application is for a value of KES 1,000,000 and above (or equivalent in local currency). The IBG must be authenticated by the guaranteeing bank via a SWIFT message sent to the Receiving Bank before 3:00p.m. 19 December 2014. The Eligible Shareholder must attach the IBG to the Entitlement and Acceptance Form at the time of submission by 3.00p.m. on 19 December 2014.

11.3 Payments made in accordance with paragraph 11.1 above will, upon receipt by Uchumi of the relevant amount in cleared funds, constitute acceptance of the Rights Issue upon the terms and conditions set out in this Information Memorandum and in the Entitlement and Acceptance Form.

11.4 Eligible Shareholders with CDS Accounts in Kenya are required to pay the Subscription Price per New Share in accordance with the Entitlement and Acceptance Form plus Kshs 30/= in accordance with the Central Depositories (Regulation of Central Depositories)(Amendment) Rules, 2008. This CDSC fee should NOT be included in the Application Money

12. Rejections Policy

Uchumi shall be entitled to reject applications which are made inter alia under the following circumstances:

12.1 The applicant is an Ineligible Investor.

12.2 The PAL does not comply with the Information Memorandum and Section 18 – Regulatory and other Restrictions.

12.3 The Authorized Selling Agents will present all Bankers’ Cheques for payment to the Registrar who will present the Authorized Cheques to the Receiving Bank on behalf of the Company. Delivery of the PAL, Form E accompanied with payment by way of an Authorised Cheque will constitute a warranty that the Authorised Cheque will be honoured on first presentation. If any Authorised Cheque accompanying the PAL, Form E is not paid on first presentation and the PAL, Form E has already been accepted in whole or part, such acceptance may at the option of the Company be rescinded and the New ordinary shares comprised therein may be transferred to another person upon such terms and conditions as the Company deems fit. The entire proceeds of such transfer shall be retained for the account of the Company, as the case may be, and the original Applicant shall be responsible for any losses and all costs incurred.

12.4 The Company shall not be under any liability whatsoever should any PAL, Form E fail to be received by the Registrars or by the Receiving Bank or by any Authorised Selling Agent by the Closing Date. In this regard, such PAL, Form E and accompanying Bankers’ Cheques shall be returned to the Authorised Selling Agent or Receiving Bank where the PAL, Form E was submitted,for collection by the applicable Applicants.

12.5 The PAL, Form E can be rejected if full value has not been received. It is not sufficient to merely present an Authorised Cheque for the full amount payable.

12.6 Applications will also be rejected for the following reasons:

12.6.1 Missing or illegible name of primary or joint Applicant in any Application Form;

12.6.2 Missing or illegible or non verification (where required) of status of Applicant;12.6.3 Missing or illegible identification number, including corporation registration number, or in the

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case of Kenyan residents, missing or illegible alien registration number;12.6.4 Missing or illegible address (either postal or physical street address);12.6.5 Missing residence and citizenship indicators (for primary Applicant in the case of an individual) or

missing residency for tax purposes for corporate investors;12.6.6 Missing or incomplete CDS 5 Form in the case of financed applications where the Offer Shares

are to be taken as collateral;12.6.7 Insufficient documentation is forwarded;12.6.8 In the case of nominee applications, incomplete information or lack of declaration from the agent

submitting the Application;-Missing or inappropriately signed Application Form including without limitation:

-Primary signature missing from Signature Box 1;

-Joint signature missing from Signature Box 2 (if applicable); and

-Two directors or a director and company secretary not having signed in the case of a corporate application;

12.6.9 Number of New ordinary shares does not comply with the rules as set out in Information Memorandum;

12.6.10 Payment accompanying the PAL, Form E for the offer Shares applied for is less than the required amount;

12.6.11 Authorized Cheque has unauthenticated alterations; and12.6.12 Authorized Cheque is not signed or dated or if the amount in figures and words do not tally;12.6.13 Sums paid for Offer Shares in respect of any rejected Applications shall be returned in

accordance with the Refunds Policy.

13. Refunds policy

In the event that either, an application is rejected or the Allocation Policy results in entitlements which result in applicant monies being refunded, then Application Monies will be refunded by Bankers’ Cheque (or by Electronic Funds Transfer (EFT) only for shareholders who have existing EFT mandates in the register) and will apply as follows:

13.1 Refunds will only apply where funds for the PAL, Form E are not pledged through guarantees or letters of undertaking on behalf of the Applicant.

13.2 No interest will be paid on any Application Monies to any Eligible Shareholder or other person taking up the Rights. Interest, if any, earned on Application Monies is payable to the CMA Investor Compensation Fund in accordance with CMA regulations.

13.3 Refunds in respect of unsuccessful applications (if any) shall be in the form of refund cheques or by way of RTGS by Uchumi (where an Eligible Shareholder has provided accurate RTGS details including the name of the relevant bank, bank code, branch, branch code and account number. The preferred method of refund is RTGS where a bank account is available as refunds will reach the recipient quicker and more efficiently and effectively if the information provided is correct. Uchumi will begin refunds to Eligible Shareholders from 24 December 2014.

13.4 Eligible Shareholders are required to choose their preferred option of refund: (a) by RTGS (b) ordinary post at the risk of the Eligible Shareholder, or (c) collected by the Eligible Shareholder from the relevant Authorized Agent (as designated by the Eligible Shareholder on the PAL for that purpose) against proof of identity. Neither Uchumi nor any Authorized Agent will be responsible for any refund not received.

13.5 In the case of Applicants whose New ordinary shares are pledged, refund money/monies in the nameof the Applicant will be delivered to the financier indicated on the Application Form.

13.6 Refunds to East African investors i will be effected in local currency through EFT to the Applicant’s bank account provided in the Share Register or by an Authorised Cheque (net of transaction charges). The receiving bank will apply conversion rates locked down for the period of the offer assuming that the local currency in the other respective countries will continue to perform within reasonably stable exchange rates bands (within and up to 10.0%) on either side. These rates shall also apply to refunds, effectively avoiding any exchange rate differences/shortfalls for regional investors.

13.7 A refund will be deemed to have been made by Uchumi by virtue of a Bankers’ Cheque having been issued or an EFT instruction having been made. In this regard, Uchumi has appointed the Receiving Bank to make refunds (if any) on its behalf after final allocation has been determined and approved.

14. New ordinary shares

14.1 Eligible Shareholders and their Renouncees with CDS Accounts who comply with the procedures for

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acceptance as set out in this Information Memorandum, will receive their New ordinary shares in electronic form by way of credit to their respective CDS Accounts. It is the responsibility of Eligible Shareholders and Renouncees to ensure that their CDS Account details set out in the Entitlement and Acceptance Form are correct.

14.2 Eligible Shareholders without a CDS Account who comply with the procedures for acceptance as set out in this Information Memorandum, will have to complete the process of immobilization of their already dematerialized shares through their investment advisors and stock brokers before they can receive their news shares in electronic form. Participating in this rights issue and subsequent trading of the New ordinary shares may only take place if the Eligible Shareholder has a CDS Account.

14.3 New ordinary shares will be admitted on the MIMS on 29 December 2014, with dealings of New ordinary shares commencing on the same date.

1 15. Untaken Rights and Allocation Policy

15.1 All Eligible Shareholders who apply for their New ordinary shares in full shall receive the full number of New ordinary shares indicated in their PAL. New ordinary shares not taken up shall form the Untaken Rights. The Untaken Rights may be allocated as Additional Shares in accordance with the Allocation Policy to Eligible Shareholders who duly submit applications for Additional Shares in accordance with paragraph 8 (Additional Shares) of this Section.

15.2 Any Rights not taken up as part of the Untaken Rights may be allotted by the Board in such manner as it determines and if not so allotted, will lapse.

16. Loan Facilities

16.1 Eligible Shareholders and/or Renouncees or any purchaser of the Rights may approach a licensed financial institution or bank (“a Lender”) at their risk, for loan facilities to facilitate participation and payment of the full amount due in respect of the Rights Issue.

16.2 Please note that the extension of loan facilities by any Lender is a decision to be made by such Lender at its sole and absolute discretion.

16.3 In the case of Eligible Shareholders or Renouncees with CDS Accounts financed by a Lender to take the New ordinary shares as security:

16.3.1 The Lender shall write to the CDSC Limited making it clear that it requires the New ordinary shares to be pledged as security until such time as CDSC Limited is instructed in writing to the contrary by such Lender, through an Authorized Agent, to lift such pledge;

16.3.2 Upon completion of CDS Form 5 (available from an Authorized Agent) prescribed by CDSC Limited all pledges will be effected through entries in the Central Depository System maintained by CDSC Limited. The pledging of such shares will at all times be subject to Rule 63 of the Central Depositories (Regulation of Central Depositories), Rules, 2004. For every financed application to the CDSC, the Lender or the purchaser of Rights are required to pay CDSC Kshs 1,000/-.

17. Foreign Investors

17.1 The Capital Markets (Foreign Investors) Regulations, 2002 (as amended) (“the Foreign Investor Regulations”) provide that “a foreign investor” (“Foreign Investor”) is any person who is not a local investor. A “local investor” is defined to mean (a) an individual being a natural person who is a citizen of an East African Community Partner State or (b) a body corporate being a company incorporated under the Companies Act of Kenya or such other similar statute of an East African Community Partner State in which the citizen or the Government of an East African Community Partner State have beneficial interest in 100% of its ordinary shares or any other body corporate established or incorporated in an East African Community Partner State under the provisions of any written law. An East African Community Partner State means States that are members of the East African Community.

17.2 Foreign Investors wishing to apply for New ordinary shares must satisfy themselves as to the full observance of the laws of the relevant territory and governmental and other consents to ensure that all requisite formalities are adhered to, and pay any issue, transfer or other taxes due in such territory. Before applying for and purchasing New ordinary shares, foreign investors are advised to consult their own professional advisers as to whether they require any governmental or other approvals or need to observe any applicable legal or regulatory requirements.

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17.3 The Foreign Investor Regulations require not less than 25% (as amended by Legal Notice No. 29 of 2008) of the ordinary shares in listed companies which have been listed to be reserved for local investors.

17.4 This Information Memorandum and accompanying PAL do not, and are not intended to, constitute an offer for the New ordinary shares in any place outside East Africa. In that regard, this Information Memorandum and accompanying PAL may not be used for or in connection with any offer to, or solicitation by, anyone in any jurisdiction or in any circumstances where such offer or solicitation is not authorized or is unlawful. The distribution of this Information Memorandum and the accompanying PAL outside of East Africa may be restricted by law and persons who come into possession of this Information Memorandum and the accompanying PAL should seek advice on and observe those restrictions. Any failure to comply with those restrictions may constitute a violation of applicable securities laws. Any such recipient must not treat this Information Memorandum and accompanying PAL as constituting an offer to him, unless in the relevant jurisdiction, such invitation or offer could be made lawfully to him without contravention of any unfulfilled registration or legal requirements. Without limitation, neither this Information Memorandum nor the accompanying PAL may be sent or passed or otherwise distributed outside East Africa.

17.5 In particular, the Rights Issue has not been, and will not be, registered under the United States Securities Act, 1933 or the securities laws of any state in the United States of America and is not being made in the United States of America or to persons resident in the United States of America. Without limitation, neither this Information Memorandum nor the accompanying PAL may be sent or otherwise distributed to investors in the United States of America.

17.6 Eligible Shareholders with a registered address in East Africa holding Existing Shares on behalf of persons who are resident in a jurisdiction outside East Africa are responsible for ensuring that taking up the New ordinary shares under the Rights Issue does not breach securities laws in that other jurisdiction. The return of a duly completed Entitlement and Acceptance Form in accordance with this Information Memorandum will not be deemed as a representation that there has been no breach of such laws.

18. Regulatory and other Restrictions

Eligible Shareholders are requested to note that Uchumi is subject to the provisions of the Capital MarketsLegislation, its Articles of Association extracts of which are set out in Section 16.4 of this Information Memorandum. Notable, for purposes of the Rights Issue are the provisions summarised below. Eligible Shareholders are required to seek their own advice in connection with these matters. Kindly note that the Directors may take the said provisions into account when determining the allocation of any Untaken Rights to applicants for Additional Shares. These provisions also affect an investor’s eligibility to purchase Rights on the Exchanges.

18.1 The Capital Markets (Take-Overs and Mergers) Regulations, 2002, oblige the observance of certain procedures if any person takes up Rights which would result in that person “acquiring effective control” of a listed company.

18.2 The Capital Markets (Foreign Investors) Regulations, 2002 require every listed company to reserve at least 25 per cent of its ordinary shares listed on the security exchange to Local Investors.

19. Tax Implications

19.1 Eligible Shareholders interested in participating in the Rights Issue should consult their tax advisors of any possible tax implications connected with the Rights Issue. Therefore, Uchumi and the Directors consider it inappropriate to provide detailed advice in respect of taxation consequences in connection with the Rights Issue save for what is expressly set out in this Information Memorandum.

19.2 Neither Uchumi nor any of the Directors or any of Uchumi’s officers or advisers accept any liability for any taxation implications of Eligible Shareholders in connection with the Rights Issue.

19.3 Local investors are subject to withholding tax on dividends at the rate of 5%. Foreign Investors will be subject to a withholding tax rate of 10%.

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19. Expenses of the Rights IssueKenya Shillings

Transaction Advisor Fees 2,700,000Sponsoring Broker Fees 2,000,000Reporting Accountants Fees 4,365,000Registrars Fees 2,005,000Advertising & PR Consultants Fees 6,300,000Legal Advisors Fees 7,500,000NSE Application for Listing new ordinary shares 500,000CMA Kenya Approval Fees 2,363,955Advertising and media costs 34,565,525Printing and postage Costs 1,498,500Placement Commission 13,437,222Miscellaneous Expenses 5,000,000Total 80,530,202

The expenses are indicative.

*Placing commission of 1.5% is payable to Members of the NSE (and is computed on the value of each successful application accepted in respect of the Entitlement and Acceptance forms completed and signed by Eligible Shareholders or Renouncees or respective investors, bearing the stamp of a single Authorised Agent).

20. Governing Law

The Rights Issue Documents and any contract resulting from the acceptance of an application to purchase the New ordinary shares shall be governed by and construed in accordance with the Laws of Kenya and it shall be a term of each such contract that the parties thereto and all other interested parties submit to the exclusive jurisdiction of the Courts of Kenya.

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9 ECONOMIC OVERVIEW OF KENYA, TANZANIA, UGANDA &

RWANDA

9.1 Kenya Economic Overview

GDP Growth Rate

Kenya’s Real Gross Domestic Product (GDP) grew by 4.7% in 2013 compared to 4.6% in 2012. The economy grew by 4.1% in the first quarter of 2014 compared to 5.2% in the first quarter of 2013. The deceleration was attributed to erratic weather and suppressed external demand for agricultural products. The hotel industry also contracted mainly due to insecurity concerns and negative travel advisories by key tourist source countries.

Source: CBK

Interest Rates

The average lending rate increased to 17.0% in May 2014 from 16.7% in April 2014 while the average deposit rate fell to 6.42% from 6.48% during the same period. The interest rate spread rose from 10.2% in April 2014 to 10.6% in May 2014.

By the end of 2011, the Central Bank Rate (CBR) stood at 18.0%, a level that was maintained up to June 2012 and gradually reduced to 11.0% in December 2012. The Monetary Policy Committee (MPC) cut the CBR to 8.5% in May 2013 and has since maintained the rate at that level.

Source: KNBS, CBK

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Inflation

As the chart depicts, overall monthly inflation was on an upward trajectory from the beginning of the year, rising from a level of 7.2% in January 2014 to a high of 8.4% in August 2014. The rise in inflation rate was attributed to a rise in the prices of food commodities, housing, electricity and transport costs.

Source: KNBS, CBK

Exchange Rate

The Kenya Shilling remained relatively stable against the Dollar appreciating marginally by 0.3% to close the year at Kshs. 86.31 per USD. The Kenya Shilling however weakened against the Euro and Sterling Pound by 5.0% and 2.4% respectively in 2013. The Kenya Shilling depreciated to an average of Kshs. 88.39 and Kshs. 146.58 against the USD and Sterling Pound respectively during the week ending 29 August 2014. The Kenya Shilling appreciated by 1.2% to Kshs. 116.9 per Euro during the same period.

Balance of Payments

The overall balance of payments declined to USD 298 million in May 2014 from USD 1,272 million in May 2013 due to a reduction in the capital and financial account surplus. The current account deficit improved by USD 47 million from a deficit of USD 4,760 million in the year to May 2013 to a deficit of USD 4,713 in the year to May 2014. The improvement was attributed to improvement in the services account surplus. Receipts from merchandise exports decreased by 3.0% to USD 5,963 million in the year to May 2014 while payments for merchandise imports increased by 1.3% to USD 17,239 million during the same period.

Money Supply

A 22.4% year-on-year increase in domestic credit to Kshs. 2,177.4 billion in the year ending May 2014 led to a 17.8% year-on-year increase in extended broad money supply (M3) to Kshs. 2,147.5 billion during the period.

Broad money supply increased from Kshs. 1,823.4 billion in May 2013 to Kshs. 2,147.5 billion in May 2014. Money and Quasi-money (M3) expanded from Kshs. 1,543.7 billion to Kshs. 1,828.0 billion over the same period.

Public Debt

Public debt stood at Kshs. 2.2 trillion in May 2014, comprising of domestic debt (Kshs. 1.2 trillion) and external debt (Kshs.1.0 trillion). The ratio of nominal debt/GDP was 56.9% in May 2014 from a high of 77.4% in June 2000.

Gross government domestic debt stood at Kshs. 1,232.5 billion in May 2014. Stocks of Treasury bills, Treasury bonds and government overdraft at the Central Bank of Kenya increased by Kshs. 7.1 billion, 142.7 billion and 32.1 billion respectively during the June 2013 to May 2014 period. Cumulative interest and other charges on domestic during the period amounted to Kshs. 108.7 billion compared to Kshs. 101.7 billion the previous year.

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9.2 Tanzania Economic Overview

GDP Growth Rate

According to the Bank of Tanzania, real GDP grew by 7.0% in 2013 compared to a growth rate of 6.9% in 2012. The performance in 2013 was attributed to accelerated growth in trade and repairs, communications and hotels and restaurants activities that grew by 8.3%, 22.8% and 6.3% respectively.

Source: BOTMoney Supply

Extended broad money supply (M3) grew by 15.8% (TZS 2.4 trillion) during the year ending June 2014 compared with 14.9% growth recorded in the year ending June 2013. The increase was attributed to an increase in credit to the private sector and Net Foreign Assets (NFA) of the banking system.

The annual growth of credit to the private sector stood at 21.4% in June 2014 compared with 17.1% in a similar period in 2013.

Interest Rates

The overall time deposit rate decreased by 21 basis points to an average of 8.5% during the quarter ending June 2014. The overall lending rate decreased to 16.4% from 16.5% recorded the previous quarter. The spread between the 12-months deposit rate and one-year lending rate widened to 3.4% in June 2014 compared to 2.8% recorded in June 2013.

Balance of Payments

In the year ending June 2014, the current account balance recorded a deficit of USD 4,790.4 million compared to USD 4,244.6 million recorded in the year ending June 2013. During the same period, the balance of payments recorded a lower surplus of USD 268.3 million compared with USD 451.9 million recorded in the year ending June 2013. Gross official reserves stood at USD 4,634.1 million in June 2014. These were sufficient to cover 4.5 months of projected imports of goods and services, excluding those financed by foreign direct investment.

Inflation

The annual headline inflation fell to 6.4% in June 2014 from 6.5% in May 2014. The fall in inflation was attributed to slowdown in prices of some items under the food and non-alcoholic group.

Exchange Rate

The Tanzanian shilling depreciated slightly against the USD, trading at an average of TZS 1,658.7 per USD in June 2014 from TZS 1,646.7 per USD in May 2014.

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Public Debt

The country’s external debt as at the end of June 2014 stood at USD 14,021.2 million, an increase of USD 271.8 million and USD 1,691.0 million from the amount recorded at the end of the preceding month and corresponding period in 2013, respectively. The increase was attributed to new disbursements and accumulation of interest arrears.

The stock of domestic debt as at the end of June 2014 decreased by TZS 16.2 billion to TZS 6,535.4 billion from the amount recorded the preceding month. The Government borrowed a total of TZS 136.7 billion from domestic sources during the month of June 2014.

9.3 Uganda Economic Overview

GDP Growth Rate

According to the World Bank, Uganda’s Gross Domestic Product (GDP) grew by 7.3% in 2009 and by 5.9% in 2010. In the year 2012, GDP growth rate dropped to 3.4% but rebounded to 5.8% in 2013. The World Bank expects GDP growth to accelerate to 13.0% in 2017/2018 as oil production begins. Most recent data from the Bank of Uganda indicates that quarterly GDP growth grew by 6.9% in the fourth quarter of 2013.

Source: World Bank

Interest Rates

The average commercial bank lending rates declined marginally to 21.7% in April 2014 from 21.9% in March 2014. The average time deposit rate increased from 12.4% to 13.3% over the month. The spread between the commercial bank lending and time deposit rates narrowed to 8.4% from 9.5% the prior month. The Central Bank Rate stood at 11.0% in June 2014.

Balance of Payments

The current account deficit stood at USD 486 million in the 3 months to April 2014 compared to a deficit of USD 269 in the previous months. The capital account balance stood at USD 10 million over the three months to April 2014 compared to USD 43 million recorded over the three months to January 2014. The financial account declined from a net borrowing position of USD 489 million over the three months to January 2014 to USD 384 million over the three months to April 2014. Official foreign reserves stood at USD 3,402 million at the end of April 2014, equivalent to 4.1 months of future import cover.

Inflation

Annual headline inflation fell to 5.4% in May 2014 from 6.7% in April 2014. Annual core inflation fell to 3.3% in May 2014 from 3.4% in April 2014.

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Exchange RateThe Ugandan shilling depreciated by 0.1% month-on-month in May 2014 trading at an average exchange rate ofUShs 2,532.39 against the USD. Year-on-year, the Ugandan shilling appreciated by 2.1% during the same period.

9.4 Rwanda Economic Overview

GDP Growth Rate

Source: National Bank of Rwanda (BNR)

Rwandan economy recorded a 4.7% growth in GDP in 2013 compared to a growth of 8.0% recorded in 2012. According to the Government of Rwanda, real GDP grew by 7.4% year-on-year in the first quarter of 2014 compared to 4.7% recorded in the first quarter of 2013. This was due to improved performance in the agriculture, service and industry sectors that recorded growth rates of 5.0%, 8.0% and 9.0% respectively.

Inflation

Source: National Bank of Rwanda

Based on the latest figures available, Rwanda’s headline inflation rate grew by 1.4% year-on-year in June 2014 from 1.9% in the previous month. According to the National Bank of Rwanda, the decline in inflation was attributed to decreases in education, housing and transport.

Interest Rates

The average lending interest rate stood at around 17.2% in January 2014 to June 2014 period from 17.3% in the same period for 2013. Commercial bank’s average deposit rates stood at 8.5% for the first half of 2014 from 10.9% recorded in the same period for 2013.

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Exchange Rates

According to the BNR, the RwF depicted a fairly stable performance against the major international currencies during the first half of 2014. The RwF depreciated by 1.9% against the USD, trading between RwF 670.08 end December 2013 and RwF 682.54 by the end of June 2014 per USD. During the same period, the RwF appreciated by 5.3% against the Sterling Pound and 1.0% against the Euro.

Money Supply

Broad money supply, M3 expanded by 19.2% during the first half of 2014. The BNR attributed this to a 73.1% rise in net domestic assets (NDA). During the same period, net foreign assets (NFA) declined by 1.4% due to a decline in BNR NFA (-11.6%).

Credit growth to the private sector grew by 7.3% in the first half of 2014 compared to 5.0% recorded in the first half of 2013.

Balance of Payments

In the first half of 2014, a growth of 1.2% to USD 294 million was realised in the value of exports compared to a value of USD 290 million in the first half of 2013. The value of imports amounted to USD 1.2 billion in the first half of 2013 from USD 1.1 billion in the first half of 2013 leading to a trade deficit of USD 898 million from USD 765 million recorded in the first half of 2013.

At the end of first half of 2014, export cover of imports fell to 24.6% from 27.5% in the first half of 2013.

Public Debt

The stock of government’s total domestic debt stood at RwF 260.8 billion by the end of December 2013, representing a 25.1% increase compared to a similar period in 2012.

The country launched a USD 400 million Eurobond, with an annual yield of 6.875%, in April 2013 aimed at servicing debt and completing strategic investment projects.

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10 RETAIL SECTOR OVERVIEW

10.1 Kenya Retail Sector Overview

During the past decade, the retail industry in Kenya has developed significantly with some of the family owned businesses growing into some of the largest retail companies in the country.

The Kenyan retail sector can be classified into three broad categories:

The informal segment: This includes estate kiosks. The mini supermarket segment: This includes small supermarkets formed in small towns.

The retail chain outlets: This includes supermarket chain stores such as Nakumatt, Uchumi, Tuskys, Naivas, Chandarana, and Ukwala supermarkets etc.

The major supermarket chain stores in Kenya are:

a.) NakumattNakumatt was established in 1987 as a small family shop in Nakuru. The retail chain’s model entails convenience stores, supermarkets and hypermarkets. It serves an average of 200,000 customers per day and has about 650,000 loyal customers contributing 70.0% of its turnover. It offers a range of over 75,000 products.

In total, Nakumatt has about 45 branches across East Africa with a total turnover of over USD 450 million.

Source: Company’s website

b.) TuskysTuskys was formed about 10 years ago, in Nakuru and was operating under the name Tusker Mattresses Limited until 2007 when it rebranded and changed its name to Tuskys. The business model ranges from express (convenience) stores to Mega supermarkets.

Tuskys deals in products ranging from the conventional supermarket products and services to private label products in the form of in-store bakeries, delis, butcheries, whole milk dispensers, water dispensers and locally sourced fresh fruits and vegetables.

By the end of October 2013, Tuskys had 48 outlets.


c.) NaivasNaivas Limited began trading as a small family-owned service store called Rongai Self Service Stores Limited which was located at Rongai in Nakuru. It was was registered as a private limited company in July 1998. It changed its name to Naivasha Self Service Stores Limited but later rebranded to the current Naivas Limited in 2007.

The retail chain has over 17 branches distributed in Nairobi, Edoret, Naivasha, Embu, Machakos, Kitui and Narok.


According to a research done by Citigroup (South African Retail, May 17, 2012), Kenya has the second most developed retail sector in sub- Saharan Africa with about 30.0 % of retail shopping being done in formal outlets. This has been attributed to the burgeoning middleclass which provides a rising consumer demand for goods and services offered by large supermarkets.

South Africa is the most formalized market in the region with 60.0% of retail shopping being done in formal outlets.

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The table below shows the growth of the wholesale and retail sector during the four quarters of the past four years.

0

20000

40000

60000

2009 2010 20112012

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Source: Kenya National Bureau of Statistics

As the graph above shows, the wholesale and retail sector in Kenya has been on an upward trend during the past four years.

10.2 Uganda Retail Sector Overview

According to management, formal retail penetration in Uganda is relatively low, at between 15-20% of total national retail sector, compared to about 30% in Kenya. Majority of the population purchase their goods from small shops. The available retail infrastructure is concentrated in major cities and municipalities. Most of the available formal retail outlets are family-owned which face the challenges of scale and corporate governance, a phenomenon common to family-owned enterprises.

The retail sector is essentially characterised by small informal retail stores, kiosks and market stalls, thus presenting opportunity for formal retail sector growth mainly fuelled by the expected growth of the middle income population. There has also been a shift in shopping trends from corner shops (small retail shops) to trendy one-stop-shop leisure stores.

The scramble for the Ugandan retail market is on high gear with many players positioning themselves in strategic locations in and around Kampala City. There are also many small family-owned supermarkets that have mushroomed in the suburbs of Kampala all seeking to take advantage of the high potential retail business.

The growth of the industry has been mainly spurred, albeit slowly, by foreign retail chains expanding into a region previously occupied by small family-owned chains.

Uchumi in Uganda

Uchumi has six stores in Uganda and the first Uchumi store was opened in Kampala in 2003 at Garden City Mall. There are three more stores in Kampala at Kabalagala Mall, Freedom City Mall and Natete. The fifth supermarket is located in Gulu, in Nothern Uganda. Two more supermarkets are under development in Mbale and Mbarara.

In order to drive its business in Uganda, Uchumi has vigorously engaged in turnover growth through customer numbers, geographical growth as well as cost management strategies.

Major Retail Players in Uganda

Below are highlights of the key players in the Ugandan Retail Sector, according to management.

a.) Nakumatt Holdings Ltd

Nakumatt have eight branches in Uganda. Their first branch was in Kampala and remains their flagship branch. Nakumatt’s first upcountry branch was opened in Mbarara in 2012.

b.) Tuskys Supermarkets Ltd

Tuskys Supermarkets entered the Uganda retail sector by buying two Payless outlets in 2011.They now have over four stores in total, all in Kampala.

