BACHELOR OF COMMERCE
CORPORATE GOVERNANCE AND SUSTAINABILITY
CENTUM INVESTMENT COMPANY
PART ONE
Company Profile
Centum is a publicly owned investment company with headquarters in Nairobi, Kenya. It
operates as an affiliate of the Kenyan government-owned Industrial and Commercial
Development Corporation (ICDC) which was founded in 1954 and shareholders changed its
name to Centum Investment company Limited in 2008. Its shares have been publicly traded on
the Nairobi Securities Exchange (NSE) since 1967 and the Uganda Securities Exchange (USE)
from 2011. It ‘s both a provider and manager of funds and positions itself as an investment
channel through which other investors are able to access diversified investments and
management expertise for a superior return. The company invests in enterprises in the
agricultural, education, healthcare, energy, financial services, insurance, information and
communication technology, food and beverages, catering, automotive, publishing, real estate,
power and FMCG sectors.
Centum Board charter against the NSE codes and Chapter 4 class discussions.
The board charter defines the governance parameters within which the board exists, sets out
specific responsibilities to be discharged by the Board of directors collectively, as well as certain
roles and responsibilities incumbent upon directors as individuals.
1.1 Appointment, composition, size, and qualifications of Board members
1.1.1 Appointment and qualifications of Board Members
There is a formal and transparent process for all appointments to the Board. The Board is directly
involved in the sourcing and appointment of new directors which are based on merit and against
objective criteria. The criteria are financial literacy, crisis management skills, integrity and
standing in society, a history of high standards of performance, communication skills, effective
management skills, leadership qualities, industry specific technical skills and a commitment to
the company.
A nomination and Governance committee is formed, and they shall invite as many applications
as possible from qualified persons who should disclose any conflict of interest that may
undermine their position. The committee will then screen the list and picks at least 2 according to
the set criteria and recommend them to the board for approval. The nominees will be appointed
when a majority of shareholders/directors vote to appoint them after which they are issued with
official letters of appointment. Every year the board reviews and assesses the composition and
performance of the Board.
In Succession Planning, the nomination and governance committee ensures that the term of
office of the members of the Board ends at different times and where applicable no more than
one third of the members shall retire at the same time ensuring retention of institutional memory
and smooth transition.
1.1.2 Board composition and size.
According to Centum’s Company Articles of Association the company has to comprise of not
more than eleven directors; currently they have 10 members. On the Board composition, Centum
aims at attaining a desirable ratio and balance of executive and nonexecutive directors with the
independent directors forming one third of the Board to avoid particular individuals' interest
overriding the interest of the company. The members of the board are diverse and have
experience, knowledge, skills, and a mix of personalities necessary to ensure its sound
performance.All directors have an initial term limit of 3 years which can be renewed on
satisfactory performance.
The board members, their qualifications and remuneration.
Name
Position
Qualification
Remunerati
on
Dr. Donald
Chairman, non-
·
Kaberuka
executive director
university of Glasgow
Dr. Leila Macharia
Vice Chairperson and
independent
non-executive director
PHD in Economics from 2,472,000
3,048,000
·
B.A in planning and
public policy from University
of Oregon.
·
A Juris Doctor and
LL.M from Cornell
University.
·
A Doctorate from
Stanford University
Catherine Igathe
Independent
·
Bachelor of science in
non-executive director
Business Administration from
2,928,000
United States International
University
·
Advanced Management
program from Strathmore
Business School and IESE
Business school
James Mworia
Executive director and
·
CEO
from University of Nairobi
·
Bachelor of law degree
46,241,000
Doctorate in Business
(Honoris Causa) from
Machakos University
Susan Githuku
·
CFA and CPAK holder
Independent
·
Bachelor of science
non-executive director
degree in economics and
Psychology from St.
Lawrence University
·
Master of Science
degree in development
Economics from university of
Strathclyde
2,508,000
Mary Ngige
Independent
·
non-executive director
from university of Nairobi
·
Bachelor of commerce
2,928,000
Master of Business
Administration from
Strathmore University
Andrew Mukite
Non-executive director
Musangi
Moses Ikara
·
Holder of CPAK
·
Bachelor of law from
the university of Hull in UK
Independent
·
PhD in environmental
Non-executive director
science and Natural
3,228,000
Resources from university of
Amsterdam
·
Master’s degree in
economics and bachelor’s in
agriculture from University
of Nairobi
William Byaruhanga Non-executive director
·
Bachelor of law degree
from Makerere University
·
Diploma in legal
Practice from Law
Development Centre in
Uganda.
1,908,000
William Haggai
Representative of ICDC
·
Bachelor’s degree in
(industrial and
management science and
commercial
master’s in business
development
administration in
corporation)
management science from
1,925,000
university of Nairobi
TOTAL
67,186,000
1.2 Structure of the board.
1.2.1 Skills and experience.
The board of Centum consists of individuals with an appropriate balance of skills, knowledge
and experience that benefits the company. Some examples would include, the Chairman, Dr.
Kaberuka his experience includes, he was previously the president and Chairman of African
Development Bank and served as the Minister of Finance in Rwanda. Mrs. Githuku, who is an
independent non-executive director, was previously working as the Founder and managing
director in Human Performance Dynamics Africa and as the head of talent management and
director of Coca-Cola University. These examples show that the company selects its directors’ to
ensure a good balance and value addition.
1.2.2 Committees
Without giving up its ultimate authority, the Board has assigned certain functions to committees
with authorized formal terms of reference which are reviewed annually. They currently have four
committees that serve various responsibilities. These are Audit, Risk, Nomination and
Governance and the Finance and Investment Committees.
1.3 The functions of the board.
1.3.1 The Board.
Centum has clearly defined roles and functions of the board distinct from those of management.
They demonstrate leadership, enterprise, honesty, and judgment in order to maintain the
company's prosperity while maintaining transparency, accountability, and responsibility.
The Role of the board
·
The board has the responsibility to retain full and effective control over centum and
monitor the implementation of strategic plans.
