Allegations of financial impropriety were made against Centum Investments. Bizna sought clarification and below is the accounting response (in bold) by the investment firm associated with billionaire investor Chris Kirubi.

Consolidated Statement Of Financial Position (ie Balance sheet )

• In 2014 the figure used was 1,071,947 but make up provided in the note 24 to the financial statements actually adds up to 1,915,020.They used this figure of 1,071,947 to force alignment with the 2014 cash flow figure of 811,122 M
• Difference is 843,073 implying the equity linked note DID NOT from part of the balance sheet figure.

Note 24 (page 145) of the FY2014 financials does add up to Kes 1,071,947 as below: (in ‘000) Dividend receivable 3,500 Other receivables 225,289 Equity linked note 843,073 Interest receivable 851,071,947.

As highlighted in the detail above, the Equity Linked Note Asset forms part of the total receivable amount. The cash flow movement arising is also accurately stated as 811,122.

• In 2015, Note 31 they explain the 2014 figure of 1,071,947 as having two figures Equity linked note asset 843,073 and Receivables and prepayments of 228,874
• Why did the figure reduce by 843,073 yet the 2014 balance figure used in the Balance sheet DID NOT include it ? False figures is why (sic)

The FY2015 Statement of Financial Position (page 149), shows receivables & prepayments at 228,874 and a separate (additional) disclosure for the Equity Linked Note as 843,073. These two figures add up to 1,071,947 which is consistent with the FY2014 financials.

Note 31 (page215) breaks down the receivables and prepayments while

Note 40 (page 220) provides detail on the Equity Linked Note

Payables and accruals

• Again the 2014 balance sheet figure used is 1,840,552 which is actually an understatement from the makeup figures provided of 2,662,505 (add up Note 29 of 2014). Again the purpose of this purposeful misstatement was to force agreement with the cashflow statement.
• Difference of 821,953 also implying the equity linked notes figure was NOT used

Note 29 on payables and accruals (page 147) of the FY2014 financials adds up to Kes 1,840,552 and not 2,662,505 as implied. This is highlighted below: (in ‘000)
Sundry payables & accruals 525,274; Equity linked note 843,073; Settlements in respect of investments 33,653; Leave pay provision 7,234; Performance bonus provision 431,318 Total = 1,840,552; 

The Equity Linked Note Liability formed part of the total receivable amount, as highlighted in the detail above. The cashflow movement arising is accurate at 1,552,694.

• However in 2015 ,note 38, the payables and accruals figure was broken down as containing Payables and accruals 997,479 and equity inked note of 843,073. – The payable and accruals figure was manipulated downwards to the tune of 821,953.
• They Grossly understated the payables figure to accommodate the equity linked note. Fraudulently actually.

The FY2015 Statement of Financial Position (page 149), shows payables & accruals of 997,479 and a separate disclosure for the Equity Linked Note as 843,073. These two figures add up to 1,840,552 which is consistent with the FY2014 financials.

Note 38 (page 220) further breaks down the payables & accruals of 997,479, while Note 40 (page 220) provides detail on the Equity Linked Note Liability. There was no understatement.

Cash From Operations ( Note 31 2014 and Note 41 2015)
Receivables and prepayments. In 2014 the amount was claimed as 811,122M in 2015 books the figure went down to 718,949 M. Difference 93 Million.

Payables and accrued expenses. In 2014 it was listed as 1,552B in 2015 the 2014 figure was reduced to 1,475 B. Difference 77 Million. The manipulation of the amounts above caused a net diff of around 22M on the net cash from operations.

The highlighted differences were on account of the change in disclosure of the receivables and payables in the balance sheet as highlighted above.

It is important to note that all the balance sheet details (including opening and closing cash highlighted in the statement of cashflows) disclosed in the FY2015 financials remain consistent with those disclosed in the FY2014 financials statement; a true view of the financial position of the company at that time.