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c.) Capital Shoppers Ltd

Capital Shoppers Ltd, a local supermarket operator has a large local client base with wholesale remaining their main business.

d.) Shoprite Holdings Ltd

Shoprite was the first modern retail supermarket that opened in Uganda in 2000. They have three branches, all in Kampala.

e.) Quality Supermarkets Ltd

Quality Supermarkets is a locally owned supermarket that was began in 1980 as a grocery store. The supermarket has grown from humble beginnings to three branches.

f.) Standard Supermarket

Standard Supermarket has one branch which is located centrally at the Taxi Park in the heart of Kampala City.

g.) Game Discount Store

Game has one branch located at Lugogo Shopping Mall together with Shoprite. They have been taken over by Massmart and will be rebranding.

10.3 Tanzania Retail Sector Overview

Management estimates that the formal retail penetration in Tanzania is relatively low, at less than 10% of the total retail sector. Majority of the population continue to purchase their goods from small shops. The low formal retail penetration has been attributed to an underdeveloped retail infrastructure, such as inadequate supply logistics and credit policies among others.

The limited available retail infrastructure is concentrated in major cities and municipalities. Most of the available formal retail outlets are family-owned and face challenges of scale and corporate governance, a phenomenon common to family-owned enterprises.

The low penetration creates immense potential for Uchumi Supermarkets. Growth of the industry has been mainly spurred, albeit slowly, by foreign retail chains expanding into a region previously occupied by small family-owned chains.

Uchumi in TanzaniaUchumi opened its first store in 2011 in the biggest mall in Dar es Salaam, Quality Mall. Uchumi’s growth in Tanzania is anchored on an MOU with a major developer in various cities and municipalities around the country.

The major retail players in Tanzania, according to management, include:

a.) TSN SupermarketsThe retail chain has six supermarkets, all in Dar es Salaam.

b.) Shoppers SupermarketsShoppers Supermarkets has two stores, both situated in Dar es Salaam.

c.) Shrejee SupermarketsShrejee Supermarkets has four supermarkets, all situated in Dar es Salaam.

d.) Shoprite SupermarketsShoprite had three branches; two in Dar es Salaam and one in Arusha. This stores were recently acquired by Nakumatt Holdings of Kenya.

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e.) Game StoresGame Store has one supermarket which is located in Dar es Salaam.

f.) Nakumatt SupermarketsNakumatt has one outlet which is situated in Moshi.

10.4 Rwanda Retail Sector Overview

The formal retail penetration in Rwanda stands at less than 5% of the national retail sector, according to Uchumi’s management. There have been very minimal investments in formal retail infrastructure development.

Uchumi in Rwanda

Uchumi plans to open stores in Rwanda soon and has identified four potential sites.

Major Retail Players in Rwanda

Other than Uchumi, there are two main retail players in Rwanda, Nakumatt and Simba Supermarkets. They both have two supermarkets within the central business district of Kigali.

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Uchumi Supermarkets

Limited*

Uchumi Supermarkets

(Uganda) Limited

USLTanzania) Limited

Kasarani MallLimited

Uchumi Holdings Limited

11 UCHUMI’S BUSINESS OVERVIEW


The Group structure is as follows:

*In addition to the abovementioned subsidiaries, Uchumi has registered a branch in Uganda, Tanzania and

in South Sudan.

The principal activity of Uchumi Supermarkets Limited, Uchumi Supermarkets (Uganda) Limited and USLTanzania Limited is operations of retail Supermarkets. The principal activity of Kasarani Mall Limited is property management.

All subsidiaries are owned 100% by Uchumi.

11.2 Vision, Mission and Values

Vision StatementTo be the supermarket of choice in the East African Region.

Mission statementTo provide quality customer service; maintain quality and motivated manpower; and to ensure the company’s long-term professional and financial viability; while protecting the environment.

Core values

Integrity and Transparency

Networking

Team work

Quality Service

Commitment and Accountability

Professionalism; and

Social Responsibility

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11.3 The Company’s Business and Products

The Company deals in retail trade and provides consumers with a wide range of goods and services through a network of supermarket stores in Kenya, Uganda and Tanzania.

The products are broadly categorized into 5 divisions including:-

i. Foods (food stuff for human consumption)ii. Non-Food groceries (non-food fast moving consumer goods)iii. General merchandise (non-food general products)iv. Textiles (clothing and fabric-made products) and v. Services (specialty products and services offered by the company and/or partners).

The divisions are broken down into a number of categories which are made up of similar or related products as perceived by customers and these are managed as strategic business units through the category management principle.

11.4 Company Profile

Status of the CompanyUchumi is a public limited liability company incorporated in Kenya under the Companies Act with registration number C.6/92. The shares of the Company are listed on the NSE, the RSE and the USE.

The Government of Kenya through the Cabinet Secretary to the National Treasury is the largest shareholder,holding 13.4% of the issued share capital of the Company. The rest of the issued shares of the Company areheld in varying quantities by local and foreign institutional and retail investors.

The details of Uchumi’s registered office, its company secretary, auditor, share registrar, legal advisors and bankers are set out in sub-section 6.11 of this Information Memorandum.

11.5 Board of Directors

The Directors are Kenyan nationals having diverse skills and experience and they are as follows.

Full Name Position Postal AddressDate of Appointment

Number of Shares Held

Ms. Khadija Mire

Chairperson; Non-executive and Independent

P.O. Box 40672-00100 Nairobi 25 Nov 2011 19,600

Dr. Ibrahim Mohamed representing the Ministry of East Africa Affairs, Commerce & Tourism Director; Non-Executive

P.O. Box 39430-00100 Nairobi 11 Dec 2012

35,576,550

Ms. Mbatha Mbithi representing the ICDC Director; Non-Executive

P.O. Box 45519-00100 Nairobi 25 Nov 2011

7,288,472

Mr. James Ruhiu MuriguDirector; Non-executiveand Independent


100,000

Mr. Bartholomew RagaloDirector; Non-executiveand Independent


34,812

Dr. Jonathan Ciano

Managing Director/Chief Executive Officer; Executive

P.O. Box 73167-00200 Nairobi 4 Mar 2010

518,379

Source: USL

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As detailed in sub-section 13.11, Uchumi’s senior management team consists of the following:Name Position




Owino Ayodo General Manager, Operations




Sam Murigi Acting IT Manager

Benson Sila Head of BuyingSource: USL

Management Organizational Chart

Uchumi’s organisational structure is made up of the divisions shown in the diagram below:

Source: USL

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12 UCHUMI’S HISTORY & MILESTONES

12.1 Brief History

Uchumi Supermarkets Limited was incorporated on 17 December 1975 as a private limited liability company established and issued with company number C. 14109.

Its shareholders at incorporation comprised entirely of related government parastatals that included ICDC, ICDC Investments (ICDCI), KWAL and Kenya National Trading Corporation Limited. Its main objective at the time was to create retail outlets for Kenya’s small scale farmers, locally manufactured goods and the sale of essential retail products at competitive prices.

By a special resolution dated 9 December 1992, Uchumi adopted new Memorandum and Articles of Association and converted to a public company before listing on the Main Investment Market Segment of the NSE in the same year. Upon conversion into a public company, Uchumi was issued with a new company number C.6/92.

From the period between 2000 and 2004, Uchumi suffered severe financial challenges that culminated in the Company being declared insolvent by its Directors on 30 May 2006. The Company also notified the CMA and the NSE on 31 May 2006 that it was insolvent and its shares were suspended from trading on the securities exchange on 2 June 2006.

12.2 The Uchumi Rescue Plan

Following the declaration that the Company was insolvent, the Company’s debenture holders at the time, Kenya Commercial Bank Limited (KCB) and the Eastern and Southern African Trade and Development Bank (PTA)were each compelled to appoint Harveen Gadhoke and Daniel Mutisya Ndonye as joint receiver and manager of the Company on 2 June 2006.

Subsequently, the Government through the Minister and the PS Ministry of Trade appointed a taskforce, in collaboration with the KCB and PTA, to work out a ‘rescue plan’ for the Company. On the recommendation of the task force, a framework agreement (this is a document available for inspection under section 17 of this Information Memorandum) relating to a business rescue plan was drawn and entered into between the Government, KCB, PTA and the Company.

Based on this Framework Agreement, KCB, PTA and the receivers were requested to suspend the realization of the assets to permit the implementation of the rescue and recovery package. The Framework Agreement provided for, among others, the recruitment of Strategic Equity Partners (SEPs) who would inject additional capital, and secure and drive the Company’s business successfully.

The Framework Agreement further stipulated that;

a) The Government grants a loan of Kshs 675 million for a period of 36 months to provide working capital and settle part of the amount due to trade creditors and finance re-organisation costs. The loan was disbursed into an Escrow Account held at KCB.

b) Government would on a ‘best endeavors’ basis, procure that certain of the shareholders of Uchumicommit to advance to Uchumi through the Receivers a loan of Kshs 300 million. The debentures were to be issued in multiples of Kshs 100,000 at face value and would carry a coupon rate of 91-day Treasury Bill rate accrued every quarter.

c) Government would further procure that suppliers and other non-secured creditors of Uchumi including landlords commit to support the arrangements on restructuring of the trade debts through postponement of 25% of their debt into preference shares at an appropriate time.

d) Of the 75% of the old suppliers’ and non-secured creditors’ debt subjected to the verification, suppliers whose total outstanding invoices to Uchumi were Kshs 100,000 and less would be eligible to receive 50% of their dues subject to such suppliers undertaking to resume supplies to Uchumi as may be required on terms similar to other supermarket chains.

e) Suppliers whose total outstanding invoices to Uchumi are Kshs 100,001 and above would be eligible to receive 25% of their dues and the remainder would be payable in nine equal monthly installmentsfollowing the expiry of three months from the date of first payment subject to each supplier undertaking to continue supplying to Uchumi on terms similar to other supermarket chains.

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On 14 July 2006, KCB and PTA appointed Jonathan Ciano as specialized receiver and manager. The specialized receiver was responsible for among other things, the provision of strategic leadership in the turning around of the business. Harveen Gadhoke and Daniel Mutisya Ndonye subsequently ceased acting as receivers and managers and issued notices to that effect to Uchumi on 18 October 2006.

At the same time, KCB and PTA as the debenture holders allowed the specialized receiver and manager to reopen Uchumi retail outlets for business and operate them with a view to safeguarding the interests of all shareholders, suppliers and creditors, both secured and unsecured.

As at 30 May 2006, when the Company was declared insolvent, the KCB and PTA loans amounted to approximately Kshs. 956,738,040. Through effective implementation of the business rescue plan, Uchumi successfully repaid these outstanding loan amounts and the two banks discharged the specialized receiver and manager on 4 March 2010 effectively lifting the receivership. The two banks soon thereafter discharged of the assets of Uchumi secured under various debentures and charges.

The restructuring strategy that was carried out and the implementation of the business turnaround strategy and the proceeds of the debenture issues enabled the Company to return to profitability and liquidity. On 22 March 2010, the Board resolved that Uchumi was solvent and converted shareholder loans and part of the Government loan to equity

Conversion of Kshs 231.8 million (equivalent to 23,179,601 shares) worth of shareholders’ debentures and interest thereof, Kshs 266.7 million (equivalent to 26,670,463 shares) worth of suppliers’ debentures and Kshs 355.7 million (equivalent to 35,576,550 shares) of GoK loan shares were effected.

Subsequently, and after fulfilling the requirements of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations (2002), the Company’s suspension from the NSE was lifted by the CMA; and the NSE approved the commencement of the trading of the Company’s shares on the NSE with effect from 31 May 2011.

As at June 2014, the Company had a total of 37 supermarket outlets in Kenya, Uganda and Tanzania.

12.3 Uchumi’s Corporate Milestones

In 2012, Uchumi celebrated the realization of its short term goals with a campaign dubbed “Asante Wakenya”.This campaign was Uchumi’s way of saying “Thank you” to its stakeholders for their loyalty, their eagerness and their steadfast support throughout the last six or so years. It has now been trading for 3 years since Re-listing. Through the support of all its stakeholders, it has continued to grow in revenues, brand equity and reach.

Strategic growth across the East African region – Branch Network – From 2012 when there was a total of 25 branches, it has grown to a total of 37 shops currently, with another 5 shops expected shortly. Uchumi hasensured its growth inculcates improvements in technology, human resources and logistics, and improved the stores portfolios to incorporate hyper stores, upcountry and small shops into the network.

Strategic growth in its operations - Uchumi celebrates its progress in technology, human resource skill and infrastructure. Currently, Uchumi accepts payment in all its forms - plastic, paper and virtual money. It hasupgraded its system to include online local purchase order processing and payments to promote efficiency in ordering and stock management levels. In addition to introducing an online processing system, its finance department is dedicated to meeting all financial obligations in time. Currently, its payment turnaround time stands at 30 days.

Improving the living standards of more than 4,500 people across East Africa - Uchumi is the proud employer of more than 4,500 Kenyan, Ugandan and Tanzanian nationals. With 37 branches and the head quarters in Industrial area, Uchumi continues to directly and indirectly put bread on the tables of numerous families, educate and shelter the children of its team members.

Increased shareholder value – Uchumi’s shares rose to a high of Kshs. 21.50/- over the past 12 months. The company’s revenue grew to Kshs. 14.5 billion by close of financial year 2013/2014 and the branch network to 37profitable shops with more expected soon. With the benefit of hindsight, the management now observes strict controls on debt management, a practice that has encouraged increased retained earnings and improved earnings per share from a negative to a positive value.

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Customer loyalty – U-Card & Gift Card - Uchumi shops see an average of 70,000 customers walking through its doors every day. Customers have shown loyalty to Uchumi because of its fair prices, fresh fruit, vegetable and bakery sections, convenient locations, friendly customer service and Loyalty scheme – U-Card. Currently the loyalty programme has over half a million active members and continues to grow every day. Uchumi ensuresthat customers’ points are kept safe and can be retrieved even with loss of the card. Uchumi has also ensured points can be accrued and carried over the lapse of every year.

Efficient supplier channel to distribute goods and services - Uchumi handles more than 4,000 suppliers from multi-national firms such as Unilever and Coca Cola to large local manufacturers such as Inter Consumer Products and Kevian Kenya Limited. The Company’s pride however remains being devoted to small struggling local business people and nurturing them to established and respected SME’s.

12.4 Awards Received

To add to its achievement, Uchumi has received numerous awards from its suppliers among other agencies. Some of these awards are listed below:

2013: Most consistent key supermarket nationally award by Sony Sugar Limited

2011: Best performing award by Jambo Biscuits Limited Best in Lucozade award 2011 by Gsk Best performing Mpesa agent key accounts award 2011 by Safaricom Limited Best performing key accounts award 2011 by Safaricom

2009-2010: Best payer outlet award by Haco Industries Limited

2009: Best Mpesa dealer award by Safaricom Limited

2008: Dealer of the year award Mpesa agent 2008 by Safaricom Limited

2007: Top Large Tax Payer-Wholesalers, by Kenya Revenue Authority

2007: Golden award for superior performance in sales distribution 2007 by Haco Industries Limited 2006: Commissioner Generals commendation award 2006 by Kenya Revenue Authority

12.5 Key Success Factors

Uchumi’s success factors are attributable to three overall points:

Branda) Uchumi enjoys strong loyalty in East Africa. This is because it is one of the oldest supermarkets in the region

and therefore East Africans already have a lot of faith in the brand.b) Uchumi has a policy of engaging local suppliers and entrepreneurs as the main part of its supply chain, with

the objective of promoting local entrepreneurship.c) Uchumi marshals all its stakeholders in its operations with an endeavour to maintain brand

positioning/equity: customers’ direct dialogue, suppliers’ management of inventory on the floor, joint activities with suppliers among others.

Corporate Governancea) Uchumi is the only listed supermarket in the East Africa region.b) Uchumi operates with principles of integrity and transparency as part of its core values.c) Uchumi pays taxes in an open and timely manner, as demonstrated by awards received from the Kenya

Revenue Authority.d) Uchumi prioritises giving back to the community in and around its areas of operations. Its key focus areas

include: education, health and environment in all the three countries of its operations.

Operational Policy

a) Uchumi has greatly improved inventory management, and as a result, shrinkage is below 1,0% compared to global average of 4.0%.

b) Uchumi undertakes research useful for making decisions for outlet strategic locations, competitive rental rates, purchasing equipment and product profit margins mixes.

c) Uchumi takes customer service and customer dialogue very seriously and considers customer service to be its core purpose.

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d) Investing in technology has continued to promote efficiency in business operations. The Company’s investment in an ERP system has led to business process improvements, customer service, and streamlined inventory management.

e) Value in pricing driven by customer need and trust and overall shareholder value.f) Specialty business model that promotes small and medium entrepreneurs, giving them a fair chance through

their participation in the formal retail business value chain. Specialty business is the shop-in-shop concept that enables customers to get everything under one roof, enriching their shopping experience.

12.6 Drivers of Change in the Company

There are a number of factors driving change in the Company:

Demographic Dynamics Increasing population coupled with increasing purchasing power and infrastructural development has resulted in an increased demand for formal retail shopping outlets and their strategic positioning.

Competitive PricingUchumi prides itself in offering value for money, thus enhancing customer trust – home of value.

Shopping Experience and Convenience Uchumi offers a variety of products under one roof, endeavours to competitively position its outlets in line with the demographic movement, creating convenience for its customers.

Varied Range of MerchandiseUchumi offers its customers a varied range of merchandise. The products are categorised into 5 divisions namely foodstuffs, non-food groceries, general merchandise, textiles and services.

Robust Training ProgramThe Company has put a robust human resource training program to enhance service delivery.

Technology and InnovationInvestment in the ERP and its continued enhancement contributes to efficiency and innovation in management of customer service, inventory management and suppliers interface.

12.7 Uchumi’s Competitive Positioning

Product Categories Depending on LocationUchumi’s long history in formal retail gives it an edge in appreciating the local retail market. Consequently, the Company makes available different products and services in different geographical locations to meet the varied needs of customers.

Uniform PricingThe Company’s mission is to be a home of value. The Company prides itself in offering value for money through a practice of uniform national pricing.

Focus on Locally Produced ProductsThe Company’s supplies are locally sourced. The Company’s aim is to promote local entrepreneurs and service providers, which was the founding objective of the Uchumi supermarkets chain.

Improving Shareholder Value

The growth and sustainability of the Company is managed with the objective of increasing shareholder value, while upholding the founding objective of promoting local entrepreneurs and service providers.

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12.8 Uchumi CSR Activities

Kenya Activities2010 / 2011

2011

2011/2012

2011/2012

2012/2013

St. Lucy School for the Blind – MeruDonating 300 mattresses. Fitting a branded gate to secure the institution.

Be Your Brother’s Keeper ( BYBK)Fundraising drive, collected Kshs. 2.75M to go towards food and medicine for starving Kenyans in Northern Kenya. BYBK fund drive coincided with the national campaign – Kenyans for Kenya

Ngala School of the DeafA public special school for the hearing impaired children. Providing 20 double decker beds, complete with mattresses and blankets to ease the congestion in the current dormitories. Undertaking sewerage connection from the school to the main sewer to enable the students use the in-house rest rooms and improve sanitation in the school.

Donation of wheelchairs - KenyaDonating wheelchairs to selected institutions all over the country. These included Nairobi Spinal Injury, Kenya Paraplegic Organization, Eldoret Hospice etc.

Kajiado Adventist Rehabilitation and Educational Centre - Kenya

Serves as a rescue and rehabilitation boarding school for girls. It handles cases of abused girls, forced marriages, FGM, destitute, orphans and the neglected.Providing text books for the children.

Uganda Activities

2011

2012

2012

Nsambya Children’s Home – Kampala, Uganda.

Non-Governmental Organisation that advocates for children and promotes care of the vulnerable to grow into responsible adults. The children’s home cares for abandoned children between 0-5 years old.

Caring for children e.g. cleaning, sweeping the compound, fetching water. Feeding and playing with children.

Mama Africa International Home – Kampala UgandaNon-Governmental Organisation that works with children, families and communities to tackle the root cause of poverty and injustice. Its mission is to help create access to sustainable opportunities.Providing food for families and books for children.

Uganda Water & Sanitation – Kampala, UgandaParticipating in water and sanitation drive geared towards promoting safe water collection and storage, and proper sanitation to enhance health and reduce water borne diseases amongst younger children.

Tanzania Activities2012

2013

Upendo Centre – Dar es Salaam TanzaniaHome for abandoned mentally challenged children between the ages of 4 and 13 years. They protect and educate children to allow them live a holistic life.

Providing books, furniture and food for both staff and children.

Mwana Orphans Home – Dar es Salaam, Tanzania

Orphan centre located in the Vigunguti, Dar es Salaam. Caring for children who have been abandoned or have no one to take care of them after the death of their parents / guardians. Depends solely on donations from well wishers.

Fun day with children together with branch staff and management to celebrate 2nd anniversary of the branch. Providing food and other accessories to both children and staff during Holy month of Ramadhan.

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13 CORPORATE GOVERNANCE, THE BOARD OF DIRECTORS AND

SENIOR MANAGEMENT

13.1 Corporate Governance

Uchumi has adopted sound corporate governance structures under which the Board of Directors oversee the management of the Company on behalf of Shareholders; approve policies and procedures, and monitor strategic performance indicators to ensure that the Company continues to conduct its operations and affairs as mandated by its Shareholders.

The Board of Directors is responsible for the long-term strategic direction for profitable growth of the business, whilst being accountable to the Shareholders for legal compliance and maintenance of highest standards of business ethics. It is also responsible for building shareholders value through ensuring growth and profitability of the Company.

The Company is also keen on effectively equipping its Directors and all the directors have attended corporate governance training. All the Directors have also undergone an orientation to understand the Company’s operations.

13.2 Shareholders’ Responsibilities

The Shareholders appoint the Directors and the external auditors at the Annual General Meetings. Their role extends to holding the Board accountable and responsible for efficient and effective governance.

13.3 Board’s Responsibilities

The Board of Directors determines the Company’s strategic objectives, values, key policies and procedures in accordance with best practice. It has delegated the authority for day-to-day management of the Company to the Managing Director and Chief Executive Officer.

However, the Board retains overall responsibility for the Group’s financial performance, compliance with laws and regulations, monitoring of operations as well as ensuring competent management of the business.

Although the Board is responsible for the management of the Group, it has delegated the detailed discussions on audit, finance, human resource, investments, legal, risk and compliance, compensation and nomination to three committees which have specific and detailed terms of reference.

Composition of the Board of Directors

The Board is made up of six Board members, five non-executive directors (including the Chairperson) and one executive director. Out of the five non-executive directors, two are institutional directors, and three are independent directors. The composition of the Board adheres to the standards contained in the guidelines on corporate governance issued by the CMA for publicly listed companies in Kenya.

The Board meets at least once every quarter and is chaired by an independent non-executive chairman. The Board retains full responsibility for the direction and control of the Company.

Remuneration of the DirectorsIn determining the remuneration of the Directors, demands and responsibilities placed on the Directors in relation to the Company’s business and the availability of the Directors to consult on an ad hoc basis are considered.

Apart from the Chief Executive Officer, no other Director or party related to a Director has a service contract or receives compensation from the Group. Sitting allowances to the Directors are only paid subject to attendance ofmeetings and other Board duties.

The emoluments and fees paid to Directors are disclosed in sub-section 13.7 of this Information Memorandum.

Professional AdviceIn order to carry out its responsibilities in an independent and objective manner, the Board seeks professional counsel as required from time to time;

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13.4 Board Members, Committees and Terms of Reference

Board Members

Name Position Ms. Khadija Mire Chairperson; Non-Executive and Independent

Dr. Ibrahim Mohamed Director representing the Ministry of East Africa Affairs, Commerce & Tourism; Non-executive

Ms. Mbatha Mbithi Director representing Industrial & Commercial Development Corporation (ICDC); Non-executive

Mr. James Murigu Non-executive and Independent Director

Mr. Bartholomew Ragalo Non-executive and Independent Director

Ms. Joyce A Ogundo Non-Executive Director (Alternate to Dr. Ibrahim Mohamed)

Dr. Jonathan Ciano Managing Director/Chief Executive Officer and Executive Director

Source: USL

Board Committees and Terms of ReferenceThe Board in line with CMA Corporate Governance Guidelines 2002 has in place three committees as follows:

Audit CommitteeThis Committee assists the Board in meeting its responsibilities of reviewing and monitoring the effectiveness of the design and system of internal control. Its functions include: review of the Company’s financial and accounting policies and practices; review of the Company’s internal controls and risk management systems; monitoring the effectiveness of the internal audit function, considering the major findings of internal audit investigations and management’s responses, ensuring effective co-ordination between the internal and external auditors, ensuring that the internal audit function is adequately resourced and has appropriate standing within the Company and is free from constraint by management or other restrictions, approval of the appointment and removal of the head of internal audit; making recommendations to the Board, for it to put to the shareholders for their approval in general meetings, in relation to the appointment, re-appointment and removal of external auditors and approving the remuneration and terms of engagement of the external auditors; reviewing and monitoring the external auditor’s independence and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements and reports from the external auditors; and review of reports on risk areas susceptible to fraud, forgeries and errors.

The members of this Committee are:a) Mr. James Murigu – Chairb) Ms. Mbatha Mbithi – Representing ICDCc) Dr. Ibrahim Mohamed –Representing Ministry of East Africa Affairs, Commerce & Tourismd) Ms Khadija Mire

Staff and Administrative Matters CommitteeThe Committee’s main functions include: ensuring that the Company’s Management builds the HR capacity and discharges its duties as delegated by the Board in accordance with local laws and regulations, established standards of governance and code of conduct; review of terms of compensation for the Uchumi Management team, staff members and the Board; guiding the Board on matters relating to the retirement of non-executive directors and recruitment of Directors.

The members of this Committee are:

a) Bartholomew Ragalo-Chairb) Dr. Ibrahim Mohamed – Representing Ministry of East Africa Affairs, Commerce & Tourismc) Ms Khadija Mired) Dr. Jonathan Ciano

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Strategy and Business Development CommitteeThe Committee’s main functions include: review of the Company’s strategic plan, including short-term priorities and recommending the same to the Board for approval; analysing business growth, branch expansion and business development plans contained in the strategic plans and budgets and making the necessary recommendations to the Board; analysing new investment opportunities based on the available financial resources and making the necessary recommendations to the Board for consideration.

The members of this Committee are:a) Ms. Mbatha Mbithi – Representing ICDC – Chairb) Mr. James Muriguc) Mr. Bartholomew Ragalod) Dr. Jonathan Ciano

13.5 Direct and Indirect Equity Investments of Directors

Directors’ shareholding in the company preceding the date of this Information Memorandum:

Full Name Number of shares held Percentage of HoldingMs Khadija Mire 19,600 0.01%Dr. Ibrahim Mohamed 0 0.00%Ms Mbatha Mbithi 100,000 0.04%Mr. James Murigu 100,000 0.04%Mr. Bartholomew Ragalo 34,812 0.01%Dr. Jonathan Ciano 518,379 0.20%Source: USL

13.6 Board of Directors Profiles

Uchumi Board of Directors

Ms Khadija Mire

Age: 42

Chairperson

(Non-Executive, Independent)

Ms. Mire holds a Bachelor of Arts degree from the University of Nairobi. She is a human resources professional with several years of experience. She is currently the Managing Director of Human Capital Business Solutions. Previously she worked as the Chief Human Resources Officer at Telkom Kenya Limited. Ms. Mire joined the board on 25 November 2011 and was appointed chairperson on 16 October 2012.

Dr. Ibrahim Mohamedrepresenting Ministry of East Africa Affairs, Commerce & Tourism (with Mrs Joyce A.Ogundo as alternate to the PS

Age: 56

Director

(Non-executive)

Dr. Mohamed holds a Bachelor of Medicine and Bachelor of Surgerydegree and is a medical doctor by training. He is the Principal Secretary for Commerce and Tourism in the Ministry of East African Affairs, Commerce & Tourism. He served as Director of the National Aids Control Unit (NASCOP) in the Ministry of Health for ten years before being appointed to his new position. Dr. Mohamed is credited for increasing HIV/AIDS Consultation Centres in Kenya from just about 50 in 2002 to over 1,000 in 2012.

Mrs Ogundo holds MSC in Entrepreneurship from JKUAT and BA in Economics and Sociology. She is the Director of the Trade Commerce and Tourism in the Ministry of East African Affairs, Commerce & Tourism.

Ms. Mbatha Mbithi representing ICDC

Age: 47

Director

(Non-executive)

Ms. Mbithi has a solid background in banking and finance having had a career spanning 17 years in the financial services sector. She is currently the Chief Manager, Operations at ICDC and was appointed alternate director representing the Industrial Commercial Development Corporation (ICDC) on 22 March 2010. Prior to joining ICDC, she was Head of Credit at Family Bank and had previously served in various capacities in four other banks.

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James Murigu, MBS

Age: 64

Director


Mr. Murigu is a Bachelor of Science graduate in Economics and Statistics from the United Nations sponsored Institute of Statistics and Economic Planning at Makerere University Kampala, Uganda, Mr. Murigu has extensive hands on experience in economic development issues at both macro and micro levels. During the last thirty six years he has acquired extensive knowledge and experience in the promotion and management of small enterprises and development banking with particular reference to project preparation appraisal and monitoring. Mr. Murigu has hands on experience in the management of finance companies, credit card companies and is a specialist in money and capital markets, credit referencing and credit rating. He joined the Board of Uchumi on 25 November 2011.