·
Ensure that there are comprehensive policies and procedures in place for smooth
governance and efficient and prudent stewardship of the company.
·
Ensure that the company carries out its activities in an ethical manner in all its dealings
and exercise corporate social responsibility.
·
Ensure that Centum complies with all the relevant laws and regulations, audit and
accounting principles which may be revised by the board from time to time.
·
Appoint the CEO senior management staff, consultants and external auditors
·
Approve annual financial statements and communicate key policies to senior
management team.
·
Approve the company’s risk appetite and maintain the desired risk profile
·
Ensure proper succession planning and nominate board members who will add value to
the company.
1.3.2 The Chairperson
The chairperson’s primary role is to direct and facilitate the board’s business. The codes specify
that the chairperson should be a non-executive Board member and in Centum Dr. Donald
Kaberuka, the Chairman, is an Independent Non-Executive Director.
Roles of the chairperson
·
Providing leadership to the board
·
Chairing the board meeting and ensure the directors receive accurate information
·
Keeping track of the contribution of individuals and ensuring visible contribution
·
Monitoring the activities of board committees.
1.3.3 Conflicts of interest
The directors are supposed to avoid putting themselves in any positions where self interest may
conflict with their duty to act in the best interest of the company. A policy is set that the
directors, their immediate family and companies where they have interests should not transact
any business with the company, without approval from the board. Annually the directors sign a
declaration of any possible or actual conflict of interest. In case of solving a conflict of interest,
they can either disclose the conflict and refrain from voting, refrain from discussion if it is minor
in nature or exclusion, where the director will be excluded from meetings where the matter is
discussed.
1.3.4 The company Secretary
The board appoints the company secretary to assist and advise all members of the Board. The
company secretary is the secretary of the board.
Company Secretary responsibilities
·
The company secretary has the role of advising the board and provide guidance to the
board on its duties and responsibilities.
·
Ensure that the board complies with the articles of association and its obligation
·
Assist the chairperson in organizing board activities
·
Maintain and update the register of conflict of interest
·
Facilitate effective communication between the organization and the shareholders and
carry any duty assigned by the board.
1.4 Board Independence
The Board in Centum has six independent directors but they may lose such independence after
associating with the company for more than nine years, consecutively or intermittently.
1.5 Board tools
The Board has the essential tools and support in place to carry out its duties and obligations
effectively. These are the Board Charter, Annual Board work plan, Code of ethics policy and an
insider trading policy.
1.6 Board Induction and continuous skill development.
The board ensures that new members are inducted into the company in accordance with the
Board Induction Policy. Each member of the Board is required to attend a minimum of twelve
hours of Board development per year by a reputable source on areas of governance.
1.7 Annual evaluation of Board members
An annual Board evaluation is conducted on the performance of the Board, committees, the
CEO, and the company Secretary.
1.8 Remuneration of Board members
Remuneration of the Board is reviewed and determined by the nomination and governance
committee. The charter states that the remuneration should be sufficient to attract motivate and
retain directors. The Board periodically reviews the remuneration of directors which is approved
by shareholders at the AGMs.
1.9 Compliance with Laws, Regulations and Standards
The company’s legal team and compliance function developed a compliance matrix for all
applicable laws and regulations and conducted regular assessments to ensure the company
remains compliant with them.
1.10 Governance Audit
The Board ensures that a governance audit is carried out annually after which they provide an
explicit statement on the level of compliance.
PART TWO
The Whistle Blowing Policy
The Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015
requires publicly listed companies to provide a platform for the disclosure of serious
malpractices. Centum whistle blow anonymous provides a platform where all stakeholders, that
is, employees, shareholders, customers, suppliers and the general public, can report on serious
malpractices in a safe, confidential and secure way.
Whistleblowing is the process through which an individual raises a concern or disclosure about
wrong doings or serious malpractices within an organization.
A whistleblower is an individual who alerts an organization on serious malpractice or actions
that endanger the firm’s employees or assets via the appropriate channels. The individual could
be an internal party like an employee or an external party like suppliers, customers or the general
public.
Serious malpractice is defined as improper behavior being committed or likely to be committed,
which includes but is not limited to the following:
1. A criminal offence, including bribery, corruption, fraud, misuse of office or breach of
government regulations/laws.
2. Breach of any legal obligation.
3. A miscarriage of justice. For example, an unreasonable verdict or a significant
misdirection by the judge.
4. Endangering health and safety.
5. Unethical practice in accounting, internal accounting controls, financial reporting and
auditing matters.
6. Conduct contrary to Centum’s ethical principles and values.
7. The cover up of any of the above.
Serious malpractice does not usually include general complaints or personal employment
grievances such as bullying, harassment, discrimination, unsatisfactory probation reports,
performance evaluation, discriminatory work assignments, equal employment opportunities and
sexual harassment. These should be dealt with through the channels provided for in the Group
Human Resources (HR) policy. However, in cases where an employee genuinely considers the
issue to be endemic within the organization or their department and no action has been taken in
response to a complaint directed to HR, then a whistle-blow may be appropriate.
The Ethics Committee is constituted at Centum Group Level and is a management committee
which is responsible for receiving and investigating whistleblowing disclosures, making a
decision based on the investigation and reporting the outcome to the CEO and the Board. It also
ensures that there is protection of the whistleblowers.
Raising Whistleblowing Concerns
A whistleblowing concern can be made confidentially or anonymously.
a. Confidential whistleblowing - the whistle blower’s name is known but will not be
disclosed, without their consent, unless required by the law.
b. Anonymous whistleblowing - the whistle blower does not identify themselves to anyone.
If a whistleblowing concern is made anonymously, enough information must be provided to
facilitate a thorough investigation on the allegations.
The Group Whistleblowing Policy encourages that whistleblowing concerns are made promptly
and at least within 3 months following the date of occurrence of the serious malpractice
disclosed.
All whistleblowing concerns must be raised through channels such as:
a. The Centum whistle blowing portal which can be accessed through the company’s
website.
b. An email address where emails are received by a designated officer of the Ethics
Committee.
c. Toll-free/Hotline number where calls will be directed to a designated officer of the Ethics
committee.
