Mwanza Community Bank (MCB) Plc Prospectus

Prospectus Mwanza Community Bank i

PROSPECTUS

MWANZA COMMUNITY BANK PLCFor your Development

Prospectus Date:27th September, 2013

ii Prospectus Mwanza Community Bank

PROSPECTUSFor an initial public offer by Mwanza Community Bank PLC of 5,000,000 Ordinary Shares of

TZS 550 per share.

Prospectus Date: 27th SEPTEMBER, 2013

Prospectus Mwanza Community Bank iii

MWANZA COMMUNITY BANK PLC

Incorporated under the Companies Act 2002 in the United Republic of Tanzania with Certificate of Incorporation No: 84309 issued on 1st of March 2012

PROSPECTUS

Nominated Advisor

Arch Financial & Investment Advisory Limited

Application under

The Capital Markets and Securities (Nominated Advisors) Regulations 2010

For

An Initial Public Offer by Mwanza Community Bank PLC of 5,000,000 Ordinary Shares of a nominal value of TZS 550 per share.

Offer opens: 1st October, 2013

Offers closes: 31st October, 2013

Expected listing date: 13th December, 2013

iv Prospectus Mwanza Community Bank

CAUTIONARY STATEMENT

“Enterprise Growth Market (EGM) is designed primarily for small and medium size

companies, starts up or companies with no track record to which a higher investment

risk tends to be attached than to more established companies or companies with good

track record. A prospective investor should be aware of the risks of investing in such

companies and should make that decision to invest only after careful consideration

and, if appropriate, after consultation with an independent financial advisor.

A copy of this Prospectus has been delivered to the Capital Markets and Securities

Authority for approval and to the Registrar of Companies (BRELA) for Registration.

The securities offered have not been approved or disapproved by the Authority and

therefore the prospective investors should carefully consider the matters set forth

under the caption risk factors.”

Prospectus Mwanza Community Bank v

MWANZA COMMUNITY BANK PLC

ISSUER

MWANZA COMMUNITY BANK PLC,

POSTAL ROAD STREET,

P.O.BOX 11120,

MWANZA

NOMINATED ADVISORS: LEGAL ADVISORS:

ARCH FINANCIAL & INVESTMENT

ADVISORY LTD,

NIC LIFE HOUSE, 2ND FLOOR,WING C,

P.O BOX 38024,

DAR ES SALAAM .TANZANIA

Tel: +255 22 2112844

Email: [email protected]

K&M ADVOCATES

3RD FLOOR, TAC ASSOCIATE BUILDING

PLOT NO. 114,MALIK STREET

P.O. BOX 71394,

DAR ES SALAAM

TANZANIA

TEL: +255 22 2133615


REPORTING ACCOUNTANTS

DIAMOND FINANCIAL SERVICES 2ND FLOOR/ROOM 218 PAMBA ROAD/GARDEN AVENUE P.O. BOX 12482 DAR ES SALAAM Tel: +255 22 2124 339, Email: [email protected]

vi Prospectus Mwanza Community Bank

DECLARATION OF THE DIRECTORS:

As Directors of the Bank we have made all our reasonable inquiries. We accept the responsibility for and confirms that this prospectus contains all information with regard to the Bank and the Offer, which is material in the context of the Offer, that the information contained in this prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Prospectus as a whole or any of such information or the expression of any such opinions misleading in any material respect.

We hereby declare that we will comply with the law on the age of retirement of the Directors, and in compliance with the good corporate governance requirements of the CMSA. Those of us in excess of the mandatory age of retirement will have our reappointment approved by a general meeting under the requirements of the Companies Act and resolution filed with the Registrar of Companies. We declare further that the Bank will have adequate working capital for the current and future needs of the Bank.

We also confirm that none of us has ever been involved in bankruptcy, liquidation or other regulatory prohibitions.

Prospectus Mwanza Community Bank vii

DECLARATION OF THE NOMINATED ADVISOR

NIC life house, 2nd Floor, Wing C, P.O Box 38024, Dar es Salaam .Tanzania Tel: +255 22 2112844

Tel: +255 22 2112844 +255 22 732 922 396


NIC life house, 2nd Floor, Wing C, P.O Box 38024, Dar es salaam . Tanzania Tel: +255 22 2112844 Email: [email protected]

Having made due and careful enquiry and taking into account all relevant matters under the Capital Markets and Securities (Nominated Advisors’) regulations, 2010 and the Dar Es Salaam Stock Exchange Rules for EGM Companies and in relation to this application for admission, we hereby confirm that all applicable requirements have been complied with and in particular;

ØØ The listing document is in compliance with the DSE Rules for EGM Companies.ØØ The requirements of the First Schedule to the Capital Markets and Securities

(Nominated Advisors) regulations, 2010 have been also been complied with.ØØ As Nominated Advisors, we have given an advice and guidance to the Directors of

Mwanza Community Bank PLC as to their responsibilities and obligations under the law in order to facilitate due compliance by the applicant on an ongoing basis.

ØØ We will comply with the law as applicable in our role as a Nominated Advisor to the applicant.

IYEN J.A.NSEMWA

MANAGING DIRECTOR

viii Prospectus Mwanza Community Bank

IMPORTANT INFORMATION

The information given in this prospectus is in compliance with the requirements of the Companies Act Cap. 212 (Revised Laws 2002) of the Laws of Tanzania, the Capital Markets and Securities Act No. 5 of 1994, as amended in 2010, the regulations of the Capital Markets and Securities Authority (CMSA), Capital Markets and Securities (Prospectus Requirements) - Amended (Second schedule) and the rules of the Dar Es Salaam Stock Exchange (DSE).

Ms K&M Advocates, the legal advisors to the transaction, have given and not withdrawn their written consent to have their legal opinion included as part of this prospectus in Section 10.

The Prospectus also contains the Reporting Accountant’s opinion from Ms Diamond Financial

Services, which constitutes a statement made by an expert. Ms Diamond Financial Services 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 prospectus in section 11.

This Prospectus includes “forward-looking statements” that express or imply expectations of future events or results. They are defined as statements that do not have historical facts and they include, but not limited to, financial projections, financial estimates, their respective underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, products or services, or statements regarding future performance.

Despite the fact that forward-looking statements have inherent risks, uncertainties and other factors, Mwanza Community Bank PLC believes that the expectations that have been reflected in all their forward-looking statements are reasonable.

However, in view of the risks and uncertainties involved, it is important for Prospective Investors to know that it is difficult to predict precisely and therefore it is generally beyond the control of the Bank. Actual results and developments may differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained in this document.

Some of the factors that may cause differences between the predicted or expected performance or achievement and actual results includes among others, competition; changes in laws; political; economic and business conditions; industry trends; and fluctuations in exchange rates, local and foreign inflation.

Based on the above factors, all Prospective Investors are advised to make their own inquiries with appropriate professional advisors before reaching a decision on whether or not to make an investment in the bank’s shares. They should not place absolute or sole reliance on forward looking statements contained in this Prospectus.

Kindly note that shares of the Bank are being offered to both Tanzanians and non Tanzanians. Since, Mwanza Community Bank PLC is a startup bank, all Promoters who are institutional

investors and the first directors of the bank will be locked-in for a period three (3) years.

Prospectus Mwanza Community Bank ix

Should you have any doubt as to the meaning of the contents in this Prospectus or what action to take, please consult your Broker, Lawyer, Banker, Accountant, Nominated Advisors or Licensed Investment Advisor immediately.

FEATURES OF THE OFFER

Offer Key Statistics

Offer price per ordinary share (Nominal Value) TZS 550Number of shares offered for sale 5,000,000Gross proceeds of the offer TZS 2,750,000,000

Estimated net proceeds of the offer(after expenses) TZS 2,500,000,000

Estimated IPO Cost TZS 250,000,000

Table of Key Events

Opening date 9.00 am

On 1st October 2013

Closing date 4.00 pm

On 31st Oct, 2013 Announcement of offer results 15th November, 2013

Crediting shares to the CDS accounts, dispatch of depository receipts 29th November, 2013

Listing date and commencement of trading of Mwanza Community Bank PLC shares on the DSE

13th December, 2013

x Prospectus Mwanza Community Bank

TERMS AND ABBREVIATIONS

Accountants’ Report The report of the Reporting Accountants

Application Form The Share Application Form set out in Appendix IV of this prospectus

Audited Accounts There is no audited accounts of Bank that are contained in this prospectus.

Authorized receiving agents

Authorized licensed dealing members and banks in Tanzania whose details are set out in Appendix I of this prospectus

Business Day

A day (other than Sunday or a day gazette as a public holiday in Tanzania including bank holidays) on which commercial banks are open for business in Tanzania

CDS The Central Depository System at the Dar es Salaam Stock Exchange

CEO Chief Executive Officer of the Bank

Closing Date The last date and time for submission of Application Forms for this offer for subscription, which is 1600 hours on 31st October 2013

CMSA or Authority The Capital Markets and Securities Authority

Company Mwanza Community Bank PLC

Directors The Directors of the Company whose names are given on page 22

DPS Dividend Per Share

DSE The Dar Es Salaam Stock Exchange

EPS Earnings Per Share

GDP Gross Domestic Product

IAS International Accounting Standards

IFRS International Financial Reporting Standards

IPO Initial Public Offer

Offer Price Nominal Value of TZS 550 per share

Opening date The first date for acceptance of applications for the offer of shares

PE Price Earnings ratio

Rules Rules of the Dar Es Salaam Stock Exchange

TZS Tanzanian Shillings

USD United Stated Dollar

Prospectus Mwanza Community Bank xi

TABLE OF CONTENTSCautionary Statement .................................................................................................................................. iii

Declaration of the Directors: ........................................................................................................................ v

Declaration of the Nominated Advisor .................................................................................................... vi

Important Information ...............................................................................................................................vii

Features of the Offer ...................................................................................................................................viii

Terms and Abbreviations ............................................................................................................................ ix

Table of Contents ........................................................................................................................................... x

Board of Director’s Statement .................................................................................................................... xi

1.0 Offer Details .......................................................................................................................................1

2.0 Summary of Transaction ..................................................................................................................4

3.0 Risk Factors ........................................................................................................................................6

4.0 Economic Overview ...............................................................................................................................8

5.0 Company Overview ........................................................................................................................11

6.0 Corporate Governance ...................................................................................................................13

6.9 Proposed Organization Structure ................................................................................................20

7.0 Corporate Directory: .......................................................................................................................21

Principal Places of Business & Registered Office ........................................................................ 21

8.0 Extracts of the Memorandum and Articles of Association ......................................................22

9.0 Application Procedures & Terms and Conditions ......................................................... 31

10.0 Legal Opinions ................................................................................................................................32

11.0 Independent Reporting Accountant’s Report ............................................................................38

12.0 Nominated Advisor’s Comments on the Projected Financial Statements .............................53

List of Collecting Agents .............................................................................................................................56

xii Prospectus Mwanza Community Bank

BOARD OF DIRECTOR’S STATEMENT

Dear Investors,

On behalf of the Board of Directors of Mwanza Community Bank PLC, it’s indeed my pleasure to present this prospectus in connection with the Offer for Subscription of the Bank’s shares. The offer is for 5,000,000 ordinary shares at a nominal value of TZS 550 per share and is open to Tanzanian and non-Tanzanian persons. So far, a total, 600,000 ordinary shares worth TZS 340million have been subscribed for and paid by the Founder Members. The offer was approved by a resolution of the board meeting held on the 31st December, 2012 and has also been approved by the CMSA. The offer will be followed by listing on the Dar Es Salaam Stock Exchange through the EGM window.

Mwanza Community Bank PLC is a newly incorporated community bank duly registered in Tanzania. The main reasons for taking the Bank through the IPO and subsequent listing include the following:

ØØ The ability to raise a large amount of new capital in a short period of timeØØ To establish the necessary capital base for the Community Bank as per requirement

by the Bank of TanzaniaØØ Improving the Bank’s competitive edge which will enhance customers’ loyalty

within Tanzania. ØØ Improve the perception of the Bank and enhance its prestige as a listed entityØØ Help the Bank to attract high-quality management and employees. ØØ Access to a wider range of financing options for future growth such as issue of

additional equity, enhanced credit rating with other banks and lending institutions. ØØ To broaden share ownership of the bankØØ To increase and enhance the general awareness of the bank among TanzaniansØØ To enable the bank to acquire the necessary technology and facilities needed for the

bank to operate smoothlyWe therefore, kindly invite all Tanzanians to have a stake in Mwanza Community Bank PLC.

Prospectus Mwanza Community Bank 1

1.0 OFFER DETAILS1.1 Reasons for the IPO and Listing

The main reasons for taking the Bank through the IPO and subsequent listing includes the following

ØØ The ability to raise a large amount of new capital in a short period of timeØØ To establish the required capital base as a Community BankØØ Improving its competitive edge, this will enhance customers’ loyalty within

Tanzania. ØØ Improve the perception of the Bank and enhance its prestige as a listed entityØØ Help the Company to attract high-quality management and employees. ØØ Access to a wider range of financing options for future growth such as issue of

additional equity, enhanced credit rating with banks and lending institutions. ØØ To broaden share ownership of the bankØØ To increase and enhance the general awareness of the bank among TanzaniansØØ To enable the bank to acquire the necessary technology and facilities needed for the

bank to operate smoothly through the use of capital raised by this IPO

1.2 The Basis and Offer Price

Since the issuer is a start-up Bank, the Board has set the Offer Price at a nominal value of TZS 550 for each Ordinary Share.

1.3 Eligibility

The offer to subscribe for shares is open to all Tanzanians and non-Tanzanians subject to the following general requirements:

ØØ The shareholding pattern shall also allow individual municipals in Mwanza City Council to hold some shareholdings in the bank.

ØØ The maximum shareholding for a single corporate investor shall not exceed 20% of paid up capital as per the banking law.

ØØ The ceiling for individuals shall be 5 % of the paid up capital.

2 Prospectus Mwanza Community Bank

1.4 Minimum number of shares per application

ØØ The minimum number of shares that may be applied for is 100ØØ Subject to the foregoing, investors may apply for any number of shares.ØØ Subject to the eligibility requirements in section 2.3 above, there is no maximum

restriction on the total number of offer shares that may be applied for.1.5 Allotment Policy

Subject to CMSA approval, in the case of oversubscription, , subscribers will be allotted in full for the amount of shares applied for and proceeds from oversubscription will be retained. There will therefore be a Green Shoe Option in which an approval will be sought from CMSA to allocate shares in excess of the shares included in the Public Issue. It should also be noted that the bank has received in advance a total share subscription of Cash of TZS 340 million from individuals who are the Founders of the Bank. This implies that 600,000 shares has been set aside for the Founders while 4,400,000 shares are available to the public in general.

1.6 Use of Net Proceeds

The net proceeds (after the expenses of the offer) of TZS 2,500,000,000 from the sale of 5,000,000 shares will accrue to the Mwanza Community Bank PLC. The proceeds will be used to capitalize the Bank as a Community Bank so as to meet the requirements of the Bank of Tanzania.

1.7 Rights and Transferability

The offered shares are issued subject to the Memorandum and Articles of Association of the Bank and will rank peri pasu in respect of the voting rights, dividends, capital, and pre-emptive rights to subscribe to new issues of shares.

1.8 Dividend Policy

The declaration of dividends will be recommended by the Board of Directors and approved by the shareholders, at their discretion, and will depend on a number of factors, including but not limited to the profits, capital requirements and overall financial position of the Bank. The Board may also from time to time pay interim dividends.

1.9 Tax Implications

Applicants should consult their own professional tax advisors in regard to the tax implications of subscribing for, holding and disposing of the shares under the offer. The Bank, its staff and advisors do not accept any responsibility or liability for any tax consequences to applicants subscribing for, holding and disposing of offer shares as a result of the offer. Holders of shares in companies listed at the DSE are subject to a 5% withholding tax on dividends as opposed to 10% for unlisted Banks. There is no stamp duty payable on transactions in shares listed on the DSE compared to transaction outside the DSE which are charged at 6%. Capital gains tax is also zero for DSE transactions


compared to 10% outside the Exchange.

1.10 Estimated IPO Cost

Item Amount(TZS)

Professional Fees 89,000,000Receving Agent Fees 50,000,000Receiving Bank 70,000,000

CSMA Prospectus Approval 2,750,000

DSE Listing Fees (Note 1) 2,750,000

Marketing 25,000,000

Printing Cost 10,500,000

TOTAL 250,000,000

Note 1: DSE listing fees might increase depending on CDS a fee which is chargeable when uploading the shares into CDS after allotment results


2.0 SUMMARY OF TRANSACTION

2.1 Legal Status of the Bank

The Bank was initially incorporated as a private limited liability company in Tanzania under the Companies Act, [Cap. 212 R.E. 2002]. It holds Certificate of Incorporation No: 84309 issued on 1st of March 2012. The Bank was converted from Private Limited Liability Company to a Public Limited Liability Company following the Board Resolution passed and dated 4th May 2013.