Bartholomew Ragalo

Age: 61

Director


Mr. Ragalo holds an MBA (Strategic Management) and a Bachelor of Arts (BA) Land economics. He is a qualified real estate and business management professional with over 20 years’ experience, Mr. Ragalo is currently the Managing Director of Tysons Limited a leading Real Estate Consultancy Firm in Eastern Africa. He joined the board on 25 November 2011.

Dr. Jonathan Ciano, MBS

Age: 63

Managing Director/Chief Executive Officer

(Executive)

Dr. Ciano holds a Bachelor of Commerce (B.Com), Master of Business Administration (MBA) (Strategy and Finance) and a PhD. He is a fellow of the Certified Public Accountant, Kenya (FCPA(K)) as well as the Kenya Institute of Management (FKIM). Dr. Ciano was appointed the Managing Director of Uchumi in March 2010. Prior to his appointment, Jonathan acted as the specialist receiver manager for Uchumi between July 2006 and March 2010. He has had exposure and experience at senior management levels locally, regionally (Eastern African Region) and internationally in global/multi-national/cultural Companies for 25 years. He has previously worked for Shell Group (Executive Director), Kenya Petroleum Refineries and Kenya Power & Lighting Company where he facilitated the Company’s restructuring and its turnaround. Dr. Ciano’s experience extends to, but is not limited to, managing organizations, corporate strategy development and turnaround/change programmes implementation, restructuring and reorganization, finance and asset management, contracting and logistics, legal services, information technology, and human resources policies/disciplines and PR/administration.

Source: USL

13.7 Directors Remuneration and Benefits

The total aggregate of the remuneration paid and benefits in kind granted to the Directors of the Company during the last five financial years under any description whatsoever are detailed in the table below.

June 2014 June 2013 June 2012 June 2011 June 2010

Executive Director 24,450,000 26,691,360 19,236,000 18,339,000 Nil

Directors’ Emoluments 3,329,000 3,142,856 905,000 320,000 Nil

Total 29,779,000 29,834,216 20,141,000 18,659,000 Nil

Source: USL

13.8 Directors Interests in Related Party Transactions

None of the Directors of the Company have any interests which are or were unusual in their nature or conditions or significant to the business of Uchumi and which were effected by the Company during the current or immediately preceding five (5) financial years or in any earlier financial year and remain in any respect outstanding.

13.9 Directors Loans

None of the Directors have any outstanding loans from Uchumi.

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Name Position




Owino Ayodo General Manager Operations




Sam Murigi IT Manager

Benson Sila Head of BuyingSource: USL

13.11 Senior Management Team Profiles

A brief summary of management’s qualification and experience is presented below:

Uchumi Senior Management Team

Dr. Jonathan Ciano, MBS See sub-section 13.6 above for details regarding Dr. Ciano’s profile

Chadwick Okumu

Age: 41

Finance Manager

Years at USL: 6

Mr. Okumu holds a Bachelor of Commerce Degree (BCom), Certified Public Accountant (CPA(K)) and is currently finalising a Master of Business Administration (MBA) (Finance). He is responsible for co-coordinating the finance function and providing management with timely and accurate financial information. He is also responsible for establishing and enforcing compliance with internal financial controls. Mr. Okumu has over 10 years’ experience holding various finance positions including Strategic Planning Manager of Celtel Kenya Limited, Commercial and Supply Accounting Manager (Head of Finance Operations) of Reckitt Benckiser East Africa, Treasury Accountant for Coca Cola Africa and later Treasury Accountant for Beverages Services (K) Limited, Financial Accountant and later Management Accountant at Kenya Shell/BP Limitedand East Africa Business Analyst at the Shell East Africa Cluster.

John Kiumi Wambugu

Age: 34

Company Secretary

Years at USL: <1

Mr. Kiumi holds a Bachelor of Law Degree (LLB), Master of Business Administration in Strategic Management (MBA (Strategic Management)), Certified Public Accountant, Kenya (CPA (K)), Certified Public Secretary, Kenya (CPS (K)). He is also the Managing Partner at Wambugu & Muriuki Advocates and a Founding Partner at Rikan Registrars, a Secretarial firm that offers secretarial services to over 300 companies. He is a practicing Advocate of the High Court of Kenya, a practicing Certified Public Secretary, a Member of the Law Society of Kenya, Institute of Certified Public Secretaries of Kenya, Institute of Certified Public Accountants of Kenya, Faculty member of Duke University Corporate Education (East Africa) and an Associate member of Chartered Institute of Arbitrators (Kenya Chapter). He is responsible for, among other things, ensuring that the Company observes proper corporate governance principles. He is also responsible for all legal and administrative matters of the Company. He has experience in all forms of Private and Public company commercial work, receivership and liquidation, negotiation of project and loan agreements, drafting and negotiation of single/syndicated loan agreements and debt restructuring documentation.

Owino Ayodo

Age: 52

General Manager Operations

Years at USL: 29

Mr. Owino holds a Bachelor of Arts Degree. He is in-charge of the day to day operations of the chain, preparation of the budget for the branches, monitoring key performance indicators in respect of customer service and loyalty program, pilferage, staff levels, stock levels, basket size, general expenses, general maintenance of units including plant and machinery, security operations and preparation of monthly and quarterly management reports for the branches. Before his current role, Mr. Owino had previously worked as the General Manager of Associated Auto Centre for 1.5 years. Prior to 2004, he had held various positions at Uchumi including that of General Manager of Operations, and Senior Manager (acting as Project Manager in setting up the first hyper project in

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Ngong). He was engaged by USL initially as a management trainee and rose through the ranks to the present position.

John Peter Kariuki

Age: 51

Security Services Manager

Years at USL: 20

Mr. Kariuki holds a Bachelor of Arts (BA) in Criminology and Security Management; and a Diploma In Private Investigation. He is responsible for security management, which involves security installations, audits, investigations, staff training on security and general coordination of security staff (both internal and external). He has previously worked for Kenya Prisons Service for 7 years as a superintendent of prisons in-charge of Narok and Machakos prisons. After leaving the prisonsdepartment, he then worked for Thomas de la Rue as a security supervisor for three years after which, he joined Uchumi as a Security Officer in 1996 and rose through the ranks to Senior Security Manager. He then left Uchumi briefly for SDV Transami where he worked as a Security Manager for 2 years after which he then rejoined Uchumi in 2008.

Michael Kibbe

Age: 52

Human Resource Manager

Years at USL: 2

Mr. Kibbe holds a Bachelor of Arts, Master of Business Administration (MBA), Diploma in HRM & Business Management; Member IHRM &KIM. He has significant experience in human resources and administration spanning more than twenty years from private and non-governmental organizations, where he was involved in strategic human resource management and development.

David Mboya

Age: 40

Internal Auditor

Years at USL: 2

Mr. Mboya holds a Master of Business Administration (MBA), a Bachelor of Arts Degree and a CPA (K). He is responsible for evaluating and improving the effectiveness of risk management, control and governance processes. He has over ten years working experience as an internal auditor gained from public and private sectors as well as non-governmental organizations.

Sam Murigi

Age: 34

IT Manager

Years at USL: 7

Mr. Murigi holds a BSC, a diploma in Computer Electronics, Certified Systems Administrator, Certified DBA, CCNA, MCSA, Project Management. He has experience in retail business operation overseeing the running of ICT departments and realization of the ICT strategic agenda. Prior to his current position, he held the position of Business process leader (BPL), Point of sales specialist administrator and systems administrator. He has been responsible for the upgrade of the company ERP system, centralization of the company data center, implementation of customer relationship management systems, money card system,corporate website and online store.

Mr. Benson M. Sila

Age: 48 yrs

Head of Buying

Years at USL: <1

Mr. Sila holds an MSc-Finance in Finance & Investments, and a Bachelor of Commerce (Accounting) both from the University of Nairobi. He also has a Graduate Professional Diploma (MCIPS) from The Chartered Institute of Purchasing and Supply (CIPS - UK and has pursued supplementary professional training in Project Management (KIM-Diploma Level).

Sila’s work experience spans full-cycle Supply Chain Operations & Management, specializing in: General Procurement, Procurement Audit, Warehousing/Inventory Management Logistics, Security, Transport & Fleet Management and Facilities Management. Mr. Sila has also had a stint in the medical field where he trained on-the job in various medical operations, patient and customer care.

Mr. Sila has worked in the following organizations: Kenya Threads Industry (Storekeeper), The Aga Khan Hospital, Nairobi CARE International in Somalia/South Sudan; Save the Children-USA and Solidarites International.

Mr. Sila is responsible for procurement of goods for resale (Trade goods), products pricing, Merchandising activities within all USL outlets, negotiating trading terms (Joint Business Plans) and margins with partners; category management, which involves: Products range, new products evaluation and/or listing, Range-out; supplier payments and relations; administrative, staff development, capacity building, training, advisory and strategic management. He is also the current chair of the tender committee overseeing procurement of CAPEX and Non-trade goods and services. Mr. Sila is a Full Member of Professional body (Kenya Institute of Supplies Management (KISM)

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14 RISK FACTORS SPECIFIC TO UCHUMI’S BUSINESS

14.1 Socio-Political Risk

Uchumi conducts Retail Business operations across the region. The political stability of the region is therefore crucial for growth and sustainability of the business. Any instability would create numerous disruptions ranging from supply logistics as well as debt collection challenges.

Mitigating Factor: The Company has diversified their investments across the region in terms of branch location. It is not expected that the entire region would be politically unstable at the same time.

14.2 Pricing Risk

Uchumi has positioned itself as a home of value across various product ranges. However, there is the risk of undercutting by other competitors that may sometimes re-direct customer traffic away from Uchumi. In addition, margins are sensitive to product and services pricing.

Mitigating Factors: Uchumi’s pricing is based on Recommended Retail Prices (RRP’s) from suppliers. The Company has pre-negotiated margins which are the maximum that any supplier would allow. In addition, the Company’s close partnership with suppliers leads to more trade incentives to coincide with seasons (e.g. back-to-school, Christmas, etc.)

14.3 Shrinkage/Pilferage Risk

The retail industry is characterized by some level of pilferage at the various levels of business operations. Uchumi has managed to reduce the level of pilferage to about 1.0% compared to the industry average of 4.0%. The Company has ensured minimum losses from the point of back office operations to the stores and at the tills.

Mitigating Factors: The Company continues to invest in loss prevention measures at all potential leakage points, such as Receiving, In-Store and Point of Sale. Further, Electronic Article Surveillance equipment, CCTV’s and physical undercover security are some additional measures taken to mitigate pilferage risk. Uchumi also carries out Staff Training in order to influence the culture in the organization.

14.4 Product Availability Risk

This is the risk that certain products will not be available, as some products are seasonal while others may be logistically unavailable.

Mitigating Factors: Uchumi has a rich product mix and encourages competition within product categories as a means of enhancing customer shopping experience and to also cushion against monopolistic tendencies by suppliers in all categories.

14.5 Macro-Economic Risk

This is the risk that the macro-economic environment may reduce the customer’s purchasing power. Situations of tight credit, and high inflation could negatively affect the business sales and volumes.

Mitigating Factors: The governments in the region have embarked on several measures, which, if satisfactorily pursued will result in macroeconomic improvements that will culminate in the overall reduction of poverty levels and increased levels of income in line with Vision 2040 (Uganda), Vision 2030 (Kenya), Vision 2020 (Rwanda), Tanzania’s Development Vision 2025. However, this risk cannot be fully mitigated.

14.6 Weather

This is the risk that the Company will not be able to meet its sales and volumes targets, due to occurrences related to weather. During rainy seasons, retail outlets tend to record lower customer traffic. Availability of agricultural produce may also be affected by extreme weather conditions.

Mitigating Factors: The seasonal nature of the weather in the East African region ensures a normalization of annual sales growth. Shortages in one season are compensated by gluts in other seasons. Challenges may only be experienced in times of prolonged extreme or erratic weather patterns, which instances are not frequent.

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14.7 Competition/Crowding

This is the risk of having too many retail outlets at one place or at close proximity. This increases pressure on the customer numbers and realisable sales levels.

Mitigating Factors: Uchumi has consistently invested in customer service in order to distinguish itself from the competition. As a policy, the Company does not open stores in locations that are in close proximity to other Uchumi outlets and does not therefore cannibalise their existing stores. Uchumi has continued to grow itscustomer numbers year on year even in locations that have been encroached by competition.

14.8 Access to Specific Market Information

Data on the retail industry is very limited and absent in certain markets, made worse by the unregulated nature of the retail industry.

Mitigating Factors: Uchumi continues to focus on customer satisfaction by acting on customer feedback in every location. All other stakeholders, including the Board and suppliers/landlords have also become a good source of industry information.

The Company may not be able to obtain all the information they may desire until such a time that more competitors are listed in the stock exchanges. Likewise, the fact that Uchumi is listed assures all stakeholders of observation of corporate governance principles, subsequently enhancing confidence in their dealings.

14.9 Red Tape

This is the risk of an unfair playing ground through arbitrary interpretation and enforcement of rules and regulations. It increases the cost of doing business.

Mitigating Factors: Uchumi is an equal opportunity market player that continues to strive for value addition. Policy documents that guide decisions in complex situations are available. As a consequence of embracing corporate governance practices, Uchumi carries out checks and balances through the Internal Audit processes.

14.10 Exchange Rate Risk

The group activities expose it to a variety of financial risks, including credit risk, foreign currency exchange rates risk, liquidity risk and interest rates risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance.

Mitigation Factors: Risk management is carried out by management headed by the director risk and compliance committee. The group maintains a conservative policy regarding currency and interest rate risks and does not engage in speculation in the markets. In addition, the group does not speculate or trade in derivative financial instruments.

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15 GROUP FIVE YEARS FINANCIAL SUMMARY

15.1 Group Performance

The Group’s profit and loss account for each of the last five years to 30 June 2014 is summarized below:30-Jun-10 30-Jun-11 30-Jun-12 30-Jun-13 30-Jun-14Kshs '000 Kshs '000 Kshs '000 Kshs '000 Kshs '000

Gross sales 9,559,682 10,770,961 13,802,191 14,270,598 14,364,844Net sales 9,608,926 10,840,728 13,918,530 14,368,643 14,457,687

Cost of sales (7,912,857) (8,943,513) (11,407,227) (11,600,148) 11,643,604 Profit from operating activities 536,750 518,463 428,425 501,964 517,389Finance costs (103,558) (3,630) (25,082) (16,062) (64,640)Profit before tax 433,192 514,833 403,343 485,902 452,749Income tax credit/(expense) 431,907 (124,408) (129,366) (128,892) (68,461)Profit for the year 865,099 390,425 273,977 357,010 384,288

Source: USL

The Group’s growth in gross sales recorded an upward trend over the last 5 years, rising from Kshs 9.6 billion in 2010 to Kshs 14.4 billion by the end of June 2014.

The table below depicts the trends in gross sales and net sales over the last 5 years.

Source: USL reports

Cost of sales grew from Kshs 7.9 billion in 2010 to Kshs 11.6 billion by the end of June 2014.

The profit from operating activities depicted a mixed trend over the same period. It grew by 21.0% in June 2010, dropped by 3.4% and 17.4% in June 2011 and June 2012 respectively. In June 2014, profit from operating activities grew by 3.1% to Kshs 517 million from the previous year.

The customer numbers also depicted an upward trend as shown in the chart below:

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Uchumi customer numbers

Source: USL

In June 2014, the number of customers grew by 12.5% compared to a growth of 9.1% in the previous year

The administrative and establishment expenses grew by 133.4% from Kshs 1.5 billion in June 2010 to Kshs 3.5 billion in June 2014. The chart below shows the trend in both the administrative and establishment expenses and selling and distribution expenses.

Source: USL

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15.2 Group Balance Sheet Summary

The Group’s summarised audited Balance Sheet for each of the five years to 30 June 2014 is shown in the table below:

Kshs '000 30-Jun-10 30-Jun-11 30-Jun-12 30-June-13 30-Jun-14

Non-current assets

1,959,944

2,607,070

3,347,742 3,848,218 4,634,417

Current assets

1,193,567

1,397,650

1,594,146 1,725,315 2,250,436

Total assets

3,153,511

4,004,720

4,941,888 5,573,533 6,884,853

Non-current liabilities

320,140

183,368

80,309 200,000 177,370

Current liabilities

1,294,438

1,542,187

2,203,769 2,448,121 3,350,169

Total liabilities

1,614,578

1,725,555

2,284,078 2,649,347 3,527,539

Shareholders' funds

1,538,933

2,279,165

2,657,810 2,925,412 3,357,314Source: USL

The Group’s balance sheet grew by 118.3% from Kshs 3.2 billion in June 2010 to Kshs 6.9 billion in June 2014. This was an average growth rate of 22.7% year on year. On average non-current assets constituted about 66.3% of total assets while current assets constituted 33.7%. Over the years, the percentage of non-current assets has been shrinking while that of current assets has been on the rise.

Non-current liabilities shrank by 44.6% from Kshs 320 million in June 2010 to Kshs 177 million in June 2014. These were mainly term loans that the Company had. Current liabilities grew by 158.8% from Kshs 1.3 billion in June 2010 to Kshs 3.4 billion in June 2014.

The shareholders’ funds grew from Kshs 1.6 billion in June 2010 to Kshs 3.4 billion in June 2014.

15.3 Geographical Markets Financial Information Summary

Kenya (Kshs ‘000) June 2010 June 2011 June 2012 June 2013 June 2014

Sales 8,589,301 9,794,441 11,849,709 12,197,652 12,421,044Profit/(Loss) before tax 424,698 493,767 621,909 873,589 199,531

Segment Assets

Current Assets 1,015,214 1,193,531 1,731,936 2,064,975 2,064,975

Non Current Assets 1,937,258 2,391,959 3,083,620 3,642,865 3,642,865

Total Segment Assets 2,952,472 3,585,490 4,815,556 5,707,840 5,707,840

Segment Liabilities

Current Liabilities 1,174,006 1,408,817 1,708,125 1,817,508 1,817,508

Non Current Liabilities 320,140 183,368 80,309 200,000 200,000Total Segment Liabilities 1,494,146 1,592,185 1,788,434 2,017,508 2,017,508Source: USL Reports

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Uganda June 2010 June 2011 June 2012 June 2013 June 2014

Sales 970,381 976,520 1,592,186 1,442,326 1,263,625

Profit/(Loss) before tax 8,494 32,749 (75,857) (256,408) (364,006)

Segment Assets

Current Assets 178,353 157,323 309,007 341,952 341,952

Non Current Assets 22,686 69,675 304,426 281,885 281,885

Total Segment Assets 201,039 226,998 613,433 623,837 623,837

Segment Liabilities

Current Liabilities 120,432 133,370 603,310 881,791 881,791

Non Current Liabilities - - - -

Total Segment Liabilities 120,432 133,370 603,310 881,791 881,791Source: USL Reports

Tanzania June 2011 June 2012 June 2013 June 2014

Sales - 360,296 630,620 692,876

Profit/(Loss) before tax (11,683) (142,709) (131,279) (125,187)

Segment Assets

Current Assets 46,796 87,860 85,710 85,710

Non Current Assets 145,436 164,821 128,597 128,597

Total Segment Assets 192,232 252,681 214,307 214,307

Segment Liabilities

Current Liabilities - 415,257 516,144 516,144

Non Current Liabilities - - - -

Total Segment Liabilities - 415,257 516,144 516,144Source: USL Reports

15.4 Direct or Principle Investments

Uchumi has not made any direct or principle investments in shares, bonds or other undertaking over the last financial years and in the current year.

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15.5 Branch Network

The table below shows Uchumi store network, the initial year of opening and the current status.

Segment Branch Name Initial Opening Year Date Re-opened

Hypers (50,000 -55,000 sq. feet)Nairobi City Sarit Hyper 1983 Jul-06City Square 1976 Jul-06

Ngong Hyper 1997 Jul-06Mombasa Road Hyper 2002 Jul-06

Lang'ata Hyper 2001 Jul-06Taj Mall Hyper 2011 Dec-11

Supermarkets (20,000-25,000 sq feet)-Nairobi City Buruburu 2001 Aug-06Nairobi West 1999 Aug-06

Westlands 1976 Sep-06Koinange 1996 Dec-06

Jogoo Road 1984 Dec-06Ngong Road 1997 Dec-06

Ongata Rongai 2012 Aug-12Syokimau 2014 Jul-14

Supermarkets-Upcountry Nakuru 2011 Jan-11Embu 2010 Nov-10

Kericho 2010 Mar-10Meru 2002 Oct-06

Eldoret 1994 Dec-06Eldoret Sugarland 2012 Dec-12

Karatina 2003 Sep-06Kisii 2013 Jul-13

Mombasa City 2013 Nov-13Juja 2014 Jan-14

Maua 2014 May-14Kisumu 2014 Jun-14

Convenience Stores-Nairobi City Jipange 2009 Jun-09

Uganda Freedom City 2012 Jun-12Garden City 2002 Dec-02Kabalagala 2011 Aug-11

Natete 2012 Dec-12Gulu 2011 Nov-11

Mbale 2014 Feb-14

Tanzania Quality Mall 2011 Jul-11Segerea 2014 Feb-14

Makumbusho 2014 Jul-14Shekilango 2014 Aug-14

Total Branches 37Source: USL

15.6 Future Prospects

The Group‘s prospects for current trading period is to increase branches by 9 from the current 37 branches to 46branches across East African.

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16 CORPORATE STATUTORY AND GENERAL INFORMATION


Uchumi’s subsidiaries are as follows:

Name of Subsidiary Date of Incorporation

Country Activity Beneficial Ownership

Uchumi Supermarkets (Uganda) Ltd 31 May, 2001 Uganda Retail Supermarket 100%

USL Tanzania Limited 12 Sept, 2001 Tanzania Retail Supermarket 100%

Uchumi Holdings Limited 23 Mar, 2001 Kenya Dormant 100%Uchumi Supermarkets Limited (Branch) 6 Jul, 2012 South

SudanDormant 100%

Kasarani Mall Limited 14 Feb, 2001 Kenya Property Acquisition 100%Source: USL

In addition to the abovementioned subsidiaries, Uchumi has registered a branch in Uganda, Tanzania and in South Sudan.

16.2 Share Capital

The authorised share capital of the Company is Kshs. 3,000,000,000 divided into 500,000,000 ordinary shares of Kshs. 5 each and 25,000,000 redeemable preference shares of Kshs. 20 each.

The issued share capital of the Company is Kshs. 1,327,133,070 divided into 265,426,614 ordinary shares of Kshs. 5 each.

Uchumi has unissued share capital of Kshs. 1,672,866,930 divided into 234,573,386 ordinary shares of Kshs. 5 each and 25,000,000 redeemable preference shares of Kshs. 20 each. No redeemable preference shares have been issued by the Company.

The Company’s Shares are listed on the NSE, the RSE, the USE and the DSE. The Shares are freely transferable without pre-emptive rights in favour of any person. The Company had a total of 17,835 shareholders in the register as at 31 August 2014. The composition of the shareholding was as follows:-

Composition of shareholding

Classification Shares % Holding

Local Companies 79,724,735 30.0%

Local Individuals 102,839,515 38.7%

Foreign Companies 79,182,357 29.8%

Foreign Individuals 3,680,007 1.4%


As at 31 August 2014, the shareholding in Uchumi shares was evidenced as shown in the table below:

Evidence Shares Shareholders Percentage

Electronic / CDS 201,591,091 12,544 76.0%

Certificate Form 63,835,523 5,291 24.1%

Total 265,426,614 17,835 100.0%Source: USL

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The top ten shareholders of the Company as at 31 August 2014 were as follows:-

Top 10 Shareholders As at 31.08.2014 Shares%

Holding

1.The Cabinet Secretary to the Treasury of Kenya on Behalf of The Government of Kenya 35,576,550 13.4%

2. Standard Chartered Nominees Non-Resd. A/C Ke 8723 14,058,020 5.3%3. Standard Chartered Nominees Non-Resd. A/C Ke 11663 13,821,387 5.2%4. Karim Jamal 12,939,146 4.9%5. Standard Chartered Nominees Non-Resd.A/C 9537 8,499,000 3.2%6. Standard Chartered Nominees Non-Resd.A/C 9913 8,166,000 3.1%7. Industrial & Commercial Development Corporation 7,288,472 2.7%8. Co-op Custody A/C 4018 6,902,800 2.6%9. Standard Chartered Nominees Non-Resd. A/C 9729 5,713,600 2.2%10. Standard Chartered Nominees Non-Resd. A/C 9289 5,000,000 1.8%


16.3 Dividend Policy and Future Dividends

Uchumi has a policy of payment of cash dividends. The amount of cash dividends payable are dependent on the Company’s performance and it is deliberated in good time for recommendation and presentation to the shareholders at an annual general meeting of the Company.

There are no arrangements under which future dividends will be waived or have been agreed to be waived.

16.4 Extracts from the Memorandum and Articles of Association

A. Uchumi was incorporated with the following principal objects as set out in clause 3 of the Memorandum of Association of the Company:

(1) to carry on business as proprietors, operators and managers of supermarkets, multiple stores and retail trading establishments of every description.

(2) to carry on the businesses of grocers, bakers, butchers, meat salesmen, bacon factors and merchants, butter factors and salesmen, cheese mongers, fruiterers and green grocers, egg merchants and salesmen, poulteres, wine, spirit and beer merchants and salesmen and general provision merchants and to buy, sell, manufacture and deal in goods, stores and consumable articles of all kinds, both wholesale and retail.

B. The Articles of Association contain the following salient provisions:

Shares6. Except as required by law, no person shall be recognized by the Company as holding any share upon

any trust, and the Company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Articles or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

7. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the Company may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Company may from time to time by ordinary resolution determine.

8. The Company may be special resolutions create and sanction the issue of Preference shares which are, or at the option of the Company are to be, liable to be redeemed, subject to and in accordance with the provisions of the Statutes. The special resolution sanctioning any such issue shall also specify by way of an addition to these Articles the terms in which and the manner in which any Preference shares shall be redeemed.

9. If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of three-fourths of

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the issued shares of that class, or with the sanction of a special resolution passed after a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of these Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holdings or representing by proxy one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll and if any adjourned meeting of such holders a quorum is not present, the holders present shall form a quorum.

10. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of the issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

Alteration of Capital46. The Company may from time to time, by ordinary resolution, increase the share capital by such sum,

divided into shares of such amount, as the resolution shall direct, or, in default of such direction, as the Directors shall determine.

47. Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of capital, all new ordinary shares shall, before issue, be offered to such persons as at the date of the offers are entitled to receive notices from the Company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and ager the expiration of that time, or on the receipt of an intimation from the persons to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of the same in such manner as they think most beneficial to the Company. The Directors shall likewise so dispose any new ordinary shares which, by reason of the ration which the new ordinary shares bear to the shares held by persons entitled to an offer of new ordinary shares, cannot in the opinion of the Directors, be conveniently offered under this Article.

47A. Notwithstanding the provisions of Article 8 and 47 the unissued shares of the Company shall be at the disposal of the Board of Directors and by their discretion may allot, grant options over or otherwise dispose of them to such persons, at such times, and for such consideration, and upon such terms and conditions, as the Board may determine.

48. Any new ordinary shares may be offered at par, at a premium or (subject to the provisions of the Act) at a discount as the Directors may decide.

49. The new ordinary shares shall be subject to the same provisions with reference to the payment of calls, liens, transfer, transmission, forfeiture and otherwise as the shares in the original share capital.

50. The Company may by ordinary resolution:(a) Consolidate and divide all or any of its share capital into shares of larger amount than its

existing shares;

(b) Sub-divide its existing shares, or any of them, into shares of smaller amount that is fixed by the Memorandum of Association, subject nevertheless, to the provisions of the Act;

(c) Cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any persons.

General Meetings:51. The Company shall in each year hold a general meeting as its annual general meeting in addition to any

other meeting that year and shall specify the matter as such in the notices calling it. Not more than fifteen months shall elapse between the date of one annual general meeting of the Company and that of the next : Provided that if the first annual general meeting is held within Eighteen months of the date on incorporation of the Company, it need not be held in the year of incorporation nor in the next following year. Annual and extraordinary general meetings shall be held at such times and places within Kenya as the Directors shall from time to time appoint.

52. All general meeting other than annual general meeting shall be called extraordinary general meetings.53. The Directors may, whenever they think fit, convene an extraordinary general meeting and extraordinary

general meeting shall also be convened on such requisition, or , in default, may be convened by such requisitionists, as provided by the Act. If at any time there are not within Kenya sufficient Directors capable of action to form a quorum, any director or any two Members of the Company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which the meetings may be convened by the directors.

