DIRECTORS AND STATUTORY INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2017

Transcription

1 DIRECTORS AND STATUTORY INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2017 DIRECTORS Mr. Ngeny Biwott - Chairman Mr. Joshua. N. Oigara - Chief Executive Officer & Managing Director Mr. Henry K Rotich - Alternate Mr. Julius Mutua Mrs. Catherine Kola - Retired 1 June 2017 Mrs. Charity M. Muya-Ngaruiya - Retired 21 April 2017 Mr. Adil A. Khawaja Gen. (Rtd) Joseph R.E. Kibwana - Retired 21 April 2017 Mr. Tom D. Ipomai Mr. John Okoth A. Nyerere Ms. Georgina.M. Malombe Dr. Nancy A Onyango - Appointed 22 September 2017 and resigned 3 January 2018 Mrs. Josephine Djirackor - Appointed 3 January 2018 Mr. Lawrence Kimathi - Chief Financial Officer SECRETARY Mr. Joseph Kania PO Box Nairobi, Kenya AUDITORS KPMG Kenya Certified Public Accountants 8th Floor, ABC Towers ABC Place, Waiyaki Way PO Box Nairobi, Kenya REGISTERED OFFICES AND PRINCIPAL PLACES OF BUSINESS KCB Group PLC KCB Bank Tanzania Limited Kencom House Harambee Plaza Moi Avenue Ali Hassan Mwinyi Road/Kaunda Road Junction P.O. Box PO Box 804 Nairobi, Kenya Dar es Salaam, Tanzania KCB Bank South Sudan Limited KCB Bank Uganda Limited KCB Plaza Commercial Plaza Ministry Road 7 Kampala Road P.O. Box 47 PO Box 7399 Juba, Southern Sudan Kampala, Uganda KCB Bank Rwanda Limited KCB Bank Burundi Limited Avenue de la Paix Boulevard Patrice Lumumba PO Box 5620 PO Box 6119 Kigali, Rwanda Bujumbura, Burundi KCB Bank Kenya Ltd (Ethiopia Representative Office) Morning Star Mall 4th floor Bole Medhanialem Addis Ababa, Ethiopia SOLICITORS Various. A list is available at the Company 63

2 KCB INTEGRATED REPORT AND FINANCIAL STATEMENTS 2017 REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2017 The Directors submit their report together with the audited financial statements for the year ended 31 December 2017, in accordance with the Kenyan Companies Act, 2015 which disclose the state of affairs of KCB Group PLC (the Group ) and its subsidiaries. 1. Change of name On 17 January 2016, Kenya Commercial Bank Limited, with the sanction of a special resolution of the Company and with the approval of the Registrar of Companies, changed its name to KCB Group Limited. Subsequently, in compliance with the Kenyan Companies Act, 2015, KCB Group Limited changed its name to KCB Group PLC on 23 August Principal activities The company is licensed as a non-operating holding company under the Banking Act (Cap 488). The principal activities of its main subsidiaries is provision of corporate, investment and retail banking services. 3. Transfer of assets and liabilities from KCB Group PLC On 1 January 2016, KCB Group PLC transferred its banking business and the related assets and liabilities to its wholly owned subsidiary, KCB Bank Kenya Limited, by operation of Section 9(3) of the Banking Act, in line with the approval of the shareholders of the company during the annual General Meeting held on 15 May The assets and liabilities were transferred to KCB Kenya Limited at their carrying amounts, without any fair value uplift, in exchange for equivalent share capital in the subsidiary. The agreement to transfer assets was signed by both companies and approved by the Central Bank of Kenya to take effect from 1 January Results The results of the Group and the Company are set out on pages 74 to 76 and 77 to 79 respectively. 5. Dividend An interim dividend of KShs 3,066 million was approved and paid during the year (2016 Nil). The Directors recommend a final dividend of Kshs. 6,132 million, this together with the interim dividend this brings total dividend to Kshs. 9,198 million (2016: Kshs. 9,198 million) which represents KShs 3 per share in respect of the year ended 31 December 2017 (2016 Kshs. 3 per share). 6. Directors The Directors who served during the year and up to the date of this report are set out on page 63. All the Directors are non-executive other than the Chief Executive Officer and the Chief Financial Officer. 7. Business overview The Group Consolidation includes the results of the entities owned by KCB Group PLC. The entities operate in Kenya, Tanzania, South Sudan, Rwanda, Uganda and Burundi mainly in the Banking Business. The profit before tax remained flat at Kshs. 29 billion mainly affected by the diminishing interest income on loans and the additional impairment on loans and advances. The year 2018 will see other additional changes in the Banking sector as the implementation of IFRS 9 comes into effect. The implementation is expected to increase provisions across the banking industry; however the bank will be cushioned by the excess regulatory provisions that it currently holds. Total Operating expenses were up 6% from Kshs billion to Kshs. 35 billion mainly attributable to expenses to support business growth. Customer deposits were up 11% from Kshs. 448 billion to Kshs. 500 billion attributable to customer number growth and improved customer confidence with the KCB brand. Loans and advances improved by 10% from Kshs. 425 billion to Kshs. 386 billion.the improved liquidity is due to the increase in deposits and customer credit appetite attributed to this phenomenal growth.the Group will continue to innovate products to satisfy its customers ever changing needs. Going forward the focus is to improve the non-funded income ratio through alternative channels and technology. The Group s activities exposes it to a variety of financial risks, including credit risk, liquidity risk, market risks and operational risks. The Group s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial performance. The Board of Directors has overall responsibility for the establishment and oversight of the Group s risk management framework. The Board of Directors of the Group has established various committees including Credit, Audit, Risk, Human Resources, Procurement and Information Technology committees, which are tasked with developing and continuous monitoring of the Group risk management policies in their specified areas. The detailed description and analysis of the key risks is set out on note 4 of the financial statements. Information about the employees of the Group and Company is included in Note 15 of the Financial Statements. Information about social and community issues is included on pages 43 to 45 and 48 to 53 of the Integrated Report. 8. Relevant audit information The Directors in office at the date of this report confirm that: i. There is no relevant audit information of which the Group s auditor is unaware; and ii. Each director has taken all the steps that they ought to have taken as a director so as to be aware of any relevant audit information and to establish that the Group s auditor is aware of that information. 9. Auditors The auditors of the Company, KPMG Kenya, have indicated their willingness to continue in office in accordance with Section 721 of the Kenyan Companies Act, Approval of financial statements The financial statements were approved and authorised for issue by the Board of Directors on 7 March By order of the Board Mr. Joseph Kania GROUP COMPANY SECRETARY Date: 7 March