A certified copy of the new Articles of Association of the Company was filed with the Registrar of Companies on 28th June, 2013 and consequently on 5th July 2013 the bank had its name changed to Mwanza Community Bank PLC.

2.2 Legal Basis of the Offer

The Board of Directors approved the IPO by a special resolution passed on 31st December, 2012

2.3. Background and Objective of the Offer

Mwanza Community Bank PLC is a new Community Bank to be established in Mwanza Region. The bank is being established to provide financial services to the community particularly the low-income segments of the society in a sustainable basis in Mwanza. With the development of market oriented systems, creation of sustainable mechanism for provision of financial services to the communities has become a critical element for creation of genuinely enabling environment for the society and poverty reduction.

Mwanza Community Bank PLC wishes to sell to the general public by way of Initial Public Offer 5,000,000 ordinary shares of Mwanza Community Bank PLC. A total of 600,000 shares worth TZS 340million have already been issued and fully paid for by the Founder Members. The offer price per share is set at a nominal value of TZS 550.00 per share. The Bank has a total authorized shares amounting to 60,000,000, which means a total 55,000,000 shares will be outstanding after the initial public offering.

The proceeds from the sale of shares will be used to capitalize Mwanza Community Bank PLC in line with Bank of Tanzania requirements so as to make it operate smoothly.

2.4 Shareholding and Structure

Currently the Bank has only one class of ordinary shares authorized and issued. There are no preference shares.


Table 4: Share capital after the offer will depend on the actual subscription of shares, however,

in the meantime the structure stands as follows:

Type of Shareholder Number of Shares Held Percentage of Shares held

Founder Members for the shares already subscribed in advance

600,000 12

Open to the Public 4,400,000 88

Total 5,000,000 100

2.5 Litigation

As Directors of the bank, we hereby confirm that, we are not aware of any material litigation or proceedings that may have material impact on the Bank’s financial position.


3.0 RISK FACTORS

There are risks factors associated with the operations of the banking business which are external to management, board and shareholders. The study identified the key risks relating to the operations of the proposed bank as follows:

3.1 Credit Risk

Credit risk (or default risk) is the possibility that a borrower will not meet his or her contractual obligations. In order to mitigate this risk, the management of the bank would issue loans based on exiting professional standard and principles. Owning the bank by itself shall not be a guarantee to access loan services by the promoters or its affiliates. The proposed bank is expected to analyze the credit risk of potential borrowers along with several dimensions involved in credit. It will look at the borrower’s reputation, which is usually measured by credit history or credit rating. It will also investigate the borrower’s ability to make the payments required on the loan on the basis of projected income, and they will consider borrowers’ financial reserves and sometimes their collateral.

3.2 Market Risk

Market risk is the possibility that the value of assets or liabilities will change because of ups and downs in their prices. It is a standard measure of risk in the financial world in part because it is easier to quantify than other many types of risk. Analysts can examine past changes in prices and calculate the variance of returns. The greater that variance is, the greater the market risk - that is, the greater the likelihood that returns may swing widely in the future. The volatility of prices or returns has traditionally been used as a proxy for market risk. The proposed bank will recruit the necessary experts as a mitigation strategy for these particular risks.

3.3 Liquidity Risk

A bank or other financial entity bears liquidity risk when it holds illiquid assets. If it has to meet demands for cash, it may have to sell the assets at a loss; if the market is very illiquid, it may not be able to sell them at all. Banking business will require appropriate skills at all levels, particularly Board and management level. This is one of the best ways to mitigate such risks.

3.4 Systemic Risk

This is the possibility that the failure of one financial institution to meet its obligations to other banks will trigger a chain reaction, depriving those banks of expected funds and preventing them from settling their transactions. Such a series of events could mean that institutions that had no business dealings with a failed bank would ultimately be affected in a general shutdown of banks’ normal clearing and settlement operations.


3.5 Risks associated with a start-up bank.

The potential investors will have to take into account the following risks which are associated with the Enterprise Growth Market Window:

ØØ Mwanza Community Bank PLC is a startup bank. Being a new venture without any track record means there are inherent risks that potential investors will have to undertake while making their investment decisions. This fact is likely to have a negative impact in the efforts to raise the adequate funds to meet the statutory minimum requirements for the community bank. In order to mitigate this risk, the Sponsors of the bank have started well in advance to secure some commitments from potential subscribers to the MCB shares so as to make sure the statutory minimum core capital is raised.

ØØ Mwanza Community Bank PLC is likely to face stiff competition from other banks in the Lake Zone. There are quite a number of banks and non-bank financial institutions operating in the Lake Zone. The bank will have to be innovative in terms of products, services and marketing strategies so as to out-compete other service providers. The bank will also need to monitor and respond swiftly to all competitors’ actions to ensure its competitive edge in the region.

ØØ The Bank of Tanzania requires all banks to adhere to the international accounting standards to disclose and comment on specific risk management techniques that the bank has put in place in anticipation of risks inherent in banking.

ØØ Being a community bank with moderate core capital, MCB will initially target customers with relatively low or moderate purchasing power. In order to break even, the bank will have a challenge to ensure that the business turnover is high all the time.


4.0 ECONOMIC OvERvIEw

4.1 Tanzania Economic Overview

Tanzania’s Growth accelerated from 3.5% on average in the 1990s to 7% on average in the 2000s and has been remarkably stable over the decade. Growth in gross domestic product (GDP) has been between 5%-7% in recent years. Tanzania has proved to be resilient to international shocks over the recent past, with effective demand-side measures both on the fiscal and monetary sides during the global financial crisis in 2009. After a year of economic rebound from the global crisis, growth decelerated again in 2011 due to a massive domestic power shortage. The economy has been in the recovery phase since early 2012. This positive trajectory appears to have accelerated in January-March 2012, the period captured by the latest official data available. Quarterly GDP growth reached 7.1% on an annual basis, up from 6.1% a year ago.

Sources of growth are rather concentrated in a few sectors. The drivers of growth over the past decade have been to a large extent the growth in the mining sector, telecommunications, tourism, and construction. There are some signs of economic diversification. For example, manufacturing value-added grew at around 8.8% from 2005 to 2010, with exports having grown by 45% annually during the same period, driven by regional exports to the East African Community (EAC) and Southern Africa Development Community (SADC) countries. However, the size of the sector remains small. At the same time, agriculture faces stagnation in its productivity growth.

Recent banking reforms have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7% of its budget. Continued donor assistance and solid macroeconomic policies supported a positive growth rate, despite the world recession. In 2008, Tanzania received the world’s largest Millennium Challenge Compact grant, worth $698 million. Dar es Salaam used fiscal stimulus and loosened monetary policy to ease the impact of the global recession. GDP growth in 2009-12 was a respectable 6% per year due to high gold prices and increased production.

KEY ECONOMIC

INDICATORSINDICATOR 2010 2011 2012 June 2013

GDP (PPP) $ 73.5 Billion $ 69.01 Billion

$ 64.83

Billion

$ 39.86 Billion

(half year)GDP real growth rate 6.50% 6.40% 7% 7%

GDP Per Capita (PPP) $1,700 $1,600 $1,600

$ 900 (based on

half year GDP)

Inflation Rate (Consumer

Prices) 15.30% 12.70% 16% 7.6%

Commercial Prime

Lending rate as at

December 14.83 14.96 21.3 15.5%Source: Bank of Tanzania economic Report July 2013


4.2 Tanzania banking sector analysis

5.2.1 The Banking Sector Overview

As at 31 December 2012, the Tanzania Banking sector had 48 registered banks excluding FBME.

The banks are classified as follows:

ØØ 8 large banks,ØØ 20 medium banks,ØØ 16 regional & small banks, andØØ 3 NBFIs. ØØ Banking sector assets increased by 17% in 2012(16% in 2011). This growth was

largely in ØØ Loans and advances (+ 23%) (29% in 2011),ØØ Investment in Government securities up 38% (-17% in 2011), andØØ Cash and balances with BoT up 11% (34% in 2011)

Table 1: snapshot of Banks’ Balance sheet key items over 5 years – Tanzania

Balance Sheet

2008 2009 2010 2011 2012

Amounts in TZS million Cash and Balances with BoT 859,552 1,412,919 1,672,966 2,245,488 2,484,360

Balances w/other banks 1,113,656 1,458,686 1,857,145 1,932,141 1,483,575Investment in Government & Debt securities 1,548,614 1,719,470 2,441,708 2,030,413 2,792,173Loans, Advances & Overdrafts (NET) 4,163,019 4,534,091 5,485,269 7,099,527 8,705,299

Other assets 591,671 692,106 907,670 974,169 1,176,902Total Assets 8,276,512 9,817,271 12,364,757 14,281,738 16,642,310

Customer deposits 6,400,796 7,906,561 9,846,585 11,395,876 12,886,419Deposits from other banks 350,531 253,706 509,064 535,657 839,174

Other Liabilities 551,393 408,250 490,019 611,735 777,672Total Liabilities 7,302,720 8,568,517 10,845,669 12,543,268 14,503,265

Paid up share capital 293,821 407,002 533,687 644,345 793,795Retained Earnings 410,806 534,649 695,453 788,887 897,018

Profit & Loss Account 154,542 185,024 154,195 174,450 219,486Others 114,623 122,079 135,753 130,789 228,746

Total shareholders’ Fund 973,792 1,248,755 1,519,089 1,738,471 2,139,045Total Liabilities and Shareholders’ Fund

8,276,612 9,817,272 12,364,757 14,281,738 16,642,310

Source: Ernest & Young Banking Survey Report May 2013


4.2.2 Profitability

Table 5: sector’s Profitability & Earnings Ratios for the 5 Year Period

Tanzania Banking sector (Total)Earnings & Profitability Ratios 2008 2009 2010 2011 2012

Loans & Advances to Total Assets 50.30% 46.20% 44.40% 49.70% 52.30%Non Interest Expense to Interest Income 67.30% 67.40% 82.50% 83.00% 74.00%

Return on Average Assets 2.70% 2.40% 1.80% 1.70% 1.80%Return on Average Earnings 23.80% 19.50% 14.20% 14.20% 14.10%

Interest Margin to Average Earning Assets 8.40% 8.00% 7.30% 7.60% 8.60%Non Interest Expense to Gross Income 48.60% 47.70% 54.40% 59.90% 53.90%

Gross Loans to Deposits 66.20% 57.20% 57.60% 64.10% 69.20%Interest Income to Total Income 72.30% 70.90% 65.90% 68.60% 72.70%

Interest Margin 77.20% 74.10% 76.10% 77.80% 72.20%Earning Assets to Total Assets 82.60% 79.40% 80.30% 78.60% 78.90%

Net Interest Margin 15.00% 13.40% 12.80% 12.80% 13.30%Total Expenses to Interest Income 90.10% 93.30% 106.50% 105.20% 101.80%

Source: Ernest & Young Banking Survey Report, May 2013

The loans & advances to total assets ratio increased to 52.3% in 2012 (49.7% in 2011). Earning assets to total assets increased slightly to 78.9% (78.6% in 2011).

Gross loans to deposits increased to 69.2% from 64.1% in 2011. Despite the increase, the industry ratio is still below the BoT prudential limit of 80%.

Non- interest expense to interest income decreased to 53.9% from 56.9 in 2011, the interest margin decreased to 72.2% (77.8% in 2011), interest margin to average earning assets rose to 8.6% (from 7.6% in 2011), the net interest margin decreased to 12.1% (from 14.2% in 2011), and total expenses to interest income dropped to 101.8% (from 105.2% in 2011).


5.0 COMPANY OvERvIEw

5.1 vision and Mission Statement

5.1.1 vision

The Vision of the bank is to be bank that helps consumers and businesses achieve their goals. The bank will accomplish its Vision through its commitment to strategic growth, outstanding service, and community involvement.

All Mwanza Community Bank employees will help accomplish this Vision through provision of:

ØØ Unparalleled personal service. ØØ Proactively tailoring innovative banking solutions to fully meet each of its

customer’s individual needs. ØØ Treating customers and colleagues with respect. ØØ Being accountable to customers and colleagues in all we do.

5.1.2 Mission

The mission of the bank is to become the premier bank in Tanzania. We will enhance shareholder value by serving the personal and business needs of our markets, providing superior customer service, investing in the communities that we serve, and enriching the lives of our employees

5.2 Manpower Development

The bank will recruit professional staff with banking background, experience and good integrity. Human Resource Development programs will be in place to ensure that all staffs have access to continuous capacity building so as to keep abreast with the new developments that are taking place in the technological world.

5.3 Job Creation

The bank is expected to create employments to almost seventeen (17) employees during the first year of its operation. The number of employees will increase with the expansion of the business operation


5.4 Use of Net Proceeds

The net proceeds of the offer will accrue to the bank. The bank proposes to use the net proceeds on the following areas:

Table 13: Use of Net Proceeds

Description Amount in TZSWorking capital for banking operation and creation of Capital Base as per BOT regulations

2,500,000,000Total 2,500,000,000

5.5 Authorized and issued share capital

Mwanza Community Bank PLC has a total authorized share capital of TZS 30,000,000,000. It consists of 60,000,000

ordinary shares out of which 5,000,000 will constitute Initial Public Offer at a nominal value of TZS 550 per share.

5.6 Capitalization of the proposed bank

The proposed bank to be established in Mwanza will raise a minimum of gross TZS 2.75 billion to cover both pre-operations and investments costs. The amount to be raised will assist the bank to meet the banking regulatory requirements and cover initial investment and pre-operations expenses. The bank to be established will be allowed to offer banking services in Mwanza City in which a license was granted.

5.7 Material Contracts:

Except for the contracts disclosed in the Legal Opinion herein, the Bank has not entered into any other material contracts.


6.0 CORPORATE GOvERNANCE

6.1 Board Responsibility and Accountability

The Bank’s Board will be responsible for the governance of the business and is accountable to the shareholders to ensure that the bank complies with the law and the highest standards of corporate governance and business ethics. The Directors attach great importance to the need to conduct the business and operations with integrity and in accordance with generally accepted International Standards of corporate practice and governance.

The bank undertakes to comply with the requirements of the Capital Markets and Securities Authority Guidelines for Corporate Governance Principles for listed companies in the Dar Es Salaam Stock Exchange.

6.2 Board of Directors

The full Board will meet at least four times a year. The Directors will be given appropriate and timely information so that they can maintain full and effective control over strategic, financial, operational and compliance issues. Except for direction and guidance on general policy, the Board has delegated authority to conduct day-to-day business to the Managing Director. The Board none-the-less retains overall responsibility for establishing and maintaining the banking overall internal control of financial, operational and compliance issues.

6.3 Committees of the Board

The Board will constitute Executive and Audit & Compliance Committees in line with the requirement of the CMSA and DSE rules to meet regularly under the terms of reference set by the Board. The committee will meet at least four times a year. The responsibilities of the committee will include reviewing the financial statements, compliance with Accounting Standards, liaison with the external auditors, remuneration of the external auditors, and maintaining oversight on internal control systems. The Chairperson of the Audit & Compliance Committees will be appointed from the Board Members other than the Chairman of the Board. The Chief Internal Auditor, the Finance Director, and the Managing Director will attend all meetings of the committee. The external auditors will only attend the meetings on invitation.


6.4 Internal Control System

The bank has defined procedures and financial controls to ensure the reporting of complete and accurate

accounting information. The identified procedure includes:

ØØ Systems for obtaining authority for major transactions and for ensuring compliance with laws and regulations of the bank that have significant financial implications.

ØØ Ensuring that assets are subject to proper physical controls and that the bank remains structured to ensure appropriate segregation of duties.

ØØ In reviewing the effectiveness of the systems of internal control, the Board takes into account the results of all the work carried out to audit and review the activities of the bank.

ØØ A comprehensive management accounting system will be in place providing financial and operational performance measurement indicators.

ØØ Weekly and monthly meetings will be held by the management to monitor performance and to agree on measures for improvement.

6.5 Code of Ethics

Mwanza Community Bank PLC is committed to the highest standards of integrity, behavior and ethics in dealing with all its stakeholders. All employees of the Bank are expected to avoid activities and financial interests that could clash with their responsibilities with the Bank.

6.6 Profiles of Directors

Name: Mr. Joseph Matanga Kahungwa,

Nationality: Tanzanian

Age: 50 years

Current Position: Chairman of the Board of Directors of MCB PLC

Education and working Experience:

Mr Kahungwa holds Master of Business Administration degree from University of Dar es salaam. He also holds a Bachelor of Commerce (Accounting) from University of Dar es salaam.

