Rights Issue

RIGHTS ISSUE

INFORMATION MEMORANDUM

December 2020

Rights issue of 20,615,272 New Ordinary Shares of TZS. 1,000 par value at an Offer Price of TZS 750.00 per share, at the rate of One (1) New Ordinary Share for every One (1) Ordinary Share held as at 10th Nov, 2020. RIGHTS ISSUE

INFORMATION MEMORANDUM

ii TABLE OF CONTENTS

CAUTION...... ii IMPORTANT NOTICE...... iii FORWARD LOOKING STATEMENT...... vi DIRECTORS DECLARATION...... vii DECLARATION OF THE NOMINATED ADVISOR...... viii DEFINITIONS AND INTERPRETATIONS...... ix CORPORATE INFORMATION...... xi TRANSACTION ADVISERS...... xii CHAIRPERSON’S STATEMENT...... xiii SECTION 1.0: FEATURES OF THE OFFER...... 1 SECTION 2.0: DETAILS OF THE RIGHTS ISSUE...... 4 SECTION 3.0: PROFILE OF THE BANK...... 8 SECTION 4.0 ECONOMIC OVERVIEW...... 15 SECTION 5.0: CORPORATE GOVERNANCE, BOARD OF DIRECTORS AND SENIOR MANAGEMENT...... 21 SECTION 6.0: RISK FACTORS...... 29 SECTION 7.0: STATUTORY AND GENERAL INFORMATION...... 32 SECTION 8.0: REPORTING ACCOUNTANT REPORT...... 41 SECTION 9.0: LEGAL OPINION...... 59 SECTION 10.0: NOMINATED ADVISOR’S REPORT...... 67 SECTION 11.0: DETAILS OF THE NOMINATED ADVISOR...... 70 Appendix I: Licensed DSE Dealing Members...... 73 Appendix II: Licensed Investment Advisers...... 74 APPENDIX III: SAMPLE PROVISIONAL ALOTMENT LETTER (PAL)...... 75 APPENDIX IV: SAMPLE ENTITLEMENT AND ACCEPTANCE FORM...... 77 APPENDIX V: APPLICATION GUIDELINES...... 79

iii CAUTION

This Prospectus has been prepared in compliance with the Capital Markets and Securities Act, Cap. 79 of the Laws of United Republic of Tanzania (Act, No. 5 of 1994); the Companies Act, Cap.212 of the Laws of United Republic of Tanzania (Act No. 12 of 2002).

A copy of this Prospectus has been delivered to the Capital Markets and Securities Authority (CMSA) for approval and to the Registrar of Companies (BRELA) for registration. Approval of this Information Memorandum by the CMSA is not taken as an indication of the merits of the Mkombozi Commercial Bank PLC or its shares. The securities offered in this Information Memorandum have not been approved or disapproved by the CMSA.

Prospective investors should carefully consider the matters set forth under the caption “Risk Factors” in this Information Memorandum. If you are in doubt about the contents of this Information Memorandum, you should consult your Investment Advisor, Stockbroker, Lawyer, Banker or any other Financial Consultant.

iv IMPORTANT NOTICE

This document is important and should be read in its entirety. If you are in doubt about the contents of this document or what action to take, you are advised to contact your Stockbroker, Investment Adviser, Financial Adviser, Banker or other relevant professional Adviser, who specializes in advising on the acquisition of shares and other securities.

This Information Memorandum contains information that is provided in compliance with the requirements of the Companies Act 2002 of the Laws of Tanzania, the Capital Markets and Securities Act, Cap 79 of the Laws of Tanzania (Act No. 5 of 1994), the regulations of the Capital Markets and Securities Authority (CMSA) and the Rules of the Dar es Salaam Stock Exchange (DSE).

This Information Memorandum is issued by Mkombozi Commercial Bank PLC (“the Bank” or “the Issuer”) and has been prepared in respect of the issue and subscription of the New Shares being issued under Mkombozi Commercial Bank PLC capital raising exercise (the “Rights Issue”) and subsequent listing of the New Shares on the Enterprise Growth Market Segment (EGM) of the DSE. This follows approvals of the Rights Issue by Shareholders through the meeting held on 25th May 2019 and by the Board through their meeting held on 29th April 2020.

The Entitlement and Acceptance Form required for the subscription of the Rights Shares accompanies this Information Memorandum. The Offer will open at 9:00 am on 30th December 2020 and close at 4:00 pm on 30th January 2021. The application procedure has been set out in Section 2.4 of this Information Memorandum and in the accompanying Entitlement and Acceptance Form.

The Offer shares applied for pursuant to the Offer will rank pari-passu in all respect with the existing issued ordinary shares of Mkombozi Commercial Bank PLC. The Offer shares will qualify for any dividend to be declared from year 2020 and onwards.

The Board of Directors of the Company, whose names appear in section 5.4 of this Information Memorandum, have taken all reasonable care to ensure that the facts stated and the opinions expressed herein are true and accurate in all material respects, and there are no other material facts the omission of which would make any statement herein, whether of fact or opinion, misleading. The Board of Directors accepts responsibility for the information contained in this document.

Abenry and Company Advocates, the Legal Advisers, have given and not withdrawn their written consent to the inclusion in this Information Memorandum of their Legal Opinion in section 9. This Information Memorandum contains the Reporting Accountant’s opinion in Section 8 from Claritas International, Certified Public Accountants (Tanzania) which constitutes a statement made by an expert in terms of Chapter V of the Companies Act. The Reporting Accountant have given and not withdrawn their consent to the issue of the said statement in the form and context in which it is included in this Information Memorandum.

v FORWARD LOOKING STATEMENT

This Information Memorandum contains “forward looking statements” relating to the Bank’s business. All statements, other than statements of historical fact are, or may be deemed to be forward-looking statements, including, without limitation, those concerning: strategy; the economic outlook for the industry; cash, costs, growth prospects and outlook for operations, individually or in the aggregate; and liquidity, capital resources, expenditure and the outcome and consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect current views concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “may”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “would be”, “planned”, “estimated”, “potential” or similar words and expressions.

Examples of forward-looking statements include statements regarding a future financial position or future profits, cash flows, corporate strategy, anticipated levels of growth, estimates of capital expenditures, acquisition strategy, future expansion projects or future capital expenditure levels and exchange rates, sales forecasts and parameters and other economic factors, such as interest rates and inflation. The Issuer cautions that forward-looking statements are not guarantees of future performance. Actual results, financial and operating conditions, liquidity and the developments within the industry in which the Issuer operates may differ materially from those made in, or suggested by, the forward-looking statements contained in this Information Memorandum.

The prospective investors should keep in mind that any forward-looking statement made in this Information Memorandum is applicable only at the date on which such forward-looking statement is made. New factors that could cause the business of Mkombozi Commercial Bank PLC not to develop as expected may emerge from time to time and it is not possible to predict all of them. The Issuer has no duty to, and does not intend to update or revise the forward- looking statements contained in this Information Memorandum after the date of this Information Memorandum, except as may be required by law.

vi DIRECTORS DECLARATION

We, the Directors of Mkombozi Commercial Bank PLC whose names appear in section 5 of this Information Memorandum, collectively and individually accept full responsibility for the accuracy of the information given and certify that to the best of our knowledge and belief there are no other facts the omission of which would make any statement false or misleading; that we have made all reasonable inquiries to ascertain such fact and that the application contains all information required by law.

Signed by:

Chairperson Company Secretary

vii DECLARATION OF THE NOMINATED ADVISOR

NIC Life House, 2nd Floor, Wing C, P.O. Box 38694, Dar es Salaam, Tanzania [email protected], Website:www.archco.co.tz Tel:+255 22 211 844.

We hereby confirm that:

SECTION A; To the best of our knowledge and belief, having made due and careful enquiry and considered all relevant matters under the Capital Markets and Securities (Nominated Advisers’) Regulations, 2008 and the DSE Rules for EGM Companies and in relation to this application for admission, all applicable requirements have been complied with and in particular: a. The listing document complies with DSE Rules for EGM Companies b. The requirement of First Schedule to the Capital Markets and Securities (Nominated Advisers) Regulations 2008 have been complied with; and

SECTION B; a. We are satisfied that the applicant and its securities are appropriate to be listed on the EGM having made due and careful enquiry and considered all relevant matters set out in the DSE Rules for EGM Companies and the CMS Nominated Advisers Regulations 2008 and; b. The directors of the applicant have received advice and guidance (from this Nominated Adviser and other appropriate professional advisers) as to the applicant’s responsibility and obligations under the law in order to facilitate due compliance by the applicant on an ongoing basis; and c. It will comply with the law as applicable to it in its role as a Nominated Adviser to this applicant

IYEN J.A.NSEMWA MANAGING DIRECTOR

viii DEFINITIONS AND INTERPRETATIONS Anchor Any one of the 3 largest founding shareholders of the Company, namely, Shareholder the Dioceses, TEC and Institutions Articles The Articles of Association of MKCB Mkombozi Commercial Bank PLC, a company incorporated under Bank the Companies Act, Cap 212 of the Laws of Tanzania. The Banking and Financial Institutions Act, Cap. 342 (Act No. 5 of Banking Act 2006); Board The Board of Directors of the bank.

BoT Bank of Tanzania, which is the Central Bank of Tanzania.

CSD Central Securities Depository of the DSE CSDR CSD & Registry Company Ltd 30h Jan 2021 being the last submission date for applications for the Closing date offer Capital Markets and Securities Authority, the Regulator of Capital CMSA or the Authority Markets in Tanzania. Companies Act Companies Act 2002 Collecting Agents Licensed dealing members of the DSE and all branches of MKCB PLC. The Company Mkombozi Commercial Bank PLC, also called “the bank”. A non-negotiable document issued by the CSDR representing title in Depository Receipt respect of securities deposited in the CSD by a shareholder The members of the Board of Directors of Mkombozi Commercial Directors Bank whose names appear in Section 5.4. DSE The Dar es Salaam Stock Exchange PLC Enterprise Growth Market - a segment of the DSE that caters for start- EGM up companies and SMEs seeking capital without a prior track-record of business operations. The Shareholders who, on the Record Date, are members of the Eligible Shareholders Bank and “Eligible Shareholder” shall be construed accordingly. The form to be sent by the Bank to an Eligible Shareholder and Entitlement and completed by an Eligible Shareholder as set out in Appendix iv of Acceptance Form this Information Memorandum and in accordance to the terms and conditions set out in the form. GDP Gross Domestic Product Government The Government of the United Republic of Tanzania IM Information Memorandum Information This Rights Issue Information Memorandum and appendices to it Memorandum Refers to corporate investors like Pension Funds, Unit Trusts, Asset Institutional Investor Management Companies, Banks. .

ix Issuer Mkombozi Commercial Bank PLC Archco Ltd, a licensed Nominated Advisor, appointed Lead Advisors Lead Advisor to this Issue Legal Advisor Abenry and Company Advocates Expected to be on 28th Feb 2021, the effective date for trading on Listing Date the DSE MEMARTS Memorandum and Articles of Association MKCB Mkombozi Commercial Bank PLC The new ordinary shares of Mkombozi Commercial Bank PLC, that New Shares are to be issued pursuant to this Information Memorandum. Nominated Advisor Archco Ltd Offer shares The ordinary shares of MKCB subject to this offer Offer Price TZS 750.00 per share 30th December 2020, being the first date for submission of applications Opening Date for the Rights Issue. Ordinary shares of TZS 1000 each in the share capital of the Ordinary Shares Company Provisional Allotment Letter, a letter sent out to qualifying PAL Shareholders in respect of the New Shares (See appendix iii). Receiving Banks Mkombozi Commercial Bank PLC 10th Nov 2020 the date on which entitlement to Rights issue shares Record Date will be determined. A right attached to a security that one may buy or Sell separately Renounceable Right from that security. Reporting Accountant Claritas International The right to subscribe for New Shares under the terms of this IM Rights and the PAL. Rights Issue Closure The date of closure of the Rights Issue which is 28th Jan 2021. The issue of 20,615,272 New Shares by way of rights as described Rights Issue in this IM An ordinary share of TZS.1000.00 in the share capital of the Bank Share or Shares and “Ordinary Share” or “Ordinary Shares” shall be construed accordingly. Members of the Bank who hold Shares in the share capital of the Shareholders Bank and “Shareholder” shall be construed accordingly Individual and Corporate persons and eligible institutions with legal General Public capacity to contract. TEC Tanzania Episcopal Conference TZS Tanzania Shillings USD United State Dollar Untaken Rights The aggregate of New Shares not subscribed for.

x CORPORATE INFORMATION Contact Information for the Bank:

Mkombozi Commercial Bank PLC Plot No.40 Mansfield Street P.O. Box 38448 Dar es Salaam, Tanzania Telephone: +255 22 2137806/7 Fax: +255 22 2137802 Email: [email protected] website: www.mkombozibank.com Certificate of Incorporation No. 59516 Registered on 06 March 2007

Current Directors of the Bank - as at 30th October 2020

NAME POSITION NATIONALITY Prof Marcellina Mvula Chijoriga Chairperson Tanzanian Respige Kimati Managing Director Tanzanian Most Rev Beatus Kinyaiya Director Tanzanian Mr Robert Mtendamema Director Tanzanian Mr Ayoub Mtafya Director Tanzanian Ms Uphoo Swai Director Tanzanian Mr Benedict Warisianga Sudi Director Tanzanian Fr Dr Charles Kitima Director Tanzanian Other Corporate Information Bank’s Address Mkombozi Commercial Bank PLC Plot No.40 Mansfield Street, P.O Box 38448, Dar es Salaam, Tanzania. Tel: 255 22 2137806/7 & Fax: 255 22 213780 Email: [email protected] Bank’s Secretary Baltazar Mbilinyi Auditors Ernst & Young, Certified Public Accountants P. O. Box 2475 4th Floor, Tanhouse Tower, Plot 34/1, Ursino South New Bagamoyo Road, Dar es Salaam, Tanzania. Bank’s Lawyers Galat Law Chambers Plot No. 21 Block K, Kenyatta Road, 3rd Floor, Exim Bank Building, Mwanza, Tanzania Maleta & Ndumbaro Advocates P.O.Box 79944, Tancout House, Ground Floor Dar es Salaam, Tanzania Main Banker BHF Bank Frankfurt am Main, German 60302, Bockenheimer Landstrabe 10 United Bank for Africa Plc 1 Rockefeller Plaza, 8th Floor, New York, NY 10020

xi TRANSACTION ADVISERS

Lead Transaction Adviser & Lead Collecting Agent Sponsoring Broker

ARCHCO Limited Head Office 10th LAPF Towers, NIC Life House, Wing C, 2nd Floor Bagamoyo Rd, Opp Makumbusho Village, Ohio Street/Sokoine Drive Junction Kijitonyama, P.O.Box 38694, Dar es Salaam, Tanzania P.O.Box 9300, Tel: +255 22 211 2844 Dar es Salaam. Email: [email protected] Tel: +255 22 2162940 Website: www.archco.co.tz

Lead Receiving Bank Legal Adviser

Abenry & Company, Advocates Mkombozi Commercial Bank PLC Golden Jubilee Towers, 3rd Floor, Main Plot No.40 Mansfield Street Tower, P.O. Box 38448 Ohio Street Dar es Salaam, Tanzania P.O Box 3167 Dar es Salaam, Tanzania Telephone: +255 22 2137806/7 Tel: +255 22 2123661 Fax: +255 22 2137802 Fax: +255 22 2123681 Email: [email protected] website: Email: [email protected] www.mkombozibank.com

Registrar Reporting Accountant

Claritas International Mkombozi Commercial Bank PLC 4th Floor, 395 Ursino Bldg, Morocco Plot No.40 Mansfield Street Mwai Kibaki Rd, P.O. Box 38448 P.O.Box 76062, Dar es Salaam, Tanzania Dar es Salaam, Tanzania. Telephone: +255 22 2137806/7 Tel: +255 22 2666670 Fax: +255 22 2137802 Email: [email protected] Email: [email protected] website: Web: www.claritas.co.tz www.mkombozibank.com

xii CHAIRPERSON’S STATEMENT

TO - SHAREHOLDERS OF MKOMBOZI COMMERCIAL BANK PLC

Dear Valued Shareholders,

On behalf of the Board and Management, it is my pleasure to present to you this short statement on the Bank’s journey with focus on the achievement attained and challenges faced, industry position and the future outlook in terms of investment and growth of the Bank.

A Strong Foundation – Achievements and Challenges: We are proud of the achievements the Bank has registered over the period of eleven years of its existence. It has been a great journey in building revenue foundation through investment in financial assets and physical infrastructure. The period has witnessed the Bank expanding its physical presence by opening eleven fully-fledged bank branches, the investment which has set a solid foundation and marked important progress towards our growth in customer numbers and value of business. The Bank’s branches are currently located in Dar es Salaam (four branches) and one each in Moshi, Morogoro, Dodoma, Mwanza, Bukoba, Iringa and Njombe.

The business has been growing from strength to strength to achieve a balance sheet size of TZS 204billion as at 31st December 2019; made up of Loans and Advances to customers at TZS 122billion, Money Market Investments at TZS 49billion and other Assets at TZS 33billion. The Customers Deposits was at TZS 162billion. The Bank has managed to create value for the entity through retention and investment of profits over years in addition to dividends paid to its shareholders in 2016 and 2017 of TZS 20.00 and TZ 25.00 per share respectively. The dividend pay-out rates recorded in these years are considered to be very reasonable compared with other payers in the banking sector who are listed on the Dar es Salaam Stock Exchange Market. The 2019 financial year for the Bank had mixed results, with good performance on balance sheet components whose revenue contribution was offset to a great extent by loans loss impairment charge and other accounting adjustments hence resulting into a financial loss position for the year. We have taken remedial measures on non-performing loans and tightened credit origination criterion in order to address the historic problem and build a strong base for future good loan formation. Our limited physical outreach and small balance sheet size are significant inhibiting factors to our growth and profitability ambitions. These are the factors we are seeking to address through capitalization of the bank, which is a subject matter of this presentation.

About the Industry and future outlook: The country experienced an economic growth in the year 2019. GDP growth increased to 7.0 percent compared to 6.7 percent in 2018. The Primary Economic Activities were the main contributor to GDP (37.7%) and Services or Tertiary activities accounted for (37.5%). Mining and Quarrying activity had the highest growth of 21.5 percent followed by Arts and Entertainment at 13.9 percent while activities of Construction and Information and Communication each increased by 11.0 percent.

The external sector improved economic growth as the current account deficit decreased to USD 1,863.6 million compared to USD 1,989.7 million in the year ending 2018. Improvement in the current account deficit was largely contributed by increase in exports. An increase in the value of non- traditional goods exports and service receipts were the main contributors of high exports.

xiii Headline inflation was reported at 3.8% at the year ending December 2019, higher than corresponding period of 2018 which was 3.0%, however, the rate was below the medium target of 5.0%. The increase was on account of higher food inflation. The Bank of Tanzania maintained an accommodative monetary policy stance aiming at stimulating growth of credit to the private sector and economic activities. The liquidity position in the banking system remained generally high and consistent with the monetary policy stance. Interest rates for overnight slightly decreased to 4.28 percent in December 2019 compared to 4.68 percent in December 2018. However, the lending rates declined due to reduced risks on premium which was a result of sustained accommodative monetary policy stance and streamlined fiscal policy. Furthermore, credit extended to major sectors of the economy recorded growth. Credit to the private sector continued to grow, recording an annual increase of 8.9 percent in November 2019 compared with 5.0 percent in November 2018. The industry average non-performing loans decreased to 7.61 percent in December 2019 compared to 10.70 percent in December 2018. On the foreign exchange perspective, the Tanzania Shilling weakened against the USD from 2,300 in December 2018 to 2,300.58 in December 2019.

Generally, the economy of the country remains to be a thriving environment for banking business both on short and long basis.

Future Outlook of the Bank: The Bank’s profitability and growth potential remains to be strong as demonstrated by key financial metrics in the foregoing sections. The Bank is implementing strategic initiatives necessary to position itself to reap the benefits of the growing economy of the country by tapping into a wider and profitable clientele base for sustainable profitable growth. The success of this future strategy is hinged on the investment in digital technology and expansion of the Bank’s physical network in order achieve market penetration and delivery of digital solutions to a wider section of the market. We seek to achieve this investment through capitalization of the Bank through fresh capital injection, which is also necessary for regulatory compliance purposes.