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Notice of General Meetings:54. An annual general meeting and a meeting called for the passing of a special resolution shall be called by

twenty-one days’ notice in writing at the least, and a meeting of the Company other than an annual general meeting or a meeting for the passing of a special resolution shall also be called by twenty- one days’ notice in writing at the least. The notice shall be exclusive of the day of which it is served or deemed to be served and of the day for which it is given and shall specify the place, the day and the hour of meeting and, in case of special business, the general nature of that business, and shall be given, in manner hereinafter mentioned or in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are, under the regulations of the Company, entitled to receive such notices from the Company, including the Nairobi Securities Exchange and the Capital Markets Authority. Provided that a meeting of the Company shall notwithstanding that it is called by shorter notice than that specified in this article be deemed to have been duly called if it is so agreed:-(a) In the case of a meeting called as the annual general meeting, by all Members entitled to attend and

vote thereat; and(b) In the case of any other meeting, by a majority in number of Members having a right to attend and

vote at the meeting, being a majority together holding not less than Ninety-Five percent (95%) in normal value of the shares giving that right.

55. In every notice calling a meeting of the Company, there shall appear the reasonable prominence, a statement that a Member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote in his stead and that a proxy need not be a Member.

56. The Accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.

Proceedings at General Meetings:57. All business shall be deemed special that is transacted at an extraordinary general meeting, and also all

business that is transacted at an annual general meeting, with exception of declaring a dividend, the consideration of the accounts, balance sheets and the reports of the Directors and Auditors, the election of Directors in the place of those retiring (if any), and the appointment and the fixing of the remuneration of the Auditors and the remuneration of the Directors.

58. No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business; save herein otherwise provided, two Members personally present shall be quorum.

59. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved ; in any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the Directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the Members present shall be quorum.

60. The chairman, if any, of the Board of Directors (or his absence the Deputy-Chairman, if any) shall preside as Chairman at every general meeting of the Company.

61. If there is no such Chairman (or Deputy Chairman) or if at any meeting he is not present within Fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as Chairman, the Directors present shall choose one of their own to be Chairman. If no Director is willing to act as Chairman or no Director is present with Fifteen Minutes after the time appointed for holding the meeting, the Members present shall choose one of their numbers to be chairman of the meeting.

62. The Chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting form which the adjournment took place. When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

63. At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded :-(a) by the Chairman;(b) by any Member or Members present in person or by proxy and representing not less than one-tenth of the total voting rights of all the Members having the right to vote at the meeting.Unless a poll be so demanded a declaration by the chairman that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the numbers or proportion of the votes recorded in favour of or against such resolution. The demand for a poll may be withdrawn.

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64. Except as provided in Article 66, if a poll is duly demanded it shall be taken in such a manner as the Chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

65. In the case of an equality of votes whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hand takes place or at which the poll is demanded, shall be entitled to a second or casting vote.

65A. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded and the demand may be withdrawn at any time. On a poll, votes may be given personally or by proxy or attorney or by a representative of a corporation appointed in accordance with Article 78.

66 A poll demanded on the election of Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any question shall be taken at such time as the Chairman of the meeting directs, and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.

Vote of Members67. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a

show of hands, every Member present in person shall have one vote and on a poll, every Member present in person or by proxy shall have one vote for each share of which he is the holder.

68. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose, seniority shall be determined by the order in which the names stand in the Register.

69. A Member incapable by reason of mental disorder of managing and administering his property and affairs may vote, whether on a show of hands or on a poll, by his receiver, or other person authorised by any court of competent jurisdiction to act on his behalf, and such person may on a poll vote by proxy.

70. No Member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.

71. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the meeting, whose decision shall be final and conclusive.

72 On a poll, votes may be given either personally or by proxy.73. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney

duly authorised in writing, or, if the appointor is a Corporation, either under seal, or under the hand of an officer or attorney duly authorised. A proxy need not be a Member of the Company.

74. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or notarially certified copy of the power or authority shall be deposited at the office or at such other place within Kenya as is specified for that purpose in the notice convening the meeting, not less than forty-eight hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposes to vote, or , in the case of a poll, not less than Twenty-four hours before the time appointed for the taking of the poll, and in default, the instrument of proxy shall not be treated as valid.

76. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

77. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or incapacity of the principal, revocation of the proxy, of the authority under which the proxy was executed or the transfer of the share in respect of which the proxy is given, provided that no intimation in writing of such death, incapacity, revocation or transfer as aforesaid shall have been received by the Company at the office before the commencement of the meeting or adjourned meeting at which the proxy is used.

Corporations:78. Any corporation which is a Member of the Company may, by resolution of its Directors or other

governing body, appoint such persons as it thinks fit to act as its representative at any meeting of the Company or of any class of Member of the Company. The production at a meeting of a copy resolution certified by a director (other than the appointee if he himself shall be a Director) and the secretary, if any, of such corporation to be a true copy the resolution, shall be accepted by the Company as sufficient evidence of the validity of his appointment. The person appointed shall be entitled to exercise the same powers on behalf of such corporation as it could exercise if it were an individual Member of the Company.

Directors 79. Unless and until otherwise from time to time determined by an ordinary resolution of the Company, the

number of the Directors (excluding Alternates) shall not be less than Five nor more than Ten in number. The first directors shall be appointed by the subscribers to the Memorandum of Association, or a

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majority thereof, by notice in writing. If at any time the number of Directors falls below the minimum number fixed by or in accordance with these Articles, the remaining Directors may act for purpose of convening a general meeting or for the purpose of bringing the number of Directors to such minimum, and for no other purpose.

80. The board shall cause to be kept a register of the Directors’ holding of shares and debentures of the Company and of its subsidiaries or holding company (if any) as required by the Act, and shall cause the same to be available for inspection during the period and by the persons prescribed, and shall produce the same at every annual general meeting as required by the Act.

81. The directors (other than those directors whose remuneration is determined by agreement between the Company and such directors) shall be paid out of the funds the Company by way of remuneration for their services, such sums as the Company may from time to time by ordinary resolution determine and such remuneration shall be divided among them in such proportion and manner as the directors may determine and, in default of such determination within the reasonable period, equally, subject as aforesaid, a Director holding office for part only of a year shall be entitled to a proportionate part of a full year’s remuneration. The directors shall also be entitled to be repaid by the Company, all such reasonable travelling (including hotel and incidental) expenses as they may incur in attending meetings of the Board, or of committees of the Board, or general meetings or which they may otherwise properly incur in or about the business of the Company.

82. Any Director who by request performs special services or goes or resides abroad for any purposes of the Company, may be paid such extra remuneration by way of salary, percentage of profits or otherwise as the board may determine.

83. Directors shall not be required to hold any share qualification by shall be entitled to receive notice of and to attend and speak at all general Meeting of the Company.

Alternate Directors:84. Any director may with consent of the Board (such consent not to be unreasonably withheld) appoint any

person to be an alternate Director of the Company, and may at any time remove any alternate director so appointed by him from office. An Alternate Director so appointed, shall not be entitled to appoint an alternate to himself and shall not as such be entitled to receive any remuneration from the company. Every person acting as an alternate Director shall be an officer of the Company, and he shall not be deemed to be the agent of the Director by whom he was appointed.

85. An alternate Director shall be entitled to receive notices of all meeting of the board and to attend and vote as a Director at any such meeting at which the Director appointing him is not personally present, and generally to perform all the functions of his appointor as a Director in his absence, including that of being counted as part of a quorum at any such meeting.

86. An Alternate Director shall ipso facto cease to be an alternate Director if his appointor ceases for any reason to be a Director or if of his own volition, he resigns.

86A The remuneration of an Alternate Director shall be payable out of the remuneration of his appointor and shall be such proportion thereof as shall be agreed between them.

87 Every appointment and removal of an alternate Director shall be effected by notice in writing to the Company under the hand of the Director making or revoking such appointment.

88. A director or any other person duly appointed as an Alternate Director may act to represent more than One Director, and a Director appointed an Alternative Director shall be entitled at Board meetings to One vote for every Director whom he represents in addition to his own vote (if any) as a director.

Powers and Duties of Directors:89. The business of the Company shall be managed by the Directors who may pay all expenses incurred in

promoting and registering the Company, and may exercise all such powers of the Company as are not, by the act or by these Articles, required to be exercise by the Company in general meetings and the exercise of the said powers shall be subject also to the control and regulation of any general meeting of the Company, but no resolution of the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if such resolution had not been passed.

Chief Executive, Managing Director or Executive Director:90. (1) The Directors may from time to time appoint a person (persons) of such qualification as the Directors may

from time to time determine, whether such is a Director of the Company or not, to the office of the Chief Executive or the Managing Director or the Executive Director (by whatever name called) for such period and on such terms and with such powers as they may think fit and subject to the terms of any agreement entered into in any particular case, may revoke any such appointment.

(2) Where the person so appointed is not otherwise a Director, he shall be entitled to attend and speak at board and general meetings and subject to these Articles, shall be entitled to vote thereat.

(3) A Director so appointed shall not, whilst holding that office be subject to retirement by rotation or be taken into account in determining the rotation or retirement of the Directors but shall cease to be a Director of the Company if he ceases to be the Chief Executive or the Managing Director or the executive Director for any reason or cause.

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(4) The Chief Executive or Managing Director or the Executive Director shall receive such remuneration (whether by way of salary, commission or participation in profits, or partly in one way and partly in another) as Directors may determine.

(5) The Directors may entrust to and confer upon a Chief Executive or Managing Director or an Executive Director, any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusions of their own powers and may from time to time revoke, withdraw, alter or vary all or any powers.

91 The directors may exercise all the powers of the Company to borrow or raise money and to mortgage or charge its undertaking, property and uncalled capital and to issue debentures, debenture stock, legal and equitable mortgages and charges and other securities whether outright or as security (principal or collateral) for any debt, liability or obligations of the Company or any third party.

92. The directors shall duly comply with the provisions of the Statutes, and in particulars and with the provisions in regard to the registration of the particulars of mortgages and charges affecting the property of the company, or created by it, and to keeping a register of the Directors and Secretaries, and to sending to the Registrar of Companies an annual list of Members, and a summary of particulars relating thereto, and notice of any consolidation or increase of share capital, or conversion of shares into stock, and copies of special resolutions, and a copy of the register of Directors and notifications of any charges therein;

93. The Directors may from time to time and at any time by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and wit such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

94. The Company may exercise the powers conferred by the Act with regard to having an official seal for use abroad, and such powers shall be vested in the directors.

Directors Contracts:95 (1) A director who is in any way, whether directly or indirectly interested in a contract or proposed contract

with the Company shall declare the nature of his interest at a meeting of the Directors in accordance with Section 200 of the Act.

(2) A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser, or otherwise, or from being interested whether directly or indirectly in any contract or arrangement proposed to be entered into or in fact entered into by or on behalf of the Company; nor shall any such contract or arrangement in which any Director shall be so interested be avoided, nor shall any Director so contracting, or being interested be liable to account to the Company for any profit realised by him from such contract or arrangement in which he shall be so interested by reason of such Director holding that office or the Fiduciary relation thereby established.

(3) A director shall not vote in respect of any contract or arrangement in which he is interested, and if he shall do so, his vote shall not be counted, nor shall he be counted in the quorum present at the meeting but neither of these prohibitions shall apply to :-(a) Any arrangement for giving any director any security or indemnity in respect of money lent by him or

obligations undertaken by him for the benefit of the Company; or(b) Any arrangement for the giving of the Company of any security to a third party in respect of a debt

obligation of the company for which the Director himself has assumed responsibility in whole or in part under a guarantee or indemnity or by deposit of Security; or

(c) Any contract by a Director subscribe for or underwrite shares or debentures of the Company; or(d) Any contract or arrangement with any other company in which he is interested only as an officer of

the Company or as holder of minority shares or other securities. (4) A director, notwithstanding his interest, may be counted in the quorum present at any meeting whereat

he or any other director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote on any such appointment or arrangement other than his own appointment or the arrangement of the terms thereof.

(5) Any director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as Auditor to the Company.

6) A general notice given to the Directors by any Director to the effect that he is a Member of any specified Company or firm and is to be regarded as interested in any contract which may thereafter be made with that Company or firm shall be deemed a sufficient declaration of interest in regard to any contract so

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made but no such notice shall be of effect unless either is given at a meeting of the Directors or the Director takes reasonable steps to secure that it is brought up and read at the next meeting of the Directors after it is given.

96. All cheques, promissory notes, drafts, bill of exchange and other negotiable instruments, and all receipts for moneys paid to the Company , shall be signed drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

97. The directors shall cause minutes to be made, in books provided for the purpose, recording in respect of every meeting of the Company, of the Directors and of Committees of Directors, the names of all persons present and all resolutions and proceedings at such meeting. The minutes of every such meeting shall be read at the next meeting of the Company, of the Directors or of the Committee of Directors, as the case may be, and, after being amended or corrected if necessary, approved by the meeting, shall be signed by the chairman of the meeting and, once so signed, shall be prima facieevidence of the matters stated therein.

98. The directors may grant retirement pensions of annuities or other gratuities or allowances, including allowances on death, to any person or to the widow or dependants of any person in respect of services rendered by him to the Company whether as Managing Director or in any other office or employment under the Company or indirectly as an officer or employee of any subsidiary company or the Company, notwithstanding the he may be or may have been a Director of the Company and may make payment towards insurances or trusts for such purposes in respect of such person and may include rights in respect of such pensions, annuities and allowances in the terms of engagement of any such person.

Disqualification of Directors:99. The Office of Director shall be vacated if the Director:-(a) ceases to be or is prohibited from being a Director by virtue of any provisions of the Act ; or(b) becomes bankrupt; or(c) becomes incapable by reason of mental disorder of exercising his functions as Director; or (d) resigns his office by notice in writing to the Company; or(e) is absent, without the previous sanction of the Directors, for a period of more than six months from

meetings of the directors held during such period and the Directors resolve that his office be vacated accordingly.

Rotation of Directors 100. At the Annual General Meeting to be held in the year 1992/93 and at every succeeding Annual General

Meeting, one third of the Directors or, if their number is not a multiple of three, the number nearest to but not exceeding one third shall subject to the provisions of Article 99 hereof, retire from office, those retiring in every year being those who have been longest in office since their last election or appointment but as between persons who become Directors on the same day, those to retire shall unless they otherwise agree among themselves, be determined by lot. A retiring Director shall be eligible for re-election and shall act as a director throughout the meeting at which he retiring.

100A. No person, other than a Director retiring at the meeting, shall unless recommended by the Directors be eligible for election of the office of a Director at any General Meeting unless, not less than three or more than twenty one days before the date appoint for the meeting, there shall have been left at the office, notice in writing signed by a Member duly qualified to attend and vote at the meeting for which such notice is given of his intention to propose such person for election, and also notice in writing signed by that person of his willingness to be elected.

101. The Company at the meeting at which a Director retires in the manner aforesaid, may fill the vacated office by election a person thereto and, in default, the retiring Director shall if offering himself for re-election, be deemed to have been re-elected unless, at such meeting, it is expressly resolved not to fill such vacated office or resolution for the re-elections of such Director shall have been put to the meeting and lost.

102 The Directors shall have power at any time, and from time to time, to appoint a person as an additional Director either to fill a casual vacancy or as an addition to the existing Directors but so that the total number of Directors shall not exceed the maximum authorised by these Articles; but any person so appointed shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the Company at that meeting as an additional Director.

103. The Company may from time to time by ordinary resolution increase or reduce the number of Directors and may also determine in what rotation the increased or reduced number is to go out of office.

104. The Company may by ordinary resolution, of which special notice has been given in accordance with the Act, remove any director before the expiration of his period of office, and, without prejudice to the powers of the Directors under Article 101 hereof, may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a Director on the day on which the Director in whose place he is appointed was last elected a Director. Such Power of removal may be exercised notwithstanding anything in these Articles or in any

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agreement between the Company and such Director but without prejudice to any claim, such Director may have for damages for breach of contract of service between him and the Company.

Proceedings of Directors105. The Directors may meet together for the despatch of business, adjourn, and otherwise regulate their

meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In the case of an equality of votes, the Chairman shall have a second or casting vote. A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Directors. It shall be necessary to give notice of a meeting of Directors to any Director for the time being absent from Kenya.

106. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors, and unless so fixed shall be Two.

107. The continuing Directors may act notwithstanding any vacancy in their body but, if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the Company as the necessary quorum of Directors, the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, of summoning a general meeting of the Company, but for no other purpose.

108. The Directors may elect a Chairman and Deputy Chairman for their meetings and determine the period for which they are each to hold office, but if no such Chairman or Deputy Chairman is elected, or it at any meeting neither the Chairman nor the Deputy Chairman is present within Five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the Meeting.

109. The Directors may delegate any of their powers to committees consisting of such Member or Members of their body as they think fit; any such committee shall conform to any regulation that may be imposed on it by the Directors.

110. A committee may elect a Chairman of its meetings; if no such Chairman is elected, or if at any meeting the Chairman is not present within Five minutes after the time appointed for holding the same, the Members present may choose one of their number to be Chairman of the meeting.

111. The meetings and proceedings of any committee consisting of two or more person shall be governed by the provisions herein contained for regulating the meeting and proceeding of the Directors so far as the same are applicable and are not superseded by any regulations imposed by the Directors Under Article 109.

112. All acts done by any meeting of the Directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or person action as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.

113. A resolution in writing signed by a majority of the Directors, or of all the Members of a committee, shall be as valid and effectual as if it had been passed at a meeting of the Directors or of the committee duly convened and held.

Dividends and Reserves118. The Company in general meeting may declare dividends, but no dividend shall exceed the amount

recommended by the Directors.119. The Directors may from time to time pay to the Members such interim dividends (including therein the

fixed dividends payable upon any preference or other shares at stated times) as appear to the Directors to be justified by the profits of the Company.

120. No dividend shall be paid otherwise than out of profits.

121. Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares, but if and so long as nothing is paid up on any of the shares in the Company, dividends may be declared and paid according to the amounts of the shares. No amount paid or credited as paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this regulation as paid on the share. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the share during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms provided that it shall rank for dividend as from a particular date such share shall rank for dividend accordingly.

122. The Directors may, before recommending any dividend, set aside out of the profits of the Company, such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the Company) as the Directors may from time to time

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think fit. The Directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

123. Notice of any dividend that may have been declared shall be given in manner hereinafter mentioned to the persons entitled to share therein.

124. The Directors may deduct from any dividend payable to any Member, all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company.

124A. The Directors may retain any dividend or other money payable on or in respect of a share on which the Company has a lien and may apply the same towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.

125. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and in particular of paid up shares, debentures or debenture stock of any other Company or in any one or more of such ways and the Directors shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient, and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors.

126. Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the Register of Members or to such persons and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends, bonuses or other moneys payable in respect of the shares held by them as joint holders.

127. No dividend shall bear interest against the Company.128. Any dividend or refund or interest unclaimed for a period of more than three years from the date of

declaration thereof shall be forfeited and shall be paid to the Unclaimed Financial Assets Authority.

Capitalisation of Profits134. The Company in general meeting may upon the recommendation of the Directors resolve that it is

desirable to capitalise any part of the amount for the time being standing to the credit of any of the Company's reserve accounts or to the credit of the profit and loss accounts or otherwise available for distribution, and accordingly that such sum be set free for distribution amongst the Members who would have been entitled thereto if distributed by way of dividend and in the same proportions on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such Members respectively or paying up in full unissued shares or debentures of the Company to be allotted and distributed credited as fully paid up to and amongst such Members in the proportion aforesaid, or partly in the one way and partly in the other, and the Directors shall give effect to such resolution: Provided that a share premium account and a capital redemption reserve fund may, for the purposes of this Article, only be applied in the paying up of unissued shares to be issued to Members of the Company as fully paid bonus shares.

135. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto, with full power to the Directors to make such provision by the issue of fractional certificates or by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorise any person to enter on behalf of all the Members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation, or (as the case may require) for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such Members.

Winding up140. If the Company shall be wound up, the liquidator may, with the sanction of a special resolution of the

Company and any other sanction required under the Act, divide amongst the Members in specie or kind, the whole or any part of the assets of the Company, (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability.

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16.5 Minority Interests

The rights of minorities of the Company as contained in the Articles of Association include provisions that any two members of the Company can requisition an extraordinary general meeting (Article 53 above) and that one tenth of the members present can demand a poll (Article 63 above).

Further, the Board has three non-executive and independent directors: Ms. Khadija Mire (Chair), Mr. James Murigu and Mr. Bartholomew Ragalo.

16.6 Property Disposal and Acquisition

A. Immovable Property owned by UchumiUchumi owns the following immovable property:

Registered Proprietor Description Tenure

Uchumi Supermarkets Limited LR No. 209/12593 Nairobi (Langata Hyper) 99 years from 1 May 1995Uchumi Supermarkets Limited LR No. 209/399/3 Nairobi (Ngong Hyper) FreeholdKasarani Mall Limited LR No. 5875/2 Nairobi 99 years from 1 July 1999Kasarani Mall Limited LR No. 23393 Nairobi 53 years from 1 July 1965Source: USL

There is a caveat registered against LR No. 5875/2 Nairobi by the Government of Kenya and the validity of the title is not yet completely certain. This land is also the subject of two disputes as disclosed in sub- section 16.10 of this Information Memorandum.

Another caveat dated 10 November 1993 has been registered against LR No. 209/399/3 Nairobi in respect of stamp duty of an unspecified amount. Uchumi has engaged the Collector of Stamp Duties to understand why the caveat was registered with a view to having it withdrawn.

ICDC has registered a legal charge dated 3 September 2013 over LR No. 209/12593 Nairobi to secure the sum of Kshs. 300,000,000 borrowed by Uchumi. Details of this loan are set out in sub-section 16.7 below.

KCB has also registered a legal charge dated 23 May 2014 over LR No. 209/399/3 Nairobi to secure the sum of Kshs. 800,000,000 borrowed by Uchumi. Details of this loan are set out in sub-section 16.7 below.

The tenure for LR No. 23393 Nairobi is due to lapse in less than 5 years and Uchumi is taking steps to have the tenure renewed by the National Land Commission.

Uchumi has paid all land rates in respect of the above listed leasehold properties and the land rent for LR No. 209/12593 Nairobi.

The Company and its subsidiaries have not disposed or acquired any immovable property in the last five years.

B. Immovable Property Leased from UchumiUchumi has leased to Integrated Health Services Limited the mezzanine floor located in the building erected on LR No. 209/399/3 Nairobi (Ngong Hyper) for a term of 5 years and three months from 1 December 2011.

C. Immovable Property Leased by UchumiUchumi has leased the following properties in which it has established supermarkets:

Description of Property Landlord Term

1. LR No. 209/8607 Nairobi (Head Office)

Kenya National Trading Corporation Limited

20 years from 1 September 2002

2. LR No. 209/6368/4 (part of LR No. 209/6368) Nairobi

Westlands Triangle Properties Limited 7 years 4 months from 1 February 2013

3. LR No. 209/11616 Nairobi (Capital Modways Investment Limited 15 years from 1 October 2002

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Description of Property Landlord Term

Centre)4. Nairobi Block 78/881 and 886

(Buru Buru)Fairlane Supermarkets Limited 5 years and 3 months from 1

July 20115. LR No. 209/3871 Nairobi

(Koinange Street)Gordhandas Dharamshi & Brothers Limited

6 years from 1 September 2011

6. LR. No 1870/IX/159 and 1870/IX/176 (Sarit)

PBM Nominees Limited 8 years from 1 May 2014 to 30th April 2022

7. L.R. No. 37/251/1 Nairobi (Nairobi West)

United Housing Estate Limited 9 years from 1 April 2009

8. L.R. No. 209/7120 Nairobi (Aga Khan Walk/City Square Branch)

Allgate Limited 15 years from 1 October 2004

9. LR No 13330/614 Nairobi (Jipange)

Simon Kagiri Kamatu 5 years and 1 month from 1 June 2012

10. Karatina Block 1/290;1/291; 1/292 Lucy W. Weru 15 years from 1 December 2002

11. Meru Municipality/Block 11/311 City Square Properties Limited 10 years from 1 June 201312. Nakuru Municipality/Block 10/42 Berjan Suppliers Limited 5 years 9 months from 21

February 201113. Embu/ Municipality/911 Cyrus Gituai 10 years from 18 November

201014. L.R. No. 631/292 Kericho Noah Arap Too 10 years from 1 April 201015. Eldoret/Municipality/Block 6/241 Sugarland Estates Limited 10 years from 1 Jan 201316. Eldoret/Municipality Block 3/50

and 52Tipsy Company Limited 5 years and 3 months from 1

May 201117. L.R. No 209/8300 (Jogoo Road) Fleur Investments Limited 6 years and 3 months from 1

August 201118. L.R. No. Ngong/Ngong/42672 Kirsek Investment Limited 10 years from 1 August 201219. Kisii Municipality/Block III/371 Abel Moranga Ongwacho 10 years from 1 July 201320. Mombasa/Block XIX/59&60

MombasaAbson Motors Limited 10 years from 15 October

201321. Land Reference 27904/20 Ndungu Mbugua 10 years from 1 November

201322. Amwathi/Maua/3584 and

Amwathi/Maua/11559Amuiri Investment Limited 10 years from 1 February 2014

23. Block 18 Plots 514, 640 and 641 Natete Kampala

Natete Shopping Limited 10 years

24. 97 LRV 4159 Folio 15 subdivided from LRV 3984 Folio 10 Plot 2530 Block 15 Kibuga Tirupati Mazima Mall, at Nsambya, Gaba Road, Kampala

Imperial Hardware Limited 10 years from 15 July 2011

25. Plot 29 Gulu Avenue Gulu Donald Lukiywa 10 years from 1 September 2011

26. Kampala Golf Course Holdings Limited 5 years from October 201227. Plot 136/137 Segerea Dar es

salaamOilcom 4 years from February 2014

Source: USL

Uchumi is negotiating the leases for its branches in Adams, Nairobi. Its occupation of this property is that of a protected tenant pursuant to the provisions of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap. 301, the Laws of Kenya).

The lease for Land Reference 27904/20 (Juja) is currently undergoing registration.

The landlord has taken occupation of one floor and in return USL pays rent for one floor only. This is in line with the deed of settlement reached between the parties following a long dispute over improvements done to the premises by USLD. Licences Granted by Uchumi

Uchumi has licenced the following banks to operate ATMs adjacent to its branches:

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Location Bank Term

LR. No. 209/12593 Nairobi (Langata Hyper)

Kenya Commercial Bank Limited 6 years from 1 April 2012NIC Bank Limited 5 years from 1 April 2012

LR No. 209/393/3 Nairobi (Ngong Hyper)

Kenya Commercial Bank Limited 3 years from 1 May 2011Bank of Africa Limited 2 years from 1 April 2011Barclays Bank of Kenya Limited 5 years from 1 April 2012Ecobank Kenya Limited 5 years from 1 March 2013

LR No. 209/405/9 Nairobi (Adams) Post Office and Savings Bank Limited 2 years from 1 October 2012Ecobank Kenya Limited 2 years from 1 October 2011

Source: USL

Uchumi is also in the process of concluding ATM licence agreements with National Bank of Kenya Limited and Co-operative Bank of Kenya Limited for its Ngong Hyper branch and with National Bank of Kenya Limited for the Langata Hyper branch.

16.7 Borrowings

a) Government Loan

By a loan agreement dated 1 November 2006 and made between Government of Kenya and Uchumi, the Government acting in public interest and as an indirect shareholder agreed to advance Kshs. 675,000,000 (“Government Loan”) in accordance with the Framework Agreement dated 7 July 2006. The Framework Agreement is made between the Eastern and Southern African Trade and Development Bank (PTA), Kenya Commercial Bank Limited (KCB), the Government and Uchumi. This Framework Agreement related to the business recovery plan of Uchumi and provided for, among other things, the provision of a loan by the Government, the restructuring of the bank loans and the establishment of an advisory committee to work with a special receiver manager.

The Government Loan was advanced to be used exclusively by Uchumi as working capital for settling parts of sums due to trade creditors and financing the re-organisation costs and its core business. The Government Loan together with interest up to December 2009 was Kshs. 875,000,000.

By a subsequent loan restructuring agreement having a commencement date of 30 June 2010 and made between Government of Kenya and Uchumi, the Government Loan totalling Kshs. 857,000,000 was restructured as follows:i) Kshs. 100,000,000 to be repaid immediately;ii) Kshs. 350,000,000 to be converted to equity at a conversion rate of Kshs. 10 per share;iii) Kshs. 407,000,000 to be retained as a term loan for a period of 5 years. The life of the term loan

to run up to 30 June 2014; iv) Interest rate to be calculated on outstanding principal amount at the rate of 9.5% per annum

over a tenor of 5 years;v) Interest to accrue from the date of withdrawal and shall be computed on the basis of a 360 a day

year of twelve 30 day months on a reducing balance basis;vi) Repayment to be made in 10 equal monthly instalments on the 30th day of June and 31st day of

December each year commencing on the 30th day of June 2010; andvii) All or part of the loan may be repaid on any date earlier, but not later than the dates in

paragraph (vi) above upon giving the Government 30 days’ written notice.

In the event Uchumi defaults, it will pay interest on that sum from the date on which it fell due until actual payment at an annual rate equal to one and half per cent higher than the interest lending rate of the loan restructuring agreement.