Consolidated statement of cashflow ie (Cashflow statement) Bonds

• 2014 figure used as purchase of bonds was 934,052 …very OK with the only declared disposal being 725,765..still OK. In 2015 however this 2014 figure is broken down as 399,000 and 635,052….OK BUT the disposal figure of 725,765 remains intact but a phantom figure of 100M corporate disposal appeared. This wasn’t declared anywhere in the 2014 cashflow 100 Million not declared in 2014. The figure of Kes 934,052 in respect to 100 Million
• 100 Million not declared in 2014.

The figure of Kes 934,052 in respect to purchase of bonds as disclosed in the FY2014 financials is consistent with the comparable disclosed in the FY2015 statement of Cashflows on page 155. It was disclosed in more detail as highlighted below; Purchase of Corporate Bonds (399,000); Government securities at fair value (635,052); Proceeds from disposal of Corp Bonds 100,000 Total = (934,052)

Investment Property

• A figure of 225 M appears with no explanation whatsoever. NO way of determining if it relates to note 19 property reduction of 105.6 M What Property was this?
• A balancing figure inserted to prop up the cashflow perhaps?

The figure of Kes 225M was in respect of proceeds on disposal of development rights for development of an office block at Two Rivers.

The carrying amount of Kes 105.6M was disclosed in Note 19 (page 206) of the financial report. The total gains realized on this disposal was Kes. 119.3M. Of this, Kes 78.7M has been disclosed in Note 6 (page 195), and an element of deferred income (Kes. 40.6M) (on account of the progress on construction of infrastructure) and this is disclosed as part of the ‘Deferred income’ in the balance sheet.

Investment in subsidiaries

• According to note 18 the ownership of two rivers development and two rivers lifestyle reduced by 42% .But the disposal of this was NOT captured under note 21 of 2015.
• The CEOs review on page 42 states that there were equity investors to a tune of 75 Million USD (6.4 Billion). Also mentioned under note 35 of 2015.
• Under note 35 The 75 Million USD is claimed to be a loan
• Which is which? disposal or loan… if loan why the reduction in equity? if sale price why is it recorded under financing in the cashflow?

Refer to page 34 and 56 of the annual report relating Two Rivers Development funding. ‘As at 31 March 2015, Two Rivers Development had signed investment commitments from the two institutional investors to invest a total of USD 75 million for a 42.8% equity stake in the Company.’

This transaction constituted an injection of new capital into Two Rivers Development Ltd., and was not a disposal of shares.

As at 31st March 2015, documentation pertaining to the subscription of shares was not complete and therefore, the investors advanced Two Rivers
Development Ltd the funds in the form of a shareholder loan pending completion.

Completion was achieved after Centum’s FY2015 reporting and these amounts have sincebeen applied to fully pay up for the 42.8% equity stake.

• CEO stated that they received 60 M USD loan from co-op bank
• 60 Million USD coop loan is NOT recorded anywhere in the books.

The $60 Million loan was secured from Co-op Bank during the financial year ended 31 March 2015.

However no drawdowns had been made during the period, hence no liability disclosure in the Consolidated Balance Sheet.

Borrowings

• The balance sheet figure is stated as 9,982,600.
• Even if we indulge the company’s trickery that 6.4 B is a loan. This figure is not listed under note 37 as part of the borrowings.
• Further proof 6.4 B was received but they are not sure how to conceal it. In the final analysis other than in the cashflow this figure of 6.4 B is NOT recorded elsewhere in the financial statements. Good luck tracing it.

The shareholder loan (Kes 6.9Bn) had equity features (no definite maturity period and no contractual obligation to make predetermined interest payments). It was therefore disclosed as equity and not as a liability. Refer to the balance sheet page 149 and note 35; under Total Equity.

This is in accordance to the International Accounting Standards, IAS 32; Financial Instruments: Presentation

• None of the “Term loans “ in note 37 of 2015 are recorded in the cashflow statement yet all are first recorded in the year.
• Total ignored is 1.015 Billion. This is however ok if brought in by subsidiaries but the subsidiaries should be.

The movement in borrowings and the details of borrowings at 31 March 2015 are highlighted in detail (under note 37(a) of the financials (page 218).