The business transformation and growth initiatives which also form part of the capital formation process are bearing fruits in terms of growing a profitable clientele base. We are implementing strategic business development initiatives focusing on Church and its Institutions as our niche market in driving mobilization of cheap deposits and transactional business. We are tapping opportunity in other lucrative sectors specifically Service, Trading and Manufacturing by targeting on value chains of key institutional clients as well as select Corporates and Small and Medium Enterprises. We are intensifying our digital offerings in terms of investment in necessary technology and channels in order to expand our outreach for sustainable growth. Generally, the Bank remains to be a strategic investment capable of delivering significant value to shareholders in terms of dividends and appreciation of investment value both in the short and long periods. The achievement of the articulated objectives requires support of our shareholders, partners, regulators and other key stakeholders in the industry and the economy at large.

Investing in Profitable Growth: At the 10th Annual General Meeting, a business growth strategy was presented which was calling for addition capital in the tune of TZS 15billion in order to finance business expansion need and bridge a regulatory capital adequacy gap. The shareholders unanimously approved this proposal and directed the Board of Directors to consider the best modality of raising this capital. The Board, at its 95th Extra-Ordinary Meeting held on 29th April 2020, unanimously passed a resolution for Rights Issue as

xiv the modality to raise the envisaged capital. Rights Issue gives existing shareholders an opportunity to buy additional shares at a discounted price. At the 11th Annual General Meeting, the shareholders unanimously approved the Rights Issue price of TZS 750/= per share. It is therefore my request to all our valued shareholders to support the ongoing business transformation and capital restoration initiatives in order to build a sound ground for business growth and profitability.

On behalf of the Board of Directors, I present to you this Information Memorandum which contains necessary information about the Bank’s historic performance, current operations and future growth and profitability ambitions.

Thank you!

Prof. Marcellina Mvula Chijoriga BOARD CHAIRPERSON

xv xvi SECTION 1.0: FEATURES OF THE OFFER

1.1 The Offer The Bank is offering a total of 20,615,272 New Shares at TZS 750.00 per Share to raise a total of TZS 15,461,454,000.00 under this Information Memorandum on the basis of one New Share for every one Ordinary Share held on the Record Date of 10th Nov 2020.

1.2 Statistics of the Offer

Offer Price TZS. 750.00 per New Share 20,615,272 Ordinary Shares, to rank pari passu in all Number of New Shares Offered respects with the existing Ordinary Shares Total amount to be raised TZS. 15,461,454,000.00

One New Share for every One Ordinary Share Held as Ratio of entitlement of the offer at 10th Nov 2020

1.3 Other Key Rights Issue Data

Par Value of each share 1,000 Total Number of Authorised Shares of Mkombozi Commercial Bank 50,000,000 PLC Total No. of issued and fully paid up Shares before the Rights Issue 20,615,272

Authorized share capital of Mkombozi Commercial Bank PLC TZS 50,000,000,000

Fully paid up share capital of MKCB PLC before the Rights Issue TZS 20,615,272,000 Market Capitalization (closing price TZS 780.00 on the DSE on TZS 16,079,912,160 31August 2020)* Offer Price per Share TZS 750.00

Number of New Shares on offer under the Rights Issue 20,615,272

Gross proceeds of the offer (assuming full subscription) TZS 15,461,454,000

Total number of issued and fully paid up Shares after the Rights Issue 41,230,544

Fully paid up share capital of the bank post Rights Issue (assuming TZS 36,076,726,000 full subscription)

1 1.4 Timetable of Principal Events

No Activity Time 1 Record Date 10th Nov 2020 2 Official Launch - Press 30th Dec 2020 3 Distribution of IM and application forms to Shareholders 24th Dec 2020 4 Commencement of Rights Issue 30th Dec 2020 5 Closing Date 30th Jan 2021 6 Announcement of Offer Results 08th Feb 2021 7 Submission of approved Register to CSDR 10th Feb 2021 8 Electronic credit/deposit CSD Account 12th Feb 2021 9 Printing of CSD Depository Receipt 15th Feb 2021 10 Listing and Commencement of Trading at the DSE 18th Feb 2021

1.5 Timetable in case of Lapse of Time

No Activity Time 1 Record Date 10th Nov 2020 2 Official Launch - Press 30th Dec 2020 3 Distribution of IM and application forms to Shareholders 28th Dec 2020 4 Commencement date for Lapsed Rights Issue 05th Jan 2021 5 Closing Date 05th Feb 2021 6 Announcement of Offer Results 15th Feb 2021 7 Submission of approved Register to CSDR 18th Feb 2021 8 Electronic credit/deposit CSD Account 22th Feb 2021 9 Printing of CSD Depository Receipt 25th Feb 2021 10 Listing and Commencement of Trading at the DSE 28th Feb 2021

Note: The indicated dates might change depending on the approval process

1.6 Legal Basis of Rights Issue The Rights issue was approved by the shareholders on 25th May 2019 while the Board of Directors gave their approval of the same on 29th April 2020.

2 1.7 Use of Proceeds from Rights Issue The proceeds of the Rights Issue shall be used;

n To support strategic business growth and modernization initiatives

n To meet regulatory compliance especially the resultant capital impact due to adoption of the IFRS 9 and 16 in accounting for financial assets and leases respectively.

n The Bank’s financial performance for the year 2019 makes the capital mobilization to be an imminent agenda due to deterioration of the capital position and adequacy ratios. This has been attributed mainly to significant impairment charge on Non-Performing Loans (NPLs). The resultant Core Capital stands at TZS 8.6billion (against Regulatory Limit of TZS 15 billion and both Core and Total Capital Adequacy ratios at 5.76% (against Regulatory Limits of 12.5% and 14.5% respectively).

3 SECTION 2.0: DETAILS OF THE RIGHTS ISSUE

2.1 Basis of Offer Price The shareholders of the bank passed the recommendation made by the Directors which set the Rights Issue price at TZS 750.00 per Share, equivalent to a discount of about 4% of the current market price.

2.2 Terms of the Rights Issue

2.2.1 Offer for subscription 1. Mkombozi Commercial Bank PLC hereby offers to Eligible Shareholders as of the Record Date of 10th Nov 2020 by way of renounceable rights, a total of 20,615,272 New Shares at the Rights Issue Offer price of TZS 750.00 per share. 2. The Rights Issue is on the basis of One new share for every One existing Share held as at 10th Nov 2020. 3. The number of New Shares that an Eligible Shareholder is entitled to (i.e. your entitlement or your number of Rights) is shown on the PAL. 4. Eligible Shareholders may also, at their option, choose not to take any action at all.

2.2.2 Status of the New Shares The New Shares will rank pari-passu in all respects with existing Shares including the right to receive in full all dividends and other distributions declared, made or paid in respect of the Ordinary Shares, for the financial year ending 31st December 2021.

Eligible Shareholders who comply with the procedures for acceptance as set out in this Information Memorandum, will receive their New Shares in electronic form by way of credit to their respective CDS Accounts. It is the responsibility of Eligible Shareholders to ensure that their CDS Account details set out in the Entitlement and Acceptance Form are correct. New Shares will be admitted at the DSE on 12th Feb 2021 with dealings of New Shares commencing on the same date.

2.2.3 Opening and Closing Date of the Rights Issue The Rights Issue will open at 9:00 a.m. on 30th December 2020 and close at 4:00 p.m. on 30th January 2021.

2.3 Entitlement of the Rights Shareholder’s entitlement is shown on the PAL. The number of New Shares offered to Eligible Shareholders has been calculated pro rata on the basis of the ratio of the entitlement and no restrictions are placed on the number of existing shares to be held before entitlement accrues. However, mathematically, this might result in fractional entitlements to New Shares and in such an event, fractions will be rounded downwards to the nearest whole number. Fractions of New Shares that result from applying the ratio of the entitlement will form part of the Untaken Rights.

4 2.4 Procedures in respect to the Rights Issue

2.4.1 Acceptance and Application Procedure Eligible Shareholders may take up all, some or none of the Rights. Eligible Shareholders wishing to take up all or part of their Rights are required to observe the following:

n Acceptance of the Offer, once given is irrevocable.

n Persons wishing to apply for New Shares must complete the Entitlement and Acceptance Form.

n Except in the case of negligence or willful default on the part of the Bank, their Advisers or any of the Authorized Agents, neither the Issuer, nor any of the Advisers nor any of the Authorized Agents shall be under any liability whatsoever should an Entitlement and Acceptance Form not be received by the Closing Date.

n Acceptance may only be communicated by submitting a duly completed Entitlement and Acceptance Form together with Application Money for the number of New Shares applied for, which cannot be withdrawn and constitutes a binding application for the number of New Shares specified in the Entitlement and Acceptance Form. The Entitlement and Acceptance Form must be signed so as to be binding.

n The Entitlement and Acceptance Form, once duly completed and signed, must be returned to Mkombozi Commercial Bank PLC either directly or through any Authorized Agent, together with the Application Money for the number of New Shares. Payment of the Application Money must be made as specified in section 2.6 no later than 4.00 pm on 20th January 2021.

n New Shares in respect of which a duly completed and signed Entitlement and Acceptance Form together with the Application Money paid in accordance with the sections above, are not received by Mkombozi Commercial Bank PLC or an Authorized Agent by the dates and times stipulated in this IM will be deemed not have been subscribed.

n Eligible Shareholders who wish to take up their full entitlement are required to duly complete the section entitled “Full Acceptance” (PART A: I) as well as other relevant sections of the PAL. Eligible Shareholders wishing to accept only part of their Entitlement are required to duly complete the section of the PAL entitled “Partial Acceptance” (PART A:II) as well as other relevant sections of the PAL.

n Only Eligible Shareholders will be permitted to renounce their Rights.

2.5 Options Available to Eligible Shareholders

n Full Acceptance: Eligible Shareholder may choose to take up full quota of the entitled shares.

n Partial Acceptance: Eligible Shareholder may choose to only pay for partial shares.

n Do nothing: Eligible Shareholder may decide to do nothing and therefore the entitlement to Rights will lapse. In this case, there will be a dilution of shareholding following the Rights Issue.

5 2.6 Application Money Payment for the New Shares shall be made in the form of a banker’s cheque for values that are below Ten million shillings or through TISS for values that are above Ten million shillings. Such bankers cheques for each PAL must be in Tanzanian Shillings and drawn on a licensed bank that is a member of the Central Bank of Tanzania Clearing House, and should be made payable to “Mkombozi Commercial Bank PLC Rights Issue-PAL”. Payment may also be made by Authorized Agents on behalf of Eligible Shareholders or deposited directly by the Eligible Shareholders to a dedicated collection account. Please note that no interest will be payable by Mkombozi Commercial Bank PLC on money received.

2.7 Rejection Policy In addition to the procedure for acceptance set under section 2.4, applications will also be rejected for the following reasons:

n The PAL is missing;

n The number of shares applied for are not in multiples set out in the IM;

n Missing CDS form number

n Missing financing bank details in case of financed application;

n Missing or illegible name of primary applicant/joint applicant/corporate applicant in any application;

n Missing or illegible identification number, including company registration number;

n Missing account number or name for nominee applications;

n Insufficient documentation;

n Missing or illegible postal address and postal code;

n Missing bank details and verification documents where mode of refund is indicated as electronic fund transfer (the refund will be defaulted to a cheque payment);

n Missing or inappropriately signed Application Form;

n Application bears stamps from two different Agents

2.8 Refund No interest will be paid on any application monies to any eligible shareholder or other person taking the Rights. Payment of refunds in foreign currency shall be made having regard to the prevailing exchange rates less bank charges for the foreign currency draft.

2.9 Untaken Rights and Allocation Policy All Eligible Shareholders who apply for their New Shares in full shall receive the full number of New Shares indicated in their PAL. New Shares not taken up shall form part of Untaken Rights which will be open to other existing shareholders who are willing to take more shares than their rights allocated by the rights issue ratio of one to one.

6 2.10 Regulatory Restrictions Eligible Shareholders are requested to note that Mkombozi Commercial Bank PLC is subject to the provisions of the Banking and Financial Institutions Act, Cap 342 of the Laws of Tanzania (the “Banking Act”) and the Capital Markets and Securities Act, Cap 79 of the Laws of Tanzania and the Regulations made thereunder. Notable, for purposes of the Rights Issue are the provisions summarized below. Eligible Shareholders are required to seek their own advice in connection with these matters. Section (15)-1 of the Banking and Financial Institutions Act stipulates that “A person shall not own or control, directly or indirectly, a beneficial interest of more than twenty percent of the voting shares of any bank or financial institution, except as provided in this section” and Subsection (2) prohibits any transfer of ownership or control of a beneficial interest in shares of a bank or financial institution that results in ownership or control of five percent or more of voting shares unless the Bank of Tanzania has granted prior approval of the transfer.

2.11 Tax Implications Eligible Shareholders interested in participating in the Rights Issue should consult their tax Advisers of any possible tax implications connected with the Rights Issue. Therefore, Mkombozi Commercial Bank PLC and the Directors consider it inappropriate to provide detailed advice in respect of taxation consequences in connection with the Rights Issue save for what is expressly set out in this Information Memorandum.

Neither Mkombozi Commercial Bank PLC nor any of the Directors or any Mkombozi Commercial Bank PLC officers or Advisers accepts any liability for any tax implications of Eligible Shareholders in connection with the Rights Issue. Local investors and Foreign Investors are subject to withholding tax on dividends at the rate of 5%.

2.12 Estimated Expenses of the offer Role Amount [TZS] Lead Transaction Adviser/ Sponsoring Broker Fee 65,000,000.00 Legal Adviser Fee 7,500,000.00 Reporting Accountants Fee 12,000,000.00 CMSA Information Memorandum Evaluation Fees 52,730,727.00 CSD Processing fees 10,000,000.00 Printing of CSD Receipt TZS 1000 per CSD (Est.) 30,000,000.00 DSE Listing Fees 10,000,000.00 Printing Expenses 15,000,000.00 Total 202,230,727.00 The figures above are inclusive of VAT (where applicable) and may be subject to change.

2.14 Governing Law The Rights Issue documents and any contract resulting from the acceptance of an application to purchase the New Shares shall be governed by and construed in accordance with the Laws of Tanzania.

7 SECTION 3.0: PROFILE OF THE BANK

3.1 Background Mkombozi Commercial Bank PLC is a public limited company established under the Companies Act with registration No.59516 with majority shareholding comprised of the Tanzania Episcopal Conference, its dioceses and congregations. It was granted a banking license by the Bank of Tanzania as a fully-fledged commercial bank on 18th July 2009, and the bank started banking business on 28th August 2009.

3.2 Vision The bank’s vision is to be a leading bank in addressing the growth needs of small and medium size enterprises through delivery of high quality and integrity banking services to a wide micro customer base and corporate enterprises.

3.3 Mission To be a bank that will provide high quality financial services to all sectors and levels of the economy in a sustainable and socially responsible manner to meet stakeholders’ expectations.

3.4 Core Values The bank’s day to day activities are guided by a set of values and principles. Values and principles define corporate culture and inform the actions of its employees by identifying what is most important in how things are done within the bank. These values and principles are there to guide MKCB’s employees in the way they interact with each other and the bank’s stakeholders.

n The core values of the bank will include the following;

n serving customers cordially with speed and efficiency;

n observing the highest level of ethics, honesty; integrity and mutual respect.

n delivering quality and distinguished products and services;

n operating with prudence and in conformity with statutory and regulatory requirements;

n adhering to good corporate governance;

n establishing strong relationship with other stakeholders;

n inspiring pride and confidence among the general public; and

n applying the principle of flexibility and responsiveness

n inspiring teamwork and open communication among staff

n Excellence in everything.

3.5 Main Activities The main activities of the bank include the following: i) To mobilize financial resources from individuals, institutions and donor agencies for financing the informal sector in order to support the Government’s endeavors in poverty alleviation;

8 ii) To provide enabling environment for self-employment for the population in Tanzania; iii) To provide commercial services and support to target groups at minimum risk and full cost recovery and a profit margin rate in order to enable the bank to consolidate itself and maximize returns to its shareholders. iv) To provide micro finance loans and loans to salaried employees.

3.6 Shareholding Structure before and after Rights Issue

Shareholding Structure before Rights Issue:

As at 30th October 2020, the shares of the bank were held as follows:

Category No. of Shares % of holding Church Dioceses and Affiliated Institutions 5,777,708 28.0% Other Institutions 2,125,907 10.3% Tanzania Episcopal Conference (TEC) 4,133,995 20.1% Individuals 8,577,662 41.6% Total 20,615,272 100.0%

Shareholding Structure after Rights Issue:

After Rights Issue, the shares of the bank will be held as follows:

Category No. of Shares % of holding Church Dioceses and Affiliated Institutions 11,555,416 28.0% Other Institutions 4,251,814 10.3% Tanzania Episcopal Conference (TEC) 8,267,990 20.1% Individuals 17,155,324 41.6% Total 41,230,544 100.0%

3.7 Key achievements in 2019 The Bank closed the year with a total number of 11 branches, having opened three new Branches in Dodoma and Iringa (March 2019) and the last one in Njombe (August 2019) hence marking the Bank’s branch footprint to be 4 in Dar es Salaam, 1 each in Morogoro, Moshi, Mwanza, Bukoba, Dodoma, Iringa and Njombe.

The Total Assets increased by 14% from TZS 178.8 billion as at 31st Dec 2018 to TZS 204 billion as at 31st Dec 2019. The Loans and Advances to customers increased by 23.3% from TZS 99 billion as at 31 December 2018 to TZS 122 billion as at 31 December 2019. The Customers Deposits increased by 18.7% from TZS 136 billion as at 31 December 2018 to TZS 162 billion as at 31 December 2019. The Fee and Commission (non-funded income) increased by 30% from TZS 3.17 billion as at 31 December 2018 to TZS 4.12 billion as at 31 December 2019.

9 The Bank is in the right trajectory in implementation of the strategic initiatives necessary to drive the Bank’s ultimate agenda, which is sustainable and profitable growth. Some of these initiatives are:- reintroduction of the Direct Sales Agency model; adoption of new technology in issuance of ATM Cards (KADI PAP) that enables instant issuance of ATM card over the counter immediately after opening an account; decentralization of the Mobile Banking service registrations and other initiatives around human resources and risk and compliance fronts. These have contributed in improvement of business growth traction and service level overall.

3.8 Financial Highlights - 2018 -2019 The key financial performance metrics for 2019 were generally on a positive trend compared with the preceding year’s performance. The balance sheet growth to TZS 204billion (up by 14%) was attributed to Loans and Advances growth to TZS 122billion (23.3%), Money Market Investment growth to TZS 49billion (11%) and other Assets to TZS 33billion (31%). The Customers Deposits growth to TZS 162billion (18.7%), was attributed to both time deposits (46%) and other deposits (54%). The total income at TZS 24.6billion (down by 10%) was attributed to the Fee, Commission and Foreign Currency Trading at TZS 4.12billion (up by 30%) and the Interest Income at TZS 20.5billion (down by 13%). In addition to the above income components, the net income position of the Bank was also adversely affected by the loan loss impairment charge (TZS 4.5billion), Deferred Tax Asset derecognition (TZS 1.14billion) and historic income adjustment (TZS 950million), the combined effects of which resulted in a net loss position of TZS 6.5billion reported in the audited financial statements. Despite unfavorable profit outcome for 2019, which was occasioned by the implementation of the IFRS 9 which started in January 2018 as was required by the amended Accounting standards, the Bank’s profitability potential remains strong as demonstrated by key financial metrics above. The implementation of IFRS 9 in January 2018 was widely expected by most of the banks to increase the stock of credit impairment provisions and affect profits.