Uchumi duly remitted the Kshs. 100,000,000 to the Government and by a resolution of the Board dated 16 May 2011, 35,576,550 ordinary shares were allotted to the Government in full and final payment of Kshs 355,765,500 as provided for in the loan restructuring agreement. Uchumi continues to pay the

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outstanding loan amount and details regarding this are more particularly identified in the Accountant’s Report.

b) Secured Borrowings

ICDC facility letter dated 6 June 2013 for the granting of a debt facility in the sum of Kshs. 300,000,000 under the following terms and conditions: (1) repayment of the loan on a quarterly basis over a period of three years without a moratorium period; (2) facility to attract interest at ICDC’s base rate; (3) Uchumi to note ICDC’s interest in collaterals insurance policy; (4) a first charge over LR No. 209/12593, Langata Road, Nairobi; (5) Uchumi to have right to pre-pay all or any part of the outstanding principal amount of the loan on payment of a premium of 1.75% of the amount to the pre-paid and after giving ICDC notice of 6 months in writing indicating the amount to be pre-paid.

The above facility is secured by a legal charge issued by Uchumi to ICDC over Land Reference No. 209/12593 dated 9 September, 2013. The charge is duly executed, stamped and registered at both the lands and companies registries.

Kenya Commercial Bank by a facility agreement dated 16 April 2013 gave a facility of Kshs. 800,000,000 to Uchumi. This facility is involves an overdraft facility of Kshs. 200,000,000/- and short term loan facility of Kshs. 600,000,000/-. This facility is secured by a legal charge dated 23 May 2014 over property land reference number 209/399/3 dated 23rd May 2014. The legal charge is duly executed, stamped and registered at both the lands and companies registries.

c) Borrowings Tabulated

TitleAmount Authorized (KShs)

Date Authorized Amount Paid Maturity

Amount Outstanding (June 2014)

Government of Kenya Loan

675,000000 November 2006

KShs 100,000,000 paid immediately

KShs 355,765,500 converted to shares

Balance to be repaid at KShs 60 million repayable every 6 months

December 2014

Nil

ICDC Loan 300,000,000 June 2013 - June 2016 300,000,000KCB Loan 800,000,000 April 2013 Kshs 200,000,000 overdraft facility

Kshs 600,000,000 loan. Paid Kshs 150,000,000 on 27 August 2014

June 2016 Kshs 600,000,000

d) Company Guarantee

Uchumi has issued a bank guarantee dated 23 April 2013 for Five Hundred million Ugandan Shillings on behalf of Uchumi Supermarkets (Uganda) Limited to Barclays Bank Uganda Limited. The guarantee is to pay all the sum of money which may now be or which hereafter may from time to time become due or owing to you anywhere from the principal either as principal or surety. The guarantee is a continuing security for the whole amount now due and owing.

16.8 Loan Covenants

Uchumi is not in breach of its loan covenants.

16.9 Material Contracts

Apart from contracts entered into by Uchumi in the ordinary course of its business, Uchumi has not entered into any material contracts with third parties which have any onerous or illegal covenants or that restrict the freedom of Uchumi to carry on its business.

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16.10 Litigation

Uchumi is involved in the following material litigation:

a) High Court Civil Case No. ELC 495 of 2011, Kasarani Mall Limited vs. Daniel Otieno Miganga, David J Kollal, Gilbert Thuo Macharia and Roysa Community Self Help Group

The Company's subsidiary, Kasarani Mall Limited, has gone to court against the four defendants and their Self Help Group claiming orders of injunction to restrain the defendants from trespassing on Kasarani Mall Limited's property LR No. 5875/2 Nairobi, along Thika Road. The High Court has granted temporary orders of injunction pending the hearing and determination of the suit. This order has been extracted and served on the plaintiffs and the Officer Commanding Station (OCS) Kasarani Police Station. The case is now listed for hearing on 9 December 2014. The matter is yet to be fully determined and the fate of the future ownership of this land remains uncertain for now.

b) High Court ELC Civil Case No. 47 of 2011, Richard Ochilla, David Ochieng, Kennedy Otieno Onyango (suing as the officials of Roysambu Shell Youth Self Help Group) vs. Uchumi Supermarkets Limited, Jacob Meshamor Samules, Raphael Jacob Samuels and Kasarani Mall Limited

The plaintiffs claim to be officials of a self-help group known as Roysambu Shell Youth Self Help Group and claim that they have occupied LR No. 5875/2 Nairobi, along Thika Road for a long period of time. The property is registered in the name of the Company's subsidiary Kasarani Mall Limited. The company has denied the plaintiffs’ allegation and is defending the matter at the High Court. The matter is yet to be fully determined and the fate of the future ownership of this land remains uncertain for now.

c) High Court Civil Case No. ELC 1522 of 2013 (O.S) Daniel Otieno, Roysa Community Self Help Group & 3 Others vs Uchumi Supermarkets Limited and Kasarani Mall Limited

This case is related to the two (2) cases set out above. This suit had been filed by way of originating summons dated 6 November 2013, by members of a group known as Roysa Community Self Help Group, seeking declaration that they have acquired title to L.R No. 5875/2 and L.R. No. 12803 by way of adverse possession. This case is similar to the above matter in which Uchumi has sought an injunction to prevent the group from interfering with L.R No. 5875/2.

The Company has filed a replying affidavit in response to the claims of the originating summons. On 8July 2014 the matter was in court where parties were directed to file their written submissions and the matter would be mentioned on 23 September 2014 to confirm compliance and get a date for ruling. The matter is yet to be fully determined and the fate of the future ownership of this land remains uncertain for now.

d) High Court Civil Case Number 311 of 2005, Sidhi Investments Limited vs. Uchumi Supermarkets Limited and Kasarani Mall Limited

The plaintiff filed suit seeking specific performance of a contract for the sale of LR No 5875/2 Nairobi and 23393 Nairobi (original number 11622/3) Thika Road Nairobi. The Company is also defending this claim at the High Court.

Each of the four matters listed as (a), (b), (c) and (d) above is yet to be fully determined and the fate of the future ownership of the land known as LR No. 5875/2 Nairobi remains uncertain for now. There is also caveat registered against the title of this property and the validity of the title is not completely certain.

e) Eldoret High Court Civil Case Number 164 of 2000, Toiyoi Investments Company Limited vs. Uchumi Supermarkets Limited

This is a claim arising out of a fire at Uchumi Supermarket Eldoret. Judgment for Kshs. 92,012,341.20 plus costs of Kshs. 4,500,000 and interest from 1 November 2012 has been entered. A stay of execution pending appeal was obtained against a bond issued by UAP Insurance Company Limited. Subsequently, a settlement of Kshs. 59,632,900 inclusive of costs and interest was negotiated. The settlement has not been completed and the decree holder is applying to set aside the stay while Uchumi has instructed an advocate to lodge an appeal.

16.11 Working Capital

The Uchumi net current liabilities as at June 30, 2014 were negative KShs 1.1 billion. However, this is in keeping with the global retail industry trends as all retailers leverage on short-term working capital financing by suppliers.

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In Uchumi’s case, this was more so due to the fact that Uchumi opened eight (8) new branches between October2013 and June 2014. As a result, suppliers variedly agreed to change trading terms in the interim as a means of supporting the new branches which had not yet matured. Credit limits and days were therefore temporarily adjusted by major suppliers and the average creditor days moved from an average of 45 to 65 days.

In addition to the existing Kshs 215 million outstanding ICDC loan, Uchumi took a Kshs 600 million loan from KCB for working capital financing across the region. The Current Liabilities therefore include Kshs 716 million due to KCB and ICDC that was classified as current, though the tenure is negotiable and if deemed necessary can be renegotiated.

On the receipts sides, more than 90% of Uchumi sales, on average, are on cash basis and the 8% credit/debit card sales are credited to Uchumi bank accounts within 5 days of the sale.

We have also enhanced our ordering process with the resultant improvement in our inventory mix to comprise largely of fast-moving products hence the liquidity assurance by the time trade payables fall due. Indeed, over 70% of our sales are in the foods category while our stock-holding at any given time is about 45% for the foods category.

Being in the GROWTH phase of our recovery strategy, we are also still in the process of opening new branches in strategic locations as we continue implementing our Group strategy in order to remain competitive and sustain both top-line and bottom-line growth.

In our opinion, therefore, the working capital position is adequate for the operations of Uchumi Supermarkets Ltd and management is actively involved in the daily monitoring of performance to avoid any shocks.

16.12 Material Inter-Company Finance

Uchumi Uganda Uchumi Tanzania Kasarani Mall TotalCapital Expenditure 87,453 160,428 133,023 380,904 Working Capital Financing at 0% interest 221,210 163,985 - 385,195 Total 308,663 324,413 133,023 766,099

16.13 Licences

Uchumi has procured all the material licences required for its business.

16.14 Authorisations and Approvals

The Rights Issue has been duly authorised by a resolution of the Board and the shareholders of the Company passed on 1 November 2012 and 11 December 2011 respectively. The Company has also received approvalsfrom CMA (Kenya) and the NSE.

16.15 Directors

None of the Directors of the Company has, in the five years preceding the date of this Information Memorandum:

(a) had any petition under bankruptcy laws filed against him or her or (in the case of corporate directors)any winding-up petition filed or pending against it; or

(b) been convicted in any criminal proceedings for fraud or any felony; or(c) been the subject of any ruling of any court of competent jurisdiction or any governmental body, the

effect of which is to permanently or temporarily prohibit him or her from acting as a fund manager, director, broker, dealer or engaging in any business practice or activity.

16.16 Significant or Material Changes

Save as disclosed in this Information Memorandum, there has been no significant change in the financial position of the Company since 30 June 2012 to the date of this Information Memorandum.

16.17 Governing Law

This Information Memorandum and the Rights Issue shall be governed by the Laws of Kenya.

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17 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the registered office of the Company during

normal business hours (8.30 am to 5.00 pm) for thirty calendar days from the date of this Information

Memorandum.

1. The Information Memorandum and PAL dated 7 November 2014

2. The CMA Kenya approval letter dated 03 October 2014;

3. The NSE approval letter dated 9 October 2014;

4. The Company’s Memorandum and Articles of Association;

5. A copy of the shareholders’ and Board of directors resolution for increasing the issued share capital;

6. A copy of the Board and shareholders’ resolution dated 1 November 2012 and 11 December 2013

respectively approving the Rights Issue;

7. The shareholders register used to determine the entitlement;

8. Copies of audited financial statements for the Company for the years ended 30 June, 2011, 2012, 2013

and 2014 respectively;

9. A copy of the Accountant’s Report in respect of the Rights Issue; and

10. A copy of the Legal Opinion by Harrison Hamilton & Mathews.

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18 LEGAL OPINION

Legal Opinion by Lead Legal Advisor

We have acted as legal advisors to Uchumi Supermarkets Limited (“the Company”) in relation to the Rights Issue as set out in the Information Memorandum dated 7 November 2014 (“the Information Memorandum”).

We, Hamilton Harrison & Mathews, are Advocates of the High Court of Kenya, practicing and qualified as such to practice in Kenya, and to advice upon the laws of Kenya.

Unless otherwise stated or the context otherwise requires, words and terms defined in the Information Memorandum issued by the Company in relation to the Rights Issue bear the same meaning in this Opinion.

1. Documents

For this Opinion, we have examined originals or copies certified to our satisfaction of the following documents:

1.1 the certificate of incorporation of the Company, and its memorandum and articles of association in force as at the date of the Information Memorandum;

1.2 a resolution of the shareholders of the Company in an Annual General Meeting (“AGM”) dated 11th December 2013, inter alia, approving the Rights Issue;

1.3 a letter dated October 3, 2014 from the Capital Markets Authority (“CMA”) approving the Rights Issue in the manner prescribed under the Information Memorandum;

1.4 a letter dated 9 October 2014 from the Nairobi Securities Exchange (“NSE”) approving the listing of the 99,534 980 new ordinary shares that are to be issued pursuant to the Rights Issue;

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1.5 the Information Memorandum and the Provisional Allotment Letter thereto; and

1.6 such other records and documents as we have considered necessary and appropriate for the purposes of this Opinion.

2. Assumptions

For the purposes of this opinion, we have assumed:

2.1 Accuracy of information suppliedAll written information supplied to us by the Company and by its officers and advisors is true, accurate and up to date.

2.2 Authenticity of copiesThe 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.

2.3 SignaturesThe genuineness of all signatures on all documents.

2.4 Due execution by other partiesAll agreements and other relevant documents have been duly authorised, executed and delivered by the parties to those documents other than the Company.

2.5 Factual mattersWith respect to matters of fact, we have relied on the representations of the Company and its officers and advisors.

3. Opinions

In our opinion, based on the information made available to us by the Company and subject to (i) the foregoing; (ii) Section 5 of this Opinion; (iii) any matters set out in the Information Memorandum; (iv) the qualification and reservations set out below; and (v) any matters not disclosed to us:

3.1 the Company is a public company limited by shares, duly incorporated in Kenya pursuant to the provisions of the Companies Act (Chapter 486 of the Laws of Kenya) and listed at the NSE, with power to execute, deliver and exercise its rights and perform its obligations pursuant to the Rights Issue, and such execution, delivery and performance have been duly authorised by appropriate corporate action;

3.2 all rights and obligations of the Company contemplated by the Rights Issue constitute valid and binding rights and obligations enforceable according to their terms;

3.3 the existing share capital of the Company has been authorised and issued in conformity with all applicable laws and has received all necessary authorisations;

3.4 the transactions contemplated by the Rights Issue and the performance by the Company of its obligations thereunder will not violate any laws of Kenya;

3.5 all authorisations, approvals, consents, licences, exemptions, filings or registrations of or with any governmental or public bodies or authorities of or in Kenya required in connection with the Rights Issue have been obtained in proper form and are in full force and effect;

3.6 the Company continues to maintain its statutory books at its registered office;

3.7 the contracts between the Company and third parties have been entered into in the ordinary course of the business carried on by the Company;

3.8 save for the matters referred to in Section 16.10 (Litigation) of the Information Memorandum, and to the best of our knowledge there is no material litigation or arbitration, prosecution or other civil or criminal legal action in which the Company or any of its Directors are involved; and

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3.9 to the best of our knowledge, there are no other material items not mentioned in the Information Memorandum of which we are aware with regard to the legal status of the Company and the Rights Issue.

4. Further OpinionsBased upon and subject as aforesaid, and without prejudice to the generality of the foregoing, we are also of the opinion that:

4.1 the Information Memorandum has been dated in accordance with Section 43(4) of the Companies Act;

4.2 a copy of the Information Memorandum, together with the documents required under Section 43 of the Companies Act, have been delivered to the Registrar of Companies at Nairobi for registration in accordance with Section 43(a) of the Companies Act, duly signed by every person named in the Information Memorandum as a director of the Company or by his agent duly authorised in writing, and a statement to such effect appears on the face of the Information Memorandum in accordance with Section 43 (3) of the Companies Act;

4.3 this Information Memorandum contains statements made by Messrs. Ernst & Young, Certified Public Accountants and by ourselves, all of whom are experts for the purposes of Section 42(1) of the Companies Act. In accordance with Section 42(1) of the Companies Act, Messrs. Ernst & Young and we have given, and have not prior to the date of this Information Memorandum withdrawn our consent to the issue of the Information Memorandum with the statements by us included in the form and context in which they are included;

4.4 the shares subject to the Rights Issue shall rank pari passu in all respects with the existing Ordinary Shares in the issued share capital of the Company, including the right to participate in full in all dividends and/or other distributions declared in respect of such share capital with effect from the financial year of the Company ending 30th June 2014;

4.5 application has been duly made to, and permission duly granted by, the Capital Markets Authority in respect of the Rights Issue pursuant to the Capital Markets (Securities) (Public Offers, Listing and Disclosure) Regulations 2002 and the Fourth Schedule thereto;

4.6 in addition to the information required to be included by the Companies Act, the Information Memorandum includes such information as investors would reasonably require and reasonably expect to find therein for the purpose of making an informed assessment of:-

(a) the assets and liabilities, financial position, profits and losses, and prospects of the Company; and

(b) the rights attaching to the new ordinary shares to be issued pursuant to the Rights Issue.

Based on the foregoing, we are of the opinion that the Rights Issue is in conformity with all applicable laws and has received all necessary authorisations.

5. Qualification

We have not verified the titles to properties known as Land Reference Number 5875/2 and Land Reference Number 23393 Nairobi and therefore provide no opinion as to the validity of the titles to the said properties.

6. Reservations

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.

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19 REPORTING ACCOUNTANTS REPORT

UCHUMI SUPERMARKETS LIMITED AND SUBSIDIARIES

RIGHTS ISSUE – 2014

REPORTING ACCOUNTANTS’ REPORT

Uchumi Supermarkets LimitedAccountants’ ReportFor the Rights Issue

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A. INTRODUCTION (continued)

We have not audited any financial statements nor reviewed any management accounts of the group as of any date or for any period subsequent to 30 June 2014. The audited financial statements for the year ended 30 June 2014 were approved by the Board of Directors on 5th September 2014.

There were no major adjustments required in the prior years’ financial statements to ensure compliance with International Financial Reporting Standards and accounting policies applicable for the financial year ended 30 June 2014.

We are not aware of any material items not mentioned in the Information Memorandum regarding the Rights Issue at the Nairobi Securities Exchange, which could influence the evaluation by the investors of the assets, liabilities and financial position of the group.

The financial statements have been prepared on the basis of the accounting policies set out in section B below. For all the accounting periods dealt with in this report, the financial statements have, in all material respects, been prepared in accordance with the International Financial Reporting Standards.

A. ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

1. Country of incorporation and principal activities

Uchumi Supermarkets Limited is domiciled and incorporated in Kenya under the Companies Act (Cap.486). The group operates retail supermarkets in Kenya, Uganda and Tanzania.

b) Basis of preparation

The financial statements have been prepared on the historical cost basis, except for land and buildings, and investment properties that have been measured at fair value as disclosed in the accounting policies hereafter. The financial statements are presented in Kenya Shillings (KShs.) and all values are rounded to the nearest thousand (KShs’000) except where otherwise indicated.

c) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs).

d) Consolidation of financial statements

Subsidiaries are all 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. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date control ceases. The subsidiaries of Uchumi Supermarkets Limited are:

Subsidiary % Ownership Country of incorporationUchumi Supermarkets (U) Limited 100 UgandaUchumi Supermarkets (T) Limited 100 TanzaniaKasarani Mall Limited 100 Kenya

The consolidated financial statements of the group comprise the financial statements of the company and its subsidiaries at the end of the reporting period.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The accounting policies for the subsidiaries are consistent with the policies adopted by the company.


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B. ACCOUNTING POLICIES (Continued)

e) Critical accounting estimates, judgements and assumptions

In the process of applying the company’s accounting policies, the directors make certain estimates, judgments and assumptions about future events. In practice, the estimated and assumed results may differ from the actual results. Such estimates and assumptions, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below:

Property, plant and equipment The directors make estimates in determining the depreciation rates for property and equipment. The rates used are set out in the accounting policy for property, plant and equipment. These estimates 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 prevailing circumstances.

Impairment of non-financial assetsThe directors assess whether there are any indicators of impairment for all non-financial assets ateach reporting date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

Deferred tax assetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Allowances for obsolete inventories The directors review the inventories on regular basis to assess the likelihood of obsolescence. In determining whether an inventory item is obsolete, the directors make judgments as to whether the inventory item can be used as an input in production or is in a saleable condition.

Allowances for credit losses The directors review the receivables portfolio regularly to assess the likelihood of impairment. Thisrequires an estimation of the amounts that are irrecoverable.

Estimation of fair value of points earned under the customer loyalty programmeThe group estimates the fair value of points earned under the loyalty points programme by applying statistical techniques. Inputs to the models include making assumptions about expected redemption rates. As points issued under the programme do not expire, such estimates are subject to significant uncertainty.

Revaluation of property, plant and equipment and investment propertiesThe group carries its investment properties at fair value, with changes in fair value being recognised in the income statement. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The group engaged an independent valuation specialist to assess fair value as at 30 June 2014 for its properties. A valuation methodology based on comparable market data was adopted.

f) New and amended IFRS and IFRIC interpretations

The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended IFRS and IFRIC interpretations effective as of 1 July 2013:

IFRS 7 Financial Instrument Disclosures (revised)

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements

IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement


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f) New and amended IFRS and IFRIC interpretations (continued)

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1 IAS 1 Clarification of the requirement for comparative information (Amendment)

IAS 19 Employee Benefits (Revised 2011)

IAS 16 Property, Plant and Equipment — Classification of servicing equipment

IAS 32 Financial Instruments: Presentation — Tax effects of distributions to holders of equity instruments

IAS 34 Interim Financial Reporting — Interim financial reporting and segment information for total assets and liabilities

IFRIC 20-Stripping Costs in the Production Phase of a Surface Mine

These revised standards and interpretations did not have any material effect on the financial performance or position of the Group. They did, however, give rise to additional disclosures in some occasions.

IFRS 7 Financial Instrument Disclosures (revised) - effective for periods beginning on or after 1 January 2013.The amendments require disclosures to include information that will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's statement of financial position.

Offsetting of financial assets and financial liabilities Financial assets and financial liability are offset and the net amount presented in the statement of financial position when and only when, the entity:

has a legally enforceable right to set off the recognised amounts; and Intends either to settle on a net basis, or to realise the asset and settle the liability

simultaneously.

IFRS 7 did not have an impact on the financial performance or the financial position of the Group as the Group does not have such arrangements.

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements - effective for annual periods beginning on or after 1 January 2013IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities, which resulted in SIC-12 being withdrawn. IAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures, and associates in separate financial statements. IFRS 10 does not change consolidation procedures (i.e., how to consolidate an entity). Rather, IFRS 10 changes whether an entity is consolidated by revising the definition of control. Control exists when an investor has:- Power over the investee (defined in IFRS 10 as when the investor has existing rights that give it the

current ability to direct the relevant activities) Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect the amount of the investor’s returns

IFRS 10 also provides a number of clarifications on applying this new definition of control. IFRS 10 did not have any impact on the entities to be consolidated by the Group.


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IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures - effective for annual periods beginning on or after 1 January 2013.IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. Joint control under IFRS 11 is defined as the contractually agreed sharing of control of an arrangement, which exists only when the decisions about the relevant activities require the unanimous consent of the parties sharing control. ‘Control’ in ‘joint control’ refers to the definition of ‘control’ in IFRS 10. IFRS 11 also changes the accounting for joint arrangements by moving from three categories under IAS 31 to the following two categories:

Joint operation — An arrangement in which the parties with joint control have rights to the assets and obligations for the liabilities relating to that arrangement. In respect of its interest in a joint operation, a joint operator must recognise all of its assets, liabilities, revenues and expenses, including its relative share of jointly controlled assets, liabilities, revenue and expenses.

Joint venture — An arrangement in which the parties with joint control have rights to the net assets of the arrangement. Joint ventures are accounted for using the equity method. The option in IAS 31 to account for joint ventures as defined in IFRS 11 using proportionate consolidation has been removed.

Under these new categories, the legal form of the joint arrangement is not the only factor considered when classifying the joint arrangement as either a joint operation or a joint venture, which is a change from IAS 31. Under IFRS 11, parties are required to consider whether a separate vehicle exists and, if so, the legal form of the separate vehicle, the contractual terms and conditions, and other facts and circumstances. IAS 28 has been amended to include the application of the equity method to investments in joint ventures.

This has no effect on the Group as the Group has not entered into any joint arrangements.

IFRS 12 Disclosure of Interests in Other Entities – effective for annual periods beginning on or after 1 January 2013.IFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries for example, where a subsidiary is controlled with less than a majority of voting rights. Some of the more extensive qualitative and quantitative disclosures of IFRS 12 include:

Summarised financial information for each subsidiary that has non-controlling interests that are material to the reporting entity

Significant judgments used by management in determining control, joint control and significant influence, and the type of joint arrangement (i.e., joint operation or joint venture), if applicable

Summarised financial information for each individually material joint venture and associate Nature of the risks associated with an entity’s interests in unconsolidated structured entities, and

changes to those risks

This has no effect on the group.

IFRS 13 Fair Value Measurement - effective for annual periods beginning on or after 1 January 2013IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS. IFRS 13 defines fair value as an exit price. As a result of the guidance in IFRS 13, the Group re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. IFRS 13 also requires additional disclosures. Application of IFRS 13 has not materially impacted the fair value measurements of the Group.


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IFRS 13 requires an entity to disclose additional information that helps users of its financial statements assess both of the following:

for assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements

For fair value measurements using significant unobservable inputs, the effect of the measurements on profit or loss or other comprehensive income for the period.

Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined.

IAS 19 Employee Benefits (Revised 2011) – effective for annual periods beginning on or after 1 January 2013IAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income (OCI) and permanently excluded from profit or loss; expected returns on plan assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures and in determining the discount rate used in accounting for employee benefit plans, an entity would include high quality corporate bonds issued by entities operating in other countries, provided that those bonds are issued in the currency in which the benefits are to be paid. Consequently, the depth of the market for high quality corporate bonds would be assessed at the currency level and not at the country level.

Short-term employee benefits are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service whereas other long-term employee benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service.

IAS 19R also requires that when an employee has rendered service to an entity during an accounting period, the entity shall recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service:

(a) as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, an entity shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or cash refund.

(b) as an expense, unless another IFRS requires or permits the inclusion of the benefits in the cost of an asset (see, for example, IAS 2 Inventories and IAS 16 Property, Plant and Equipment).

IAS 19R did not have any impact on the financial performance or the financial position of the Group’s financial statements

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1 - effective from 1 July 2012The amendments to IAS 1 require an allocation of items presented in OCI. Items that will be reclassified (‘recycled’) to profit or loss at a future point in time (e.g., net loss or gain on available for sale financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation of land and buildings). The amendments affect presentation only and have no impact on the Group’s financial position or performance.


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The following improvements to International Financial Reporting Standards – 2009 -2011 Cycle were effective for annual periods beginning on or after 1 January 2013

IAS 1 Clarification of the requirement for comparative information (Amendment) These amendments clarify the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The amendments also clarify that the opening statement of financial position presented as a result of retrospective restatement or reclassification of items in financial statements does not have to be accompanied by comparative information in the related notes. The amendment did not have impact on the Group’s financial statements as the Group did not have any retrospective restatement or reclassification in its financial statements.

IAS 16 Property, Plant and Equipment (amendment) Classification of servicing equipmentThis amendment clarifies that major spare parts and servicing equipment that meet the definition of property; plant and equipment are not inventory. The improvement had no impact on the Group’s financial statements as such items were already correctly accounted for.

IAS 32 Financial Instruments: Presentation (amendment) -Tax effects of distributions to holders of equity instrumentsThis amendment clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. The improvement had no impact on the Group’s financial statements as no such income taxes are payable by the Group.

IAS 34 Interim Financial Reporting (amendment) - Interim financial reporting and segment information for total assets and liabilitiesThis improvement clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities for each reportable segment to enhance consistency with the requirements in IFRS 8 Operating Segments. Total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total amount disclosed in the entity’s previous annual financial statements for that reportable segment. The improvement had no impact on the Group’s financial statements as these are not interim financial statements.

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The interpretation addresses the accounting for the benefit from the stripping activity. The interpretation is effective for annual periods beginning on or after 1 January 2013. The new interpretation had no impact on the Group as it is not involved in mining activities.

Standards issued but not effective

The following standards have been issued or revised and will become effective for the June 2015 year-end or thereafter:

IFRIC 21 Levies IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. The Group does not expect that IFRIC 21 will have material financial impact in future financial statements.


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Standards issued but not effective (continued)

IFRS 9 Financial Instruments – classification and measurement - effective for annual periods beginning on or after 1 January 2018

On 24 July 2014, the International Accounting Standards Board (IASB) issued the final version of IFRS 9-Financial Instruments bringing together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The classification and measurement requirements address specific application issues arising in IFRS 9 (2009) that were raised by preparers, mainly from the financial services industry. The expected credit loss model addresses concerns expressed following the financial crisis that entities recorded losses too late under IAS 39. IFRS 9 stipulates that financial assets are measured at amortised cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics.Apart from the ‘own credit risk’ requirements, classification and measurement of financial liabilities is unchanged from existing requirements. IFRS 9 is applicable for annual periods beginning on or after 1 January 2018, but early adoption is permitted.

The Group is currently assessing the impact of IFRS 9.

IFRS 14 Regulatory Deferral Accounts - effective for annual periods beginning on or after 1 January 2016

IFRS 14 allows an entity whose activities are subject to rate regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first time adoption of IFRS. Existing IFRS preparers are prohibited from applying this standard. Also, an entity whose current GAAP does not allow the recognition of rate-regulated assets and liabilities, or that has not adopted such policy under its current GAAP, would not be allowed to recognise them on first time application of IFRS. This new standard is not expected to impact the Group as it already reports in terms of IFRS and is not subject to rate regulation.

IFRS 15- Revenue from Contracts with customers- Effective for annual periods beginning on or after 1 January 2017

IFRS 15- Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue and related interpretations. IFRS 15 specifies the accounting treatment for all revenue arising from contracts with customers. It applies to all entities that enter into contracts to provide goods or services to their customers, unless the contracts are in the scope of other IFRSs, such as IAS 17 Leases. The standard also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property or equipment. Extensive disclosures will be required, including disaggregation of total revenue; information about performance obligations; changes in contract asset and liability account balances between periods and key judgments and estimates. This amendment is not expected to have a material financial impact on future financial statements.

