TCCIA INVESTMENT PLC

Transcription

1 DRAFT Application under the Capital Markert and Securities (Prospectus Requirements) Regulations 1997 TCCIA INVESTMENT PLC PROSPECTUS For an Initial Public Offer by the TCCIA Investment Public Limited Company of 112,500,000 ordinary shares at TZS 400 per share, representing 61..3% of the issued share capital of 183,592,400 ordinary shares of a nominal value of TZS 20 each. Opening date Closing date Listing date and commencement of DSE trading Wednesday 1 st February 2017 Tuesday 14 th March 2017 Monday 24 th April 2017 Application has been made to the Dar es Salaam Stock Exchange for the official listing of all the Company s 183,592,400 ordinary shares Index of ASI, TSI, and TICL Portfolioo 5,800 4,800 3,800 2,800 1, Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec-15 ASI TSI TICL_PORTFOLIO 1 February 2017 This Prospectus is not for sale i

2 DRAFT CAUTION A copy of this Prospectus has been delivered to the Capital Markets and Securities Authority for approval and the Registrar of Companies for registration. Approval of this Prospectus by the Authority is not to be taken as an indication of the merits of TCCIA Investment PLC or its shares. The securities offered have not been approved or disapproved by the Authority. Prospective investors should carefully consider the matters set forth as Risk Factors on page 38 of this Prospectus. ii

3 DRAFT IMPORTANT NOTICE This document is important and requires your immediate attention. If you are in doubt as to the meaning of this Prospectus or what action to take, please consult your Banker, Stockbroker, Advocate, Accountant, Licensed Investment Advisor or other professional advisors immediately. iii

4 DRAFT ISSUER TCCIA INVESTMENT PLC Certificate of Incorporation No Registered on 9 November 1999 TCCIA Investment PLC PPF HOUSE, Morogoro Road/Samora Avenue, P O Box Dar es Salaam, Tanzania Tel: /9 Fax: info@tcciainvest.co.tz website: Company Secretary/Registrar TCCIA INVESTMENT PLC TCCIA Investment PLC PPF HOUSE, Morogoro Road/Samora Avenue, P O Box 72678, Dar es Salaam. Tel: /49 Fax: info@tcciainvest.co.tz Auditors Baccon Certified Public Accountants Morogoro Road/Indira Ghandi Street 2 nd Floor, Textile House P. O. Box 70697, Dar es Salaam Tel: +255 (0) Bankers CRDB Bank PLC PPF Tower Ohio Street P. O. Box 2302, Dar es Salaam Tel: +255 (0) iv

5 DRAFT TRANSACTION ADVISORS CORE CAPITAL Lead Adviser CORE Capital Limited Fourth Floor, Elite City Building PO Box Dar es Salaam Tel: Fax: Sponsoring Broker Tanzania Securities Limited Seventh Floor, IPS Building PO Box 9821 Dar es Salaam Tel: Fax: BM Associatess Reporting Accountant BM Associates 2 nd Floor,IPS Building Azikiwe Street/Samora Avenue P.O. Box 63214, Dar es Salaam Tel: Fax: Legal Advisor NexLaw Advocates 4 th Floor, PPF Tower Ohio Street/Garden Avenuee P.O. Box 75578, Dar es Salaam Tel: Fax: Lead Receiving Bank CRDB Bank PLC 4 th Floor,Azikiwe Tower P.O. Box 9531, Dar es Salaam Tel: Fax: PR FIRM EAGgroup Limited P. O Box 33971, Dar es Salaam Tel: imani.kajula@eaggroup.co.tz v

6 DRAFT MOBILE PHONE COLLECTING AGENT Maxcom Africa Limited First Floor Suite 3 4 Millennium Tower Makumbusho Area P.O. Box 31211, Dar es Salaam Tel: info@maxcomafrica.com vi

7 DRAFT DIRECTORS RESPONSIBILITY The Directors of TCCIA Investment PLC whose names appear on page 27 of this Prospectus, collectively and individually accept responsibility for the information given in the Prospectus and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any statement false or misleading, that they have made all reasonable enquiries to confirm the correctness of this information as required by law. CHAIRMAN SECRETARY vii

8 DRAFT Table of Contents CAUTION...ii IMPORTANT NOTICE...iii TRANSACTION ADVISORS... v MOBILE PHONE COLLECTING AGENT...vi DIRECTORS RESPONSIBILITY...vii 1. TERMS AND ABBREVIATIONS... 1 LETTER FROM THE CHAIRMAN EXECUTIVE SUMMARY Financial performance Key Summary Financial Information Income Statement Balance Sheet Cash Flow Statement FORECASTED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDING 30 JUNE FORECASTED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE The Offer shares Dividend Policy The offer price SECTION A BOARD OF DIRECTORS AND MANAGEMENT DETAILS OF DIRECTORS AND MANAGEMENT TEAM SECTION B RISK FACTORS Introduction A: General Risks Associated with the Market B: CREDIT RISK C: OPERATIONAL RISKS: D: COMPANY SPECIFIC RISK FOR TICL LITIGATION RISK SECTION C ECONOMIC OVERVIEW Industry Overview Overview of the national economy Development of Capital Markets in Tanzania History of the financial sector in Tanzania Evolution of Capital Markets in Tanzania A Historical Perspective EVOLUTION OF THE DAR ES SALAAM STOCK EXCHANGE About Dar es salaam Stock Exchange SECTION D BUSINESS OVERVIEW Business overview Company history TICL s Investment Portfolio Asset Allocation Policy Portfolio Returns Management Investment Style Strategies for the future and planned actions Investment Portfolio Corporate Objectives viii

9 DRAFT Strategic Actions Targeted major products and services Markets and sales activities Current Business Lines New Business Lines SWOC ANALYSIS Overview Strengths Weaknesses Challenges The Way Forward SECTION E THE LEGAL AND REGULATORY ENVIRONMENT SECTION F LEGAL AND STATUTORY MATTERS Offer statutory information Particulars of the Initial Public Offer and listing The Initial Public Offer Time and date of opening and closing the public offer Eligibility Minimum and maximum level of subscription Allotment policy Application for listing Withholding tax on securities income Central Securities Depository Experts Consent Use of proceeds Authorisations Registration of Prospectus Documents available for inspection IPO Expenses Commissions Extracts from the Memorandum and Articles of Association SECTION G INDEPENDENT REPORTING ACCOUNTANT S REPORT Reporting Accountant s Report On TCCIA Investment Company Plc Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Reporting Accountant s Report on the Profit Forecast to June Forecasted Statement of Comprehensive Income for the Period ending 30 June Forecasted Statement of Financial Position as at 30 June Key Assumptions Underlying Forecasts for the Period Ending 30 June ix

10 DRAFT SECTION G LEGAL OPINION Licensed Dealing Members of the Dar es Salaam Stock Exchange Authorised Receiving Agent (Mobile Banking) List Of CMSA-Licensed Investment Advisors List of Licensed Nominated Advisors APPLICATION FORM APPLICATION VIA MOBILE PHONE PLATFORM x

11 DRAFT TABLE OF FIGURES Table 1: Shareholders Structure as at 31 December Table 2: Top 10 Shareholders as at 31 st December Table 3: Regional spread of shareholdings in TICL as at 31 December Table 4: TCCIA Branch shareholdings as at 31 December Table 5: Expected Timetable of Principal Events Table 6: Offer Statistics Table 7: Valuation of TCCIA Investment PLC as at September Table 8: Earning Multiples Table 9: Justification of TICL IPO Price Table 10: Evolution of DSE Table 11: TICL Investment Portfolio at 7 September Table 12: Portfolio return Table 13: Quarterly Portfolio Return xi

12 DRAFT 1. TERMS AND ABBREVIATIONS In this Prospectus and the appendices hereto, unless otherwise indicated, the words on the left column have the meaning stated on the right column, words in singular include the plural and vice versa, words imparting one gender include the other gender and reference to a person include references to a body corporate and vice versa: Articles "the Company ASI Authority The Articles of Association of TICL TCCIA Investment PLC or abbreviated as TICL The all Share Index of the DSE The Capital Markets and Securities Authority Board BRELA CEIC CIS Closing date CMSA The Board of Directors of the Company. Business Registration and Licensing Authority Close Ended Investment Company. Collective Investment Scheme. Tuesday 14 th March 2017, being the last submission date for valid applications for the offer The Capital Markets & Securities Authority Companies Act The Companies Act, Cap 212 (Act No.12 of 2002) CSD DCB Central Securities Depository of the DSE Dar es Salaam Community Bank PLC Depository Receipt Directors DSE Foreign Exchange Regulations Foreign investor A non-negotiable document issued by the DSE representing title in respect of securities deposited in the CSD by a shareholder The members of the Board of Directors of TCCIA Investment PLC whose names appear on page 27 of this document. Dar es Salaam Stock Exchange PLC The Foreign Exchange (Listed Securities) (Amendment) Regulations 2014 issued by the Bank of Tanzania In the case of an individual, a non-citizen of Tanzania and, in the case of a body corporate, means a body corporate in which more than 50% of the shares are held by non-citizens of Tanzania or by a body or bodies not registered in Tanzania. 1

13 DRAFT Foreign Investors Regulations GDP General public Government IFRS IMF Initial Public Offer or IPO or Offer Institutional Investor IRMC Issuer JSE The Capital Markets and Securities (Foreign Investors) Regulations 2014, issued by the CMSA. Gross Domestic Product Individual and Corporate persons and eligible institutions with legal capacity to contract. The Government of the United Republic of Tanzania International Financial Reporting Standards International Monetary Fund The Initial Public Offer of 112,500,000 ordinary shares in terms of this Prospectus Refers to corporate investors like Pension Funds, Unit Trusts, Asset Management Companies, Banks. The Investment and Risk Management Committee of the Issuer. TCCIA Investment PLC Johannesburg Stock Exchange LDM Licensed Dealing Member of the DSE Listing Date Expected to be on or about Monday 24 th April 2017, the effective date for first trading on the DSE M&A Regulations M1, M2, M3, M4 MEMARTS MFI Micro-finance NBAA The Capital Markets and Securities (substantial Acquisitions, takeovers and Mergers) Regulations 2004 These measures used in Tanzania and elsewhere to define money supply in the economy, though local practices may vary. M1, also called narrow money, includes coins and notes in circulation and other money equivalents that are easily convertible into cash. M2, also called broad money, includes M1 plus short-term time deposits in banks and 24- hour money market funds. M3, also called extended broad money, includes M2 plus longer-term time deposits and money market funds with more than 24-hour maturity. M4 is sometimes defined, to include M3 and all other deposits. Memorandum and Articles of Association Microfinance Institutions Refers to that unique sector of financing that targets small and micro-enterprises National Board of Accountants and Auditors 2

14 DRAFT NEMC NFA NSE Offer Price Offer shares Opening Date Ordinary Shares OSHA PLC Prospectus Receiving Bank SACCOS Shares SMEs SSRA TBL TCC TICL TRA TSI TZS USD National Environment Management Council Net foreign assets Nairobi Stock Exchange TZS 400 per share The ordinary shares of TICL subject to this offer Wednesday, 1st February 2017 the first submission date for applications for the offer Ordinary shares of TZS 10 each in the share capital of the Company Occupational Safety and Health Administration Public Limited Company This offer document of the Company s shares to the general public CRDB Bank PLC. The Savings and Credit Cooperatives Society TICL Shares Small and Medium Enterprises Social Security Regulatory Authority Tanzania Breweries PLC Tanzania Cigarette Company PLC TCCIA Investment PLC Tanzania Revenue Authority The Tanzania Share Index of the DSE Tanzanian Shillings United States Dollar 3

15 DRAFT LETTER FROM THE CHAIRMAN Dear Shareholders and Prospective Shareholders: On behalf of the Directors of TCCIA Investment PLC [TICL], it is my great pleasure to welcome you to this valuable opportunity to invest in our Company. We are offering 112,500,000 ordinary shares at price of TZS 400 for the purpose of raising our capital base to provide investible funds to further our operations. TICL is a public limited liability Company established under the sponsorship of and proactively promoted by the Tanzania Chamber of Commerce, Industry and Agriculture [TCCIA] in an effort to expand its financing sources. The Chamber floated the Company as an internal IPO restricted only to the Chamber, its Regional branches and its individual members. LAPF also participated as specially invited institutional investor. The outcome of the restricted IPO was that the Chamber and its affiliate offices upcountry together ended up owning 1.2% of the Company, meaning that the Chamber does not really own the Company, or even control it. However, the Chamber is proud of its vision that promoted the Company by mobilizing TCCIA members to buy shares individually in the new Company so that they can participate meaningfully in the ownership and control of the Tanzanian economy. Thanks to these efforts, the Company was shortlisted by the Government to participate in the privatisation of NMB as a member of the founder Consortium. Using as its seedcapital the relatively meagre NMB shares it bought as the junior most member of the Consortium, TCCIA Investment Plc has since grown to become a multibillion investment PLC wholly owned by Tanzanians. TICL is invested only on listed securities, the blue-chip stocks of the Dar es Salaam Stock Exchange. Since 2011, TICL s investment portfolio has recorded a total return of % which translates into a compounded annual growth rate (CAGR) of 39.17%. In other words, the portfolio has grown from TZS 6.16 billion in 2011 to TZS billion as of 31 December 2015 without a single extra investment. This performance is better than that of the DSE whose All Share Index recorded comparable returns, respectively, of 91.91% and 13.93% only. The TICL business model a closed-ended investment Company I wish to underscore this impressive performance by emphasizing the fact that in terms of the Capital Markets and Securities (Collective Investment Schemes) Regulations 1997, we are regulated by the CMSA and mandated to operate as CIS in the category of closed ended investment Company (CEIC). Conceptually, CEICs differ from open-ended investment companies (OEIC) and unit trusts in that the latter sell and buy shares/units continuously through their manager (using NAV-valuation). As such, OEIC s and unit trusts have to be invested in financial 4

16 DRAFT assets that have a ready market value, such as listed securities or government paper that can be valued using the time value of money. This makes it easier and more transparent to make a daily valuation compared to investing in real assets (buildings, real estate, mining companies, and such like) because these latter have no ready market value to enable the investor to derive their NAV to support daily needs for redemption form share/unit holders. Closed-ended investment companies ( like TCIL, on the other hand, are allowed some latitude toward investing in real assets (farms, factories, mining, agriculture, etc.) to diversify and presumably enhance their profitability. As such, CEICs tend to be listed on the stock exchange rather than liquidating their shares through NAV. Even then, such real investments tend to be small, mostly under 5%, in order to avail investors with a ready valuation. It is unwise for CEICs to inter-mingle their financial assets portfolios with too many illiquid assets like abattoirs, fish companies, farms, pharmaceuticals, and such like, which end up being nonperforming assets and diverting management attention to non-core business. TICL is focused on financial assets, single-minded looking at maximising shareholder value by monitoring the performance of various stocks on the DSE. In its assets structure, non-financial assets form only minor part (less than 1% of its balance sheet) comprising minor operating furniture and fittings. This means that TICL s valuation is readily available for investors to make up their mind. This is what we want prospective investors to understand when they entrust their shares to us. Confident of the Company s sustained profitability and liquidity, the Board has resolved that it will recommend to the shareholders for their approval that 50% of available profits be paid out each year as dividends. Expectations and plans for the future The Board has decided as part of the way forward to carry out the following activities in order to leverage on its strong position and create value for its members in future: 1. Strengthen the manpower resources of the management. This will add not only professional expertise (for better performance) but also release time to management to focus on developmental issues. In addition, the auditors would say that it would strengthen checks and balances. 2. Reappraise the functions of the Investment and Risk Management Committee so as to deal with asset allocation strategies, taking benefit of research findings and the overall guidance of the investment committee, to actively participate in the capital markets. A formal ratio of financial assets and real assets will be established, as well as allowable ranges of investment in residual income and fixed income investments. Guidelines used by the Investment and Risk 5

17 DRAFT Management Committee (IRMC) are set flexibly in response to available investment opportunities. 3. Widen investment areas in other products that are currently missing from our portfolio such as Government securities, REITs, infrastructure bonds and other debt instruments. These offer a good trade off when returns in the equities board become unattractive. 4. Obtain a Broker-dealer s license (after making necessary feasibility evaluation and regulatory preparations) so that the management fees and brokerage commissions being paid can add to TICL s bottom line. Prior to that we were using the services of an existing LDM. In the long term, TICL stands to gain from playing multi-dimensional roles in Tanzania s capital markets, such as underwriting, private equity investments, market making, stock lending, use of derivatives, commodities futures, cross-border trading, IPO underwriting, and structuring of its own products. 5. Establishing arm s length companies with suitable venture partners with TICL owning 20% of the equity at most to take ownership of any illiquid assets or non-core businesses. This approach avoids opacity of TICL s share valuation, as the equity method shall be used in valuing these non-financial assets. These include: i) Establishment of Microfinance Window ii) Implementation of the Agro-Business Project iii) Real Estate Development at Dodoma, Tanga, Dar es Salaam, and Mtwara 6. The Board is firm in its resolve to take a foothold in real estate and agribusiness because these are the things for the future, offering Tanzania s only real competitive advantage within the Region or even globally. However, if this is to be done, the investments shall not focus on hard business that goes with primary production; rather it should securitize the properties and develop them using real estate investment trusts (REITs); exchange traded infrastructure funds or fixed income securities such as infrastructure bonds. As we look forward to your participation in this laudable opportunity, it is my hope that you will find this Prospectus useful in reaching your investment decisions. Our main objective is that of Economic empowerment of Tanzanians through widening and deepening financial resource mobilization Please join us so that we make this a reality. Yours faithfully, CHAIRMAN OF THE BOARD 6

18 DRAFT 2. EXECUTIVE SUMMARY KEY FACTS ABOUT THE ISSUER The TCCIA Investment PLC ( TICL ) was incorporated on 9 November 1999 under Certificate of Registration No: TICL is a public limited liability Company established under the sponsorship of and proactively promoted by the Tanzania Chamber of Commerce, Industry and Agriculture [TCCIA] in an effort to expand its financing sources. The Chamber floated the Company as an internal IPO restricted only to the Chamber, its Regional branches and its individual members. LAPF also participated as specially invited institutional investor. The outcome of the restricted IPO was that the Chamber and its affiliate offices upcountry together ended up owning 1.2% of the Company, meaning that the Chamber does not really own the Company, or even control it. However, thanks to its formation and the Chamber s persistent efforts, the Company was shortlisted by the Government to participate in the privatisation of NMB as a member of the founder Consortium. Using as its seed-capital the relatively meagre NMB shares it bought as the junior most member of the Consortium, TCCIA Investment Plc has since grown to become a multibillion investment PLC wholly owned by Tanzanians..In addition, the Company was mandated and is regulated by the Capital Markets and Securities Authority [CMSA] to operate as a Collective Investment Scheme in the category of Closed-ended investment Company (CEIC).This framework enables the Company - subject to obtaining specific approval from the CMSA - to raise additional funds from the public by way of a Rights Issue or a Public Offer for the purpose of strengthening its capital base to finance new business and investment lines. The Company was incorporated in November 1999 and commencing business operations January 2005.The Company operates as a collective investment vehicle through which the TCCIA members were able to pool their financial resources for the purpose of buying shares in public business enterprises that were being privatized following the Government s decision to disengage in the ownership and management of business entities. To avoid co-mingling financial assets and physical assets, the Company decided to concentrate on investing in shares belonging to companies listed and actively traded on the Dar-es-Salaam Stock Exchange. This means that its worth can be objectively determined at any point in time by just referring to the value of the underlying portfolio. By 31 December 2015 the total number of shareholders was 2,493, of which the LAPF Pensions Fund ( LAPF ) was the largest with just under 40% of the stock. The remaining shareholders are mostly individuals and a few companies operating small 7

19 DRAFT and medium businesses. These shareholders are spread throughout the country as shown below: Table 1: Shareholders Structure as at 31 December 2015 S/n Shareholder No. of shares Amount (TZS) % Share 1 LAPF 2,248, ,006, % 2 TCCIA H/Q & Branches 68,510 17,127, % 3 OTHERS 3,370, ,714, % TOTAL 5,687,392 1,421,848, % Table 2: Top 10 Shareholders as at 31 st December 2015 S/N NAME OF SHAREHOLDERS SHARES REGION %ge 1 LAPF PENSIONS FUND 2,248,024 DODOMA MKOMBOZI FISHING & MARINE TRANSPORT LTD 337,203 MWANZA ABBASI EXPORTS LTD 134,881 DSM CHRISTOPHER MWITA GACHUMA 112,400 MWANZA FAYAZ FEROZ RASHID 98,913 MWANZA NIMROD ELIREHEEMAH MKONO 89,921 DSM ELVIS MUSIBA 53,953 DSM JAMES MAJUKANO 44,960 MWANZA ABIHUDI MHIDZE 31,472 DSM JULIUS MATIKO MWITA 28,325 PWANI 0.49 TOTALS 3,180,

20 DRAFT Table 3: Regional spread of shareholdings in TICL as at 31 December 2015 REGION COUNT %ge %ge SHARES Count Shares DODOMA % 2,342, % DAR ES SALAAM % 922, % MWANZA % 749, % ARUSHA % 163, % MOROGORO % 159, % MBEYA % 145, % IRINGA % 138, % PWANI % 128, % MANYARA % 121, % KAGERA % 111, % TANGA % 104, % KIGOMA % 98, % NJOMBE % 92, % SHINYANGA % 65, % KILIMANJARO % 61, % MARA % 51, % SINGIDA % 49, % RUVUMA % 48, % LINDI % 33, % TABORA % 30, % RUKWA % 28, % MTWARA % 27, % GEITA % 11, % TOTALS 2, % 5,687, % 9

21 DRAFT Table 4: TCCIA Branch shareholdings as at 31 December 2015 S/N TCCIA BRANCH SHAREHOLDINGS SHARES %ge TCCIA %ge Total 1 TCCIA DAR ES SALAAM 17, % 0.32% 2 TCCIA HQ 9, % 0.17% 3 TCCIA MWANZA 4, % 0.09% 5 TCCIA TANGA 4, % 0.08% 6 TCCIA MOROGORO 4, % 0.08% 7 TCCIA DODOMA 3, % 0.06% 8 TCCIA IRINGA REGION 2, % 0.04% 9 TCCIA SHINYANGA 2, % 0.04% 10 TCCIA MTWARA 2, % 0.04% 11 TCCIA MBEYA 2, % 0.04% 12 TCCIA ARUSHA 2, % 0.04% 13 TCCIA GEITA BRANCH 1, % 0.02% 14 TCCIA BARIADI BRANCH 1, % 0.02% 15 TCCIA COAST 1, % 0.02% 16 TCCIA RUKWA 1, % 0.02% 17 TCCIA LINDI 1, % 0.02% 18 TCCIA KAGERA 1, % 0.02% 19 TCCIA BABATI 1, % 0.02% 20 TCCIA KILIMANJARO % 0.02% 21 TCCIA KIBAIGWA BRANCH % 0.02% 22 TCCIA MAGU % 0.01% 23 TCCIA TAWI LA TARIME % 0.01% 24 TCCIA KIGOMA % 0.01% 26 TCCIA MBINGA BRANCH % 0.00% 27 TCCIA MASASI DISTRICT BRANCH % 0.00% 28 TCCIA - KILOMBERO % 0.00% TOTALS TCCIA 68, % 1.20% The company has invested in 8 companies, whose shares are traded on the Dar es Salaam Stock Exchange. At the 10 th Annual General Meeting of the Company held on 11 December 2015 the shareholders agreed that the par value of each of its 5,687,392 be reduced from TZS 250 each down to TZS 20, thereby increasing the number of shares in circulation to 71,092,400 ordinary shares prior to this IPO. 10