Outcome of the key performance indicators (KPIs):

Performance Unaudited Audited Audited Definition and calculation method Indicator 30 Sep 2020 2019 2018 Return on equity (Loss)/profit before tax/Total equity 11% (23%) 6%

Return on assets (Loss)/profit before tax/Total assets 1% (3%) 1% Cost to income Operating costs/Net interest + non-interest 14% 105% 80% ratio income

Total interest income/(interest on government securities + balances with Interest margin on other banks + interbank loans receivable + 12% 12% 11% earning assets investments in other securities + net loans, advances and overdrafts)

Non - interest income to gross Non - interest income/Total income 20% 20% 12% income

10 Basic earnings/ Number of ordinary shares Earnings per share 104 (319) 39 in issue (TZS)

Gross loans to Total loans and advances to customers / 71% 75% 73% customers deposits Total deposits due to customers

Non - performing Non - performing loans/Gross loans and loans to gross 20% 20% 10% advances loans Earning assets to Earning assets/Total assets 80% 84% 86% total assets

Trend (Sep 2020/Dec 2019/ Dec 2018 total Growth in total assets – Dec 2019/ Dec 2018/ Dec 2017 19% 14% 19% assets total assets) / (Dec 2019/ Dec 2018/ Dec 2017 total assets) Trend (Sep 2020/ Dec 2019/ Dec 2018 Growth in loans loans and advances – Dec 2019/ Dec 2018/ and advances to 5% 23% 21% Dec 2017 loans and advances) /(Dec 2019/ customers Dec 2018/ Dec 2017 loans and advances) Trend (Sep 2020/ Dec 2019/ Dec 2018 Growth in deposits – Dec 2019/ Dec2018/ Dec 2017 deposits due to 16% 19% 13% deposits)/(Dec 2019/Dec 2018/2017 customers deposits)

Capital adequacy [Core capital/Total risk-weighted on and off Core (Tier 1) statement of financial position, operational 5.97% 5.76% 15.33% capital ratio and market risk weighted exposures] x 100

Total (Tier 1 + [Total capital/Total risk-weighted on and off Tier 2) capital statement of financial position, operational 5.97% 5.76% 15.96% ratio and market risk weighted exposures] x 100

Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2019 Unaudited Audited Audited 30th/09/2020 2019 2018 TZS TZS TZS

Interest income 18,924,878 20,563,640 23,770,463 Interest expense (7,317,456) (8,300,425) (7,512,284) Net interest income 11,607,422 12,263,215 16,258,179

11 Expected credit losses - loans and (628,629) (4,540,169) (2,480,560) advances to customers Expected credit losses - other financial - - (11,501) assets Net interest income after expected 10,978,794 7,723,046 13,766,118 credit losses Fees, commission, and other income 3,101,678 3,445,169 2,721,134 Net foreign currency trading and 594,118 673,958 447,403 translation gains Total non-interest income 3,695,796 4,119,127 3,168,537 Net operating income 14,674,589 11,842,173 16,934,655 Personnel expenses (6,390,271) (8,513,111) (7,013,099) Depreciation and amortization (1,156,284) (2,169,538) (1,356,973) General and administration expenses (4,980,249) (6,597,826) (7,154,105) Total operating expenses (12,526,804) (17,280,475) (15,524,177) (Loss)/profit before tax 2,147,786 (5,438,302) 1,410,478 Income tax expense - (1,144,631) (604,434) (Loss)/profit for the year 2,147,786 (6,582,933) 806,044 Total comprehensive income for the 2,147,786 (6,582,933) 806,044 year, net of tax TZS TZS TZS Basic and diluted (loss)/earnings per 104 (319) 39 share Statement of Financial Position as at 31st December 2019

Unaudited Audited Audited 30th/09/2020 2019 2018 TZS “000” TZS “000” TZS “000” ASSETS Cash and balances with Bank of 19,723,228 20,973,818 17,478,962 Tanzania Loans and advances to banks 31,603,087 23,235,028 24,942,547 Other assets 2,913,703 1,504,206 1,094,421 Current income tax recoverable - 408,850 78,939 Loans and advances to customers 118,648,277 122,083,704 99,035,944 Government securities 24,380,000 23,780,209 27,793,299 Investment in corporate bond 2,000,000 2,002,220 2,002,255 Equity investments 539,000 539,000 539,000 Right-of-use assets 4,551,141 4,551,141 - Intangible assets 798,764 819,591 869,146 Property and equipment 2,564,497 4,140,589 3,844,610 Deferred tax asset - - 1,144,631 TOTAL ASSETS 207,721,697 204,038,356 178,823,754 LIABILITIES AND EQUITY

12 Liabilities Deposits due to customers 171,453,977 161,925,946 136,466,747 Deposits due to banks 9,399,060 16,799,185 13,869,813 Other liabilities 3,260,425 3,727,800 4,743,328 Current income tax payable 140,488 - - Provisions - 265,261 437,886 Lease liabilities 4,597,117 4,597,117 - 188,851,067 187,315,309 155,517,774 Equity Share capital 20,615,272 20,615,272 20,615,272 (Accumulated losses)/retained (9,176,265)) (11,323,848) 1,898,334 earnings Regulatory reserve 7,431,623 7,431,623 11,455 General reserve - - 780,919 18,870,630 16,723,047 23,305,980 TOTAL LIABILITIES AND 207,721,697 204,038,356 178,823,754 EQUITY

3.9 Financial Projections and Key Milestones for the years 2021 - 2023 Parameter 2021 – 2023 Fresh capital injection of TZS 15bn is expected in 2020/21. Further Paid – Up Share Capital capital enhancement shall be through retention of profits. Customer Deposits is expected to reach TZS 283.70 billion by Customer Deposits and end of year 2023, which translates to average annual growth rate Composition of 34%. The CASA/FD ratio of 70%:30% respectively from the current level of 51%:49%. Loan and Advances portfolio is projected to reach TZS 176.65 Loans and Advances billion by end of year 2023, an average annual growth rate of 16%. Profit Before Tax for the period of three year is projected at TZS Profit Before Tax 1.67billion, TZS 4.24billion, TZS 8.58billion and TZS 12.30billion for 2020, 2021, 2022 and 2023, respectively.

Total assets are projected at TZS 501.88billion by 2023; an average Total Assets annual growth rate of 66%

The forecast to growth its strategic clientele base to reach the following targets by 2023 (with respective growth rates from current level in bracket): Strategic Business Agenda • Dioceses: 35 (51%) (Church/Institutions/Value • Parishes: 875 (200%) Chain) • Jumuiya ndogo ndogo & Vyama vya Kitume: 2,650 (115%) • Religious Congregations: 521 (33%) • Education Centres: 1,552 (400%) • Health Centres: 463 (100%)

13 Business Expansion – The Bank forecast to open twelve (12) mini branches and enroll 950 Physical Outlets Agencies by 2023. The Bank shall roll out digital banking platforms in 2020/21, subject Digitization to capital adequacy and necessary regulatory approvals. The Bank forecast to upgrade/replace the core banking system Core Banking System in 2021/22 to align itself with business needs and technological Upgrade advancement in the industry.

The success of this plan is dependent on many interdependent factors, one among key ones being availability of necessary capital to support growth. The plan places the Bank on a strategic footing to tape business opportunity in the key sectors of priority for sustainable and profitable growth.

14 SECTION 4.0 ECONOMIC OVERVIEW

4.1 Economic Development The economy continued to record satisfactory performance during the first quarter of 2020 despite the impact of COVID-19 on some sectors of the economy. Real gross domestic product grew by 5.7 percent, slower than 6.3 percent in the corresponding quarter in 2019. Main drivers of growth were construction, agriculture, transport and storage, and mining and quarrying activities, altogether contributing about 60.0 percent.

Year-on-Year Real GDP Growth

Source: National Bureau of Statistics

Consumer price index inflation remained subdued and below the country medium-term target of 5.0 percent. Headline inflation averaged 3.2 percent in the quarter ending June 2020, lower than 3.6 percent in the preceding quarter and 3.5 percent in the corresponding quarter in 2019, mainly due to slowdown in prices of some non-food items, particularly petroleum products. The rate was also in line with the East African Community (EAC) and Southern African Development Community (SADC) convergence criteria of not more than 8.0 percent and between 3.0 and 7.0 percent, respectively.

Noteworthy, headline inflation in the EAC averaged 5.8 percent, while in SADC it was 6.41 percent. During the quarter ending June 2020, the Bank sustained accommodative monetary policy and enhanced liquidity easing measures to cushion the financial sector and economy from the negative impact of COVID-19 pandemic.

Accordingly, growth of monetary aggregates remained strong. Extended broad money supply (M3) grew at an annual rate of 9.5 percent in June 2020 compared with 7.7 percent in June 2019. Credit to the private sector grew by 5.5 percent in the year ending June 2020, down from 7.6 percent in the corresponding period in 2019. Interest rates charged on loans by banks

15 and yields on government securities eased during the quarter in line with the monetary policy measures taken by the Bank of Tanzania to support aggregate demand and limit the negative impact of COVID-19 on the economy.

The shilling remained fairly stable against the US dollar, trading at an average of TZS 2,303.43 per USD during the quarter ending June 2020, compared with TZS 2,300.52 per USD in the preceding quarter and TZS 2,300.33 per USD in the corresponding quarter in 2019.

The Government continued to enhance revenue collection efforts and expenditure management based on available resources and priorities. Government resource envelope, revenue and grants, amounted to TZS 5,132.9 billion during the quarter, while expenditure was TZS 5,585.8 billion.

External debt stock was USD 22,522.7 million at the end of June 2020, an increase of USD 107.7 million and of USD 601.7 million from the stock at the end of preceding quarter and corresponding quarter in 2019, respectively. The increase was largely due to new disbursements. Similarly, domestic debt stock increased to TZS 15,515.7 billion from TZS 14,863.1billion at the end of June 2019.

The overall balance of payments recorded a deficit of USD 249.0 million in the quarter ending June 2020, compared with a deficit of USD 222.3 million in the corresponding quarter in 2019. Widening of the deficit was on account of broadening of financial account deficit. Meanwhile, current account deficit narrowed to USD 43.9 million from a deficit of USD 700.5 million in the quarter ending June 2019, due to increase in the value of exports, coupled with the decrease in import bill. Gross official reserves amounted to USD 5,184.7 million at the end of June 2020, sufficient to cover 6.0 months of projected imports of goods and services. The import cover was above the country benchmark of not less than 4.0 months, the EAC and SADC benchmarks of at least 4.5 months and 6 months, respectively.

4.2 Banking Industry in Tanzania 4.2.1 Tanzania Banking Sector Liberalization The Tanzanian banking sector embarked on a plan for financial liberalization in the 90’s in order to sustain the country’s economic growth. This has been accomplished through the mobilization of financial resources as well as by increasing competition in the financial markets and by enhancing the quality and efficiency of credit allocation. As a result of the liberalization, new merchant banks, commercial banks, bureau de change, credit bureaus and other financial institutions have entered the market.

4.2.2 Tanzania Banking Sector General Performances Apart from the recorded profit before tax of TZS 590 billion in 2019, compared to TZS 313 billion in 2018, the total assets of the banking sector reached TZS 33 trillion in 2019, representing a growth of 9% from TZS 30 trillion in 2018. Major components of the banking sector assets were loans advances and overdrafts (54%), investment in debt securities (16%), and balance with the BoT (8%). Distribution of the loan portfolio was: personal loans (29%), trade (16%), building, construction and real estate (11%), manufacturing (10%), agriculture, fishing, hunting and forestry (10%), transport and communication (5%), and other sectors (19%). Total liabilities grew by 9% from TZS 25.7 trillion in 2018 to TZS 28.1 trillion in 2019. Deposits accounted for 77% of the banks’ total liabilities. Total capital increased by 8% from TZS 4.7 trillion in 2018

16 to TZS 5 trillion in 2019. The growth was attributed to an increase in profitability recorded by banks during the period.

Source:https://www.tanzaniainvest.com/finance/banking

4.3 Banking Regulatory Framework With a view to meeting the demands of modern business practice and catering for the needs of the local and international banking sector, the government of Tanzania repealed the Banking and Financial Institutions Act 1991, Cap 342 (the “BAFIA ‘91”) and replaced it with the Banking and Financial Institutions Act 2006 (the “BAFIA ‘06”). The bill was presented to the National Assembly by the Minister for Finance on 28 March 2006 and passed by the National Assembly on 3 March 2006. The law came into force on 5 April 2006. On 12 December 2008, the BAFIA ‘06 was supplemented with the Banking and Financial Institutions Regulations, 2008 (the “Regulations”).

The primary objective of the BAFIA ’06 (as stated in its “objects” and “reasons”) is to establish a framework for the comprehensive regulation and supervision of banks and financial institutions in Tanzania, and to ensure the stability, safety and soundness of the financial system with the aim of reducing the risk of loss to depositors. Being a fairly wide-ranging act, there are a number of elements of the BAFIA ’06 which will be of interest to those investing in Tanzania, the principal ones of which are listed below.

Licensing, Regulation and Supervision The BAFIA ‘06 and the Regulations vest a greater independence in the Bank of Tanzania (“BoT”) than its predecessor, by granting the BoT certain powers relating to the licensing, regulating and supervising of banks and financial institutions in Tanzania. The Regulations for instance provides the BoT, amongst other things, with the power to ensure banks maintain a prescribed minimum core capital, to ensure that a bank’s total capital does not fall below 12% of its total risk, to prescribe and enforce a liquid assets ratio and to enforce financial reporting to the BoT.

Grant, Suspension and Revocation of Licenses The BAFIA ‘06, like the BAFIA ‘91, is the legislation which provides the BoT with its power and authority to grant, suspend and revoke licenses to banking and financial institutions engaged in banking business in Tanzania. The BoT may allow a bank or financial institution licensed by it to conduct business outside Tanzania subject to terms and conditions set by the BoT to ensure effective supervision and compliance with the BAFIA ’06 and the law in that other country.

In respect of the granting of a license, whilst retaining most of the elements found in the BAFIA’91, the BAFIA ’06 goes on to impose additional new requirements on the BoT when determining whether or not to grant a license to an applicant institution in Tanzania. Under the BAFIA ’06, the BoT must also now consider and take into account in respect of any applicant: (a) the extent to which the policies, procedures and internal controls of the applicant are designed to promote sound financing of economic activities in under-served communities; and

17 (b) the extent to which the intended training and employment programs of the applicant are aimed at promoting professionalism in the financial sector.

Under the BAFIA ’06 the new concept of suspension of license was introduced, where the BoT has the authority to suspend a license where: a) it determines that a bank or financial institution has failed to meet any one of the capital requirements set down by the BoT; or b) it is of the opinion that the affairs of the bank or financial institution are being conducted in a manner that is detrimental to the interests of its depositors.

Interestingly, although the first test is clear cut (a bank either does or does not meet the capital maintenance requirements), we once again (as per the issuing of a license in the first instance) see a level of subjective interpretation vested in the BoT in its power to determine whether there are circumstances which exist which would justify the revocation of a license.

The BoT under the BAFIA ’06 has been granted the power to revoke a license where there is: (a) a voluntary request; (b) a failure to commence business within the prescribed time; (c) a failure to comply with the prudential requirement; (d) provision of false information during application for license; (e) a failure to comply with terms and conditions of license; (f) engagement in unsafe or unsound practices that threaten the bank or financial institution’s financial condition or are detrimental to the interests of the depositors; (g) a refusal to permit inspection or provide information required by the BoT; (h) a cessation of business; or (i) an insolvency and failure to pay assessment.

Capital Reserves and Accounts Under the BAFIA ’91, an investor was required to raise a minimum of one billion Tanzanian shillings to form a bank. Under the BAFIA ’06, the amount has been increased substantially and applicants for banking licenses now need to have and maintain at all times a minimum core capital of not less than five billion Tanzanian shillings.

Additional requirements relating to capital reserves have been introduced under the BAFIA ’06, in that every bank will be required to maintain, at all times: (a) core capital of not less then 10% of its total risk-weighted assets and off balance sheet exposure; and (b) total capital of not less than 12% of the same risk.

The BAFIA ‘06 also empowers the BoT to establish categories of financial institutions and prescribes additional specific capital requirements to encourage the provision of banking services to specific communities.

18 Activities and Investments The BAFIA ‘06 lists the activities which banks and financial institutions may engage in, such as acceptance of deposits, lending, financial leasing, transmission of money, issuing (credit cards, traveler’s cheques, banker’s drafts, etc), financial advisory, etc. Activities attributed to banks and financial institutions cannot be performed by a person or institution not holding a banking license.

New provisions have also been introduced through the BAFIA ’06 in an attempt to reduce the level of risks banks and financial institutions incur, restricting credit exposure to customers and connected lending. Banks and financial institutions are prohibited from lending to a single person in excess of amounts equaling 5% or more of the core capital of the bank or financial institution or 3% per cent of the core capital for a micro-finance institution. Exceptions may be available if the lending is:

(a) guaranteed by the government of Tanzania; (b) secured against cash or near cash items; (c) guaranteed by a first class international bank; or (d) against securities issued by the government of Tanzania or the BoT.

The BAFIA ’06 also empowers the BoT to set limits on the amount of lending that can be provided to connected parties.

Supervision, Co-ordination and Control In order to improve the supervision of banks and financial institutions, the BAFIA ’06 vested the power to supervise, coordinate, control, and conduct the examination of banks and financial institution to the BoT. A key element of this has been the introduction of provisions allowing for the sharing of supervisory information with other appropriate supervisory authorities (who may be within Tanzania or abroad), with the only caveat being that the sharing of relevant information must be on a reciprocal basis with any such supervisory authority. The new BAFIA ’06 is not simply a token step towards reform, but a genuine development in Tanzania towards providing an improved, transparent and robust regulatory framework in compliance with the country’s directives and to bring the country in-line with international standards.

4.4 Capital Market Regulatory Framework 4.4.1 Establishment of the Capital Markets and Securities Authority The Capital Markets and Securities Authority (CMSA) was established in 1995 by the Capital Markets and Securities Act, Chapter 79 R.E. 2002. The CMS Act is supplemented by 19 Regulations and Guidelines governing various aspects of capital markets.

CMSA became operational as an autonomous body in the 1995/1996 Financial Year. The establishment of CMSA followed comprehensive financial sector reforms in the early 1990s that were aimed at developing capital markets in Tanzania. The capital markets are important because they provide the appropriate mechanisms for mobilizing long term savings and ensuring efficient allocation of resources to productive sectors in that way stimulate economic growth.

19 4.4.2 Functions of the CMSA Functions, duties and powers of the CMSA are subject to the provisions of the Section 10 (1) of the CMS Act; the CMSA has the duty to:-

n Promote and develop efficient and sustainable capital markets and securities business in Tanzania while ensuring fair and equitable dealings;

n Formulate principles for the guidance of the industry, protection of investors’ interests and integrity of the securities market against any abuses;

n Licensing and regulating stock exchanges, dealers, brokers and their representatives and investment advisors;

n Advising the Government on policies and all matters relating to the securities industry.

n Create the necessary environment for the orderly growth and development of the capital market;

4.4.3 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 licensing of stock exchanges, stockbrokers and other persons dealing in securities, and for connected purposes

20 SECTION 5.0: CORPORATE GOVERNANCE, BOARD OF DIRECTORS AND SENIOR MANAGEMENT

5.1 Responsibilities of the Board The Board’s primary role is to protect and enhance long term Shareholders value, while considering the interests of other stakeholders. The Board is responsible for the overall corporate governance of the bank including formulating its strategic direction, setting policies for all areas of the bank’s activities, approving and monitoring business plans and budgets, setting remuneration, appointing, removing and creating succession policies for the management team, establishing and monitoring the achievement of management’s goals and ensuring the integrity of risk management, internal controls, legal compliance and management information systems. The Board is also responsible for approving and monitoring financial and other reports of the bank to the Shareholders.

5.2 Composition of the Board The Board of Directors (the ‘’Board’’) consists of eight directors including the Managing Director. Other than the Managing Director, no director holds an executive position in the Bank. The Board has overall responsibility for the Bank, including responsibility for identifying key risk areas, considering and monitoring investment decisions, considering significant financial matters, and reviewing performance by management against business plans and budgets.

The Board is also responsible for ensuring that a comprehensive system of internal control policies and procedures, which is compliant with sound corporate governance principles, is operative.

The Board is required to meet at least four times a year. The Board delegates the day to day management of the business to the Managing Director who is assisted by the Bank’s Management Team. The Management Team is invited to attend Board meetings and facilitates the effective control of the Bank’s operational activities, acting as a medium of communication and coordination between the various business units.

