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Preamble The FEP Holdings Board of Directors notes with concern various postings on social and other media. We take exception to these claims and write to state as follows: Background of the company FEP Holdings is an investment Holding Company with majority equity holdings in subsidiaries in the following sectors of the economy: Technologies, Financial Services, Retail, Real Estate, Education, Hospitality and Security. Our core businesses are currently Financial Services and Real Estate with their value of portfolio currently being over KShs 5.5 Billion. Twenty percent of these assets are held in the money markets as short term bonds or bank deposits. FEP was founded in 2009 as a member owned organization and currently has over 174,000 members of whom over 60,000 are investors who have pooled resources through various rounds of equity funding. The Group has a management team who report to the Board of Directors. The Board has four committees which are: Human Resources and Nominations, Investor Relations, Finance and Investments and Audit Committee. The committees meet at least once a quarter. In addition to the Board, the Group has an Advisory Council whose mandate is to ensure the group is run within the rules of corporate governance and in adherence to Christian values. This is due to the fact that the Company is founded on Christian principles. The Group employs about one thousand people and complies with all government employment regulations. Current status of the company We have noted various assertions about the company and wish to set the record straight: 1. Management: FEP started as an informally managed organization and for several years was run by a core team of employees and unpaid volunteers. Many investors availed their time to raise funding and manage various aspects of the business as 2 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 directors, managers or marketers. With the rapid growth of the company, the Board in September 2014 engaged BPC Africa, a leading HR consulting firm, to redesign the organization, advise on operational excellence and recruit staff competitively. The recommendations of the consultants were fully implemented as from November 2014. 2. Business Operations and Strategy: 1st November 2014 marked the launch of the FEP Transformation Programme. This entailed the following: i. Downsizing staff by 20% ii. Exiting noncore operations iii. Setting up and resourcing the investment and marketing functions; and iv. Establishing a new organisational culture. As a result of the changes, FEP revenues have increased by 43% in the half year ending June 2015 while costs have declined by 44%. The improved results are driven by strong performances in our Microcredit, Technology and Security Businesses. Our technology company has secured and is executing major infrastructure contracts in both Solar Energy and Rural Electrification. In security, we have won major contracts for various sections of the SGR project. Currently, the Board is also evaluating all our investments and where necessary will partially divest from some investments provided there is no loss in shareholder value. A new five year strategy will be launched in the fourth quarter of 2015. This will take into account learnings of our successes and failures while ascribing to the existing vision as well as our new Investment Policy. 3. Financial Accounts: The Group has prepared and published its audited accounts to its shareholders for all financial Years up to 31st December 2013. The FEP AGM with respect to 2015 has been scheduled for 23rd September 2015 during which the 2014 Financial Accounts duly audited by Deloitte will be tabled. 3 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 4. Governance: The Group upholds strong corporate Governance principles. In order to enhance transparency the Board has effected the following measures: i. A forensic review of the Share Register was carried out and an improved financial reporting system developed. ii. A detailed review of our financial records and assets has also been carried out by the new management team to ensure full transparency and the audit by Deloitte will be completed before the AGM. iii. A zero tolerance to corruption policy is in place with all employees and the Board having signed conflict of interest declarations. Additionally, the board has taken action against any employees found to have engaged in any malpractices or not exhibited ethical conduct. Recovery of any stolen assets and funds is also underway. 5. Capital Raising: With the close of the PPO in 2014, the Board has closed the mobilization phase of the company and is of the view that the company has adequate equity capital for the foreseeable future. For clarity, FEP has carried out four rounds of equity raising, Tier I (2008/2009), Tier II (2011/2012) and Tier III (2013). The fourth was a rights/rump issue (PPO) in 2014. Starting with the PPO of 2014, all fundraising of the company is benchmarked on that of listed companies. An Information Memorandum was prepared under professional advice of external investment bankers, advocates and other professionals with full disclosures of company financials and material information including investing risks. This was to allow investors to make an informed decision. Share Register and Share Certificates: The Board engaged KPMG in March 2015 to audit all monies raised from investors since inception of the company that is Tier I, II and Tier III. For Tier I, II and Tier III capital raising, all record keeping was kept internally while for the PPO the entire exercise was outsourced to Image Registrars. The aim of the audit was to create one master shareholder 4 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 register and ultimately ensure that every person that paid monies to FEP during the various cash calls will have shares allotted to them and a share certificate to evidence the same. This will apply to both FEP Holdings and Fountain Microfinance Bank (in formation) shareholders. KPMG have completed the assignment as of the date of this letter and the respective Boards of the two entities will meet to adopt the report. The PPO share certificates have been ready since March 2015 and a number of them have been picked by investors. For the uncollected