22 DRAFT In the language of stock markets, this is a 12.5 times stocksplit, meaning that an existing shareholder surrenders 1 share of 250/= shillings (that he currently owns) in return for 12.5 new shares (of 20 shillings ea ch). Put it another way, he or she surrenders 2 of his old shares in return for 25 of the new shares. The shareholders further agreed that 112,500,000 new ordinary shares be sold to the general public at a price of 400/= per share, expected to fetch TZS 45 billion in all. The Company also approved necessary amendments to the Memorandum and Articles of Association of the Company that are required to make it eligible for an IPO and a listing on the DSE. Resolutions were passed by the Board of Directors of Company at a meeting held on 9 September 2016 to pass this Prospectus and apply to the CMSA for its approval to enable the Company to collect monies from eligible applicants in terms of the Prospectus. The Prospectus will be the subject of the Offer for Sale of shares in TICL by way of an IPO. The Board also resolved to apply to the DSE for admission to the Official List of the Exchange. Institutional Set Up The institutional set up of TICL consists of Shareholders (through the Annual General Meeting), the Board of Directors and the Management. The Board is supported by two committees the Investments and Risk Management Committee and the Audit Committee. The relationships of the institutional set up are depicted below: Organization Structure ANNUAL GENERAL MEETING BOARD OF DIRECTORS Investment & Risk Management Committee Audit Committee MANAGEMENT The Organizational Structure of the Company comprises the Annual General Meeting; the Board of Directors (supported by the Investment and Risk Management 11

23 DRAFT Committee and the Audit Committee) and the Management. According to the Company s Memorandum and Articles of Association, the minimum number of Directors is seven [7] and the maximum is twelve [12]. On 31 December 2015 the Board of Directors comprised eleven [11] Directors. The Directors are expected to serve for a period of three [3] years. Consistent with the requirements of the Company s MEMARTS and Tanzania Companies Act 2002 the Directors are elected by the Shareholders during the Annual General Meeting. All the Directors are Tanzanians. As aforementioned, the Board is supported by two Board Committees, these being: Investment and Risk Management Committee Audit Committee. Each Committee is composed of four members. The Investment and Risk Management Committee meets regularly to discuss and decide on investment proposals which require urgent decision. It also reviews the performance of the company on a quarterly basis. The Audit Committee meets quarterly to discuss and approve the internal audit reports. The organizational structure of TICL is lean to ensure effective distribution of responsibilities, exercise of authority and accountability at all levels. The structure includes the following levels:- Board of Directors: The Board provides the strategic direction of the company, sets policies and procedures, approves strategic and operational plans, and allocates resources. Management: This is headed by the Chief Executive Officer who is accountable to the Board of Directors and provides leadership of the company on a day to day basis on operational activities. Staff: Staff are responsible at operational and tactical levels where tasks are guided by operational plans implemented under direct management supervision. The current Organizational Structure is illustrated below: 12

24 DRAFT BOARD OF DIRECTORS INVESTMENT & RISK MANAGEMENT COMMITTEE AUDIT COMMITTEE CHIEF EXECUTIVE OFFICER (CEO) EXECUTIVE ASSISTANT TO CEO (Also IT SPECIALIST) COMPANY ACCOUNTANT INVESTMENT OFFICER Management Human resources requirements have been determined on the basis of the activities to be carried out and the Board s decision to maintain a very lean organization structure. Currently the Management team consists of the Chief Executive Officer who also serves as the Company Secretary, the Company Accountant and the Executive Assistant to the CEO, who is also the IT Specialist. It is projected that in future, depending on the growth of the company including widening of the company s investment portfolio the company will employ additional stafff including Investment Officer and Credit Officer (the former has already been hired and final steps are being taken for him to report for work). In the interim period, in view of the need for the lean management structure envisaged, the Human Resources function will be outsourced. Employment of additional staff will depend on the volume of revenue generated to support the resulting personnel expenses and other operating expenses. 13

25 DRAFT The following diagram represents what TICL s structure will be in the short term: Revised Organization Chart: BOARD OF DIRECTORS INVESTMENT & RISK MANAGEMENT COMMITTEE AUDIT COMMITTEE CHIEF EXECUTIVE OFICER (CEO) INTERNAL AUDITOR INVESTMENT OFFICER IT SPECIALIST COMPANY ACCOUNTANT CREDIT OFFICER ADMINISTRATION MANAGER Note: at the date of this Prospectus, the Administration Manager s position has not yet been filled. 2.1 Financial performance Key Summary Financial Information These statements should be read in conjunction with the portfolio performance analysis presented on page 61 of this Prospectus. The summary of financial information for the periods presented below should be read in conjunction with the Independent Reporting Accountant s Report beginning page 79 14

26 DRAFT Income Statement For the years ended 31 December TShs '000 TShs '000 TShs '000 Dividend income 1,320,647 1,351, ,202 Other income 48,589 42,154 35,864 1,369,236 1,393, ,066 Personnel expenses (247,745) (212,754) (135,427) Administrative costs (557,309) (396,846) (252,406) Operating profit 564, , ,233 Profit before tax 564, , ,233 Income tax expense (169,255) (235,268) (176,470) Profit for the year 394, , ,763 Other comprehensive income Change in fair value of shares, net of tax (1,861,772) 8,834,055 8,353,152 (1,861,772) 8,834,055 8,353,152 Total comprehensive income for the year (1,466,845) 9,383,013 8,764,915 15

27 DRAFT Balance Sheet For the years ended 31 December TShs '000 TShs '000 TShs '000 ASSETS Non-Current Assets Property and equipment 9,527 10,236 15,810 Investments In shares at fair value through P& L 32,149,180 33,868,403 20,871,494 Others 179,981 36,016 26,530 32,329,161 33,904,419 20,898,024 Total Non-current Assets 32,338,688 33,914,655 20,913,834 Current Assets Accounts receivable 143, ,888 16,897 Treasury bills (182 days) Fixed deposits 123, , ,686 bank and cash balances 339, , ,410 Total Current Assets 606, , ,993 Total assets 32,945,577 34,558,027 21,483,827 EQUITY Capital and reserves Share capital 1,421,848 1,421,848 1,421,848 Retained earnings 22,945,084 24,609,393 15,500,859 Total Equity 24,366,932 26,031,241 16,922,707 LIABILITIES Current Liabilities Income tax payable 2,169 45,237 69,180 Deferred Tax 8,021,010 8,021,010 4,234,986 Trade and other payables 555, , ,954 Total liabilities 8,578,645 8,526,786 4,561,120 Total equity and liabilities 32,945,577 34,558,027 21,483,827 16

28 DRAFT Cash Flow Statement For the years ended 31 December TShs '000 TShs '000 TShs '000 Cash flows from operating activities Cash generated from (used in) operations (1,328,427) 13,350,065 12,740,928 Income tax paid (141,814) (186,476) (113,828) Net cash generated from/(used in) operating activities (1,470,241) 13,163,589 12,627,100 Investing activities Investment in/disposal of shares 1,719,223 (12,996,909) (12,120,378) Other investments (56,472) (31,971) (16,862) Purchase of property and equipment (1,550) (770) (8,350) Proceeds from disposal of assets - 1, Tax paid at source (70,509) (72,736) (50,518) Net cash used in investing activities 1,590,692 (13,100,574) (12,195,508) Financing activities Dividends paid (84,975) (123,112) (113,531) Net cash used in financing activities (84,975) (123,112) (113,531) Net increase/(decrease) in cash and cash equivalents 35,476 (60,097) 318,061 Cash and cash equivalents at the start of year 304, ,410 46,349 Cash and cash equivalents at the end of year 339, , ,410 17

29 DRAFT FORECASTED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDING 30 JUNE 2017 Management Projections Accounts July June 2016 June 2017 TShs '000 TShs '000 Dividend income 908,648 2,826,176 Other income 18,691 2,503, ,339 5,329,447 Personnel expenses (140,420) (401,707) Administrative costs (207,049) (1,060,072) Operating profit 579,870 3,867,668 Profit before tax 579,870 3,867,668 Income tax expense (173,961) (1,160,300) Profit for the year 405,909 2,707,368 Other comprehensive income Change in fair value of shares, net of tax (5,501,447) 266,477 (5,501,447) 266,477 Total comprehensive income for the year (5,095,538) 2,973,845 18

30 DRAFT FORECASTED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 TShs '000 ASSETS Non-current assets Property and equipment 42,058 Investments In shares at fair value through P& L 34,680,681 Others 144,519 34,825,199 Total non-current assets 34,867,257 Current assets Accounts receivable 238,374 Treasury bills (182 days) 10,500,000 Fixed deposits 23,800,000 bank and cash balances 8,366,189 Total current assets 42,904,563 Total assets 77,771,820 EQUITY Capital and reserves Share capital 46,421,848 Retained earnings 21,830,568 Total equity 68,252,416 LIABILITIES Current liabilities Income tax payable 1,246,207 Deferred tax 8,021,010 Trade and other payables 252,187 Total liabilities 9,519,404 Total equity and liabilities 77,771,820 19

31 DRAFT 2.2 The Offer shares The Offer Shares rank pari passu in all respects with the existing shares (including the right to participate in full in any dividends to be declared and paid, if any, on the ordinary share capital of the Company in respect of the financial year beginning 1 st January 2016), are freely and in the event of liquidation to an equal entitlement in any surplus and any other special rights attaching to the Company shares. The transaction will be managed in accordance with the following indicative timetable: Table 5: Expected Timetable of Principal Events Opening date Wednesday, 1 st February 2017 Closing date Tuesday 14 th March 2017 Allotment of shares Tuesday, 4 th April 2017 Announcement of results Tuesday, 11 th April 2017 Crediting of shares into the CSD Thursday, 13 th April 2017 Making refunds completed by Friday, 21 st April 2017 Listing date and commencement of DSE trading Monday, 24 th April 2017 Table 6: Offer Statistics 1. Offer price per ordinary share TZS Number of shares offered for sale to be issued fully paid 112,500,000 ordinary shares at a par value TZS 20 each 3. Gross proceeds of the offer TZS 45,000,000, Market capitalisation of the Company at the offer price TZS 73,436,960, EPS for the year ended 31 December 2015 (after stocksplit) TZS (20.63) 6. EPS for the year ending 31 December 2015 TZS (17.29) 7. Historic PE Ratio based on the EPS for the twelve month period ended 31 December DPS for the twelve month period ended 31 December 2015 (61.95) N/A 20

32 DRAFT 2.3 Dividend Policy Declaration of dividend is subject to Directors recommendation and approval by the Annual General Meeting and the state of the Company s financial position. Subject to Shareholders approval in general meeting, the Directors shall recommend that at least 50% of legally distributable profits of each year be distributed as dividend. 2.4 The offer price A business valuation of the Company was conducted by the Lead Advisor to provide an estimate of the fair value of its equity, using a number of standard valuation techniques. Using this valuation as a guide, the Board has placed a price on the shares and determined that the Offer Price of TZS 400 for each ordinary share in the company is fair and reasonable. Minimum number of shares to be applied for The minimum subscription is 100 shares and in multiples of 10 shares thereafter. Allotment policy In the event of an over-subscription, allotment of shares will be proportionately. The Directors have requested, and the Authority has agreed, that in the event of an oversubscription, additional shares up to a maximum of 30% of the IPO value will be allotted in a Green Shoe option. Unsuccessful applicants beyond the Green Shoe option will get pro-rata allotment, but there will be no interest or penalty on refunded amounts. Refunds will be paid by Electronic Funds Transfer to the bank account details in the CSD account or in the Application Form. However, if the electronic transfer is declared unsuccessful or otherwise, a Cheque or bank draft may be issued in the name appearing on the Application Form. Where a Lender has advanced money to an investor to subscribe for Offer Shares, refunds will be made to or for the account of such a Lender as the case may be. 3. BASIS OF THE ISSUE PRICE The par value of the Equity Shares is TZS 20 each and the Issue Price is TZS 400 each, giving rise to a share premium of TZS 380 per share. The Issue Price has been determined by the Board in consultation with the Lead Advisor on the basis of market demand as well as the qualitative and quantitative factors discussed below. 21

33 DRAFT At the Close of Business on 7 September 2016, the value of the Issuer s investments was taken from the DSE printouts and the following picture emerged: Table 7: Valuation of TCCIA Investment PLC as at September 2016 CLOSING SHARES QUANTITY PRICE VALUE Twiga 88,348 2, ,316,920 TCC 301,800 11,740 3,543,132,000 Swissport 101,427 6, ,089,990 CRDB Bank 4,249, ,232,228,560 Simba 68,269 1, ,980,340 DCB 656, ,124,720 NMB 2,611,886 2,750 7,182,686,500 TBL 1,183,655 13,000 15,387,515,000 TOTAL VALUE 28,603,074,030 No. OF SHARES 5,687,392 VALUE PER SHARE (THERE ARE NO LIABILITIES) 5, The Company had 4 employees. It had no fixed assets apart from their individual laptops; chairs and tables; and a desktop for the MD. These had a carrying value of TZS 9 million. Other than about 300 million shillings at bank, the Company had no other assets or liabilities. The office was rented. It had no long term borrowing nor any plans to borrow or incur in future capital expenditure. The best valuation method is therefore simply net assets value (NAV) per share. Because the portfolio is entirely composed of listed shares, any valuation that gives a different result will be superfluous. If the valuation is higher, investors will ignore our shares and go to the DSE to buy their own equivalent mix of shares. If it is lower, smart investors will arbitrage out of the portfolio mix and sell their shares at a profit. The above NAV of 5,029/= per share was rounded off to TZS 5,000/= per share. Because an IPO price of 5,000/= would be awkward to trade on the DSE, we made 12.5x stock-split, meaning that 1 existing share was subdivided into 12.5 new shares or, more realistically, 2 existing shares were subdivided into 25 new shares. The split was done by reducing the par value from 250/= to 20/= (that is 12.5 times). The IPO price was therefore reduced from 5,000/= to 400/= (that is 12.5 times). That is how that is how the IPO price of 400/= was reached. We made several other comparisons as further described below) with a basket of similar shares that are traded in similar circumstances to arrive at the final numbers but 22

34 DRAFT they merely confirmed the above valuation. Even the market cap post-ipo will still be close to NAV. Qualitative Factors A track record of profitable operations The business has grown from a small investment in value. By judicious investing, careful stock picking and purposeful cost management, the fund has grown over 6 times in the course of the last 4 years. This is particularly profound when one considers that during all this time, the Company has had minimal investment in staff or facilities to be exact, 3 staff and minimal office equipment. Skilled and experienced top management The Managing Director and his team at head office, with strong backing from the Board through its Investment and Risk Management Committee has great experience in the workings of capital markets in Tanzania and the financial system in general. This knowledge and experience, along with the contacts cultivated within the industry, have managed to turn a small Company into a multi-billion institution. They are capable of greater deeds still, given wider professional support and plentiful investible funds. Well-established brand Both TCCIA and TCCIA Investment PLC are household names that carry national stature for excellence and dedication to their Mission. TICL will leverage from this brand awareness to grow its business, build relationships and attract from the market and retain talented individuals amongst its professional cadre. Wide range of financial products and services So far, TICL has been engaged mostly in equity securities. With openings now available in other products like fixed income securities, Government paper and CIS, the Company will benefit from the substantial investable funds that it has, giving the management greater room to maneuver and a wider choice of products. Quantitative Factors Information presented in this section is derived from the TICL audited financial statements. Adjusted Earnings per Share (EPS) EPS for 3 years ended 31 December were averaged to get TZS

35 DRAFT Price Earnings Ratio (P/E Ratio) P/E ratio for Peer Group of 6 companies was used, giving an average of The peer group comprised the following companies: Table 8: Earning Multiples PEER GROUP FOR TICL VALUATION STOCK EXCHANGE P/E RATIO P/B RATIO DCB DAR ES SALAAM JSE JOHANNESBURG Stanrose Mafatlal MUMBAI NSE NAIROBI Centum Investment Co Ltd NAIROBI EQUITY NAIROBI AVERAGE Net Asset Value (NAV) TICL s NAV at 31 December 2015 was used. This was based on the shares held in the portfolio, all of which are actively traded on the DSE. This gave a NAV of TZS 5, The price to book ratio of the Peer Group was then computed, giving an average ratio of 2.01 It was neither possible nor desirable to compute DCF valuation in view of TICL s thin investment in infrastructure and without any approved budget for significant capex. As all the Company s investments are in financial assets with ready quotations on the DSE, the NAV valuation is seen to be adequate. An average of the 2 methods was then used, weighted equally, to arrive at the recommended price of TZS 5,000. This was split 12.5 times from the current par value of TZS 250/= to give a par value of TZS 20. The IPO price was then found to be TZS 400 as follows: 24

36 DRAFT Table 9: Justification of TICL IPO Price SHARES PORTFOLIO Closing PORTFOLIO HOLDING 7-Sept-16 VALUE Twiga 88,348 2, ,316,920 TCC 301,800 11,740 3,543,132,000 Swissport 101,427 6, ,089,990 CRDB Bank 4,249, ,232,228,560 Simba 68,269 1, ,980,340 DCB 656, ,124,720 NMB 2,611,886 2,750 7,182,686,500 TBL 1,183,655 13,000 15,387,515,000 TOTAL 28,603,074,030 No. OF SHARES 5,687,392 PAR VALUE 250 PAID UP CAPITAL 1,421,848,000 NAV 5, VALUATION P/B= , EPS (AVERAGE 3 YEARS) VALUATION P/E RATIO = AVERAGE P/B & P/E MULTIPLE WEIGHT VALUATION P/B 10, ,088 P/E VALUATION 5, ,879 SAY 5,000 SHARE PREMIUM 4,750 PROPOSED IPO PRICE 400 PROPOSED STOCKSPLIT PROPOSED PAR VALUE IPO SIZE PROPOSED 45,000,000,000 NUMBER OF SHARES TO BE ISSUE 112,500,000 BEFORE SPLIT AFTER SPLIT ISSUED SHARE CAPITAL 5,687,392 71,092, % IPO PRICE 5, IPO SHARES 9,000, ,500, % IPO PROCEEDS 45,000,000,000 TOTAL ISSUED AFTER IPO 183,592, % MARKET CAP. AT IPO PRICE 73,436,960,000 25

37 DRAFT SECTION A BOARD OF DIRECTORS AND MANAGEMENT 1.0 DETAILS OF DIRECTORS AND MANAGEMENT TEAM 1.1 Directors The Board of Directors is the highest policy making organ of the Company. As presently constituted the Board consists of eleven [11] Directors. All the Directors are Tanzanians. Eng. Aloys Joseph Mwamanga (67 years- Tanzanian) Eng. Mwamanga holds a Bachelor of Science [Hons] degree in Civil Engineering from the University of Nairobi, He is registered as a Professional Engineer by the Engineers Registration Board of Tanzania [ERB]. He is also a Fellow of the Institute of Engineers Tanzania. In addition, Eng. Mwamanga is a registered Member of the Institute of Directors in Tanzania. Eng. Mwamanga has attended several short courses including: Role of the Income Tax Appeals Board and Tribunal in July 2003, the International Board of Directors Seminar held in Stockholm- Sweden; from September to October 1990, organized by SIDA, Management Development Programme organized by UNIDO in May 1994 and Industrial Management and Marketing Course organized by USAID in the USA from May to July 1991 and Certificate in Directorship Course, organized by the Institute of Directors in Tanzania. Eng. Mwamanga has over 40 years working experience. He joined the Tanzania Zambia Railway Authority [TAZARA] in 1972 as an Assistant Civil Engineer and was promoted to Civil Engineer in 1976, the position he served up to August 1978 when he joined Bains Construction Company as a Resident Engineer and worked up to December 1979.In January 1980 he joined Pioneer Electric Machines and Consulting Company Limited [PEMACCO] as a founder Member and served as Deputy Managing Director up to December 1999.when he was appointed the Managing Director of the Company to date. Eng. Mwamanga has served as Board Chairman of Mbeya Technical College from 1996 to 2005 and Mbeya Institute of Science and Technology from November 2005 to He was President of Tanzania Chamber of Commerce, Industry and Agriculture from November 2007 to May He has also served as Vice-Chairman of the Tanzania Private Sector Foundation from 2009 to 2013 and Council Member of the Tanzania National Business Council from 2000 to He has also been a Board Member of Road Fund, Export Processing Zones Authority and Tan Trade. Engineer Mwamanga is currently the Board Chairman of TCCIA Investment PLC, PEMACCO Ltd, Njombe Resource Development Limited, and Mapembasi Hydro Power Company Limited. 26

38 DRAFT 27

39 DRAFT Ms. Hanim A. Babiker (45 years Tanzanian) Ms. Babiker holds a BSc. in Economics and Human Nutrition from Sokoine University and a Master s in Business Administration from the University of Dares-Salaam. She is a registered Member of the Institute of Directors of Tanzania. Ms. Babiker has also attended several short courses including: Programme on Project Risk Management organized by Meirc Training and Consulting in Dubai, United Arab Emirates. Social Security and Pension Fund West Africa Summit in Accra, Ghana, Core Course on Pension Schemes organized by ILO Training Center, Turin Italy, Budgeting and Results Based Monitoring and Evaluation organized by Information Management Research Centre in Dar-es-Salaam, Economic and Finance Project Analysis, Project Costing and Investment Analysis organized by the University College of Lands and Architectural Studies and Certificate in Directorship Course organized by the Institute of Directors of Tanzania in October, Ms. Babiker has over 12 years working experience. From May 2002 to January 2004 she served as a Regional Programme Manager Iringa, Voluntary Health Sector Programme (VHSP). The VHSP was being funded by USAID and covered five Regions and executed by Care Tanzania. From June 2004 to June 2006 Ms Babiker worked as a District Programme Coordinator of Community Based Health Initiatives (CBHI). The CBHI is a collaborative Health Programme which is funded by the Swiss Development Agency for Development Cooperation (SDA). From July 2006 to January, 2007 Ms. Babiker served as Coordinator for the Global Fund Malaria Project managed by Plan International Tanzania Office ON Tanzania Mainland In February, 2007 she joined the LAPF Pensions Fund ( LAPF) as a Research and Marketing Officer, rising to the position of Zonal Manager for the LAPF Lake Zone based in Mwanza. In May, 2014 Ms. Babiker was appointed as Planning and Investments Manager of LAPF. Her current responsibilities include: Evaluation and monitoring financial market trends for the purpose of determining appropriate interest rates, diversification of LAPF s investment portfolio and focusing on high yield investments, identification of new business lines, conducting feasibility studies and developing and implementing annual investment plans. Mr. Joseph Matanga Kahungwa (52 years -Tanzanian) Mr. Kahungwa holds a Bachelor of Commerce [Accounting] (Hons.) Degree from the University of Dar-es-Salaam, 1987 and Master of Business Administration (Hons) from the University of Dar-es-Salaam, Mr. Kahungwa has also attended several short courses including: Certificate in Directorship Course organized by the Institute of Directors in Tanzania, Asset and Liability Management Course organized by MEX Microfinance, Risk Management in Microfinance organized by OIKCREDIT, Business Development Planning and Customer Relation Management organised by UNDP. 28