The Board has three committees, that is, the Board Audit, Risk and Compliance Committee, the Board Human Resources and Operations Committee and the Board Credit Committee. Each committee has a charter to govern its roles and responsibilities as well as facilitate efficiency and effectiveness of the Board’s performance.

The Bank is committed to the principles of effective corporate governance, especially recognizing the importance of integrity, transparency and accountability. The Board exercises close oversight over the Bank’s operations and ensures high standards of corporate governance through its committees as shown below:

21 The Board Audit, Risk and Compliance Committee (BARCC) is composed of the following:

No. Name of director Position 1. Ms. Uphoo Swai Chairperson 2. Most Rev. Beatus Kinyaiya Director 3. Mr. Benedict Warisianga Sudi Director

The Board Credit Committee (BCC) is composed of the following:

No. Name of director Position 1. Mr. Robert Mtendamema Chairperson 2. Mr. Ayoub Mtafya Director 3. Fr. Charles Kitima1 Director 4. Mr. Benedict Warisianga Sudi Director

The Board Human Resources and Operations Committee is composed of the following:

No. Name of director Position 1. Mr. Ayoub Mtafya Chairperson 2. Mr. Robert Mtendamema Director 3. Fr. Charles Kitima Director

5.3 Directors’ Shareholding None of the Directors indirectly or directly hold in excess of 0.3% of the share capital of the Issuer.

5.4 Board of Directors Profile The Bank’s directors are appointed by the Shareholders as provided in the Articles of Association of the Bank. A brief profile of each of the Bank’s directors at the date of the Information Memorandum is as follows:

Prof. Marcellina Mvula Chijoriga (Board Chairperson) - 66yrs old

Prof. Marcellina Mvula Chijoriga is an Associate Professor in Finance and Business Management at the University of Dar es Salaam Business School. She holds Doctorate degree in Economics and Business Administration, from Witschaftsuniersitat Wien (WU), Vienna, Austria; and MBA, Finance, from Catholic University of Leuven, Belgium; Postgraduate Diploma in Institutional Economics, from University of Connecticut, USA; and a B. Com Accounting, from University of Dar es Salaam, Tanzania. Prof. Chijoriga has worked for the University of Dar es Salaam in various positions for the past 34 years.

22 Her professional expertise and strength are in finance and business management. She is also a seasoned trainer and facilitator for both public and private enterprise in the area in finance, business management. She has researched and published numerous books, journal and conference papers singly and jointly. She was the founder of the 10,000 International Women program and graduate internship program (GRIP).

She has consulted for various local and international organizations. She is currently a Management Consultant to the Bill and Melinda Gates Foundation (BMGF) and supported and facilitated the Ministry of Agriculture, Livestock and Fisheries (MALF) in the finalization of Agricultural Sector Development Program II(ASDPII) which was launched by his Excellency the President of United Republic of Tanzania, Dr. John Joseph Pombe Magufuli on 4th June, 2018.

She has eighteen (18) years of experience in board management and governance having served and continue serving on a number of public, private and international boards and committees.

Mr. Ayoub Mtafya (Member and Chairperson of the Human Resource and Operations Committee) - 50yrs old

Mr. Ayoub Mtafya is an Advocate of the High Court of Tanzania and a Registered Tax Consultant. He is a Partner at NexLaw Advocates and holds LL.M (Taxation), LL.B and PGDTM.

Most Rev. Beatus Kinyaiya (Member) - 64yrs old

Most. Rev. Bishop Beatus Kinyaiya OFM (Cap) is currently the Archbishop of the Catholic Diocese of Dodoma. He is a graduate of the London University and the Antonianum University in Rome. Before becoming a Bishop, he served as Provincial Minister of the Capuchin Fathers in Tanzania for 6years. He also held several other administrative duties such as Chairman of the Capuchin fathers Association of East, Central and Southern Africa and of UFRATA, the Union of the Franscan Groups in Tanzania; teacher at Maua Seminary (1989-2002) and then Rector (1997-1999).He holds M.A. (African Philosophy); BA (Geography & History), London University and B.A.(Spirituality), Antonianum University, Rome.

Uphoo Swai (Member and Chairperson of the Audit, Risk and Compliance Committee)- 49yrs old

Uphoo is a member of the accountancy profession in Tanzania, registered with national Board of Accountants and Auditors as Fellow Certified Public accountant (FCPA-T), a Certified Professional Risk Manager (CPRM) by Asia Risk Management Institute-Singapore, a Certified Lead auditor ISO 9001: 2008 by British Standardisation Institute (BSi) and Certified Balance Score card Professional by George Washington University. Uphoo holds MBA from university of Dar Es Salaam and

23 Advanced diploma in accountancy from Institute of Finance Management. She also holds a certificate in Board Directorship from Tanzania Institute of Directors. Uphoo is an expert in Risk Management and Internal Audit; a hands on Professional with 19 years working experience both from private and public sector out of which 9 years are in Senior Management position. Her experience ranges from Accounting & Finance, Internal Audit and Risk Management. Her background was in Media, Banking and moved to Social Security industry. She worked as Director of Risk Management for PPF Pensions Fund till July 2018, Senior Internal Auditor for CRDB Bank Plc and Accountant for ITV Independent Television. She has consulted in Establishing Risk Management Framework for various organizations including NHIF and TTCL. Apart from Mkombozi Board, Uphoo serve as a Board Trustee for Medical Stores Department (MSD) and a Member in Funding promotion Committee for Dar Es Salaam University College of Education (DUCE). Currently she is a Member Records Manager in a newly established department in Public Service Social Security Fund (PSSSF).

Mr. Benedict Sudi (Member) - 53yrs old

Benedict is a member of the National Board of Accountants and Auditors -the accountancy profession in Tanzania. He is registered with the Board as Approved Certified Public Accountant in the Public Practice Category (ACPA –PP).

Benedict is a graduate holding an Advance Diploma in Certified Accountancy from the Institute of Development Management (IDM) Mzumbe (now Mzumbe University). He trained and gained his professional experience as an auditor and financial consultant through working with the renowned audit firms –Coopers & Lybrand (now PricewaterhouseCoopers) and Ernst & Young. He also gained accounting and managerial experience through working as a Finance Director in one of the Government Authorities - The Vocational Education and Training Authority. Benedict’s experience spans for over 25 years, mainly in accounting, auditing and consulting.

As an audit manager at PwC (the position he held for two years before he crossed to the industry), his client portfolio was mainly Banks and Insurance Companies.

Mr. Robert Mtendamema (Member and Chairperson of the Credit Committee) - 48yrs old

Mr. Robert Mtendamema is an IT expert with 23 years’ experience. Currently he is the Director of Information Technology at National Social Security Fund (NSSF). He holds a Master’s of Science Degree in Data Communications, Networks and Distributed Systems from the University College London (UK). He also holds a certificate in Board Directorship from Tanzania Institute of Directors since 2015. Robert possess skills in database management ,IT Governance, IT security, IT projects management, IT strategic planning, systems designing, implementation as well as being a certified balance score card professional, talent management and culture change programmes implementation. He has been part of the PPF management team as a Director of Information Systems (DIS) for seven years from 2011.

24 Fr. Dr. Charles Hugo Kitima (Member) - 56yrs old

He is a Secretary General, Tanzania Episcopal Conference since July 2018. He was Senior Lecturer for Constitutional Law, Media Law and Human Rights at SAUT and was promoted to the post of Vice-Chancellor, St. Augustine University of Tanzania, Mwanza, Tanzania from July 2003 to July 2013: He has published a number of books on governance and democracy and has presented several papers. He holds B.A in Theology from the Urban University Rome, Licentiate in Canon Law University of Rome and Doctorate in Law (Doctor Juris) Lateran University Rome.

Mr. Respige Onesmo Kimati (Managing Director) - 47yrs old

Mr. Respige Onesmo Kimati was appointed to the role of the Managing Director for Mkombozi Commercial Bank PLC with effect from 18th January 2020. Mr Kimati has an extensive banking experience of over 20years covering various segments namely; Corporate, SME, Mortgage, Consumer/Retail, Public Sector and Branch Management. He has a diverse skills-set and hands on experience in Deal Structuring, Project Appraisal, Credit Analysis and Relationship Management. He has held Senior Managerial roles in Banking Sector for over 11 years consecutively, a career accomplishment which places him in a competent position to make significant strategic contribution in growing sustainable and profitable businesses in the financial sector. Mr Kimati has worked for various local, regional and international banks and financial institutions in Tanzania, namely; Capital Finance Ltd/Tanzania Development Finance Co. Ltd, Standard Chartered Bank, Stanbic Bank, KCB Bank, NIC Bank and Ecobank Tanzania Ltd. He possesses academic qualifications in Finance where he holds an MSc. Finance and a B.Com - Finance degrees from the Universities of Strathclyde and Dar es Salaam respectively.

5.5 Management Team Profiles

Mr. Respige Onesmo Kimati (Managing Director)

25 Ltd. He possesses academic qualifications in Finance where he holds a MSc. Finance and a B.Com - Finance degrees from the Universities of Strathclyde and Dar es Salaam respectively.

Ms. Joanitha Mashulano (Ag. Chief Internal Auditor)

She joined the bank on 17th January 2017 as Internal Audit Manager. Before joining MKCB, she worked at ICB as Head of Internal Audit, United Bank for Africa (UBAT) as Internal Control and Internal Audit Associate. She has a wealth of experience in Audit and Assurance, Compliance, Process Improvement, Data Analytics and Risk and Control assessments. She is a certified COSO Enterprise Risk Management by IIA, Certified Information System Auditor (CISA), and Certified Public Accountant (CPAT) and holds a degree of Commerce in Accounting from the University of Dar Es Salaam. She is an active member of ISACA, NBAA and IIA. She is currently serving in the Board Committee of Research and Advisory of Institute of Internal Auditors Tanzania.

Mr. Thomas Enock (Chief Operations Officer)

He joined the bank on 1st August 2015.Before joining MKCB, he worked at BancABC (part of Atlas Mara) for 7 years. He is an expert in Banking Operations and Audit having handled large branch networks, multi geography audits, large audit infrastructure across Microfinance, Corporate, Commercial and Consumer Banking. He is a CPA(T), CPSP (T), CPB (T) and accredited with CiDir (T). He holds a Bachelor of Commerce (Accounting) and MSc. Finance from the University of Dar es Salaam and Strathclyde University respectively. He is an active member of NBAA, PSPTB,TIOB, IoDT and IIA Tanzania.

Mr. Dennis Frank Kejo (Chief Finance Officer)

He joined the bank on 1st July 2009, before joining MKCB he worked with NIC Bank (T) as Chief Accountant and KCB as Section Head-Finance. He has vast banking experience in Finance and Treasury for over 17 years and has attended various professional course within the country and abroad. He is a CPA (T) holder since 2004 and holds ADA III-Advanced Diploma in Accountancy from the Institute of Finance Management (IFM), Dar es Salaam. He has attended MBA- (International Trade), from Indian Institute of Foreign Trade (IIFT) in collaboration with IFM.

26 Mr. Baltazar Baltazar Mbilinyi (Head of Legal Services)

He joined the bank on 1st June 2009 and he is an advocate of the High Court of Tanzania since the year 2003. He holds Bachelor of Law (Hons) degree and Master of Laws (LLM) in Commercial and Corporate Law both from the University of Dar es salaam. He further holds a Certificate as an Advocate of the High Court of Tanzania and a Practicing Certificate as a Notary Public and Commissioner for Oaths. He is a member of both the Tanganyika Law Society and the East African Law Society. In the field of banking he holds Diploma in Banks and Financial Institutes, Strategies and Management from the Galilee International Management Institute, Israel.

Mr. Nwaka G. Mwabulambo (Head of Treasury)

He joined the bank on 25th March 2011. Before his current position, he has worked with NMB for 9 years in banking operations, credit and treasury since year 2002.He is a financial markets practitioner certified by the financial markets association (ACI).He holds a Master Degree in Business Administration and Bachelor of Commerce from the University of Dar es Salaam and has attended several trainings from both within Tanzania and abroad on Treasury Risk Management, Assets and Liabilities Management, Basel regulatory requirements, Treasury Sales and Trading, Retail products pricing and Leadership coaching.

Ms Fortunata Mgweno (Ag. Human Resource Manager)

She joined the bank on 7th December 2009, before joining MKCB she was working as an HR Officer at Swedish Cooperative Centre Project in Musoma Tanzania in the HR department. She has 10 years’ experience in banking having held HR officer position and Assistant Manager Human Resources. Holding a bachelor’s degree in public administration (Majoring Human Resources Management) from the University of Kampala and a Post Graduate Diploma in Laws, Mediation and Arbitration.

Daudi Senkondo (Risk and Compliance Manager)

Prior to joining Mkombozi Commercial Bank PLC in June 2010, He was an Auditor at KPMG Tanzania, having worked for KPMG Tanzania for four years in the Corporate Finance and Transaction Services (CFTS) department. He has more than twenty years’ experience in banking having held various position in different banks in Tanzania. He holds a Bachelor of Commerce (Accounting), University of Dar es Salaam in Tanzania, and he is also a Microsoft Certified System Administrator (MCSA)

27 Mr. Raphael Joseph Sakita (Ag. Head of Credit)

He Joined the Bank in June 2010 as a Credit Officer before being promoted to Credit Manager Corporate. He has over ten years’ experience in Banking and Financial institutions in credit area. He possesses commendable work experience in Credit Process, Administration, Monitoring, Recoveries, and Risk Assessment & Management. He holds Master Degree of Business Administration – Corporate Management (MBA) from Mzumbe University, Postgraduate Diploma in Insurance and Risk Management (PGDIRM) from the Institute of Finance Management, Advanced Diploma in Project Planning and Management (ADPPM) from Community Development Training Institute (CDTI) and has attended various professional courses within and outside the country. He is a Certified Risk Management Professional (CRMP) from the Institute of Risk Management Tanzania. He is an active member of TIOB and IRMT.

28 SECTION 6.0: RISK FACTORS

The MKCB faces a variety of risks, the occurrence of which could adversely affect its performance, earnings, financial position and prospects.

MKCB has taken a number of steps to mitigate some of these risks and will continue to evaluate ways in which it can manage and mitigate risks accordingly. Notwithstanding this, due to the very nature of risks no assurance can be given that mitigating actions taken or planned will be wholly effective. In addition, there may be additional risks unknown to MKCB and other risks, which are currently believed to be immaterial, could turn out to be material. These risks, whether they materialize individually or simultaneously, could significantly affect the bank’s business and financial results. In addition, MKCB could also be affected by risks relating to the banking industry generally and the risks and hazards involved in the business of bank, which are largely outside its control.

6.1 Risk factors relating to the Issuer 6.1.1 Compliance Regulatory risk Compliance risk is the risk of non-compliance with regulatory guidelines. Regulatory risk is the current and prospective risk to earnings or capital arising from violations of, or non-conformance with laws, rules, regulations, prescribed practice, or ethical standards issued by the regulator from time to time. MKCB is managing these risks in the following manner:

n MKCB has put in place a Board approved compliance/regulatory policy which clearly sets out the specific requirements, duties and responsibilities of the Board and Compliance Officer. The Policy is reviewed annually.

n MKCB has put in place independent Risk and Compliance functions responsible for continuous review, monitoring and evaluation to ensure compliance at all times.

n Compliance is the responsibility of all managers and is embedded in the processes and procedures of conducting the MKCB’s business.

6.1.2 Liquidity Risk Liquidity risk is the risk that the Bank will be unable to meet cash flow obligations as they become due, because of an inability to liquidate assets, or can only access these financial resources at excessive cost. The Bank follows a comprehensive liquidity risk management policy and procedures duly recommended by appropriate Board Committees and approved by the full Board.

6.1.3 Operational risk Operational risk is inherent in banking business and may result in loss of money or reputation arising out of human error, technology/system failures, breaches in internal controls, fraud, unforeseen catastrophes, inadequate procedures and controls or weaknesses in MKCB’s business processes. MKCB is actively managing this risk to ensure that its business and

29 stakeholders’ interests are secure by having in place a Board approved Operational Risk Policy which is applicable to all business divisions and functions. The policy is reviewed at least once a year.

6.1.4 Credit risk Credit risk is the risk of loss due to the failure of a borrower to meet its credit obligations in accordance with agreed contract terms. Credit risk makes up the largest part of the Bank’s risk exposures. The Bank’s credit process is governed by centrally established credit policies and procedures, rules and guidelines with an aim to maintain a well-diversified credit portfolio. Credit risk policies and procedures (set out in the Credit Policy Manual) are reviewed by the management and are approved by the Board.

6.2 Risk factors relating to the market

6.2.1 Economic Risk The stability of Tanzania’s macro-economy will to a large degree determine the business growth prospects and operational results of MKCB. The bank has put in place a robust business strategy, systems and procedures to minimize MKCB’s exposure to adverse economic conditions increased competition on regulation. However, as with any other entity operating within a similar business environment, this cannot provide an assurance that adverse economic conditions will not hamper MKCB’s performance.

6.2.2 Foreign Exchange Risk Foreign exchange risk is the current or prospective risk to earnings and capital arising from adverse movement in currency exchange rates. It exists when MKCB’s assets do not equal its liabilities in a currency. The Bank’s assets are typically funded in the same currency as the business transacted to eliminate foreign exchange exposure. However, the bank maintains an open position within the tolerance limits prescribed by the BoT and approved by the Board. End-of-the-day positions are marked to market daily while intra-day positions are managed by the treasury dealing room through stop loss/dealers limits.

6.2.4 Interest Rate Risks Interest rate risk is the risk that an investment’s value will change due to a change in credit spreads, changes in the yield curve, or in any other interest rate relationship. The Bank is exposed to interest rate risk as a result of mismatches on a relatively small portion of its fixed rate assets and liabilities. The major portion related to this risk is reflected in the banking book owing to investments in fixed rate Government paper. The overall potential impact of the mismatches on the earnings in short-term and economic value of the portfolio in the long-term is not material and is being managed within the tolerance limits approved by the Board.

6.2.5 Investment (Price) Risks Price risk is the risk of loss due to unfavourable movements in market prices. MKCB is managing this risk by effectively managing its resources for optimization of returns through a proper trade-off between risk and return in line with the Board approved policy which clearly states out the tolerance of the Board and Senior Management for the various risks arising from investment and trading activities per statutory guidelines.

30 6.3 Risk factors relating to Rights Issue

n Rights issues can also be a risk as current shareholders may not wish to buy any more shares in the bank depending on how they are advised. With an increased supply of shares available following a rights issue, this could be very bad news for a bank’s market value as well as any future fund raise for the bank through public offering.

n The market price of the Ordinary Shares may fluctuate significantly in response to a number of factors, many of which are outside of the Bank’s control; Such risks depend on the market’s perception of the likelihood of completion of the Rights Issue, and/or in response to various facts and events, including any regulatory changes affecting the bank’s operations, variations in the bank’s operating results, business developments of the bank and/or its competitors. Stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market prices for securities and which may be unrelated to the bank’s operating performance or prospects. Furthermore, the bank’s operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the New Shares.

MKCB has managed the first risk (for untaken rights issue) by establishing a listof commitments from anchor shareholders who are ready to buy all untaken Right Issues.

31 SECTION 7.0: STATUTORY AND GENERAL INFORMATION

7.1 Incorporation Details The Bank was incorporated as a public limited company in Tanzania on 6th March 2007 under the Companies Act, Cap 212 of 2002 with a Certificate of Incorporation No 59516. The Bank’s shares are listed on the Dar es Salaam Stock Exchange (EGM Segment).

7.2 Registered office of the Company The registered office of the Bank is situated onPlot No.40 Mansfield Street in Dar es Salaam, Ilala District.

7.3 Authorized and Issued Share Capital The Bank’s share capital structure as at 31st December 2019 was as shown below:

Authorized Share Capital TZS.50,000,000,000.00 comprising 50,000,000 Ordinary Shares of TZS.1000.00 each.

Called up and fully paid up share capital TZS.20,615,272,000.00 comprising 20,615,272 Ordinary Shares of TZS.1000.00 each.