Mr Kahungwa is trained in Risk Management in Microfinance, Strengthening of Saccos Supervisory function, Principles and Practices of microfinance governance, business development plan and customer relations management both overseas and within the country. He also attended an International course in Corporate Governance for directors, strategic management and planning.

In addition Mr Kahungwa boasts of vast experience in leadership and management which includes member of the Board of Directors of CRDB Ltd (2001 - 2006), Chairman of Audit Committee of CRDB Ltd Board of Directors (2003 – 2006), Chairman of CRDB Ltd Mwanza Branch advisory Board (1998 – 2010). He currently holds the positions of Vice President of Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA), Board member of TCCIA Investment Company, Chairman of Victoria Saccos Board of Directors, Chairman of Mwanza Region Business Council


Executive Committee and member of the board of directors of the VETA Lake zone. Mr Kahungwa is also a successful business person operating a modern hotel and guest house, Kahungwa Hotels Limited in which he is the Managing Director.

As a Chairman of Board of Directors of Mwanza Community Bank PLC, Mr Kahungwa is responsible for ensuring that Board of Directors formulates suitable organizational policies and oversees proper implementation of strategic plans and policies and corporate governance of the bank by the management.

Name: Mr. Stephen Yakobo Kapongo


Age: 54 years

Current Position: Board Member of MCB PLC

working Experience:

Mr Kapongo holds Master degree in Divinity and Masters degree in Theology in addition to holding a Bachelor degree in Theology.

He is currently the National Co-ordinator of Evangelism and Mission for Africa Inland Church Tanzania.

He possesses long time leadership experience acquired through his role as a National coordinator of Evangelism and Mission for the Africa Inland Church of Tanzania since 2003.

He has participated in various numerous leadership and management trainings both domestically and overseas. He has a rich working experience in the field of medicine at Bugando Referral Hospital between 1985 and 2002.


Name: Mr. Abel Yeji Busalama


Age: 49 years


working Experience:

Mr Abel Yeji Busalama is a holder of Master of Business Administration degree from University of Dar es salaam as well as Bachelor of Commerce degree from the University of Dar es salaam

Mr Busalama has consulting/research experience of more than 20 years with reputable local and international firms. He provides consulting services to Governments (Ministries, Departments and Executive Agencies), the World Bank (UPI No, 390335), UN organizations, bilateral and multilateral organizations, Non Governmental Organizations (NGOs) and the private sector. Mr Abel worked as a researcher and consultant for TISCO for more than 10 years. He also previously worked for three years as Director for Research and Development at DataVision International Limited and as Chief Executive Officer of Data Works Associates Ltd. He is currently a member of Board of Directors of Community Development Trust Fund (CDTF), TeleSecurity Company Limited.

Name: Mr. Charles Masolwa Malunde


Age: 52 years


working Experience:

Charles M.Malunde holds Master degree in Cooperative management and Organizational Development from Leicester University UK, and an Advanced Diploma in Cooperative Studies from Cooperative College Moshi, Tanzania

Mr Malunde is currently a Regional Program Coordinator for MUCCoBS for Mwanza center. He has been working as a field trainer, researcher and consultant with Moshi University College of Cooperative and Business Studies (MUCCOBS) for about twenty six years. He has extensive working experience with community-based organizations in Tanzania. He is a good facilitator in the area of community mobilization, establishment and strengthening, training and capacity building of SACCOS, Agriculture Marketing Cooperative Societies and Community Based Organizations.


Name: Mr. Nicholaus B.wanna


Age: 68 years


working Experience:

Mr Nicholaus B.Wanna is a holder of Advanced Diploma in Community Development from the Institute of Development Management (IDM) Tanzania. He also possesses an Intermediate Certificate in Cooperative Management from the Cooperative College Moshi, Tanzania.

Mr Wanna has extensive knowledge and experience in business management. He attended an Entrepreneurship Development and Venture Management program offered by Eastern and Southern Management Institute (Esami) at Arusha Tanzania in 1995. He also attended a course on agriculture cooperation and extension in the Israel in 1970. He worked for Financial Assurance to Micro Enterprise (FAME) as Support Trainer in the year 1994.

6.8 Profiles of Management Team

Name: Mr. Josephat Ndaskoi Makundi


Age: 60 years

Current Position: Managing Director of MCB PLC

working Experience:

Mr Makundi holds Higher National Diploma (HND) in business studies from South West London College UK, and an ordinary Diploma in Business Studies (OND) from South West London UK. He also attended an Advanced Credit Appraisal Techniques course offered by Institute of Bankers -London. Furthermore he is a member of Chartered Institute of Secretaries (CIS) London.

Mr Makundi was appointed to the position of Managing Director on January 2013. He had previously worked in countries of Ghana, Kenya, Liberia, Malawi, Zambia, Sierra Leone, Rwanda, Uganda, Mozambique and South Africa in various capacities at senior management level. His specific experience includes Housing Finance Company of Kenya as Advances Manager in 1974 to 1987, UN Habitat in Zambia as General Manager, Zambia Housing Development Fund in 1988 to 1991 as Chief Technical Advisor, and African Housing Fund in Nairobi as Fund Operations Manager. Further Mr Makundi held various consulting positions with Price WaterHouse Ltd since 2006. Other consulting assignments include but not limited to consultancy service on CRDB Bank Ltd’s Mortgage portifolio and UNDP/UNCDF Dare salaam on mapping out of Microfinance Institutions In Mwanza and Shinyanga regions Tanzania.

As Managing Director, Makundi is responsible for planning, directing, co coordinating and control of daily business activities of the bank. He reports to the Board of Directors on performance of the bank in general. His other responsibilities also entail assisting the Board of Directors with laying strategic plans and implementing the strategic plans and policies of the bank. He is also the spoke person of the bank.


Name: Ms Jemina Elia Uyagilo


Age: 29 years

Current Position: Chief Internal Auditor of MCB PLC

working Experience:

Jemina holds Advanced Diploma in Accountancy from the St Augustine University of Tanzania

Jemina was appointed to become the Chief Internal Auditor of Mwanza Community Bank Ltd on January 2013. She brings with her a significant working experience in the area of accounting and auditing from her past experience working for Victoria Saccos from the position of Internal Auditor and finally to the General Manager until her appointment with Mwanza Community Bank Ltd as Chief Internal Auditor. She also served as Secretary to the board of directors of the Victoria Saccos.

Jemina has carried out a number of researches including among others a research on effectiveness of internal audit in public sector, and a research on Importance of financial Institutions to Micro and Small and medium enterprises in Tanzania

As Chief Internal Auditor, Jemina is responsible for ensuring compliance with internal controls, organizational policies and regulations and safeguarding bank’s assets.

Name: Mr Gasper Nicodemus Mwanalyela


Age: 40 years

Current Position: Director of Human Resources & Legal Services of MCB PLC

working Experience:

Mr Mwanalyela holds Bachelor degree in Law (Hons) from the University of Dar es salaam, Tanzania. He has also a pool of professional experience in legal area acquired since 2005.

Mr Mwanalyela was appointed to the position of Director of Human resources and Legal services on January 2013. He previously worked as the Managing Partner at Right Mark Attorneys, a law firm based in Mwanza. His other professional experience ranges from working as a Legal and Security Officer for former Savings and Finance Bank, currently NIC Bank Limited, to a lawyer with Juristic Law Chambers at Mwanza city.

Mr Mwanalyela has a significant leadership experience ranging from Chairman to Tanganyika Law Society, Mwanza zone position held since 2012 to-date to Chairman to the Board of Directors of Kivulini, a non-governmental organization based in Mwanza. As director of human resources and legal services, he is responsible for implementing human resources policies and regulations, executing legal assignments for the bank and in-charge of all matters related to employees of the bank


Name: Mr David Fabian Lugwisha


Age: 59 years

Current Position: Director of Finance and Investments of MCB PLC

working Experience:

Mr Lugwisha is a holder of Certified Public Accountancy (CPA-T) and Postgraduate Diploma in Managerial Control and Management Information System from Maastricht School of Management in the Netherlands. He is also registered by National Board of Accountants and Auditors Tanzania as a Certified Public Accountant in Public Practice (CPAPP) also registered as Tax Consultant by Tanzania Revenue Authority.

Lugwisha was appointed to the position of Director of Finance and Investment on January 2013. His key previous experience includes Assistant Audit Manager at Tanzania Audit Corporation in 1977, Director of Finance and General Manager of DM Investments Group and Sahara Marketing Corporation respectively. Before his appointment with Mwanza Community Bank PLC, Lugwisha was the Managing Director of Continental Printing and Packaging Company Limited.

As Director of Finance and Investment, Mr Lugwisha is responsible for managing bank’s finances and Investments which includes investment and financial planning (budgeting), directing, coordinating, and control of bank’s finances and investments. He is also responsible for financial reporting and formulation of financial and investment policies. In addition he plays a role of financial advisor to the Managing Director


6.9 PROPOSED ORGANIZATION STRUCTURE

6.9

PR

OP

OS

ED

OR

GA

NIZ

AT

ION

ST

RU

CT

UR

E

An

nual G

ener

al M

eetin

g (A

GM)

Boar

d of

Dire

ctor

s

Audit a

nd Com

plianc

e Co

mm

ittee

Ex

ecut

ive Co

mm

ittee

Man

aging Di

rector

Chief I

nter

nal A

udito

r

Bran

ch M

anag

er

Cred

it M

anag

er

Dire

ctor

ate of

Finan

ce &

In

vestm

ents

Cred

it Offi

ces

Acco

unta

nt

Telle

rs

Custom

er Ser

vice

Adv

isor

Adm

inist

rativ

e Offi

ce

Ope

ratio

n Offi

cer

Driver

/Mes

seng

er

IT M

anag

er

Risk

Man

ager

Dire

ctor

ate of

Hum

an

Reso

urce

s & Leg

al Ser

vice

s M

arke

ting M

anag

er


7.0 CORPORATE DIRECTORY:

PRINCIPAL PLACES OF BUSINESS & REGISTERED OFFICE

THB/TRA BUILDING, GROUND FLOOR, POSTAL ROAD STREET, P.O.BOX 11120, MwANZA.

Certificate of Incorporation No: 84309 Registered on 1st March 2012.

COMPANY SECRETARY: MR GASPER MWANALYELA

RECEIVING BANK SHARE REGISTRAR

AZANIA BANK LTD,

P.O BOX 9271,

DAR ES SALAAM

Tel: +255 22 2117998-9

+255 22 2118025-6

AZANIA BANK LTD,

P.O BOX 9271,

DAR ES SALAAM

Tel: +255 22 2117998-9

+255 22 2118025-6


8.0 ExTRACTS OF ThE MEMORANDUM AND ARTICLES OF ASSOCIATION

8.1 Memorandum of Association

Under Article 3 of the Memorandum of Association, the objects for which the Bank is established includes: transaction of any and all lawful business for which companies may be licensed to undertake in Tanzania under the provisions of the Banking and Financial Institutions Act 2006 (the Bank Act) or any statutory modification or re-enactment therefore and the time being in force, and of the regulations, policies, orders and/or instructions made there under more particularly the bank have the following objectives;

(a) To carry on the business of Banking with a special focus in Microfinance in all its departments, branches and agencies including:

ØØ Receiving deposits of money, including savings and time deposits.ØØ Lending money to individuals, small scale business, industrial, commercial or

agricultural micro enterprises, saving and credit societies, Savings and credit Associations, nongovernmental organizations against borrower’s character and risk assessment such as prior credit performance, group guarantee or personal property or mortgages or real property, borrowing, raising or taking up money, accepting drafts, granting, borrowing, raising or taking up money, accepting drafts, granting and issuing letter of credit and circular notes, bills of exchange and other debt instruments. Providing money transfer services

ØØ Facilitate payment system through operating current account and other accounts for individuals, Government Departments, NGOs, SMEs, companies, religions organizations and other institutions.

ØØ Acquiring marketable instruments evidencing indebtedness of the government or of any person, firm, association or company, in the form of government securities, stocks, bonds, notes or debentures.

ØØ Investing in equity of other companies which are engaged primarily in activities allied or relating to banking.

ØØ Discounting or factoring commercial paper or accounts receivable.ØØ Buying and selling contracts, leases, chattel mortgages or other evidences of

indebtedness.ØØ Leasing of machines and equipments or other property.

Ancillary Objects:-

(a) To engage in the business of mortgage finance by granting loans or credit facilities for the purpose of the acquisitions, construction, improvement, development, alteration or adaptation for a particular purpose of land in Tanzania.

(b) To act as financial agent and to buy and sell by order of and for the account of its customers, shares, dept, instruments and all types of securities.

(a) To perform functions related to the registration of transfers and issue of


share certificates and similar documents.(b) To perform functions related to registration of transfer and issue of share

certificates and similar documents.(c) To make collection, payments and transmissions or remittances of money

for the account of others.(d) To receive in custody money, documents, and valuables and rent safety

deposit boxes for safeguarding of such effect.(e) To do all such other things and services as are considered or conducive to

the above objects or any of them as the company think fit for its normal activities and as they are incompatible with the business of Banks/financial instruments

8.2 Articles of Association

Share Capital and Variation Rights

Article 6: Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the Company may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the Company may from time to time by ordinary resolution determine.

Article 7: The Company may, by the special resolution create and sanction the issue of preference shares which are, or at the option of the Company are to be, liable to be redeemed, subject to and in accordance with the provisions of the Act and the Banking Act. The special resolution sanctioning any such issue shall also specify by way of an addition to the Articles the terms on which and the manner in which any such preference shares shall be redeemed.

Article 8: 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 the that class) may, whether or not the Company is being wound up, be varied with consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of that class. The provisions of the Article relating to General Meetings shall apply to such meetings, save that any holder of shares of the class present in person or by proxy may demand a poll.

Article 9: The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

Article 10: Subject to the provisions of section 57 of the Act, the Company shall not give, directly or indirectly (and whether by means of loan, guarantee, the provision of security or otherwise), any financial assistance for 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 Company, its Holding Company or its Subsidiary.


Article 12: (a) The Company may, subject to Article 39 and 65 hereof, allot, grant options over, or otherwise deal with or dispose of, any relevant Shares of the Company in accordance with the provisions of that Act to such persons and generally on such terms and conditions as the Directors thinks fit.

(b) The General authority conferred by paragraph (a) of this Article shall be conditional upon due compliance with Article 40 and 66 thereof.

(c) The Directors shall be entitled, under the General authority conferred by Paragraph (a) of this Article, to make, at any time before the expiry of such authority, any offer or agreement which will or might require relevant Securities of the Company to be allotted after the expiry of such authority.

Article 14: No person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or be required to recognize any equitable, contingent, future or potential interest in any share or any right whatsoever in respect of any share other than an absolute right to the entirely thereof in the registered holder, except as by the Article otherwise expressly provided or as required by Law.

Transfer of Shares

Article 27: 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 Rules and any arrangement agreed between the Company and the Stock Exchange.

Article 28: The Shares shall be transferred in accordance with the Rules and the Company shall accept for registration all transfers of Shares in the form prescribed by the Stock Exchange including the electronic transfer of Shares in the Central Depository System.

Article 29: In the case of a transfer of a share on a Stock Exchange, the lodgment of share certificates have been issued in respect of the Shares in Question.

Article 31: No Fee shall be charged by the Company in respect of the registration of any instrument of transfer or other document relating to or effecting the title to any Shares.

Article 32: The Company shall be entitled to destroy:(a) All instrument of transfer of Share which has been registered, and all other

documents on the basis of which any entry is made in the Register, at any time after the expiration of seven years from the date of registration or entry.

(b) All dividend mandates, variations or cancellation of dividend mandates, and notification of change of address, at any time after the expiration of seven years from the date of the cancellation;

(c) All share certificates which have been cancelled, at any time after the expiration of seven years from the date of the cancellation;

(d) All paid dividend warrants and cheques, at any time after the expiration of seven years from the date of actual payment;

(e) All proxy appointments which have been used for the purpose of a poll, at any


time after the expiration of seven years from the date of use; and(f) All proxy appointments which have been used for the purpose of a poll, at

any time after seven years from the end of the meeting to which the proxy appointment relates and at which no poll was demanded.