40 DRAFT Mr. Kahungwa has vast experience in saving as a Chairman, Board member, a Board Chairman, a Board Vice-Chairman and Chairman of the committees of the Board such as Audit Committee of the Board in various business, investment, finance/banking and NGO organizations since 1998 to dated. Mr. Kahungwa is currently a Chairman and Managing Director of New Kahungwa Hotel & Guest House Limited and a farmer based in Mwanza. He is also President (Agriculture) of the Tanzania Chamber of Commerce, Industry and Agriculture (May 2013 to date), shareholder and board member of the Board of Directors of TCCIA Investment PLC and also Chairman of its Audit Committee. Furthermore, he is a Board Member of Meat Board of Tanzania, Chairman of the Board- Economic, Planning and Development of the Africa Inland Church Tanzania (AICT), Chairman of the Mwanza community Bank PLC (In -formation) and Chairman of the Board Victoria SACCOS Limited based in Mwanza. Mr. Kahungwa also saved as the TCCIA Mwanza region Chairman (March 2008 to March 2013) TCCIA Mwanza Regional Vice Chairman (2001 to March 2008) Board members CRDB Bank PLC from 2001 to 2006, member of finance committee of the Africa Inland Church Tanzania (AICT) 1977 to Previously Mr. Kahungwa was employed where he held several position including: Logistics and Government Relations Manager of Pangea Minerals Ltd from July 1999 to Senior Accountant -Pangea Minerals Ltd, Senior Accountant and Credit Controller Board of External Trade from 1992 to Accountant, Board of External Trade from 1991 to Mr. Kahungwa is registered member of the Institute of Directors in Tanzania Prof. Lucian Ambrose Msambichaka (72 years Tanzanian) Prof. Msambichaka holds a B.Sc. in Agriculture from the University of Dar-s- Salaam. In addition, he holds an M.Sc. and PhD. from Leipzig University in Germany. Prof. Msambichaka s area of specialization covers: Agriculture and Rural Development, Development Economics, Capacity Building, Microfinance, Strategic Plans, Business Plans, Investment decisions and Stakeholder Consultations. Prof. Msambichaka is a Member of the following professional Bodies: Agricultural Economics Society of Tanzania, Economics Society of Tanzania, and the African Association of Public Administration and Management. Prof. Msambichaka joined the University of Dar-es-Salaam as a Tutorial Assistant in From 1972 to 1984 Prof. Msambichaka served in various capacities rising to the position of Associate Research Prof. in July, He was Founder Director of the University s Consultancy Bureau- University of Dar-es-Salaam from 1993 to From 1993 to 2008 he served as Research Professor, Economics Research Bureau, University of Dar-es-Salaam and since 2008 Prof. Msambichaka served as Professor, Department of Economics, at the University of Dar-es-Salaam. 29

41 DRAFT Prof. Msambichaka is also the Chairman of the Board s Investment Committee. In addition Professor Msambichaka has served as Board Chairman of several companies and organizations including: Morogoro Leather Goods Board of Directors, Financial Services and Enterprises Development Association, National Health Insurance Fund Board, Moshi University College of Cooperative and Business Studies, Business Registration and Licensing Agency [BRELA], Rufiji Basin Development Authority [RUBADA], Institute of Social Work Board of Governors and the Tanzania Investment Centre. He is also a member of the Presidential Task Force, which formulated the Tanzania National Agricultural Policy, and was a member of the Presidential Task Force which reviewed Tanzania s Rural Credit System. Prof. Msambichaka has undertaken more than 60 consultancies commissioned by the Tanzania Government, International Organisations and the private sector. In addition he has published more than 40 professional articles in professional journals locally and internationally and published 10 Books. Mr. Arphaxad Gomborojo Agomas Masambu (56 years-tanzanian) Mr. Masambu holds a B.A Degree in Economics, from the University of Dar-es- Salaam, 1985, Graduate Diploma in Economics 1992/1993, and Master of Economics from the Australian National University, Canberra Mr. Masambu also holds a Certificate in Stock Broking and Securities Dealership as well as a Licence in Capital Market Development, Stock Broking and Dealership Licence issued by CMSA. Mr. Masambu has also attended several short courses covering corporate finance, Bonds and share valuation, capital market developments, finance and investment advisory services, stock and capital markets developments in various countries - Nairobi Stock Exchange, Johannesburg Stock Exchange, Bombay Stock Exchange, National Stock Exchange of India and the London Stock Exchange and Certificate in Directorship Course organized by the Institute of Directors in Tanzania. Mr. Masambu has over 30 years of work experience. He has served as an Investment Banker, Dealer and Stock Broker, Research and Development Officer, project appraisal and monitoring, debt recovery, receivership and liquidation. In addition Mr. Masambu serves as one of Professional Resource Persons for Securities Industry Training Institute [SITI] in East Africa. Mr. Masambu served as a Director on the Board of TOL Gases PLC from April 1999 to May 2004 and November 2009 until to date, being member of its Audit Committee. He is a Member of the Investment and Risk Committee of the TCCIA Investment Public Limited Company since January He was until recently a Member of the DSE Governing Council as well as Committee Member of its Primary Markets, Trading and Programmes Steering Committee. Mr. Masambu is also a registered Member of the Institute of Directors in Tanzania. 30

42 DRAFT Ms Magdalene Nelson Enock Mkocha (61 years- Tanzanian) Ms. Mkocha holds BSc. Agriculture from the University of Dar-es-Salaam 1979 and Master of Science [Agriculture] from Sokoine University Ms. Mkocha has attended various courses including: Regional Training Workshop December 2014 in Agribusiness and Agro-Industries Investment Promotion, Sector Wide Approach for Executives, March 2004, Business Association Management August 2002, Planning and Appraisal of Agro-Industrial Projects August October, 1981 IDM Mzumbe and Certificate in Directorship Course organised by the Institute of Directors in Tanzania. Ms. Mkocha has over 37 years of working experience. From April 1979 to June 2002 she was employed by the National Agricultural and Food Corporation [NAFCO]. In July, 2002 she joined the Tanzania Chamber of Commerce, Industry and Agriculture holding the position of Senior Chamber Development Officer. In February 2014 she was promoted to the position of Director for Agriculture Development. She is a member of the TICL Audit Committee. Ms. Mkocha is a Member of the following Boards/ Committees, Labour Economic and Social Council of the Ministry of Labour, the Tanzania Meat Board, the National Sanitary and Phytosanitary Committee, Chairperson of the VETA Trade Advisory Committee and Alternate Member to the Technical Advisory Committee of the Sugar Board of Tanzania. In addition she is a registered Member of the Institute of Directors in Tanzania. DR. Gideon Hosea Kaunda Ph.D. (69 years, Tanzanian) Dr. Kaunda holds LL.B from the University of Dar-es-Salaam, Diploma in Air and Space Law from McGill University, Master s Degree [LLM] and PhD [DCL] from McGill University, Canada. Dr. Kaunda is a Member of the Tanganyika Law Society and Advocate of the High Court of Tanzania, Member of the International Law Society, Life Member of the McGill Institute of Air and Space Law, Montreal Canada. Dr. Kaunda has over 40 years of working experience.in1970, Dr. Kaunda joined the East African Community [EAC] as Assistant Legal Secretary and was subsequently promoted to Senior Assistant Counsel and Principal Legal Counsel respectively, appearing as an Advocate representing the General Fund Services and Corporations of the EAC in District Magistrates and High Courts in the EAC Member Countries. In 1976 Dr. Kaunda was appointed by the Government of Tanzania to serve as its Representative on the International Civil Aviation Organisation [ICAO]. On completion of his Diplomatic assignment, Dr. Kaunda returned to Tanzania and joined the Ministry of Communication and Transport as Principal Air Navigation Officer and Director of Air Transport. 31

43 DRAFT Presently Dr. Kaunda serves as Director on a number of companies and organizations including: Air Tanzania Company Limited, Chairman of the National Investment Company Limited [NICO], Member of the TCCIA Investment Committee, Founding Director Fanikiwa Investment Company an affiliate of the Tanzania Private Sector Foundation, Commissioner Tanzania Commission for Universities, Trustee the Nelson Mandela African Institute of Science and Technology, Member of the Tanzania National Business Council. He is also a registered Member of the Institute of Directors in Tanzania. Mr. Nathan Edward. Mnyawami (47 years -Tanzanian) Mr. Mnyawami holds a B.A Statistics [Hons] Degree, Makerere University 1993 and M.A. [Economics] from the University of Dar-es-Salaam 2003.Mr. Mnyawami is also a registered Member of the Institute of Directors in Tanzania. Mr. Mnyawami has attended several short courses including: Certificate in Directorship Course organized by the Institute of Directors in Tanzania. March 2013, Advanced Project Management organized by Meirc Training and Consulting, Dubai February 2013, Asset and Liability Management Best Practice organised by LenMore Training Institute, Windhoek Namibia July 2011, Strategic Planning and Implementation organized by Management Training and Consultancy [MTC] Dubai May 2010, Advanced Financial Analysis Evaluation &Budgeting organized by LenMore Training Institute, Windhoek Namibia May 2011, Certified Training Course for Board Directors, organized by the Centre for Corporate Governance, Mombasa, Kenya June 2010, Project Appraisal and Impact Analysis Organised by Meridian Consultancy, Swaziland, December 2009, Senior Management Programme, organized by Sun Way International Business & Management, Malaysia, September 2008 and Advanced Business Strategy and Financial Analysis organized by Euro Money Training of U.K, Johannesburg May Mr. Mnyawami has over 20 years of working experience. From 1994 to 2002 Mr. Mnyawami was employed by the Tanzania Petroleum Development Corporation as a Statistician attached to the Directorate of Marketing and Investments. In October 2002, he joined the Parastatal Pensions Fund as a Programme Coordinator/Research Planning Manager. In April 2013 Mr. Mnyawami was promoted to the position of Research and Planning Manager reporting to the Director General. He rejoined TPDC in Mr. Mnyawami is also a Member of the Company s Investment and Risk Management Committee and a registered Member of the Institute of Directors in Tanzania 32

44 DRAFT Nathaniel Rajabu Mbwambo (57 years-tanzanian) Mr. Mbwambo holds a BSc. Agriculture from the Sokoine University of Agriculture, Post Graduate Diploma in Animal Science from the Agriculture University of Norway 1989 and M. Sc. Agriculture 1993 from the Sokoine University of Agriculture Mr. Mbwambo has also attended several short courses including Management of Artificial Insemination Programme 2002 Uppsala, Sweden, Milk Post Harvest Losses Management 2004 Debre Zeit Ethiopia and One Health Framework Workshop, 2002 Nairobi Kenya. Mr. Mbwambo has over 30 years of working experience. He joined the Ministry of Agriculture and Livestock Development in 1980 as a Livestock Training Field Assistant and in 1985 he was promoted to the position of Livestock Officer III and was subsequently promoted to various positions and in 2004 he was promoted to the position of Principal Livestock Officer 1. Mr. Mbwambo is a Board Member in the following companies/institutions: Kibaha Education Centre from 2012 to 2014, Heifer Project International from 2008 to date, Tanzania Dairy Board 2005 to 2008, Inspection and Acceptance of Goods Committee 2009 to date and the Tanzania Society of Animal Production. Mr. Julius M. Kaijage (58 years - Tanzanian) Mr. Kaijage holds a Post Graduate Diploma in Public Finance from Glasgow College- Scotland 1990, Master of Business Administration from the Open University of Tanzania 2012 and CPA (T). Mr. Kaijage has also attended various short courses including Business Consulting and Training organized by the Business Centre a USA Aid Project 1906, Contract Management and Estimation organized by the Contractors Registration Board of Tanzania 2000 and State of Cities Analysis and Development Planning organized by Ardhi University He is a member of the Institute of Directors of Tanzania. Mr. Kaijage has over 30 years of working experience. In 1984 he joined Bagamoyo District Council as a District Council Accountant From 1988 t he worked as Head of Council Finance Department at the Mbeya Municipal Council From 1992 to 1996 he served as Principal Accountant and Auditor at Shebrila & Company Accountants and Auditors. From 2001 to date Mr. Kaijage is Managing Director of KAI Consult, a management firm which renders Management Consultancy Services and training. Mr. Kaijage has served as a Director on a number of companies including: VETA South WestZone, SIDO Mbeya Region Advisory Board, Mbeya Urban Water Supply Authority Board. Regional Chairman TCCIA and Vice-President Commerce, TCCIA. Member of the Audit Committee of the Mbeya University of Science and Technology 33

45 DRAFT Ndibalema John Mayanja, 61 years Tanzanian Land economist Ndibalema John Mayanja holds an Advanced Diploma in Land Management and Valuation from Ardhi Institute, He is registered with Tanzania Institute of Valuers and Estate Agent (TIVEA) and is also a member of the Institute of Surveyors in Tanzania (IST). He has attended courses in leadership at the Tanzania Institute of Leadership (Chuo cha Taifa cha Uongozi). Mr. Mayanja worked with the Ministry of Finance and Planning in 1978 before he was seconded to Tanzania Peoples Defense Forces (TPDF). He worked as a military officer at the Army Head Quarters and was later transferred to the Ministry of Defense as Adviser to the Minister on Land Matters from He voluntarily retired from the army in 1995, thereafter he joined the private sector, offering consultancy services in lands matters, real estate, transportation as well as trade and industry. He is currently Managing Director of John Baptist Ltd, which owns John Baptist Secondary School. Mr. Mayanja has served as Board member of various institutions including VETA-Dar es salaam and Tanzania Private Sector Foundation (TPSF). Currently he is a Vice Chairman of Board member of National Construction Company (NCC), a Board Member of TCCIA Investment PLC, the President of TCCIA and Executive Chairman of John Baptist Secondary School. 34

46 DRAFT 1.2 Senior Management Donald Jimogi Kamori (72 years Tanzanian) Mr. Kamori holds B. Com. [Hons] Degree from Nairobi University 1970 and M.A. Development Economics, Center for Development Economics, Williams College, Massachusetts, USA Mr. Kamori has attended several short courses including; Seminar on American Finance organised by Morgan Guaranty and Trust Bank, New York USA June 1973, Financial Analysis Course organized by IMF Institute, Washington DC, from July to November 1978,National Economic Management Course organized by the Institute of Economic Development, World Bank, Washington Dc, USA July African Senior Bankers Seminar organized by Citi Bank, New York USA 1996 and Conference on Challenges to Microfinance Commercialization organized by Accion International and Microfinance Network, Washington DC,USA June 2001.Workshop on Practical Experience on the Alternative Investment Market [AIM],Operations, UK Experience and Lessons for Tanzania organized by the Capital Markets and Securities Authority May 2013,Seminar for Directors and Senior Management of Banks and Financial Institutions on Risk Based Supervision March 2008 organised by Bank of Tanzania and Certificate in Directorship Course organized by the Institute of Directors in Tanzania February 2013., Mr. Kamori has more than 40 years of working experience in the economic and banking fields. Since January 2005 Mr. Kamori has been serving as the Company s Chief Executive Officer and also Company Secretary. Between July 1970 and April 1993 he worked with the Bank of Tanzania, initially as an economist and in 1981 he was appointed Director of Economic Research and Policy. In 1984 he was appointed Director of Exchange Control and in 1990 he was appointed Director Import Licensing. In April 1993 he was appointed General Manager CRDB. However in July the same year he was appointed Managing Director of the former National Bank of Commence Limited. As the Bank s Chief Executive Officer Mr. Kamori was responsible for the overall operations of the Bank and also played a key role in the successful restructuring of the bank which was concluded in September From 1998 to 2004 Mr. Kamori served as Managing Director Impala Consultant Company Limited. Mr. Kamori has in the past served as a Director on a number Boards, including: TANESCO, Tanzania Petroleum Development Corporation, Aluminum African Limited, Agip Tanzania Limited [ORYX], Tanzania Investment Bank, National Social Security Fund, Tanzania Tobacco Processing and Marketing Board, and the CF Union Bank (now I&M Bank). He was also a Member of the bank s Credit Review and Audit Committees, CarnaudMetalbox Tanzania Limited. He is also a registered Member of the Institute of Directors in Tanzania. 35

47 DRAFT Mr. Edgar L. Kahabwa (59 years Tanzanian) Mr. Edgar Kahabwa is a holder of CPA I from NBAA, National Accountancy Diploma [NAD] from the Institute of Accountancy Arusha and National Bookkeeping Certificate [NABOCE] from the Tanzania Institute of Accountancy. He has also attended various courses organized by NBAA, notably Contemporary Issues in the Profession development, International Accounting Standards No 12, Accounting for Pension Funds and Employment Benefits, Cost and Management Accounting, Budgeting and Taxation Issues, International Standards and the Global Financial Crisis, International Financial Reporting Standards for Small and Medium sized Entities, International Standards - Implementation and Challenges, Enhancing Public Trust through Governance and Corporate Reporting Introductory technical analysis of Global Financial Securities, Migration from GAAP to IFRS, MYOB Accounting System and Course on Corporate Governance organized by the Institute of Directors in Tanzania. Mr. Kahabwa has more than 30 years of working experience in senior management positions as Accountant and Project Financial Controller in the public and private sector. He previously worked with Tanzania Saruji Corporation from 1989 to 1996, as Project Financial Controller and from 1999 to March 2006 He worked with TCCIA as Chamber Accountant. In April 2006 he was seconded to the TCCIA Investment PLC. Mr. Joel Chikoma (29 years) Mr. Chikoma holds a Bachelor of Business Administration in Accounting from Tumaini University. He is also a Certified Public Accountant (CPA (T}) 2013 and a Certified Risk Management Professional (CRMP) Mr. Chikoma has five years of working experience. He joined the Company in October 2015 as an Accountant/Investment Officer. His main responsibilities include budgeting, performance report, forecasting and carrying out investment analysis with respect to investment in shares and other investment as well as monitoring development in the capital market. Before joining the Company Mr. Chikoma worked with TANROAD as an accountant for 2 years. Thereafter he joined World Vision International as Finance and Administration officer before promoted to the role of cluster accountant where he overseen the coordination and consolidation of program budgets, effected disbursements, consolidated funding requests in line with cash forecast for Projects and Grants managed supply chain activities and monitored implementation activities such as construction (DAMS irrigation scheme) and training to local partners 36

48 DRAFT Ms. Rose Aloyce Osima (33 years - Tanzanian) Ms Osima holds a Bachelor Degree in Information and Communication Technology [B.Sc. ICT] from the Open University Tanzania. She also holds a Certificate in Computing and Information Technology from the University of Dares-Salaam, Computing Centre 2008, and Diploma in Computer Science from the University of Dar-es-Salaam. She has also attended the following short courses: Professional CISCO Certified Network Administration organized by the University of Dar-es-Salaam Computing Centre, Information Systems Auditing and Controls Course organized by the Institute of Accountancy Arusha 2012, Corporate Governance course, organized by the Institute of Directors in Tanzania February She has also attended studies in Higher Advanced Level Finance Management organized by Learnit Institute of Business and Technology. She also attended a Business Continuity Management and Disaster Recovery course organised by IAA in June Ms Osima joined the Company in 2008 as an IT Assistant cum Secretary. In January 2011 she was promoted to the position of Executive Assistant to the CEO. She also serves as IT Specialist for the Company. Further, Ms Osima is a registered Member of the Institute of Directors in Tanzania. 37

49 DRAFT SECTION B RISK FACTORS Any investment venture is always associated with risks. Risks are important for investors to know, especially the prospective shareholders of TICL who shall participate in this IPO. Risks can affect the Company s operations and lead it into a loss-making Company if not carefully identified, monitored, managed and mitigated. It is emphasized that prices of shares and other securities on the DSE may go up or down and there is no guarantee that previous good performance by any or all shares will necessarily repeat itself in the future. Prospective investors should carefully consider the risks described below, in addition to the other information contained in this Prospectus, before making any investment decision relating to the IPO. 2.0 Introduction There are two types of risks that are discussed in this Section: Risks of a general nature that may or may not crystallise in now or in future to affect the Company s operations to the extent that they apply to it. Three such risks are discussed here. Risks of a specific nature that are known to be currently facing the Company but whose outcome and extent are dependent on one or more occurrences that will arise in future. One such specific Litigation Risk is reported here. These risks are together discussed under the following heads: A: Market Risks B: Liquidity Risks C: Operational Risks D: Specific Risk of Litigation facing TICL A: General Risks Associated with the Market There are 4 risks that are associated with the market: i) Interest rate or price risk ii) Equity risk iii) Exchange rate risk iv) Liquidity risk These are discussed overleaf. 38

50 DRAFT i) Interest rate (or price) risk Amongst the products TICL invests in include fixed income securities such as government securities, corporate bonds, and even cash holdings. These are directly affected by changes in interest rates the higher the interest rates in the economy the lower the value of these securities, and vice-versa. In order to manage this risk, TICL normally carries out detailed risk analysis on the feasibility of every new project or securities to be invested in, satisfy itself that the Company s money shall be safe. Whilst interest rate risk does not directly affect TICL investments in shares of listed companies, this risk may indirectly affect TICL investments if, for instance, higher yields are being enjoyed in fixed income securities compared to equities. In such cases TICL would be tasked to observe trends and may decide to move funds from equity securities to fixed income securities, or vice-versa in periods of falling yields in fixed income investments It is also quite possible for any of the companies in whose shares TICL has invested to have excessive debts or loans that are subjected to interest risk, to the extent of defaulting in their repayments. If this happens, it means those financial constraints in such companies shall directly affect TICL if they fail to pay their dividends; and TICL would thereby report reduced dividend income. This risk is managed by TICL in judicious investment diversification in its portfolio of equities and fixed income securities. By having a highly diversified investment portfolio, failure in a single or just a few investments due to interest risk will have insignificant negative impact on TICL s revenues. ii) Equity Risk This is the risk associated with share price fluctuations in the market. Since TICL is obviously subjected to this risk (as most of its investments are in the form of shares in various companies). In most cases, as TICL s investment history has shown, shares are expected to appreciate and create capital gain if the shares held are then sold at the higher price compared to their carrying value. It is also possible for the reverse to occur in some years: in such cases the share depreciation realised can create big losses to the Company in terms of decreases in earnings. TICL, through its investment policy, requires the Company s investment portfolio to be well balanced between risk-free assets and those with uncorrelated or negatively correlated investments. The Company mitigates this risk constantly monitoring of the share performance in the DSE market. It tries to anticipate shares that will fall in price, and sell them; and those that whose prices will rise, and hold them. In addition, TICL is flexible enough to take such immediate measures as may be indicated to protect the Company and its shareholders. 39

