2018 SEC Annual Report

2018 ANNUAL REPORT

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CONTENTS 1 SEC ANNUAL REPORT 2018 Our Mission Statement 3 SEC Commissioners 5 SEC Management 7 Chairman’s Review 12 Chief Executive’s Statement 14 Performance of the equities market 15 Equity market 15 Market Capitalisation 16 Turnover 16 Volume of shares and number of trades 16 Number of Listed and Quoted Companies 16 Turnover to Market Cap Ratio 16 Trading Turnover (Government Debt Securities) 16 Corporate Bonds 16 Collective Investment Schemes (CISs) 17 Financial Performance of the Commission 17 Staff Complement 19 Training and Workshops 20 Strategic Plan Overview 21 Conclusion 22 Corporate Governance 23 Board Composition 24 Board Meetings 25 Committees and Committee Membership 25 Audit Function 27 Commission Secretary 28 Board Performance Self-Evaluation 28 Report on regulatory and operational efficiency 31 Extent of implementation of the Commission’s oversight function and their effectiveness 31 Cost Savings resulting from the Commission’s Operations 31 Cost to the Nation for not having the Commission 32 Actual and Projected efficiencies the Commission has achieved as a result of the continuing regulatory activities 32 Nature of the working relations with Capital Market Operators 33 Immediate and Projected capabilities of the Commission 33 Operational Activities 34

2 SEC ANNUAL REPORT 2018 Market Supervision 34 Zambia’s Capital Market Players 34 Licensing 34 Compliance 35 Inspections 36 Market Development 37 Enforcement And Legal Services 51 Legislative developments 51 Enforcement and legal actions taken 53 IOSCO MMOU Compliance 53 Securities Industry Emerging Trends - 43rd IOSCO General Conference 54 Regulatory compliance 56 Market Transactions 56 Appendix I 104 The SEC Staff in 2018 104 Appendix II 105 List of Authorised Capital Market Players for 2018 105 Dealer’s Licenses 105 Dealer’s Representative Licenses 106 Investment Adviser’s Licenses 110 Investment Adviser’s Representative Licenses 111 Securities Exchange Licenses 111 Appendix III 112 Contact Details of Capital Market Players 112 Stock Exchange Contact Details 112 Dealers’ Contact Details 112 Investment Advisors’ Contact Details 114 Listed Companies’ Contact Details 115 Quoted Companies’ Contact Details 118 Details of Companies with Listed Debt Securities 119

OUR MISSION, VISION AND MANDATE 3 SEC ANNUAL REPORT 2018 A dynamic Regulator that protects investors and promotes capital markets development To safeguard interests of investors and promote the growth of capital markets The Securities and Exchange Commission (SEC) was established pursuant to section 3 of the repealed Securities Act, Cap 354 of the Laws of Zambia and its existence has been continued under the new Securities Act, No. 41 of 2016. The Commission’s mandate is to ensure that investors in the Zambian capital markets, both local and foreign, are protected. It is also the mandate of the Commission to develop the capital markets. The Commission has to ensure there is a right balance between investor protection and Capital Market Development. MISSION VISION

info@seczambia.org.zm Plot 3827, Parliament Road,Olympia | P.O.Box 35165, Lusaka - Zambia +260 211 227 012 | Fax: +260 211 225 443 www.seczambia.org.zm SECURITIES AND EXCHANGE COMMISSION Protecting investors in the capital markets. If you are approached by someone offering Investment products… Remember to do your part by first asking to see their Securities and Exchange Commission Investment Adviser’s License.

SEC Commissioners During the period under review, the SEC Commissioners, appointed from institutions specified in the Securi￾ties Act, No. 41 of 2016, were the following: Mr. Siwila, a legal practitioner, is the SEC Board Chairperson. He previously served as the SEC Board Vice-Chairperson from November 2015 to August 2016. He then served as Acting Chairperson from August 2016 until his election as Board Chairperson in June 2017. Mr. Siwila is a Partner in the law firm Mambwe Siwila and Lisimba Associates and he represents the Law Association of Zambia (LAZ) on the Board. Mr. Amos Siwila Board Chairperson Mr. Nonde, a chartered accountant, is the Board’s elected Vice-Chairperson since June 2017 and has been a SEC Board Member since September 2014. He is the Finance Director for CFAO Zambia and he represents the Zambia Chamber of Commerce and Industry (ZACCI) on the Board. He also chairs the Board’s Staff and Remuneration Committee. Mr. George Nonde Board Vice-Chairperson Mrs. Habasimbi, an economist, has been a SEC Board Member since May 2017. She is the Director – International Debt Management at the Ministry of Finance and she represents the Ministry of Finance on the Board. She chairs the Commission’s Licensing Committee. Mrs. Ireen Musonda-Habasimbi Commissioner Dr. Chipili, an economist at the Bank of Zambia (BoZ), has been a SEC Board Member since August 2012. Dr. Chipili is the Director – Financial Markets at BoZ and he represents the Central Bank on the Board. He chairs the Market Transactions Committee of the Board. Dr. Jonathan Chipili Commissioner 5 SEC ANNUAL REPORT 2018