Article 33: It shall conclusively be presumed in favour of the Company that:(a) Every entry in the Register purporting to have been made on the basis of an

instrument of transfer or other documents destroyed in accordance with Article 32 above was duly and properly registered;

(b) Every instrument of transfer destroyed in accordance with Article 32 (a) above was a valid and effective instrument duly and property registered;

(c) Every share certificate destroyed in accordance with article 32(c) above was a valid effective certificate duly and properly cancelled; and

(d) Every other document destroyed in accordance with article 32 above was a valid and effective document in accordance with its recorded particulars in the book or records of the Company;

But(i) The provisions of the articles apply only to the destruction of a document

in Good faith and without notice of any claim(regardless of the parties) to which the document might be relevant;

(ii) Nothing in the article shall be construed as imposing on the company any liability in respect of the destruction of any document earlier than the time specified in Article 32 above or in any other circumstances which would not attach to the Company in the absence of the article and

(iii) Any reference in the Articles to the destruction of any documents includes a reference to their disposal in any manner including deletion

Transmission of Shares

Article 36: In the case of the death of a Member, the survivors, where the deceased was a joint holder, and the executors or administrators of the deceased, where he was a sole or only surviving holder, shall be the only persons recognized by the Central Depository System as having any title to his Shares, but nothing herein contained shall release the estate of deceased joint holder from any liability in respect of any Share jointly held by him.

Article 37: Any person become entitled to a Share in consequence of the death or bankruptcy of any Member may, upon producing such evidence of title as the Directors shall require, be registered himself as holder of the Share, or, subject to the provisions as to transfers herein contained) which shall apply as if the death or bankruptcy of the member had not occurred), transfer the same other person.

Article 38: A person entitled to a share by transmission shall be entitled to receive, and may give a discharge for, and dividends or other monies payable in respect of the Share, but he shall not entitled in respect of it to receive notice of, or to attend or vote at meetings of the Company or, save as aforesaid, to exercise any of the rights or


privileges of a Member, unless and until he shall become a Member in respect of the Share.

Alteration of Capital

Article 39: The Company may from time to time and in accordance with the provisions of article 65 hereof and the laws;(a) Considerate and divide its share capital into shares of a larger amount than its

existing shares;(b) Cancel any Shares not taken or agreed to be taken by any person and diminish

the amount of the shares so cancelled;(c) Divide its share capital or any part thereof into sales of smaller amount than is

fixed by its memorandum of Association by sub-division of its existing shares or any of them, subject nevertheless to the provisions of the Act; or

(d) Reduce its share capital or any capital redemption reserve or share premium account in any manner authorized and subject to the provisions of the Act.

Article 40: Subject to the Laws, the rules and the provisions of Article 65, hereof, the company in General Meeting may from time to time, whether all the Shares for the time being authorized shall have been issued or all the Shares for the time being issued shall have been fully called up or not, increase its share capital by the creation of new shares, such new capital to be of such amount and to be divided into shares of such respective amounts and (subject to any special rights for the time being attached to any existing class of Shares) to carry such preferential, deferred or other special rights(if any), or to be subject to such conditions or restrictions(if any), in regard to dividend, return of capital, voting or otherwise, as the general Meeting resolving upon such increase directs.

General Meetings

Article 48: The Company shall in each year hold a General Meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notice calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of the Company and that of the next: Provided that, so long as the Company shall hold its first annual general meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year. The annual general meeting shall be held at the Registered Office or at such other place in Tanzania as the Directors shall appoint.

Article 49: All General Meetings other than annual general meetings shall be called extraordinary general meetings.

Article 50: The Directors may, in accordance with the provisions of these Articles, whenever they think fit, convene an extraordinary general meeting. An extraordinary general meeting may also be convened on members requisition as provided by section 134 of the Act.


Votes of members

Article 66: Subject to any rights or restrictions for the time being attached to any class or classes of Shares, every Member shall have one vote for each Share of which it is the holder.

Article 67: Votes of Members in relation to a decision to approve any matters reserved in Articles 65 hereof shall be as provided therein.

Article 68: Without prejudice to the provisions of article 65 hereof, voting shall be by the following modes:

a) an ordinary resolution shall be passed by votes representing more than one-halt of the Shares held by the Members (including proxies) present at the General Meeting; and

b) a special resolution shall be passed by votes representing more than three fourths of the Shares held by the Members (including proxies) present at the General Meeting

Directors

Article 80: The number of the Directors shall not be less than five (5) and not more than nine (9).

Article 81: Every Member holding more than ten per cent (10%) of the Shares in the share capital of the Company shall be entitled to nominate one Director for every ten per cent (10%) of the Shares held by it. Members holding less than ten per cent (10%) of the Shares but more than five per cent (5%) of the Shares may group together and, upon such Members reaching an aggregate holding of ten per cent (10%) of the Shares, shall have the right to nominate a candidate for appointment as a Director.

Article 82: Subject to Articles 80 and 81, the Board shall appoint an independent firm of good repute which shall take such action as is reasonably necessary to identify and attract the best candidates for directorship for the remaining two positions in the Board by advertising in the news media of wide circulation within Tanzania. The firm shall, thereafter, make its recommendations to the Board for submission to the Members at the General Meeting at which the election of the Director is to be undertaken. The appoint firm shall, so far as possible; submit three proposed candidates for the position.


Article 83: The Members shall not nominate for directorship any individual who is a shareholder, a director or an employee of a direct competitor of the Company or an employee of the Company other than a member of the Management Team.

Article 84: (1) Subject to Article 80, the Board may consist of seven (7) or eight (8) Non-executive and one (1) or two (2) Executive Director(s). In the event of an executive director being appointed to be a member of the Board, such a member shall be the Chief Executive Officer. In the event no Executive Director is appointed to be a member of the Board, the Chief Executive Officer shall have a right to notice of all meetings of the Board and to attend and speak at all or any such meeting but shall not have any voting rights in the Board.

(2) The Directors shall elect one amongst their number to be the chairman of the Board and shall serve in a non-executive capacity and the Chairman aforesaid shall not have a casting vote. The Chairman shall be a Tanzanian with relevant experience.

Article 88: The Members shall have power at any time, and from time to time, to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, but so that the total number of Directors shall not at any time exceed the number fixed in accordance with the Articles. Any such appointment for filling in a vacancy shall be made by the Member who had initially nominated the Director who has ceased to be a Director or, in the case of a vacancy arising in the position of Director, proposed by an independent firm, such position shall be filled in accordance with the provisions of Articles 81 and 82.

Rotation of Directors

Article 93: After every one year, at the annual general meeting, one third of the Directors who have served on the Board for more than three years shall retire.

Article 94: The Directors to retire shall be those who have been longest in office since their last election, but, as between persons who became Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. A Director holding any executive office shall not be subject to retirement by rotationArticle 95: A retiring Director shall be eligible for re-election.

Alternate Directors

Article 98: (1) The Members having a right to nominate Directors as aforesaid shall be entitled to nominate an alternate Director of each Director they have appointed who shall act as the appointed Director’s alternative at any meeting in respect of which the appointed Director is absent. The alternate Director shall have the same rights and obligations as that of a Director and may, in particular,


vote in place of the Director. An alternate to a Director appointed pursuant to Article 82 hereof shall be nominated by the Board from the remaining two names presented to it for nomination of Director. The Board shall submit the name of alternate along with the name of the Director for appointment by the Members at the General Meeting.

(2) Notwithstanding the provisions of Article 98 (1) hereof, alternate Directors shall not be entitled to payment of Directors’ fee.

Powers and Duties of Directors

Article 102: (1) Subject to the provisions of the Act, a Director, notwithstanding his office, may contract with, be a party to, or otherwise be interested in any contract or proposed contract or arrangement with the company or in which the Company is otherwise interested and shall not be liable to account for any profit or other benefit derived by him by reason of any such matter and no such contract, proposed contract, transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit: Provided that the nature and extent of the interest of the Director be declared at a meeting of the Directors in full compliance with section 209 of the Act and be disclosed in the financial statements as part of related party transactions notwithstanding the provisions of sub-article (2) below.

(2) For the purposes of paragraph (1), a general notice given to the Directors at such meeting by a Director to the effect that he is a Member of a specified company or firm and is to be regarded as interested in any contract, transaction or arrangement which may, after the date of the notice, be made with that company or firm, or that he is to be regarded as interested in any contract, transaction or arrangement which may after the date of the notice be made with a specified person who is connected with him shall be sufficient declaration of interest in relation to any such contract, transaction or arrangement.

Proceedings of Directors

Article 104: Unless otherwise agreed between the Members at General Meeting, a meeting of the Board shall be held of less frequently than once every three (3) calendar months to review the Company’s business and progress and determine such other matters as may fall within the competence of the Board.

Article 105: Notice of at least fourteen (14) days shall be given to each Director of any Board meeting unless all Directors approve a shorter notice period.

Article 106: The quorum for Board meetings shall be five (5) Directors comprising at least one (1) Director appointed by each Member holding not less than twenty five percent


(25%) shareholding in the Company.

Article 111: Each Director at a meeting a Directors shall have one vote.

Dividends and Reserve Funds

Article 131: Subject to the provisions of the Act and the Banking Act, the Members shall, unless they agree otherwise in relation to any financial year, take all steps to ensure that the Company shall, on the recommendation of the Board and subject to its present and reasonably anticipated future requirements for working and expansion capital, and provided that the Company does not borrow funds in excess of its funding policy and gearing ratio from time to time to enable it to pay the dividend, declare and pay dividends in accordance with Article 133 hereof, in each of its financial years, which declaration and payment shall be made within 90 (ninety) days after the declaration of the dividends by Members at General Meeting.

Article 132: Subject to Article 131, the Company shall have a dividend policy of the Company which shall require a dividend cover of at least 3 (three) times, provided that such cover may be reduced in the event that the Company’s Tier 1 Capital ratio increases above 12% (twelve per centum) of its risk weighted assets.

Article 133: No dividend shall be declared by the Company:

(a) Which is prohibited by any legal commitment binding upon the Company from time to time or inconsistent with the provisions of the Companies Act;

(b) Which would render the Company unable to pay its debts as and when they fall due;

(c) The amount of which should reasonably be retained as a provision for corporation tax or other tax liabilities or for other actual liabilities of the company;

(d) Except out of the profits of the Company.Article 134: The Company shall maintain a stable dividend with a steady growth of yearly

dividend payments based on sustainable profit level and the Directors shall continue to review the dividend policy from time to time in light of the prevailing circumstances at such time and the need to plough back part of the profits in an effort to fund the Company investment program.

Article 136: The Directors may, before recommending any dividend, set aside of the profits of the Company such sums as they think proper to a reserve fund or reserve account, which shall at the discretion of the Directors, subject to the approval of the General Meeting, be applicable for any purpose for which the profits of the Company may lawfully be applied.


9.0 APPLICATION PROCEDURES & TERMS AND CONDITIONS

9.1 Time Table

ØØ Application for the shares will be open at 9am on 1st October 2013 and will close at 4pm on 31st of October 2013.

ØØ Application for the shares must be received by any of the Authorized Receiving Agents listed in section 16.2 below, by not later than 4pm on 31st of October 2013.

ØØ Application has been made to list all the shares on the Dar Es Salaam Stock Exchange through the Enterprise Growth Market window.

ØØ Persons interested to apply for the shares in the Bank must complete the appropriate Form accompanying this Prospectus and return it to one of the Authorized Receiving Agents listed in section 7.14.2

ØØ Dealings in Mwanza Community Bank PLC shares are expected to commence on 13th December, 2013.

9.2 Acceptance and Settlement

Arch Financial & Investment Advisory Ltd who are the Lead Advisors and Mwanza Community Bank PLC reserve the right to reject any application not complying in all respects with the terms and conditions spelt out in this Prospectus or if any Application Form is not completed as required subject to CMSA approval.

Upon acceptance of any application, the Bank and the Lead Advisors will as soon as possible allot and thereafter the Registrar will transfer the ordinary shares concerned into the name of the applicant.

Applicants will receive allotted offer shares in electronic form by way of crediting their CDS Accounts with the allocated number of offer shares. If the applicant has indicated in the appropriate block on the Application Form that he wishes to collect the CDS Receipt or any refund cheque, the CDS Receipt and refund cheques will be forwarded to the Authorized Receiving Agent through whom his Application Form was submitted. No CDS Receipt or refund cheques will be released by the Authorized Receiving Agents at which the application was lodged unless the receipted and numbered original receipt/counterfoil of the Application Form is produced. Otherwise share certificates and refund cheques will be dispatched by ordinary mail to the postal addresses set out in the Application Forms at the applicant’s risk. Interest will not be paid on any amounts refunded or indeed deposited at the time of application.

By signing the Application Form, an applicant agrees to accept transfer of such number of shares (not exceeding the number applied for) as shall be allotted to the applicant upon the terms and conditions of the Prospectus and subject to the Company Memorandum and Articles of Association and agrees that the Bank may enter the applicant’s name in the register of members of the company as the holder of such shares.

In the event of a discrepancy between the number of shares applied for and the value thereof, the Lead Advisors and the Bank may, in their discretion, adjust the number of shares to correspond


with the value received for their application.

9.3 Governing Laws

Any contract resulting from acceptance of any application to purchase shares of Mwanza Community Bank PLC shall be governed by and construed in accordance with Tanzania Laws.

10.0 LEGAL OPINIONS

Our Ref: K & M/MCB PLC /LOP/____/2013

Date: 5th August, 2013

Directors,

Mwanza Community Bank PLC,

THB/TRA Building,

Ground Floor, Postal Road Street,

Nyamagana District,

P.O. Box 11120,

MWANZA

RE: MwANZA COMMUNITY BANK PLC- ShARE CAPITAL MOBILIZATION FROM

ThE PUBLIC ThROUGh ThE CAPITAL MARKETS SYSTEM (ENTERPRISE

GROwTh MARKET)

1.0 INTRODUCTION

1.1 We, the law firm of K&M (Advocates), a Firm of advocates duly licensed to practice law in the United Republic of Tanzania have been engaged as the Legal Advisor for the Mwanza Community Bank PLC (“MCB”) in connection with the process of mobilizing share capital from the public through the capital markets system (Enterprise Growth Market) in Tanzania.

1.2 The MCB has instructed K&M (Advocates) to prepare a legal opinion for inclusion in the prospectus to be made available to the general public in connection with the above initial public offering.


2.0 SOURCES OF INFORMATION, DOCUMENTS, AND ThE LAw ExAMINED:

The Opinion given herein is based partly on statutory and non-statutory records of the Company availed to us by the Company, records available at the Registrar of Companies, and specific legislation governing the Company, as a Public Limited Company ( PLC) on the initial public offering exercise. The documents examined to our satisfaction include the originals and certified copies of the following:-

1.1 The Original Certificate of Incorporation of the Company; Tax Identification Number(TIN), VAT Registration Number(VRN) and any other relevant incorporation document;

1.2 Certificate of Change of Name from Mwanza Bank Limited to Mwanza Community Bank PLC dated 5th July, 2013;

1.3 The Original Memorandum and Articles of Association of the Private Company;

1.4 The Original Memorandum and Articles of Association of the Public Company;

1.5 Minutes of the meetings of the Board of Directors and Shareholders;

1.6 A copy of the Resolution of the Extraordinary General Meeting of the Company dated 27th February, 2013 which among other things resolved to change the company name from the current name Mwanza Bank Limited to Mwanza Community Bank Limited.

1.7 A copy of the Board Resolution to change a company from a private company to a Public Limited Company(PLC)

1.8 The Company’s Register of Members and Directors;

1.9 Copies of Annual Returns of the Company filed at BRELA;

1.10 Original copies of Contracts that have been entered into by the company including

§All Employment Contracts

§Consultancy Agreements.

o Consultancy Agreement Between Victoria Saccos Limited and MF Services Limited dated 20th June, 2011

o An Agreement between Mwanza Community Bank Limited and Arch Financial & Investment Advisory Ltd on the Appointment of Nominated Advisors dated 14th December, 2012.

§A Lease agreement for rented business premised situated at THB/TRA Building, Ground floor, Postal Road Street, Nyamagana District, Mwanza


Tanzania

1.11 Copies of all letters to and from the Bank of Tanzania on the Application for Banking License – Mwanza Community Bank Limited- Eg Letter dated 11th September, 2012.

1.12 Letters to Tanzania Revenue Authority dated 19th July, 2011 on the Appointment of Auditors and Tax Consultant and 22nd March, 2012 on change of Business Name,

1.13 A copy of the Prospectus.

1.14 We have also made such enquiries and examined such records as we have considered appropriate for the purpose of providing this opinion.