51 DRAFT As a result of such monitoring, the Company sometimes engages in swapping its shares investment in order to dispose those which are not performing well and buy those which are performing well in the market at that particular time. iii) Exchange Rate Risk This risk is associated with economic losses that are caused by changes in the foreign exchange rate between the local currency and foreign currencies. TICL is not directly linked to this, as most of the shares invested in are from local companies. However there are cases when foreign investors tend to dominate the market and therefore are able to materially influence market prices. This is especially so for those companies whose shares are in high demand or have a small free float (such as TBL, SWISSPORT, TCC, and the cement companies). Whenever there is change in exchange rates in favour of the local currency, foreigners find our shares more expensive in dollar terms and therefore desist from buying them. In the opposite direction, many foreign investors make a quick mental calculation to determine if the shares are falling or rising in dollar terms, though not necessarily in TSZ. These are important considerations in our market because, following removal of the foreign ownership ceiling in 2014, foreigners now provide most of the liquidity in the DSE. TICL would normally be caught in between these fluctuations, since it has many of those shares that are highly demanded by foreigners. On the other hand, Exchange Rate Risk can be destructive to our economy, and indirectly affect TICL s earnings. This can happen if TICL s investee companies are export-oriented such that most of their income is expected from export products to their foreign customers. In this case too, whenever our currency appreciates it will make our exports more expensive to foreign buyers. Hence, the demand for TICL s investee companies products may fall and consequently affect TICL s income in terms of dividend reduction from these TICL s investee companies. Another effect due to exchange rate risk may be experienced if TICL s expected earnings are from foreign listed companies. That is, if TICL can have most of its share investments bought from companies operating in foreign countries and listed on the stock exchanges in their respective countries, such as LSE, NYSE, JSE, ASX, NSE, Borsa Italiana, Deutsche Bourse, etc.; or in foreign companies crosslisted on the DSE. Whenever there is currency depreciation in any of these countries, their income shall decline. As a result, dividend earnings from such foreign companies will also decline, thereby forcing TICL to end up booking losses. Here again, the net effect to TICL due to this risk will be insignificant it does not own shares of listed or crosslisted foreign companies. In addition, the investment policy of TICL is to invest for a long term, not for a short term or speculative reasons. 40

52 DRAFT iv) Liquidity Risk This is a risk that occurs due to illiquidity in the market, as investors may not have money to buy shares in the market. This risk becomes costly to the sellers of shares as they may be forced to sell their shares at extremely low prices due to lack of demand. If the price goes below its carrying price it means the Company shall suffer serious financial losses in search of liquidity at times of financial commitments. This liquidity risk can be either due to domestic economic factors or foreign economic factors depending on the type of investee companies. That is, if they are foreign companies or domestic companies; and if they are locally listed or foreign cross listed companies. A typical example occurred during the global economic and financial crisis that was experienced in the years when almost all the western countries found themselves in financial crisis that spread worldwide, including Tanzania. The problem has been contained by international regulatory cooperation and the situation appears back to normal. In short, this liquidity risk is normally cyclic as sometimes the economy can be so illiquid and sometimes become so liquid. Those affected most are normally short term investors, long term investors will only feel the shocks but they are normally the main beneficiaries of these stock markets. TICL like any other share investor can also be affected by this risk. However, this also may not be a problem to the Company, since the Company s policy is in favour of long term share investment and not for short term or speculative reasons. The financial commitments of the Company are well budgeted and controlled, such that the cash flow available is enough to meet the requirements of the Company without necessarily the need to sell its shares at a loss. B: CREDIT RISK These include general default risk and Issuer specific risk i) General default risk; This occurs when the issuer fails to pay its debts in terms of principal loan and its accrued interests as planned in the repayment schedule. This can have disastrous effects to the Company as sometimes it may lead a Company into liquidation. This risk is not directly linked to TICL as TICL does not have any outstanding debts. Indirectly it can happen if any of its companies in which it has invested in is facing serious default risks such that it may fail to pay its dividends to its shareholders including TICL. This also is not a problem to TICL as none of the companies in which TICL has invested has ever defaulted. They are all well-managed companies that are currently performing well in the market. These can be seen in the discussions of TICL s investments portfolio on page 56 of this Prospectus. 41

53 DRAFT ii) Issuer Specific Risk Issuer-specific risk is related to any default by any of its counterparty. That is, when any investee companies fails to meet its dividend or interest paying obligations and thereby causing loss to TICL. Issuer specific risk would be particularly damaging if there was overdependence on dividend income from only a few listed companies, otherwise the risk by holding a diversified investment portfolio. TICL too, has been constantly continuing to diversify its portfolio from time to time whenever an opportunity for diversification occurred. The process of diversification is still continuing, also by targeting on other new investments like real estate, microfinance, agribusiness and industrial production, all of which are planned (in form of joint venture participation with seasoned operators to provide finance, expertise, technology, markets, managerial and other potential resources that TICL may. C: OPERATIONAL RISKS: The risks in this Category include: i) Reputational risk ii) Legal risk iii) Strategic and competition risk iv) Fraud risk v) Organisational risk vi) External Risk or Force Majeure Risks i) Reputational Risk This is when a Company suffers a loss due to bad actions or behaviour that can erode the good name of the Company so that it fails to attract customers, thereby ending up underperforming or making losses. This could be caused by foul language to customers; overpricing with the intention of gaining at the expense of customers; theft problems; poor services or shoddy products; cheating; fictitious or substandard products; or poor customer care. Any of these may cause the Company to suffer losses in the long term due to loss in reputation. Fortunately TICL is not affected by any of the above, as TICL is not directly dealing with customers at the moment. Even when it does, the Board and the management shall be organised and prepared enough to meet such challenges. ii) Legal compliance Risk This is when there are uncertainties in some of the activities that require legal advisory, legal contracts and/or Legal compliance during implementation. TICL has so far been 42

54 DRAFT careful in this by involving lawyers and other relevant professional in most of the business activities or transactions undertaken by the Company. Even at the Board level and at the committee level, there is a prominent Lawyer who guides the Board and the management in any legal issues that need professional legal interpretation. Furthermore, whenever necessary, strong legal firms have been contracted to provide legal advisory services. iii) Regulatory Risk By definition, this is the cost that can be experienced due to changes in the regulations. TICL can be affected by the regulations from various regulators like CMSA, BOT, NBAA, DSE, SSRA, BRELA, NEMC, OSHA and TRA. For example, changes in taxation can affect the earnings of the Company; whilst non-compliance to any of the regulation(s) may cause the Company to face serious financial penalties or even to be terminated or suspended from business. However, Regulators are there to oversee fair business operations, fair competition, and to put in place a proper, well-regulated playing for the benefit of both customers and market players, and to allow all companies to pay their statutory charges without discrimination, favouritism or corruption. These regulations are therefore there for all players in the market and not for TICL alone. This means that if TICL wants to operate legally and ethically, then it has to comply with all the regulations put in place without failure, so that TICL can continue to exist in business like any other business entity in the country. iv) Strategic or Competition Risk This is when the Company may suffer losses due to changes in technology, entry of new competitors, product modification or price cuts in the market. TICL may not directly be affected by this risk, but it can be indirectly affected if any of its investee companies, competitors, bankers, brokers or the trading platforms at DSE, BOT and other stakeholders and counterparties are affected by any of those factors. On the other hand competition should be considered as a business challenge that is unavoidable. Hence, in any world of business, competition is always there and if TICL wants to continue operating profitably and existing in business, it should be ready to compete with other business operators in the market. v) Fraud Risk This is the Risk that can be experienced when a Company is having dishonest workers; as some workers can be involved with purposeful wrongdoings for their personal gain, but at the expense of the Company. Hence, the Company ends up making losses 43

55 DRAFT through theft and TICL is subjected to this risk just like any other Company. Fortunately until to date the Company has never experienced such a risk, but that does not mean that it shall not occur. The Board and the management are always extra careful in recruitment, and also to have continuous monitoring of the existing employees in order to avoid such bad intentional wrongdoings at the expense of the Company. The Board has an Audit Committee as top-level overseer of the Company s risk profile. In addition, the Company has appointed an outside Internal Auditor who makes monthly internal audit reviews and reports them on a quarterly basis to the Audit Committee. We also have a properly registered External Auditor who does all annual external audit work in line with global audit standards. vi) Organisational Risk This is the risk that can occur due to deficiencies in the internal controls and supervision of the Company s business activities. Hence, if TICL management fails to monitor efficiently the behaviour of some individual workers or a group of workers who can collude to sabotage the operations of the Company, then TICL shall be in danger of making losses or even being liquidated. TICL through its Board and Management makes close supervision to its workers and its IT Systems, including separation of duties among workers, in order to make sure there are no chances of frauds, mistakes, and inefficiencies during business operations. It also has put disaster recovery and emergency systems in place to ensure business continuity as a going concern, vii) External Risk or Force Majeure Risks. This is risk that is associated with factors that are out of control of the Company, factors that arise unexpectedly and therefore be able to cause serious damage to the Company in terms of business operations and consequently major financial losses to the Company. These factors include fire, natural disasters, terrorism, arson, worker strikes or at our business partners, and geopolitical turmoil. To manage this risk, TICL has taken measures aimed at rescuing the situation whenever it occurs. These include having a proactive Investment Policy to ensure that the investments of the Company and business operations are safe. Others include Disaster Recovery Policy, special training programmes that are related to some of these external risks, to its workers and Board members. In addition, when doing any feasibility study for any project or any Business Plan, such factors are considered and pre-planned for before they can happen. This does not mean they can be controlled 100% but at least the impact can be minimised by taking measures like insurance cover, continuous monitoring of business operations; and Learning from past experiences and adverse occurrences in other places. 44

56 DRAFT D: COMPANY SPECIFIC RISK FOR TICL LITIGATION RISK At the date of this Prospectus, one of the shareholders of the Company (who happens also to be a Director since 2012) has brought claims against the Company. The shareholder/director claims that the company was able to participate in the Consortium (from which the Company obtained 1.7% of the NMB issued share capital) because he had pledged his personal property as collateral for the Bid. For this he wants to be compensated. The Board has rejected this claim, adding that the Company can in any case absorb the risk depending on whatever is finally determined. Following failure of an internally organised arbitral process, the parties have decided that, the matter may go to Court. At the date of this Prospectus, no action has been taken in Court. 45

57 DRAFT 3.0 Industry Overview SECTION C ECONOMIC OVERVIEW This Section discusses macroeconomic factors, including the Country s fiscal and financial policies that are likely to impact TICL s performance in the future. Collective investment schemes normally thrive in line with a thriving economy it is therefore fair to expect that the Company s target group with be affected by government actions in growth, infrastructure, and service delivery. 3.1 Overview of the national economy There appears to be growing unanimity about Tanzania s economic prosperity, future growth and the challenges facing the country in the new economic dispensation: infrastructure; long term planning to improve the quality of life in terms of health and education; rapid urbanization; and the corporate governance problems that go with them. The IMF Regional Review for Sub Saharan African countries has this to say about Tanzania:.. Growth in the EAC region is projected to remain strong but vulnerable to external shocks. GDP growth is projected to improve to 6.1 percent in 2016 from 5.8 percent in The economy is mostly driven by increased private consumption and investment in infrastructure. However, tighter global financial conditions may expose the region to risks arising from potential increase in cost of borrowing for financing infrastructure investments. The African Development Bank s Country Strategy Paper for the United Republic of Tanzania, covering the period , has this to say: Tanzania has continued to register strong economic performance, with the annual average real GDP growth rate exceeding 6% since However, the country is still confronting the challenge of translating this growth into economic transformation, faster poverty reduction and subsequent improvement in the livelihoods of the majority of its population. Poverty has been reduced, although marginally and remains high at 28.2% and income inequality as measured by the Gini coefficient is largely unchanged at Integrating the majority of the population into gainful economic activities will require addressing the most pressing constraints to inclusive and sustainable growth, in particular energy and transport infrastructure. These two anchors have the potential to unlock gains in keys sectors of the economy. Furthermore, addressing underlying governance challenges are critical to achieving prosperity. Progress has been made in combating corruption although there is still room to improve governance particularly in the infrastructure sector. 1 IMF SSA Regional Economic Outlook, April

58 DRAFT With regard to economic plan, the ADB summarises the current thinking and strategic interventions in the following manner:..tanzania s national development strategies have the potential to guide the country towards sustainable economic transformation. Tanzania s Development Vision (TDV) 2025 is implemented through multiple medium term plans. The key medium term frameworks include the2 nd National Strategy for Growth and Reduction of Poverty (NSGRP-II) for Mainland and the 2 nd Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP-II) both covering the period2010/ /15 and the 1st Five Year Development Plan (FYDP-I) 2011/12 15/16. These multiple development frameworks are to be consolidated into a single national development plan, the FYDP-II (2016/17 20/21) to maximize synergies.. Finally, the World Bank s Economic Overview for Tanzania as of April 2016 says:..although revenue performance in 2015/16 has been better than in the past few years, shortfall has been experienced in the first quarter of the FY driven largely by weak implementation of the new 2015 VAT Act. The new government is committed to 4.2% of GDP fiscal deficit target for 2015/16. The government faces additional expenditure needs, equivalent to 0.7% of GDP, coming from expenditures carried over from last FY, payment of government arrears to TANESCO, and additional fiscal space needed for provision of free basic education and expansion of higher education students loans program (new Presidential Initiatives). Tanzania s main challenges include addressing infrastructure bottlenecks, improving the business environment, increasing agricultural productivity and value addition, improving service delivery to build a healthy and skilled workforce, and managing urbanization. The country also has a youthful labor force growing by approximately 800,000 every year and needs to increase the private sector s role in employment creation for them The growth of Tanzania s economy is expected to remain strong at 7.2 percent in 2016 compared with 7.0 percent in 2015, benefiting from its export diversity, government s commitment to invest further in infrastructure and industrial development, and increased construction activity 3. Inflation is projected to remain at single digits level, underpinned by favourable domestic food supply, subdued oil prices and prudent monetary policy. But the import bill has grown, mainly due to imports of capital and intermediate goods, particularly oil, keeping 2 World Bank Overview April BOT Financial Stability Report March

59 DRAFT the current account deficit wide at around 8.1 of GDP 4. The foreign reserves position has remained healthy, with 4.4 months of import cover. Liquidity Management and Interest Rates Developments, There is, consistent with liquidity developments, growth of broader monetary aggregates remained broadly within the program targets, with extended broad money supply (M3) and credit to the private sector growing at 18.0 percent and 24.8 percent, respectively in the year ending December 2015, compared with the projected rates of 17.6 percent and 24.0 percent 5. The strong growth of credit to the private sector was supported by moderation in net credit to the government coupled with improvement in various economic activities particularly transport and communication, manufacturing, trade and construction activities. During the first half of 2015/16, Treasury bills rates rose to percent in December 2015 from percent recorded in June 2015, associated with the increased demand for domestic financing of the budget following delays in the disbursement of program assistance and realization of non-concessional borrowing. Despite the increase in Treasury bill rates, one year lending and deposits rates remained fairly stable. During the year ending May 2016, extended broad money supply (M3) grew by 11.9 percent, down from 12.9 percent in the year ending April The outturn was mainly caused by a slowdown in the growth of credit to the private sector and net foreign assets (NFA) of the banking system. The NFA of the banking system recorded year-onyear growth of 7.1 percent, significantly lower compared with 11.0 percent in April This was mainly caused by net foreign assets of banks which contracted by 45 percent following an increase in foreign borrowing and decrease in short-term placements and deposits abroad. Financial Sector Stability The banking sector continued to grow with new institutions starting business, including Tanzania Agricultural Development Bank. The sector remained sound and stable with levels of capital and liquidity above regulatory requirements. As at the end of December 2015, the ratio of core capital to total risk weighted assets and off-balance sheet exposures was 17.5 percent compared with the minimum legal requirement of 10 percent, while the ratio of liquid assets to demand liabilities stood at 37.4 percent which was within the minimum regulatory limit of 20 percent. The quality of the banking sector s assets improved as reflected by the ratio of non-performing loans to gross loans, which decreased to 6.4 percent from 6.8 percent recorded at the end of December The sector continues to maintain steady growth with total assets growing by 19.3 percent to TZS 26,917.2 billion in December 2015 compared to TZS 22,554.8 billion 4 BoT Annual Report 2014/ Monetary Policy statement, The Mid-year review 2015/16 6 BOT Monthly Economic review June

60 DRAFT recorded in December Deposits continued to be the main funding source in the banking sector assets, accounting for 75.3 percent of total liabilities. The remaining funding gap was largely bridged through shareholders equity. During May 2016, banks interest rates on loans and deposits were generally low relative to the preceding month. Overall (average of deposit interest rates) eased to 8.53 percent from 8.98 percent in the preceding month. The deposit rate was also lower than 8.73 percent recorded in May Likewise, the overall lending rate decreased to percent from percent in April 2016 and percent in May The 12- month deposit rate decreased by 51 basis points to percent from the rate offered in the preceding month, although it was higher than percent in May Transactions in the inter-bank cash market amounted to TZS 1,286.9 billion in May 2016, slightly higher than TZS 1,126.3 billion transacted in April Similarly, overnight transactions amounted to TZS 1,074.1 billion, higher than billion in the preceding month. The overall inter-bank cash market rate rose to percent from percent while the overnight rate increased to percent from percent. The stock exchange has grown rapidly in recent years. The bourse, which lists 23 equity counters and has a market capitalization of about 24 percent of GDP, owes its recent growth to a growing willingness of companies to list on the exchange, and liberalization of foreign exchange regulations that allow foreign investors full access to the bourse. Corporate and government bonds are also listed on the exchange but there is little secondary trading of these papers 9. Future macroeconomic outlook IMF projects that Tanzania s economic growth will remain strong at 7 percent in 2015/16 and in the medium term. With inflation currently at 5.6 percent, the IMF agrees that it will gradually converge to the 5 percent Government s medium term objective 10. The external current account deficit is at 6.7 percent of GDP in 2015, there is percentage decrease comparing to 10.5 in This due to expenditure cuts during the fiscal year in an effort to meet their 5 percent of GDP target. During its visit the IMF mission applauded the Government on their effort to fight against corruption. It said impressive economic performance was recorded in construction, communication, finance, and transportation sectors. 7 Monetary Policy statement, The Mid-year review 2015/16 8 BOT Monthly Economic review June International Monetary Fund, June Macro financial issues Tanzania 10 International Monetary Fund, June Macro financial issues Tanzania 11 BoT Annual Report 2014/

61 DRAFT 3.2 Development of Capital Markets in Tanzania History of the financial sector in Tanzania Before Uhuru in 1961, the central bank s function of money supply in Tanganyika was played by various entities. For example, during the Germany colonial era, the Germany East African Company (Deutsch-Ostafrikanische Gesellschaft), which administered the Germany East Africa colony up to 1903, was responsible for controlling money supply. This role was later taken over by the German Government until 1918 when Britain took over the Germany territory of Tanganyika. Later, the East African Currency Board (EACB) was established in 1919, with the main objective of supplying and controlling the issue of currency in East Africa. The EACB made its first issue of currency after the introduction of the Pound/Shilling system in In 1956, the EACB began to play the role of fiduciary issue, thus providing for the first time a reasonable opportunity for a monetary policy. As economic activities expanded, the monetization of the economies increased, necessitating the EACB to play a more active role in regulating money supply. The EACB was liquidated in 1965 paving way for the establishment of national central banks in Kenya, Tanzania and Uganda. The Bank of Tanzania was established under the Bank of Tanzania Act of 1965 to perform all the traditional central banking functions. Shortly after its establishment, the Arusha Declaration was pronounced in 1967 in which all private banks were nationalised. This made most of the traditional instruments of indirect monetary policy as stipulated in the Bank of Tanzania Act of 1965 inoperative. The Bank of Tanzania had no control over monetary policy as monetary operations were based on government directives. The Annual Finance and Credit Plan (AFCP) and the Foreign Exchange Plan (FEP) were the main instruments of monetary policy, supported by a system of administered prices and credit controls. This situation resulted into overall macroeconomic imbalances with high money supply, escalating inflation and a slowdown in the rate of economic growth. Following the transformation of the rural economy, the industrialization process and persistent weaknesses in the balance of payments in the mid-1970s, the Bank of Tanzania Act of 1965 was amended in 1978 to empower the Bank with additional developmental functions of providing refinance and offer guarantee facilities to banks and to other financial institutions. The Law also empowered the Bank to inspect and supervise banks and other financial institutions, unlike under the Bank of Tanzania Act of Following macroeconomic instability experienced in the 1970s and the first half of the 1980s, The Government took deliberate efforts to reform the economy in the late 1980s. The intention was to eliminate controls and introduce a market based economy. Pursuant to this goal, in 1988 a Commission of Enquiry (the Nyirabu Commission) was formed to address the problems facing the financial sector at that time. On the basis of the recommendations of the Commission, the Bank of Tanzania embarked on a series of reforms in the 1990s, in an effort to liberalize the financial sector. 50

62 DRAFT The liberalization of the financial sector was spearheaded by the enactment of the Banking and Financial Institutions Act (BFIA) in 1991 which allowed the entrance of private sector (both local and foreign) in the Tanzanian financial sector. The new Act also paved way for the introduction of financial markets in the economy. This was followed by an enactment of the Bank of Tanzania Act of 1995 which relieved the Bank from multiple objectives in order to focus on a single objective of price stability. In the conduct of monetary policy, the Bank of Tanzania introduced indirect instruments of monetary policy namely: open market operations; repurchase agreements; discount window and Lombard facility; foreign exchange market operations; statutory minimum reserve requirement; and moral suasion Evolution of Capital Markets in Tanzania A Historical Perspective The history of organised capital markets in the country dates back to 1995 when CMSA was established. Its formation followed comprehensive financial sector reforms in the early 1990s that were aimed at, among others, developing capital markets to provide appropriate mechanism for mobilising long term savings and ensuring its efficient allocation to the productive sector, thus fuelling economic growth. When CMSA came into being, Tanzania had just started moving away from the centralized economic policies to open market policies. The country then was characterised by about 700 poorly performing parastatals amidst a very small private sector. The public was also not enlightened of the opportunities available in the capital markets as none had been formalised. In 1996, CMSA assessed the corporate sector as well as prospective investors to long term securities and concluded that a 2-tier equity securities market structure was suitable. However, it was considered prudent to start with a less risky, Tier One, equity securities market with some assurance of returns. In rented premises, the Dar es Salaam Stock Exchange (DSE) was established in 1996 and started admitting companies in Four years later DSE started listing debt securities by allowing Treasury bonds and less risky corporate bonds. At this point the market structure was composed of a 2-tier equity securities market; one [Tier 1] which is operational and the other [Tier 2] was not operational. The third market was the Fixed Income Securities Market Segment. Further breadth and depth of the market was to await development of both the supply and demand sides of the market. For some time, the DSE Governing Council had been in consultation with stakeholders and the Regulator for it to demutualise and become a for-profit business entity owned by its shareholders. This dream was fulfilled this year when DSE PLC listed on 12 July 2016 to become only the third in Africa after JSE and NSE in Johannesburg and Nairobi respectively. 51