3 DIRECTORS REMUNERATION REPORT FOR THE YEAR ENDED 31 DECEMBER 2017 The KCB Group Plc. approach towards reward and recognition is to ensure that individuals are adequately compensated and recognized for their role towards the overall success of the Groups business. KCB Group Plc. presents the Director s Remuneration report for the year ended 31 December, 2017 in line with The Capital Markets Authority Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 which provides guidelines on Director s remuneration and in line with the provisions of The Companies Act, During the year ended 31 December, 2017, the Board of Directors consisted of: (a) Two Executive Directors: (i) Joshua Oigara Group Chief Executive Officer & Managing Director (ii) Lawrence Kimathi Group Chief Financial Officer (b) One Non-executive Director: (i) Henry Rotich (Cabinet Secretary - National Treasury) (Alternate: Julius Mutua) (c) Maximum of eight independent Non-Executive Directors: (i) Ngeny Biwott. (ii) Adil Khawaja (iii) Tom Ipomai (iv) Georgina Malombe (v) John Nyerere (vi) Charity Muya-Ngaruiya (retired 21 April, 2017) (vii) Gen. (Rtd.) Joseph Kibwana (retired 21 April, 2017) (viii) Catherine Kola (retired 1 June, 2017) (ix) Nancy Onyango (appointed 7 August, 2017 and resigned 3 January, 2018) (a) Directors Emoluments For the financial year ended 31 December, 2017, the total Directors remuneration was KShs 400 million (2016 KShs 347million) The total amount of emoluments paid to Directors for services rendered during the Year 2017 is disclosed in Note 18 and 38 to the Financial Statements. Neither at the end of the financial year, nor at any time during the year, did there exist any arrangement to which the Company is a party, under which Directors acquired benefits by means of acquisition of the Company s shares. (b) Non-Executive Directors Remuneration and Privileges Policy The Group has put in place a policy that adequately defines the remuneration and related privileges received by the Non-Executive Directors of the Company. All the remuneration and privileges accorded to the Non-Executive Directors and enumerated under the policy are competitive and reviewed according to the prevailing market trends for companies of a similar size and complexity of the Company. The Board has in place a formal process of reviewing its performance and that of its committees and individual directors. Evaluation of the board is externally facilitated after every 2 years. Each director completes a detailed questionnaire designed to obtain feedback on the board s performance on the following areas: Strategic objectives. Risk governance. Board composition and skills. Board meetings and preparation. Board interaction and support. Performance of governance functions. Performance of Chairman, respective committees and individual directors. Each Non-Executive Director serves for a total non-renewable period of 8 years from the date of appointment. However, in accordance with the Articles of Association of the Company, one-third of the Non-Executive Directors are required to resign at each AGM and may offer themselves for reappointment to continue serving on the Board. No Director is entitled to any compensation upon the termination or end of their tenure as a member of the board. The details of the tenure of the current Non-Executive Directors is provided in the following table: Name Appointment Date Retirement Date Mr. Ngeny Biwott 15 June June 2019 Mr. Henry Rotich (Alt. Mr. Julius Mutua) 24 September Mr. Adil Khawaja 14 June June 2020 Mr. Tom Ipomai 8 July July 2021 Ms. Georgina Malombe 16 June June 2022 Mr. John Nyerere 13 June June 2022 Mrs. Josephine Djirackor 3 January January 2026 The Human Resources & Nominations Committee of the Board is responsible for setting and administering the Non-Executive Directors remuneration policy. During the year 2017, the Human Resources & Nominations Committee reviewed the entitlement under the Remuneration Policy and considered that the remuneration as set was sufficient and in line with prevailing market rates with the exception of the adjustment of the telephone allowance for the Group Chairman which was increased by Kshs. 30, due to exigency requirements of the office. The Human Resources & Nominations Committee will, during the current year, review the level of the Non-Executive Directors remuneration and make proposals for any changes as may be deemed appropriate. The following components are provided to the Non-Executive Directors: Monthly Fees These are paid to the Non-Executive Directors taking into account their responsibility as a Director of the Company. These are paid monthly Sitting Allowance A sitting allowance is paid to each Non-Executive Directors for attending a duly convened and constituted meeting of the Board or of any of the Committees. 65