2.0 ASSUMPTIONS

Based on these documents, we assume that:-

2.1 All the information supplied to us by the MCB, their respective officers, advisers, and all other authorities consulted are bona fide, true, accurate, and current;

2.2 Copies of all the documents supplied to us are complete, authentic and up to date, and that they conform to the originals;

2.3 That insofar as any obligation under any of the documents referred to above is to be performed in any jurisdiction outside Tanzania, its performance will not be illegal or ineffective by virtue of the law of that jurisdiction;

2.4 The person or persons who signed the Documents are the person(s) who were authorized to do so and are genuine.

3.0 OPINION

Subject to the above, other matters not disclosed to us, and qualifications set forth herein, we, K & M Advocates, a Firm of Advocates duly licensed to practice law in the United Republic of Tanzania, and retained by the MCB to opine on this matter, are of the following opinion:

3.1 We confirm that the Company is a public company limited by shares and duly incorporated in Tanzania Mainland under the Companies Act, Cap. 212 (Revised Edition, 2002).

3.2 We confirm that the Company has the capacity power and authority to execute, deliver and exercise its rights and perform its obligations pursuant to the initial public offer, and that such execution and performance have been duly authorised in compliance with all requisite corporate authorizations of the Company.

3.3 We confirm that the Company has no loans on its own account.3.4 We confirm that subject to the material contracts disclosed herein, the Company

has not entered into any material contracts (pursuant to paragraph 9 of Part II of the Schedule to the Capital Markets & Securities (Prospectus Requirements) Regulations, material contracts are defined as contracts not being entered into in the ordinary course of business entered into within two years immediately preceding


the publication of the prospectus).

No.

DATE

(D/M/Y)

PARTIES

(OThER ThAN

MCB)

TYPE OF

CONTRACT

VALIDITY CONSIDERATION

15/02/2012 The Regional Manager- Tanzania Building Agency Mwanza

L e a s e Agreement

Valid up to 20th June 2013 subject to renewal.

TZS 2,090,720.00

per month / or

TZS 25,088,640.00 per annum

3.5 We confirm that is not subject to any material litigation and or material litigious claims, and/or actions involving the Company.

3.6 We confirm that no winding-up order has been issued against the company or Statutory Manager or Liquidator appointed in respect of the company.

3.7 We confirm that none of the advisors to the initial public offer has any share(s) in the company as of the date of preparing the Prospectus.

3.8 We confirm that there is no other agreement or arrangement concerning this initial public offer, save as disclosed in this initial public offer.

3.9 We confirm that in addition to the above all other authorizations, approvals, consents, licences, exemptions, filings or registration of or with any governmental or public bodies or authorities of or in Tanzania required in connection with the initial public offer have been obtained in proper form and are in full force and effect.

3.10 Based upon and subject to the aforesaid, and without prejudice to the generality of the matters set out hereinabove, we are also of the opinion that:

(i) The Prospectus has been dated in accordance with section 46 of the Companies Act, Cap. 212 (Revised Edition, 2002) (“Companies Act”);

(ii) A copy of the Prospectus duly executed, together with the documents required under section 49 of the Companies Act have been delivered to the Registrar of Companies for registration, and a statement to such effect appears on the face of the Prospectus;

(i) The Prospectus includes statements made by Diamond Financial Services (Reporting Accountants) and ourselves (Legal Advisors), all of whom are experts for the purposes of section 48 of the Companies Act. In accordance with the said provision of the law, Diamond Financial Services and ourselves have given, and have not before the delivery of a copy of this Prospectus for registration withdrawn our consent to the issue of the Prospectus with the statements included in the form and context in which they are included;


(ii) An application has been duly made to, and approval granted by the Capital Markets and Securities Authority in respect of the Initial public offer pursuant to section 131 of the Capital Markets and Securities Act, Cap. 79 (Revised Edition, 2002);

(iii) In addition to the information required to be included under the Companies Act, the Prospectus includes such information as investors would reasonably require and expect to find herein, for the purpose of making an informed assessment of:(a) the assets and liabilities, financial position, profits and losses,

prospects of the Company; and(b) The rights attaching to those securities.

4.0 QUALIFICATION

This opinion is given on the strength of the documents supplied to us and our understanding of the laws of Tanzania and should not be construed in the meaning of any other jurisdiction.

5.0 CONSENT CLAUSE

We hereby consent to the inclusion of this legal opinion in the Prospectus to be issued by Mwanza Community Bank Public Limited Company, in the form and text in which it is included.

Yours Sincerely,

Silvanus Benedict Mlola,

Partner,

K & M (Advocates),

3rd Floor, TAC Associate Building,

Plot No. 114, Malik Street,

P.O. Box 71394,

Dar Es Salaam,

Tanzania.


10.1 Document available for inspection

Copies of the following documents may be inspected at Mwanza Community Bank PLC business office at THB/TRA Building, Ground Floor Postal Road Street Mwanza during usual working hour from 0900 on1st October, 2013 up to1600 on 31st October, 2013

a) The memorandum and Article of association

b) Feasibility Study for establishment of Mwanza Community Bank PLC

c) Five Year Business Plan

d) Signed Legal Opinion by legal advisor K &M Advocates

e) Signed Accountant Report Diamond Financial Services

f) The approval for offer for subscription, issue of shares and listing of share from the CMSA and DSE and

g) Written consent of Nominated Advisor, Reporting Accountant and Legal Advisors named in this prospectus


11.0 INDEPENDENT REPORTING ACCOUNTANT’S REPORT

11.1 REPORTING ACCOUNTANT REPORT

THE DIRECTORS, MWANZA COMMUNITY BANK PLC, P. O. BOX 11120, MWANZA, TANZANIA

Dear Sir/Madam;

REPORTING ACCOUNTANT’S REPORT ON MwANZA COMMUNITY BANK PLC

We hereby submit our Report in accordance with the requirements of the Capital Markets and Securities (Prospectus Requirements) Regulations, 1997 (hereafter referred to as “the Regulations”). We understand that Directors of Mwanza Community Bank PLC are responsible for the Information Memorandum, assumptions and for all information contained therein, and for the financial statements and information to which this Accountant’s Report relates and from which it has been prepared.

A) FINANCIAL INFORMATION

MCB is a new setup which is looking forward to raise capital through EGM. The bank is yet to be operational; as a result, there are no audited financial statements to review. We have instead reviewed the financial projections prepared by the Consultant and we express no audit opinion on the projections. We have also applied knowledge obtained from carrying out review procedures on the projected financial statements.

Our comments after the review are provided below.

B) REvIEw PROCEDURES

We have conducted a review of MCB projected financial statements covering five years. We conducted our review in accordance with the International Standard on Review Engagements 2400, Engagements to Review Financial Statements (“ISRE 2400”). The objective of the review engagement is to enable us to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to our attention that causes us to believe that projected financial statements reflect realistic and robust assumptions and they are achievable to a high degree. The review engagement standard requires that we plan and perform the review with an attitude of professional skepticism, and obtain sufficient evidence


primarily through enquiry and analytical procedures to be able to draw conclusions.

Our review procedures were limited primarily to inquiries directed to Mwanza Community Bank PLC’s management and founding shareholders that we considered necessary.

Since this is a new setup, we limited our review to projections, hence being substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. However based on our review, nothing has come to our attention that causes us to believe that projected financial statements of Mwanza Community Bank PLC are far from being realized.

C) CONSENT

In our opinion, the assumptions underlying the preparation of the projected financial statements are realistic. Furthermore, the projected financial information has been properly complied on the basis stated and the basis is consistent with the accounting policies of the Bank.

Actual results are likely to be different from forecast since anticipated event frequently do not occur as expected and the variation may be material

Further, we emphasis that the forecast information is not intended to, and does not provide all the information and disclosures necessary to give true and fair presentation of result of the operation of the Bank in accordance with International Financial Reporting Standards

Yours faithfully

Signed: Octavian S. Kessy-ACPA (T)


11.2 PROJECTED FINACIAL STATEMENTS

11.2.1 ASSUMPTIONS UNDERLYING PREPARATIONS OF FINANCIAL PROJECTIONS

The financial projections have been prepared based on the following assumptions

1. Capital: The bank shall start operations with a paid up capital of TZS 2.5 billion.

2. Pre-operational Costs and expenses: These are costs associated with having the bank formally licensed, refurbishment of business premises including fixed assets, staff recruited and properly trained, and the necessary capital mobilized to enable the bank to start operations.

Pre Operations Costs

Details Amount (TZS)Lease hold improvement 80,000,000Computers, printers and other accessories 40,000,000

Air condition system 30,000,000Generator 50,000,000

Office Furniture 50,000,000

Office machines and equipment 36,000,000Motor Vehicle 50,000,000

IT system 200,000,000

ATM 100,000,000Security systems ( including safes) 65,000,000

Total

701,000,000 Pre-operational expenses

Job title Monthly rate

Duration in

months

Number of

employees Amount (TZS)

Managing Director 5,000,000 2 1 10,000,000

Finance Manager 3,000,000 2 1 6,000,000

Human Resource

Manager

3,000,000

Marketing Manager 3,000,000

Accountant 1,500,000 1 1 1,500,000

Credit Manager 3,000,000 1 1 3,000,000

IT Manager 2,800,000 1 1 2,800,000

Internal Auditor 3,000,000 1 1 3,000,000

Tellers 800,000 1 3 2,400,000

Credit Officers 900,000 1 2 2,400,000


Job title Monthly rate

Duration in

months

Number of

employees Amount (TZS)Administrative

Assistant 700,000 2 1 1,400,000Customer service

Advisors 850,000 1 2 1,700,000

Operations Officer 1,700,000 1 1 1,700,000

Driver/Massager 500,000 1 1 500,000

Total 17 36,400,000

3. Staffing: The bank will start with 17 employees. Subsequent recruitments will be related to opening of new branches, and a staff turnover estimated at 5%.

4. Staff costs: It has been projected that five core staff shall be in place three months before the banks open its doors to the public, while an additional 12 shall be in place one month before operations starts. Costs of staff at this stage are part of the pre-operations costs. The staff costs also include training and orientation of staff for on the banking operation

5. The staff cost will be increased by 5% annually

6. Cash: Cash in vaults will not exceed 3% of total deposits

7. Statutory Minimal Reserve at 10% of the deposit

8. Lending ratio: Any time the amount lent out will not exceed the ratio of 60% of deposits plus 40% of the paid up capital

9. Interest expense: The following rates have been used in calculating interest expenses:

Type of account Interest rate

Savings account (standard) 5%Savings account-Linked to loans 5%Time deposit 7%Premium account 8%Agreed account 10%Deposit from SACCOS 6%

10. Dividends: The Board of Directors will declare dividends depending on the performance of the Bank and shareholder approval.

11. Depreciation: The following rates have been applied to compute depreciation expenses


Item Applicable Rate

%Computer 33.7Equipment 12.5Furniture & Fittings 12.5Intangible Assets 33.7Motor Vehicles 25Office Equipment 12.5

11.2.2 CONDENSED PROJECTED COMPREhENSIvE INCOME STATEMENT FOR

MwANZA COMMUNITY BANK PLC

Year 1Financial Income TZS

Interest Loan Portfolio 273,274,544 Commission Income 51,733,178Credit Insurance Income 10,089,621Other Earned Income 8,650,000Financial Revenue from Investments 66,167,541

Total Income 409,914,884

Financial Expenses

Interest paid on Savings deposits 44,657,404

Total Financial Expenses 44,657,404

Net Financial Income 365,257,480

Provision for loan Losses 49,282,681

Net Financial Margin 315,974,799

Operating Cost

Salaries & Benefit 509,472,000Other operational Expenses 168,840,000

Flotation Cost 250,000,000

Depreciation 135,948,715

Total Operation Cost 1,064,260,715

Net Profit Before Taxation (748,285,916)

Taxation -

Net Profit After Taxation (748,285,916)

Proposed Dividend -

Net Profit After Taxation and Dividend (748,285,916)


11.2.3 PROJECTED STATEMENT OF FINANCIAL POSITION OF MwANZA COMMUNITY

BANK PLC

Current AssetsYear 1

TZS

Cash and cash equivalent 584,563,285Preliminary Expenses 72,772,069Investment (Savings & Shares) 211,500,000Portfolio Outstanding 1,549,475,856Less Provision (30,989,520)Short-Term Investment 1,184,114,508Saving Reserves 214,894,795

Total Current Assets 3,786,330,994

Fixed Assets

Computer Set 28,058,160Equipments 132,668,375Furniture & Fittings 45,214,750Intangible Assets 132,600,000Motor Vehicles 37,500,000Office Equipments 114,625,000

Total Fixed Assets 490,666,285

Total Assets 4,276,997,279

Equity and Liabilities

Share capitalIssued Share 2,815,049,000Retained Earning (733,457,197)

Shareholders’ Funds 2,081,591,803

Current Liabilities

Provisional for Taxation -Creditors 46,457,524Saving Deposits 2,148,947,952

Total Current Liabilities 2,195,405,476

Total Equity & Liabilities 4,276,997,279


11.2.4 PROJECTED CASh FLOw STATEMENT OF MwANZA COMMUNITY BANK PLC Year 1

Cash flow from Operating Activities TZS

Financial Income 409,914,884(Increase)/Decrease on Portfolio Outstanding (1,549,475,856)Increase/(Decrease) on Provision on Portfolio 30,989,520(Increase)/Decrease on Short-Term Investments (1,184,114,508)(Increase)/Decrease on Saving Reserves (214,894,795)Interest Paid on Savings Deposit (44,657,404)Provision for loan Losses (49,282,681)Increase/Decrease) on Savings Deposit 2,148,947,952Operation Expenses (1,064,260,715)Increase/)Decrease) on Creditors-Victoria SACCOS -Cash flow from Operating activities (1,516,833,604)Adjusted for Non-Cash ItemDepreciation 135,948,715Adjusted Cash flow (1,380,884,889)Collection from Public Issues of Share 2,500,000,000Acquisition of Plant, Property and Equipment (621,000,000)Taxation -Cash & Cash Equivalent at the beginning 86,448,174Cash & Cash Equivalent at the end 584,563,285


11.2

.5 w

OR

KIN

G C

AP

ITA

L R

EP

OR

T

AS

SU

MP

TIO

N, A

NA

LY

SIS

OF

INC

OM

E S

TA

TE

ME

NT

AN

D M

AN

AG

EM

EN

T S

UM

MA

RY

64

11.2

.5 W

OR

KIN

G C

AP

ITA

L R

EP

OR

T

ASS

UM

PTIO

N, A

NA

LYSI

S O

F IN

CO

ME

STA

TEM

ENT

AN

D M

AN

AG

EMEN

T SU

MM

AR

Y

Ass

um

pti

on

Aut

hori

zed

Shar

e C

apita

l30

,000

,000

,000

Val

ue p

er S

hare

500

Issu

ed a

nd P

aid

up S

hare

s63

0,09

8

Sh

are

Cap

ital r

equi

red

for

BOT

licen

sing

2,50

0,00

0,00

0

Num

ber

of S

hare

s fo

r BO

T Li

cens

ing

5,00

0,00

0

Num

ber

of S

hare

s to

be

Issu

ed to

Pub

lic5,

000,

000

Es

tmat

ed F

loat

ing

Cos

t10

%IP

O C

ost

550

Prop

osed

Div

iden

d pe

r Sh

are

28

Star

ting

Dat

eJa

n-14

Yea

r to

Dec

-14

Dec

-15

Dec

-16

Dec

-17

Dec

-18

An

uu

al T

otal

Rev

enu

e40

9,91

4,88

4

1,24

7,30

3,99

0

1,74

2,22

1,76

6

2,59

5,93

7,80

1

3,24

0,37

5,67

3

An

alys

is o

f In

com

e S

tate

men

tYe

ar 1

Year

2Ye

ar 3

Year

4Ye

ar 5

Perf

orm

ing

Ass

ets

3,20

1,76

7,70

9

6,

414,

421,

198

9,74

4,68

2,25

1

14,6

84,4

07,0

36

20

,918

,213

,329

Man

agem

ent S

um

mar

yA

vera

ge P

erfo

rmin

g A

sset

s3,

201,

767,

709

4,80

8,09

4,45

3

8,

079,

551,

724

12

,214

,544

,643

17,8

01,3

10,1

83

1

23

4O

ngoi

ngFr

ee C

ash

Flow

584,

563,

285

59

5,65

3,52

2

662,

018,

523

73

7,47

4,50

4

830,

478,

955

Gro

ss R

etur

n on

Ave

rage

Per

form

ing

Ass

ets

13%

26%

22%

21%

18%

- Fi

nanc

ing

Cos

ts *

1%4%

4%4%

4%Te

rmin

al V

alue

874,

188,

373

= G

ross

Fin

anci

al M

argi

n11

%22

%17

%17

%14

%-

Loan

Los

s Pr

ovis

ions

*2%

1%1%

1%0%

Tota

l Fl

ows

584,

563,

285

59

5,65

3,52

2

662,

018,

523

73

7,47

4,50

4

1,70

4,66

7,32

8

= N

et F

inan

cial

Mar

gin

10%

21%

17%

17%

14%

- O

pera

ting

Cos

ts *

33%

20%

13%

9%7%

NPV

=62

3,31

0,34

9

- T

axes

Pai

d0

0%1%

2%2%

= O

pera

ting

Mar

gin,

pre

-tax

(RO

A) *

-23%

1%2%

5%5%

IRR

on

Equi

ty -

Adj

ustm

ents

to O

pera

tions

0% =

Net

Mar

gin,

pre

-tax

(Adj

uste

d R

OA

) *-2

3%1%

2%5%

5%Eq

uity

Cas

hflo

w31

5,04

9,00

0-

00

087

4,18

8,37

3

Ope

ratio

nal S

usta

inab

ility

*35

%10

4%11

7%15

2%15

8%Eq

uity

IRR

29%

Fina

ncia

l Sus

tain

abili

ty *

Adj

. Pre

-tax

Ret

urn

on E

quity

(AR

OE)

-36%

2%11

%30

%31

%Eq

uity

Mul

tplie

r2.