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation -effective for annual periods beginning on or after 1 January 2016

The IASB issued amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets prohibiting the use of revenue-based depreciation methods for fixed assets and limiting the use of revenue-based amortisation methods for intangible assets. The amendments are effective prospectively. This amendment is not expected to have a material financial impact on future financial statements as the Group does not use revenue-based depreciation methods for fixed assets and intangible assets.


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IAS 16 and IAS 41 - Accounting for bearer plants- effective for annual periods beginning on or after 1 January 2016

IAS 41 Agriculture currently requires all biological assets related to agricultural activity to be measured at fair value less costs to sell. This is based on the principle that the biological transformation that these assets undergo during their lifespan is best reflected by fair value measurement. However, there is a subset of biological assets, known as bearer plants, which are used solely to grow produce over several periods. At the end of their productive lives they are usually scrapped. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates.

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41.This will not have any impact on the Group.

IAS 19 Defined Benefit Plans: Employee Contributions — Amendments to IAS 19 - Effective for annual periods beginning on or after 1 July 2014.IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. IAS 19 requires such contributions that are linked to service to be attributed to periods of service as a negative benefit.

The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. Examples of such contributions include those that are a fixed percentage of the employee’s salary, a fixed amount of contributions throughout the service period, or contributions that depend on the employee’s age. The amendments are applied retrospectively, in accordance with the requirements of IAS 8 for changes in accounting policy but early application is permitted and must be disclosed. The amendment will not have an impact on future financial statements as the Group has not entered into any defined benefit schemes. IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments are effective for annual periods beginning on or after 1 January 2014. The Group does not expect this amendment to have a material financial impact in future financial statements as no such offsetting arrangements exist.

IAS 36 Recoverable Amount Disclosures for Non - Financial Assets — Amendments to IAS 36 -effective for annual periods beginning on or after 1 January 2014.The amendments clarify the disclosure requirements in respect of fair value less costs of disposal. In addition, additional disclosure requirements have been added as follows:

(a) Additional information about the fair value measurement of impaired assets when the recoverable amount is based on fair value less costs of disposal.

(b) Information about the discount rates that have been used when the recoverable amount is based on fair value less costs of disposal using a present value technique. The amendment harmonises disclosure requirements between value in use and fair value less costs of disposal.

The group is assessing the impact of this amendment.


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Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)These amendments are effective for annual periods beginning on or after 1 January 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. The group is currently assessing the impact of this amendment.

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after 1 January 2014. The Group does not apply hedge accounting and as such is not expected to impact the Group.

Annual Improvements December 2013

The IASB issued two cycles of Annual Improvements to IFRSs – 2010-2012 Cycle and 2011-2013Cycle – on 12 December 2013. These improvements include:

IFRS 2 Share-based Payment - Definition of vesting condition IFRS 3 Business Combinations-Accounting for contingent consideration in a business combination IFRS 3 Business Combinations-Scope exceptions for joint ventures IFRS 8 – Operating Segments IFRS 13 Fair Value Measurement-Scope of paragraph 52 (portfolio exception) IAS 16 and IAS 38 - Revaluation method—proportionate restatement of accumulated depreciation IAS 24 Related Party Disclosures-Key management personnel IAS 40 Investment Property - Clarifying the interrelationship between IFRS 3 and IAS 40 when

classifying investment property or owner-0cuppied property.

IFRS 8 Operating Segments-Aggregation of operating segments and Reconciliation of the total of the reportable segments’ assets to the entity’s assets

IFRS 13 Fair Value Measurement-Short-term receivables and payables

IAS 16 and IAS 38 - Revaluation method—proportionate restatement of accumulated depreciation

These improvements are effective for annual periods beginning effective on or after 1 July 2014. The Group is currently assessing the impact of these improvements where applicable


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g) Revenue recognition

Sales of goods are recognised in the period in which the group delivers the product to the customer, the customer has accepted the products and the collectability of the related receivable is reasonably assured.

Revenue from the rendering of services is recognised in the period in which the services are rendered, by reference to the completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Revenue represents the fair value of the consideration receivable for sales of goods and services and is stated net of Value-Added Tax (VAT), rebates and discounts.

Interest income is recognised on a time proportion basis using the effective interest method.

h) Customer loyalty program

The group estimates the fair value of points earned under the loyalty points programme by applying statistical techniques. Inputs to the models include making assumptions about expected redemption rates. As points issued under the programme do not expire, such estimates are subject to significant uncertainty.

Award credits are accounted for as a separate identifiable component of sales. The fair value of the consideration received in respect of the initial sale is allocated between the award credits and other components of the sale.

Revenue is recognised as the risk expires which is based on the number of points that have been redeemed relative to the total number expected to be redeemed.

i) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average cost method. Net realisable value is the estimate of the selling price in the ordinary course of business, less selling expenses.

Provision for obsolescence is done on the basis of the period an item is projected to take to clear from the shelves for the two main categories of inventory being food and non-food items as follows;Food items

Between 3 and 6 months 50%Between 6 and 9 months 75%Over 9 months 100%

Non food itemsBetween 9 and 18 months 50%Between 18 and 24 months 75%Over 24 months 100%

j) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.


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j) Property, plant and equipment (continued)

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed frequently to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

Any revaluation surplus is recognized in other comprehensive income and accumulated in the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

Depreciation is calculated on a straight-line basis to write down the cost of each asset, or the revalued amount, to its residual value over its estimated useful lives as follows:

Buildings on freehold land Over a period of 45 yearsBuildings on leasehold land Shorter of estimated useful life or the lease termImprovements to premises 10 yearsPlant and machinery 5 yearsEquipment and motor vehicles 6.67 years, 5 years and 4 years (as applicable)

Freehold land is not depreciated as it is deemed to have an indefinite life.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

Property, plant and equipment are periodically reviewed for impairment. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Impairment losses are recognised in the profit or loss. The recoverable amount is the greater of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

k) Foreign currencies

The consolidated financial statements are presented in Kenya Shillings, which is the group's functional and presentation currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.


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k) Foreign currencies (continued)

Monetary assets and liabilities in foreign currencies have been translated at rates approximating the mean rates of exchange ruling at the reporting date. Transactions during the period are converted at the rates ruling at the dates of the transactions. Gains and losses on conversion and translation are either included in profit or loss or, where appropriate, recharged to the relevant third party.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

As at the reporting date, the assets and liabilities of foreign subsidiaries are translated into Kenya Shillings at the rate of exchange ruling at the reporting date, and their income statements are translated at the weighted average exchange rates for the period. Exchange differences arising on translation are recognised in other comprehensive income and accumulated in equity in the translation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised through other comprehensive income into profit or loss.

l) Financial instruments

Financial assets and liabilities are recognised when the group becomes a party to contractual provisions of the instrument.

Financial assets are recognised initially at fair value plus directly attributable transaction costs.

Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, directly attributable transaction costs.

The subsequent measurement of financial assets and liabilities depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Short-term receivables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial.

Impairment of financial assetsThe group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. The loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. Impaired debts are derecognised when they are assessed as uncollectible.


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l) Financial instruments (continued)

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Cash and cash equivalentsCash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

Cash and cash equivalents that have a fixed maturity date (less than 3 months) are subsequently measured at cost, as these are highly liquid and readily convertible.

Cash and cash equivalents are subsequently measured at amortised cost using the effective interest rate method.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are disclosed separately under current liabilities.

Trade payablesTrade and other payables are carried at amortised cost using the effective interest rate method. Trade payables being short term in nature are carried at cost as the effect of imputing interest is considered to be insignificant.

Derecognition of financial assets

i) Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

the rights to receive cash flows from the asset have expired; or the group has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the group has transferred substantially all the risks and rewards of the asset, or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, a new asset is recognised to the extent of the group’s continuing involvement in the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset, is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the group’s continuing involvement is the amount of the transferred asset that the group may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.


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l) Financial instruments (continued)

ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

Offsetting

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a currently legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

m) Tax

Current corporate taxCurrent corporate tax is provided on the basis of the results for the year as shown in the income statement, adjusted in accordance with the tax legislations and at the tax rate that has been enacted or substantively enacted at the reporting date. Corporate tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authority.Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss.

Deferred income taxDeferred income tax is provided using the liability method, on all temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, if the deferred income tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit, it is not accounted for.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted at the reporting date and are expected to apply when the asset is realised or the liability is settled.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.


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m) Tax (Continued)

Value added taxRevenues, expenses and assets are recognised net of the amount of value added tax except where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables that are stated with the amount of value added tax included. The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of accounts receivables or payables in the statement of financial position.

n) Employee benefit cost

Retirement benefit plansThe company contributes to a statutory defined contribution pension scheme, the National Social Security Fund (NSSF). Contributions are determined by local statute and are currently limited to KShs.200 per employee per month. In addition the company operates a provident fund scheme, where employees contribute 5% of their basic salaries and the employer contributes 7%.

In Uganda and Tanzania contributions to NSSF/PPF are as follows:-

Uganda : Employee contribution 5%: Employer contribution 10%

In Tanzania, the employee and employer each contributes 10% of the basic pay.

The company’s contributions to the above scheme are charged to the profit or loss in the year to which they relate.

Employee entitlementsThe monetary benefits for employees’ accrued annual leave entitlement at the reporting date are recognised as an expense accrual.

o) Impairment of non-financial assets

The group assesses at each reporting date whether there is an indication that an asset may be impaired. If such indication exists, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

Impairment losses are recognised in profit or loss, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the group estimates the asset’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.


101


p) Borrowing costs

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur.

q) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a lessee

Prepaid operating lease rentals paid are recognised as assets and are subsequently amortised over the lease period. Operating lease payments are recognised as an operating expense in profit or loss on a straight-line basis over the lease term.

r) Intangible assets and amortization

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised using the straight-line method over a period of three years.

Costs associated with developing or maintaining computer software program are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the group and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over a period of three years. Amortisation begins when the asset is available for use. Amortisation ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposable proceeds and the carrying amount of the asset and are recognized in the income statement when the asset is derecognised.

s) Cost of sales

Cost of sales includes the historical costs of inventory expensed during the year including inventory losses.

t) Investments in subsidiaries

Investments in subsidiaries are carried in the company’s separate statement of financial position at cost less provisions for impairment losses. Where, in the opinion of the directors, there has been impairment in the value of an investment, the loss is recognised as an expense in the period in which the impairment is identified.

u) Segmental reporting

The group presents segmental information using geographical segments format. This is based on the internal financial reporting systems and reflects the risks and earnings structure of the group.

The group operations are carried out in Kenya, Uganda and Tanzania.


102


v) Investment properties

Investment properties are measured initially at cost, including transaction costs, and excluding the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the year in which they arise.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use.


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C. CONSOLIDATED INCOME STATEMENT

2014 2013 2012 2011 2010Note KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

REVENUE

Sales 1 14,364,844 14,270,598 13,802,191 10,770,961 9,559,682Income from redemption of loyalty points

21 92,843 98,045 116,339 69,767 49,244

14,457,687 14,368,643 13,918,530 10,840,728 9,608,926COST OF SALES 2 (11,643,60

4)(11,600,148) (11,407,227) (8,943,513) (7,912,857)

GROSS PROFIT 2,814,083 2,768,495 2,511,303 1,897,215 1,696,069

720,000CHANGE IN VALUE OF INVESTMENT PROPERTIES

12 720,000 480,000 250,000 160,721 130,000OTHER INCOME 3 601,803 430,709 378,407 290,840 307,842

4,135,886 3,679,204 3,139,710 2,348,776 2,133,911

EXPENSES:-Administration and establishment

4

(3,498,676) (3,055,665) (2,572,249) (1,727,672) (1,498,717)

Selling and distribution 5 (119,821) (121,575) (139,036) (102,641) (98,444)

(3,618,497) (3,177,240) (2,711,285) (1,830,313) (1,597,161)

PROFIT FROM OPERATING ACTIVITIES

517,389 501,964 428,425 518,463 536,750

FINANCE COSTS 6 (64,640) (16,062) (25,082) (3,630) (103,558)

PROFIT BEFORE TAX 7 452,749 485,902 403,343 514,833 433,192

INCOME TAX (EXPENSE)/ CREDIT

8( 68,461) (128,892) (129,366) (124,408) 431,907

PROFIT FOR THE YEAR 384,288 357,010 -

273,977 390,425 865,099

ATTRIBUTABLE TO:

Owners of the parent 384,288 357,010 273,977 390,425 865,099

EARNINGS PER SHAREBasic and diluted – KShs. 9 1.45 1.35 1.03 1.47 4.81


104

D. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

PROFIT FOR THE YEAR 384,288 357,010 273,977 390,425 865,099

OTHER COMPREHENSIVE INCOME:Revaluation of land and buildings 298,084 - 190,000 531,623 -Deferred tax effect on revaluation surplus (89,425) - (57,000) (159,487) -Exchange differences on translation of foreign entity (81,417) (9,781) (28,332) (17,015) (5,251)

Other comprehensive income for the year, net of taxes 152,210 (9,781) 104,668 355,121 (5,251)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAXES

511,530 347,229 378,645 745,546 859,848

ATTRIBUTABLE TO:Owners of the parent 536,498 347,229 378,645 745,546 859,848


105

E. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

2014 2013 2012 2011 2010Note KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment 11

2,402,670 2,255,442 2,114,777 1,438,734 687,428

Investment properties 12 2,200,000 1,480,000 1,000,000 750,000 580,000Prepaid operating lease rentals 13 19,201 19,470 19,738 20,013 20,284Intangible assets 14 12,546 21,707 15,899 17,193 23,666Deferred tax asset 8

- 71,599 197,328 381,130 648,566

4,634,417 4,634,417

3,848,218 3,347,742 2,607,070 1,959,944CURRENT ASSETSInventories 15 1,333,218 1,185,065 1,067,959 838,891 709,390Trade and other receivables 16 778,697 435,791 388,424 329,095 259,108

Tax recoverable 8 4,938 - 5,300 2,356 4,101Short term deposits 23 - - 33,033 73,033 101,696Bank and cash balances 23 133,583 104,459 99,430 154,275 119,272

2,250,436 1,725,315 1,594,146 1,397,650 1,193,567

TOTAL ASSETS 6,884,853 5,573,533 4,941,888 4,004,720 3,153,511

EQUITY AND LIABILITIES

EQUITYShare capital 17 1,327,133 1,327,133 1,327,133 1,327,133 900,000Reserves 18 2,030,181 1,598,279 1,330,677 952,032 638,933

3,357,314 2,925,412 2,657,810 2,279,165 1,538,933

NON-CURRENT LIBILITIESDeferred tax 78,185 - - - -Term loans 19 99,185 200,000 80,309 183,368 320,140

177,370 200,000 80,309 183,368 320,140

CURRENT LIABILITIESTrade and other payables 20 1,876,267 1,845,793 1,631,350 1,110,984 1,090,383Deferred revenue 21 26,105 12,264 17,097 47,688 47,780Tax payable 8 1,191 673 - 2,263 -Amounts due to related parties 22

-16,054 12,879 10,785 14,433

Term loans 19 716,032 180,309 104,843 137,200 132,142Bank overdraft 19 730,574 393,028 437,600 233,267 9,700

3,350,169 2,448,121 2,203,769 1,542,187 1,294,438TOTAL EQUITY AND LIABILITIES 6,884,853 5,573,533 4,941,888 4,004,720 3,153,511


106

F CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Sharecapital

Sharepremium

Revaluationreserve

Equity pending allotment

Translationreserve

Accumulated losses Total

KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

At 1 July 2009 900,000 662,882 215,526 - (16,745) (1,942,158) (180,495)Equity pending allotment - - - 859,580 - - 859,580Profit for the year - - - - - 865,099 865,099Transfer to accumulated losses - - (1,275) - - 1,275 -Total comprehensive loss for the year - - - - (5,251) - (5,251)

At 30 June 2010 900,000 662,882 214,251 859,580 (21,996) (1,075,784) 1,538,933


107

F. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

Note Sharecapital

Sharepremium

Revaluationreserve

Equity pending allotment

Translationreserve

Accumulated losses Total

KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

At 1 July 2010 900,000 662,882 214,251 859,580 (21,996) (1,075,784) 1,538,933Equity allotment 427,133 427,133 - (854,266) - - -Reversal of excess interest capitalised

- - - (5,314) - - (5,314)

Transfer to accumulated losses - - (7,887) - - 7,887 -Profit for the year - - - - - 390,425 390,425Other comprehensive income/(loss) for the year - - 372,136 - (17,015) - 355,121

At 30 June 2011 1,327,133 1,090,015 578,500 - (39,011) (677,472) 2,279,165

At 1 July 2011 1,327,133 1,090,015 578,500 - (39,011) (677,472) 2,279,165Transfer to accumulated losses - - (10,842) - - 10,842 -Profit for the year - - - - - 273,977 273,977Other comprehensive income/(loss) for the year - - 133,000 - (28,332) - 104,668

At 30 June 2012 1,327,133 1,090,015 700,658 - (67,343) (392,653) 2,657,810


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1. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

Sharecapital

Sharepremium

Revaluationreserve

Translationreserve

Accumulatedlosses Total

KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

At 1 July 2012 1,327,133 1,090,015 700,658 (67,343) (392,653) (2,657,810)Transfer to accumulated losses - - (10,842) - 10,842 -Dividend paid - - - - (79,627) (79,627)Profit for the year - - - - 357,010 357,010Total comprehensive loss for the year - - - (9,781) - (9,781)

At 30 June 2013 1,327,133 1,090,015 689,816 (77,124) (104,428) 2,925,412

At 1 July 2013 1,327,133 1,090,015 689,816 (77,124) (104,428) 2,925,412

Profit for the year - - - 384,287 384,287

Other comprehensive income for the year - 208,659 (81,417) - 127,242

Total comprehensive Income - 208,659 (81,417) 384,287 511,529

Transfer to accumulated losses - (10,842) - 10,842 -

Dividends paid - - - 79,627 79,627

At 30 June 2014 1,327,133 1,090,015 887,633 (158,541) 211,074 3,357,314


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2. CONSOLIDATED STATEMENT OF CASH FLOWS

2014 2013 2012 2011 2010Note KShs’000 KShs‘000 KShs‘000 KShs‘000 KShs‘000

Net cash generated from operating activities 23 (539,159) 333,923 551,859 255,904 225,946Interest received - 3,050 8,222 2,386 9,719Income tax paid (8,808) (4,784) (14,527) (10,781) (3,986)Net cash (used in)/ generated from operating activities (547,967) 332,189 545,554 247,509 231,679

INVESTING ACTIVITIESPurchase of property and equipment

(465,513) (427,237) (715,542) (300,073) (59,888)Proceeds from disposal of property and equipment 350,403 1,038 2,288 1,307 499Additions to investment properties - - - (9,279) -Purchase of intangible assets - (13,851) (12,663) (7,962) (8,578)

Net cash used in investing activities (115,110) (440,050) (725,917) (316,007) (67,967)

FINANCING ACTIVITIES

Payment of dividends (79,627) (79,627) - - -Proceeds from/ (repayments) of long term borrowing 434,907 195,157 (135,416) (131,714) (935,244)Proceeds from debenture loan - - - - 859,580

Net cash (used in)/generated from financing activities 355,280 115,530 (135,416) (131,714) (75,664)

NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS (307,797) 7,669 (315,779) (200,212) 88,048

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (288,569) (305,137) (5,959) 211,268 128,471

Effects of exchange rate movements on cash and cash equivalents

(625) 8,899 16,601 (17,015) (5,251)

CASH AND CASH EQUIVALENT AT THE END OF THE YEAR 23 (596,991) (288,569) (305,137) (5,959) 211,268

Uchumi Supermarkets Limited Accountants’ Report For the Rights Issue

110

3. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SALES 2014 2013 2012 2011 2010KShs KShs’000 KShs’000 KShs’000 KShs’000

Food 9,160,492 9,304,970 9,190,868 6,934,877 6,074,602Personal care 2,875,509 2,916,613 2,702,045 2,142,710 1,982,226General merchandise 1,858,019 1,844,198 1,709,254 1,528,652 1,355,266Textiles 470,824 204,817 200,024 164,722 147,588

14,364,844 14,270,598 13,802,191 10,770,961 9,559,682

2. COST OF SALES

Food 7,568,343 7,567,373 7,658,306 5,789,360 5,041,981Personal care 2,328,721 2,385,260 2,230,663 1,772,451 1,631,604General merchandise 1,397,232 1,494,453 1,375,046 1,205,832 1,083,528Textiles 349,308 153,062 143,212 175,870 155,744

11,643,604 11,600,148 11,407,227 8,943,513 7,912,857

3. OTHER INCOME

Promotions income 129,527 89,487 64,835 67,018 43,269Profit on disposal of property and equipment 19,972 1,038 1,806 840 499Speciality shop income 184,691 166,850 207,411 155,407 186,328Decrease in allowance for credit losses - - - 1,291 2,237Miscellaneous income 267,613 170,284 96,133 63,898 65,790Interest receivable - 3,050 8,222 2,386 9,719

601,803 430,709 378,407 290,840 307,8424. ADMINISTRATION AND

ESTABLISHMENT EXPENSES

Staff costs (Note 27) 1,398,257 1,084,642 914,078 589,141 458,361Establishment costs 407,292 466,563 400,740 270,623 237,649Rent 682,582 622,056 475,001 333,671 288,130Computer expenses 33,947 25,552 23,392 30,562 21,293Motor running expenses 34,847 39,320 39,047 30,008 22,384Auditors’ remuneration 15,900 13,795 10,800 8,250 7,616Consultancy fees 49,814 46,925 39,490 41,401 28,999Increase in allowance for credit losses

-44 4,036 5,414 -

Credit card commission 46,534 43,594 39,899 33,030 27,819Bank charges and commission 58,965 17,410 32,401 10,532 27,783Amortisation of intangible assets 9,342 8,019 13,995 14,371 11,258Amortisation of operating lease rentals 269 268 275 271 271Depreciation of property and equipment 330,657 275,510 190,802 79,069 57,936General expenses 439,632 411,967 388,293 281,329 309,218

3,498,676 3,055,665 2,572,249 1,727,672 1,498,7175. SELLING AND

DISTRIBUTION

Marketing expenses 119,821 121,575 139,036 102,641 98,444


111

H. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. FINANCE COSTS 2014 2013 2012 2011 2010KShs ‘000 KShs’000 KShs’000 KShs’000 KShs’000

Interest – bank overdraft 8,541- - - - 672Interest – unsecured loans - 16,062 25,082 3,535 56,398Interest – secured loans 56,099 - - 95 27,999Interest – debenture - - - - 18,489

64,640 16,062 25,082 3,630 103,558

7. PROFIT BEFORE TAX

The profit before tax is stated after charging:-

Depreciation of property, plant and equipment 330,657 275,510 190,802 79,069 57,936Amortisation of intangible asset 9,342 8,019 13,995 14,371 11,258Amortisation of operating lease rentals 269 268 275 271 271Auditors’ remuneration 15,900 13,795 10,800 8,250 7,616Directors’ emoluments:-As executives 26,450 21,156 19,236 18,339 --As directors 3,329 3,143 905 320 -

And after crediting:

Gain on disposal of property, plant and equipment 19,972 1,038 1,806 840 499

8. TAX

INCOME TAX RECOVERABLEAt 1 July (673) 5,300 93 4,101 115Tax charge for the year (8,100) (6,916) (6,963) (15,024) -Under-provision in previous years - 3,753 4,399 (1,435) -Tax paid during the year 8,808 4,784 14,527 10,781 3,986Exchange difference 3,712 (7,594) (6,756) 1,670 -

At 30 June 3,747 (673) 5,300 93 4,101

Tax recoverable 4,938 1,226 5,044 2,356 4,101Tax payable (1,191) (1,899) 256 (2,263) -

3,747 (673) 5,300 93 4,101

DEFERRED TAX ASSET


Tax losses carried forward 126,999 214,916 341,890 468,001 576,155Excess of depreciation over tax allowances 74,633 50,690 45,797 50,770 53,371Other temporary differences 26,095 22,480 26,128 21,846 19,040Revaluation surplus transferred to equity (305,912) (216,487) (216,487) (159,487) -

(78,185) 71,599 197,328 381,130 648,566


112


Accounting profit before tax 452,749 485,902 403,343 514,833 433,192

Tax calculated at tax rate of 30% (135,825) (145,771) (121,003) (154,450) (129,958)

Tax effects on items not deducted for tax 67,366 16,879 (8,363) 30,042 3,169

Utilisation of previously unrecognised tax losses - - - - 558,696

(68,459) (128,892) (129,366) (124,408) 431,907

8. TAX (Continued) 2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

INCOME STATEMENT

Deferred tax (charge)/ credit (60,359) (125,729) (126,802) (107,949) 431,907Corporation tax (8,100) (6,916) (6,963) (15,024) -Under /(over)-provision in previous years - 3,753 4,399 (1,435) -

(68,459) (128,892) (129,366) (124,408) 431,907

9. EARNINGS PER SHARE


Profit for the year 384,288 357,010 273,977 390,425 865,099

Number of ordinary shares 265,427 265,427 265,427 265,427 180,000

Profit per share – KShs. 1.45 1.35 1.03 1.47 4.81

10. DIVIDENDS

2014 2013 2012 2011 2010KShs KShs KShs KShs KShs

Final proposed dividend per share 0.3 0.3 0.3 - -


Final proposed dividends 79,627 79,627 79,627 - -

Dividends paid 79,627 79,627 - - -


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In the opinion of the directors, there was no impairment of items in property, plant and equipment.

Buildings and freehold land were last valued in July 2014 by Kiragu & Mwangi Limited, independent professional valuers. Valuations were made on the

basis of open market value. The Kenya commercial bank has its loan to the group secured by a first charge on freehold property Land Reference Number 209/399/3 while the ICDC loan is secured by a first charge on leasehold property Land Reference number 209/12593.

11. PROPERTY, PLANT AND EQUIPMENT

Buildings and Improvements Plant and Vehicles andAt 30 June 2014: freehold land to premises machinery equipment Total

KShs ‘000 KShs’ 000 KShs’000 KShs’000 KShs’000COST OR VALUATIONAt 1 July 2013 1,268,215 361,882 939,978 1,121,672 3,691,747Revaluation recognized in OCI 298,084 - - - 298,084Transfer (66,290) - - - (66,290)Additions - 28,067 195,596 222,977 446,640Disposals - (25,511) (163,229) (258,239) (446,979)Exchange differences - 23,759 (75,287) 99,818 48,290

At 30 June 2014 1,500,000 388,198 897,058 1,186,228 3,971,483

Comprising:Cost 6,882 388,198 897,058 1,186,228 2,478,365Valuation 1,493,118 - - - 1,493,118

1,500,000 388,197 897,058 1,186,228 3,971,483

DEPRECIATIONAt 1 July 2013 45,869 282,377 437,413 670,646 1,436,305Transfer (66,290) - - - (66,290)Charge for the year 20,421 19,143 116,768 174,340 330,672Disposals - (2,953) (39,944) (73,651) (116,548)

Exchange differences - 2,172 (8,384) (9,105) (15,317)

At 30 June 2014 - 300,740 505,853 762,229 1,568,822

NET CARRYING AMOUNTAt 30 June 2014 1,500,000 87,458 391,204 423,999 2,402,661


114




KShs ‘000 KShs’ 000 KShs’000 KShs’000 KShs’000COST OR VALUATIONAt 1 July 2012 1,268,215 300,431 819,339 990,397 3,378,382Additions - 63,024 147,352 216,861 427,237Disposals - - (17,730) (80,225) (97,955)Exchange differences - (1,573) (8,983) (5,361) (15,917)

At 30 June 2013 1,268,215 361,882 939,978 1,121,672 3,691,747

Comprising:Cost 6,882 361,882 939,978 1,121,672 2,430,414Valuation 1,261,333 - - - 1,261,333

1,268,215 361,882 939,978 1,121,672 3,691,747

DEPRECIATION At 1 July 2012 25,882 255,490 359,659 622,574 1,263,605Charge for the year 19,987 28,249 97,600 129,674 275,510Disposals - - (17,730) (80,225) (97,955)Exchange differences - (1,362) (2,116) (1,377) (4,855)

At 30 June 2013 45,869 282,377 437,413 670,646 1,436,305



Buildings and freehold land were last valued in July 2012 by Kiragu & Mwangi Limited, independent professional valuers. Valuations were made on the basis of open market value.