The Ethics Committee has the ultimate responsibility to determine whether the disclosure falls
within the scope of the whistleblowing policy.
Handling of whistleblowing
Centum welcomes and supports the disclosure of suspected or alleged major malpractice, and has
put in place measures that allow for independent, objective, and prompt investigations. This
approach ensures that the person making the disclosure is shielded from potential harm as a
result of actions taken by those inside or outside the Group, while also ensuring anonymity when
requested.
Protection of whistleblowers
All whistleblowing issues must be addressed in strict confidence, and Centum promises to take
all reasonable means to protect whistleblowers' identities from being used against them within
the firm, such as not disclosing their names without their consent unless required by law. For a
disclosure to be protected it must be made through the right channels to the right person, as
provided for in this policy. The whistle-blower must:
a. Make the disclosure in good faith - with honest intent and without malice.
b. Reasonably believe that the information is substantially true.
As a result of raising a whistleblower concern, an employee should not face retaliation. For
example, continued employment, prospects for future promotion and training of an employee
must not be negatively affected because he/she has made a whistle-blow.
Subjecting any member of staff to any form of detriment as a result of a protected disclosure,
including the member of staff who is being investigated as part of the disclosure, is considered
gross misconduct and will result in disciplinary action as outlined in the Group HR policy. If an
employee is harassed or victimized, he or she should report the incident to any member of the
Ethics Committee.
While this policy provides protection, intentional, false, or malicious allegations will not be
accepted. Anyone detected making purposeful, false, or malicious claims faces disciplinary
action, which might include dismissal, according to Group HR policy.
Furthermore, any costs incurred as a result of investigations conducted on the basis of false
claims would be sought by the Group as damages from the employee who made the false and
malicious allegations. Giving or accepting instructions to cover up serious malpractice is
unacceptable and may result in disciplinary action.
Disclosure Response Plan
This section of the policy documents the whistleblowing disclosure response plan, clearly
detailing the process for investigating whistleblowing concerns:
a. Making Disclosures.
b. Assessing Disclosures.
c. Addressing Disclosures - All whistleblowing issues will be handled by the Chairperson of
the Ethics Committee. When the implications are potentially serious or far-reaching, the
investigation's independence and oversight should be maintained. When a member of the
Ethics Committee is referenced in a disclosure, he or she is conflicted and should step
aside so that an independent investigation can be conducted. It's also crucial to follow
through on assurances of confidentiality.
d. Investigating Disclosures - All investigations will be conducted in confidence and will
only be shared with those who have a valid need to know such information.
e. Possible Outcomes.
Employee Training
The Ethics Committee, which will be responsible for handling whistleblowing arrangements,
should be trained on the operations of the policy and how to deal with allegations that are raised.
During their initial orientation at Centum, all new workers must be made aware of the company's
whistleblower policies. All other employees must be reminded of whistleblowing arrangements
at least once a year through refresher training so that they can continue to identify and report
malpractice suspicions, understand Centum's legal requirements for whistleblowing, and the
protection that whistleblowers must receive.
Records of training must be kept showing who received training, the training content and the
date the training was received. Training on the Whistleblowing policy shall be coordinated and
conducted by the Group Risk and Compliance Function.
The whistle blowing policy shall be made available on the Group’s intranet and website.
Legal and regulatory obligations
To ensure that they stay locally compliant and can report any conflicts with local legislation,
each business in Centum must determine the extent to which local legal and regulatory
obligations apply.
Compliance
It is the responsibility of all employees to follow the whistleblowing policy and report any
violations or suspected violations. If a member of staff fails to report an occurrence that is
included in, but not limited to, the list of categories of whistleblowing concern described above,
he or she may be considered to have engaged in significant misconduct that is addressed under
the Group HR policy.
Independent Assurance
Internal audit will determine how successful risk management and governance processes are, as
well as whether control systems are operating as intended in relation to perceived risk.
External Reporting
Whistleblowing events must be reported by the appointed Chairperson of the Ethics Committee
to local law enforcement, regulatory bodies, or government agencies where appropriate, for
example, where criminal behavior such as fraud, bribery, and corruption and/or local regulatory
breaches have been identified, unless this is impractical or unsafe, in which case they must be
reported to the Group CEO and Board Risk Committee. Within the confines of local law, Centum
must fully cooperate with law enforcement and regulators.
Cooperation
Employees who refuse to cooperate in an investigation or intentionally offer false information
during an investigation may face disciplinary action, up to and including dismissal, as outlined in
the Group HR Policy. Before any action is taken, anyone named in a report will be given the
opportunity to be heard and defend themselves.
Records Keeping
All records of the investigations are delivered to the Ethics Committee at the conclusion of the
proceedings, who must maintain them for a minimum of seven years after the conclusion of the
proceedings and ensure that they are backed up.
Insider trading policy
Centum is subjected to various laws that relate to transacting securities whether the director is an
insider. Centum directors, agents, employees and consultants are required to be fully aware of
restrictions on the company.
Insider information
Insider information is any non-public information that is only available to insiders, and which is
material enough to affect the price of the company’s securities. Centum considers the following
information to be insider information.
ü Earning and losses that are significantly higher or lower than generally expected by the capital
markets.
ü Proposed merger, acquisition, public issue of securities or divestiture of the company or its
investments
ü Significant board of management changes
ü Proposed stock split or stock dividend
ü Significant new innovations, technologies or intellectual property.
ü Imminent financial distress or bankruptcy of the company
ü Proposed partnership agreements
Insider trading guidelines
Restricted period
People deemed to be insiders are expected to obtain written consent from the company’s
secretary outside the open period which is 30 days following the public announcement and they
should exercise high degree of caution to avoid any accusation of insider trading from capital
markets.
They are expected to consult the company secretary if they are unsure where their action will
lead to insider trading
Confidentiality
Insiders are prohibited from discussing any insider information in the public unless permitted by
the company.