7.4 Extracts from the Memorandum and Articles of Association

The key features of the Company’s Articles of Association are as follows:

Share Capital and Variation of Rights

n The authorized share capital of the bank is Tanzania Shillings fifty Billion (TZS.50,000,000,000.00) divided into fifty million (50,000,000) shares of Tanzania Shillings One Thousand (TZS.1,000/=) each. n Subject to the provisions of the Act, and without prejudice to any rights attached to any existing shares, any shares may be issued with such rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Directors may determine. n Subject to the provisions of section 61 of the Act, any shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the bank are liable to be redeemed on such terms and in such manner as the bank before the issue of the shares may by special resolution determine. n If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the bank is being wound up, be varied with the consent in writing of the holders of three-fourths of the paid up issued shares of that class, or with the sanction of a special resolution passed at separate general meeting of the holders of that class of shares of the class. To every such separate general meeting, the provisions of these

32 Articles relating to general meetings shall apply but so that the necessary quorum shall be two persons at least holding or representing by proxy one third of the paid up issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll. n The rights conferred upon the holders of the shares of any class shall not, unless otherwise expressly provided by the terms of issue of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. n The bank (or the Directors on behalf of the bank) may exercise the power of paying commissions conferred by section 56 of the Act. Subject to the provisions of the Act, such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in other.

Except as required by law, no person shall be recognized by the bank as holding any share upon any trust, and the bank shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except as otherwise provided by the Articles or by law) any other right or interest in respect of any share except an absolute right to the entirety thereof in the registered holder.

No share shall be issued or transferred to any infant, bankrupt or person of unsound mind.

The bank being a public company shall not give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the bank or, where the bank is a subsidiary company, in its holding company save as provided in Section 57 of the Act as follows:

n where the lending of money is part of the ordinary business of the bank, the lending of money by the bank in the ordinary course of its business;

n the provision by the bank in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the bank or its holding company if any or any subsidiary of it or its holding company if any, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees or former employees or the dependants of any of them of the bank or any such other company:

n the making by the bank of loans to persons other than Directors, bona fide in the employment of the bank with a view to enabling those persons to purchase or subscribe for fully paid shares in the bank or its holding company, if any, to be held by themselves by way of beneficial ownership:

n the lawful distribution by the bank of any of its assets by way of dividends or otherwise.

n if the bank obtains the certification of the Capital Markets and Securities Authority to exempt the bank from the application of the prohibition provided in Section 57 (1) of the Act.

33 n If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividends or other moneys payable in respect of such share.

Depository Receipts

Every Member upon becoming a holder of any shares and whose name is entered in the Register in respect of any Share shall, subject to the terms of the issue of any such Share and the DSE Rules, be issued with a Depository Receipt. A Member shall be entitled to one Depository Receipt for all his Shares of each class and, when part only of the Shares comprising a Depository Receipt is sold or transferred, to a new Depository Receipt, for the remainder of the shares.

A Depository Receipt issued by the DSE shall be prima facie evidence of title to the Shares issued in lieu of a share certificate.

The Directors may appoint a Share Transfer Registrar to maintain the Register in which shall be recorded the number of Shares in respect of which the Share Transfer Registrar has been appointed. The Share Transfer Registrar shall be appointed on such terms and conditions as the Directors shall approve.

The Register shall be kept and maintained by the Share Transfer Registrar in accordance with the Rules and procedures prescribed by the Company and shall be open to inspection by any person during usual business hours.

If a Depository Receipt issued by the DSE is worn out, destroyed, lost or misplaced, it may be replaced by the DSE in accordance with the DSE Rules.

Rights Issue

The bank may, with the authority of the general meeting ( and subject to Capital Markets and Securities applicable regulations if the bank becomes listed), invite its existing Members to subscribe for further capital in proportion to their existing shareholding in the following manner:

n where the bank makes a rights issue, it shall send to each Holder of the class or classes concerned, a letter called “Provisional Letter of Allotment” by which the new shares are actually allotted to such Member, subject to his right to reject the allotment if he does not wish to subscribe, or to renounce them in favour of someone-else by completing the form prepared by the bank and attached to the Provisional Letter of Allotment.

n the bank may offer the shares at a discount only if it first obtains a resolution of the general meeting authorizing the discount which resolution will be effective when it is subsequently sanctioned by the court. The resolution must specify the maximum rate of discount at which the shares are to be issued and that the shares to be issued at a discount must be issued within one month after the date on which the issue is sanctioned by the court or within such extended time as the court may allow.

34 n Where a discount has been sanctioned by the court, and an invitation is issued to a Member who does not wish to take the additional shares himself, he may sell his right to subscribe for the shares to someone who is willing to pay the market price for it. The consideration such a Member receives from the purchase will approximate to the difference between the market price of the new shares after the rights issue invitation and the issue price asked by the bank less any taxes payable thereon by such Member n In the absence of a discount, each Member wishing to subscribe to a rights issue invitation shall pay the market price for the shares. If the Member does not wish to take the new shares himself, he may sell them to someone who is willing to pay for the shares either at par or at a premium.

Transfer of Shares n The Transferor of a share shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register as the holder of that share, subject to the DSE Rules and any arrangement agreed between the bank and the DSE. n The Directors may (pursuant to the DSE Rules) accept for registration all transfers of shares in the form approved by the DSE in such form including the electronic transfer of shares in the DSE’s Central Depository System. n Registration of transfers may be suspended and the register of Members closed during the fourteen days immediately preceding every general meeting of the bank, and during the fourteen days immediately preceding meetings at the bank’s branches by Members in preparation for the annual general meeting and at such other times (if any) and for such period as the Directors may, from time to time determine: provided always that the register shall not remain closed for more than thirty days in any year. n Save as the Directors may determine, no fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting title to any share.

Transmission of Shares n In case of the death of a Member, the survivor or survivors where the deceased was a joint holder, and the executor or administrator of the estate of the deceased where he was a sole holder or the only survivor of joint holders, shall be the only person recognized by the Central Depository System as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased Member from any liability in respect of any share which had been jointly held by him. n A person becoming entitled to a share in consequence of the death or bankruptcy of a Member may, upon such evidence being produced as may properly be required by the Directors and subject as hereinafter provided, either elect by notice to the bank to be registered as holder of the share, or elect to have some person nominated by him registered as the transferee in which case he shall execute the appropriate instrument of transfer. All the Articles relating to the right to transfer of shares shall apply to any such notice or transfer as if it were an instrument of transfer executed by the Member and the death or bankruptcy of the Member had not occurred.

35 n A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall have the rights to which he would be entitled if he were the registered holder of the share such as the right to receive any dividends or other monies payable in respect of the share, but he shall not be entitled in respect of it to receive notice of, or to attend or vote at meetings of the bank or be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the bank before being registered as the holder of the share.

The bank may by ordinary resolution:

n increase its share capital by new shares of such amount, as the resolution prescribes: provided that the bank may direct that new shares or any of them so increased shall be offered in the first instance, either at par or at a discount to the existing Members or to holders of any class of shares for the time being, in proportion to the number of shares or shares of the class or group held by them respectively, or make any other provision as to the issue of the new shares but subject to the provisions of the B&FI Act and the DSE Rules relating to shareholding restrictions.

n consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; or

n subject to the provisions of Section 65(1) (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; or

n issue any preference cumulative or redeemable shares; and

n cancel any shares which, at the date of the passing of the resolution, have into 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 but subject to the provisions of the B & FI Act.

Whenever as a result of a consolidation of shares any Members would become entitled to fractions of a share, the Directors may, on behalf of those Members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including subject to the provisions of this Act, the bank) and distribute the net proceeds of sale in due proportion among those Members, and the Directors may authorize some person to execute an instrument of transfer of the shares to or in accordance with the directions of the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the sale.

The bank may, by special resolution, reduce its capital, any capital redemption reserve fund or any share premium account in any manner authorized by the Act and approved as may be required by any other law.

Except so far as otherwise provided by or pursuant to these Articles or by the conditions of issue, any new share capital shall be considered as part of the original ordinary share capital of the bank, and shall be subject to the same provisions with reference to transfer, transmission, forfeiture and otherwise as the original share capital.

36 General Meetings

The bank 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 bank and that of the next.

The annual general meeting shall be attended by the Members either in person or by proxy, all the Directors, and the Managing Director.

Subject to the provisions of the Act, the general meeting shall be held, not later than six months after the close of every financial year, or at such other time as the Directors may determine.

All general meetings other than annual general meetings shall be called extra-ordinary general meetings.

The Directors may, whenever they think fit, call an extra-ordinary general meeting, and an extra-ordinary general meeting may, subject to the provisions of section 134 of the Act, also be convened on a Members’ requisition as follows:

n Members entitled to requisition an extra-ordinary general meeting are Members entitled to vote at general meetings of the bank who either alone or as a group hold, at the date the requisition is made, not less than one-tenth of the paid up shares of the bank;

n The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office of the bank and may consist of several documents in like form each signed by one or more requisitionists;

n the Directors shall on a Members’ requisition, immediately proceed duly to convene an extra-ordinary general meeting of the bank;

n a meeting convened at the requisition of Members shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by Directors;

n if the Directors do not within 21 days from the date of the deposit of the requisition proceed duly to convene a meeting, the requisitionists, or any of them representing more than half of a total voting rights of all of them, may themselves convene a meeting, but any meeting so convened shall not be held after the expiration of 3 months from the said date;

n if at any time there are not within Tanzania sufficient Directors to call the meeting, any Director or any two Members of the bank may call the meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors. In the case of extra-ordinary general meeting called pursuant to a requisition, no business other than that stated in the requisition as the object of the meeting shall be transacted.

37 Notice of General Meetings

Every general meeting shall be called by thirty (30) clear days’ in writing through an advertisement in one or more newspapers enjoying wide circulation in Tanzania and where practical by electronic means followed by signed scanned copy of the notice. The notice shall specify the place, the day and time of the meeting and the general nature of the business and, in the case of an annual general meeting, shall specify the meeting as such: provided that a meeting of the bank may be called by shorter notice if it is so agreed:-

n in the case of an annual general meeting, by all the Members entitled to attend and vote thereat; and

n in the case of any other meeting by a majority in number of the Members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right.

Subject to the provisions of these Articles and to any restrictions imposed on any shares, the notice shall be given to all the Members, to all persons entitled to a share in consequence of the death or bankruptcy of a Member and to the Directors and auditors. The accidental omissions to give notice of a meeting to or the non-receipt of notice of a meeting by any person entitled to receive notice shall not invalidate the proceedings at the meeting.

Proceedings at General Meeting

All business shall be deemed special that is transacted at an extra-ordinary 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.

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. Members representing half the total paid up issued share capital of the bank including proxies shall form a quorum and they shall be entitled to vote on the business to be transacted.

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 same day in two weeks, at the same time and place or to such other day at such other time and place as the Directors may determine.

The chairman of the general meeting shall be the chairman of the board and shall serve for a term of three years.

Any person entitled to be present and vote at a meeting may submit any resolution or amendment to the meeting, provided that he shall have at least not more than fourteen clear days before the day appointed for the meeting, served upon the bank a notice in writing signed by him, containing the proposed resolution or amendment and stating his intention to submit the same.

38 Upon receipt of any such notice, the secretary shall include in the notice of the meeting in any case where the notice of intention is received before the notice of the meeting is issued, and shall in any other case issue as quickly as possible in the most practical means available to the Members notice that such resolution or amendments will be proposed. Any resolution or amendment of which such notice has not been given shall be ruled out of order, and the ruling of the Chairman shall be conclusive.

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 bank.

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, notice of an adjourned meeting shall be given as in the case of an original meeting save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

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:

n by the chairman or;

n by at least two Members having the right to vote at the meeting; or

n 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

n 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;

n by proxy for a Member provided that the demand by proxy shall be the same as a demand by the Member.

Unless a poll is 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 poll shall always be held when the following issues are brought for consideration of the Members:

n amendment of these Articles;

n appointment or/and election of members of the Board of Directors;

n amendment of the memorandum of association; and

n amendment of the structure for entitlement to appointment of Directors to the Board.

The demand for a poll may, before the poll is taken, be withdrawn.

Except as provided in Article 53, 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.

39 In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting shall declare the matter under consideration deferred to give room for the Members to reconsider the matter and for the bank to introduce it either in the same form with explanations or in a revised form.

A poll demanded 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 directs, and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.

Votes of Members

On a show of hands every Member present, shall have one vote. On a poll, every Member present in person, or his proxy shall have one vote for every share of which he is a holder.

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.

A Member in respect of whose estate a manager has been appointed under Section 26 of the Mental Diseases Act R.E. 2002, 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.

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 bank unless all calls or other sums presently payable by him in respect of shares in the bank have been paid.

No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to, is tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any objection made in due time shall be referred to the chairman, whose decision shall be final and conclusive.

On a poll, votes may be given either personally or by proxy. A Member may appoint more than one proxy to attend on the same occasion.

The instrument appointing proxy shall be in writing executed by or on behalf of the appointer or of his attorney duly authorised in writing, or, if the appointer is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A proxy need not be a Member of the bank.

The instrument appointing a proxy and any authority under which it is executed a copy of that authority certified notarially or in such other manner as approved by the Directors shall b e deposited at the registered office of the bank or at such other place within the Tanzania as is specified for that purpose in the notice convening the meeting, not less than 72 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid.

40 SECTION 8.0: REPORTING ACCOUNTANT REPORT

MKOMBOZI COMMERCIAL BANK PLC

2020 RIGHT SHARES ISSUE

FINANCIAL INFORMATION

41 42 INDEPENDENT REVIEW REPORT ON HISTORICAL FINANCIAL INFORMATION

October 2020 The Directors Mkomobozi Commercial Bank Plot Number 40 Mansfield Street P.O. Box 38448 Dar es Salaam, Tanzania

Report on the Historical Financial Information

We have reviewed the accompanying historical financial information of the Mkombozi Commercial Bank (the “Bank”) set out on pages 45 to 50, which comprises the Bank’s statements of financial position as at 31 December 2019, 31 December 2018, 31 December 2017, 31 December 2016 and 31 December 2015, and their respective statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Historical Financial Information

Management is responsible for the preparation and fair presentation of the historical financial information that gives a true and fair view in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of historical financial information that is free from material misstatement, whether due to fraud or error.

Practitioner’s Responsibility

Our responsibility is to express a conclusion on the accompanying historical financial information. We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400 (Revised) requires us to conclude whether anything has come to our attention that causes us to believe that the historical financial information, taken as a whole, is not prepared in all material respects in accordance with International Financial Reporting Standards. This Standard also requires us to comply with relevant ethical requirements.

A review of historical financial information in accordance with ISRE 2400 (Revised) is a limited assurance engagement. The practitioner performs procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluates the evidence obtained. Our review of the historical financial information also included review of the working papers of the external auditors of Mkombozi Commercial Bank and comparing the historical financial information to the audited financial statements from which the historical financial information was extracted.

43 The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on the historical financial information.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the historical financial information does not give a true and fair view of the financial position of the Mkombozi Commercial Bank as at 31 December 2019, 31 December 2018, 31 December 2017, 31 December 2016 and 31 December 2015, and of its financial performance and cash flows for the respective years then ended, in accordance with International Financial Reporting Standards.

Report on Other Matters

The historical financial information has been extracted from the audited financial statements of the Mkombozi Commercial Bank for the years ended 31 December 2019, 31 December 2018, 31 December 2017, 31 December 2016 and 31 December 2015. Other than inclusion of additional disclosures and amendment of the presentation style of disclosures, there were no adjustments to the financial information previously presented in the audited financial statements.

CPA Irene Swai ACPA 3215

For and on behalf of Claritas International Certified Public Accountants Dar es Salaam

44 - - - - 2015 46.25 28,562 225,221 953,465 953,465 (461,311) (461,311) (643,503) TZS ‘000 8,573,878 1,212,086 1,465,869 1,414,776 11,557,851 11,557,851 15,592,288 10,039,747 (4,034,437) (2,983,973) (3,965,490) (4,015,978) (8,624,971) - - - - - 2016 50.75 211,481 (945,273) (450,577) TZS ‘000 1,476,736 1,688,217 1,496,799 1,046,222 1,046,222 11,162,874 11,162,874 18,503,207 12,774,940 12,851,091 (5,728,267) (1,612,066) (5,636,648) (4,772,372) (11,354,292) - - - 2017 69.99 383,407 (333,436) (617,000) (501,849) 2,426,011 2,426,011 TZS ‘000 2,809,418 1,944,749 1,442,900 1,442,900 14,783,495 (6,527,158) (5,719,714) (1,149,451) (5,969,581) 11,974,077 11,974,077 19,451,671 12,924,513 (12,838,746) - - - 2018 39.10 447,403 806,044 806,044 (11,501) (11,501) (604,434) TZS ‘000 2,721,134 3,168,537 1,410,478 (7,512,284) (2,480,560) (7,013,099) (1,356,973) (7,154,105) 13,766,118 13,766,118 23,770,463 16,258,179 16,934,655 (15,524,177) - - - - 2019 673,958 (319.32) TZS’000 4,119,127 4,119,127 7,723,046 3,445,169 (8,513,111) (8,513,111) (8,300,425) (4,540,169) (2,169,538) (6,597,826) (5,438,302) (1,144,631) (6,582,933) (6,582,933) 11,842,173 11,842,173 20,563,640 12,263,215 (17,280,475) 8 9 11 10 10 12 13 14 15 16 17 Notes FOR THE YEARS ENDED 31 DECEMBER 2019, 31 DECEMBER 2018, 31 DECEMBER 2017, 31 DECEMBER 2016 AND 31 DECEMBER 2015 YEARS ENDED 31 DECEMBER 2019, 2018, 2017, 2016 THE FOR AND OTHER COMPREHENSIVE INCOME OR LOSS PROFIT OF STATEMENT Interest income Interest expense income Net interest Loans impairment charge Expected credit losses - loans and advances to customers Expected credit losses - other financial assets loans impairment income after Net interest Fees, commission and other income Net foreign currency trading and translation gains Other operating income income non-interest Total Net operating income Personnel expenses Depreciation and amortization General and administration expenses operating expenses Total tax before (Loss)/profit Income tax expense the year for (Loss)/profit Other comprehensive income net of tax the year, income for comprehensive Total share Basic and diluted (loss)/earnings per

45 - - - 2015 74,080 20,000 566,270 312,827 578,061 217,518 948,820 (810,873) 1,350,465 1,999,278 1,549,015 2,713,532 TZS ‘000 13,411,053 13,411,053 21,721,134 20,615,272 89,594,268 85,733,148 12,363,530 63,308,414 17,680,394 111,315,402 111,315,402 111,315,402 111,315,402 - - - 2016 20,000 654,500 928,989 568,594 221,886 431,368 668,927 669,807 731,325 2,189,187 3,035,175 1,177,159 TZS ‘000 22,767,355 20,615,272 12,725,599 73,807,067 20,460,205 14,870,936 128,166,200 105,398,845 102,556,404 128,166,200 - - - - 2017 39,000 721,166 291,136 748,838 572,156 454,636 2,461,513 2,149,517 3,313,720 3,334,353 1,709,675 TZS ‘000 23,797,951 20,615,272 15,516,614 81,805,635 31,353,194 15,139,783 150,673,883 126,875,932 121,121,559 150,673,883 - - 2018 11,455 11,455 78,939 780,919 437,886 869,146 539,000 1,898,334 4,743,328 3,844,610 1,144,631 2,002,255 1,094,421 TZS ‘000 23,305,980 20,615,272 13,869,813 27,793,299 99,035,944 24,942,547 17,478,962 178,823,754 155,517,774 136,466,747 178,823,754 - - 2019 265,261 819,591 539,000 408,850 4,597,117 4,597,117 7,431,623 3,727,800 4,140,589 4,551,141 2,002,220 1,504,206 TZS ‘000 16,723,047 20,615,272 16,799,185 23,780,209 23,235,028 20,973,818 204,038,356 187,315,309 161,925,946 204,038,356 122,083,704 (11,323,848) (11,323,848) 35 35 34 33 32 31 30 29 28 26 27 25 24 23 22 21 16 20 19 18 Notes