115




KShs ‘000 KShs’ 000 KShs’000 KShs’000 KShs’000COST OR VALUATIONAt 1 July 2011 1,096,882 271,556 517,994 726,804 2,613,236Increase on revaluation 171,333 - - 171,333Additions - 46,258 331,887 337,397 715,542Disposals - (1,107) (29,889) (66,688) (97,684)Exchange differences - (16,276) (653) (7,116) (24,045)

At 30 June 2012 1,268,215 300,431 819,339 990,397 3,378,382

Comprising:Cost 6,882 300,431 819,339 990,397 2,117,049Valuation 1,261,333 - - - 1,261,333

1,268,215 300,431 819,339 990,397 3,378,382

DEPRECIATION At 1 July 2011 25,549 215,644 326,048 607,261 1,174,502Eliminated on revaluation (18,667) - - - (18,667)Charge for the year 19,000 39,547 51,605 80,650 190,802Disposals - (1,107) (29,889) (66,206) (97,202)Exchange differences - 1,406 11,895 869 14,170

At 30 June 2012 25,882 255,490 359,659 622,574 1,263,605



Buildings and freehold land were valued in July 2012 by Kiragu & Mwangi Limited, independent professional valuers. Valuations were made on the basis of open market value. The opening book values of the properties were adjusted to the revalued amounts and the resultant surplus, net of deferred tax, was credited to revaluation surplus in equity.


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11. PROPERTY, PLANT AND EQUIPMENT (Continued)


KShs ‘000 KShs’ 000 KShs’000 KShs’000 KShs’000COST OR VALUATIONAt 1 July 2010 581,882 263,111 344,752 630,104 1,819,849Increase in revaluation 515,000 - - - 515,000Additions - 13,531 181,712 104,830 300,073Disposals - - (2,260) (4,500) (6,760)Exchange differences - (5,086) (6,210) (3,630) (14,926)

At 30 June 2011 1,096,882 271,556 517,994 726,804 2,613,236

Comprising:Cost 6,882 271,556 517,994 726,804 1,523,236Valuation 1,090,000 - - - 1,090,000

1,096,882 271,556 517,994 726,804 2,613,236

DEPRECIATION At 1 July 2010 23,505 193,811 323,196 591,909 1,132,421Eliminated on revaluation (16,623) - - - (16,623)Charge for the year 18,667 26,073 10,537 23,792 79,069Disposals - - (1,794) (4,500) (6,294)Exchange differences - (4,240) (5,891) (3,940) (14,071)

At 30 June 2011 25,549 215,644 326,048 607,261 1,174,502



Buildings and freehold land were valued in August 2010 by Lloyd Masika Limited, independent professional valuers. Valuations were made on the basis of open market value. The opening book values of the properties were adjusted to the revalued amounts and the resultant surplus, net of deferred tax, was credited to revaluation surplus in equity.


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11. PROPERTY, PLANT AND EQUIPMENT (Continued)

Buildings and Improvements Plant and Vehicles and At 30 June 2010: freehold land to premises machinery equipment Total

KShs ‘000 KShs’ 000 KShs’000 KShs’000 KShs’000COST OR VALUATIONAt 1 July 2009 581,882 260,892 329,977 592,727 1,765,478Additions - 3,941 16,676 39,271 59,888Disposals - - - (1,000) (1,000)Exchange differences - (1,722) (1,901) (894) (4,517)

At 30 June 2010 581,882 263,111 344,752 630,104 1,819,849

Comprising:Cost 6,882 263,111 344,752 630,104 1,244,849Valuation 575,000 - - - 575,000

581,882 263,111 344,752 630,104 1,819,849

DEPRECIATION At 1 July 2009 14,283 168,867 319,877 576,975 1,080,002Charge for the year 9,222 26,323 5,276 17,115 57,936Disposals - - - (1,000) (1,000)Exchange differences - (1,379) (1,957) (1,181) (4,517)

At 30 June 2010 23,505 193,811 323,196 591,909 1,132,421

NET BOOK VALUEAt 30 June 2010 588,377 69,300 21,556 38,195 687,428

In the opinion of the directors, there was no impairment in items in property, plant and equipment.

Buildings and freehold land were valued in April 2008 by Lloyd Masika Limited, independent professional valuers. Valuations were made on the basis of open market value. The opening book values of the properties were adjusted to the revalued amounts and the resultant surplus was credited to revaluation surplus in equity.


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12. INVESTMENT PROPERTIES 2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

At 1 July 1,480,000 1,000,000 750,000 580,000 450,000Additions - - 9,279 9,279 -Changes in fair value during the year 720,000 480,000 250,000 160,721 130,000

At 30 June 2,200,000 1,480,000 1,000,000 750,000 580,000

Investment properties relate to two pieces of land held by the company’s subsidiary, Kasarani Mall Limited, under long-term lease arrangements with the Government of Kenya with Kasarani Mall Limited as the lessee. The land was valued at KShs.2.2 billion by Kiragu & Mwangi Limited, accredited independent valuers, as at 30 June 2014. The present value of the ground rent obligations is immaterial and thus, the valuation amount of KShs.2.2 billion is equivalent to the fair values of these properties.

Additions relate to the cost incurred in constructing a perimeter wall around the properties.

13. PREPAID OPERATING LEASE RENTALS

2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

Balance brought forward 19,470 19,738 20,013 20,284 20,555Amortisation charge for the year

(269) (268) (275) (271) (271)

At 30 June 19,201 19,470 19,738 20,013 20,284

Prepaid operating leases relate to one piece of land held by the company under a long term lease arrangement, with the Government of Kenya where the company is a lessee. The remaining lease period is 81 years.

14. INTANGIBLE ASSETS 2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

COST

At 1 July 72,089 58,288 58,288 58,288 58,288Additions - 13,851 13,851 13,851 13,851Exchange difference 195 (50) (50) (50) (50)

At 30 June 72,284 72,089 72,089 72,089 72,089

AMORTISATIONAt 1 July 50,382 42,389 42,389 42,389 42,389Amortisation for the year 9,342 8,019 8,019 8,019 8,019Exchange difference 14 (26) (26) (26) (26)

At 30 June 59,738 50,382 50,382 50,382 50,382

NET CARRYING AMOUNT At 30 June 12,546 21,707 15,899 17,193 23,666

Intangible asset relate to the computer software acquisition costs.


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Other inventory relates to packaging materials,empties and crates.

15. INVENTORIES 2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

Food 523,748 444,602 437,313 331,704 296,157Non-food 768,871 701,959 498,749 483,675 185,851Other 40,599 38,504 131,897 23,512 253,707

1,333,218 1,185,065 1,067,959 838,891 735,715

Provisions for obsolescence - - - - (26,325)

1,333,218 1,185,065 1,067,959 838,891 709,390

16. TRADE AND OTHER RECEIVABLES

Trade receivables 58,987 85,634 142,328 57,931 47,792Prepayments and other receivables 719,710 350,157 246,096 271,164 211,316

778,697 435,791 388,424 329,095 259,108

Aging analysis of trade receivables:Neither past due nor impaired 40,124 56,317 116,533 38,999 32,815Past due but not impaired: 30 to 60 days 15,821 29,317 25,795 18,932 14,977Impaired: Over 60 days 31,692 28,898 28,854 24,818 20,695

87,637 114,532 171,182 82,749 68,487Allowance for credit losses (28,650) (28,898) (28,854) (24,818) (20,695)

58,987 85,634 142,328 57,931 47,792

Movement in allowance for credit losses:

At 1 July 28,898 28,854 24,818 20,695 22,932Income statement movement(note 4) (248) 44 4,036 4,123 (2,237)

At 30 June 28,650 28,898 28,854 24,818 20,695

The above trade receivables have no collateral, are non - interest bearing and are generally on 30-60 days term. All trade receivables above 60 days are deemed past due and are assessed as impaired.

There were no trade receivables written off during the year

Neither past due nor impairedThe group classifies trade receivables under this category for receivables that are up to date with their payments and conforming to all the agreed terms and conditions. Such customers are financially sound and demonstrate capacity to continue to service their debts in the future.


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17. SHARE CAPITAL 2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

Authorised:2013: 500,000,000 (2010-2012: 300,000,000) ordinary shares of KShs.5 each 2,500,000 2,500,000 1,500,000 1,500,000 1,500,00025,000,000 preference shares of KShs.20 each 500,000 500,000 500,000 500,000 500,000

3,000,000 3,000,000 2,000,000 2,000,000 2,000,000

Issued and fully paid:

Ordinary shares of Shs.5 each 1,327,133 1,327,133 1,327,133 1,327,133 900,000

Number of ordinary shares in thousands 265,427 265,427 265,427 265,427 180,000

18. RESERVES 2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

Accumulated losses (462,874) (104,428) (392,653) (677,472) (1,075,784)Share premium 1,090,015 1,090,015 1,090,015 1,090,015 662,882Revaluation reserve 678,974 689,816 700,658 578,500 214,251Translation reserve (133,574) (77,124) (67,343) (39,011) (21,996)Equity pending allotment - - - - 859,580

1,172,541 1,598,279 1,330,677 952,032 638,933

The revaluation reserve represents the surplus on the revaluation of buildings and freehold land net of deferred income tax. The reserve is non-distributable.

The translation reserve arises from translation of the net investments in foreign subsidiaries, Uchumi Supermarkets (Uganda) Limited and Uchumi Supermarkets (Tanzania) Limited, to Kenya Shillings.

19. LOANS 2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

Borrowings are made up as follows:a) Non-current

Term loan 99,185 200,000 80,309 183,368 320,140

b) Current

Bank overdraft 730,574 393,028 437,600 233,267 9,700Debenture loan - - 80,309 183,368 320,140

Term loan 716,032 180,309 104,843 137,200 132,142

1,446,606 573,337 542,443 370,467 141,842

1,545,791 773,337 622,752 553,835 461,982


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19. LOANS (Continued) 2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

Maturity profile of non-current borrowingsBetween 1 and 2 years 99,185 100,000 80,309 104,469 95,605Between 2 and 5 years - 100,000 - 78,899 224,535Over 5 years - - - - -

99,185 200,000 80,309 183,368 320,140Term Loan

Non-currentICDC 99,185 200,000 - - -Eastern and Southern African Trade and Development Bank - - - - -Centum Investment Company Limited - - - - 40,000Kenya Commercial Bank Limited - - - - -Government of Kenya - - 80,309 183,368 280,140

99,185 200,000 80,309 183,368 320,140

CurrentICDC 16,032 80,000 - - -Eastern and Southern African Trade and Development Bank - - - 27,463Kenya Commercial Bank Limited 600,000 - - - 17,547Centum Investment Company Limited

-- 40,000 -

Government of Kenya -

100,000 104,843 97,200 87,132

616,032 180,309 104,843 137,200 132,142

The debenture loans previously had a maturity date of 23 August 2007. However, during the Annual General Meeting held on 29 January 2010, the shareholders passed a resolution to convert them into equity.

The loans from Eastern and Southern African Trade and Development Bank and Centum Investment Company Limited have been fully repaid.

The loan from the Government of Kenya was restructured in December 2009 with KShs.350 million converted into equity and the balance repaid before June 2014.

The company acquired a new loan from ICDC in June 2013 of KShs.300 million at the base rate (currently 16%) to be repaid on a quarterly basis over a period of three years without a moratorium period. The ICDC loan is secured by a first charge on LR 209/12593, a leasehold property.

The Kenya Commercial bank Loan and overdraft is secured by a first charge on freehold property land reference number 209/399/3.

The weighted average effective interest rate at year-end was:

2014 2013 2012 2011 2010

Term loan 18% 9.50% 9.50% 9.50% 9.94%Bank overdrafts 15.5% 15.10% 14.50% 14.34% 12.14%


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20. TRADE AND OTHER PAYABLES

2014 2013 2012 2011 2010

KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

Trade payables 1,634,611 1,596,030 1,444,094 995,040 930,831Accrued expenses 188,628 197,656 77,881 75,849 115,169Other payables 53,028 52,107 109,375 40,095 44,383

1,876,267 1,845,793 1,631,350 1,110,984 1,090,383

Trade payables are non-interest bearing and are normally settled within 60 days.

21. DEFERRED REVENUE 2014 2013 2012 2011 2010KShs’000 KShs’000 KShs’000 KShs’000 KShs’000

At 1 July 12,264 17,097 47,688 47,780 37,310Deferred during the year 106,121 92,691 85,748 69,675 59,714Released to the income statement (92,843) (98,045) (116,339) (69,767) (49,244)Exchange difference 563 521 - - -

At 30 June 26,105 12,264 17,097 47,688 47,780

Deferred revenue represents fair value of the consideration received from customer’s loyalty points

22. RELATED PARTY TRANSACTIONS

The group is related to various other entities through common shareholding and /or directorships.

The following balances relating to transactions entered into with related parties arising from sale and purchase of goods/ services were outstanding at year end:

1. Amounts due to related parties:2014 2013 2012 2011 2010KShs KShs’000 KShs’000 KShs’000 KShs’000

Industrial and Commercial Development Corporation (ICDC) - 369 369 369 -

Kenya Wine Agencies Limited (KWAL)

-15,685 12,510 10,416 14,433

- 16,054 12,879 10,785 14,433

KWAL and ICDC traded with the company in the normal course of business. The balances due to ICDC and KWAL relate to outstanding amounts at year end.

The table below shows total amount of transactions that have been entered into with related parties;-


Purchases from KWAL - 92,632 98,427 103,076 65,936Purchases from ICDC - - - 369 -

- 92,632 98,427 103,445 65,936


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22. RELATED PARTY TRANSACTIONS (Continued)2014

KShs’0002013

KShs’0002012

KShs’0002011

KShs’0002010

KShs’0002. Senior management compensation:

Short term employee benefits 82,062 78,961 52,072 41,407 36,162Post employment benefits 10,286 5,535 4,613 3,013 2,381

86,045 84,496 56,685 44,420 38,543

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 30 June 2014, the group did not record any impairment of receivables relating to amounts owed by related parties (2013, 2012,2011,2010: KShs Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

23. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

(a) CASH FLOWS FROM OPERATING ACTIVITIES

This has been derived as follows:-Profit before income tax 452,749 485,902 403,343 514,833 433,192Adjustments for:Depreciation on property, plant and equipment 330,657 275,510 190,802 79,069 57,936Change in fair value of investment properties (720,000) (480,000) (250,000) (160,721) (130,000)Amortisation of prepaid operating lease rentals 269 268 275 271 271Amortisation of intangible assets 9,366 8,019 13,995 14,371 11,258

Interest received - (3,050) (8,222) (2,386) (9,719)Profit on sale of property and equipment (19,972) (1,038) (1,806) (840) (499)

Operating profit before working capital changes 58,612 285,611 348,387 439,283 362,439Trade and other receivables (445,097) (47,367) (59,329) (69,987) 9,002Due to related parties (16,054) 3,175 2,094 (3,648) 339Inventories (144,815) (117,106) (229,068) (129,501) (101,441)Trade and other payables (3,374)8 214,443 520,366 19,849 (54,863)Deferred revenue 11,569 (4,833) (30,591) (92) 10,470

(539,159) 333,923 551,859 255,904 225,946


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24. EMPLOYEE BENEFITS


Salaries 670,371 602,615 543,090 513,908 411,703Medical 48,085 37,021 27,696 22,474 19,147Pension 45,403 46,957 30,587 3,013 2,854Other 634,398 398,049 312,705 49,746 24,657

1,398,257 1,084,642 914,078 589,141 458,361

25. SEGMENT INFORMATION

Kenya

KShs ‘000

Uganda

KShs ‘000

Tanzania

KShs ‘000

Adjusted on consolidation

KShs ‘000

Group

KShs ‘000

Year ended 30 JUNE 2014:Sales 12,421,044 1,263,625 692,876 - 14,377,545

Profit/(loss) before tax 199,531 (364,006) (125,187) - (289,662)

Current assets 2,064,975 341,952 85,710 (767,322) 1,725,315Non-current assets 3,642,865 281,885 128,597 (205,129) 3,848,218

Total segment assets 5,707,840 623,837 214,307 (972,451) 5,573,533

Current liabilities 1,817,508 881,791 516,144 (767,322) 2,448,121

Non-current liabilities 200,000 - - - 200,000

Total segment liabilities 2,017,508 881,791 516,144 (767,322) 2,648,121

23. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

2014KShs’000

2013KShs’000

2012KShs’000

2011KShs’000

2010KShs’000

(b) ANALYSIS OF CASH AND CASH EQUIVALENTS

Bank and cash balances 133,583 104,459 99,430 154,275 119,272Short term deposits - - 33,033 73,033 101,696Bank overdraft (730,574) (393,028) (437,600) (233,267) (9,700)

(596,991) (288,569) (305,137) (5,959) 211,268

Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the group, and earn interest at a rate in 2013: 8-11%; 2012:2.5% -15%; 2011: 3.5%; 2010:7%; . No short term deposits were held during the year ended 30 June 2014.


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25. SEGMENT INFORMATION (continued)Kenya

KShs ‘000

Uganda

KShs ‘000

Tanzania

KShs ‘000

Adjusted on consolidation

KShs ‘000

Group

KShs ‘000Year ended 30 June 2013:Sales 12,197,652 1,442,326 630,620 - 14,270,598

Profit/(loss) before tax 873,589 (256,408) (131,279) - 485,902



Current liabilities 1,817,508 881,791 516,144 (767,322) 2,448,121Non-current liabilities 200,000 - - - 200,000


Year ended 30 June 2012:Sales 11,849,709 1,592,186 360,296 - 13,802,191

Profit/(loss) before tax 621,905 (75,853) (142,709) - 403,343





Year ended 30 June 2011:

Sales 9,794,441 976,520 - - 10,770,961

Profit before tax 493,767 32,749 (11,683) - 514,833





Year ended 30 June 2010:Sales 8,589,301 970,381 - - 9,559,682

Profit before tax 424,698 8,494 - - 433,192

Current assets 1,125,721 178,353 - (110,507) 1,193,567Non-current assets 2,142,391 22,682 - (205,129) 1,959,944

Total segment assets 3,268,112 201,035 - (315,636) 3,153,511

Current liabilities 1,284,523 120,690 - (110,775) 1,294,438Non current liabilities 320,140 - - - 320,140

Total segment liabilities 1,604,663 120,690 - (110,775) 1,614,578


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25. SEGMENT INFORMATION (continued)

Sales revenue is based on the country in which the sales took place. Total assets are shown by the geographical area in which the assets are located. All the geographical segments are involved in the operation of retail supermarkets.

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash and exclude investments and amounts due from subsidiaries.

Segment liabilities consist of operating liabilities and exclude items such as dividends payable and amounts due to the parent company.

The group activities expose it to a variety of financial risks, including credit risk, foreign currency exchange rates risk, liquidity risk and interest rates risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance.

Risk management is carried out by management headed by the director risk and compliance committee.

The group maintains a conservative policy regarding currency and interest rate risks and does not engage in speculation in the markets. In addition, the group does not speculate or trade in derivative financial instruments.

26. OPERATING LEASE COMMITMENTS

Operating lease commitments – Group as lessee

Non-cancellable operating lease rentals are payable as follows:


Not later than one year 719,323 514,559 469,557 237,400 306,421Later than one year and not later than five years 3,016,315 1,431,754 1,094,601 831,661 737,295Later than five years 1,141,762 1,204,868 1,084,889 405,116 267,014

4,877,400 3,151,181 2,649,047 1,474,177 1,310,730

Operating leases – Group as lessor

Not later than one year - - - 21,673Later than one year and not later than five years - - - - 75,504

- - - - 97,177

The group leases a number of branches and office premises under operating leases. The leases typically run for a year up to ten years, with an option to renew the lease after that date. Lease payments are increased accordingly to reflect market rentals.

27. CONTINGENT LIABILITIESUchumi Supermarkets (Uganda) Limited received a notice of assessment in 2011 from Uganda Revenue Authority amounting to KShs.75.8 million which relates to a variance noted between the purchases included in the financial statements and those declared in the returns for the years 2004 to 2008. The company objected to this assessment since it could support the disallowed expenses and, therefore, no provision has been made in these financial statements.

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES


127


Interest rate risk

Interest rate risk is the risk that the future profitability and/or cash flows of financial instruments will fluctuate because of changes in the market interest rates.

The group’s exposure to the risk of changes in market interest rates relates primarily to the group’s long and short term obligations with floating interest rates.

Interest margin may increase as a result of changes in the prevailing levels of base rates applied based on the lending covenants entered into with the company. The balances outstanding as at 30 June for the respective years are disclosed under note 19.

The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at year end. The analysis was prepared using the following assumptions:

Interest-bearing liabilities outstanding as at 30 June 2014 were outstanding at those levels for the whole year,

All other variables are held constant.

If interest rates on bank overdraft had been 3 percent higher or lower, the group's net profit for the year ended 30 June 2014 would increase or decrease by xxxx (2013 - KShs.12 million 2012 – KShs.13 million; 2011 – KShs.7 million; 2010 – KShs.0.3 million).

The group’s exposure to the risks associated with changes in interest rates is minimal as its borrowings are pegged to interest rates that were agreed in advance and do not change regularly.

In light of this, the directors are of the opinion that any sensitivity analysis with respect to the interest rate risk would be unrepresentative.

Foreign currency exchange risk

The group’s policy is to record transactions in foreign currencies at the rate in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange in effect at the statement of financial position date. All gains or losses on changes in currency exchange rates are accounted for in the statement of comprehensive income. The group operates wholly within Kenya, Uganda and Tanzania and its assets and liabilities are mainly denominated in local currencies. Consequently, the group’s exposure to exchange risk is minimal. In light of this, the directors are of the opinion that any sensitivity analysis with respect to the foreign exchange exposure would be unrepresentative.

Credit risk

The largest concentration of credit exposure within the group relate to cash held with banks and accountsreceivable. The group has policies in place to ensure that services are provided to customers with an appropriate credit history. In addition, the group only deals with financial institutions which have a strong credit rating. The directors have the responsibility of managing the group’s credit risk.

The amount that best represents the group’s maximum exposure to the credit risk as at 30 June is made up as follows:


Bank balance 130,878 104,459 99,430 154,275 107,110Short term deposits - - 33,033 73,033 101,696Trade and other receivables 508,801 85,634 142,328 57,931 259,108

639,679 190,093 274,791 285,239 467,914

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)


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Credit risk (continued)

Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the group, and earn interest at the rate of xxxx in 2014; 2013: 8-11%; 2012: 2.5% - 15%; 2011: 3.5%; 2010: 6.7%. There were no short term deposits held at any time during the year ended 30 June 2014.

Liquidity risk

Liquidity risk concerns the ability of the group to fulfil its financial obligations as they become due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The group maintains a portfolio of short-term liquid assets, largely made up of bank balances and short term deposits to ensure that sufficient liquidity is maintained within the group as a whole. The group also arranges for short-term borrowings to ensure that the group’s financial obligations are met.

The group’s non derivative financial liabilities mainly comprise of trade and other payables which are short term in nature with maturities of between 30 and 60 days.

Liquidity risk analysis

At 30 June 2014 BetweenLess than Between 1 2 and 5 Over

1 year and 2 years years 5 years TotalKShs‘000 KShs‘000 KShs‘000 KShs‘000 KShs‘000

Trade payables 1,634,611 - - - 1,634,611Due to other related partiesBank overdraft 730,574 - - - 730,574Term loans 600,000 215,217 - - 815,217

2,965,185 215,217 - - 3,180,402

At 30 June 2013Trade payables 1,596,030 - - - 1,596,030Due to other related parties 16,054 - - - 16,054Bank overdraft 393,028 - - - 393,028Term loans 180,309 100,000 100,000 - 380,309

2,185,421 100,000 100,000 - 2,385,421

At 30 June 2012

Trade payables 1,444,094 - - - 1,444,094Due to other related parties 12,879 - - - 12,879Bank overdraft 437,600 - - - 437,600Term loans 104,843 80,309 - - 185,152

1,999,416 80,309 - - 2,079,725

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)


129


Liquidity risk (continued)Liquidity risk analysis (continued)

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

At 30 June 2011Less than I year

KShs’000

Between 1 and 2 years

KShs ‘000

Between 2 and 5

yearsKShs ‘000

Over 5 years

KShs ‘000Total

KShs ‘000

Trade payables 995,040 - - - 995,040Due to other related parties

10,785 - - - 10,785Bank overdraft 233,267 - - - 233,267Term loans 137,200 104,469 78,899 - 320,568

1,376,292 104,469 78,899 - 1,559,660

At 30 June 2010

Trade payables 930,831 - - - 930,831Due to other related parties

14,433 - - - 14,433Bank overdraft 9,700 - - - 9,700Term loans 132,142 95,605 224,535 - 452,282

1,087,106 95,605 224,535 - 1,407,246

29. CAPITAL MANAGEMENT

The group’s objectives when managing capital are to safeguard its ability to continue as a going concern and ultimately build an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the level of borrowings or shareholders equity or sell assets to reduce debt.

The group manages the following components as part of capital:

2014 2013 2012 2011 2010KShs ‘000’ KShs ‘000’ KShs ‘000’ KShs ‘000’ KShs ‘000’

Share capital 1,327,133 1,327,133 1,327,133 1,327,133 900,000Reserves 2,030,181 1,598,279 1,330,677 952,032 638,933

3,357,314 2,925,412 2,657,810 2,279,165 1,538,933

30. CAPITAL COMMITMENTS

There were no contracted capital commitments as at 30 June 2014.


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I STATEMENT OF ADJUSTMENTS

In compiling the financial information included herein,no restatement has been effected in the financial statements:

(a) Adjustments that impact on profit:

2014 2013 2012 2011 2010KShs ‘000’ KShs ‘000’ KShs ‘000’ KShs ‘000’ KShs ‘000’

f) Profit before tax

Profit before tax as reported in the audited financial statements

452,749 485,902 403,343 514,833 433,192

Reclassification - - - - -

Profit before tax as reported in the Accountants’ Report 452,749 485,902 403,343 514,833 433,192

g) Profit for the year

Profit for the year as reported in the audited financial statements

384,288 357,010 273,977 390,425 865,099

Reclassification - - - - -Profit for the year as reported in the Accountants’ Report 384,288 357,010 273,977 390,425 865,099

h) Earnings per share

Earnings per share as reported in the audited financial statements

1.45 1.35 1.03 1.47 4.81

Reclassification - - - - -

Earnings per share as reported in the Accountants’ Report

1.45 1.35 1.03 1.47 4.81


131

132

20 APPENDICES20.1 Provisional Allotment Letter (PAL)

READ CAREFULLY AND COMPLETE ONLY ONE PART (“PART 1” OR “PART 2”)

PARTIAL ACCEPTANCE OF NEW SHARES – “PART 2”

.

BOX (1)Ordinary Shares in your name as at

22 October 2014

PAL Number:

BOX (2)No. of New Shares provisionally

allotted to you

BOX (3) (KShs or local currency)Amount payable in full on acceptance by

3.00pm on 5 December 2014

DO

NO

T WR

ITE HER

EOFF

ICIA

L U

SE O

NLY

AUTHORISED AGENT

AUTHORISED CODE

SHAREHOLDER’S NAME(S) & ADDRESS:

BOX (4)Full Acceptance of New Shares as per

BOX (2)

BOX (5) (KShs/local currency)Amount for Full Acceptance as

per BOX (3)

BOX (6)Additional New Shares

BOX (7) (KShs/local currency)Amount for Additional New

Shares

BOX (8)Total of BOX (4) + BOX (6)

BOX (9) (KShs/local currency)Total of BOX (5) + BOX (7)

“PART 1 A” – FULL ACCEPTANCE OF NEW SHARES (For use by a qualifying shareholder who is accepting ALL the new shares as specified in Box 2 above.) I/We hereby accept in full, subject to the terms of the Information Memorandum dated 7 November 2014, this PAL and the Memorandum and Articles of UCHUMI SUPERMARKETS Limited, the number of new shares specified above in Box (2) and for the value set out in Box (3) above.

BOX (10)Partial Acceptance of New Shares

PARTIAL ACCEPTANCE OF NEW SHARES (For use by a Shareholder with a provisional allotment, as specified in BOX (2) above, who is accepting a portion of the New Shares).

IMMOBILISATION FOR TRADING IN THE RIGHTS “PART 3” – SELECT BY TICKING HERE(For use by qualifying shareholders with a provisional allotment of New Shares as specified in Box (2) above, who wish to deposit them at the CDSC for Trading in Rights at the NSE.) I/We hereby wish to immobilise in full my/our provisional allotment, through my/our Authorised Agent, subject to the terms of the Information Memorandum dated 7 November 2014, this PAL and the Memorandum and Articles of UCHUMI SUPERMARKETS Limited, the number of shares specified in Box (2). NOTE: (1) For immobilisation in Kenya, this PAL should be attached to CDS1 and CDS2 Forms and then be submitted to CDSC through your Authorised Agent before 10 November. In the other jurisdictions where Uchumi shares are listed, consult with your broker who will guide you on the existing conventions in those markets.(2) Trading in the Rights will commence on 10 November 2014 and close at 3.00 pm on 28 November 2014(3) For purposes of Payment and Registration of New Shares in your CDS Rights account at the close of trading, you will receive the Form of Entitlement (“Form E”) through your Authorised Agent, on or before 2 December 2014..

Irrevocable Bank Guarantee (IBG)

BOX (11) (KShs/local currency)Amount for Partial Acceptance

Certificated Account No.

CDS Account No.

I/We hereby accept in part, subject to the Information Memorandum dated 7 November 2014, this PAL and the Memorandum and Articles of UCHUMI SUPERMARKETSLimited, the number of New Shares specified in Box (10) and multiplied by Kshs 9.00 per new share giving the value set out in Box (11) herein.