People guilty of insider trading will face huge penalties which include fines, dismissal or
termination of contract and legal prosecution.
PART THREE
SHARE PRICING
The average share prices of Centum Investment Company Limited for the past five years are;
2017 – sh 39.19
2018 – sh 37.04
2019 – sh 31.85
2020 – sh 23.14
2021 – sh 16.41
The share price has gradually reduced over the years.
In the year 2017-2018, Centum Investment reported lower asset valuations, a prolonged election
period, political uncertainty, an interest rate cap regime that led to a dismal performance in their
banking subsidiary, Kenya's slowing economy, and delays in closing disposed investments. The
combined effect of lower property valuation gains and deferral of recognition of realized gains
on investment disposal to the year 2018 resulted in a reduction of at least 25% in the Group's
consolidated net profit.
Centum Investment Company however, affirmed to its shareholders that it would receive a
dividend despite the company's earnings falling by at least 25%. The directors recommended the
payment of a first and final dividend of Ksh 1.2 per share. The Group's near-term priorities
included closing the gap between net asset value and share price while continuing to grow net
asset value through key activities identified by management, such as optimizing gross return,
asset redeployment, third-party capital leverage, debt reduction at the Centum level, and
gradually increasing dividend yield thereby leading to improved share prices.
In the year 2018-2019, the share prices average slightly reduced. The Board of Directors
nevertheless, recommended a first and final dividend payout of KES 1.20 per share, amounting
to KES 798 million. The Group reported a profit after tax of Ksh 4.1 billion, a 48 % rise driven
by higher realized gains, improved publishing business, and increased property valuations. Total
trading revenue increased by 7% to Ksh 10.9 billion, driven by publishing businesses, while
beverage business revenue remained resilient in the face of cold weather, distribution
disruptions, and a challenging economic environment. Financial services income increased by
23% to 3.5 billion, as non-funded income from the banking business continued to grow
throughout the year. Interest income growth remained subdued as interest capping regulation
remained in place.
In the year 2019-2020, the share price of the company reduced by about sh 8. This is because
they spent the year in many real estate units constructions, and they spent 14.4 billion on
repaying bank term loan by 31 March 2020 and a maturing bond retired post-balance sheet date
on 8 June 2020. Even so, Centum Investment performance was remarkable as its marketable
securities and cash holdings of KES 8.9 billion at 31 March 2020, rose up from KES 4.1 billion
at 31 March 2019.
The Centum Board of Directors had recommended the payment of a first and final dividend of
KES 1.20 per share to their shareholders amounting to KES 798 million.
Centum made a 4.0 scorecard for the years 2020-2024, the Group's five-year strategic plan, that
outlines strategic pillars that will institutionalize Centum by focusing on delivering consistent
and sustainable returns to both our investors and shareholders. Return and dividend payout,
capital structure and liquidity, operating costs, portfolio focus, and organizational effectiveness
are the pillars that these companies are built on.
In the year 2020-2021, the share prices further decreased. The total assets of the company
declined by 9.3 billion. This reduction was due to debt repayment of 4.1 billion, impairment
provision of 1.1 billion, finance costs of 608 million, operating expenses of 858 million and
revaluation losses of 4.2 billion. The Board of Directors recommended a final dividend of KES
0.33 per share amounting to 218 million which was charged from the 245 million profit attained
on the operating profit. Centum Investment closed some of the hottest business deals across East
Africa that would have created billions of shillings for shareholders. This year, the deals have
dried up and the company has found itself in unfamiliar loss-making territory. This was a drop of
127.5 per cent from Sh6.8 billion profit after tax that the company reported in the same period
last year, attributed to a decline in investment income.
With the current economic situation in the country and in comparison to other companies in the
investment sector, I would recommend any investor to put their money in Centum. To begin
with, Centum Investment has returned cash to its owners by paying out dividends. The dividend
payout to their owners is, the higher of 30% of the cash annuity income (excluding its capital
gains) and the previous year’s dividend pay-out. Centum Investment pays dividends; they don't
buy back the shares. Even when the company receives less profits, an investor is assured that the
Risk Committee will act in their best interest and the company will put their equity and assets
into income and profit generating projects.
Moreover, Centum holds a lot of businesses and thus uses both the residual and constant
dividend policy . In case of any excess cash they could increase the ratio of the cash dividend
and also consider the bonus share type of dividend payment. Centum also has a policy that
requires them to have a maximum operating cost to cash annuity income ratio of 30% and to
optimize dividend payout to the higher of 30% of the cash annuity income and the previous
year’s dividend income.
It is stated in the 2020 report that since 2016, Centum has returned Ksh 3.1 billion in dividends
to shareholders. The Board of Directors had recommended the payment of a dividend equivalent
to Ksh 1.20 per share (equivalent to Ksh 799 million) for the financial year ended 31 March
2020. This brings the total dividends paid in the last four years to Ksh 3.9 billion. With the
current share prices it is more affordable and cheaper for a person to invest and if one prefers to
forego the opportunity, they could sell their shares at a higher price when the share prices
increase to another potential investor.
In circumstances when there are no credible value-creating opportunities to invest in the
business, Centum Investment should only maintain assets that maximize value and return cash to
shareholders. This not only allows investors to earn a higher return elsewhere, but it also
decreases the possibility of management misusing the additional capital.
COMMITTEES
Without abandoning its ultimate responsibility, the Board has delegated certain functions to
committees with approved formal guidelines, which are reviewed yearly. The guidelines clearly
identify matters reserved for decision by the Board and Committees. The Board reviews the
membership and Chairmanship of these Committees on a regular basis and is responsible for
filling any vacancies. The Board is cognizant that members collectively have sufficient
qualifications and experience to fulfill the duties of the respective Committee. The elected
Chairman appraises the full Board of their activities on a quarterly basis through oral and/or
written reports. The Chairman of the committees participates in setting and agreeing the agenda
for meetings. There are four committees in Centum.