TOTAL LIABILITIES AND EQUITY LIABILITIES TOTAL General reserve Regulatory reserve (Accumulated loss)/retained earnings Share capital Equity Lease liabilities Provisions Other liabilities Deposits due to banks Deposits due to customers Liabilities LIABILITIES AND EQUITY TOTAL ASSETS TOTAL Property and equipment Deferred tax asset Intangible assets Right-of-use assets Equity investments Investment in corporate bond Government securities Loans and advances to customers Current income tax recoverable Other assets Loans and advances to banks Cash and balances with Bank of Tanzania Cash and balances with Bank of ASSETS HISTORICAL FINANCIAL INFORMATION FOR THE YEARS ENDED 31 DECEMBER 2019, 2018, 2017, THE FOR INFORMATION FINANCIAL HISTORICAL POSITION FINANCIAL OF AND 31 DECEMBER 2015 - STATEMENTS DECEMBER 2016

46 ------Total Total 331,898 806,044 (516,107) (412,305) 1,442,901 TZS’ 000 TZS’ 23,797,951 23,016,043 23,305,980 22,767,356 23,797,951 (1,113,806) (1,113,806) (6,582,933) 23,305,980 16,723,047 ------59,753 66,666 780,919 721,166 721,166 780,919 654,500 721,166 reserve* reserve* General (780,919) TZS’ 000 TZS’ ------11,455 11,455 11,455 11,455 11,455 928,989 (928,989) reserve** reserve** TZS’ 000 TZS’ 7,420,168 7,431,623 Regulatory 568,594 928,989 (11,455) (11,455) (59,753) (66,666) 780,919 331,898 806,044 (516,107) (412,304) 1,898,334 2,461,513 1,679,605 1,898,334 1,442,900 2,461,513 TZS’ 000 TZS’ (1,113,806) (1,113,806) (6,582,933) (7,420,168) (11,323,848) Retained earnings (Accumulated loss)/ ------Share Share capital TZS’ 000 TZS’ 20,615,272 20,615,272 20,615,272 20,615,272 20,615,272 20,615,272 20,615,272

1 HISTORICAL FINANCIAL INFORMATION FINANCIAL HISTORICAL AND 31 DECEMBER 2015 YEARS ENDED 31 DECEMBER 2019, 2018, 2017, 2016 THE FOR CHANGES IN EQUITY OF STATEMENT At 1 January 2019 comprehensive income for the year Total to regulatory reserve Transfer from general reserve* Transfer 2019 At 31 December At 1 January 2018 IFRS 9 initial impact of IFRS 9 initial impact effect Tax At 1 January 2018 – Restated comprehensive income for the year Total to regulatory reserve Transfer to general reserve Transfer with owners: Transactions Dividend declared 2018 At 31 December At 1 January 2017 comprehensive income for the year Total to regulatory reserve Transfer from general reserve Transfer Dividend payment 2017 At 31 December

47 - - - - Total Total (4,000) 953,465 1,046,222 TZS’ 000 TZS’ 21,721,134 22,767,355 20,771,669 21,721,134 ------88,230 566,270 654,500 566,270 566,270 reserve* reserve* General TZS’ 000 TZS’ - - - - - 928,989 498,433 852,032 (421,476) reserve** reserve** TZS’ 000 TZS’ 1,350,465 1,350,465 Regulatory - loss)/ (88,230) 421,476 568,594 953,465 (810,873) (346,036) (852,032) (566,270) (810,873) 1,046,221 TZS’ 000 TZS’ (Accumulated Retained earnings ------

4,000 capital (4,000) Advance TZS’ 000 TZS’ towards share towards share ------Share Share capital TZS’ 000 TZS’ 20,615,272 20,615,272 20,615,272 20,615,272 represents the surplus of loan provision computed as per the Bank of Tanzania regulations over the impairment of loans and regulations over the impairment Tanzania represents the surplus of loan provision computed as per Bank represents one percent general provision on unclassified loans following an amendment of the Banking and Financial Institutions Regulatory Reserve General Reserve General At 1 January 2016 comprehensive income for the year Total to regulatory reserve Transfer from general reserve Transfer 2016 At 31 December At 1 January 2015 comprehensive income for the year Total to regulatory reserve Transfer with owners Transactions to share capital Transfer 2015 At 31 December (Management of risk assets) regulation in 2014. The reserve is not available for distribution to the shareholders. Effective from July 2019, the Bank 2019, the July from Effective shareholders. the to for distribution available not is reserve The 2014. in assets) regulation of risk (Management issued a circular removing the requirement to maintain reserve. Tanzania of ** * This is a non-distributable reserve. advances determined for IFRS purposes.

48 ------2015 59,895 98,125 583,608 636,378 813,709 TZS’000 (218,879) (617,647) 4,188,843 1,414,776 2,983,973 13,651,872 (1,135,000) (1,050,714) (22,693,606) (13,163,604) (14,214,318) ------2016 (90,941) 144,297 800,975 189,905 TZS’000 (954,648) (228,338) 1,612,066 1,496,799 3,963,196 6,857,752 5,802,502 16,823,256 (1,117,647) (1,117,647) (1,319,319) (1,055,250) (10,498,653) ------2017 49,500 333,436 164,069 985,382 989,332 (39,677) TZS’000 (532,517) (375,893) (308,072) 1,944,749 3,477,136 2,882,353 18,565,154 16,967,320 16,659,248 (7,998,568) ------2018 126,927 151,848 146,750 615,255 TZS’000 (292,632) 1,410,478 2,480,560 1,201,812 5,518,375 2,170,139 15,345,188 10,556,092 12,791,121 12,498,489 (1,279,350) (20,134,572) - - - 2019 5,366 (5,366) 559,995 779,642 271,278 282,500 902,564 TZS’000 (329,911) (329,911) (409,786) (455,125) 1,118,618 1,118,618 4,540,169 2,108,534 2,929,372 2,379,484 2,054,939 25,459,199 (5,438,302) (1,015,528) (27,139,746) 7 11 14 10 14 14 32 32 16 Notes ASH FLOW STATEMENT ASH FLOW HISTORICAL FINANCIAL INFORMATION FINANCIAL HISTORICAL AND 31 DECEMBER 2015 YEARS ENDED 31 DECEMBER 2019, 2018, 2017, 2016 THE FOR C Operating activities (Loss)/profit before tax Adjustments: of intangible assets Loss on write off Interest expense on lease liabilities Dividend income Depreciation on right-of-use assets on loans and advances to customers ECL Impairment and credit losses on loans advances Amortization of intangible assets Depreciation on property and equipment Increase in provisions Changes in operating assets and liabilities: Statutory minimum reserve Other assets Loans and advances to customers Deposits due to customers Deposits due to banks Other liabilities Loans and advances to banks with maturity over three months Payment of provisions operations Cash generated from Income tax paid Dividend received operating activities Net cash flows from

49 - - - - -

2015 15,212 (4,000) (4,000) (78,864) TZS’000 3,199,545 1,217,547 35,918,718 22,917,947 (1,903,134) (13,000,771) ------2016 4,532 11,968 11,968 TZS’000 (740,025) 3,280,515 22,917,947 26,202,994 (362,069) (1,431,865) (2,521,991) ------2017 (92,470) TZS’000 (340,030) (340,030) 12,151,174 26,202,994 (2,791,014) (1,284,560) (4,168,044) 38,354,168 - - - 2018 TZS’000 (500,000) (575,765) (516,107) (516,107) (266,432) 38,354,169 33,003,345 (2,002,255) (1,712,069) (5,084,392) (12,276,685) (17,066,774) - - 35 2019 9,196 TZS’000 (221,634) (733,666) (559,995) (458,640) 2,387,263 3,148,541 4,013,090 33,003,345 35,693,246 (1,413,424) (1,293,661) 26 27 33 33 36 Investing activities Decrease/(increase) in government securities Decrease/(increase) in investment corporate bond Increase in equity investment Purchase of intangible assets Purchases of property and equipment Proceeds from sale of assets in) investing activities Net cash flows from/(used Financing activities Lease liabilities paid – principal Lease liabilities interest paid Refund of advance share capital Dividend paid Net cash flows used in financing activities in cash and equivalents Net increase/(decrease) Cash and cash equivalents at 1 January differences Translation Cash and cash equivalents at 31 December

50 1. GENERAL INFORMATION

Mkombozi Commercial Bank Public Limited Company (the ‘’Bank’’ or ‘’Mkombozi Commercial Bank Plc’’) is a public limited liability company incorporated and domiciled in the United Republic of Tanzania.The Bank’s shares are listed and traded on the Dar es Salaam Stock Exchange (DSE). The address of the Bank’s registered office is as follows:

Mkombozi Commercial Bank Plc Plot No. 40, Mansfield Street Behind St. Joseph Cathedral P.O. Box 38448 Dar es Salaam, Tanzania

Further information about the Bank is presented under the Bank Information and the Bank’s activities are presented in the Directors’ Report. The financial statements were approved for issue by the Board of Directors as indicated under the statement of financial position.

2. BASIS OF PREPARATION

2.1 Statement of compliance and basis of preparation The Bank’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the requirements of the Banking and Financial Institutions Act, 2006 and Companies Act, 2002 of Tanzania.

The measurement basis applied in the preparation of the financial statements is the historical cost basis, except where otherwise stated in the accounting policies. The financial statements are presented in Tanzania shillings (TZS) and the amounts are rounded to the nearest thousand (TZS’000), except where otherwise indicated.

For purposes of reporting under the requirements of the Companies Act, 2002 and Banking and Financial Institutions Act, 2006 of Tanzania, the balance sheet in these financial statements is represented by the statement of financial position, and the profit and loss account is represented by the statement of profit or loss and other comprehensive income.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Bank’s management and directors to exercise judgment in the process of applying the Bank’s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions change. The directors believe that the underlying assumptions are appropriate and that the Bank’s financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 6.

51 PROSPECTIVE FINANCIAL INFORMATION

52 October 2020 The Directors, Plot Number 40, Mansfield Street, P.O. Box 38448, Dar es Salaam, Tanzania

INDEPENDENT ASSURANCE REPORT ON PROSPECTIVE FINANCIAL INFORMATION

We have examined the accompanying prospective financial information of Mkombozi Commercial Bank Plc, which comprises the Bank’s statement of financial position for the year ending 31 December 2020 and 2021 and statement of profit or loss and other comprehensive income, statement of cash flows for the years then ending and other explanatory notes. Our examination was conductedin accordance with the International Standard on Assurance Engagements (ISAE) 3400.

Management is responsible for the preparation and presentation of the prospective financial information on the basis of the significant accounting policies and significant assumptions set out in Notes 1 and 2 of the prospective financial information. It is our responsibility to provide the opinion required by the Capital Markets and Securities Authority.

In our opinion the prospective financial information has been properly compiled on the basis of the significant accounting policies and significant assumptions set out in Notes 1 and 2 of the prospective financial information.

Actual results are likely to be different from the prospective financial information since anticipated events frequently do not occur as expected and the variation may be material. Further, we emphasise that the prospective financial information is not intended to, and does not, provide all the information and disclosures necessary to give a fair presentation in accordance with International Financial Reporting Standards.

This prospective financial information has been prepared for inclusion in a prospectus for a Rights issue of shares, and may, therefore, not be appropriate for another purpose.

Irene Swai, ACPA

For and on behalf of Claritas International Certified Public Accountants Dar es Salaam

53 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Audited Actual Prospective Prospective Dec 2019 Sep 2020 Dec 2020 Dec 2021 TZS’000 TZS’000 TZS’000 TZS’000

Interest income 20,563,640 18,924,878 24,767,137 31,171,705 Interest expense (8,300,425) (7,317,456) (9,384,517) (9,725,352)

Net interest income 12,263,215 11,607,422 15,382,620 21,446,353

Expected credit losses - loans and advances to (4,540,169) (628,629) (1,800,000) (4,683,873) customers

Expected credit losses - other financial assets - - - -

Net interest income after expected credit losses 7,723,046 10,978,794 13,582,620 16,762,480

Fees, commission and other income 3,445,169 3,101,678 4,273,760 5,299,824 Net foreign currency trading and translation gains 673,958 594,118 800,000 920,000 Total non-interest income 4,119,127 3,695,796 5,073,760 6,219,824

Net operating income 11,842,173 14,674,589 18,656,380 22,982,304

Personnel expenses (8,513,111) (6,390,271) (9,323,902) (9,476,576) Depreciation and amortization (2,169,538) (1,156,284) (2,513,405) (2,565,502) General and administration expenses (6,597,826) (4,980,249) (5,662,693) (8,957,922)

Total operating expenses (12,526,804) (17,500,000) (21,000,000) (17,280,475)

(Loss)/profit before tax (5,438,302) 2,147,786 1,156,380 1,982,304

Income tax expense (1,144,631) - (346,914) (594,691)

(Loss)/profit for the year (6,582,933) 2,147,786 809,466 1,387,613

Other comprehensive income - - - -

Total comprehensive income for the year, net of tax (6,582,933) 2,147,786 809,466 1,387,613

TZS TZS TZS TZS Basic and diluted (loss)/earnings per share (319.32) 104.18 39.27 67.31

54 STATEMENTS OF FINANCIAL POSITION

Audited Actual Prospective Prospective Dec 2019 Sep 2020 Dec 2020 Dec 2021 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 ASSETS Cash and balances with Bank of 20,973,818 19,723,228 23,185,030 25,652,629 Tanzania Loans and advances to banks 23,235,028 31,603,087 29,131,312 34,455,160 Other assets 1,504,206 2,913,703 1,534,008 1,609,188 Current income tax recoverable 408,850 - 61,936 61,936 Loans and advances to customers 122,083,704 118,648,277 131,401,709 154,167,554 Government securities 23,780,209 24,380,000 25,500,000 42,380,000 Investment in corporate bond 2,002,220 2,000,000 2,000,000 2,000,000 Equity investments 539,000 539,000 539,000 539,000 Right-of-use assets 4,551,141 4,551,141 3,686,424 2,986,004 Intangible assets 819,591 798,764 1,109,243 997,786 Property and equipment 4,140,589 2,564,497 7,439,140 8,055,750 TOTAL ASSETS 204,038,356 207,721,697 225,587,803 272,905,007

LIABILITIES AND EQUITY

Liabilities

Deposits due to customers 161,925,946 171,453,977 184,170,200 206,188,681 Deposits due to banks 16,799,185 9,399,060 15,996,978 18,998,499 Other liabilities 3,727,800 3,260,425 3,973,086 10,804,220 Current income tax payable - 140,488 - - Provisions 265,261 - 305,750 402,225 Lease liabilities 4,597,117 4,597,117 3,609,276 2,591,256 187,315,309 188,851,067 208,055,290 238,984,881

Equity Share capital 20,615,272 20,615,272 20,615,272 35,615,272 (Accumulated losses)/retained (11,323,848) (9,176,265) (11,682,759) (10,895,146) earnings Regulatory reserve 7,431,623 7,431,623 8,600,000 9,200,000 16,723,047 18,870,630 17,532,513 33,920,126

TOTAL LIABILITIES AND 204,038,356 207,721,697 225,587,803 272,905,007 EQUITY

55 CASH FLOW STATEMENT Audited Unaudited Actual Actual Prospective Prospective Dec 2019 Sep 2020 Dec 2020 Dec 2021 TZS’000 TZS’000 TZS’000 TZS’000 Operating activities (Loss)/profit before tax (5,438,302) 2,147,786 1,156,380 1,982,304 Adjustments: Interest expense on lease liabilities 559,995 559,995 527,995 458,640 ECL on loans and advances to customers 4,540,169 628,629 1,800,000 4,683,873 Dividend income (5,366) - - - Depreciation on right-of-use assets 779,642 779,642 864,717 700,420 Amortization of intangible assets 271,278 228,219 391,160 475,766 Depreciation on property and equipment 1,118,618 928,066 2,122,245 2,089,735 Increase in provisions 282,500 - 40,489 136,964 2,108,534 5,272,337 6,902,986 10,527,703 Changes in operating assets and liabilities: Decrease/(increase) in statutory minimum 902,564 - (2,449,933) (1,310,385) reserve (Increase)/decrease in other assets (409,786) (1,409,497) (29,802) (75,180)

Increase in loans and advances to customers (27,139,746) 2,806,798 (11,118,005) (27,449,718)

Increase in deposits due to customers 25,459,199 9,528,031 22,244,254 22,018,481 Increase in deposits due to banks 2,929,372 (7,400,125) (802,207) 3,713,330) (Decrease)/increase in other liabilities (1,015,528) (413,541) 245,286 7,076,622 Payment of provisions (455,125) (265,261) - - Cash generated from operations 2,379,484 8,118,742 14,992,579 14,500,853

Income tax paid (329,911) 495,504 - (594,691) Dividend received 5,366 - - - Net cash flows from operating activities 2,054,939 8,614,246 14,992,579 13,906,162

Investing activities Decrease/(increase) in government securities 4,013,090 (599,791) (1,719,791) (16,880,000) Decrease/(increase) in investment in corporate 35 2,220 2,220 - bond Purchase of intangible assets (221,634) (207,392) (680,812) (364,309) Purchase of property and equipment (1,413,424) 648,026 (5,420,796) (2,706,345) Proceeds from sale of assets 9,196 - - - Net cash flows from/ (used in) investing 2,387,263 (156,936) (7,819,179) (19,950,654) activities

Financing activities Lease liabilities paid – principal (733,666) (779,642) (987,841) (2,015,805) Lease liabilities interest paid (559,995) (559,995) (527,995) (458,640) Proceeds from rights issue of shares - - - 15,000,000 Net cash flows used in financing activities (1,293,661) (1,339,637) (1,515,836) 12,525,555

Net increase/(decrease) in cash and cash 3,148,541 7,117,673 5,657,563 6,481,062) equivalents Cash and cash equivalents at 1 January 33,003,345 35,693,246 35,693,246 41,350,809 Translation differences (458,640) (203) - - Cash and cash equivalents at 31 December 35,693,246 42,810,716 41,350,809 47,831,871

56 NOTES TO PROSPECTIVE FINANCIAL INFORMATION

1. Significant accounting policies The prospective financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), the basis on which Mkombozi Commercial Bank Plc prepares its annual published financial statements.

There has been no change in accounting policies since the Mkombozi Commercial Bank Plc financial statements for the year ended 31 December 2019 (most recent historical financial statements) were published.

2. Significant assumptions a. Capital injections of TZS 15 billion will be collected in January 2021 from existing shareholders though right issue; b. There will be cost containment measures to minimise growth in general and administrative expenses despite inflationary pressures. In 2020, the Bank has estimated operating cost cut down by TZS 1.61 billion (i.e. 7%) by year end; c. There shall be no wage inflation for the years ending 31 December 2020 and 31 December 2021. d. Recovery from written off book for the year ended 31 December 2020 and 31 December 2021 is expected to be TZS 100 million and TZS 500 million respectively; e. The weighted average effective annual interest rate on loans and advances, and investments in government securities based on the planned product mix is 16% and 11% respectively. f. The weighted average effective annual interest rate on interest bearing customer deposits based on the planned product mix is 4%. g. Average non-interest incomes growth per month is 2%; h. Revenue generation is sustained at current run rate level or better; i. The rate of exchange between the Tanzania Shilling and the major foreign currency which USD is TZS 2,360/USD; j. Statutory Minimum Reserve is maintained at 6% of the total deposits throughout the years; k. Cash on hand is maintained at 4% of the total deposits; l. It is projected that Commercial lending which represent more than 70% of total portfolio, will slightly decrease in year 2020, mainly due to the impact of COVID 19 and gradually improve from 2021 on wards;

57 NOTES TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)

2. Significant assumptions (continued) m. loans provisions will gradually improve from TZS 9.3 billion in 2019 to TZS 7.0 billion in 2020 and down to TZS 5.2 billion in 2021; n. With introduction of Digital banking from 2020 on wards, its assumed that fees and commissions will increase by 15% from 2020 results; o. To boost non-interest income and increasing core deposits, its projected that 400 agencies will be opened up to end of year 2021; p. From year 2021 on wards four (4) Mini Branches will be opened in each year to mitigate customer outreach problems. This will result in increased capital expenditure; and q. There will be no dividend declared for the years ended 31 December 2020 and 31 December 2021

3. Date of preparation

The prospective financial information has been prepared as of 19th October 2020.