4 KCB INTEGRATED REPORT AND FINANCIAL STATEMENTS 2017 DIRECTORS REMUNERATION REPORT Duty Travel-day(s) Allowance An allowance is paid to a Non-Executive Director for any day of travel away from (and back to) his regular station in order to attend to duties of the Company. Duty Day Allowance An allowance paid to a Non-Executive Director for any day away his regular station in order to attend to duties of the Company. Telephone Allowance Non-Executive Directors are entitled to a telephone allowance paid monthly. Club Membership Non-Executive Directors are entitled to paid membership to a social or fitness club. Medical Insurance Cover Provided to all Non-Executive Directors for their individual medical requirements covering both out-patient and in-patient requirements. Professional Indemnity Cover This is provided in line with best market practice to provide protection for the Non- Executive Directors in undertaking their duties in such capacity. (c) Executive Directors remuneration The remuneration for Executive Directors is as per the negotiated employment contracts. Each Executive Director is employed on a fixed term basis. The fixed term contracts run for a period not exceeding 5 years. The contracts are renewable. The details of the contracts for the Executive Directors are as follow: Name Commencement Date Duration Unexpired term* Termination Notice Joshua Oigara 1 January years 4 years 3 months Lawrence Kimathi * As at 31 December, January years 3 years 3 months Executive Directors performance is measured on the basis of a Balanced Score Card. Annual business performance targets are derived from the KCB Group five year ( ) strategic plan. The key initiatives under the strategic plan include: Key performance measures under the Balances Score Card cover areas around: Financial performance; Customer and stakeholder satisfaction; Human capital culture, learning and growth; and, Efficiency in internal business processes. Executive Directors are entitled to the following remuneration: Consolidated Basic Pay This is the consolidated base salary paid to the Executive Director that includes an element of housing. Bonus Executive Directors are entitled to a performance based bonus pay. The bonus is paid based on existing bonus policy and is paid in full on an annual basis. Allowances Allowances paid include a house allowance, a car allowance, a telephone allowance and an allowances related to loan benefit adjustment. Gratuity This is paid to Executive Directors at the rate of 20% of the annual consolidated basic salary. The total gratuity earned is paid at the end of the contract term. Club Membership Executive Directors are entitled to paid membership to a social or fitness club. Medical Insurance Cover As provided to all employees, Executive Directors are entitled to medical insurance cover for their individual and family medical requirements covering both outpatient and in-patient requirements. Professional Indemnity Cover This is provided in line with best market practice to provide protection for the Executive Directors in undertaking their duties in such capacity. During the year 2017, there was a 5% adjustment to the basic pay of the two Executive Directors sitting on the board with effect from 1 January, The Company proposes to make a similar adjustment to the remuneration level of the Executive Directors in the current financial year. Building a customer centric organization; Exponential growth in digital financial services; Business growth; Excellence in operational efficiency; Effective talent management; and, Driving shareholder value. 66