055

3.47

24.

602

5.24

65.

667

Qui

ck R

atio

1.7

1.3

1.3

1.2

1.2

Pric

e Ea

rnin

g R

atio

17.9


65

Fixe

d A

sset

sC

ost

Add

ition

Tota

lLi

feTZ

SU

SDC

ompu

ters

2,32

0,00

0

40

,000

,000

42

,320

,000

Equi

pmen

t1,

621,

000

150,

000,

000

151,

621,

000

4Fu

rnitu

re &

Fitt

ing

1,67

4,00

0

50

,000

,000

51

,674

,000

4In

tang

ible

Ass

ets

200,

000,

000

200,

000,

000

5M

otor

Veh

icle

s50

,000

,000

50

,000

,000

5O

ffic

e Eq

uipm

ents

131,

000,

000

131,

000,

000

Add

ition

al A

sset

s Ye

ar 2

-

5Le

ss:A

ccum

ulat

ed D

epre

ciat

ion

Tot

al5,

615,

000

621,

000,

000

626,

615,

000

Fin

anci

ng

Str

uct

ure

Equi

ty-

2,81

5,04

9,00

0

10

0%Lo

an-

0%

Tota

l Fin

anci

ng2,

815,

049,

000

100%

Cor

pora

tion

Tax

Rat

e-Li

sted

25

%

Cos

t of E

quity

100%

WA

CC

100%

Con

tinue

d G

row

th r

ate

Yr

5+5%

Acq

uisi

tion

of N

ew


Tw

EL

vE

MO

NT

h O

PE

RA

TIO

NA

L F

OR

EC

AS

T

66

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Jun

-14

Jul-

14A

ug-

14S

ep-1

4O

ct-1

4N

ov-1

4D

ec-1

4Y

ear

toFi

nan

cial

In

com

eD

ec-1

4In

tere

st lo

an p

ortf

olio

22,7

72,8

79

22

,772

,879

22,7

72,8

79

22

,772

,879

22,7

72,8

79

22

,772

,879

22

,772

,879

22,7

72,8

79

22

,772

,879

22,7

72,8

79

22

,772

,879

22,7

72,8

79

27

3,27

4,54

4

C

omm

isss

ion

Inco

me

4,31

1,09

8

4,31

1,09

8

4,31

1,09

8

4,

311,

098

4,31

1,09

8

4,31

1,09

8

4,

311,

098

4,

311,

098

4,

311,

098

4,

311,

098

4,

311,

098

4,

311,

098

51

,733

,178

Cre

dit I

nsur

ance

Inco

me

840,

802

840,

802

840,

802

84

0,80

2

840,

802

840,

802

84

0,80

2

84

0,80

2

84

0,80

2

84

0,80

2

84

0,80

2

84

0,80

2

10

,089

,621

Oth

er E

arne

d In

com

e72

0,83

3

72

0,83

3

72

0,83

3

720,

833

72

0,83

3

72

0,83

3

720,

833

720,

833

720,

833

720,

833

720,

833

720,

833

8,65

0,00

0

Fina

ncia

l Rev

enue

from

Inve

stm

ent

5,51

3,96

2

5,51

3,96

2

5,51

3,96

2

5,

513,

962

5,51

3,96

2

5,51

3,96

2

5,

513,

962

5,

513,

962

5,

513,

962

5,

513,

962

5,

513,

962

5,

513,

962

66

,167

,541

Tot

al R

even

ue

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

40

9,91

4,88

4

Fin

anci

al E

xpen

ses

Inte

rest

on

Fees

on

borr

owed

fund

s-

-

-

-

-

-

-

-

-

-

-

-

In

tere

st p

aid

on s

avin

gs d

epos

it3,

721,

450

3,

721,

450

3,

721,

450

3,72

1,45

0

3,

721,

450

3,

721,

450

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

44,6

57,4

04

O

ther

Fin

ncia

l exp

ense

s

Tot

al F

inan

cial

Exp

ense

s3,

721,

450

3,

721,

450

3,

721,

450

3,72

1,45

0

3,

721,

450

3,

721,

450

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

3,72

1,45

0

44,6

57,4

04

Net

Fin

anci

al I

nco

me

30,4

38,1

23

30

,438

,123

30,4

38,1

23

30

,438

,123

30,4

38,1

23

30

,438

,123

30

,438

,123

30,4

38,1

23

30

,438

,123

30,4

38,1

23

30

,438

,123

30,4

38,1

23

36

5,25

7,48

0

Prov

isio

n fo

r lo

an lo

sses

4,10

6,89

0

4,10

6,89

0

4,10

6,89

0

4,

106,

890

4,10

6,89

0

4,10

6,89

0

4,

106,

890

4,

106,

890

4,

106,

890

4,

106,

890

4,

106,

890

4,

106,

890

49

,282

,681

Net

Fin

anci

al M

argi

n26

,331

,233

26,3

31,2

33

26

,331

,233

26,3

31,2

33

26

,331

,233

26,3

31,2

33

26,3

31,2

33

26

,331

,233

26,3

31,2

33

26

,331

,233

26,3

31,2

33

26

,331

,233

315,

974,

799

Op

erat

ion

g C

osts

Bra

nch

Exp

eses

-

Sa

lari

es &

Ben

efits

-

-

-

-

-

-

-

-

-

-

-

-

-

Oth

er o

pera

tiona

l exp

ense

s-

Hea

d O

ffic

e E

xpen

ses

-

Sa

lari

es &

Ben

efits

42,4

56,0

00

42

,456

,000

42,4

56,0

00

42

,456

,000

42,4

56,0

00

42

,456

,000

42

,456

,000

42,4

56,0

00

42

,456

,000

42,4

56,0

00

42

,456

,000

42,4

56,0

00

50

9,47

2,00

0

Fl

otat

ion

Cos

t25

0,00

0,00

0

25

0,00

0,00

0

O

ther

ope

ratio

nal e

xpen

ses

14,0

70,0

00

14

,070

,000

14,0

70,0

00

14

,070

,000

14,0

70,0

00

14

,070

,000

14

,070

,000

14,0

70,0

00

14

,070

,000

14,0

70,0

00

14

,070

,000

14,0

70,0

00

16

8,84

0,00

0

D

epre

ciat

ion

11,3

29,0

60

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

135,

948,

715

Tot

al O

per

atio

n C

ost

317,

855,

060

67,8

55,0

60

67

,855

,060

67,8

55,0

60

67

,855

,060

67,8

55,0

60

67,8

55,0

60

67

,855

,060

67,8

55,0

60

67

,855

,060

67,8

55,0

60

67

,855

,060

1,06

4,26

0,71

5

-

-

Net

Op

erat

ion

g In

com

e b

efor

e T

axat

ion

(291

,523

,826

)

(41,

523,

826)

(41,

523,

826)

(4

1,52

3,82

6)

(41,

523,

826)

(4

1,52

3,82

6)

(41,

523,

826)

(41,

523,

826)

(41,

523,

826)

(41,

523,

826)

(41,

523,

826)

(41,

523,

826)

(748

,285

,916

)

Taxa

tion

-

N

et P

rofi

t Aft

er T

ax(2

91,5

23,8

26)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(41,

523,

826)

(4

1,52

3,82

6)

(41,

523,

826)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(4

1,52

3,82

6)

(7

48,2

85,9

16)

-853

%-1

22%

-122

%-1

22%

-122

%-1

22%

-122

%-1

22%

-122

%-1

22%

-122

%-1

22%

-183

%

OP

ER

AT

ION

AL

FO

RE

CA

ST

FO

R Y

EA

R E

ND

ED

DE

CE

MB

ER

201

4

PR

OP

OS

ED

MW

AN

ZA

CO

MM

UN

ITY

BA

NK

PL

CP

. O. B

ox 1

1120

, MW

AN

ZA


67

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Jun

-14

Jul-

14A

ug-

14S

ep-1

4O

ct-1

4N

ov-1

4D

ec-1

4Fi

xed

Ass

ets

Com

pute

rs2,

320,

000

41,1

31,5

13

39

,943

,027

38,7

54,5

40

37

,566

,053

36,3

77,5

67

35

,189

,080

34

,000

,593

32,8

12,1

07

31

,623

,620

30,4

35,1

33

29

,246

,647

28,0

58,1

60

28

,058

,160

Equi

pmen

t1,

621,

000

150,

041,

615

148,

462,

229

146,

882,

844

14

5,30

3,45

8

143,

724,

073

14

2,14

4,68

8

140,

565,

302

138,

985,

917

137,

406,

531

135,

827,

146

134,

247,

760

13

2,66

8,37

5

13

2,66

8,37

5

Fu

rnitu

re &

Fitt

ing

1,67

4,00

0

51

,135

,729

50,5

97,4

58

50

,059

,188

49,5

20,9

17

48

,982

,646

48,4

44,3

75

47,9

06,1

04

47

,367

,833

46,8

29,5

63

46

,291

,292

45,7

53,0

21

45

,214

,750

45,2

14,7

50

In

tang

ible

Ass

ets

-

194,

383,

333

188,

766,

667

183,

150,

000

17

7,53

3,33

3

171,

916,

667

16

6,30

0,00

0

160,

683,

333

155,

066,

667

149,

450,

000

143,

833,

333

138,

216,

667

13

2,60

0,00

0

13

2,60

0,00

0

M

otor

Veh

icle

s-

48

,958

,333

47,9

16,6

67

46

,875

,000

45,8

33,3

33

44

,791

,667

43,7

50,0

00

42,7

08,3

33

41

,666

,667

40,6

25,0

00

39

,583

,333

38,5

41,6

67

37

,500

,000

37,5

00,0

00

O

ffic

e Eq

uipm

ents

-

129,

635,

417

128,

270,

833

126,

906,

250

12

5,54

1,66

7

124,

177,

083

12

2,81

2,50

0

121,

447,

917

120,

083,

333

118,

718,

750

117,

354,

167

115,

989,

583

11

4,62

5,00

0

11

4,62

5,00

0

Tot

al

5,61

5,00

0

61

5,28

5,94

0

60

3,95

6,88

1

59

2,62

7,82

1

581,

298,

762

56

9,96

9,70

2

558,

640,

643

54

7,31

1,58

3

53

5,98

2,52

3

52

4,65

3,46

4

51

3,32

4,40

4

50

1,99

5,34

5

490,

666,

285

490,

666,

285

Cur

rent

Ass

ets

Cas

h &

Ban

k 86

,448

,174

1,

621,

207,

766

1,

526,

967,

359

1,

432,

726,

951

1,33

8,48

6,54

4

1,

244,

246,

137

1,15

0,00

5,72

9

1,

055,

765,

322

96

1,52

4,91

5

86

7,28

4,50

7

77

3,04

4,10

0

67

8,80

3,69

2

584,

563,

285

584,

563,

285

Prel

imin

ary

Expe

nses

72,7

72,0

69

72,7

72,0

69

72

,772

,069

72,7

72,0

69

72

,772

,069

72,7

72,0

69

72

,772

,069

72

,772

,069

72,7

72,0

69

72

,772

,069

72,7

72,0

69

72

,772

,069

72,7

72,0

69

72

,772

,069

Inve

stm

ent (

Savi

ng &

Shar

e)211,

500,

000

211,

500,

000

211,

500,

000

211,

500,

000

21

1,50

0,00

0

211,

500,

000

21

1,50

0,00

0

211,

500,

000

211,

500,

000

211,

500,

000

211,

500,

000

211,

500,

000

21

1,50

0,00

0

21

1,50

0,00

0

Po

rtif

olia

Out

stan

ding

-

12

9,12

2,98

8

25

8,24

5,97

6

38

7,36

8,96

4

516,

491,

952

64

5,61

4,94

0

774,

737,

928

90

3,86

0,91

6

1,

032,

983,

904

1,

162,

106,

892

1,

291,

229,

880

1,

420,

352,

868

1,54

9,47

5,85

6

1,54

9,47

5,85

6

Less

: Pro

visi

on(2

,582

,460

)

(5,1

64,9

20)

(7,7

47,3

80)

(10,

329,

840)

(1

2,91

2,30

0)

(15,

494,

760)

(1

8,07

7,22

0)

(2

0,65

9,68

0)

(2

3,24

2,14

0)

(2

5,82

4,60

0)

(2

8,40

7,06

0)

(3

0,98

9,52

0)

(3

0,98

9,52

0)

Sh

ort-

term

Inve

stm

ents

98,6

76,2

09

19

7,35

2,41

8

29

6,02

8,62

7

394,

704,

836

49

3,38

1,04

5

592,

057,

254

69

0,73

3,46

3

78

9,40

9,67

2

88

8,08

5,88

1

98

6,76

2,09

0

1,

085,

438,

299

1,18

4,11

4,50

8

1,18

4,11

4,50

8

Stat

utor

y M

inim

an R

esev

es17

,907

,900

35,8

15,7

99

53

,723

,699

71,6

31,5

98

89

,539

,498

107,

447,

398

12

5,35

5,29

7

14

3,26

3,19

7

16

1,17

1,09

6

17

9,07

8,99

6

19

6,98

6,89

6

214,

894,

795

214,

894,

795

-

-

-

-

-

-

-

-

-

-

-

-

-

370,

720,

243

2,14

8,60

4,47

2

2,29

7,48

8,70

2

2,44

6,37

2,93

1

2,

595,

257,

160

2,74

4,14

1,38

9

2,

893,

025,

619

3,04

1,90

9,84

8

3,19

0,79

4,07

7

3,33

9,67

8,30

6

3,48

8,56

2,53

6

3,63

7,44

6,76

5

3,

786,

330,

994

3,

786,

330,

994

T

otal

Ass

ets

376,

335,

243

2,76

3,89

0,41

3

2,90

1,44

5,58

2

3,03

9,00

0,75

2

3,

176,

555,

922

3,31

4,11

1,09

1

3,

451,

666,

261

3,58

9,22

1,43

1

3,72

6,77

6,60

0

3,86

4,33

1,77

0

4,00

1,88

6,94

0

4,13

9,44

2,10

9

4,

276,

997,

279

4,

276,

997,

279

Prov

isio

n fo

r Ta

xatio

n-

Cre

dito

rs-V

icto

ria

46,4

57,5

24

46,4

57,5

24

46

,457

,524

46,4

57,5

24

46

,457

,524

46,4

57,5

24

46

,457

,524

46

,457

,524

46,4

57,5

24

46

,457

,524

46,4

57,5

24

46

,457

,524

46,4

57,5

24

46

,457

,524

Leas

e-

-

-

-

-

-

-

-

-

-

-

-

-

Sa

ving

Dep

osit

179,

078,

996

358,

157,

992

537,

236,

988

71

6,31

5,98

4

895,

394,

980

1,

074,

473,

976

1,25

3,55

2,97

2

1,43

2,63

1,96

8

1,61

1,71

0,96

4

1,79

0,78

9,96

0

1,96

9,86

8,95

6

2,

148,

947,

952

2,

148,

947,

952

C

redi

tors

-

46

,457

,524

22

5,53

6,52

0

40

4,61

5,51

6

58

3,69

4,51

2

762,

773,

508

94

1,85

2,50

4

1,12

0,93

1,50

0

1,

300,

010,

496

1,

479,

089,

492

1,

658,

168,

488

1,

837,

247,

484

2,

016,

326,

480

2,19

5,40

5,47

6

2,19

5,40

5,47

6

Net

Ass

ets

329,

877,

719

2,53

8,35

3,89

3

2,49

6,83

0,06

6

2,45

5,30

6,24

0

2,

413,

782,

414

2,37

2,25

8,58

7

2,

330,

734,

761

2,28

9,21

0,93

5

2,24

7,68

7,10

8

2,20

6,16

3,28

2

2,16

4,63

9,45

6

2,12

3,11

5,62

9

2,

081,

591,

803

2,

081,

591,

803

Fin

ance

d B

y:Sh

are

Cap

ital

315,

049,

000

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,

815,

049,

000

2,81

5,04

9,00

0

2,

815,

049,

000

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,81

5,04

9,00

0

2,

815,

049,

000

2,

815,

049,

000

O

wne

rs C

ontr

ibut

ion

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Ret

aini

ned

Earn

ings

14,8

28,7

19

(276

,695

,107

)