58 SECTION 9.0: LEGAL OPINION

Your ref: MKCB/TR/AA/2223 October 2020

Managing Director Mkombozi Commercial Bank Plc Plot 40, Mansfield Street P.O Box 38448 Dar es Salaam Tanzania

LEGAL OPINION

Ladies and Gentlemen,

RE: LEGAL OPINION IN RESPECT OF THE INTENDED RIGHTS ISSUE BY MKOMBOZI COMMERCIAL BANK PUBLIC LIMITED COMPANY

1. Background and purpose We, Abenry & Company, Advocates, have been engaged as Legal Advisers to advise Mkombozi Commercial Bank Public Limited Company (“the Bank” or “the Company”) in connection with the planed Rights Issue pursuant to this Information Memorandum.

We are Advocates of the High Court of Tanzania, qualified to practice in Tanzania and to advice upon the laws of Tanzania.

2. Interpretation 2.1 Wherever used in this Opinion, unless the context otherwise requires: 2.1.1 the term “Banking Act” shall mean the Banking and Financial Institutions Act, Cap. 342; 2.1.2 the term “BoT” shall mean the Central Bank of Tanzania, established under the Bank of Tanzania Act, Cap 197; 2.1.3 the term “CMSA” or “the Authority” shall mean the Capital Markets and Securities Authority established under the Capital Markets and Securities Act, Cap 79; 2.1.4 the term “CMS Act” shall mean the Capital Markets and Securities Act, Cap 79; 2.1.5 the term “Companies Act” shall mean the Companies Act, Cap. 212; the term “the Bank” or “the Company” shall mean Mkombozi Commercial Bank Public 2.1.6 Limited Company, a company incorporated in Tanzania on 6th March 2007 under certificate of incorporation No. 59516.

59 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.

2.3 Terms and expressions referring to the singular are deemed to include the plural and vice- versa.

3. Reviewed Documentation, Procedures and Assumptions 3.1 For the purpose of expressing the opinion hereinafter we have examined the documents hereunder-mentioned or copies thereof and such other documents or instruments as we have considered necessary in connection with this Opinion: 3.1.1 the Certificate of Incorporation of the Company, No. 59516 issued on the 6th March 2007; 3.1.2 the Certificate of Change of name of the Company issued on the 29th September 2010; 3.1.3 the Memorandum and Articles of Association of the Company in their original form; 3.1.4 the Resolutions of Board of Directors dated 29th April 2020 recommending the raising of capital through a Rights Issue be commenced; 3.1.5 the shareholders Resolutions dated approving the Rights Issue process; 3.1.6 the Companies Act; 3.1.7 the Banking Act; 3.1.8 the Capital Markets and Securities (Capitalisation and Rights Issue) Regulations G.N. No. 288 of 2000; 3.1.9 the CMS Act and related Regulations including the Capital Markets and Securities (Prospectus Requirements) Regulations, 1997; 3.1.10 a letter with reference FA.56/237/15/24 dated 5th August, 2020 from BoT approving the Company’s capital restoration plan; 3.1.11 the approval letter from CMSA approving the rights issue is still pending; 3.1.12 the letter from DSE acknowledging the rights issue is still pending; 3.1.13 an Extract of a resolution of the Directors approving the Information Memorandum is still pending; 3.1.14 the following licences and approvals given to the Company for conducting its businesses: a. the Banking Licence No. CBA No. CBA 00047 which was issued by BoT on 8th November, 2010 authorising the Bank to conduct banking business; b. the Taxpayer’s Identification Number (TIN) Certificate No. 107-308-687 issued on by the Tanzania Revenue Authority; c. the business licence for the head office No. 20000008972 issued on the 13th August 2020.

60 3.1.15 Court files and Advocates’ briefs relating to material litigation by or against the Company in the context of the provisions of the Schedule to the Capital Markets and Securities (Prospectus Requirements) Regulations, 1997; 3.1.16 material contracts to which the Company is a party in the context of the provisions of the Schedule to the Capital Markets and Securities (Prospectus Requirements) Regulations, 1997; 3.1.17 insurance policies taken by the Company; 3.1.18 various bank policies as approved by BoT; and 3.1.19 various leases to which the Company is a tenant (Company’s head office).

3.2 We have further made such other enquiries and examined such other official records at the Registrar of Companies as we have considered appropriate for the purposes of giving the Opinion set out below.

3.3 In expressing the Opinion hereinafter, 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: 3.3.1 the authenticity and completeness of all documents submitted to us as originals or copies, the genuineness of all signatures, the conformity to originals of all copies, and the accuracy of any translations; 3.3.2 that representation made to us by officers and agents of the Company are true in all material respects; 3.3.3 each natural person signing any document reviewed by us had the legal capacity to do so; 3.3.4 each natural person signing any document reviewed by us in a representative capacity had authority to sign in such capacity; and 3.3.5 the Rights Issue will not change the operations of the Company.

4. Opinion 4.1 Based upon and subject to: (1) the foregoing, (2) paragraph 4.2 of this Opinion, (3) any matters not made known to us, we are of the considered opinion that: 4.2 the Company is a public company incorporated in Tanzania pursuant to the provisions of the Companies Act, with powers to execute, deliver and exercise its rights and perform its obligations pursuant to the Rights Issue , and such execution and performance have been duly authorized by appropriate corporate action; 4.3 the rights obligations of the Company contemplated by the transactions constitute valid and binding rights and obligations enforceable in accordance with the terms thereof; 4.4 the Rights Issuance have been duly and validly authorized by the Company and no other corporate action on the part of the Company is necessary to authorize the Rights Issue; 4.5 save as stated in paragraph 4.1.4 above, the Rights Issuance is in compliance of the CMS Act and all other laws relevant and enforceable in Tanzania at the time of giving this Opinion.

61 4.2 Based upon and subject as aforesaid, and without prejudice to the generality of the matters set out in paragraph 4.1 of this Opinion, we are further of the considered opinion that: 4.2.1 the current authorised share capital of the Company is Tanzania Shillings Fifty Billion (TZS.50,000,000,000) divided into fifty million shares (50,000,000) of Tanzania Shillings One Thousand (TZS. 1,000) each; 4.2.2 the Company was incorporated as a private company on 6th March, 2007 and has a Certificate of Incorporation No. 59516 the Company was later issued with a certificate of change of name dated 29th September 2010 duly issued by the Registrar of Companies; 4.2.3 the Company is authorised to conduct banking business and was duly licenced and issued with a Banking Licence No. CBA 00047 which was issued by the Bank of Tanzania on the 8th November, 2010; 4.2.4 according to the Articles of Association of the Company, and the Company being a public company, its right to transfer shares and issuance of share certificates is not restricted and after Rights Issuance, the Company shall also be regulated by the DSE Rules; 4.2.5 some authorizations, approvals, consents, licenses, exemptions, filings or registrations of/or with any governmental or public bodies or authorities of/or in Tanzania required in connection with the business of the Company have been obtained, are in proper form, and are in full force and effect; 4.2.6 all authorizations and approvals by BoT, CMSA and DSE required for the Rights Issue under the respective legislation and rules have been obtained; 4.2.7 as of the date of this Opinion the Company has in force eight (8) “material” contracts to which the Company is a party. These include Service contracts entered for the purpose of carrying out its functions. The List does not include employment contracts and Leases. By and large, the Agreements reviewed are well crafted and structured. Below is a summary of some of the material contracts reviewed: (a) Service Agreement for the Provision of Consultancy Service in Providing Connectivity and Support Between Mkombozi and Tanzania Telecommunications Corporation (Consultant).

This agreement is for the provision of connectivity and support to 15 Head quarter and branch offices of Mkombozi. That includes leasing of digital transmission network comprising the right to route data transfer through WAN connectivity in particular. The Consultant shall provide separately connectivity and support to 7 workstations in Dar-es-Salaam and other regions through TTCL backbone network.

(b) Data Sharing Agreement between Mkombozi and National Identification Authority (NIDA).

The agreement is for data sharing whereby NIDA agrees to share data with the Data Recipient in accordance with the scope provided in clause 2 of the Data Sharing Agreement.

62 Agreement for Bulk Collection and Disbursement (C2b, B2c) Through Airtel Mobile Platform Between Airtel Money Tanzania Limited (“Airtel”) and Mkombozi.

The agreement with Airtel is for the provision of cash management solution for self-use, making payment to third parties including government agencies through Airtel Money platforms and reconciliations.

(c) Agreement for Performing Project Management for the Implementation of Digital Solutions Between Kabolik Company Limited (“Kabolik”) and Mkombozi Commercial Bank Plc (“Mkcb”).

The agreement is for the provision of project management services by Kabolik for the implementation of digital solutions.

(d) Agreement for Provision of Share Registry Services Between CDS & Registry Company Limited (“CSDR”) and Mkombozi Commercial Bank Plc (“Mkombozi”)

The agreement is for CDS & Registry Company Limited is to provide to MKOMBOZI the share registry services, updating the register of members, monthly update of shareholders’ register and updating the Bank’s shareholders entitled to dividends.

(e) Memorandum of Understanding Between the Registered Trustees of the Archdiocese of Dar-Es-Salaam Represented by St. Joseph’s Parish Council (“Landlord”) and Mkombozi Commercial Bank (“Tenant”).

The Agreement is for the purpose of letting of the demised property upon completion.

(f) Agreement for Provision of Travel Agency Services Between Worldlink Travel & Tours Limited (“Service Provider”) and Mkombozi Commercial Bank Plc (“Customer”).

The Agreement is for the provision of air travel services for domestic and internationals, reservations and creating and managing travellers’ profiles.

(g) Contract No. Me/004/2019-20/Hq/Nc/27 For Engagement of Service Providers for Facilitating Intergration through Government Electronic Payment Gateway for the Ministry of Finance and Planning (Vote 50).

The Service Provider has agreed to facilitate integration through the Government Electronic Payment Gateway for the Ministry of Finance and Planning. 4.2.8 The Company has taken the following insurance policies:

63 2021 2021 2021 2021 2021 2021 2021 January January, January, January, January, January, January, January, DATE st st st st st st st EXPIRY 31 31 31 31 31 31 31 . INSURER Tanzania Limited Tanzania (Tanzania) Limited (Tanzania) Limited (Tanzania) Limited (Tanzania) Limited (Tanzania) Limited (Tanzania) Limited (Tanzania) Sanlam General Insurance Sanlam General Insurance Sanlam General Insurance Sanlam General Insurance Sanlam General Insurance Sanlam General Insurance Sanlam General Insurance PREMIUM TZS. 450,000.00 TZS. 600,000.00 inclusive of VAT TZS.2,100,000.00 TZS. 4,879,415.00 TZS. 45,620,737.00 TZS. 33,250,000.00 TZS. 19,760,395.64 AMOUNT OF COVER TZS. 3,252,943,105.00 TZS. 100,000,000.00 TZS. 300,000,000.00 Cash and scratch safe: TZS 100,000,000.00 All branches: TZS.4,000,000,000.00 in transit Cash and Scratch cards (including those in transit by courier companies): TZS 1,000,000,000.00 Estimated Annual Carrying: 6,000,000,000.00 TZS. 2,232,813,133.00 TZS. 350,000,000.00 TZS. 300,000,000.00 INSURANCE POLICY Assets All Risk Policy No. Assets P/01/2020/2011/000014 Fidelity Guarantee Insurance Policy No. P/01/2020/5012/000014 Public Liability Insurance Policy No. P/01/2020/6002/000013 Money Insurance Policy No. P/01/2020/5005/000009 Equipment Electronic Insurance Policy No. P/01/2020/4003/000012 Machinery Breakdown Insurance Policy No. P/01/2020/4001/000010 Allied Perils and Fire Insurance Policy No. P/01/2020/2002/000045/00 1. 2. 3. 4. 5. 6. 7. S/ N.

64 2021 August st 31 (Tanzania) Limited (Tanzania) Strategis Insurance TZS. 520,000,000.00 Inpatients Benefit- TZS 150,000,000.00 Maternity Benefits-TZS 5,000,000.00 and HIV/ chronic Pre-existing AIDS- TZS. 30,000,000.00 International Referral benefit- TZS. 3,000,000.00 Outpatient Benefits- TZS. 2,500,000.00 Physiotherapy-TZS. 300,000.00 Medication for outpatients- TZS. 500,000.00 Optical Benefits- TZS. 500,000.00 Basic Dentistry- TZS. 600,000.00 Funeral Benefits- TZS. 1,000,000.00 Added Benefits- TZS. Value 200,000.00 Annual Medical Check-up- TZS. 200,000.00 Excess of loss 50 Million Group cover)- a limit of TZS. (Buffer 5,000,000.00 per person. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) Health Insurance Proposal, 2020 Health Insurance Proposal, including Health Insurance Quotation. 8.

65 2.4.9 There is no significant civil or criminal legal action whatsoever in which the Company is involved that is taking place, pending or threatened that may adversely affect the Company in the Rights Issue. (a) According to the information provided to us by the Bank, there are a total of 29 cases. The potential liability in the claims against the Bank is TZS. 5,774,982,404.33 as of 30th October 2020. Eight (8) cases out of 29 are being handed internally by their inhouse lawyers while the remaining have been outsourced to external lawyers.

(b) Most of these cases, if not all, occurred when the Company attempted to recover from the borrowers who have defaulted from making repayments of their loans. As a result, the borrowers decided to file cases as a way of resisting recovery by the Company of the outstanding amounts. In the premises, the real loss to the Company is the loan repayable plus accruing interest and the legal fees. However, most of the cases are at early stages or just commenced the hearing, as such it is very difficult to predict with certainty in terms of actual liabilities that may arise for the purpose of determining the impact of pending litigation on the financial status of the Company. In our opinion, other than the legal costs involved, there is a minor likelihood of the Company suffering loss as a result of these cases.

2.4.10 No winding-up order has been issued against the Company and no Receiver Manager or Liquidator has been appointed in respect of the Company.

2.4.11 Save as disclosed in this Information Memorandum, there is no other agreement or arrangement concerning the Rights Issue.

2.4.12 There are no other material items than those mentioned in this Prospectus which have been disclosed to us or of which we are aware of regarding the legal status of the Company, the Rights Issue. 5. Reservations We express no Opinion as to any law other than the laws of Tanzania in force, and as interpreted, at the date of this Opinion.

6. Consent We consent to the inclusion of our Legal Opinion in the Prospectus to be issued in connection with the proposed Rights Issue by the bank in the form and context in which it appears. We confirm that we have given and as at the date of issue of the Prospectus have not withdrawn our consent to its issue and the inclusion of our Legal Opinion herein.

Yours sincerely,

Lucy Sondo SENIOR PARTNER

66 SECTION 10.0: NOMINATED ADVISOR’S REPORT

NIC Life House, 2nd Floor, Wing C, P.O. Box 38694, Dar es Salaam, Tanzania [email protected], Website:www.archco.co.tz Tel:+255 22 211 844

RE: ASSESMENT OF MKOMBOZI COMMERCIAL BANK PLC

Mkombozi Commercial Bank PLC intends to undertake a right issue of 20,615,272 new ordinary shares of TZS 1000 par value at offer price of TZS 750.00 per share at a ratio of one (1) new ordinary share for every one (1) share held as at 30th September 2020.

As Nominated Adviser to the Bank our responsibilities are owed directly to the Dar es Salaam Stock Exchange (“DSE”) and the Capital Markets and Securities Authority (“the CMSA”) in accordance with the applicable laws, rules and regulations. Our responsibilities for Mkombozi Commercial Bank PLC include among others; (a) To undertake an assessment of the viability of the project with a view to determining the viability of Mkombozi Commercial Bank Plc as an investment. For this purpose, our company made a review of the business plan of the Bank in order to determine its compliance with Schedule IV of the Enterprise Growth Market (EGM) Regulations; (b) To evaluate, advise and recommend measures to be taken by the Bank in order to meet the minimum requirements for issuance of new shares and subsequent listing them on the EGM;

Our Review In view of the above, we reviewed both the Business Plan, and the Financial Projections of Mkombozi Commercial Bank Plc and accordingly we hereby wish to confirm that they have been prepared with due care and that they are in line with the underlying assumptions which were availed to us as shown under Section 8 dealing with Reporting Accountant’s Report.

Reviewed documents enclosed herewith include: 1) Strategic Business plan 2) Independent Accountant report 2) Due Diligence and Legal Opinion 3) Financial Models

Based on our analysis, the underlying assumptions seem to be realistic, however, since projections refer to unknown future, it is not easy to guarantee that the expected results will be achieved or not.

67 Analysis of some Key Performance Indicators (%), TZS in ‘’000’’

INDICATOR Year 2019 (Audited) Year 2020 Year 2021 Return on Total assets -3.20% 0.35% 0.50% Assets Turnover 12.09% 13.22% 13.70% Cash balance TZS 35,693,246 TZS 41,350,809 TZS 47,831,871

Net Profit Margin -26.67% 2.71% 3.71%

Total Assets TZS 204,038,356 TZS 225,587,803 TZS 272,905,007

Total Net worth(Equity) TZS 16,723,047 TZS 17,532,513 TZS 33,920,126

Return on Equity -39.36% 4.61% 4.09%

According to above table, Return on total assets is projected to be consistently on increase from 0.35% in the Year 2020 to 0.5% in Year 2021. The projected Return on Total Assets for Year 2020 is an improvement of 111% over the actual return on Total assets experienced in year 2019. The above remarkable improvement is due to increased profitability of business by 113% in net terms projected for year 2020 compared to the actuals of Year 2019.

On the other hand the actual negative net profit for Year 2019 was a result of the effect of estimated credit losses on Loans and Advances of TZS 4.54 Billion which was occasioned by the implementation of the IFRS 9 which started in January 2018 as was required by the amended Accounting standards. Likewise the Return on Equity is projected to increase by 112% for Year 2020 compared to actual Return on Equity for Year 2019 due to projected growth in Net Profit of business by 113% which is also augmented by increased turnover over the same period. The negative returns on equity in Year 2019 was attributable to the estimated credit losses of TZS 4.54 Billion following implementation of IFRS 9 by the bank as per requirement of the amended accounting standards. Afterwards the Return on Equity for Year 2021 is projected at 4.09% a slight decrease from 4.61% projected for Year 2020. On the profitability side, the bank’s projections illustrates that the net profit margin will grow from 2.71% in the Year 2020 to 3.71% in the Year 2021. The projected Net Profit margin for Year 2020 is a growth of 110% over the actual Net Profit margin of -26.67% for Year 2019.The above trend is a result of consistent growth of turnover over the projected periods which coupled with controlled operating expenses result into growth of net profit hence impacting positively on the net profit margin ratios.

Regarding the actual negative net profit for Year 2019, the effect of estimated credit losses on Loans and Advances of TZS 4.54 Billion had a hand on the results. This was due to implementation of the IFRS 9 which started in January 2018 as was required by the amended Accounting standards.

On the efficiency of assets, the Assets turnover ratio is on increase from actual of 12.09% in Year 2019 thereafter projected to 13.22% in Year 2020 and 13.7% in Year 2021. The above trend is attributable to relative growth of turnover over the total assets owing to aggressive sales and marketing efforts. On the liquidity side the bank projects its cash balances to increase consistently from actual cash balance of TZS 35.7 Billion at end of Year 2019 to cash balance of TZS 41.35 Billion projected at end of Year 2020 and thereafter to TZS 47.8 Billion projected at end of Year 2021.

68 Regarding the Audited financial statements for year 2015 to 2019, both the Net Profit (Total Comprehensive Income net of tax) depicts an upward trend save for year 2018 and 2019 which indicate a decline of net profit to TZS 806 Million and net Loss of TZS 6.58 Billion impacted mainly by estimated credit losses on Loans and Advances resulting from implementation of IFRS 9 as required by the amended accounting standards which started to be implemented in January 2018.

Furthermore the total assets have been on increase consistently throughout the period 2015 to 2019. The growth in Total assets and Net Profit is attributable to favorable performance of the bank which has a positive impact on the future of the bank’s performance. Based on the actuals of Year 2019 and the projections for Year 20202 and 2021 the Total assets and Total Net worth are consistently on increase suggesting the business is projected to grow so is the shareholders’ funds (equity). The growth of bank’s assets and equity appeal well with the bank’s objective of maximizing shareholders wealth and thus benefiting both existing and potential shareholders.