AGENT’S STAMP

“PART 1 B”: OPTIONAL: APPLICATION FOR ADDITIONALSHARES Having accepted all the new shares in PART 1 A above, I / We hereby apply for Additional New Shares, subject to the terms of the Information Memorandum dated 7 November 2014, this PAL and the Memorandum and Articles of UCHUMI SUPERMARKETS Ltd, the number of Additional New Shares specified in Box (6) and multiplied by Kshs 9.00 per new share giving the value set out in Box (7) herein, on the understanding that a lesser number of shares or none of the additional new shares may be allotted to me / us and any refund amount sent to the Authorised Agent. I/We have indicated herein the total number of New Shares in Box (8), comprising the Full Acceptance in Box (4) and Additional New Shares applied for, if any, in Box (6). I/We have made payment in full, shown in Box (9) to my/our Authorised Agent.

ID. No. (One for each Joint Holder)

1. 2. .

Authorised Agent to provide shareholder contact nono.ow:

UCHUMI SUPERMARKETS LIMITED RIGHTS ISSUE PROVISIONAL ALLOTMENT LETTER

Please Indicate your email address and mobile telephone number in the space provided. Email:……………………………………………………………… Mobile No:…………………… Please tick if you would like this information updated to your CDS Account

Agent’s Payment (GPS)

Tick here if your Selling Agent will forward payment on your behalf

Financed Applications Only

Financin

g Ban

PAYMENT METHOD AND DETAILS – COMPLETE ONLY 1

Direct AmountPayment

. CDSC Pledge Form 5 No.

Chq/Ref Number

Bank Name & Branch

Tick here if you will pay by IBG. Only valid for amounts 1,000,000 and above

Please Indicate your Bank details for purposes of submitting your refund and any future dividend payments in the space provided. Bank name:…………………………Branch:……………………………Bank A/c No:…………………… Please tick if you would like this information updated to your CDS Account

133

………………………………………

INSTRUCTIONSIf you do not wish to take action on your Rights, do not submit this form to your Authorised Agent. Your Rights will lapse and be disposed off as per the Information Memorandum accompanying this PAL. If you wish to take action, please follow the steps below.Please complete the payment options as below:If you are making a direct payment by way of Banker’s Cheque/ RTGS, please make sure to include the Amount payable, the cheque/RTGS Ref number, the bank name and branch in the area captioned Direct Payment. Please make cheques payable to: “Uchumi Supermarkets Limited Rights Issue-PAL No Insert No ”. For RTGS please contact your Authorised Agent. DO NOT include the Kshs 30/- CDSC levy as this is payable directly to your Authorised Agent.

If you are paying your agent directly by any acceptable means, your agent will thereafter forward payment to the receiving bank, put a tick in the box labeled Agent’s Payment (GPS)

If your application is financed, please indicate the financier details, i.e. bank name and branch, and insert the CDSC pledge form 5 Serial No. in the space provided.

If your application either in total for acceptance or the total of the acceptance of New Shares and Additional New Shares is Kshs. 1,000,000.00 (or equivalent in local currency) or above, you may submit payment by irrevocable bank guarantee (IBG). If this is the payment method you will use, place a tick in the box labeled Irrevocable Bank Guarantee (IBG), and attach the IBG as defined in the information memorandum to this PAL. THEN:

Please fill out EITHER Part 1 or Part 2

PART 1: FULL ACCEPTANCE and optional application for additional new shares

This PART should only be filled out if: You wish to accept all of your rights, and optionally apply for additional New Shares follow the steps below, otherwise, follow the steps under “PART 2”.

a. Enter the number of New Shares you are accepting in Box(4). Copy this number exactly for Box(2)b. Enter the amount for the New Shares you are accepting in Box(5). Copy this number from Box(3).c. If you wish to purchase additional New Shares, follow the directions below. Otherwise, please skip to instruction(d)

To apply for additional New Shares fill in the box labeled Box (6), with the number of additional New Shares that you would like to purchase. Please note that shareholders may receive none or a lesser amount of additional New Shares for which they have applied.

Fill in the amount due for these additional new shares in Box(7). To calculate the amount due, multiply the number in Box(6) by Kshs 9.00 per new share.

d. If you have chosen not to purchase additional New Shares, write 0 in both Box(6) and Box(7).e. Fill out the total number of New Shares accepted/applied for in Box(8). You should add the values of Box(4) and Box(6). i.e. Box(8) =Box(4)+Box(6).f. Fill out the total value of New Shares accepted/applied for in box(9). You should add the values of Box(5) and box(7). i.e.Box(9)=Box(5)+Box(7).g. Once you have accepted your rights in full, you cannot sell the rights on the market.h. Please sign the form in the section provided. Please ensure that all joint shareholders sign the form.

For Institutions Please Ensure:Please ensure that the form is signed by: Two directors + the company seal affixed OR: one director,+ Company Secretary+ the company seal is affixed.

i. Complete the box labeled payment details at the top of the form. See instructions above for more detailsj. You must ensure this PAL and payment arrives at the Receiving Bank, either directly or through your Authorized Agent on or before 3.00 p.m. on 5

December 2014

PART 2: PARTIAL ACCEPTANCE

This PART should only be filled out if: You wish to accept ONLY A PORTION of the New Shares to which you are entitled AND/OR You may trade in the remaining Rights.

a. Ignore PART 1(Both Section A & B).b. Enter number of New Shares you would like to accept into Box (10) of the PAL. This number must be less than the number shown in Box (2) of the PAL.c. Enter the amount due for the New Shares in Box (11) on the PAL. To calculate this amount:

Multiply the number appearing in Box(10) on the PAL with Kshs 9.00

Write the number calculated above in Box (11) on the PAL.d. Complete the box labeled payment method and details at the top front of this form. See instructions above for more details.e. Please sign the form in the section provided. Please ensure that all joint shareholders sign the form.f. You must ensure this PAL and payment arrives at the Receiving Bank, either directly or through your Authorized Agent on or before 3.00 p.m. on 5

December 2014.

Qualifying Shareholder(s) or Authorised Attorneys’ Signature(s). (All joint holders must sign).SIGNATURE 1:………………………………………………………… SIGNATURE 2:………………………………………………………….Holder/Joint Holder/Attorney/Co. Official (Delete Inapplicable) Holder/Joint Holder/Attorney/Co. Official (Delete Inapplicable)ID NUMBER:………………………………DATE:……………… ID NUMBER:………………………………….DATE:………………

Company Seal

PROOF OF DELIVERY TO AGENT Agent Stamp

134

……………………………………………….

DELIVERY RECEIPT:You MUST ask your Authorized Agent to tear off and give you the perforated section of this application form as proof of delivery of the PAL to the Agent. The Receipt must be stamped on the reverse by the accepting authorized agent, and should be used for purposes of tracking your PAL.

For Finance Applications:Please ensure that the Financing Bank and branch as well as the bank code are correctly recorded on the PAL. Any refunds due on Financed PALs will be forwarded directly to the financing bank as recorded on the form. Please also you complete FORM CDS 5 and record the CDS Form 5 Serial No. in the appropriate location on this PAL

IN ALL CASES you must ensure this PAL and payment arrives at the Receiving Bank, either directly or through your Authorized Agent on or before 3.00 p.m. on 5 December 2014.

135

20.2 Form E

Serial No

(INSERT DATE)

AUTHORISED AGENT STAMP AUTHORISED AGENT CODE FORM OF ENTITLEMENT FOR PURCHASER OF RIGHTS (FORM E) NO

This document is of value and is negotiable. Please consult your preferred advisor and read the Information Memorandum dated 7 November 2014 accompanying this Form E. Refer to the notes on the reverse of this page

CDS ACCOUNT NUMBER/ ACCOUNT NUMBER

NO OF RIGHTS REGISTERED IN YOUR NAME

as at DATE

PURCHASER OF RIGHTS DETAILS

[ • ]

(1) Name & ID/Passport No.ENTITLEMENT

Number of Corresponding New Shares

Provisionally Purchased By You(2) Name & ID/Passport No.

(3) Address and Tel No.

FULL ACCEPTANCE OF NEW SHARES

I/We hereby accept in full subject to the terms of the Information Memorandum, this Form E and the Memorandum and Articles of Association of UCHUMI SUPERMARKETS Limited, the number of New Shares specified above and hereby make payment (see box on the right):

AMOUNT PAYABLE (KShs/local currency)

APPLICATION FOR ADDITIONAL NEW SHARES AND TOTAL NEW SHARES

ADDITIONAL NEW SHARES

Having accepted all of my original entitlement of New Shares as set out above. I/We hereby apply for the number of Additional Shares in the appropriate box on the right, subject to the terms of the Information Memorandum, this Form E and the Memorandum and Articles of Association of UCHUMI SUPERMARKETS Limited.

ADDITIONAL SHARES AMOUNT PAYABLE (KShs) Guarantee

(tick)

TOTAL NEW SHARES

Having accepted all of my original entitlement of New Shares and applied for the Additional Shares as set out above. I/We have applied for the total New Shares and hereby make total payment accordingly (see box on the right).

TOTAL NEW

SHARES

full acceptance plus additional

TOTAL AMOUNT PAYABLE

PARTIAL ACCEPTANCE OF NEW SHARES

I/We hereby accept in part, subject to the terms of the Information Memorandum, this Form E and the Memorandum and Articles of Association of UCHUMI SUPERMARKETS Limited, the number of partial New Shares as indicated in the box on the right.

PARTIAL ACCEPTANCE AMOUNT PAYABLE (KShs)

PAYMENT DETAILS WHERE PAYMENT IS FINANCED CDS-PLEDGE FORM 5 SERIAL NO (FOR KENYA):

(In the other markets, consult with your agent on the relevant forms to fill)

BANKERS CHEQUE / EFT/ RTGS (indicate which)

Bank Code Branch Name Branch Code Cheque No. / Account No.

GLOBAL PAYMENT VIA AUTHORISED AGENT (tick)

Bank Name

REFUND DETAILS

EFT/RTGS (tick) Bank Code Branch Name Branch Code Account No

Bank Name

SIGNATURE OF PURCHASER OF RIGHTS (where applicable, the authorised attorney)

(3) Company Seal(1) Signature & ID/Passport No. & Date (2) Signature & ID/Passport No. & Date

ENDORSEMENT BY AUTHORISED AGENT We confirm all the above details and sign as below:

(1) Name, Signature, ID/Passport No. & Date (2) Address, Telephone No and Stamp of Authorised Agent

UCHUMI SUPERMARKETS LIMITED RIGHTS ISSUE - FORM E – FORM OF ENTITLEMENT FOR PURCHASER OF RIGHTS

136

1. If you have sold or transferred all your Rights in UCHUMI SUPERMARKETS Limited, please return this Form E and the Information Memorandum to the stockbroker or agent through whom the sale or transfer was effected.

2. Purchasers of Rights should read the Information Memorandum that accompanies this Form E before deciding whether to take up their Rights and exercising the options available to them. Terms defined in the Information Memorandum shall, where applicable, apply herein.

3. Instructions for Completion (refer to Section 8 of the Information Memorandum for detailed information)a) To accept your Entitlement in full, use this Form E, make payment (including KShs 30 if you have a CDS Account),

sign at the bottom and deliver to your Authorised Agent on or before 3:00 p.m. on 5 December 2014b) To accept your Entitlement in full and apply for Additional Shares, use this Form E, fill in the number of Additional

Shares and the corresponding Amount Payable (by multiplying by Kshs. 9.00 per Additional Share). Then fill in the Total New Shares (add Entitlement and no of Additional Shares) and Total Amount Payable (add Amount Payable in Full Acceptance of New Shares and Amount Payable for Additional Shares), make total payment (including KShs 30 if you have a CDS Account), complete the Refund Details section, sign at the bottom and deliver to your Authorised Agent on or before 3:00 p.m. on 5 December 2014. If payment for the Additional Shares is via an irrevocable bank guarantee (see Section 8 of the Information Memorandum), tick the appropriate box in Additional Shares, make a photocopy of the guarantee for yourself and staple the guarantee to this Form E when handing over to the Authorised Agent.

c) To accept your Entitlement in part and do nothing with the balance, use this Form E, fill in Partial Acceptance of New Shares and the corresponding Amount Payable (by multiplying by Kshs. 9.00 per partial New Share). Then make payment (including KShs 30 if you have a CDS Account), sign at the bottom and deliver to your Authorised Agent on or before 3:00 p.m. on 5 December 2014.

d) To accept your Entitlement in part and sell the balance (or portion of the balance) Rights on the exchange, use this Form E and fill in Partial Acceptance of New Shares section on this Form E and the corresponding Amount Payable (by multiplying by Kshs 9.00 per New Share), make payment (including KShs 30 if you have a CDS Account), sign at the bottom and deliver to your Authorised Agent on or before 3:00 p.m. on 5 December 2014. For the balance/portion of the balance Rights, give a sale order to your Authorised Agent (last date for trading in Rights is 3.00 p.m. on 28 November 2014.

e) If you take no action on or before 3:00 p.m. on 5 December 2014 the Rights will lapse. f) If a banker's cheque or EFT or RTGS is not being used to make payment then tick Global Payment via Authorised

Agent section in the Payment Details section. g) If a Lender is financing the take-up of Rights in Kenya, then fill in the CDS Pledge Form 5 Serial No in the Payment

Details section, make a photocopy for your records and staple the form to this Form E. In the other markets where Uchumi shares are listed, consult your agent to guide you on the established conventions.

4. Authorised Agents

UCHUMI SUPERMARKETS Limited has appointed Authorised Agents (including the Transaction Advisor and Sponsoring Stockbrokers) in connection with the Rights Issue. These Authorised Agents have signed agency agreements with UCHUMI SUPERMARKETS Limited which contain various terms and conditions that each Authorised Agent is required to comply with. The Authorised Agents are (a) Members of the respective exchanges that are issued with licenses by the

respective capital market regulators. These Authorised Agents are listed in Section 21 of the Information Memorandum.

NOTES TO THE PURCHASER OF RIGHTS

137

20.3 FORM R

UCHUMI SUPERMARKETS LIMITED RIGHTS ISSUE - FORM R- FORM OF RENUNCIATION FOR PRIVATE TRANSFERS

Agent Stamp & Name Agent Code

Direct Transfer (Renunciation):I/We hereby renounce my/our Rights to subscribe for the New Ordinary Shares on the attached Provisional Allotment Letter (PAL), details of which appear herein to the person(s) named as Renouncee(s) and for the amount shown on this form. I/We certify that this transfer is made for no consideration as per the terms set out in the Information Memorandum. I/We further agree that any unrenounced Provisionally Alloted Rights on the PAL will lapse.

BOX 1PAL NUMBER

BOX 2Number of Rights/ Shares to be Renounced

BOX 3Amount Payable for Renounced Rights / Shares on acceptance by 3.00 p.m. on 21 November 2014

Renouncer Signature 1

Date: ………………………………..

Joint Renouncer Signature 2

Date: ………………………………..

Renouncer’s Full Name

Renouncer’s Full Mailing Address and Email address

Renouncer’s ID / Passport Number

Renouncer’s Signatures as per Mandate

Joint Renouncer Signature 3 / Company Seal

Date: ………………………………..

Renouncee’s Full Name

Renouncee’s Full Mailing Address and Email address

Renouncee’s ID / Passport Number & Place of Issue

Renouncee’s Relationship to Renouncer

Direct Transfer (Renunciation):I/We hereby accept in full, subject to the terms of the Information Memorandum dated 7 November 2014 this Form of Renunciation, the attached PAL and the Memorandum and Articles of Association of UCHUMI SUPERMARKETS Limited, the number of Rights specified in Box 4, and for the value set out in Box 5. I/We have made the payment in full as shown in Box 5 to UCHUMI SUPERMARKETS Limited

Box 4Acceptance of Rights/Shares as per

Box 2

Box 5For the value of (Multiply value

in Box 4 by KShs 145

Resident of:Kenya Rwanda Uganda Tanzania

Irrevocable Bank Guarantee (IBG)

Agent’s Payment (GPS)

Tick here if your Selling Agent will forward payment on yourbehalf

Financed Applications Only

Financing Bank & Branch

PAYMENT METHOD AND DETAILS – COMPLETE ONLY 1

Direct AmountPayment

. CDSC Pledge Form 5 No.Chq/Ref Number

Bank Name & Branch

Tick here if you will pay by IBG. Only valid for amounts Kshs1,000,000 and above

Renouncee’s Signatures as per Mandate

Renouncee Signature 1

Date: ………………………………..

Joint Renouncee Signature 2

Date: ………………………………..

Joint Renouncee Signature 3 / Company Seal

Date: ………………………………..

RENOUNCEE’S DETAILS

138

Eligible Shareholders/Renouncees should read the Information Memorandum, the Provisional Allotment Letter and this Form R before deciding whether to renounce and accept their Rights and exercising the options available to them. Terms defined in the Information Memorandum shall, where applicable, apply herein.

The Rights are renounceable. Accordingly, Eligible Shareholders may elect to (a) give up their Rights in full or in part or (b) transfer their rights in full or in part (c) sell their Rights in full or in part, all in accordance with the procedures set out below.

1.8.1 Renunciation by way of Trading in the Rights

(a) The Rights constitute a security in the form of an option and are tradable on the exchanges where Uchumi shares are listed for a value but only by Eligible Shareholders with CDS Accounts. The Rights shall be listed under the Main Market Segments in the respective exchanges.

(b) Eligible Shareholders will be notified of their Rights through the PAL.

(c) In addition, Eligible Shareholders with CDS Accounts will have such accounts credited with their Rights.

(d) Only Eligible Shareholders with CDS Accounts will be permitted to trade in Rights. In such an event, Eligible Shareholders who wish to renounce some or all of their Rights in this way may instruct any Authorised Agent to dispose off any or all of such Rights by way of sale on the respective exchanges.

(e) Eligible Shareholders without CDS Accounts who wish to trade in Rights in this way must first open CDS Accounts and immobilise such Rights prior to trading and must duly complete the section entitled “Immobilisation for trading in the Rights” (PART 3) as well as other relevant sections of the PAL. The CDS Account opening forms may be obtained from any Authorised Agent. Eligible Shareholders who wish to immobilise their PAL for purposes of trading in Rights must ensure they do so before 10 November 2014.

(f) Rights may be traded on the respective exchanges from 10 November 2014 to 28 November 2014.

(g) Please note that trading of Rights on the exchanges will attract a brokerage commission plus other statutory costs payable by the seller and buyer of such Rights.

(h) The respective regulators and the exchanges have approved the trading of Rights.

1.8.2 Renunciation by way of Private Transfer

(a) Eligible Shareholders wishing to transfer their Rights to a particular Renouncee may do so by way of private transfer, subject to (a) Section 31 of the Capital Markets Act (b) Regulations 57 to 61 of the Capital Markets (Licensing Requirements) General (Amendment) Regulations 2002 and (c) Rule 31 of the Central Depository Rules, 2004. Regulation 57 allows a transfer, inter alia, of Rights by an Eligible Shareholder to a close relation in the form of a gift. In such a case, any Authorised Agent, being a stockbroker, is required to assess, endorse and submit to the NSE a written application for such a transfer with the required information and supporting documents stating the reason for the proposed private transfer. A close relation means a relationship supported by documentary evidence of a spouse, parent, sibling, child, father-in-law, son-in-law, daughter-in-law, mother-in-law, brother-in-law, son-in-law, grandchild or spouse of a grandchild.East Africa shareholders outside Kenya should consult their agents to guide them on the established conventions with regard to observance of relevant regulations.

(b) In order to effect a private transfer, an Eligible Shareholder must duly complete a CDS Form 7 (in the case of Eligible Shareholders with CDS Accounts), while those Eligible Shareholders without CDS Accounts may renounce their shares by way of FORM R. Eligible Shareholders who have CDS Accounts may only transfer Rights in favour of a Renouncee with a CDS Account. Shareholders in the other markets other than Kenya should consult their agents.

(c) The last date and time for renunciation by way of private transfer is 3.00 pm on 21 November 2014.(d) Eligible Shareholders are advised to contact any Authorised Agent for the purposes of effecting the renunciation by way of private transfer.(e) If an Eligible Shareholder accepts some of his Rights and renounces the remainder by way of private transfer in the manner specified in

this paragraph 1.8.2 (Renunciation by way of Private Transfer), and where such renunciation is done via CDS Form 7 such Eligible Shareholder shall be required to submit the Entitlement and Acceptance Form in addition to the resulting FORM E, both duly completed and signed and accompanied with the Application Money in connection with the Accepted Rights to the Receiving Bank or the relevant Authorised Agent not later than 3.00 pm on 5 November 2014. Eligible Shareholders without CDS Accounts who wish to accept a partial number of rights and renounce the remainder by way of private transfer, or who wish to renounce to more than one person are advised to immobilise their Rights as set out in paragraph 1.8.1 (e) above.

1.8.3 Renunciation by declining Eligible Shareholders who wish to decline their Rights need not do anything. Any Rights not taken up by such Eligible Shareholders will

form part of the Untaken Rights.

1.8.4 Restriction on Renunciation of Rights(a) Paragraph 18 (Regulatory Restrictions) of this Section sets out certain regulatory restrictions and obligations that may be relevant to any

Eligible Shareholder or Renouncee.

Please note that any renunciation by way of trading of Rights through exchange or by way of private transfer of Rights in accordance with paragraph 1.8.1 (Renunciation by way of Trading in Rights) and paragraph 1.8.2 (Renunciation by way of Private Transfer) of this Section is only permitted if such renunciation does not trigger the said regulatory restrictions and obligations.

NOTES TO THE ELIGIBLE SHAREHOLDERS/RENOUNCEES

139

20.4 FORM Z

AUTHORISED AGENT STAMP AUTHORISED AGENT CODE PAL No.

CDS ACCOUNT NUMBERPAL No.

PRINT YOUR NAME / ADDRESS DETAILS:

FORM Z

This Form Z is only for Eligible Shareholders who wish to appoint entirely at their own risk an attorney to act on their behalf.

This Form Z can only be used by an Eligible Shareholder who has received an Entitlement of more than 100 New Shares.

APPOINTMENT OF ATTORNEY

To: The Directors, Uchumi Supermarkets Limited

This Appointment of Attorney is limited in respect of the Uchumi Supermarkets Limited Rights Issue.

I / We hereby accept, subject to the terms of the Information Memorandum, the PAL and the Memorandum and Articles of Association of USL, to appoint the persons as named in Attorney Details below (‘Attorney’) to be my/our attorneys in my/our name and on my/our behalf, to effect sale/purchase/renunciation of the New Shares provisionally allotted to me/us or any part thereof and/or obtain Entitlement and Acceptance Forms on request, complete any forms in connection with my/our Rights and to do all or acts which the Attorney thinks fit with regard to any and all Entitlement and Acceptance Forms or other forms. I/We agree to ratify everything the Attorney does or purports to do in accordance with the Appointment of Attorney and to indemnify the Attorney against all claims and liabilities arising out of anything lawfully done by the Attorney. This power shall remain irrevocable until [Insert Date]. Accordingly, I/We have signed below.

SIGNATURE OF ELIGIBLE SHAREHOLDER(S)

1)Signature 2) Signature 3)Company Seal

ID/PP No. ID/PP No.

Date Date

ATTORNEY DETAILS

Name Name Address

ID/PP No. ID/PP No. Tel No:

Date Date

SIGNATURE OFATTORNEY

1)Signature 2)Signature 3)Company Seal

ID/PP No. ID/PP No.

Date Date

UCHUMI SUPERMARKETS Limited FORM Z: APPOINTMENT OF ATTORNEYS

140

20.5 LETTER OF UNDERTAKING

[To be typed on the letter head of the Institution Guaranteeing the Transaction]

Ref: [insert Reference Number]

Date: [insert date]

Uchumi Supermarkets Limited

KNTC Complex, Yarrow Road

P.O. Box 73167-00200, Nairobi NAIROBI.

Dear Sirs,

UCHUMI SUPERMARKETS LIMITED (USL) RIGHTS ISSUE IRREVOCABLE GUARANTEE IN RESPECT OF PAYMENT FOR ALLOCATION OF NEW SHARES INSERT NAME OF THE INVESTOR

Whereas [name of Investor] [“the investor”] has by an application form No. [Insert Serial number] date [insert date] applied for [insert the number of shares] New shares n the Uchumi Supermarkets Issue as set out in the Information Memorandum dated 7 November 2014.

AND WHEREAS it has been stipulated by you in the Uchumi Supermarkets Rights Issue Information Memorandum that the investor shall furnish you with an irrevocable on demand guarantee for the full value payable for the New shares applied for at the Rights Issue Offer Prices of 9.00 (or equivalent in local currency).

AND WHEREAS we [Name of Guarantor] have agreed to give this Guarantee:

Now at the of the investor and in consideration of your allocation to the investor the New Shares or such lesser number as you shall in your absolute discretion determine, we hereby irrevocably undertake to pay you in [applicable local currency where Uchumi shares are listed], promptly upon your first written demand through [name for Receiving Bank] and without delay or argument, such sum as may be demanded by you up to a maximum some of Kenya Shillings (or equivalent in local currency) ([words][ figures]) without your needing to prove or to show grounds or reasons for your demand or the sum specified therein by way of RTGS to “Uchumi Supermarkets Rights Issue-[pal form number]on or before 3:00 p.m. on 19 December 2014 as set out in the Uchumi Supermarkets Rights Issue Information Memorandum.

This Guarantee will remain in force up to and including 3:00 p.m. on [Insert Date] and shall be governed and construed in accordance with the Laws of the Republic of Kenya (or applicable law of the jurisdiction where Uchumi shares are listed).

IN WITNESS WHEREOF THIS LETTER OF IRREVOCABLE GUARANTEE HAS BEEN EXECUTED BY US ON THIS [date on or before [Date].

[Signed as per the Guarantor]

141

21 LIST AND DETAILS OF AUTHORIZED AGENTS

Joint Lead Sponsoring StockbrokerFaida Investment Bank Limited

Crawford Business Park, Ground Floor,

State House RoadP. O. Box 45236 - 00100, Nairobi.

Tel: [email protected]

Investment BanksAfrican Alliance Kenya Investment Bank Limited

Trans-national Plaza, 1st Floor,Mama Ngina Street

P. O. Box 27639 - 00506 NairobiTel: 2762000/2762557

[email protected]

CBA Capital LimitedCommercial Bank of Africa LimitedMara and Ragati Roads, Upper HillP.O. Box 30437 – 00100 Nairobi.


Equity Investment Bank LimitedEquity Center, Hospital Road, Upper Hill

P.O.Box 75104 – 00200 NairobiTel: 0711026511/0711026473

[email protected]

KCB CapitalKencom House, Moi Avenue

P.O. Box 48400 – 00100 NairobiTel: 3270000

[email protected]

Renaissance Capital (Kenya) LimitedPurshottam Place, 6th Floor,

Chiromo RoadP. O. Box 40560 - 00100 Nairobi.

Tel : 3682000/[email protected]

Standard Bank Group Securities LimitedCfC Centre, 2nd Floor,

Chiromo Road,P.O. Box 47198 - 00100 Nairobi.

Tel: 3638900,[email protected]

Standard Investment Bank LimitedICEA Building, 16th Floor,

Kenyatta AvenueP. O. Box 13714 - 00800, Nairobi.Tel: 2228963/2228967/2229033

[email protected]

Suntra Investment Bank LimitedNation Centre, 10th Floor,

Kimathi StreetP. O. Box 74016 - 00200, Nairobi.


Dyer & Blair Investment Bank LimitedLoita House, 10th Floor,

Loita StreetP. O. Box 45396 - 00100, Nairobi.

Tel: 3240000/[email protected]

StockbrokersApex Africa Capital Limited

Rehani House, 4th Floor, Koinange Street

P. O. Box 43676 - 00100, Nairobi. Tel: 2242170

[email protected]

ABC Capital Limited IPS Building, 5th Floor,

Kimathi Street P. O. Box 34137 - 00100, Nairobi.

Tel: 2246036/2245971 [email protected]

AIB Capital LimitedFinance House, 9th Floor,

Loita Street P. O. Box 11019 - 00100, Nairobi.


Francis Drummond & Company Limited Hughes Building, 2nd Floor,

Kenyatta Avenue, P.O. Box 45465 - 00100, Nairobi.


Genghis Capital Limited Prudential Building, 6th Floor,

Wabera Street P.O. Box 1670 - 00100, Nairobi.

Tel: 2774750

Kestrel Capital (East Africa) LimitedICEA Building, 5th Floor,

Kenyatta AvenueP. O. Box 40005 - 00100, Nairobi.

Tel: 2251758/2251893

142

[email protected] [email protected]

Kingdom Securities Limited Co-operative House, 5th Floor,

Haile Selassie Avenue P. O. Box 48231- 00100, Nairobi.

Tel : [email protected]

NIC Securities Limited NIC House, Ground Floor,

Masaba Road P. O. Box 63046 - 00200, Nairobi.

Tel: 2888444 [email protected]

Old Mutual Securities Limited IPS Building, 6th Floor,

Kimathi Street P.O. Box 30059-00100, Nairobi.


Sterling Capital Limited Finance House, 11th Floor,

Loita Street P. O. Box 45080 - 00100, Nairobi.