(318

,218

,934

)

(359

,742

,760

)

(401

,266

,586

)

(442

,790

,413

)

(484

,314

,239

)

(5

25,8

38,0

65)

(5

67,3

61,8

92)

(6

08,8

85,7

18)

(6

50,4

09,5

44)

(6

91,9

33,3

71)

(7

33,4

57,1

97)

(7

33,4

57,1

97)

Sh

areh

old

ers

Fun

ds

329,

877,

719

2,53

8,35

3,89

3

2,49

6,83

0,06

6

2,45

5,30

6,24

0

2,

413,

782,

414

2,37

2,25

8,58

7

2,

330,

734,

761

2,28

9,21

0,93

5

2,24

7,68

7,10

8

2,20

6,16

3,28

2

2,16

4,63

9,45

6

2,12

3,11

5,62

9

2,

081,

591,

803

2,

081,

591,

803

Erro

Fla

g R

ow-

-

-

-

-

-

-

-

-

-

-

-

-

-

PR

OJE

CT

ED

OF

FIN

AN

CIA

L P

OS

ITIO

N

PR

OP

OS

ED

MW

AN

ZA

CO

MM

UN

ITY

BA

NK

PL

CP

. O. B

ox 1

1120

, MW

AN

ZA


11.2

.6 T

wE

Lv

E M

ON

Th

S P

RO

JEC

TE

D F

INA

NC

IAL

PO

SIT

ION

68

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Jun

-14

Jul-

14A

ug-

14S

ep-1

4O

ct-1

4N

ov-1

4D

ec-1

4T

OT

AL

Fina

ncia

l Inc

ome

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

34

,159

,574

34,1

59,5

74

40

9,91

4,88

4

Po

rtif

olia

Out

stan

ding

(1

29,1

22,9

88)

(1

29,1

22,9

88)

(1

29,1

22,9

88)

(1

29,1

22,9

88)

(1

29,1

22,9

88)

(1

29,1

22,9

88)

(129

,122

,988

)

(129

,122

,988

)

(129

,122

,988

)

(129

,122

,988

)

(129

,122

,988

)

(129

,122

,988

)

(1,5

49,4

75,8

56)

Less

: Pro

visi

on2,

582,

460

2,

582,

460

2,

582,

460

2,58

2,46

0

2,

582,

460

2,

582,

460

2,58

2,46

0

2,58

2,46

0

2,58

2,46

0

2,58

2,46

0

2,58

2,46

0

2,58

2,46

0

30,9

89,5

20

Sh

ort-

term

Inve

stm

ents

(98,

676,

209)

(98,

676,

209)

(98,

676,

209)

(9

8,67

6,20

9)

(98,

676,

209)

(9

8,67

6,20

9)

(98,

676,

209)

(98,

676,

209)

(98,

676,

209)

(98,

676,

209)

(98,

676,

209)

(98,

676,

209)

(1,1

84,1

14,5

08)

Stat

utor

y M

inim

an R

esev

es(1

7,90

7,90

0)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(17,

907,

900)

(1

7,90

7,90

0)

(17,

907,

900)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(1

7,90

7,90

0)

(2

14,8

94,7

95)

In

tere

st p

aid

on s

avin

gs d

epos

it(3

,721

,450

)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(3,7

21,4

50)

(44,

657,

404)

Prov

isio

n fo

r lo

an lo

sses

(4,1

06,8

90)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

,106

,890

)

(4

9,28

2,68

1)

Sa

ving

s17

9,07

8,99

6

17

9,07

8,99

6

17

9,07

8,99

6

179,

078,

996

17

9,07

8,99

6

179,

078,

996

17

9,07

8,99

6

17

9,07

8,99

6

17

9,07

8,99

6

17

9,07

8,99

6

17

9,07

8,99

6

179,

078,

996

2,14

8,94

7,95

2

Ope

ratin

g ex

pens

es(3

17,8

55,0

60)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(67,

855,

060)

(6

7,85

5,06

0)

(67,

855,

060)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(6

7,85

5,06

0)

(1

,064

,260

,715

)

-

Ope

ratin

g C

ashf

low

(355

,569

,468

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

,516

,833

,604

)

Lo

an D

raw

dow

ns-

Gra

nt p

aym

ent

-

-

-

-

-

-

-

-

-

-

-

-

-

Net

Cas

hfl

ow(3

55,5

69,4

68)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(1

05,5

69,4

67)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(105

,569

,467

)

(1,5

16,8

33,6

04)

Adj

ustm

ent f

or N

on C

ash

Item

-

D

epre

ciat

ion

11,3

29,0

60

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

11,3

29,0

60

11

,329

,060

135,

948,

715

Prov

isio

n fo

r lo

an lo

sses

-

-

Ad

just

ed C

ash

flow

(344

,240

,408

)

(94,

240,

407)

(94,

240,

407)

(9

4,24

0,40

7)

(94,

240,

407)

(9

4,24

0,40

7)

(94,

240,

407)

(94,

240,

407)

(94,

240,

407)

(94,

240,

407)

(94,

240,

407)

(94,

240,

407)

(1,3

80,8

84,8

89)

-

Lo

an D

raw

dow

ns-

-

Issu

ed S

hare

to P

ublic

2,50

0,00

0,00

0

2,50

0,00

0,00

0

Floa

tatio

n C

ost

-

M

achi

ne &

Equ

ipm

ent

-

Fi

xed

Ass

ets

(621

,000

,000

)

(621

,000

,000

)

Loan

Rep

urch

ase

-

-

Ta

xatio

n-

Cas

h a

t the

beg

inni

ng86

,448

,174

1,62

1,20

7,76

6

1,52

6,96

7,35

9

1,

432,

726,

951

1,33

8,48

6,54

4

1,

244,

246,

137

1,15

0,00

5,72

9

1,05

5,76

5,32

2

961,

524,

915

867,

284,

507

773,

044,

100

67

8,80

3,69

2

86

,448

,174

-

C

ash

at t

he

end

1,62

1,20

7,76

6

1,52

6,96

7,35

9

1,43

2,72

6,95

1

1,

338,

486,

544

1,24

4,24

6,13

7

1,

150,

005,

729

1,05

5,76

5,32

2

961,

524,

915

867,

284,

507

773,

044,

100

678,

803,

692

58

4,56

3,28

5

58

4,56

3,28

5

To th

e be

st o

f our

kno

wle

dge

and

belie

f the

abo

ve c

ashf

low

has

bee

n fa

irly

pro

ject

ed

Sign

ed b

y:

Dia

mon

d F

inan

cial

Ser

vice

s -C

erti

fied

Pu

bli

c A

ccou

nta

nts

2nd

Floo

r, Su

it 21

8, P

amba

Hou

se,

………………………………………………

……

……

……

……

……

……

……

……

.P.

O. B

ox 1

2482

, Dar

es

sala

amM

rs. C

lem

entin

a Lu

pian

aTe

l: +2

55 2

2 21

2433

9, F

ax: +

255

22 2

1213

39.

Dir

ecto

rD

irec

tor

Emai

l: te

gcon

sulta

ncy@

gmai

l.com

TW

EL

VE

MO

NT

H C

AS

HFL

OW

FO

RE

CA

ST

PR

OP

OS

ED

MW

AN

ZA

CO

MM

UN

ITY

BA

NK

PL

CP

. O. B

ox 1

1120

, MW

AN

ZA


69

Growth Rate

0.05 0.05 0.05 0.05

Economic Growth Rate 5%Year toDec-14 Dec-15 Dec-16 Dec-17 Dec-18

Financial IncomeInterest loan portfolio 273,274,544 764,605,020 1,156,248,584 1,655,364,778 2,095,158,687 Commisssion Income 51,733,178 286,409,569 280,593,153 324,342,428 388,101,129 Credit Insurance Income 10,089,621 22,218,349 32,643,815 210,070,309 56,229,109 Other Earned Income 8,650,000 10,380,000 12,456,000 14,947,200 17,936,640 Financial Revenue from Investment 66,167,541 163,691,052 260,280,213 391,213,086 682,950,106

Total Income in TZS 409,914,884 1,247,303,990 1,742,221,766 2,595,937,801 3,240,375,673 Financial ExpensesInterest on Fees on borrowed funds - - - - - Interest paid on savings deposit 44,657,404 193,076,829 336,098,565 499,726,401 752,909,733 Other Finncial expenses - - - - -

Total Financial Expenses 44,657,404 193,076,829 336,098,565 499,726,401 752,909,733

Net Financial Income 365,257,480 1,054,227,161 1,406,123,202 2,096,211,400 2,487,465,940

Provision for loan losses 49,282,681 56,259,910 68,298,533 79,434,239 83,908,001

Net Financial Margin 315,974,799 997,967,250 1,337,824,668 2,016,777,161 2,403,557,939

Operationg Costs

Branch ExpesesSalaries & Benefits - Other operational expenses - Head Office Expenses - Salaries & Benefits 509,472,000 606,564,000 710,556,840 787,981,446 827,380,518 Flotation Cost 250,000,000 Other operational expenses 168,840,000 202,608,000 243,129,600 291,755,520 350,106,624 Depreciation 135,948,715 135,948,715 133,280,195 54,286,875 41,786,875

- Total Operation Cost 1,064,260,715 945,120,715 1,086,966,635 1,134,023,841 1,219,274,017

NPBT (748,285,916) 52,846,535 250,858,033 882,753,320 1,184,283,921 Taxation 13,211,634 62,714,508 220,688,330 296,070,980 Proposed DividedNet Profit After Tax (748,285,916) 39,634,902 188,143,525 662,064,990 888,212,941

P. O. Box 11120, MWANZA

PROJECTION FOR YEAR 2-5

OPERATIONAL FORECAST FOR YEAR ENDED DECEMBER 2014

PROPOSED MWANZA COMMUNITY BANK PLC


11.2.7 TwELvE MONTh CASh FLOw FORECAST

70

Year toDec-14 Dec-15 Dec-16 Dec-17 Dec-18

Fixed Assets

Computers 28,058,160 13,796,320 1,000 1,000 1,000 Equipment 132,668,375 113,715,750 94,763,125 75,810,500 56,857,875 Furniture &Fitting 45,214,750 38,755,500 32,296,250 25,837,000 19,377,750 Intangible Assets 132,600,000 65,200,000 1,000 1,000 1,000 Motor Vehicles 37,500,000 25,000,000 12,501,000 1,000 1,000 Office Equipments 114,625,000 98,250,000 81,875,000 65,500,000 49,125,000 Additional Assets Year 2 - - -

Total Fixed Assets 490,666,285 354,717,570 221,437,375 167,150,500 125,363,625

Current AssetsCash & Bank 584,563,285 595,653,522 662,018,523 737,474,504 830,478,955 Preliminary Expenses 72,772,069 72,772,069 72,772,069 72,772,069 72,772,069 Investment (Saving &Share) 211,500,000 211,500,000 211,500,000 211,500,000 211,500,000 Portifolia Outstanding 1,549,475,856 2,812,995,512 4,553,235,549 6,110,326,102 8,390,800,138 Less: Provision (30,989,520) (65,162,440) (98,043,773) (138,080,057) (183,188,610) Short-term Investments 1,184,114,508 2,859,280,662 4,179,613,065 7,188,198,072 10,654,496,056 Statutory Miniman Reseves 214,894,795 523,035,395 825,605,341 1,239,690,849 1,771,833,677

Total Current 3,786,330,994 7,010,074,720 10,406,700,774 15,421,881,540 21,748,692,284

Total Assets 4,276,997,279 7,364,792,290 10,628,138,149 15,589,032,040 21,874,055,909

Provision for Taxation - 13,211,634 62,714,508 220,688,330 296,070,980 Creditors-Victoria 46,457,524 LeaseSaving Deposit 2,148,947,952 5,230,353,952 8,256,053,411 12,396,908,491 17,718,336,768 Creditors - - - - -

2,195,405,476 5,243,565,586 8,318,767,920 12,617,596,821 18,014,407,748 Net Assets 2,081,591,803 2,121,226,705 2,309,370,230 2,971,435,220 3,859,648,161

Financed By:Owners Capital 2,815,049,000 2,815,049,000 2,815,049,000 2,815,049,000 2,815,049,000 Owners Contribution - - - - - Retainined Earnings (733,457,197) (693,822,295) (505,678,770) 156,386,220 1,044,599,161

Shareholders Funds 2,081,591,803 2,121,226,705 2,309,370,230 2,971,435,220 3,859,648,161

PROJECTED OF FINANCIAL POSITION

PROPOSED MWANZA COMMUNITY BANK PLCP. O. Box 11120, MWANZA


11.2.8 LONG FORM REPORT

71

Erro Flag Row - - - - -

Year toDec-14 Dec-15 Dec-16 Dec-17 Dec-18

Cash flow from Operating ActivitesFinancial Income 409,914,884 1,247,303,990 1,742,221,766 2,595,937,801 3,240,375,673 Portifolia Outstanding (1,549,475,856) (1,263,519,656) (1,740,240,037) (1,557,090,553) (2,280,474,035) Less: Provision 30,989,520 34,172,920 32,881,333 40,036,284 45,108,553 Short-term Investments (1,184,114,508) (1,675,166,154) (1,320,332,403) (3,008,585,008) (3,466,297,983) Statutory Miniman Reseves (214,894,795) (308,140,600) (302,569,946) (414,085,508) (532,142,828) Interest paid on savings deposit (44,657,404) (193,076,829) (336,098,565) (499,726,401) (752,909,733) Provision for loan losses (49,282,681) (56,259,910) (68,298,533) (79,434,239) (83,908,001) Savings 2,148,947,952 3,081,406,000 3,025,699,459 4,140,855,079 5,321,428,277 Operating expenses (1,064,260,715) (945,120,715) (1,086,966,635) (1,134,023,841) (1,219,274,017) Creditors-Victoria - (46,457,524) - - - Operating Cashflow (1,516,833,604) (124,858,478) (53,703,560) 83,883,614 271,905,905

Net Cashflow (1,516,833,604) (124,858,478) (53,703,560) 83,883,614 271,905,905 Adjustment for Non Cash Item - Depreciation 135,948,715 135,948,715 133,280,195 54,286,875 41,786,875 Provision for loan losses - Adjusted Cashflow (1,380,884,889) 11,090,237 79,576,635 138,170,489 313,692,780

Loan Drawdowns - Issued Share to Public 2,500,000,000 - Fixed Assets (621,000,000) Taxation - (13,211,634) (62,714,508) (220,688,330) Cash at the beginning 86,448,174 584,563,285 595,653,522 662,018,523 737,474,504 Cash at the end 584,563,285 595,653,522 662,018,523 737,474,504 830,478,955

PROPOSED MWANZA COMMUNITY BANK PLCP. O. Box 11120, MWANZA

PROJECTED OF FINANCIAL POSITION


12.0 NOMINATED ADvISOR’S COMMENTS ON ThE PROJECTED FINANCIAL STATEMENTS

NIC life house, 2nd Floor, Wing C, P.O Box 38024, Dar es Salaam .Tanzania Tel: +255 22 2112844

Tel: +255 22 2112844 +255 22 732 922 396


NIC life house, 2nd Floor, Wing C, P.O Box 38024, Dar es salaam .Tanzania Tel: +255 22 2112844 Email: [email protected]

We reviewed both the Business Plan and the Financial Projections of Mwanza Community 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 11.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.

Analysis of some Key Performance Indicators (%)

INDICATOR Year 1 Year 2 Year 3 Year 4 Year 5 AverageLoans & Advances to Total Assets 36.5 38.8 43.6 40.0 39.0 39.6

Non Interest expense to Interest

Income 371.0 123.0 94.0 68.5 58.0 142.9Return on Average Assets (16.0) 2.3 4.4 50.0 47.0 17.5Non Interest expense to Gross

Income 247.0 76.0 62.0 44.0 38.0 93.4

Gross Loans to Deposits 74.0 55.0 56.0 50.0 48.0 56.6Net Profit Margin (170.0) 32.0 11.0 26.0 27.0

Return on Equity (33) 1.8 8 22 23According to above table, Loans and Advances to Total Assets ratio is generally projected to persistently increase over time from 36.5% in the first year to 39% in the fifth year suggesting that the bank’s efforts to lend is growing over time and consequently impacting on growth of total assets.