63 DRAFT 3.3 EVOLUTION OF THE DAR ES SALAAM STOCK EXCHANGE About Dar es salaam Stock Exchange The DSE was first licensed under the Capital Markets and Securities (Establishment of Stock Exchange) Regulations in It opened its doors for business on 15 April 1998 when Tanzania Oxygen Limited was listed as the first PLC. The following provides the DSE s key milestones: Table 10: Evolution of DSE Incorporation of DSE Commencement of operations with a listing and trading of the first equity. TOL is listed and begins trading on 15 September There are 6 but one is brokers licensed as dealing members of the DSE Deployment of the Central Depository System and Listing of the first corporate debt. TBL and TATEPA are listed and begin trading on 9 September and 17 December respectively. One LDM is delicensed but 2 more are licensed to make TCC is listed Listing of Treasury bonds. Listing of Tanga Cement, with a huge oversubscription Listing of SWISSPORT Cross listing of the first foreign Company (Nairobi Stock Exchange). First corporate bond (by EADB) is listed Deployment of Automated Trading System linked with a new three tier CSD. Listing of TWIGA Cement, Listing of the first commercial bank, the Dar es Salaam Community Bank PLC, followed in quick succession by NMB in the same year and CRDB the following year CRDB bank PLC is listed. Crosslisting of the first mining Company (ABG PLC, with assets located in Tanzania) from the London Stock Exchange Listing of the first airline Company, Precision Air PLC Another LDM is licensed, headquartered in Zanzibar now they are Launching of the second tier market: EGM - Enterprise Growth Market (EGM). Listing of the first Company, Maendeleo Bank PLC, on EGM Launching of first Oil and Gas Company in EGM, Swala Gas and Oil PLC 2015 two more EGM companies are listed:; Yetu Microfinance and Mwalimu Commercial Bank 2016 Two more MIMS companies are listed: MUCOBA Bank PLC and DSE PLC Source: DSE website 52

64 DRAFT Central Securities Depository The Central Securities Depository (CSD) of the DSE acts like a bank for securities where various securities are deposited in safe custody to facilitate deliveries for DSE trades. By depositing securities into the CSD, the delivery of the securities in settlement of DSE trades can be achieved by electronic book entries instead of physically exchanging certificates (scrip). The securities deposited into the CSD may be pledged against a bank loan. It is to be understood that ownership of shares is indicated by entries in the CSD, the depository receipt being mere evidence of those entries in the CSD. This makes the CSD a very safe mechanism for shareholders. Trading System Trading is conducted through an Automated Trading System (ATS). This is an electronic system which matches bids and offers using an electronic matching engine. The ATS is integrated with the CSD to facilitate automated validation of securities holdings and straight through processing of securities transactions. Incentives to Issuers i) Reduced corporation tax from 30% to 25% for three successive years subsequent to listing of a Company that have issued at least 25% of its shares to the public. ii) Tax deductibility of all Initial Public Offering (IPO) costs fo r the purposes of income tax determination. All IPO costs are accepted by the Tanzania Revenue Authority (TRA) as acceptable expenses used in the generation of income and profits, and therefore are taken into consideration when determining profit for tax purposes. Incentives to Investors i) Zero capital gain tax as opposed to 10% for unlisted companies. ii) Zero stamp duty on transactions executed at the DSE compared to 6% for unlisted companies. iii) Withholding tax of 5% on dividend income as opposed to 10% for unlisted companies. iv) Zero withholding tax on interest income from listed bonds whose maturities are three years and above 53

65 DRAFT DSE MARKET PERFORMANCE The DSE s performance is tracked by the following indices: Index Q bqb X Beginning Index Value Where: Index Q b Qb = Index value on day = ending price for stock on day = Number of outstanding shares on day = ending price for stocks on base day = number of outstanding shares on base day Currently, DSE has three (3) categories of Indexes: i) All shares Index DSEI; ii) Domestic Index TSI; and iii) Sectoral Indexes Banking, Finance and Investment Index (BI); Industrial and Allied Index (IA); and Commercial Services Index (CS) As at 14 November 2014, DSE had the following securities on its official list: Domestic equities Cross-listed companies from Kenya and the UK Corporate bonds; and Government bonds. Its total market capitalisation at 31 October 2014 was TZS 14.8 trillion. 54

66 SECTION D BUSINESS OVERVIEW 4.0 Business overview 4.1 Company history The Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) was established in It was initiated with the support of the Tanzanian Government to strengthen the private sector. The establishment of the TCCIA was an important step in moving on from a centralized, planned economy towards a more open, mixed economy giving full scope to privately owned enterprises and farms. In addition, the Company was mandated to operate as a collective investment scheme (CIS) in terms of the Capital Markets and Securities (Collective Investment Schemes) Regulations 1997, in the category of a closed ended investment Company. Conceptually, open-ended investment companies (OEIC) are those (like unit trusts) that sell shares and buy them continuously through their manager (using NAV-valuation) or traded in the stock exchange (through market forces). As such, OEIC s and unit trusts have to be invested in financial assets that have a ready market value, such as listed securities or government paper that can be valued using the time value of money. It would be illogical and self-defeating for OEICs or unit trusts to invest in real assets (buildings, real estate, mining companies, and such like, because deriving their NAV (to support daily needs for redemption form share/unit holders). Closed ended investment companies (like TICL, on the other hand, are allowed some latitude toward investing in real assets (farms, factories, mining, agriculture, etc.) to diversify and presumably enhance their profitability. As such, CEICs tend to be listed on the stock exchange rather than liquidating their shares through NAV. Even then, such real investments tend to be small, mostly under 5%, in order to avail investors with a ready valuation. Even in its assets structure, non-financial assets from only a minor part (less than 1%) of its balance sheet, comprising minor operating furniture and fittings. This means that TICL s valuation is readily available for investors to make up their mind. VISION To become an efficient, sustainable and most preferred role model business member based organization in Tanzania, Africa and in the world MISSION To facilitate Private Sector Development in Tanzania by providing exceptional value to members and business community through the provision of demand driven advocacy, 55

67 business information, linkages, business development services and other relevant services in a more professional, resourceful and sustainable manner. 4.2 TICL s Investment Portfolio As at 30 June 2016, TICL s investment portfolio comprised the following (Table 10): Table 11: TICL Investment Portfolio at 7 September 2016 SHARES PORTFOLIO Closing PORTFOLIO HOLDING 7 September 2016 VALUE Twiga 88,348 2, ,316,920 TCC 301,800 11,740 3,543,132,000 Swissport 101,427 6, ,089,990 CRDB Bank 4,249, ,232,228,560 Simba 68,269 1, ,980,340 DCB 656, ,124,720 NMB 2,611,886 2,750 7,182,686,500 TBL 1,183,655 13,000 15,387,515,000 - TOTAL 28,603,074,030 This portfolio has remained unchanged since 2011, so it gives a good indication of asset and portfolio returns as well as asset allocation and management style. 4.3 Asset Allocation Policy The Company began its major investment activities by bidding for a block of shares of the National Microfinance Bank (NMB) at the time of the latter s privatization. The company was able to win a sizable 2% of NMB under extremely stiff competition. Gradually, TICL made investments in other securities, mostly at the IPO stage but others in the secondary market. TBL has now over taken NMB as the largest stock. 4.4 Portfolio Returns TICL s returns have been influenced directly by its portfolio composition and the returns of its constituent securities. If we take a weighted return evaluation the best comparison would be with the DSE domestic Index (DSEI), where the following picture emerges: 56

68 Table 12: Portfolio return Quarter ended ASI TSI TICL_PORTFOLIO 31-Mar-11 1,000 1,000 1, Jun-11 1, , Sep-11 1,058 1,043 1, Dec-11 1,072 1,078 1, Mar-12 1,090 1,168 1, Jun-12 1,182 1,141 1, Sep-12 1,199 1,220 1, Dec-12 1,223 1,357 1, Mar-13 1,251 1,496 1, Jun-13 1,301 1,739 1, Sep-13 1,374 1,939 2, Dec-13 1,535 2,688 3, Mar-14 1,610 2,776 3, Jun-14 1,787 3,367 4, Sep-14 2,119 4,907 6, Dec-14 1,787 3,367 5, Mar-15 2,135 4,566 5, Jun-15 2,242 4,428 5, Sep-15 2,081 4,379 5, Dec-15 1,919 4,233 5,222 CUMULATIVE RETURN 91.91% % % CAGR % % % 57

69 Table 13: Quarterly Portfolio Return Quarter ended ASI Return TSI Return TICL PORTFOLIO 31-Mar-11 1,000 1,000 1,000 Return 30-Jun-11 1, % % 1, % 30-Sep-11 1, % 1, % 1, % 31-Dec-11 1, % 1, % 1, % 31-Mar-12 1, % 1, % 1, % 30-Jun-12 1, % 1, % 1, % 30-Sep-12 1, % 1, % 1, % 31-Dec-12 1, % 1, % 1, % 31-Mar-13 1, % 1, % 1, % 30-Jun-13 1, % 1, % 1, % 30-Sep-13 1, % 1, % 2, % 31-Dec-13 1, % 2, % 3, % 31-Mar-14 1, % 2, % 3, % 30-Jun-14 1, % 3, % 4, % 30-Sep-14 2, % 4, % 6, % 31-Dec-14 1, % 3, % 5, % 30-Mar-15 2, % 4, % 5, % 30-Jun-15 2, % 4, % 5, % 30-Sep-15 2, % 4, % 5, % 31-Dec-15 1, % 4, % 5, % CUM. RETURN 91.91% 91.91% % % % % CAGR % % % Index of ASI, TSI, and TCIL Portfolio 5,800 4,800 3,800 2,800 1, Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec-15 ASI TSI TICL_PORTFOLIO 58

70 4.5 Management Investment Style The management investment style so far has been to invest in equity securities depending on their availability in the secondary market or in IPOs. Dividends and other corporate actions are reported in income, realized and used for operations. This style is best judged by comparing its returns against an appropriate market index, in this case the DSE All Share Index or the DSE Tanzania Index. As shown above the style has generally outperformed both indices. 4.6 Strategies for the future and planned actions Investment Portfolio Overview The major corporate goal of the Company is to consolidate the gains realized through diversification by creating a balanced mix in the Company s investment portfolio pertaining to marketable securities and Government Securities with the objective of realizing a turnover of TZS 1.76 billion per annum by the year Corporate Objectives The corporate objectives during the next three years will include the following: Raising additional equity capital to enable the Company expand its investment portfolio by buying marketable securities of listed companies, Government Bonds and Treasury Bills, and interest earning bank deposits. Diversifying the Company s investment portfolio by investing in other viable economic activities such as real estate development and agro-processing industries. This will be done after careful feasibility studies. Improving operational efficiency and effectiveness. Enhance the image of the Company before key stakeholders and general public. Improving and maximizing the Company s Return on Equity Strategic Actions (a) Objective 1: Consolidation and Expansion of Business Lines Strengthening financing Preparing for listing on the Dar es Salaam Stock Exchange [DSE]. Valuation of the Company s shares. Establish subsidiary companies in order to insulate management investment activities from other types of investments. 59

71 Establish Management Consultancy Services (b) Objective 2: Strengthening the Company s investment portfolio Defining available business opportunities Strengthening investment capacity Investing prudently Reviewing the current investment policy Preparation of a Strategic Plan to guide investment decisions and operations Establishing a network with potential investors [corporate, banks, social security funds, insurance companies, SACCOS as well as individuals. (c) Objective 3: Improving Efficiency, Quality and Productivity Introduction of an efficient and effective operational framework. Minimizing expenses in its business operations Strengthen human resources capacity coupled with improved working environment. Development of an efficient and effective Management Information System [MIS]. Establishment of the Company s Website with regular updating of the information posted on the website. 4.7 Targeted major products and services According to the Company s Memorandum and Articles of Association [MEMARTS] the Company s principal activities involve investing in business enterprises, industrial, financial services, telecommunication, agriculture, mining, construction and real estate, as well as the service sector. The main function of the Company is to mobilize and channel financial resources from its shareholders into viable investments. The investments are in two major categories: Short term investments; and Long term investments Short term investments include the following: Interest earning bank deposits. Marketable securities traded at the Dar-es-Salaam Stock Exchange [DSE]. Government Securities [Treasury Bills and Bonds of various maturities]. Microfinance/SACCOS. Long term investments include the following Investment in equities in listed and non-listed companies 60

72 Investment in Agriculture activities including agro-processing Investment in Real Estate development 4.8 Markets and sales activities Current Business Lines The Company will continue with its traditional business lines of mobilizing and channeling financial resources from its shareholders into viable investments New Business Lines In its efforts to grow economically, new business lines will be ventured into but guided by the need to avoid over-exposure to business risks; considering the Company also operates as a CIS in the category of CEIC under the regulation and supervision of the Capital Markets and Securities Authority [CMSA]. Respective appropriate studies will be conducted to establish the desirability, feasibility, viability, and agree on timing of the business operations. The following new business areas will be ventured into: micro-finance services through SACCOS, real estate development, lake ferry transport services, and city transport services, agro-processing and mining. The Company s involvement will as far as possible not be by direct ownership and operations of the business but by investment in the share capital in identified ventures. This will be done only after careful feasibility study and identification of credible partners. Prospective business lines are: a) Micro-Finance Business b) Real Estate Development c) Agro-Processing SWOC ANALYSIS 4.9. Overview This section covers the situation analysis of the Company by examining its strengths, weaknesses, opportunities and challenges (SWOC Analysis) that the Company is likely to face in the course of implementing the business plan. An examination of the Company s profile and the operating environment has enabled the Company to identify its strengths, weaknesses, opportunities and the challenges that need to be incorporated and considered in the formulation of the Corporate Business Plan. The strengths, weaknesses, opportunities and threats that the Company is likely to face are discussed in the following paragraphs Strengths An assessment of the situation has identified the following strengths which could be tapped to add value to the performance of the Company. 61

73 The Company s shareholders are spread throughout the country. The presence of a large institutional investor [Local Authority Pensions Fund [LAPF]] with country wide offices enhances the image of the Company before other stakeholders such as regulators, banks, stockbrokers and potential investors. Vast knowledge of the operations of the private sector. Competent Board of Directors and Management: The Directors are highly qualified and possess varied experiences in the fields of finance, investment industry, and agriculture, engineering, legal as well as general management. The Board is supported by a competent and experienced Investment Committee Members. Management staff have vast experience in the areas of finance and general management. Positive reputation. Since it commenced business the Company s reputation has not received any adverse publicity, thanks to good corporate governance practices. Strong link with the TCCIA which operates throughout the country. Proven track record in terms of profitability coupled with a strong balance sheet Weaknesses The analysis has also revealed a number of weaknesses that need to be addressed if the Company is to grow and perform strongly. The weaknesses which have been identified include: Inadequate number of staff: since it started the Company has been operating with a skeleton staff of 4. Inadequate capital: the Company commenced operations in October 2005 with a capital of TZS 1,971,000,000 which was raised from the public through an Initial Public Offer [IPO]. The paid up capital was used to acquire shares in the National Microfinance Bank PLC (NMB). Inadequate participation by TCCIA members in capitalizing their Company: though the original purpose of buying the NMB block of shares was to benefit TCCIA and its members, subsequent participation has been limited. As at the date of this Prospectus, TCCIA owns only 1.27% of the Company s equity (against the original expectation that members would take control). This has slowed down TCI s growth rate and hampered its ability to tap evolving lucrative opportunities. The volume of investments is still low and is concentrated in marketable securities. Currently the Company has invested in eight [8] companies whose 62

74 shares are traded on the DSE. The companies are TBL, NMB, DCB, CRDB, TWIGA, SIMBA, TCC and SWISSPORT. The investment portfolio is predominantly in marketable securities with TBL and NMB accounting for over 84% of the total investment in securities. Investment in short term financial instruments; interest on bank deposits and Treasury Bills is relatively small and will be increased. Diversification is a continuous process and depends on the availability of investible securities suitable for our Company as well as financial resources. Over dependence on dividend payments from companies in which the Company holds shares. Thus the Company s financial performance is tied to the performance of these companies and their Boards decision pertaining to payment of dividends Opportunities The economic and social environment shows that there are immense business opportunities that could be tapped to broaden and improve the performance of the Company. The major opportunities which have been identified are as under: Growing economy projected to grow by an average rate of 7percent over the next three [3] years. Low inflation projected between 5% and 7% per annum. Vibrant tourism sector Expanding traded securities as more companies apply for listing on the DSE, especially with the establishment of the Enterprise Growth Market Segment. Development of the mining sector- gold, gemstones, iron ore etc. Expansion of the energy sector- coal, oil and gas. Already substantial amount of gas reserves have been discovered in the south of the country. Exploitation of iron ore. Development of agro-processing industries. Provision of micro-finance services through SACCOS. Higher productivity in the agriculture sector due to irrigation projects, introduction of large scale commercial farming- [SAGCOT]. Improved economic infrastructure- truck and rural roads, railway and ports. Both the central railway line and TAZARA are being revamped. Political stability. Increase in the volume of transit trade. Regional integration Challenges Although there are a number of business opportunities that could be exploited to the advantage of the Company, there are also several challenges facing the Company. The major challenges facing the Company are summarized below: 63

75 Interest rates are very volatile and relatively high for new borrowers. Potential investors are not aware of the Company s activities as a vehicle for collective investment. Lack of understanding and appreciation of benefits associated with investment in the form of shares. The Company s equity capital is very small and additional investment relies on internally generated funds. Investment opportunities in marketable securities are very narrow and competition is quite stiff. The securities of companies which perform well are not readily available. As such one is forced to hold idle cash waiting for the opportunity to arise. Traditional financing windows, notably banks have tough conditions for borrowing. The conditions include high lending rates and provision of collateral securities in the form of landed properties, which the Company does not have. Securities in the form of marketable shares are heavily discounted The Way Forward The SWOC Analysis herein, will guide the Company in its business undertaking as well as taking deliberate steps to implement economically viable projects, capable of sustaining good returns on the investment. Measures will be taken to enhance public awareness of the existence of the Company and the benefits being generated for its shareholders. The Company intends to raise additional capital from outside sources by selling shares to the general public. 64

76 SECTION E THE LEGAL AND REGULATORY ENVIRONMENT Prior to this IPO, the main focus of Issuers was on markets for industrial gases, beer, cigarettes, tea, cement, banks, airlines and oil & gas exploration. Investors in TICL (as a CEIC) will for the first time focus primarily on securities that are regulated by the CMSA and the BoT. This section itemize s the available legal and regulatory guidelines and protections that investors will rely on in reaching their decision. Apart from the Registrar of Companies as Regulator under the Companies Act 2002 ( the Companies Act ) for the Company s corporate status, the activities of TICL are regulated primarily under the Capital Markets and Securities Act 1994 ( the Securities Act ), which is the principal legislation. The Capital Markets and Securities Authority (CMSA) is a Government Agency established under the Securities Act to promote and regulate securities business in the country. It was established under Capital Markets and Securities Act, The legal framework for the regulation of the securities industry is the Capital Markets and Securities Act No. 5 of 1994 as amended by Act No: 4 of 1997, supplemented by various regulations that are promulgated by the Minister for Finance. In terms of Section 148 (1) of the Principal Act, the following Regulations and Rules have been issued since 1994: a) Capital Markets And Securities Act [PRINCIPAL LEGISLATION] Acts Nos.5 of 1994: An Act to establish a Capital Markets and Securities Authority for the purposes of promoting and facilitating the development of an orderly, fair and efficient capital market and securities industry in Tanzania, to make provisions with respect to stock exchanges, stockbrokers and other persons dealing in securities, and for connected purposes. b) Capital Markets and Securities (The Capitalization and Rights Issue) Regulations, 2000: These Regulations set out the disclosure requirements that an issuer is obliged to comply with during capitalization by way of Rights Issue. c) Capital Markets and Securities (Collective Investment Schemes) Regul ations, 1997: To supplement the Capital Markets and Securities Act, these Regulations make detailed provisions relating to the roles of managers, trustees, schemes, trust deeds, pricing, issue and redemption of units / shares and other relevant matters. d) Capital Markets and Securities (Accounting and Financial Requirements) Regulations, 1997: These Regulations provide for the maintenance of accounting records (including audit trail), preparation of the annual financial statements as well of treatment of customer money in accordance with the law (i.e. in trust for the client). These Regulations were amended in 2003 to include provisions for penalties in case of non-compliance on the part of dealers. These Regulations supplement provisions on accounts and audit, which are contained in the Capital Markets and Securities Act 65

77 e) Capital Markets and Securities (Prospectus Requirements) Regulations, 1997: These Regulations supplement the general provisions on public issues of securities which are contained in the Capital Markets and Securities Act. The Prospectus is an important document which is required where a public offer is being made. The items required to be included in the Prospectus are listed in the Regulations. These include matters to be stated in the first page of the Prospectus. Others include information on the right of holders, information on bankers, capital of the issuer, debt of the issuer, any material contracts, the use of the proceeds from the issue etc. f) Capital Markets and Securities (Licensing) Regulations, 1996 : These Regulations set out the procedures to be complied with by the applicants for licensing for example dealers, investment advisers or their representatives. The requisite application forms are prescribed in the Regulations. General conditions relating to licenses once obtained are also provided for, including the provision that the license shall be personal to the applicant and the requirement for a licensee to inform the Authority (by written notice) of any relevant alterations. g) Capital Markets and Securities (Corporate Governance) Guidelines, 2002: These Guidelines aim at improving and strengthening corporate governance practices by issuers of securities through the capital markets and promote the standards of self-regulation so as to raise the level of governance in line with international trends. The Guidelines have been issued in view of the role that good governance has in corporate performance, capital formation and maximization of shareholders value in addition to protection of investors rights. The Guidelines apply to public listed companies and any other issuers of securities through the capital markets including issuers of debt instruments. h) Guidelines for the Issuance of Corporate Bonds and Commercial Paper, 1999: These Guidelines set out the disclosure requirements that an issuer is obliged to comply with when applying for issuance of a Corporate Bond or Commercial Paper. i) THE CAPITAL MARKETS AND SECURITIES (COLLECTIVE INVESTMENT SCHEMES REAL ESTATE INVESTMENT TRUSTS) RULES, 2011: These Rules may be cited as the Capital Markets and Securities (Collective Investment Schemes) (Real Estate Investment Trusts) Rules, 2011 j) THE DSE RULES 2016 while the Authority as Regulator has primary responsibility for the Prospectus in the primary market with further responsibilities post-listing as stated above, the Issuer undertakes (when it applies for DSE listing) to further abide by the continuing listing obligations as contained in the DSE Rules The Rules are made by the DSE Board of Directors and approved by CMSA from time to time. 66

78 6.0 Offer statutory information SECTION F LEGAL AND STATUTORY MATTERS 6.1. Particulars of the Initial Public Offer and listing 6.1.1The Initial Public Offer There are 112,500,000 ordinary shares being offered to the public, who are invited to apply only on the application form attached to, or issued in connection with, this Prospectus Time and date of opening and closing the public offer The offer will open at 8.00 am on Wednesday, 1st February 2017 and end at the close of business on Tuesday, 14 March Eligibility The Offer is open to the general public. It is open to all Tanzanian investors, individual or corporate. The offer is also open to all foreign and non-resident investors (as defined in the Foreign Investors and the Foreign Exchange regulations respectively) subject to the further clarifications below: (a) Foreign investors who end up being allotted shares in the Offer that, along with shares in the Issuer already held by them, aggregate to more than 5% of the Issuer s total issued capital are required to formally disclose their shareholding to the Issuer within 2 months of the allotment. Any further acquisitions or sales of shares in future, in the secondary market or otherwise, shall be subject to separate disclosures under the M&A Regulations. (b) The offer to Tanzanians who are not resident in Tanzania and to foreign nationals may be affected by the laws of relevant jurisdictions in which they reside and must make sure about their local eligibility. Under the Exchange Control Regulations, a non-resident may remit funds for the purposes of acquiring securities of a listed company of an Issuer in respect of which the Issuer is making a public issue. Application by/for Minors Minors are permitted to apply for Offer Shares with the assistance of the parents or a legal guardian who should sign the Application Form on their behalf. 67