1) Audit committee
Membership
The Audit Committee consists of five non-executive directors, the majority of whom qualify are
independent non-executive directors. The Chief Executive, the Chief Finance Officer, the Head
of Internal Audit and the lead audit partner in charge of the internal and external audit are in
attendance at meetings.
The Chairperson of the Audit Committee is an independent Non-Executive Director.
Mandate
The role of the Board of Directors in fulfilling its oversight responsibilities for the financial
reporting process, the system of internal control, the audit process, and the company's process for
monitoring compliance with laws and regulations.
Responsibilities
The primary responsibilities of this Committee are to;
1. Provide oversight and integrity of the Company’s financial reporting.
2. Gauge the independence, qualifications and performance of an external auditor.
3. Provide oversight in relation to the Company’s internal audit functions.
4. To provide oversight on non-financial audit processes (Governance Audit and
Environmental Social and Governance (ESG) Audit).
5. Review the effectiveness of the internal audit function.
6. Consider the effectiveness of the Company’s internal control systems.
7. Review updates from management and external counsel on compliance matters affecting
the Company.
Board audit committee charter
Responsibilities
●
Financial statements- The committee; review significant accounting and reporting issues,
recent professional and regulatory pronouncements and understand their impact on the
financial statements, review the annual financial statements, consider whether they are
complete, consistent with information known to committee members and reflect
appropriate accounting principles and understand how management develops interim
financial information, and the nature and extent of internal and external auditor
involvement.
● Internal controls- The committee; consider the effectiveness of the company’s internal
control systems, including information technology security and control and understand
the scope of internal and external auditors; review over financial reporting and obtain
reports on significant findings and recommendations, together with management’s
responses.
●
Internal audit- They approve the internal audit charter, review with the Head of Internal
Audit the internal audit budget, resource plan, activities, and organizational structure of
the internal audit function and be consulted in decisions regarding the appointment,
removal of the Head of Internal Audit and ensure there are no unjustified restrictions or
limitations in its function.
●
External audit- The committee reviews the performance and remuneration of the
external auditors, makes recommendations to the Board for approval of the appointment
or discharge of the external auditors by the shareholders and also confirms the
independence of the auditors.
●
Compliance- Obtain regular updates from management and company legal counsel
regarding compliance matters.
●
Corporate governance responsibilities- Set out the corporate governance responsibilities
that are appropriate for the nature and scope of the Company’s business, establish policies
and strategies for achieving the Company’s corporate governance responsibilities and
annually assess the extent to which the company has observed its corporate governance
policies and strategies.
Meetings
Meetings of the Committee will be held as frequently as the Committee considers appropriate,
but not less than four times a year. The Chairperson or any member of the Committee may call
further special meetings. Reasonable notice of meetings and the business to be conducted shall
be given to the members of the Committee and any other executives invited to attend the
committee meetings including the Chairperson, the Chief Executive, the Chief Finance Officer
and the Head of Internal Audit. The Chairperson, at his/her discretion, may invite other
executives to attend and to be heard at meetings of the Committee.
Voting
Where the Chairperson calls upon Members to vote on any issue, decisions will be made by
simple majority. In the event of a tie, the Chairperson shall exercise a casting vote to determine
the outcome. Only Committee Members shall be entitled to vote at meetings of the Committee.
Proceedings of the committee
● Meetings and proceedings of the Committee shall be governed by the Company's
Articles of Association and applicable laws and regulations regulating the meetings
and proceedings of the Board and committees.
● The Company Secretary or a representative appointed by the Company Secretary shall
take minutes of meetings. These shall be reviewed and approved by the members of
the Committee at a subsequent meeting.
● The minutes of all meetings of Committee, or summaries thereof, shall be submitted
to the Board at a subsequent Board meeting. The Chairperson shall be entitled to an
opportunity to report orally or in writing at any meeting of the Board on any matters
of importance as well as on the Committee's findings and shall recommend actions.
2. Risk committee
Membership
The Risk Committee consists of five non-executive directors, the majority of whom qualify are
independent non-executive directors. The Chief Executive Office, the Head of Risk, the Head of
Tax and the Company Secretary in attendance.
The Chairperson of the Risk Committee is an independent Non-Executive Director.
Mandate
The role of the Risk is to assist the Board in discharging its duties relating to corporate
accountability and associated risks in terms of management, assurance and reporting for the
Company and major subsidiary undertakings that do not have individual risk committees.
Responsibilities
The primary responsibilities of this Committee are to;
1. Review of the Company’s statement on internal control systems prior to endorsement by
the Board.
2. To consider and recommend to the Board the Company’s risk appetite.
3. Commission, receive and consider reports on key financial and operational risk issues.
Board risk committee charter
Composition and membership
●
The Committee shall be made up of at least 4 members, majority of whom shall
be nonexecutive directors, with the Chief Executive Office, the Head of Risk, the
Head of Tax and the Company Secretary in attendance.
●
The Chairperson of the Committee shall be appointed by the Board and shall be
a non-executive director. The Chairperson of the Board shall not be the
Chairperson of the Committee.
● The Board shall have the power at any time to remove any member from the
Committee and fill any vacancies created by such removal.
● The Company Secretary or a representative appointed by the Company Secretary
shall be the secretary of the Committee.
Scope and authority
The Committee shall assist the Board in the discharge of its duties relating to corporate
accountability and associated risks in terms of management, assurance and reporting for the
Company and major subsidiary undertakings that do not have individual risk committees.
The Committee will also be responsible for reviewing the Company's risk management strategy
and policies, as well as reviewing reports from the risk and compliance function. The Committee
is responsible for ensuring compliance with such policies and providing guidance on significant
issues that require, or are subject to, remedial action or recommendation as a result of the
communication's deliberation regarding internal risk policy, standards, and agreed risk limits.
Risks covered
In discharging its duties, the committee shall cover risks in a wide sense, including market risk,
credit risk, liquidity risk; operation risk and commercial risk, which together cover detailed
combined risks such as interest rate risk, currency and foreign exchange risk, technology risk,
price risk, disaster recovery risk, operational risk, reputational risk, competitive risk, legal risk,
tax risk, compliance and control risks, sensitivity risks (e.g. environmental, health and safety),
concentration of risks across a number of portfolio dimensions, investment risk, human resource
risk and any other risks that may affect the Group.