SEC Commissioners Ms. Masole, a social security professional, has been a SEC Board Member since May 2017. Ms. Masole is the Manager – Pensions at the Pensions and Insurance Authority and she represents the Pensions and Insurance Authority on the Board. She chairs the Commission’s Property Acquisition and Development Committee. Ms. Mainza Masole Commissioner Mrs. Kalimukwa, a legal practitioner, has been a SEC Board Member since March 2018. Mrs. Kalimukwa is the Administrator General and Official Receiver for the Republic of Zambia and she represents the Ministry of Justice on the Board. She also chairs the Commission’s Compensation Fund Committee. Mrs. Natasha N. Kalimukwa Commissioner Mrs. Mugala, a chartered accountant, has been a SEC Board Member since May 2017. Mrs. Mugala is an independent financial consultant and runs a number of businesses. She represents the Zambia Institute of Chartered Accountants on the Board and chairs the Commission’s Risk and Audit Committee. Mrs. Ruth Mugala Commissioner Mr. Chitalu, a chartered accountant, is the Chief Executive Officer of the Commission and is an ex-officio Member of the Commission Board. Mr. Phillip K. Chitalu Ex-officio Commissioner 6 SEC ANNUAL REPORT 2018

SEC Management During the period under review, the following were the Commission’s Management team: Mr. Chitalu, a chartered accountant, has been with the Commission since August 2011. He has a bachelor’s Degree of Accountancy from the Copperbelt University, is a Fellow of the Association of Chartered and Certified Accountants (FCCA) and also Fellow of the Zambia Institute of Chartered Accountants (FZICA). Mr. Chitalu also holds a Master of Philosophy in Development Finance from Stellenbosch University, Cape Town, and further holds the International Global Certificate for Securities Regulators from the Harvard Law School/IOSCO. Phillip K. Chitalu Chief Executive Officer Mrs. Sichone, a legal practitioner, has been with the Commission since July, 2014. She holds a Bachelor’s degree in law from the University of Zambia and a Masters degree in Corporate and Commercial law from the University of Lusaka. Mrs Sichone holds the International Global Certificate for Securities Regulators from the Harvard Law School/ IOSCO. She is also an advocate of the High Court for Zambia, a qualified legislative drafter and trained commercial Arbitrator. Diana Sichone Commission Secretary and Director – Enforcement & Legal Services Ms. Mundia, a fellow of the Association of Chartered Certified Accountants (ACCA), has been with the Commission since January 2013. She is a Chevening Scholar and holds a Master’s Degree in Corporate Strategy and Governance from the University of Nottingham in the UK. She also holds the International Global Certificate for Securities Regulators from the Harvard Law School/IOSCO. Ms Mundia further holds the Introductory Certificate in Arbitration from the UK’s Chartered Institute of Arbitrators. Mutumboi Mundia Director - Market Supervision & Development 7 SEC ANNUAL REPORT 2018

Mr. Lungu, a chartered accountant, has been with the Commission since December 2015. He is the holder of the Association of Chartered Certified Accountants (ACCA) qualification and the Certified Accounting Technician (CAT) from Chingola School of Accounts (ZAMIM-Chingola campus). He is a Fellow of the Association of Chartered Certified Accountants and an Associate member of the Zambian Institute of Chartered Accountants. Mateyo Lungu Manager – Finance Mr. Nyalugwe has been with the Commission since October, 2012. He holds a bachelor of laws degree from Nelson Mandela Metropolitan University in South Africa, a Diploma in Purchasing and Supply from Sandwell College of Higher and Further Education (West Bromwich) UK and a Diploma in Human Resource Management from Zambia Institute of Human Resource Management. He also trained in Domestic Arbitration by the Chartered Institute of Arbitrators. Saul Nyalugwe Manager – Administration Mr. Alutuli, a chartered accountant, has been with the Commission since May, 2014. He Holds a Master of Business Administration (MBA) and is a Fellow of both the Association of Chartered Certified Accountants (ACCA) and Zambia Institute of Chartered Accountants (ZICA). He is also a certified fraud examiner and holds a National Accounting Technician Certificate. Abraham Alutuli Manager – Market Supervision 8 SEC ANNUAL REPORT 2018 SEC Management Mr. Mulenga has been with the Commission since February 2013. He holds a bachelor of Science in Accounting from Hull University and BTEC National Diploma in Business and Finance from City College of Higher Education. Bruce Mulenga Manager – Market Transactions & Investments