79 6.1.4 Minimum and maximum level of subscription Applications must be for a minimum of 100 shares and in multiples of 10 shares thereafter. Investors may apply for any amount Allotment policy The responsibility for allocation of Shares that are subject of the offer lies with the Issuer in consultation with the Lead Advisor. In the event that there is an oversubscription, shares will be allotted pro-rata basis. The Directors have agreed and the CMSA has approved to allot more shares up to a maximum of 30% over the IPO in the Green Shoe option. There are no restrictions to the maximum number of offer shares to be applied for Application for listing The Directors have applied for listing on the DSE of all TICL s 183,592,400 ordinary shares. Listing is expected to occur on or about Monday 24 th April Withholding tax on securities income TICL is required to act as an agent for the Tanzania Revenue Authority in deduction of withholding tax on dividends payable to its shareholders. The withholding tax rate is currently 5% (if the Company is listed on the DSE, 10% if not listed) of the gross dividends Central Securities Depository The Central Securities Depository (CSD) is a bank for shares in stalled at the DSE to enhance security and to facilitate efficient dealing in those shares. Shares are held by the CSD on behalf of shareholders in terms of the rules of the CSD and all transfers of shares after the date of the listing must take place through the CSD. The CSD will issue each successful applicant with a Depository Receipt, which is a document of title similar to a share certificate but is not negotiable Experts Consent CORE Capital Limited ( Lead Advisor), NexLaw Advocates (Legal A dvisor),bm Associates (Reporting Accountant), Tanzania Securities Limited (Sponsoring Broker), and CRDB Bank PLC ( Lead Receiving Bank), have all given and not withdrawn their written consent to the inclusion of their names and reports, where applicable, and reference thereto in the form and context in which they appear in the Prospectus. None of these consents have been withdrawn prior to registration of this Prospectus with the Registrar of Companies. 68

80 Use of proceeds The Company will utilise net IPO proceeds to enlarge its capital base, to provide funds for expansion of its existing operations. This is CIS - All the money will be invested in more equities or equity related products. Also the money will be invested in government paper and other fixed income assets Authorisations Original resolutions dated 15 November 2013 from the shareholders of TICL, and letter CMSA/MSD/2/5 dated 16 December 2016 from CMSA, have been received approving the sale of the Company shares in this IPO Registration of Prospectus A copy of this Prospectus was registered with the Registrar of Companies on 25 February 2017 in terms of Section 49 of the Act Documents available for inspection Copies of the following documents will be available for inspection at TICL s registered offices at any time during business hours on weekdays (except official Tanzania public holidays) from the offer opening date to the offer closing date: The Memorandum and Articles of Association of TICL The audited financial statements of TICL for the three financial years ended 31 st December The signed legal opinion prepared by NexLaw Advocates (Advocates); The signed Reporting Accountants Report prepared by BM Associates. The signed Reporting Accountants report in respect to the profit forecast prepared by BM Associates. Consent letters from all the IPO Advisors; Documents related to borrowings, landed and leased properties of the Company as stated in the Legal Opinion; Business licenses, insurance policies, Directors resolution and material contracts reviewed as stated in the Legal Opinion. Letter ref CMSA/MSD/2/5 dated 16 December 2016 from CMSA approving this Prospectus; 69

81 Valuation Report of TICL Shares IPO Expenses The estimated offer expenses are analysed below: APPENDIX 2 TZS Sale proceeds of shares through IPO [112,500,000 TZS 400] 45,000,000,000 Less: IPO Expenses: CMSA Prospectus Approval and Evaluation Fees 67,500,000 Advertisement costs (estimated) 30,000,000 Meeting expenses - Board and Board Committee 82,760,000 Sponsoring Broker fees 21,000,000 Collecting Banker - Co-ordination fees 27,000,000 Collecting Agents success fees - 2% of collections 900,000,000 Collecting Banker - Application Fees 15,000,000 Lead Advisor 64,000,000 Reporting Accountant fees 21,000,000 Printing of prospectus (estimate) 30,000,000 Public relations and road show (estimate) 247,500,000 Legal Adviser fees 27,140,000 IPO Launching expenses (estimate) 10,000,000 DSE fees: 65,000,000 Printing of CSD Receipt TZS 1000 per CSD (est.) 10,000,000 Printing of Brochure and Share Application forms 7,000,000 Printing and distribution of share certificates (CDS) 10,000,000 Sub-total for IPO Expenses (3%) 1,624,900,000 Net IPO Proceeds (97%) 43,375,100, Commissions As shown above, agency commission will be paid as success fee to the licensed brokers of the DSE and Lead Receiving Banks at a rate of 2% of allotments to applications submitted through them. Applicants are not required to pay any commission. 70

82 Extracts from the Memorandum and Articles of Association The key features of the Company s MEMARTS are as follows: Memorandum of Association The Memorandum of Association set out the Company s main objects, the principal ones are: 3.The objects for which the Company is established are to: (1) To deal in all investment matters and activities including stocks & shares, bonds, acquisitions, promotions, mergers, floatation, underwriting, transfers, swap arrangements, guarantees, mortgages, portfolio management and all money and capital market operations. (2) To carry on the business of buying and selling of shares and stocks and all financial instruments including bonds and debentures, promissory notes and class rights, and to engage as brokers, dealers or investments agents in all matters related to share capital and loan issues. (3) To act as agents or brokers and as trustees of any person, in respect of any business or matter of any nature whatsoever notwithstanding that the Company may not be empowered to act as principal in connection therewith. (4) To engage in the business of unit trust schemes, mutual fund or collective investment schemes in any part of the world; Articles of Association Transferability of shares The major provisions read as follows: 4 (d) The right to transfer shares is not restricted and upon listing at the Exchange, the transfer of shares shall be regulated by the Rules. 22 The Company shall accept for registration, all transfers of shares in the form prescribed by the Exchange including the electronic transfer of shares in the Central Securities Depository. 23 The transferor shall be deemed to remain the holder of the share/s) until the name of the transferee is entered in the register of members in respect thereof. 24 As long as the Company shall be listed and remain listed at the Exchange which operates a Central Securities Depository, all transfer of shares shall take effect in accordance with the depository, trading clearing and settlement Rules of the exchange. 71

83 25 The directors may, pursuant to DSE rules, accept for registration all transfers of shares in the form approved by DSE in such form including the electronic transfer of shares in the DSE`s Central Securities Depository Alteration of Capital The Share capital of the Company can be increased by an Ordinary Resolution, as spelt out in Article 30 of the Articles which reads as follows: 30 The Company may by ordinary resolution:- (a) increase its share capital by new shares of such amount, as the resolution prescribes; (b) (c) (d) (e) Votes of Members Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; subject to the provisions of section 65(l)(d) of the Act, sub-divide its existing shares, or any of them, into shares of smaller amount than is fixed by the memorandum of association; Cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. Convert any paid up shares into stock, and reconvert any stock into paid up shares of any denomination and the holder of any stock shall have the same rights and privileges which the holder of shares has under these Articles The relevant provisions in the Articles of Association relating to the votes of member are as follows: 48. On a show of hands every member (being an individual) present in person or (being a corporation) present by a duly authorized representative, not being himself a member entitled to vote, and on a poll every member shall have one vote for each share of which he is the holder. 49. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. 50. A member in respect of whose estate a manager has been appointed under section 26 of the Mental Diseases Act or any other relevant law in force at the time, may vote, whether on a show of hands or on a poll, by his manager, and any such manager may, on a poll, vote by proxy. 72

84 51. No member shall be entitled to vote at a general meeting or at a separate meeting of the holders of any class of shares in the Company unless all calls or other sums presently payable by him in respect of shares in the Company have been paid. General Meetings The relevant provisions in the Articles of Association pursuant to the General Meeting are as follows: 33. The Company shall in each year hold a general meeting as its Annual General Meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of the Company and that of the next. 34. All general meetings other than Annual General Meetings shall be called Extraordinary General Meetings. 35. The directors may, whenever they think fit, call an Extraordinary General Meeting, and extraordinary general meetings shall also be convened on such requisitionists, or, in default, may be convened by such requisitionists, as provided by section 134 of the Act. If at any time there are not within the Territory sufficient directors to call the meeting, any director or any two members of the Company may call the meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors. Proceedings of General Meetings The proceedings of the Company are governed by Article 37 to Article 47 of the Articles, which, inter alia, provide for quorum of half of the members of the paid up issued capital including the proxies. The Articles read as follows: 37. All business shall be deemed special that is transacted at an Extraordinary General meeting, and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the accounts, and the reports of the directors and auditors, the election of directors in the place of those retiring and the appointment of, and the fixing of the remuneration of, the auditors. 38. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; this being at least fifty (50) persons holding at least twenty (20) percent in nominal value of shares entitled to vote on the business to be transacted, each being a member or a proxy for a member or a duly authorized representative of a corporation shall be a quorum. 73

85 39. If within half an hour from the time appointed for the meeting a quorum is not present, or if during the course of a meeting a quorum ceases to be present, the meeting shall stand adjourned to the next day (second day), at the same time and place or to such other day at such other time and place as the directors may determine. Provided that when the meeting is adjourned to the second day and there is no quorum in that second day, the meeting shall be adjourned to the following day (third day) and that third day the meeting shall be held whether or not the quorum as provided under these Articles is present and the business held on the third day shall be valid as if the quorum was present. 40. The Chairman, if any, of the Board of Directors or in his absence some other director nominated by the directors shall preside as Chairman of the general meeting, but if neither the Chairman nor such other director (if any) be present within fifteen minutes after the time appointed for the holding of the meeting and willing to act, the directors present shall elect one of their member to be Chairman of the meeting and, if there is only one director present and willing to act, he shall be Chairman. 41. If at any meeting no director is willing to act as Chairman or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their members to be Chairman of the meeting. 42. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at a general meeting and at any separate meeting of the holders of any class of shares in the Company. 43. The Chairman may, with the consent of any meeting at which a quorum is present and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business which might properly have been transacted at the meeting had the adjournment not taken place. When a meeting is adjourned for fourteen days or more, at least seven clear days and the general nature of the business to be transacted at an adjourned meeting. 44. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded: (a) by the Chairman or; (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or 74

86 (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member. Directors 45.Unless a poll is so demanded, a declaration by the Chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entry to that effect in the minutes of the meeting shall be evidence of that fact. (a) The demand for a poll may, before the poll is taken, be withdrawn. (b) (c) Subject to the provisions of these Articles, if a poll is duly demanded it shall be taken in such manner as the Chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting shall be entitled to a casting vote in addition to any other vote he may have. 46. A poll demanded on the election of a Chairman or on a question of adjournment shall be taken immediately. A poll demanded on any other question shall be taken either immediately or at such time not being more than thirty days after the poll is demanded as the Chairman of the meeting directs, and any business other than that upon which a poll has been demanded may be preceded with pending the taking of the poll. 47.A resolution in writing executed by or on behalf of each member who would have been entitled to vote upon it if it had been proposed at a general meeting at which he was present shall have effect as if it had been passed at a general meeting duly convened and held, and may consist of several instruments in the like form each executed by or on behalf of one or more members.. The business of the Company is managed by the Directors who are not less than7. Under Article75, the Annual General Meeting of the Company has powers to appoint the Board of Directors of the Company. The Chairperson is appointed by the Board Directors. The directors are appointed as stipulated hereunder: 75.The Members of the Company shall have the power to appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the total number of directors does not exceed the number fixed by or in accordance with these Articles. Provided that any person appointed shall serve in that capacity for three (3) years, but shall be eligible for re-appointment. 75

87 76.Every member holding more than ten percent (20%) of shares in the share capital of the Company shall be entitled to nominate one person as a candidate for the appointment as a Director of the Company. Provided that a member who nominates a candidate by virtue of the ten percent (10%) shareholding shall not participate in the appointment or nomination of other directors. 77. Subject to the provisions of these Articles, the directors of the Company shall have the power to nominate a person or persons and submit to the members for the appointment as director of the Company. Provided that a member of an investment committee shall be an ex-officio director of the Company upon approval by the regulatory authority responsible for capital markets and securities and approved further by the members. 78. The Company may by ordinary resolution, of which special notice has been given in accordance with section 144 of the Act, remove any director before the expiration of his period of office notwithstanding anything in these Articles or in any agreement between the Company and the director. Such removal shall be without prejudice to any claim the director may have for damages for breach of any service contract with the Company. 79. The Company may by ordinary resolution appoint another person in place of a director removed from office under the immediately preceding Article, and without prejudice to the powers of the directors under these Articles the Company may by ordinary resolution appoint any person to be a director either to fill a vacancy or as an additional director Vacation of Office of Director Articles 74 make provisions on how a director may cease to hold office as follows: 74.The office of director shall be vacated if the director- (a) ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) (c) (d) (e) Dividend Policy becomes bankrupt or makes any arrangement or composition with his creditors generally; or becomes of unsound mind; or resigns his office by notice in writing to the Company; or shall for more than six consecutive months have been absent without permission of the directors from meetings of the directors held during that period and the directors resolve that his office be vacated. Pursuant to Article 95 to Article 102 the Articles of Association, dividends are payable as follows: 76

88 95. Subject to section 180 of the Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. Declaration of dividend is subject to Directors recommendation and approval by the Annual General Meeting and the state of the Company s financial position. Subject to Shareholders approval in general meeting, the Directors shall recommend that at least 50% of legally distributable profits of each year be distributed as dividend. 96.Subject to the provisions of the Act, the directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the Company available for distribution. 97. The directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the Company) as the directors may from time to time think fit. The directors may also without placing the same to reserve carry for-ward and any profits which they may think prudent not to divide. 98. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid on the shares in respect of which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. 99. Any general meeting declaring a dividend may, upon the recommendation of the directors, direct payment of such dividend wholly or partly by the distribution of assets and, where any difficult arises in regard to the distribution, the directors may settle the same, and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of members, and may vest any assets in trustees Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque sent through the post to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named in the register of members or to such person and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent, and payment of the cheque shall be a good discharge to the Company. Any 77

89 one of two or more joint holders may give effectual receipts for any dividends or other moneys payable in respect of the shares held by them as joint holders No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the Company. Winding Up The following is the relevant provisions in the Articles relating to the winding up of the Company, which reads as follows: If the Company is wound up the liquidator may, with sanction of a special resolution of the Company and any other sanction required by the Act divide amongst the members in specie the whole or any part of the assets of the Company and may, for that purpose, set such value as he deems fair upon any property to be divided and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as the liquidator, with the like sanction, shall determine, but no member shall be complied to accept any shares or other securities upon which there is a liability. 78

90 SECTION G INDEPENDENT REPORTING ACCOUNTANT S REPORT BM Associates Certified Public Accountants 16 December nd Floor, IPS Building, Samora/Azikiwe Street P. O. Box Dar es Salaam TANZANIA Tel: Fax: info@bmassociates.com The Directors TCCIA Investment Public Limited Company P.O Box Samora Avenue Dar es Salaam Tanzania. Dear Ladies and Gentlemen, Reporting Accountant s Report On TCCIA Investment Company Plc We are pleased to submit our Accountant s Report in accordance with the requirements of the Capital Markets and Securities Act 1994 and the provisions of the Capital Markets and Securities (Prospectus Requirements) Regulations, As Directors of TCCIA Investment PLC, you are responsible for the preparation of the financial statements and financial information to which this Accountant s report relates and from which it has been prepared. (A) FINANCIAL INFORMATION The information required by these regulations to be disclosed in the Prospectus dated 16 December 2017, is set out on pages 79 to 105 of this report and forms an integral part of this report. The information has been compiled, in accordance with International Standard on Related Services 4410, Engagements to Compile Financial Statements ( ISRS 4410 ) from the audited financial statements of TCCIA Investment PLC for the years ended 31 December 2013, 2014 and As required by ISRS 4410, we have made enquiries from management about the operations of the company and its accounting principles and practices, and have applied that knowledge in compiling the financial statements. We have also applied knowledge obtained from carrying out review procedures on the financial statements, the results of which are reported below. 79

91 All of the financial statements from which the financial information on pages 82 to 85 was compiled received an unqualified audit opinion. BACCON (Certified Public Accountants) were the auditors of TCCIA Investment PLC for the years ended 31 December B) REVIEW PROCEDURES We have conducted a review of the audited financial statements of TCCIA Investment PLC for the three years ended 31 December We conducted our review in accordance with the International Standard on Review Engagements 2400, Engagements to Review Financial Statements ( ISRE 2400 ). The objective of the review engagement is to enable us to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to our attention that causes us to believe that the financial statements are not prepared, in all material respects, in accordance with International Financial Reporting Standards. This Standard requires that we plan and perform the review with an attitude of professional skepticism, and obtain sufficient evidence primarily through enquiry and analytical procedures to be able to draw conclusions. Our review procedures were limited primarily to inquiries directed to TCCIA Investment PLC management and the Company s auditors that we considered necessary. A review carried out in accordance with ISRE 2400 is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. We have not audited these financial statements and accordingly we express no opinion on the financial statements. However based on our review, nothing has come to our attention that causes us to believe that TCCIA Investment PLC's audited financial statements for the three years ended 31 December 2015 do not give a true and fair view in accordance with International Financial Reporting Standards. C) SUMMARY OF ADJUSTMENTS The following adjustments were made to the audited financial statements of the three years to 31 December 2015 so as to conform to International Financial Reporting Standards and the TFRS 1. Additional disclosures have been made on significant accounting policies and financial risk management. Moreover some of the amounts have been further detailed resulting into additional notes to the financial statements. No other adjustments were required in the prior years financial statements to ensure compliance with International Financial Reporting Standards and accounting policies applicable for the three years ended 31 December

92 D) CONSENT We agree that this report be included in the TCCIA Investment PLC s Prospectus dated in the form and context in which it appears. Yours faithfully, BM Associates Certified Public Accountants Dar es Salaam Signed by:.(cpa-pp) 81

93 Statement of Financial Position For the years ended 31 December TShs '000 TShs '000 TShs '000 ASSETS Notes Non-Current Assets Property and equipment 5 9,527 10,236 15,810 Investments In shares at fair value through P& L 6,14 32,149,180 33,868,403 20,871,494 Others 7 179,981 36,016 26,530 32,329,161 33,904,419 20,898,024 Total Non-current Assets 32,338,688 33,914,655 20,913,834 Current Assets Accounts receivable 8 143, ,888 16,897 Treasury bills (182 days) Fixed deposits 123, , ,686 bank and cash balances 9 339, , ,410 Total Current Assets 606, , ,993 Total assets 32,945,577 34,558,027 21,483,827 EQUITY Capital and reserves Share capital 10 1,421,848 1,421,848 1,421,848 Retained earnings 22,945,084 24,609,393 15,500,859 Total Equity 24,366,932 26,031,241 16,922,707 LIABILITIES Current Liabilities Income tax payable 11 2,169 45,237 69,180 Deferred Tax 12 8,021,010 8,021,010 4,234,986 Trade and other payables , , ,954 Total liabilities 8,578,645 8,526,786 4,561,120 Total equity and liabilities 32,945,577 34,558,027 21,483,827 82

94 Statement of Comprehensive Income For the years ended 31 December Notes TShs '000 TShs '000 TShs '000 Dividend income 15 1,320,647 1,351, ,202 Other income 16 48,589 42,154 35,864 1,369,236 1,393, ,066 Personnel expenses 17 (247,745) (212,754) (135,427) Administrative costs 18 (557,309) (396,846) (252,406) Operating profit 564, , ,233 Profit before tax 564, , ,233 Income tax expense 19 (169,255) (235,268) (176,470) Profit for the year 394, , ,763 Other comprehensive income Change in fair value of shares, net of tax 20 (1,861,772) 8,834,055 8,353,152 (1,861,772) 8,834,055 8,353,152 Total comprehensive income for the year (1,466,845) 9,383,013 8,764,915 83

95 Statement of Changes in Equity Retained Capital Earnings Total TShs '000 TShs '000 TShs '000 Year ended 31 December 2015 Balance at 01 January ,421,848 24,609,393 26,031,241 Other comprehensive income, net of tax (1,861,772) (1,861,772) Profit for the year 394, ,927 Proposed dividends (197,464) (197,464) Balance at December ,421,848 22,945,084 24,366,932 Year ended 31 December 2014 Balance at 01 January ,421,848 15,500,859 16,922,707 Other comprehensive income, net of tax 8,834,055 8,834,055 Profit for the year 548, ,958 Proposed dividends (274,479) (274,479) Balance at December ,421,848 24,609,393 26,031,241 Year ended 31 December 2013 Balance at 01 January ,421,848 6,941,826 8,363,674 Other comprehensive income, net of tax 8,353,152 8,353,152 Profit for the year 411, ,763 Proposed dividends (205,882) (205,882) Balance at December ,421,848 15,500,859 16,922,707 84

96 Statement of Cash Flows For the years ended 31 December Notes TShs '000 TShs '000 TShs '000 Cash flows from operating activities Cash generated from (used in) operations 22 (1,328,427) 13,350,065 12,740,928 Income tax paid (141,814) (186,476) (113,828) Net cash generated from/(used in) operating activities (1,470,241) 13,163,589 12,627,100 Investing activities Investment in shares 1,719,223 (12,996,909) (12,120,378) Investment in others (56,472) (31,971) (16,862) Purchase of property and equipment 5 (1,550) (770) (8,350) Proceeds from disposal of assets - 1, Tax paid at source (70,509) (72,736) (50,518) Net cash used in investing activities 1,590,692 (13,100,574) (12,195,508) Financing activities Dividends paid (84,975) (123,112) (113,531) Net cash used in financing activities (84,975) (123,112) (113,531) Net increase/(decrease) in cash and cash equivalents 35,476 (60,097) 318,061 Cash and cash equivalents at the start of year 304, ,410 46,349 Cash and cash equivalents at the end of year 9 339, , ,410 85

97 Notes to the Financial Statements 1. GENERAL INFORMATION TCCIA Investment PLC is a limited liability company incorporated and domiciled in the United Republic of Tanzania under the Companies Act as a limited liability company. It was established by the Tanzania Chamber of Commerce, Industry and Agriculture in November The principal activities of the Company are disclosed in the Directors Report. The address of its registered office is: Mezzanine Floor, PPF House, Samora Avenue, P O Box 72678, Dar es Salaam, Tanzania 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Basis of preparation These financial statements have been prepared in compliance with International Financial Reporting Standards (IFRS). The measurement basis applied is the historical cost basis except where otherwise stated in the accounting policies below. The financial statements are presented in Tanzanian Shillings (TShs), rounded to the nearest thousands. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. It also requires the Directors to exercise their judgment in the process of applying the Company s accounting policies. The areas involving a higher degree of judgment or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. (b) Property and equipment All property and equipment are stated at cost, less accumulated depreciation and impairment losses. Such cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be reliably measured. 86

