CONTENTS - Investing In Africa

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KCB EXECUTIVE COMMITTEE 1 2 3 4 5 6 7 8 9 10 11 1 Fred Mutiso, Divisional Director: Finance & Strategy 2 Dr. Tony Githuku, Divisional Director: IT & Operations 3 Kiprop Malakwen, Company Secretary 4 Wilfred Sang, Divisional Director: Credit 5 Stanley Towett, Divisional Director: Audit 6 Timothy Kabiru, Divisional Director: Treasury 7 John Mark Wandolo, Divisional Director: Corporate 8 Kepha Bosire, Head of Corporate Affairs 9 Catherine Njoroge, Divisional Director: Retail 10 Mary Ann Kirubi, Divisional Director: Marketing 11 Rose Kinuthia, Chief Risk Officer 10 KCB ANNUAL REPORT & FINANCIAL STATEMENTS 2007
CHAIRMAN’S COMMENTARY The KCB Group registered a 33% growth in profitability, moving from KShs 3.2 billion in pretax profit in 2006 to KShs 4.2 billion. Susan Mudhune, Chairman Shareholders I am pleased to present to you the Annual Report and Financial Statements for the year ended 31 December 2007. This was a very good year for us as it reflected the ongoing growth momentum for the business and witnessed real progress towards establishing KCB as a strong regional bank with further expansion into the East African Market. On the financials, your business reported a 33% increase in profit before tax to KShs4.2 billion up from KShs3.2 billion in 2006. These impressive results not only reflect stakeholder confidence in the business, and good leadership at Board and Management level but also confirm the competitiveness of our products and services in the market. The ongoing good performance in the business has impacted positively on the price movement of your shares at the Nairobi Stock Exchange which have traded on average between KShs24 and KShs28.50 in the course of the year. In recognizing the potential of the business, the market has continued to trade heavily in KCB shares and shareholders have no doubt benefited from the resultant capital gain. THE OPERATING ENVIRONMENT KCB’s good performance was achieved against the background of a thriving economy. Real Gross Domestic Product is estimated to have expanded by 6.5% in 2007 compared with 5.8% in 2006 buoyed by a stable macroeconomic environment drawing impetus from good performance in Tourism, Building and Construction, Transport and Communications and Manufacturing sectors. In addition, favorable financial market conditions continued to improve access to credit and increased remittances which spurred economic activity. This growth will considerably slow down in 2008 due to the impact of post-election violence which has painted a grim picture of the operating environment and delayed implementation of crucial investment decisions due to uncertainty. High fuel prices with the attendant inflationary pressures have negatively impacted on the economic outlook whereas the deteriorating terms of trade arising from volatile oil prices in the international market and high prices of imported inputs may continue to affect the economy. The Consumer Price Index (CPI) increased by 8.7% from 220.7 points in January 2007 to 239.8 points at the end of December 2007. The overall annual average inflation rate, however, declined to 9.8% in 2007 from 14.5% in 2006. But the month-on-month overall inflation rate accelerated to 12.2% in December 2007 from 9.7% in January 2007 while the overall underlying inflation edged up to 5.9% compared to 4.33% at the end of 2006. The pick up reflected the impact of higher prices in most categories of the CPI. The outlook on inflation will depend on movements in food and oil prices and the strength of the Kenya Shilling. Available data indicate that the post-election crisis has already significantly aggravated prices of basic consumer items occasioned by disruption of supply networks. Following the Treasury’s ongoing strict monetary policy management, short term interest rates remained stable operating within a narrow range of between 6.0% and 8.5% during the year. The benchmark 91-day Treasury Bills rate rose steadily, starting at 6.0% in January 2007, to a high of 7.5% in November before declining to 6.9% in December 2007. The 182-day Treasury Bills rate which KCB ANNUAL REPORT & FINANCIAL STATEMENTS 2007 11
Page 1 and 2: CONTENTS Group Information ........
Page 3 and 4: FIVE YEAR PERFORMANCE ANALYSIS EARN
Page 5 and 6: NOTICE OF THE 37 TH ANNUAL GENERAL
Page 7 and 8: BOARD OF DIRECTORS Standing: left t
Page 9: DIRECTORS OF SUBSIDIARIES Standing:
Page 13 and 14: CHAIRMAN’S COMMENTARY continued D
Page 15 and 16: TAARIFA YA MWENYEKITI KCB ilikuwa n
Page 17 and 18: TAARIFA YA MWENYEKITI kuendelea KCB
Page 19 and 20: CEO’s COMMENTARY Profit before ta
Page 21 and 22: CEO’s COMMENTARY continued TEAM B
Page 23 and 24: TAARIFA YA MKURUGENZI MKUU kuendele
Page 25 and 26: REPORT OF THE DIRECTORS The directo
Page 27 and 28: STATEMENT OF DIRECTORS’ RESPONSIB
Page 29 and 30: CORPORATE GOVERNANCE STATEMENT cont
Page 31 and 32: COMMUNITY SOCIAL DEVELOPMENT REPORT
Page 33 and 34: REPORT OF THE INDEPENDENT AUDITORS
Page 35 and 36: CONSOLIDATED BALANCE SHEET as at 31
Page 37 and 38: BALANCE SHEET OF THE BANK as at 31s
Page 39 and 40: CONSOLIDATED STATEMENT OF CHANGES I
Page 41 and 42: CONSOLIDATED CASH FLOW STATEMENT fo
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NOTES TO THE FINANCIAL STATEMENTS c
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PROXY FORM THE SECRETARY KENYA COMM
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