Generally it is our settled view that the bank is projected to trend in good profitability state and to be in a healthy financial condition for the Year 2020 and 2021 and certainly for the period beyond. Further that growth in its total assets and equity is a reflection of increased investment and increased capitalization respectively by the bank among others. In addition the consistent growth of return on Total Assets (Investment) and Return on equity is a reflection of growth of customer base.

The above facts coupled with the projected favorable financial performance indicators satisfied us to make a settled view that the bank at present is viable to undertake a right issue of its proposed 20 Million ordinary shares and that the envisaged right issue will enlarge the capital base of the bank and also will add value to both existing and potential shareholders.

Based on the foregoing, it is our opinion that the bank portrays in many respects that it is fit and viable to undertake the planned right Issue at present time as evidenced by its strategic business plan, audited financial statements, Due diligence report and other relevant reports annexed hereto.

IYEN J.A.NSEMWA MANAGING DIRECTOR

69 SECTION 11.0: DETAILS OF THE NOMINATED ADVISOR

NIC Life House, 2nd Floor, Wing C, P.O. Box 38694, Dar es Salaam, Tanzania [email protected], Website:www.archco.co.tz Tel:+255 22 211 844

Introduction The Second Schedule of the Capital Markets and Securities (Prospectus Requirements) (Amendment) Regulation, 2010 requires details of the Nominated Adviser to be given as part of the Prospectus. In this document we illustrate our company and explain its track record with specific reference to our key area of capability. The CMSA requires that this player should be available and answerable to it (CMSA) on conduct of EGM Company until such time as the company has qualified for migration to the main Board of the DSE listing.

ARCHCO Limited was incorporated in the United Republic of Tanzania on 15th September, 2011, with Certificate of Incorporation number 85829. Its main objectives are to provide consulting services in capital Markets operations; DSE Stock Brokers, DSE Nominated Advisers, funds arrangement and management; corporate finance; economic and Market studies; public finance and policy analysis; collective investment scheme; and organizational development and corporate planning. Continuous professional training is another key strength that we use in conjunction with our track record in the field.

Legal operational framework 1. Stock Brokers - DSE 2. Licensed Nominated Adviser 3. Authorized Participant in the CDS – (Investment in Government Securities through Bank of Tanzania)

Professional Capabilities and some of the assignments ARCHCO LTD has successfully handled the following assignments No Client Category Assignment Nature No. of Clients Status 1 Banks Public Offering 1 Listed 2 Banks Mergers & Acquisition 2 On-going 3 Exploration Company Initial Public Offering 1 Listed 4 Telecom Initial Public Offering 2 On-going 5 Mining Initial Public Offering 2 On-going 6 REIT Initial Public Offering 1 On-going 7 Agribusiness Listing 1 On-going

70 Company Organization Top management of our firm is vested in the 3-person Board of Directors while dayto-day executive and operational decisions are made by the ARCHCO LTD team that comprises of three Authorized Dealer Representatives (ADRs), 3 Nominated Adviser Representative (NARs) and three Certified Public Accountant – CPA (T); among other professionals.

They have worked together previously and demonstrated their ability for various achievements they got on the professional assignment; and the team has delivered by far the largest output of capital Markets transactions in Tanzania, including Arranging 4 IPOs in the DSE’s Enterprise Growth Market (EGM).

Below are the summary of the qualifications of the Key Management of ARCHCO LTD. CPA Iyen Jairus Attom Nsemwa – Managing Director He holds Msc – Finance-University of Strathclyde, Bachelor degree of Commerce Accounting – University of Dar es Salaam, CPA (T) –NBAA and Stockbrokers, Dealers and Commodities Markets Certificate course issued by CMSA and various short courses/workshops/seminars on the financial analysis, project financing, REPOs Markets strategies, financial derivatives, project management, project appraisal, integrated financial management, entrepreneurship and Private Public Partnership.

Mr. Nsemwa who is currently the Managing Director ARCHCO LTD is also working for MENSE Technology Security System as a Managing Partner. Prior to that, he had also worked as Diageo Resources Country Representative, Director of Finance and Administration of National Development Corporation (NDC); Internal Auditor of the Central Bank of Tanzania and Financial Analyst of the Central Bank of Tanzania responsible for Management of debt instruments, financial Market development and analysis.

Mazengo Andrew Kasilati - Director of Strategic Investments and Corporate Recovery He holds Msc-Finance - Leicester University, PGD-Economic Diplomacy-Centre for Foreign Relations, CPA (T)-NBAA, Advanced Diploma in Accountancy-IFM, Stockbrokers, Dealers and Derivatives Markets Certificate issued by CMSA and currently studying M.A Strategies & Peace Studies at University of Dar es salaam. He attended various course/Workshop/Seminar on Company Act No. 12 of 2001; public procurement Act of 2001, Public Finance Act of 2001, Asset-Liability Management, Project Finance, Trade finance tools for export diversification and procurement audit techniques.

He is also a Managing Partner of TEG Consultancy, a Business Consultant Firm as an Finance Consultant, worked at Arusha Technical College as a Bursar, National Development Corporation (NDC) as a Chief Accountant and Financial Controller.

CPA Richard R. Manamba - Director of Corporate and Project Financing He Holds MBA (Finance) University of Wisconsin Whitewater Whitewater, U.S.A, B.Com (Finance) - University of Dar es Salaam and CPA (T) National Board of Accountants and Auditors Tanzania. Stockbrokers and Dealers Certificate-CMSA and various short courses/workshops/seminars on the financial analysis, project financing, financial derivatives, project management, project appraisal, integrated financial management, entrepreneurship and Private Public Partnership.

71 He worked throughout TAN Scott Limited, Dar es Salaam as a Principal Consultant, Kabanga Nickel Company Ltdas a Financial Controller, Darbrew Ltd Dar Es Salaamas a Finance Manager, Martin Center Inc - Milwaukee, Wi, U.S.A as a Financial Accountant In Charge, Office Of The Commissioner Of Insurance, Madison, Wi, U.S.A, as a Financial Analyst/Examiner, Institute of Accountancy Arusha as a Tutorial Assistant, Citibank – Dar Es Salaam Tanzania as a Bank Operations Officer and Bank Of Tanzania- Dar-Es-Salaam as a Tanzania Bank Officer.

Lukwalo Semboja – Head of stock Brokerage Unit He hold Bcom – Corporate Finance from University of Dar es salaam, He holds various CMSA Courses (Nominated Adviser Representative -ADR, Trading Derivatives Instruments and various short courses/workshops/seminars on the financial analysis, financial derivatives, project management, project appraisal, integrated financial management, entrepreneurship and Private Public Partnership.

IYEN J.A.NSEMWA MANAGING DIRECTOR

72 Appendix I: Collecting Agents

Orbit Securities Company Limited E.A. CAPITAL Ltd 4th Floor, Golden Jubilee Tower, P.O. Box 20650, Ohio Street, DAR ES SALAAM P.O. Box 70254 3rd Floor, (Office # 305), Dar es Salaam Plot 84 Kinondoni, Tanzania Acacia Estates, Kinondoni Road Tel: +255 22 2111758 / 2120863 (Off To Kinondoni Makaburini). [email protected] Mob: +255 (0)779 740818, Fax: 255 (0)784 461759 Solomon Stockbrokers Limited E-Mail: [email protected] Ground Floor, PPF House Samora Avenue/Morogoro Road Zan Securities Limited P.O. Box 77049 P.O. Box 5366, Dar es Salaam Dar es Salaam 2nd Floor, Viva Tower, Unit 15, Bibititi Road Tanzania Tel: +255 22 2126415, Fax: 255 22 2126414 Tel: +255 22 2124495 / 2112874 Mob: +255 786 344767, +255 755 898425 E mail: [email protected] CORE Securities Limited 1st Floor, Karimjee Jivanjee Building, ARCHCO Limited Sokoine Drive 18, P.O .Box 38694, Dar es Salaam, P.O.Box 76800 2nd Floor, Wing C, NIC Life House, Dar es Salaam - TANZANIA Sokoine Drive/Ohio Street Email:[email protected] Tel. +255 22 732922396, Phone: +255 22 2123103 Fax +255 22 732928489 Fax: +255 22 2122562 Mobile: +255 754 303759 & 0622-303759 SMART Stock Brokers (T) Ltd http://coresecurities.co.tz P. O. Box 105678, Dar es Salaam, 1st Floor, Masdo House, TIB Rasilimali Limited Samora Avenue, 7th Floor, Samora Tower, Tel: +255 22 2133607 Samora Avenue/Bridge Street Email: [email protected] P.O. Box 9154 Dar es Salaam - Tanzania Optima Corporate Finance Limited Tel: +255 22 2111711 Kinondoni Road [email protected] 1st Floor, Togo Tower P.O. Box 4441, Dar es Salaam Vertex International Securities Limited Tel: +255 684 856648 Zambian High Commission, Annex Building Email: [email protected] Sokoine /Ohio Street P.O. Box 13412 Tanzania Securities Limited Dar es Salaam - Tanzania Jangid Plaza, Plot No. G6 Tel: +255 22 2110392 Kinondoni Municipality, Chaburuma Road [email protected] (Off Ali Hassani Mwinyi) Victory Financial Services Limited P.O. Box 9821 P.O Box 8706, Dar es Salaam Dar es Salaam ATC Building Tanzania Ohio Street/Garden Avenue Tel: +255 22 2112807 Tel: +255 22 211 2691 [email protected]

73 Appendix II: Licensed Investment Advisers

Orbit Securities Company Limited National Bank of Commerce Ltd, 4th Floor, Golden Jubilee Tower, Sokoine Drive & Azikiwe Street, Ohio Street, P.O.Box 6826, Dar es Salaam P.O. Box 70254, Dar es Salaam. Tel: +255 22 2199793 Tel: +255 22 2111758 / 2120863 Email: [email protected] [email protected] Stanbic Bank (T) Ltd TIB Rasilimali Limited Stanbic Centre, 99A Kinondoni Road CHC Building P.O.Box 72647 Along Samora Avenue/Zanaki Street Junction Dar es Salaam P.O. Box 9373 Tel: 255 22 266 6430/480 Dar es Salaam, Tanzania Email: [email protected] Tel: +255 22 2111711 [email protected] Zan Securities Limited P.O. Box 5366, Dar es Salaam Tanzania Mortgage Refinance Company 2nd Floor, Viva Tower, Unit 15, Bibititi Road 15th Floor, Golden Jubilee Tower, Tel: +255 22 2126415, Fax: 255 22 2126414 P.O. Box 7539, Dar es Salaam Mob: +255 786 344767, +255 755 898425 E mail: [email protected] Standard Chartered Bank Tanzania Ltd International House Victory Financial Services Limited Shaaban Robert St/Garden Avenue P.O Box 8706, Dar es Salaam P.O. Box 9011, Dar es Salaam. ATC Building Tel: +255 22 2122160/2122162 Ohio Street/Garden Avenue Tel: +255 22 211 2691 Consultants For Resources Evaluation Limited 1st Floor, Karimjee Jivanjee Building, Tanzania Securities Limited Sokoine Drive 18, Jangid Plaza, Plot No. G6 P.O.Box 76800 Kinondoni Municipality, Chaburuma Road Dar es Salaam (Off Ali Hassani Mwinyi) TANZANIA P.O. Box 9821, Dar es Salaam Email:[email protected] Tel: +255 22 2112807 Tel: + 255 22212 5147 [email protected]

SMART Stock Brokers (T) Ltd NMB Bank PLC P. O. Box 105678, Dar es Salaam, Ohio/Ali Hassan Mwinyi Road 1st Floor, Masdo House, Samora Avenue, P.O.Box 9213, Dar es Salaam Tel: +255 22 2133607 Email: [email protected] Email: [email protected]

Solomon Stockbrokers Limited Ground Floor, PPF House Samora Avenue/Morogoro Road P.O. Box 77049 Dar es Salaam Tanzania Tel: +255 22 2124495 / 2112874

74 APPENDIX III: SAMPLE PROVISIONAL ALOTMENT LETTER (PAL)

Managing Director Mkombozi Commercial Bank PLC Plot No.40 Mansfield Street P. O. Box 38448 Dar es Salaam, Tanzania

MKOMBOZI COMMERCIAL BANK PLC RIGHTS ISSUE OF 20,615,272 ORDINARY SHARES AT TZS. 750 PER SHARE (THE OFFER) ON ACCEPTANCE NOT LATER THAN 20th JANUARY 2021.

Dear Shareholder,

Provisional Allotment The Directors of Mkombozi Commercial Bank PLC have provisionally allotted to you the number of new Ordinary Shares set out on the first page of the Entitlement and Acceptance Form, representing one (1) New Ordinary Share for every one Ordinary Share that appeared against your name in the Bank’s Register of Members at the close of business on 10th Nov 2020 (Record date). The new shares to be issued shall rank pari passu in all respects with the existing Ordinary Shares including the right to receive in full all dividends and other distributions declared, made and paid in respect of Ordinary Shares, for the financial year ending 31st December 2021.

You may accept all or some of the shares allotted to you or renounce all or some of them. Shareholders who elect to accept the provisional allotment in full should complete section A (i) of the Entitlement and Acceptance Form, while those who elect to renounce their rights partially should complete section A (ii) and (iii) of the Entitlement and Acceptance Form. Those who elect to fully renounce their rights should complete section B (i).

Full Acceptance If you wish to accept this Provisional Allotment in full, please complete section A of the enclosed Entitlement and Acceptance Form. The completed Entitlement and Acceptance Form together with a cheque or bank draft for the full amount payable must be submitted to any of the Receiving Bank or Agents listed in Appendix I of the Information Memorandum not later than 20th January 2021. The cheque or draft must be made payable to the Receiving Bank or Agent. All cheques and drafts will be presented upon receipt and all Entitlement and Acceptance Form in respect of which cheques are returned unpaid will be rejected and returned through the post.

Partial Acceptance To accept your provisional allotment partially, please complete item (ii) and (iii) of section A and submit your Entitlement and Acceptance Form to any of the Receiving Bank or Agents listed

75 Appendix I of the Information Memorandum together with a cheque or bank draft made payable to the Receiving Bank or Agent for the full amount payable in respect of the number of shares you have decided to accept.

Allotment of Additional Shares All Eligible Shareholders who apply for their New Shares in full or partially shall receive the full number of New Shares indicated in their PAL.

Acceptance and Payment The receipt of any payment with your Entitlement and Acceptance Form will constitute an acceptance of all or part of this Allotment on the terms of this letter. Eligible Shareholders may take up all, some or none of the Rights. Eligible Shareholders wishing to take up all or part of their Rights are required to observe the following: n Acceptance of the Offer, once given is irrevocable. n Persons wishing to apply for New Shares must complete the Entitlement and Acceptance Form. n Except in the case of negligence or willful default on the part of Mkombozi Commercial Bank PLC, their Advisers or any of the Authorized Agents, neither the Issuer, nor any of the Advisers nor any of the Authorized Agents shall be under any liability whatsoever should an Entitlement and Acceptance Form not be received by the Closing Date. n Acceptance may only be communicated by submitting a duly completed Entitlement and Acceptance Form together with Application Money for the number of New Shares applied for. The Entitlement and Acceptance Form must be signed so as to be binding. n The Entitlement and Acceptance Form, once duly completed and signed, must be returned to Mkombozi Commercial Bank PLC either directly or through any Authorized Agent, together with the Application Money for the number of New Shares. Payment of the Application Money must be made no later than 4.00 pm on 20th January 2021. Contrary to this provision, the provisional allotment will be deemed to have been declined and will be cancelled.

Enclosed is the Entitlement and Acceptance Form and Application Guideline.

Yours Sincerely,

Board Chairperson

76 APPENDIX IV: PROVISIONAL ALLOTMENT LETTER (PAL)

MKOMBOZI COMMERCIAL BANK PLC

APPLICATION FORM FOR RIGHTS ISSUE

Collecting Agent Name Collecting Agent Stamp & Signature Agent Code No

This document is of value and is negotiable. Please consult your preferred advisor and read the Information Memorandum October 2020 accompanying this Form.

1. DETAILS OF A PURCHASER OF RIGHTS ISSUE Applicant’s Names in full (3 Names)...... Applicant’s CDS A/C NO...... Banker: ...... Branch:...... Account No: ...... Tel No:...... P.O. Box ...... Email:......

2. DETAILS OF SHARES (PER CDS RECORDS) i. Number of shares registered in your name as at 10th November 2020 (Rights Book closure date)……………....……………………………...... ii. Number of Rights issue shares entitled to you …………………....………………………

3. FULL ACCEPTANCE OF NEW SHARES

I/We hereby accept in full subject to the terms of the Information Number of shares: Memorandum, this Form and the Memorandum and Articles of Association of MKCB, the number of new share specified above. Amount payable (TZS):

4. PARTIAL ACCEPTANCE OF NEW SHARES

I/We hereby accept in part subject to the terms of the Number of shares: Information Memorandum, this Form and the Memorandum and Articles of Association of MKCB, the number of partial New Amount payable (TZS): shares as indicated in the box on the right. Lapsed shares:

77 5. PAYMENT DETAILS (TICK AS APPROPRIATE) DETAILS

[ ] Cash [ ] Direct deposit to the Receiving Bank

6. RECEIPT OF ALLOTED SHARES AND ANY FUTURE DIVIDENDS (Tick as appropriate)

a) Please send my DSE CDS Receipt through [ ] My address or [ ] My Receiving agent

b) Send my future dividends through [ ] My Address or [ ] Credit my account, bank details under 1.

7. SHAREHOLDER(S) SIGNATURES OR AUTHORIZED ATTORNEYS’ SIGNATURE(S)

Signature(S)...... Date...... Company Seal......

78 INSTRUCTIONS (Annexure 2)

1. Please refer to particulars of the Right issue as set out in the attached Information Memorandum. Applicants if necessary should consult their Licensed Dealing Members (LDMs), bankers, financial advisors or other investment and legal advisors regarding the completion of this form 2. Only original Application Forms will be accepted. Photocopies, faxes or other reproductions will be rejected. 3. Postal applications will not be accepted; Each Applicant must indicate his/her DSE CDS A/C and DSE CDS ID Numbers on the application form. All authorized Receiving Agents will assist their customers to get their DSE CDS A/C Numbers. 4. Applications are irrevocable and may not be withdrawn once submitted. 5. Any alterations on this Application Form (other than the deletion of alternatives) must be authenticated by the Applicant’s full signature. 6. Subscribers will be required to produce acceptable identification and the receipt at the foot of the application form to receive subscription refunds and DSE CDS receipt. 7. No documentary evidence of capacity needs to accompany this Application Form, but the Directors reserve the right to call upon any applicant to submit such evidence in support of a person’s authority to sign this Application form either in their own or in a representative capacity. 8. Each application must be accompanied by a TZS Bankers Cheque , TZS Direct deposit or TZS Cash and made payable to MKCB or Receiving Bank within the allocated time. 9. All successful Applicants will receive DSE CDS Receipts as proof of their shareholding in MKCB. 10. In the event of a discrepancy between the number of shares applied and the value thereof, the Directors may in their sole discretion, adjust the number of shares to correspond with the value received for their application. 11. The perforated slip (foot of application form) should be retained by the applicant and be presented to the Agent/ Receiving Bank as evidence at the time of collecting DSE CDS receipt and / or refund cheque (if applicable) 12. Nominee companies may apply on behalf of principals. The number of securities applied for on each principal’s behalf must be furnished and each Applicant will be treated as separate application and shall be subject to the terms and conditions of the Information Memorandum. Nominees must disclose the names of the beneficial owners on whose behalf the share are being bought. 13. A note on “mistakes”. Any mistake that may result into amendment costs; the amendment or correction costs will be charged at the source of the cause of the problem e.g If the applicant did not complete the application form correctly, then at the time of correction the applicant will bear the cost of amendment. 14. Lapsed shares will be sold to existing shareholders on record as at the close of business on 10th November 2020 by using the form the APPLICATION FORM FOR LAPSED RIGHTS ISSUE SHARES. 15. The duly filled application form(s) should be submitted to any of the Receiving Agent listed the Information Memorandum.

79 DETACHABLE PART (To be retained by shareholder)

Full Name......

Serial Number ...... Agent’s Code......

No. of shares Applied for...... Funds Submitted TZS......

Agent’s Stamp and Signature......