98 Notes (Continued) Significant Accounting Policies (Continued) (b) Property and equipment (continued) Depreciation is calculated using the reducing balance basis over the estimated useful lives of each unit of property, plant and equipment. The annual depreciation rates for this purpose are as follows: Motorcycles 25.0% Computers 37.5% Furniture, fittings and equipment 12.5% Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major renovation, whichever is sooner. All other repairs and maintenance expenditures are recognized in to the income statement during the financial period as incurred. An item of the property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Gains and losses on disposal of assets are determined by comparing the proceeds from disposal of with the carrying amount of the assets and recognized within income statement. The assets residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each financial year end. (c) Impairment of assets Impairment reviews are performed by comparing the carrying value of the non-current asset to its recoverable amount, being the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is considered to be the amount that could be obtained on disposal of the asset. The value in use of the asset is determined by discounting, at a market based pre-tax discount rate, the expected future cash flows resulting from its continued use, including those arising from its final disposal. When the carrying values of non-current assets are written down by any impairment amount, the loss is recognized in the income statement in the period in which it is incurred. Where the asset does not generate cash flows that are independent from the cash flows of other assets the Company or company estimates the recoverable amount of the cash generating unit (CGU) to which the assets belongs. For the purpose of conducting impairment reviews, CGUs are considered to be groups of assets and liabilities that have separately identifiable cash flows. They also include those assets and liabilities directly involved in producing the income and a suitable proportion of those used to produce more than one income stream. 87

99 Notes (Continued) Significant Accounting Policies (Continued) (c) Impairment of assets (continued) When an impairment is recognized, the impairment loss is held firstly against any specifically impaired assets of the CGU, then taken against goodwill balances and if there is a remaining loss it is set against the remaining intangible and tangible assets on a pro-rata basis. Should circumstances or events change and give rise to a reversal of a previous impairment loss, the reversal is recognised in the income statement in the period in which it occurs and the carrying value of the asset is increased. The increase in the carrying value of the asset is restricted to the amount that it would have been had the original impairment not occurred. Impairment losses in respect of goodwill are irreversible. Intangible non-current assets with an indefinite life and goodwill are tested annually for impairment. Assets subject to amortization are reviewed for impairment if circumstances or events change to indicate that the carrying value may not be fully recoverable. Accounts receivable are recognized at fair value and subsequently measured at amortized cost. Provision for impairment of accounts receivable is established when there is objective evidence that the Company will not be able to collect all amounts due according to the terms of the receivables. The amount of the provision is the difference between the asset s carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate. This provision is recognized in the income statement. Bad debts are written off when all reasonable steps to recover them have been taken without success. During the reporting period there were no bad debt written off. (e) Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents include cash in hand and bank deposits payable on demand, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. (f) Share capital Ordinary shares are classified as share capital in equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 88

100 89

101 Notes (Continued) Significant Accounting Policies (Continued) (g) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. (h) Provisions Provisions are recognized when the company has a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax Rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provision due to passage of time is recognized in the income statement as interest expense. (i) Income tax Income tax expense comprises current and deferred income tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred income tax is provided in full using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that the Directors consider that it is probable that future taxable profit will be available against which the temporary differences can be utilized. 90

102 Notes (Continued) Significant Accounting Policies (Continued) (j) Employee benefits (i) Defined contribution plan Company employees, except the CEO, make their contributions to the National Social Security Fund (NSSF), which is a publicly administered pension plan, on a mandatory basis. The company s obligation in respect of contributions to such fund is 10% of employees gross emoluments. Contribution to the fund is recognized as an expense in the period in which employees render the related services. (ii) Termination benefits Termination benefits are recognized as an expense in the year when it becomes payable. Termination benefits are determined in accordance with the Tanzanian Labour Law. (iii) Short term benefits Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit sharing plans if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (k) Dividends distribution Dividend distribution to the shareholders is recognized as a liability in the Company s financial statements in the period in which the dividends are approved. (l) Revenue recognition (i) Dividend income Dividend income is recognized when the right to receive payment is established. (ii) Interest income Interest income is recognized on a time-proportion basis using the effective interest method. (m) Financial instruments i) Financial Assets Initial Recognition and Measurement 91

103 Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held- to- maturity investments or available -for- sale financial assets, as appropriate. The company determines the classification of its financial assets at initial recognition. Notes (Continued) Significant Accounting Policies (Continued) (m) Financial instruments (continued) All financial assets are recognized initially at the fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Purchases or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the company commits to purchase or sale the asset. NMB Shares Set Aside for Disposal In the financial year 2011, the company embarked on the process of redeeming PPF Preference shares and liquidating the accumulated interest and at the same time diversifying the company s portfolio. The sources of fund for these activities were to come from the sale proceeds of NMB shares. To this effect the company set aside 8,500,000 shares for disposal and these shares were categorized as Available for Sale and were accordingly reported as such in the financial statement for Out of these shares, the company sold only 6,094,070 shares. The remaining 2,611,886 shares are not for sale and they have been re-categorized as At fair value through profit or loss. Subsequent measurement Cash and short term deposits, loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quotes in an active market. After initial measurements, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in profit or loss in finance costs. Derecognition A financial asset or where applicable a part of financial assets derecognized when:- The rights to receive cash flows from the asset have expired The company has transferred its right to receive cash flows from the assets or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass through arrangement. 92

104 Notes (Continued) Significant Accounting Policies (Continued) (m) Financial instruments (continued) Impairment of financial assets The company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flow of the financial asset that can be readily estimated. Evidence of impairment may include indication that the debtor is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measureable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. (n) Financial liabilities Initial recognition and measurement Financial liabilities with the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. The company s financial liabilities include trade and other payables, loans and borrowings. Subsequent measurement After initial recognition, trade and other payables are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process. Amortized cost is calculated taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs in the statement of comprehensive income. Derecognition A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially 93

105 modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss. Notes (Continued) Significant Accounting Policies (Continued) (n) Financial liabilities (continued) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, realize the assets and settle the liabilities simultaneously. 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including experience of future events that are believed to be reasonable under the circumstances. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstance and assumptions about future developments may, however, change due to market changes or circumstances arising beyond the control of the company. Such changes are reflected in the assumptions when they occur. The Company also makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. i) Property and equipment Critical estimates are made by the Directors in determining depreciation rates for property and equipment and their residual values. The estimated useful lives and residual values of items of property and equipment are reviewed annually are in line with the rate at which they are depreciated. (ii) Income tax Significant judgment is required in determining the Company s income tax provision or estimated future recovery of income tax losses. There are many transactions and calculations, for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax issues, based on estimates of whether additional taxes will be due. Where the final outcome of tax matters is different from the amounts 94

106 that were initially recorded, such differences will have an impact on the current and any deferred income tax provisions in the periods in which the determination is made. 95

107 4. FINANCIAL RISK MANAGEMENT The Company s activities expose it to a variety of financial risks and mostly credit risk and liquidity risk. The company s Directors are responsible for the establishment and monitoring compliance with risk management policies and procedures, and for reviewing adequacy of the Company s risk management framework. The Directors are assisted in these functions by the management. The company s risk management policies are established to identify and analyze the risks faced by the company, to set appropriate risk limits and controls, and to monitor risk adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and services offered. Credit risk Credit risks arises from failure of a customer or counterparty to a financial instrument, to meet its contractual obligations and arises principally from the Company s accounts receivable. The Company has no significant concentrations of credit risk. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company s reputation. Management monitors rolling forecasts of the Company s liquidity reserve on the basis of expected cash flows. All liquidity policies and procedures are subject to review and approval by the Company s Board of Directors. Capital management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new capital or sell assets to reduce debt. 96

108 5: PROPERTY AND EQUIPMENT Furniture and fittings Motorcycles/ bicycles and equipment Onion shed Solar power Total TZS. TZS. TZS. TZS. TZS. At 31 December 2013 Cost 8,016 16,054 7,116 1,739 32,925 Accumulated depreciation (3,047) (8,172) (4,784) (1,112) (17,115) Net book value 4,969 7,882 2, ,810 Year ended 31 December 2014 Opening net book value 4,969 7,882 2, ,810 Additions Disposal - (2,368) (7,115) (1,739) (11,222) Depreciation eliminated on Disposal - 1,553 5,250 1,190 7,993 Depreciation charge (621) (1,950) (466) (78) (3,115) Closing net book value 4,348 5, ,236 At 31 December 2014 Cost 8,015 14, ,472 Accumulated depreciation (3,667) (8,569) - - (12,236) Net book value 4,348 5, ,236 Year ended 31 December 2015 Opening net book value 4,348 5, ,236 Additions - 1, ,550 Disposal Depreciation eliminated on Disposal Depreciation charge (543) (1,716) - - (2,259) Closing net book value 3,805 5, ,527 At 31 December 2015 Cost 8,015 16, ,022 Accumulated depreciation (4,211) (10,285) - - (14,495) Net book value 3,804 5, , : INVESTMENTS IN SHARES TShs '000 TShs '000 TShs '000 Balance at 01 January 33,868,403 20,871,494 8,751,116 Additions 5,407, , ,304 Reclassification adjustment (5,265,313) - - Share appreciation (1,861,772) 12,620,079 11,933,074 Balance at 31 December (Note 14) 32,149,180 33,868,403 20,871,494 97

109 7: OTHER INVESTMENTS Mining blocks at Mererani 18,473 18,473 9,077 PTA-ESATDB bonds 133, Exim bond 10, Investment in TASO (Mbeya) 9,235 9,235 9,235 Investment in Mwanza Community Bank 5,500 5,500 5,500 Acquisition of plots in Mtwara - Preliminary expenses 2,958 2,808 2, ,981 36,016 26,530 8: ACCOUNTS RECEIVABLE Trade Debtors 140, ,545 13,567 Deposit for shares Other Debtors 3,000 9,343 3, , ,888 16,897 9: BANK AND CASH BALANCES Cash at bank 334, , ,072 Cash in hand 4, Fixed deposits maturing 3 months or less - 107, , , , ,410 10: SHARE CAPITAL 10.1 Ordinary share capital Authorized share capital 40,000,000 Ordinary shares of TShs. 250 each 10,000,000 10,000,000 10,000,000 Issued and fully paid 5,687,392 Ordinary Shares of TShs. 250 each 1,421,848 1,421,848 1,421,848 98

110 Notes (Continued) 10: SHARE CAPITAL (CONTINUED) 10.2 Ownership structure % holding Number of Shares Number of Shares Number of Shares All TCCIA Companies 3.71% 210, , ,828 - Local Authority Provident Fund 39.53% 2,248,024 2,248,024 2,248,024 - Other shareholders 57.77% 3,228,540 3,228,540 3,228, % 5,687,392 5,687,392 5,687,392 11: INCOME TAX PAYABLE TShs '000 TShs '000 TShs '000 At the beginning of the year 45,237 69,180 57,056 Add: Income tax expense 169, , ,470 Less: Tax paid at source (Withholding Tax) (70,509) (72,736) (50,518) Tax for 2013 paid in 2014 (45,237) (69,179) (57,056) Provisional tax paid during the year (96,577) (117,296) (56,772) At the end of the year 2,169 45,237 69,180 12: DEFERRED TAX At the beginning of the year 8,021,010 4,234, ,064 Increase during the year - 3,786,024 3,579,922 At the end of the year 8,021,010 8,021,010 4,234,986 13: TRADE AND OTHER PAYABLES Dividends payable 502, , ,643 Other payables and accrued expenses 53,365 70,927 18, , , ,954 99

111 14: MOVEMENT IN NUMBER AND VALUE OF INVESTMENT IN SHARES Tanzania Breweries Limited (TBL) Number of shares held 1,183,655 1,546,780 1,506,900 Value of shares (Tshs '000) 17,518,094 21,794,130 12,055,200 NMB Bank PLC Number of shares held 2,611,886 2,611,886 2,611,886 Value of shares (Tshs '000) 6,529,715 8,880,412 6,843,141 CRDB Bank PLC Number of shares held 4,249,064 3,540,887 3,540,887 Value of shares (Tshs '000) 1,720,871 1,522, ,448 Dar es Salaam Community Bank (DCB) Number of shares held 656, , ,104 Value of shares (Tshs '000) 373, , ,491 Twiga Cement Number of shares held 88,348 88,348 88,348 Value of shares (Tshs '000) 265, , ,006 Swissport Number of shares held 101, , ,427 Value of shares (Tshs '000) 745, , ,824 Simba Cement Number of shares held 68,269 68,269 68,269 Value of shares (Tshs '000) 182, , ,904 Tanzania Cigarette Company Ltd Number of shares held 301,800 1,800 1,800 Value of shares (Tshs '000) 4,813,710 30,132 15,480 Total Number of shares held 9,260,553 8,615,501 8,575,621 Value of shares (Tshs '000) 32,149,180 33,868,403 20,871,494 15: DIVIDEND INCOME The company received dividend from various shares that it has invested into. For the past three years, the Company had investments in 8 different Companies (Note 14) 100

112 : OTHER INCOME TShs '000 TShs '000 TShs '000 Interest income 48,566 41,571 29,501 Foreign exchange gain Gain on sale of assets Other gains/(losses) ,852 48,589 42,154 35,864 17: PERSONNEL EXPENSES TShs '000 TShs '000 TShs '000 Salaries, wages and other benefits 207, , ,088 Pension costs 34,080 26,565 17,804 Other related costs 6,304 6,747 5, , , ,427 18: ADMINISTRATIVE EXPENSES General administrative expenses 97,237 77, ,789 Transport and travelling 14,936 10,125 3,777 Auditor's remuneration 8,800 6,720 4,800 Directors' fees 36,000 39,000 28,000 Office rent 23,290 21,394 3,220 Depreciation charges 2,259 3,115 3,966 Mining license fee - - 6,736 Board meetings and related expenses 258, ,996 92,818 Share transaction costs 116,130 66,703 - Other expenses , , ,406 19: INCOME TAX EXPENSE Profit before taxation 564, , ,233 Add back: Depreciation 2,259 3,115 3, , , ,199 Less: Wear and Tear allowance (2,259) (3,115) (3,966) Adjusted Taxable Profit 564, , ,233 Income tax expense 169, , ,

113 20: CHANGE IN FAIR VALUE OF SHARES Value of shares at 31 December 32,149,180 33,868,403 20,871,494 Less: Value of shares at 01 January (33,868,403) (20,871,494) (8,751,116) Less: Additions (5,407,862) (376,830) (187,304) Reclassification adjustment 5,265, Change in fair value of shares (1,861,772) 12,620,079 11,933,074 Deferred tax (Note 12) - (3,786,024) (3,579,922) Change in fair value of shares, net of tax (1,861,772) 8,834,055 8,353,152 21: COMMITMENTS AND CONTINGENCIES There were neither commitments nor contingent liabilities during the three years : CASH FLOW INFORMATION TShs '000 TShs '000 TShs '000 Profit before income tax 564, , ,233 Adjusted for: Depreciation 2,259 3,115 3,966 Interest expense - 1,865 - Gain on sale of assets - (447) (464) Change in fair value of shares (1,861,772) 12,620,079 11,933,074 (1,295,331) 13,408,838 12,524,809 Changes in working capital items: Trade debtors (21,877) (104,978) 209,438 Deposit for shares - - 6,139 Other Debtors 6,343 (6,013) (2,710) Trade and other payables (17,562) 52,218 3,252 Cash generated from operations (1,328,427) 13,350,065 12,740,928 23: RELATED PARTY TRANSACTIONS The only related party transactions arise from compensations to Company s key management personnel and directors emoluments. i) Key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company. 102

114 (a) Key management compensation Tshs 000 Tshs 000 Tshs 000 Salaries 213, , ,610 Pension contributions 34,079 26,565 17, , , ,410 No terminal or other long term benefits were paid to key management personnel during the year (2013: Nil). b) Transactions with key management personnel There were no transactions with key management personnel during the year (2013: Nil). c) Balances with key management personnel There were no outstanding balances with key management personnel during the year (2013: Nil). (ii) Directors fees and emoluments Directors fees 36,000 27,000 28,000 Directors emoluments 207, ,590 28,

115 BM Associates Certified Public Accountants 2 nd Floor, IPS Building, Samora/Azikiwe Street P. O. Box Dar es Salaam TANZANIA Tel: Fax: info@bmassociates.com 6 October 2016 The Directors TCCIA Investment Public Limited Company P.O Box Samora Avenue Dar es Salaam, Tanzania. Dear Ladies and Gentlemen, Reporting Accountant s Report on the Profit Forecast to June 2017 We have reviewed the profit forecast of TCCIA Investment PLC set out on page 19 to 20 for the 18 months period ending 30 June 2017 in accordance with the International Standard on Assurance Engagements applicable to the examination of prospective financial information. Management is responsible for the forecasts including the assumptions set out on those pages on which they are based. Based on our review of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that these assumptions do not provide a reasonable basis for the forecast. Further, in our opinion the forecast is prepared on the basis of the assumptions and is presented in accordance with the accounting policies normally adopted by TCCIA Investment PLC. Actual results are likely to be different from the forecast results since anticipated events frequently do not occur as expected and the variation may be material. Accordingly, we express no assurance on whether or not the forecast will be achieved. We agree that this report be included in the TCCIA Investment PLC s Prospectus dated 16 December 2017 in the form and context in which it appears. Yours faithfully, BM Associates Certified Public Accountants Dar es Salaam Signed by:.(cpa-pp) 104

116 PROFIT FORECAST Forecasted Statement of Comprehensive Income for the Period ending 30 June 2017 Management Projections Accounts July June 2016 June 2017 TShs '000 TShs '000 Dividend income 908,648 2,826,176 Other income 18,691 2,503, ,339 5,329,447 Personnel expenses (140,420) (401,707) Administrative costs (207,049) (1,060,072) Operating profit 579,870 3,867,668 Profit before tax 579,870 3,867,668 Income tax expense (173,961) (1,160,300) Profit for the year 405,909 2,707,368 Other comprehensive income Change in fair value of shares, net of tax (5,501,447) 266,477 (5,501,447) 266,477 Total comprehensive income for the year (5,095,538) 2,973,

117 Forecasted Statement of Financial Position as at 30 June 2017 TShs '000 ASSETS Non-current assets Property and equipment 42,058 Investments In shares at fair value through P& L 34,680,681 Others 144,519 34,825,199 Total non-current assets 34,867,257 Current assets Accounts receivable 238,374 Treasury bills (182 days) 10,500,000 Fixed deposits 23,800,000 bank and cash balances 8,366,189 Total current assets 42,904,563 Total assets 77,771,820 EQUITY Capital and reserves Share capital 46,421,848 Retained earnings 21,830,568 Total equity 68,252,416 LIABILITIES Current liabilities Income tax payable 1,246,207 Deferred tax 8,021,010 Trade and other payables 252,187 Total liabilities 9,519,404 Total equity and liabilities 77,771,

118 Key Assumptions Underlying Forecasts for the Period Ending 30 June 2017 Projections for the performance from July 2016 June 2017 are mainly focused on the results brought by the existing business operations. The Company will maintain its core objectives of serving as a vehicle for the collective ownership of business enterprises by its shareholders by becoming a model catalyst of empowering shareholders in particular, and the general public to own and manage businesses. Generally, the projected growth in Company operations reflect expected results taking into consideration investments in place. The projections are based on the following assumptions: i) The offer for sale of Company shares both rights and public offer will be made during the financial ii) Share Capital is expected to increase by TShs 45 billion following the issuing of 112,500,000 new Ordinary Shares by way of IPO. iii) Assets are projected to grow by 136% from TShs 32,945.6 million recorded as of December 2015 to TShs 77,771.8 million in June iv) Income has been projected to grow by 289.2%. v) Expenditures have been forecasted to grow by 82%. Income Dividend is the main source of company s Income. Dividend is projected to increase by 114%, from income of TShs. 1,320.6 million in December 2015 to TShs. 2,826.2 million in the year July 2016 to June 2017; due to continued profitability of the companies in which the Company has invested and increased investments from IPO proceeds. Other income, mainly from interest, is projected to grow from TShs million in 2015 to TShs. 2,503.3 million in the year July 2016 to June 2017; due to growth in funds invested in fixed deposit accounts and Treasury Bills. These funds will be used for various investment opportunities as they arise. Expenditures Management of TCCIA Investment PLC will continue tightening its expenditure throughout the projection period in order to enhance the Company's profitability. Personnel expenses The Company will enhance its management capacity in 2016 and 2017 so as to complement the increased activities. This will cause increase in personnel expenses as some of vacancies will be filled. Personnel expenses are projected to increase by 62% on average. 107

119 Administrative expenses The administrative expenses are forecasted to increase by 90%, in the forecast period, mainly due to increase in capacity building costs, meetings, advertising activities as well as transaction charges relating to the anticipated sale of Company s shares. Operating profit Operating profit is forecast to increase by 567% from TShs million recorded in 2015 to TShs 3,867.7 million in the year July 2016 to June Fair value of shares The Company forecasts an improvement in prices of shares in which it invests, by an average of 1%; turning around the change in fair values of shares from a decline of TShs 1,861.8 in June 2015 to TShs million in the year July 2016 to June Value of shares is projected to grow from TShs 32,149.2 million in June 2015 to TShs 34,680.7 million by the end of the projection period. 108

120 September 16, 2016 SECTION G LEGAL OPINION TCCIA Investment PLC Mezzanine Floor, PPF House, Samora Avenue/Morogoro Road P.O. Box 72678, DAR ES SALAAM Ladies and Gentlemen, RE: LEGAL OPINION IN RESPECT OF AN OFFER FOR SALE OF SHARES OF TCCIA INVESTMENT PLC TO THE GENERAL PUBLIC AND LISTING OF THE SAID SHARES ON THE DAR ES SALAAM STOCK EXCHANGE PLC 1.0. Introduction 1.1 We, NexLaw Advocates, have been engaged as Legal Advisers to advise TCCIA Investment PLC in connection with the proposed listing of the Company s shares on the Dar es Salaam Stock Exchange (the Listing ) and the offer for sale to the general public an aggregate of 112,500,000 Ordinary Shares (the Shares ) at the price of Tanzania Shillings 400 per share for purposes of raising Tanzania Shillings 45 billion. As part of our instructions, we are rendering this Legal Opinion (this Opinion ) for incorporation in the prospectus. 1.2 This opinion is furnished to you pursuant to the provisions of the Capital Markets and Securities (Prospectus Requirements) Regulations, 1997 and other relevant laws. The opinion generally addresses the Company s, legal status and affairs, the assets and general compliance with the laws of Tanzania Interpretation 2.1 Wherever used in this Opinion, unless the context otherwise requires: i) The term Articles shall mean the Articles of Association of the Company. ii) The term Company shall mean TCCIA Investment Public Limited Company; iii) The term Companies Act shall mean the Companies Act. [Cap. 212 R.E. 2002]; iv) The term CMS Act shall mean the Capital Markets and Securities Act [Cap. 79 R.E. 2002]; v) The term MEMARTS shall mean Memorandum and Articles of Association; vi) vii) The term DSE PLC shall mean Dar es Salaam Stock Exchange; The term Stock Exchange shall mean the Dar es Salaam Stock Exchange PLC 109

121 2.2 Unless otherwise provided, references herein to a specified paragraph shall be construed as a reference to a specified paragraph hereof. In this Opinion, the headings are inserted for convenience of reference only and shall not be used to define, interpret or limit the content hereof Reviewed Documentations, Procedures and Assumptions 3.1. Documentations In rendering this opinion we have examined the documents and statutes as mentioned hereunder; (ii) (i) Corporate Status Documents a. Certificate of Incorporation No dated 9 th November 1999; b. The Memorandum and Articles of Association were filed with the Registrar of Companies. c. The Resolution authorizing the issuing of shares under rights issue and public offer dated11 th December d. The Special Resolution amending the MEMARTs; e. Annual Returns of the Company; f. Form 111- Notification of Change Form filed by the Company; g. Employment contracts h. Employees Human Resource Manual; i. Staff Regulations and j. Job Description for the various positions in the Company. Regulatory and Licensing Documents a. Business License Number issued by the Ministry of Industry and Trade on 27 th July 2009; b. Business License Number No. B dated 21st October, 2014 c. Tax Identification Number (TIN) Registration Certificate No issued on 16 th March 2005; d. Value Added Tax(VAT) Registration Certificate No P dated 8 th July 2008; (iii) Material Agreements a. Consultancy Service Agreement between Emaron Group Limited and the Company dated 22 nd August 2014; b. Letter of Engagement of provision of internal audit services to Dominic Kyaruzi dated June 14, 2015; c. Lease Agreement between Asset Management Company Limited and the Company dated 1 st August 2009; d. Lease Agreement between Asset Management Company Limited and the Company dated 15 th October 2013; e. Consultancy Service Agreement between the Company and Dr Samuel Nyantahe dated 5 th August 2013; f. Postgiro Agreement between the Company and Tanzania Posts Corporation dated 31 st January 2013; 110