5 DIRECTORS REMUNERATION REPORT i. Non-Executive Directors fees, allowances and other benefits for the year ended 31 December, 2017 DIRECTORS FEES SITTING ALLOWANCE OTHER ALLOWANCES (1) NON CASH BENEFIT (2) TOTAL Director s Name KShs. million KShs. million KShs. million KShs. million KShs. million Mr. Ngeny Biwott Chairman CS National Treasury Mr. Julius Mutua (Alt. to CS) (3) Mr. Adil Khawaja Mr. Tom Ipomai Ms. Georgina Malombe Mr. John Nyerere Mrs. Charity Muya-Ngaruiya (4) Gen. (Rtd.) Joseph Kibwana (5) Mrs. Catherine Kola (6) Dr. Nancy A. Onyango (7) GRAND TOTAL (8) 85 Notes: 1. Other allowances includes the telephone allowance, a meal allowance and the duty travel-day and duty day allowance. 2. Non-cash benefits includes medical insurance cover cost, club membership and professional indemnity cover cost. 3. Earns a sitting allowance for KCB Group PLC, KCB Bank Kenya Limited, KCB Foundation and earns both a monthly and sitting allowance for KCB Bank Burundi Limited. 4. Retired from KCB Group PLC on 21 April, She continues to serve as a director of KCB Bank South Sudan Limited. 5. Retired from KCB Group PLC on 21 April, He continues to serve as a director of KCB Bank South Sudan Limited. 6. Retired from KCB Group PLC on 1 June, Appointed 7 August, Resigned 3 January, The amount includes fees, allowances and other benefits in respect of KCB Bank Kenya Limited, KCB Bank Tanzania Limited, KCB Bank South Sudan Limited, KCB Bank Uganda Limited, KCB Bank Rwanda Limited, KCB Bank Burundi Limited, KCB Capital Limited, KCB Insurance Agency Limited and KCB Foundation. The Group Board nominates at least 2 of its members to sit on each subsidiary board. 67

6 KCB INTEGRATED REPORT AND FINANCIAL STATEMENTS 2017 DIRECTORS REMUNERATION REPORT ii. Non-Executive Directors fees, allowances and other benefits for the year ended 31 December, 2016 DIRECTORS FEES SITTING ALLOWANCE OTHER ALLOWANCES (1) NON CASH BENEFIT (2) TOTAL Director s Name KShs. million KShs. million KShs. million KShs. million KShs. million Mr. Ngeny Biwott Chairman Mr. Henry Rotich Mr. Julius Mutua (Alt. to CS) (3) Mr. Adil Khawaja Mr. Tom Ipomai Ms. Georgina Malombe Mr. John Nyerere Mrs. Charity Muya-Ngaruiya Gen. (Rtd.) Joseph Kibwana Mrs. Catherine Kola Dr. Nancy A. Onyango (4) GRAND TOTAL (5) 80 Notes: 1. Other allowances includes the telephone allowance, a meal allowance and the duty travel-day and duty day allowance. 2. Non-cash benefits includes medical insurance cover cost, club membership and professional indemnity cover cost. 3. Earns a sitting allowance for KCB Group PLC, KCB Bank Kenya Limited, KCB Foundation and earns both a monthly and sitting allowance for KCB Bank Burundi Limited. 4. Appointed 22 September 2017, resigned 3 January The amount includes fees, allowances and other benefits for KCB Bank Kenya Limited, KCB Bank Tanzania Limited, KCB Bank South Sudan Limited, KCB Bank Uganda Limited, KCB Bank Rwanda Limited, KCB Bank Burundi Limited, KCB Capital Limited, KCB Insurance Agency Limited and KCB Foundation. The Group Board nominates at least 2 of its members to sit on each subsidiary board. iii. Executive Directors remuneration for the year ended 31 December, 2017 SALARY BONUS ALLOWANCES GRATUITY NON CASH BENEFIT (1) Director s Name KShs. million KShs. million KShs. million KShs. million KShs. million KShs. million Mr. Joshua Oigara Mr. Lawrence Kimathi TOTAL Note: 1. Non-cash benefits includes medical insurance cover, club membership and professional indemnity cover. 68

7 DIRECTORS REMUNERATION REPORT iv. Executive Directors remuneration for the year ended 31 December, 2016 SALARY BONUS ALLOWANCES GRATUITY NON CASH BENEFIT (1) Director s Name KShs. million KShs. million KShs. million KShs. million KShs. million KShs. million Mr. Joshua Oigara Mr. Lawrence Kimathi TOTAL Note: 1. Non-cash benefits includes medical insurance cover, club membership and professional indemnity cover. By order of the Board Mr. Joseph Kania GROUP COMPANY SECRETARY Date: 7 March