certificates, a notice was published in the local dailies on 24th July 2015 asking shareholders who have not collected the certificates to do so. About 150 investors have not had the certificates issued because their documents were processed after the cutoff date. In accordance with the Information Memorandum, these investors have an option to receive refunds or wait for Board allotments. The revised registers will be tabled in the forthcoming AGMs for adoption by shareholders. For the avoidance of doubt, ALL shareholder complaints on record have also been audited in the forensic exercise. The Investors who have not received their share certificates have been identified and their cases will be resolved before the AGM. 6. Over The Counter Market: The Board has mandated management to set up an OTC Market to allow trading in FEP Holdings shares as per the Company’s Articles of Association. This was slated to commence on completion of the PPO but was held back pending completion of the KPMG audit of the FEP share register. This was to ensure data integrity before trading commences. 7. Investor Relations: Investor who have concerns regarding their share certificates have been advised to contact the Investor Relations Department, which is overseen by the Investor 5 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 Relations Committee of the Board. The Investor Relations Manager and his team are fully mandated to work with relevant departments like share registry in dealing with all investor relation issues. 8. Fountain Micro-Finance Bank (in formation) Licensing: Fountain Microfinance Bank (in formation) was granted a provisional letter of intent by the Central Bank of Kenya in June 2014. We would like to reiterate here that the CBK has been very helpful during the application process. Currently the AGMs of the Bank and FEP Holdings will be held to discuss and consider for adoption the revised shareholder registers. This is now a condition precedent for the next step of the license application process. The Microfinance Bank operates independently & is run by an independent Board as per provisions of the Microfinance Act number 19 of 2006. All monies raised by the Holding Company on behalf of the Microfinance Bank (in formation) have been remitted to the financial institution and is under the control of its Board and invested as per CBK guidelines. The only joint exercise with the Holding Company is the share register reconciliation. Upon completion the Bank will run its own register. 9. Land/Asset Holdings: The company has disclosed all its assets in the audited accounts published for year ending 31st December 2013 and the Information Memorandum circulated to investors in 2014. These properties will be held for capital appreciation, developed wholly or in Joint Venture partnerships or sold for gain as per an investment audit carried out in Quarter 1 2015. As for Lukenya land this was acquired and covers 372 acres. The value of this property is disclosed in our 2013 Financial Report & Accounts Page 13, Note 13 and also in the PPO Information Memorandum. For purposes of subdivision, we applied for amalgamation of the land and subdivision into over 2,039 plots. This subdivision has been approved by the National Land Commission. From our own development perspective, the land has been categorized into Phase 1A, 1B and 2. 6 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 Since this asset is the biggest value driver in the group and given rapid price appreciation in the area, we have carried out a detailed investment evaluation and the current position is as follows: • To continue selling plots in Phase 1A. 60% of the plots have been sold. Currently, the land is selling at KSh1.6Mn per 1/8 of an acre which price reflects the quality of infrastructure to be put. We are currently enjoying a good uptake. • To get a development partner to develop on Phase 1B and Phase 2 residential units including infrastructure for all the three phases (including Phase 1A). The development partner will be a consortium that will bring project management and project finance. We so far have two bids under evaluation. • It may be noted that the ongoing capital appreciation is providing incredible value for investors and the early plot buyers. 10. Sagana Hotel: Since receipt of the PPO funds, the project has progressed significantly. The main Hotel Blocks are substantially done; 95% of Phase 1 while Phase 2 is under construction. The major works for the Laundry, Kitchen and Fittings are about to commence. We are currently working on the Brand Identity for the Hotel. Management has retained the services of leading marketing agency Redhouse for this purpose. Shareholders will have the opportunity to view the progress of the hotel at the AGM. New Offices: FEP moved to its new group offices in Galana Plaza as part of its cultural transformation, revamped corporate image and to cut costs. The amalgamation of six offices into one location, has been a watershed event for the company. The attendant operational efficiencies and cost savings have a payback period of two and a half years. 7 FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS 3RD AUGUST 2015 Way forward: FEP is at a critical juncture in its growth plans. The focus of the management and Board of FEP is to sustain the reorganization of the company and deliver return to shareholders. Finally, we take this opportunity to thank our faithful investors for all the resources and support for the transformation of the company. We acknowledge the challenges of such a massive exercise involving over 60,000 shareholders, but note that the Board and management of FEP are fully committed to resolving all the issues and move the company forward. The Board will avail further information through the Annual Report and at the AGM. Any investor with other queries should contact For FEP Holdings, MAURICE K. KORIR GROUP CHIEF OPERATIONS OFFICER


FEP HOLDINGS LIMITED SPECIAL BULLETIN TO SHAREHOLDERS Preamble The FEP Holdings Board of Directors notes with concern various postings on social and other media. We take exception to these claims and write to state as follows: Background of the company FEP Holdings is an investment Holding Company with majority equity holdings in subsidiaries in the


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