Information technology governance
The Committee shall oversee and advise the Board on the Company's overall information
technology governance system and in particular:
● Consider the adequacy and effectiveness of the technology infrastructure
supporting the risk management framework.
● Review the Company's information technology processes that govern the
company's operations.
●
Review and approve the policies with relation to information technology.
● Review the company's ability to identify and manage new risk types with relation
to information technology.
●
Consider other relevant matters referred to it by the Board.
Meetings
Meetings of the Committee will be held as frequently as the Committee considers appropriate,
but it will normally meet not less than times a year. The chairperson or any member of the
committee may call other special meetings. Reasonable notice of meetings and the business to be
conducted shall be given to the members of the Committee and any other executives invited to
attend the committee meetings including the Chairperson, the Chief Executive, the head of tax
and the head of risk. The Chairperson, at his/her discretion, may invite other executives to attend
and to be heard at meetings of the committee.
Voting
Where the Chairperson calls upon Members to vote on any issue, decisions will be by way of
simple majority. In the event of a tie, the Chairperson shall exercise a casting vote to determine
the outcome. Only Committee Members shall be entitled to vote at meetings of the Committee.
Proceedings of the committee
● Unless varied by this Charter, meetings and proceedings of the Committee shall
be governed by the Company's articles of association and applicable laws and
regulations regulating the meetings and proceedings of the Board and committees.
● The Company Secretary or a representative appointed the Company Secretary
shall take minutes of the meetings. These shall be reviewed and approved by the
members of the Committee at a subsequent meeting.
● The minutes of all meetings of Committee, or summaries thereof, shall be
submitted to the Board at a subsequent Board meeting. The Chairperson shall be
entitled to an opportunity to report orally or in writing at any meeting of the
Board on any matters of importance as well as on the committee’s findings and
shall recommend action.
Authority of the committee
The Committee, in carrying out its tasks under this Charter:
●
Is authorized to investigate any activity within this Charter.
●
May, at the discretion of the Committee, require other employees of the
Company to attend meetings or parts of meetings.
● May consult with and seek any information it requires from any employees, and
all employees shall be required to cooperate with any request made by the
Committee in the course of its duties.
3. Nomination and Governance committee
Membership
The Nomination and Governance Committee (NGC) consists of five directors who are all
non-executive directors.
Mandate
The role of the NGC is to develop and implement policies with respect to both the strategic
priorities of the Board and human resources on matters of governance.
Responsibilities
The primary responsibilities of this Committee are to;
1. Provide oversight in the development and monitoring of governance-related policies as
may be determined by the Board.
2. Consider the competencies and skills of the Board as a whole.
3. Develop and recommend to the Board a succession plan for the Board and senior
management that is responsive to the needs of the Company and shareholders.
4. Review and approval of the structure of staff remuneration and incentive plans.
5. Advising the Board on staffing issues for senior management.
Board nomination and governance committee charter
Composition and membership
●
The Committee shall be made up of at least 3 members, majority of whom shall be
independent non-executive directors.
● The Chairperson of the Nominations and Governance Committee shall be an independent
non-executive Director. The Chairperson of the Board shall not be the Chairperson of the
Committee.
●
At least one of the Committee members shall have expertise in Human resources.
●
If a member of the Committee retires, is removed or resigns from the Board, that
member shall cease to be a member of the Committee.
● The Committee may invite any executive management team members or other
individuals to attend meetings of the Committee, as they consider appropriate.
● The Board shall have the power at any time to remove any members from the Committee
and fill any vacancies created by such removal.
●
The Company Secretary or a representative appointed by the Company Secretary shall
be the secretary of the Committee.
Delegations
The Committee holds delegated authority to:
●
Approve the appointment of senior managers as recommended by management.
● Receive reports and, on behalf of the boards, evaluate appeals and evaluate decisions on
promotions and confirmations by the relevant committees.
● Appoint a conciliator of disputes and, where necessary, a reserve conciliator, and receive
reports from those officers.
● Authorise the use of human resources (including payroll) systems generally; and
● Establish such sub-committees and working groups as it finds necessary to carry out its
functions. The membership and terms of reference of any standing sub-committees
established must be forwarded to the board for its endorsement.
● The committee holds delegated authority to approve the following prior to
implementation:
● Changes to the governance or contract terms of executive directors and direct reports to
the managing director.
● The design of new, or amendments to current, executive cash-based incentive plans or
equity plans.
● Total level of award proposed from or executive cash-based incentive plans or equity
plans, and termination payments to executive directors or direct reports to the managing
director
Meetings
● The Committee shall meet as frequently as required but not less than three (3) times a
year
●
Any Committee member, through the Secretary, may call any further special meetings of
the Committee.
●
A notice of each meeting confirming the date, time, venue and agenda shall be
forwarded to each member of the Committee in the week prior to the date of the meeting.
The notice for members will include relevant supporting papers for the agenda items to
be discussed.
● The Committee shall have access to professional advice from employees within the
Company and from appropriate external advisors.
Voting
Where the Chairperson calls upon Members to vote on any issue, decisions shall be by way of
simple majority. In the event of a tie, the Chairperson shall exercise a casting vote to determine
the outcome. Only Committee Members shall be entitled to vote at meetings of the Committee.
Proceedings of the committee
● Unless varied by this Charter, meetings and proceedings of the Committee shall be
governed by the Company’s articles of association and applicable laws and regulations
regulating the meetings and proceedings of the Board and committees.
● The Company Secretary or a representative appointed the Company Secretary shall take
minutes of meetings. These shall be reviewed and approved by the members of the
Committee at a subsequent meeting.
●
The minutes of all meetings of Committee, or summaries thereof, shall be submitted to
the Board at a subsequent Board meeting. The Chairperson shall be entitled to an
opportunity to report orally or in writing at any meeting of the Board on any matters of
importance as well as on the Committee’s findings and shall recommend actions.