Mrs. Makumba has been with the Commission since May 2014. She holds a Masters of Business Administration from the Eastern and Southern Africa Management Institute (ESAMI), Bachelor of Arts in social sciences from the University of Zambia and postgraduate diploma in marketing from the Chartered Institute of Marketing-UK. Dingase Makumba Manager -Market Development Mr. Kondolo, a financial sector specialist has been with the Commission since June 2017. He holds a BA (Hons) in Business and Management from University of Sunderland. Mubanga Kondolo Manager – Financial Inclusion Mr. Ngala, a legal practitioner, has been with the Commission since October 2017. He holds a Bachelor’s degree in law from the University of Zambia, and he is also an advocate of the High Court for Zambia and a qualified legislative drafter. Lubunda A. Ngala Manager – Law Reform and Enforcement 9 SEC ANNUAL REPORT 2018 SEC Management Mr. Sichilima, a chartered accountant, has been with the Commission since September, 2015. He holds a BA (Hons) Degree in Accounting and Finance from Athlone Institute of Technology, Ireland. He is a member of the Zambia Institute of Chartered Accountants and a Fellow of the Association of Chartered Certified Accountants (FCCA). Nonde Sichilima Manager – Market Supervision

10 SEC ANNUAL REPORT 2018 Enforcement From left to right: Ms Mutumboi Mundia, Mr. Phillip K. Chitalu and Mrs. Diana Sichone Front row, from left to right: Mr. Nonde Sichilima, Mrs. Dingase Makumba, Mrs. Diana Sichone and Mr. Mubanga Kondolo Middle row, from left to right: Mr Lubunda Ngala, Mr. Abraham Alutuli. Mr. Saul Nyalugwe and Mr. Mateyo Lungu Back row, from left to right: Mr. Bruce Mulenga, Mr. Phillip K. Chitalu and Ms Mutumboi Mundia SEC Senior Management Team SEC Management Team

info@seczambia.org.zm Plot 3827, Parliament Road,Olympia | P.O.Box 35165, Lusaka - Zambia +260 211 227 012 | Fax: +260 211 225 443 www.seczambia.org.zm SECURITIES AND EXCHANGE COMMISSION Protecting investors in the capital markets. Are you taking care of your future financial well being? Remember prices may rise or fall, Investors should seek professional advice. Invest in Shares | Bonds | Unit Trusts

Chairman’s Review The Commission presents the report for the year ended 31st December 2018, as required by the Securities Act, Number 41 of 2016. The Securities Act further requires that the Commission should report on a number of issues not limited to but including the following: a) The extent of the implementation of the Commission’s oversight functions and their effectiveness; b) Cost savings resulting from the Commission’s operations; c) The cost to the nation for not having the Commission; d) The nature of the working relations with capital market operators; e) The actual and projected efficiencies the Commission has achieved as a result of the continuing regulatory activities; and f) The immediate and projected capabilities of the Commission. The Commission has reported on these matters in relevant sections of this annual report. 12 SEC ANNUAL REPORT 2018 I am glad to report, on behalf of the Commission, on a number of exciting activities and projects that the Commission embarked on in the year under review. The Commission’s 2015-2018 Strategic Plan ended in March 2018. In order to craft our future strategic direction, the Commission engaged an independent Consultant, Management Development Division at Cabinet Office to help the Commission appreciate mile stones achieved and those missed in the 2015- 2018 Plan. While the Commission’s performance was rated at 72%, an above average performance, this achievement is better than the 52% scored in the review of the 2012 to 2015 Strategic Plan. I am therefore excited that while we have a long way to go in meeting and reaching capital market’s development targets, the Commission is progressing on the right trajectory. Subsequent to the review of the ended strategic plan, I am happy to report that going forward, the Commission will be guided by a new Strategic Plan for the period to December 2021. The details and goals of this plan are reported below in this annual report. Suffice to mention that the Commission remains focused on improving both investor protection and capital markets growth. I am therefore excited that while we have a long way to go in meeting and reaching capital market’s development targets, the Commission is progressing on the right trajectory.