Furthermore Gross Loans to Deposits ratio is projected at an average of 56.6% over the five years. The trend indicates that the ratio declines from 74% in the first year to 55% in the second year thereafter slightly increasing to 56% before slightly falling to 50% and lastly to 48% in the fifth year. The above downward trend is attributable to relative growth in deposits (by 143% in the second year over the first year) to growth in lending. The relative growth in deposits compared to loans further complements to increase more funds for investing in securities and others types


of investment as shown in the projected statement of Financial Position.

On the other hand, the average return on average assets is projected at 17.5% which appears to be reasonable in line with a startup company whereas Return on Equity is projected to increase starting at -33% in the first year to 23% in the fifth year. The above trend suggests that on average a return on investment is forecast to be 17.5% in other words for every TZS 100 invested the company will generate an average return of TZS 17.50. On the other side the return on equity indicates how much value generated by a unit of equity. With regard to Non Interest expenses (Operating expenses) to Gross Income the trend decreases from 247% in the first year to 38% in the fifth year due to increase in income which consequently is used to finance operating costs.

The Non Interest expense to Interest Income is projected to decrease gradually starting at 371% in the first year to 58% in the fifth year. The above trend suggests that over time operating costs are increasingly financed by interest income due to growth in interest income. On the other hand Net Profit margin is persistently increasing as well starting at -170% in the first year to 27% in the fifth year. The unimpressive performance in the first year is attributable to relatively high preliminary costs and share floatation costs.

Generally the bank appears to be profitable over time and has its total assets growing at reasonable rate. In addition the return on Investment and Return on equity is growing in line with customer base and operations of the bank.

IYEN J.A. NSEMWA

MANAGING DIRECTOR


TRANSACTION ADVISORS:

NOMINATED ADVISORS LEGAL ADVISORS

ARCH FINANCIAL & INVESTMENT ADVISORY LTD, NIC LIFE HOUSE, 2ND FLOOR, WING C, P.O BOX 38024, DAR ES SALAAM .TANZANIA Tel: +255 22 2112844 Email: [email protected]

K&M ADVOCATES 3RD FLOOR, TAC ASSOCIATE BUILDING PLOT NO. 114,MALIK STREET P.O. BOX 71394, DAR ES SALAAM TANZANIA TEL: +255 22 2133615 Email: [email protected]

REPORTING ACCOUNTANTS

DIAMOND FINANCIAL SERVICES 2ND FLOOR/ROOM 218 PAMBA ROAD/GARDEN AVENUE P.O. BOX 12482 DAR ES SALAAM Tel: +255 22 2124 339 Email: [email protected]


RECEIVING BANK SHARE REGISTRAR

AZANIA BANK LTD,

P.O BOX 9271,

DAR ES SALAAM

Tel: +255 22 2117998-9

+255 22 2118025-6

AZANIA BANK LTD,

P.O BOX 9271,

DAR ES SALAAM

Tel: +255 22 2117998-9

+255 22 2118025-6

LIST OF COLLECTING AGENTS

ZAN SECURITIES, LICENSED MEMBER OF DSE, HAIDARY PLAZA KISUTU/UPANGA P.O BOX 5366 DAR ES SALAAM TEL: +255 22 2126415. FAX:+255 22 2126414. Email: [email protected]

TANZANIA SECURITIES LTD 7TH FLOOR, IPS BUILDING SAMORA AVENUE/AZIKIWEN St. P.O.BOX 9821 DAR ES SALAAM

TEL: 255 22 2112807 FAX: 255 22 2112809 EMAIL: [email protected]


RASILIMALI LIMITED, CONSOLIDATED HOLDING BUILDING SAMORA AVENUE P.O.BOX 9373 DAR ES SALAAM

TEL: 255 22 2111711 FAX: 255 22 2122883 MAIL: [email protected]

SOLOMON stock brokers LTD GROUND FLOOR, PPF HOUSE SAMORA AVENUE P.O.BOX 77049 DAR ES SALAAM

TEL: 255 22 2112874 FAX: 255 22 2131969 Mobile: 0714 269090/0764 269090 EMAIL: [email protected], [email protected]

CORE SECURITIES LTD FOURTH FLOOR, ELITE CITE BUILDING CNR. SAMORA/MOROGORO RD P.O.BOX 76800 DAR ES SALAAM


VERTEX INTERNATIONAL SECURITIES LTD ANNEX BUILDING ZAMBIAN HIGH COMMISSION SOKOINE DRIVE/OHIO STREET P.O.BOX 13412 DAR ES SALAAM


4th FLOOR, GOLDEN JUBILEE OHIO STREET P.O.BOX 70254 DAR ES SALAAM



SHARE APPLICATION FORM A copy of this Prospectus to which this Application Form is attached was registered in terms of Section 35 of the Companies Act 2002 and Section 131 of the Capital Markets and Securities Act 1994 (as amended). This Application Form relates to the Initial Public Offer of 4,400,000 Ordinary Shares of Mwanza Community Bank PLC, a company incorporated in Tanzania, each with a nominal value of TZS 550 per share, at an issue price of TZS 550 per share. Expressions used in this Application Form shall, unless the context requires otherwise, have the same meaning as in the Prospectus. This Application Form should be read in conjunction with the Prospectus and the terms and conditions contained therein are deemed to be incorporated in and form part of this Application Form. 1. Please refer to the instructions on page 3 before completing this Application Form 2. This form has to be completed at the premises of any Receiving Bank or Licensed Dealing Member 3. This form once duly completed should be submitted, together with Tshs Banker’s cheque, TZS Direct Debit slip or TZS

Cash in favour of Mwanza Community Bank PLC, to any Receiving Bank or Licensed Dealing Member. 4. The Directors reserve the right to reject any application, in whole or in part, particularly if the instructions on page 3

and as set out in the attached Prospectus are not complied with. 5. The share offer will open on 1st October 2013 at 9.00am and will close on 31st October 2013 at 4.00pm 6. I/We understand that the share certificate shall be transferred into the custody of the DSE Central Depository system

(CDS), such that only the DSE CDS Receipts shall be issued to all successful applicants. I/We also understand that Mwanza Community Bank PLC Share Certificates can be issued under special arrangement with DSE after submitting an application to withdraw from the CDS.

APPLICANT’S DECLARATION

By signing and submitting this Application Form, I/We declare that:

I/We (or the guardian signing this application on behalf of the minor), being above 18 years of age have read the terms and conditions of application set out in the Prospectus dated September 2013 and agree to be bound by its contents.

I/We are not acquiring the shares as a nominee of any other person other than myself/ourselves;

I/We agree to accept the same or smaller number of shares in respect of this application as may be allotted by Mwanza Community Bank PLC subject to and in accordance with the terms of Memorandum and Articles of Association of Mwanza Community Bank PLC;

I/We understand that multiple or suspected multiple applications may be aggregated and treated as a single application or rejected in their entirety;

I/We confirm making payment by cash, bank transfer or banker’s cheque in favour of “Mwanza Community Bank Initial Public Offer” for the appropriate amount due in terms of this application;

I/We accept that the accuracy of the information provided is my/our sole responsibility and for any essential information that is required for the application process that I/We may not have provided may be incorporated by the selling agent, as may be appropriate;

I/We agree to receive our share depository receipt as indicated on the application form; and

I/We understand and accept that this Prospectus does not constitute an offer, but is an invitation to me/us to make an offer to Mwanza Community Bank PLC to purchase ordinary shares and that Mwanza Community Bank PLC has the sole authority of determining whether to accept or reject this offer subject to CMSA approval.

Signature............................. Signature...................................... Company Stamp/Seal Date........................................................


FOR OFFICIAL USE ONLY Serial Number: Agent Name: Agent Code No & Stamp:

Non- Tanzania

Individual Applicants 1. Title: Mr. /Mrs. /Ms. 2. Surname of applicant(s) 3. First name(s) of applicant(s) in full 4. Middle Name in full 5. ID/Passport 6. Postal address (Print only one address to which all

correspondence and/or dividends may be sent)

7. Contact Details Tel No Email Corporate Applicants 8. Name of Entity 9. Registration Number 10. Postal Address 11. Contact Details Tel No Email

Parent or Legal Guardian

12. Surname or Name of Entity 13. First name(s) in full (Individuals ONLY) 14. Middle Name in full (Individuals ONLY) 15. ID/Passport or Company Registration Number

16. Shares applied for (Note: Minimum application is 100 shares and in multiple of 100 shares thereafter)

(a) Number of shares (in figures)

(b) Share price per share (TZS)

(c) Total Amount Payable (TZS)

(d) Applicant CDS Acc. No.

Mwanza Community Bank PLC Serial Number:…………

Fill this Application Form if you wish to apply for Shares in Mwanza Community Bank PLC.

Please read the prospectus dated 27th September 2013. Follow the instructions to complete this Application form (see reverse) Print clearly in capital letters using black or blue pen.

Photograph

Batch Header No: I. APPLICANT DETAILS

*Type of Investor Individual Company Joint Minor Nationality Tanzania

II. APPLICATION DETAILS

III. PAYMENT DETAILS AND DISPOSAL INSTRUCTIONS Cash Banker's Cheque Direct debit

17. Mode of payment

18. Banker's Cheque Details Banker's Cheque Number: Issuer: Agent Post

19. DSE CDS Receipt

20. Mode of refund

21. Mode of receiving future dividends

Agent Banker Bank Post

22. Bank Details (Only for Refunds and/or Future Dividends by Direct Credit to Bank Account - if any)

Bank Name Branch Name


IV. ACKNOWLEDGEMENTS SLIP (Retain for your records) Serial Number:………………………...……

Names of applicant or Institution CDS Acc. No Total shares requested Total payment

Mode of payment Cash Banker Cheque – No Direct debit - Ref No.

Agent Code

Photograph

Received by : Location/Branch:

Date Received & Stamp: Signature: Signature


GUIDE TO APPLICATION FORMS YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM.

Please complete all relevant sections of the appropriate Application Form using BLOCK LETTERS.

These instructions are cross-referenced to each section of the Application Form. APPLICANT DETAILS (INDIVIDUAL APPLICANTS DETAILS)

APPLICANT DETAILS (INDIVIDUAL APPLICANTS DETAILS)

1. In the Title section indicates the appropriate title;

2. In the Surname section, please fill in your last or family name or company name if applying as a Tanzanian Company;

3. In the First Name section, please fill in your given first name;

4. In the Middle Name section, please fill in your given Middle name;

5. In the ID/Passport section, please fill in your identification Card number or your Passport number;

6. In the Postal Address section, please fill in the address to which you would like any refund payment (if one is due) or depository confirmation and any future notification to be delivered to. A refund may be made if we have to allot to you less shares than you applied for;

7. In the Contact Details section, please fill in your telephone/mobile number and/or your email address ONLY if you have one;

* In the Type of Investor section, please tick the appropriate box that describes you; if you have selected “Minor” Please complete Parent/Legal Guardian Details in No.12 to No.15

APPLICANT’S DETAILS (CORPORATE APPLICANT’S DETAILS

8. In the name of the entity section, please indicate the name of the company;

9. In the Company Registration Number, please fill in the company identification number registered under Business Registration and Licensing Authority (BRELA) for Tanzanian Company only;

10. In the Postal Address section, please fill in the address to which you will communicate with the issuer for any future correspondences;

11. In the Contact Details section, please fill in the company’s telephone number and/email address

APPLICANTS DETAILS (PARENT OR LEGAL GUARDIAN)




15. In the ID/Passport section, please fill in your identification Card number or your Passport number; OTHER DETAILS 16. In filling in the application details:

a) Please enter the number (in figures) of shares you wish to buy. Note that the minimum number you can apply for is 100 shares and thereafter in the multiples of 100.

b) The number indicates the price per share c) Enter the total value of all the shares for which you have applied i.e. multiply the number of shares in (a) with the price in (b). d) Provide CDS Account No.

PAYMENT DETAILS 17. In the Mode of Payment section, please tick in the box indicating the means by which you are paying for the shares (ONLY ONE method of payment

is permitted) 18. In the Bankers Cheque Details section, please write the bankers cheque number and the name of the issuers 19. In the DSE CDS Receipt section, please tick the box indicating the means by which you would like to receive your depository receipt 20. In the Mode of Refund section, please tick the box indicating the means by which you would like to receive your refund (if one I due) 21. In the Mode of Receiving Future Dividends section, please tick the box indicating the means by which you would like to receive your dividends (if

one is due) 22. Do not fill this part if you do not have a bank account or if you do not want either your refund or future dividend (if one is paid) through your bank

account.

FURTHER TERMS AND CONDITIONS


GUIDE TO APPLICATION FORMS YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM.

Please complete all relevant sections of the appropriate Application Form using BLOCK LETTERS.

These instructions are cross-referenced to each section of the Application Form. APPLICANT DETAILS (INDIVIDUAL APPLICANTS DETAILS)

APPLICANT DETAILS (INDIVIDUAL APPLICANTS DETAILS)

1. In the Title section indicates the appropriate title;




5. In the ID/Passport section, please fill in your identification Card number or your Passport number;

6. In the Postal Address section, please fill in the address to which you would like any refund payment (if one is due) or depository confirmation and any future notification to be delivered to. A refund may be made if we have to allot to you less shares than you applied for;

7. In the Contact Details section, please fill in your telephone/mobile number and/or your email address ONLY if you have one;

* In the Type of Investor section, please tick the appropriate box that describes you; if you have selected “Minor” Please complete Parent/Legal Guardian Details in No.12 to No.15

APPLICANT’S DETAILS (CORPORATE APPLICANT’S DETAILS

8. In the name of the entity section, please indicate the name of the company;

9. In the Company Registration Number, please fill in the company identification number registered under Business Registration and Licensing Authority (BRELA) for Tanzanian Company only;

10. In the Postal Address section, please fill in the address to which you will communicate with the issuer for any future correspondences;

11. In the Contact Details section, please fill in the company’s telephone number and/email address

APPLICANTS DETAILS (PARENT OR LEGAL GUARDIAN)




15. In the ID/Passport section, please fill in your identification Card number or your Passport number; OTHER DETAILS 16. In filling in the application details:

a) Please enter the number (in figures) of shares you wish to buy. Note that the minimum number you can apply for is 100 shares and thereafter in the multiples of 100.

b) The number indicates the price per share c) Enter the total value of all the shares for which you have applied i.e. multiply the number of shares in (a) with the price in (b). d) Provide CDS Account No.

PAYMENT DETAILS 17. In the Mode of Payment section, please tick in the box indicating the means by which you are paying for the shares (ONLY ONE method of payment

is permitted) 18. In the Bankers Cheque Details section, please write the bankers cheque number and the name of the issuers 19. In the DSE CDS Receipt section, please tick the box indicating the means by which you would like to receive your depository receipt 20. In the Mode of Refund section, please tick the box indicating the means by which you would like to receive your refund (if one I due) 21. In the Mode of Receiving Future Dividends section, please tick the box indicating the means by which you would like to receive your dividends (if

one is due) 22. Do not fill this part if you do not have a bank account or if you do not want either your refund or future dividend (if one is paid) through your bank

account.

FURTHER TERMS AND CONDITIONS

1. Applications may be made ONLY on this application form – photocopies or other reproductions will be rejected;

2. Applications are Irrevocable and may not be withdrawn once submitted to a receiving bank or a stockbroker;

3. Applicants should consult their stockbroker or the receiving bank in case of doubt as to the correct completion of this form;

4. Applications will only be regarded as complete when the value has been received. All monies will be deposited for payment immediately on receipt;

5. If any payment is dishonored for whatever reason, the relevant application may be regarded as invalid or other steps may be taken in this regard as may be deemed fit;

6. All alterations to the application form must be authenticated by the applicant’s signature;

7. The application form and payment or proof of payment is to be received by no later than 1600 hours on 31 October 2013.

LATE APPLICATIONS WILL NOT BE ACCEPTED;

8. Tanzanian persons and Non-Tanzanian person are allowed to participate in this offer. However, the ownership by Non- Tanzanians persons will be restricted to 60%.

9. In case of companies two signatories MUST endorse the form and stamp

10. Applicant Detachable section should be stamped by the Agent


PROSPECTUS

MWANZA COMMUNITY BANK PLCFor your Development

Prospectus Date:27th September, 2013

Mwanza Community Bank (MCB) Plc Prospectus

Documents

established companies

dar es salaam tel

dar es salaam tanzania

registrar of companies

medium size companies

foran initial public

securities authority

material respects