Authority of the committee
The Committee, in carrying out its tasks under this Charter:
●
Is authorized to investigate any activity within this Charter.
●
May, at the discretion of the Committee, require other employees of the Company to
attend meetings or parts of meetings.
●
May consult with and seek any information it requires from any employees, and all
employees shall be required to cooperate with any request made by the Committee in the
course of its duties.
● The Committee shall have the right to seek any information it considers necessary to
fulfill its duties, which includes the right to obtain appropriate external advice at the
Company’s expense.
4. Finance and Investment committee
Membership
The Finance and Investment Committee (FIC) is made up of seven directors and includes the
executive director in addition to non-executive directors.
Mandate
The key role of the Finance and Investment Committee is to provide leadership in the Group’s
financial and investment activities overseeing the achievement of attractive returns on the
investments.
Responsibilities
1. Development of Investment objectives, investment guidelines and performance
measurement standards.
2. To review and evaluate investment results in the context of established standards of
performance and adherence to the investment guidelines.
3. To provide leadership in the achievement of attractive returns on the Group’s investment
and clear guidelines on investment policies that are consistent and structured, research
based and risk sensitive approach to value investing.
4. To review the Company’s detailed strategic investment plans and to recommend them to
the Board for approval.
5. To provide advice to the Board on proposals for the investment in and divestment from
enterprises and projects in line with the Company’s strategy.
6. To monitor and evaluate the performance of the Company’s investments against budget.
Board finance and investment charter committee
Composition and membership
● The Committee shall be made up of at least four non-executive directors with financial
expertise, with the Chief Executive Officer, the Managing Director, Centum Capital, the
Risk Manager and the Company Secretary in attendance.
● The Chairperson of the Committee shall be a non-executive director with financial
expertise.
●
The company secretary shall be the secretary of the Committee.
Authority and scope
● To provide leadership in the achievement of attractive returns on the Company’s
investments by developing investment grade opportunities.
●
The Company’s investments under the strategy period 2014-2019 include investments in
real estate, power, financial services, healthcare, agribusiness, FMC, ICT, Education and
other sectors that the company focuses on.
●
To develop and recommend to the Board for approval plans for raising capital for
investment purposes.
● To provide clear guidelines on investment policies, procedures and objectives for
enabling a consistent and structured, research-based and risk sensitive approach to value
investing.
●
To review the Company’s risk management approach for appropriateness on an on-going
basis in the light of developments in the markets for the sectors that the Company invests
in and the general business and economic environment and to bring to the attention of the
Board any matters deemed necessary.
●
To review the Company’s detailed strategic investment plans, including short-term
priorities and recommend these to the Board for approval.
Meetings
●
The Committee shall meet as frequently as required but not less than four times a year.
●
Any Committee member, through the Secretary, may call a meeting of the Committee, in
consultation with the Managing Director (for purposes of management input and
preparation if required).
●
A notice of each meeting confirming the date, time, venue and agenda shall be
forwarded to each member of the Committee in the week prior to the date of the meeting.
The notice for members will include relevant supporting papers for the agenda items to
be discussed.
● The Committee shall have access to professional advice from employees within the
Company and from appropriate external advisors.
●
Minutes of proceedings and resolutions of Committee meetings shall be kept by the
Secretary. Minutes, agenda and supporting papers, will be made available to any director
upon request to the Secretary, provided no conflict of interest exists.
HISTORICAL OBSERVATIONS
Centum was established in 1967 as an affiliate of the Kenyan government-owned Industrial and
Commercial Development Corporation (ICDC) with a nominal share capital of KES 2 million
and was renamed Industrial Commercial Development Corporation Investment (ICDCI). The
same year, it was listed on the Nairobi Stock Exchange. Centum, which is traded on the Nairobi
Securities Exchange (NSE) and the Uganda Securities Exchange (USE), offers investors a
diverse portfolio of regional investment opportunities in real estate, infrastructure, financial
services, private equity, energy, agriculture, and education.
In 1972 to 1973, the Permanent Secretary of the Ministry of Commerce and Industry was
appointed to the Centum Board, and ICDCI issued 400,000 additional ordinary shares, resulting
in a KES 4 million to KES 6 million increase in share capital. Centum Investment has grown to
become East Africa's leading investment firm, with assets worth more than $1 billion and a team
of over 200 employees.
In 1979 to 1993, centum invested in various other companies which were; Nairobi Bottlers
Limited, East African Fine Spinners Limited, Mount Kenya Bottlers Limited, Minet – ICDC
Insurance Brokers, Kisii Bottlers Limited, East African Breweries Limited, Car and General (K)
Limited, Dawa Pharmaceuticals Limited and General Motors East Africa. In 2008, ICDCI
rebranded to Centum Investment Company Plc (‘Centum’) after acquiring a 35% stake in
Longhorn Publishers Limited.
Centum had $6 million in equity in 2012 and sold those shares for $190 million seven years later.
Along with top-line growth, the stake's value increased more than tenfold due to increased
efficiencies and margins, which were driven by macroeconomic improvements that reduced the
cost of doing business in Centum's primary market, Kenya. In the previous fiscal year, real estate
accounted for 51.6 percent of Centum's portfolio assets, followed by 36.1 percent in private
equity, 6.2 percent in marketable securities, and 7.6 percent in development.
Centum began the greenfield project in 2010 as the master developer which included building a
water treatment plant able to provide 3m liters of fresh water a day and installing a solar plant.
In 2018, Centum began the construction of the Sabis international school in Nairobi which cost
20 million and also launched Two Rivers Mall, the largest shopping mall in Sub-Saharan Africa,
outside South Africa attracting over 200,000 visitors while exiting from GenAfrica Asset
Managers.