122 g. IPO Advisors Agreements with the Company h. Letter of Engagement for provision of Audit Services for the Financial Year ending December 31, 201 to BACCON, Certified Public Accountants dated 29 th January, 2015Consultancy Service Agreement between TCCIA Investment Company Limited and BACCON, Certified Public Accountants dated 8 th July 2015 i. Letter of Offer for Office Accommodation on the Mezzanine Floor, PPF House, Dar es Salaam dated 12 th October 2015 and Contract between PPF Pensions Fund (PPF) and TCCIA Investment Company (iv) List of Assets A. Fixed Deposits at Azania Bank Limited a. Fixed Deposit Receipt dated 21 st July 2015 for Tshs 123,678,011.70/= only B. Fixed Deposits at Dar es Salaam Community Bank PLC a. Fixed Deposit Receipt No dated 23 rd August 2014 for Tshs. 100, 000,000/=. C. Securities held at TPCCL a. DSE Depository Receipt No dated 24 th June 2011 for 200 ordinary shares; b. DSE Depository Receipt No dated 27 th May 2011 for 84 ordinary shares; c. DSE Depository Receipt No dated 17 th June 2011 for 8,800 ordinary shares; d. DSE Depository Receipt No dated 18 th January 2008 for 76,164 ordinary shares; e. DSE Depository Receipt No dated 26 th July 2013 for 3,100 ordinary shares. D. Securities held at National Microfinance Bank PLC a. DSE Depository Receipt No dated 29 th October 2008 for 205, 957 ordinary shares; b. DSE Depository Receipt No dated 28 th December 2011 for 2,405, 929 ordinary shares. E. Securities Held at PTA Bank a. DSE Depository Receipt No dated 17 th July 2015 for 74,000,000 fixed rate medium term 2015/2020 b. DSE Depository Receipt No dated 17 th July 2015 for 74,000,000 floating rate medium term 2015/2020 F. Securities held at Swissport Tanzania Limited a. DSE Depository Receipt No dated 17 th December 2011 for 348 ordinary shares; 111

123 b. DSE Depository Receipt No dated 09 th July 2010 for 82,000 ordinary shares; c. DSE Depository Receipt No dated 19 th July 2013 for 400 ordinary shares; d. DSE Depository Receipt No dated 02 nd August 2013 for 200 ordinary shares; e. DSE Depository Receipt No dated 26 th July 2013 for 2,100 ordinary shares; f. DSE Depository Receipt No dated 6 h May 2013 for 5,779 ordinary shares; g. DSE Depository Receipt No dated 12 th April 2013 for ordinary shares. G. Securities held at CRDB Bank Public Limited Company a. DSE Depository Receipt No dated 23 rd September 2013 for 54,454 ordinary shares; b. DSE Depository Receipt No dated 14th September 2011 for 2,301,486 ordinary shares; c. DSE Depository Receipt No dated 29th July 2011 for 500,000 ordinary shares; d. DSE Depository Receipt No dated 23 rd July 2012 for 190,000 ordinary shares; e. DSE Depository Receipt No dated 15 th August 2011 for 8,847 ordinary shares; f. DSE Depository Receipt No dated 5th August 2011 for 286,100 ordinary shares; g. DSE Depository Receipt No dated 2 nd July 2012 for 19,900 ordinary shares; h. DSE Depository Receipt No dated 22 nd June 2012 for 66,800 ordinary shares; i. DSE Depository Receipt No dated 15 th June 2012 for 113,300 ordinary shares. j. DSE Depository Receipt No dated 18 th August 2015 for 708,177 ordinary shares H. Securities held at Tanzania Breweries Limited a. DSE Depository Receipt No dated 18th May 2015 for 1,183,655 ordinary shares I. Securities held at Tanzania Cigarette Company Limited a. DSE Depository Receipt No dated 13 th May 2011 for 500 ordinary shares; b. DSE Depository Receipt No dated 3rd June 2011 for 700 ordinary shares; c. DSE Depository Receipt No dated 15 th July 2011 for 200 ordinary shares; d. DSE Depository Receipt No dated 13 th July 2012 for 400 ordinary shares. e. DSE Depository Receipt No dated 30/04/2015 for 300,000 ordinary shares 112

124 J. Securities held at Dar es Salaam Community Bank Limited a. DSE Depository Receipt No dated 27 th July 2008 for 254,600 ordinary shares; b. DSE Depository Receipt No dated 13 th May 2011 for 119,100 ordinary shares; c. DSE Depository Receipt No dated 13 th May 2011 for 900 ordinary shares; d. DSE Depository Receipt No dated 1st July 2011 for 200 ordinary shares; e. DSE Depository Receipt No dated 24 th June 2011 for 1000 ordinary shares; f. DSE Depository Receipt No dated 27 th May 2011 for 20,000 ordinary shares; g. DSE Depository Receipt No dated 29 th July 2011 for 2,203 ordinary shares; h. DSE Depository Receipt No dated 30 th October 2012 for 81,168 ordinary shares; i. DSE Depository Receipt No dated 3rd June 2011 for 5,400 ordinary shares; j. DSE Depository Receipt No dated 15 th July 2011 for 18,000 ordinary shares; k. DSE Depository Receipt No dated 7 th July 2013 for 131,579 ordinary shares; l. DSE Depository Receipt No dated 15 th July 2011 for 800 ordinary shares; m. DSE Depository Receipt No dated 15 th April 2011 for 5000 ordinary shares; n. DSE Depository Receipt No dated 7 th March 2013 for 16,154 ordinary shares; o. DSE Depository Receipt No dated 7 th March 2013 for 131,579 ordinary shares; K. Securities held at Tanga Cement Company Limited a. DSE Depository Receipt No dated 25 th September 2013 for 12,300 ordinary shares; b. DSE Depository Receipt No dated 19 th July 2013 for 2000 ordinary shares; c. DSE Depository Receipt No dated 12 th September 2013 for 5,300 ordinary shares; d. DSE Depository Receipt No dated 12 th October 2012 for 1,700 ordinary shares; e. DSE Depository Receipt No dated 13 th July 2012 for 8,400 ordinary shares; f. DSE Depository Receipt No dated 26 th March 2012 for 200 ordinary shares; g. DSE Depository Receipt No dated 16 th March 2012 for 300 ordinary shares; h. DSE Depository Receipt No dated 9 th March 2012 for 50 ordinary shares; i. DSE Depository Receipt No dated 2 nd March 2012 for 100 ordinary shares; 113

125 j. DSE Depository Receipt No dated 16 th January 2012 for 150 ordinary shares; k. DSE Depository Receipt No dated 25 th November 2011 for 5000 ordinary shares; l. DSE Depository Receipt No dated 15 th August 2011 for 2000 ordinary shares; m. DSE Depository Receipt No dated 7 th October 2011 for 3,600 ordinary shares; n. DSE Depository Receipt No dated 2 nd December 2011 for 800 ordinary shares; o. DSE Depository Receipt No dated 2 nd December 2011 for 800 ordinary shares; p. DSE Depository Receipt No dated 13 th May 2011 for 100 ordinary shares; q. DSE Depository Receipt No dated 24 th October 2011 for 500 ordinary shares; r. DSE Depository Receipt No dated 15 th July 2011 for 4 ordinary shares; s. DSE Depository Receipt No dated 4 th November 2011 for 100 ordinary shares; t. DSE Depository Receipt No dated 28 th October 2011 for 200 ordinary shares; u. DSE Depository Receipt No dated 19 th September 2011 for 2,000 ordinary shares; v. DSE Depository Receipt No dated 24 th June 2011 for 4,600 ordinary shares; w. DSE Depository Receipt No dated 16 th December 2011 for 1,600 ordinary shares; x. DSE Depository Receipt No dated 23rd December 2011 for 1,400 ordinary shares; y. DSE Depository Receipt No dated 9 th September 2011 for 2000 ordinary shares; z. DSE Depository Receipt No dated 30 th September 2011 for 8,565 ordinary shares; aa. DSE Depository Receipt No dated 23rd September 2011 for 4,900 ordinary shares; bb. DSE Depository Receipt No dated 29 th July 2011 for 400 ordinary shares. L. Mining Licenses a. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; b. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; c. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; d. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; 114

126 e. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; f. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; g. Primary Mining License No dated 14th September 2009 that was valid to September 2014; h. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; i. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; j. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; k. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; l. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; m.primary Mining License No dated 22 nd July 2009 that was valid to July 2014; n. Primary Mining License No dated 14th September 2009 that was valid to September 2014; o. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; p. Primary Mining License No dated 14 th September 2009 that was valid to September 2014 q. Primary Mining License No dated 14 th September 2009 that was valid to September 2014 r. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; s. Primary Mining License No dated 14 th September 2009 that was valid to September 2014 t. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; u. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; v. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; w. Primary Mining License No dated 22 July 2009 that was valid to July 2014; x. Primary Mining License No dated 22 nd July 2009 that was valid to July 2014; y. Primary Mining License No dated 14 th July 2009 that was valid to July 2014; z. Primary Mining License No dated 14 th July 2009 that was valid to July 2014; aa. Primary Mining License No dated 14 th July 2009 that was valid to July 2014; 115

127 bb. Primary Mining License No dated 14 th July 2009 that was valid to July 2014; cc. Primary Mining License No dated 14 th July 2009 that was valid to July 2014; dd. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; ee. Primary Mining License No dated 14 th July 2009 that was valid to July 2016; ff. Primary Mining License No dated 14 th September 2009 that was valid to September 2014; Please see comments under paragraph 4.2 below with regard to the Mining Licenses listed in this section. (v) (vi) Material Litigation TCCIA Investment Company Limited v. Frank Elliya Mhando, Civil Case No 307 of 2014, Resident Magistrate Court of Dar es Salaam at Kisutu. Statutes a. The Companies [CAP 212 R.E 2002]; b. The Employment and Labour Relations Act of 2004; c. The Employment and Labour Relations (Code of Practice Rules) of 2007; d. The Law of Contract Act, Cap. 345 e. The Mining Act, 2010 f. The Capital Markets and Securities Act [Cap. 79 R.E. 2002]; g. The Capital Markets and Securities (Prospectus Requirements) Regulations, 1997 h. The Land Act, 1999 i. The Dar es Salaam Stock Exchange Rules of Procedures and Assumptions In rendering this Opinion, we have examined and relied on the originals or copies (as the case may be) of the documents mentioned in paragraph 3.1 above and we have assumed that:- i. The responses to the questions we put to the officers, and agent of the company have been true and accurate in all respects and have contained no omissions; ii. There were no documents other than those which were disclosed to us iii. which relate to the items we perused; All the documents submitted to us as copies or originals are true and complete; iv. All the signatures on all the documents we reviewed are genuine; v. Each natural person who signed any document which we reviewed had the legal capacity or authority to sign in such capacity; vi. We have assumed the corporate power of any party to enter into and perform their obligations under any of the documents and that all necessary 116

128 corporate action to authorize the signing, delivery and performance of the relevant documents was or has been taken; vii. The investment opportunities will not change in the near future; viii. The Offer and the Listing will not change the operations of the Company; and ix. All information supplied, whether of fact or opinion, was accurate when supplied and continues to be true, accurate and not misleading in any way Opinion Based on the foregoing, and subject to other facts not disclosed to us and qualifications set forth herein, we NexLaw Advocates, a firm of advocates, duly licensed to practice law in Tanzania are of the following opinion; 4.1. Corporate Status a. We confirm that the Company is a public limited liability company with Certificate of incorporation no dated 9 th November, 1999 as in accordance with the Companies Act. The said certificate is valid. b. The Company s office is currently situated at Mezzanine, PPF House, Samora Avenue/Morogoro Road. The Notification of Change of the Office was duly filed with the Registrar of Companies. The lease period is five years commencing from 1 st February 2016 to 31 st January c. The MEMARTs of the Company comply with the requirements as stipulated in the Companies Act. The Company by the Resolutions of the members dated December 11, 2015 duly authorized the Company to i. to offer for sale to the public the shares of the company; ii. To amend the Memorandum and Articles of Association; and iii. To have the company listed with DSE. The said Resolutions were filed with the Registrar of Companies in compliance with the Companies Act, The amended MEMARTS are valid and effective. d. Summary of key provisions of the Articles of Association: i. The Articles with regard to the Annual General Meeting of the authorizes the Company in each year to hold a general meeting as its Annual General Meeting in addition to any other meetings in that year and specify the meeting as such in the notices calling it; and not more than fifteen months must elapse between the date of one annual general meeting of the company and that of the next. ii. According to the Articles, where shares issued to a single person are in excess of ten percent of the total issued shares in the company, such a shareholder has the voting right, weight or power of not more than ten percent in any of the general meetings of the company and has no right to change directors, the nature of business of the company or any such decisions as the Board my determine from time to time. iii. With regard to election of directors, members of the Company have the power to appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the total number of directors does not exceed the number fixed by or in accordance with the 117

129 articles. Such a right of election is to every member holding more than ten percent (10%) of shares in the share capital of the Company. iv. The removal of any director before the expiration of his period of office may be done by ordinary resolution, of which special notice has been given v. With regards to the rights of Directors to vote on proposals in which they have personal interest, the Directors are entitled to vote and be counted in the quorum in respect of each resolution except to those matters concerning their own interests. e. As for the objects and the nature of the Company, we confirm that: The Company is authorized under its Memorandum of Association to deal with all investment matters and activities which includes but is not limited to stocks and shares, Bonds, acquisitions, promotions, mergers, floatation, underwriting, transfers, Swap arrangements, guarantees & mortgages, portfolio management and all money and capital market operations. The Company is also authorized to engage in the business of unit trust schemes, mutual fund or collective investment schemes in any part of the world. In addition, the company is authorized to carry on the business of stockbrokers, investment advisors, issuance advisors, underwriters, financial intermediaries and all kind of businesses in collective investment schemes and any other business which is related and ancillary to the objects of the company That according to Article 4 of the Company s Articles of Association, the company is a public limited liability company whereby invitation to the public to subscribe for any shares or debentures of the Company is not prohibited, the right to transfer shares is not restricted and the number of members in the company is not limited. The share capital of the Company at the date of registration was Tanzania shillings 10,000,000,000/= divided into 1,000,000 ordinary shares of 10,000 Tanzania shillings each. However, as of the date of this Opinion the authorized share capital of the Company is Tshs. 100,000,000,000 divided into 5,000,000,000 shares of Tshs. 20 each. To effectively manage the Company, the Company has prepared and intends to adopt and strictly adhere to the Human Resource Manual which includes health and safety issues for the employees. In our opinion the Manual and Staff Regulations does comply with the requirements stipulated in the Employment and Labour Relations Act of 2004 and the Employment and Labour Relations (Code of Conduct) Rules of f. The Company has complied with all the compliances and procedures of the Companies Act in relation to filing of Annual returns, notification of changes, appointment and termination of directors. It is our opinion that the Company 118

130 is not liable to fine or default fine in relation to the said compliances with the Registrar of Companies. g. We are not aware of any joint venture agreement partnership, consortium or other profit sharing arrangements, with any other Company. 4.2 Business Activities, Regulatory and Licensing a. The Company has complied with the law by having registered and obtaining TIN and VAT Certificates. The status as to the legal compliance of the Company towards Tanzania Revenue Authority, that is filing of tax returns etc. are as per the information provided by the Reporting Accountant in this Prospectus. However, upon making an inquiry the Officers of the Company confirmed that the Company has been complying with their tax obligations and compliance. b. The Company has a valid Business License which is in accordance with the law and is within the power of the Company as observed in the MEMARTS. c. The Company was involved in the business of prospecting of Gemstones at Mererani demarcated areas. Thirty four licenses to perform the said business were duly obtained as observed above. The Company was obliged to submit a report not later than 21 months from when the licenses were granted on the prospecting and mining operation carried on and the programme of mining operation.. However, we did not see reports proving that this legal obligation was complied with. All the Mining Licenses expired and as of the date of this opinion the Company had not renewed any of those licenses. The reason for not renewing the licenses is that based on the report dated March 26, 2014 by Bart Mkinga who was commissioned by the Company, all the area subject of licenses are outside the mineralized fold limb. It is based on the findings of the consultant the Company stopped paying rent and by the letter dated September 8, 2015 the Company has requested the Ministry to allow the Company to retain the area for purposes other than exploitation of Tanzanite minerals. 4.3 Material Agreements a. The Company has been a lawful tenant of the property leased to it since 2009 to date. The Lease Agreement between Asset Management Company Limited and the Company dated 1 st August 2009 expired. On 15 th October 2013 the Company entered into another agreement which is valid for a period of two years. The said Agreement is not subject to Registration. The said agreement was properly executed and delivered and is therefore enforceable as per the terms and conditions therein. As the Lease Agreement is expiring, the Company has negotiated another Lease Agreement with PPF and is in the process of relocating to mezzanine floor, PPF House situated at Samora Avenue Street, Dar es Salaam. b. The Company has been conducting financial audits in accordance with the international financial reporting standards on auditing. For the period ending 119

131 December 31, 2014 the audit was conducted and the Company has been complying with the critical assessments made. Furthermore, as for 2015 the Company has an existing agreement dated June 14, 2015 with Dominic Kyaruzi for provision of internal audit services. 4.4 Assets The Company currently holds shares in different companies as identified above. None of the said shares have ever been withdrawn, mortgaged or transferred by the Company. Thus, it is confirmed that there is no outstanding matters in relation to the shares of the Company. 4.5 Litigation/Legal Action a. No winding up order has been issued and no receiver manager or liquidator has been appointed in respect of the Company. Considering the statutory circumstances that may lead to winding up of a company, in our opinion, if any winding up proceedings will arise will not likely result in a winding up order being given against the Company. b. The Company has instituted a case against Frank Elliya Mhando in the Resident Magistrate Court of Dar es Salaam at Kisutu. The Company is claiming for a total sum of Tshs 9,229,000.00/= arising from the breach of sales of onions agreement they had. We have examined all the documents in relation to the claim and it is our opinion that the Company has a strong case against the Respondent as there is sufficient evidence to support the claims, thus, there are chances of success of the cases. However, it is our assessment that in the event the Company loses the case the assets of the Company will not be affected substantially. c. There is a potential case against the Company from one of her shareholders cum Directors. The shareholder/director is claiming for the compensation for offering his personal property which he pledged as collateral for the Bid Bond. The money so guaranteed was for purposes of acquiring shares in NMB Bank PLC in favour of the Company. The claim is not mentioning any specific amount to be compensated. The parties have not been able to resolve the matter amicably. Apart from the letter of claim dated November 21, 2014 and his Attorney s letter dated 24 th August 2016, we have not seen any document to justify the aggrieved Shareholder/Director s claim. As such we were not able to assess the likelihood of the Company to lose the case and the risk of the claim to the assets of the Company. d. In addition based on the information given and our search, the Company has no other pending material litigation, prosecution or other civil or criminal legal action in which the issuer of any of its directors are involved or any threatened claim that may affect the Company in the offer and the listing. 5.0 Conclusion 120

132 5.1 Based on the aforementioned it is our opinion that this Opinion contains all the relevant information relating to the Company s legal status and general compliance with the law. Thus, in the light of the above, we conclusively opine as follows; The existing capital of the Company and all other changes made are in accordance with the applicable laws and all necessary authorizations have been received; That the intended IPO and issuing of shares does not conflict, breach or affect the obligations in any agreement to which the Company is a party or bound by. That all the authorizations, approvals, consents, licenses, exemptions, filings or registrations with the governmental bodies and public authorities in connection with the activities of the Company have been duly obtained. All the requisite authorizations and approvals by, CMSA and the Stock Exchange required for the Offer and the Listing under the respective laws have been obtained; In consideration of the Dar es Salaam Stock Exchange granting the Company s application for the listing of securities, the Company will execute a letter of undertaking (the Undertaking ) to comply with the continuing obligations of listing on the DSE as set out in the DSE Blueprint; 5.2 This Opinion is strictly limited to the matters stated herein and is not to be used or extended by application to any other matter or issue whether in connection hereof or otherwise. Yours Sincerely, NexLaw Advocates, Ayoub Mtafya, Advocate/Partner 121

133 Licensed Dealing Members of the Dar es Salaam Stock Exchange CORE Securities Limited 4 TH Floor, Elite City Bldg, Cnr Morogoro Road/Samora Avenue P. O BOX 76800, Dar es Salaam Tel: Fax info@coresecurities.co.tz Orbit Securities Company Limited 4th Floor, Golden Jubilee Tower PSPF Building P.O Box 70254, Dar es Salaam Tel: / Fax orbit@orbit.co.tz TIB Rasilimali Limited Samora Tower Building Samora Avenue/Bridge Street P.O Box 9154, Dar es Salaam Tel: / Fax invest@rasilimali.tib.tz Zan Securities Limited,, P O BOX 5366, Dar es Salaam, 2 nd Floor, Viva Tower, Bibi Titi Road TEL: , FAX: info@zansec.com Tanzania Securities Limited 7 th Floor, IPS Building Samora Avenue/Azikiwe St. P. O Box 9821, Dar es Salaam Tel: Fax info@tanzaniasecurities.co.tz Vertex International Securities Limited Annex Building Zambia High Commission Sokoine Drive/Ohio Street P.O Box Dar es Salaam Tel: / Fax vertex@smartcardtz.com Solomon Stockbrokers Limited Ground Floor, PPF House Samora Avenue P.O Box 77049, Dar es Salaam Tel: Fax solomon@simbanet.net E.A. Capital Ltd 6 th Floor, IT Plaza Ohio Street P.O. Box 20650, Dar es Salaam Tel / ec@eacapital-tz.com 122

134 Optima Corporate Finance Limited PO Box 4441, Dar es Salaam Plot No 565 B, Senga Street, Mikocheni Mobile: ARCH Financial & Investment Advisory Limited 2nd Floor, Wing C, NIC Life House Sokoine Drive/Ohio Street P.O. Box Dar es Salaam Tel Fax Enterprise Growth Market Advisors PLC 1 st Floor, Alfa House, Victoria Area P. O. Box Dar es Salaam Tel:, Fax info@egmatv.org SMART STOCK BROKERS P.O. Box , Dar es salaam Offices: 1 st Floor, Masdo House, Samora Avenue, Tel: +255 (0) info@smartstockbrokers.co.tz Website: Authorised Receiving Agent (Mobile Banking) Maxcom Africa Limited First Floor Suit 3 4 Millennium Tower Makumbusho Area P.O. Box 31211, Dar es Salaam Tel: info@maxcomafrica.com 123