Huge loan payments for Two Rivers Mall have plunged Centum Investment into a net loss of
Sh1.4 billion in the year ending March 2021. In March 2020, the listed company made a profit
after tax of Sh4.6 billion in a period that saw it record an investment income of Sh12.4 billion
after it sold its beverage company. However, high finance costs by Two Rivers Development Ltd
(TRDL), the company that manages Two Rivers Mall, in which Centum has a 58 per cent stake,
booked a loss of Sh1.9 billion.
AGM NOTICE
Notice of the 54th Annual General Meeting
Public corporations must hold an annual general meeting (AGM) every year, usually within the
six - month time-frame commencing with the accounting reference date. Written notification of
at least 21 days is required. Notice is normally assumed to have been provided 48 hours after
posting, according to the Articles of Association. If all stakeholders who are eligible to be
present and vote agree, the AGM can be convened with less notice. In this case, Centum’s
Company Secretary Mwangi J. Mbogo, issued the notice on the 3rd September 2021 for the
AGM meeting to be held on the 24th September 2021. As prescribed in the Articles of
Association, this notice was in line with Business Law (Centum, 2021).
The AGM's customary agenda includes evaluating the director's and auditors' reports, declaring a
dividend, electing or re-electing directors (in cases they are privy to rotational retirement) and
auditors, and authorizing the directors to determine the auditors' compensation package.
Additional issues seeking shareholder permission or authorization, like alterations to the business
name, may be discussed during the AGM (Notice Annual General Meeting, n.d.).
The 54th Centum AGM notice was not any different. The notice proposed a first and final
dividend of KES 0.327 per ordinary share for the fiscal year ended 31 March 2021 to all
shareholders listed on the company’s Register of Members as the business closed on the 8th of
October 2021. This was to be considered and approved as per Article 118 of the Company’s
Articles of Association. It further proposed the approval of the directors’ remuneration stipulated
in the company’s Consolidated Financial Statements. This was to be done as per the Companies
Act, 2015, section 681(1). Following the untimely demise of the late Dr. Christopher John
Kirubi, an election was to be held to elect Mr. Andrew Mukite Musangi who was appointed then
by the board to fill his shoes until elections. Further elections were to be conducted to reinstate
Dr. Moses Ikiara, one of the company’s directors subject to retirement by rotations but still sees
fit to be re-elected as being eligible. The main agendas were to be concluded by the appointment
of PricewaterhouseCoopers (PwC) as the company’s auditing firm and the authorization of a
suitable remuneration to the auditors. The AGM could then dive into other businesses considered
legally contractual in the context of an AGM (Centum, 2021).
SHAREHOLDING
The company has a total number of 665,441,714 shares as of today according to MarketScreener.
The company’s outstanding shares (free-float) stand at 292,728,447 shares and are publicly
owned. Their company owns no shares. The company’s private equity wing holds the highest
number of shares. Details of the shareholding per shareholder are outlined in figure 1 below.
Figure 1: Centum Shareholding
Centum's current private equity portfolio is distributed across East Africa and is valued at KSh9
billion. A statement issued by Capital Business on 1 st November this year claimed that the
private equity wing has reserved 5 Billion Kenyan Shillings for investing in different parts of the
economy. Shareholders at CICP are expected to receive an Sh218 million dividend for the fiscal
year ending March 31, 2021, in accordance with the company's strategy of returning a portion of
its yearly dividends and capital gains to shareholders. The Sh0.33 per share dividend is to be paid
following the company's Sh245 million cash operational profit registered throughout the fiscal
year.
Source: MarketScreener
Centum's current private equity portfolio is distributed across East Africa and is valued at
KSh9 billion.A statement issued by Capital Business on 1 st November this year claimed that the
private equity wing has reserved 5 Billion Kenyan Shillings for investing in different parts of the
economy. Shareholders at CICP are expected to receive a Sh218 million dividend for the fiscal
year ending March 31, 2021, in accordance with the company's strategy of returning a portion of
its yearly dividends and capital gains to shareholders. The Sh0.33 per share dividend is to be paid
following the company's Sh245 million cash operational profit registered throughout the fiscal
year.
Recommendations
The PLC seems like a nice investment venture for anyone aspiring to invest. Centum
Investment PLC CEO James Mworia stated that the dividends issued are meant to buffer their
shareholders against the implications of the downturns in the economy following the COVID-19
breakout while enabling the group to preserve liquidity (Corporated, 2021). This clearly suggests
that the PLC has a moral obligation if not business duty to safeguard its shareholder’s
investments.
REFERENCES
Centum. (2021, November 3). Centum Investment Company PLC: Notice of the 54th Annual
General Meeting [Image]. Centum.Co.Ke.
https://centum.co.ke/images/docs/Centum_AGM_Notice_54th_2021.pdf
CENTUM INVESTMENT COMPANY LIMITED : Shareholders Board Members Managers and
Company Profile | KE0000000265 | MarketScreener. (n.d.).
Https://Www.Marketscreener.Com/. Retrieved November 29, 2021, from
https://www.marketscreener.com/quote/stock/CENTUM-INVESTMENT-COMPANY-65
01113/company/
Corporated, C. (2021, July 27). Centum pays out cash dividend for FY2021 to cushion
shareholders. Capital Business. Retrieved November 29, 2021, from
https://www.capitalfm.co.ke/business/2021/07/centum-pays-out-cash-dividend-for-fy202
1-to-cushion-shareholders/
Kariuki, S. (2021, September). Stakeholder statement on CICP Investment in Centum RE –
Centum Real Estate. Centum Real Estate. Retrieved November 29, 2021, from
https://centumre.co.ke/news/stakeholder-statement-on-cicp-investment-in-centum-re/
Notice Annual General Meeting. (n.d.). Simply-Docs. Retrieved November 29, 2021, from
https://simply-docs.co.uk/Company-General-Meetings/Notice-of-Annual-General-Meetig
Governance. Centum Investment Company Plc. Retrieved November 18, 2021, from
https://centum.co.ke/index.php/about-us/governance#audit.
Our history. Centum Investment Company Plc. (n.d.). Retrieved November 25, 2021, from
https://centum.co.ke/index.php/about-us/our-history.