13 SEC ANNUAL REPORT 2018 Chairman’s Review On the regulatory front, the Commission, with the support of the World Bank is developing rules and regulations needed to make the 2016 Securities Act operational. In the spirit of inclusiveness, and as required by the Law, the Commission will engage with all relevant stakeholders to ensure that the developed rules meet the aspirations of the market. The Commission plans to finalise at least five (5) sets of Rules and Regulations in 2019. Meanwhile, in order to address immediate challenges faced by the market, the Commission, with the support of the Ministry of Finance, is expediting the revision to the Statutory Instrument on fees. This is meant to immediately reduce the cost of doing business by capping the maximum fees payable on the registration of securities. In my 2017 report, I did allude to the fact that the Commission would pursue the developing of a capital markets master plan. I am excited to report that the Commission is making progress on this front. To this end, the Commission together with the Ministry of Finance will be engaging with the Financial Sector Deepening Africa, a DfID funded project, to progress the development of a plan that will anchor capital markets development in Zambia. It is expected that a cooperation agreement will be signed with the FSDA within the first quarter of 2019. The Commission continues to view capital markets as an important alternative sector in mobilizing savings into long-term development projects. However, this is only possible in an environment where confidence is maintained. In order to further enhance market confidence and also safeguard savings, the Commission issued a number of guidance notices during 2018. Of note was the December 2018 guidance note on “Prohibited Products”. This was meant to ensure that investors were only making savings into authorized products, a key step in safeguarding investments. The Commission has seen progress being made towards regularizing positions in entities that were found to be outside of the Law. While the Commission continued to deliver on its mandate of investor protection and market development, the key challenge continues to be the limitation in the availability of resources. With subdued market activities as reported in this report, the Commission failed to generate sufficient resources to meet its budgetary requirements. Therefore, continued and adequate Government support remains key to ensuring that the Commission delivers on its mandate of investor protection and market development. The Board, management, and staff continue to be thankful for the continued support that the Government, through the Ministry of Finance, continues to provide to the Commission. May I also thank all the capital markets stakeholders and in particular the Capital Markets Association of Zambia (CMAZ), whose continued dialogue and interaction with us has made our investor protection agenda and the capital markets development initiatives a success. Amos Siwila CHAIRPERSON

Chief Executive’s Statement 14 SEC ANNUAL REPORT 2018 The Commission’s duty is to ensure that investors in the capital markets are protected and that capital markets in Zambia are developed. This dual mandate is in line with the requirements of the Securities Act, number 41 of 2016. The same Act requires as indicated in the Chairman’s report that the Commission should give an update, among other things, on the performance of the Commission in line with the six key areas highlighted in the Chairman’s report. The Commission presents below operational reports that highlight activities performed by the Commission during the 2018 fiscal year. While the Commission’s main mandate is to protect investors in the capital markets and ensuring capital markets are developed, this is only possible in an environment where the limited financial and other resources are efficiently and effectively utilised. To this end, the Commission presents below financial statements for the year ended 31st December 2018. This is in line with both the Public Finance Act requirements as well as good corporate governance principles. The Commission has continued to demonstrate that the financial resources of the Commission are continually managed in a prudent manner having in mind the Commission’s need to use resources in its primary function of investor protection and attending to market development goals. The Commission continues to operate below the minimum required resource needs. However, despite this challenge, the Commission applies the limited resources to those regulatory activities that add value to the protection of investors. The Commission therefore dedicated its resources to protect the K60 Billion invested through public markets on the Lusaka Securities Exchange Plc, the K574 Million in Collective Investment Schemes, and the K700 Million in Corporate Bonds. It is the Commissions challenge to ensure that these funds are protected so that people’s savings are secure and thus have the Commission continue building confidence in the capital markets as a secure place to put retirement and other savings. The Commission now reports below the performance of the equity, corporate debt, and Collective Investment schemes (CIS) segments of the capital markets sector. These areas under the supervision of the Commission all contributed to the overall well￾being of the financial system in Zambia. The Commission therefore dedicated its resources to protect the K60 Billion invested through public markets on the Lusaka Securities Exchange Plc, the K574 Million in Collective Investment Schemes, and the K700 Million in Corporate Bonds.

15 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Performance of the equities market Equity market LuSE All Share Index Market Cap (K ’million-Including Shoprite) Market Cap (US$ million-Including Shoprite) Market Cap (K ‘million-Excluding Shoprite) Market Cap (US$ million-Excluding Shoprite) Gross Domestic Product (US$ million) Trading Turnover - Equities (K ‘million) Volume of Shares Traded (‘Millions’) Number of Trades Number of Listed Companies Number of Quoted Companies Market Capitalization/GDP Ratio †Turnover /Market cap Ratio Trading Turnover-GRZ Bonds (K ‘million) Number of Trades (GRZ Bonds) Number of Brokers Number of Collective Investment Schemes 31/12/2018 5,248.39 60,493 5,058 26,254 2,196 27,368 1,197 1,287 5,461 23 13 18.5 4.56 9,974 1,606 6 11 31/12/2017 5,311.54 62,350 6,223 28,111 2,805 25,633 1,198 852 3,850 23 13 24.27 4.26 11,959 1,331 6 10 percentage change 1% 3% 19% 7% 22% 7% 0.1% 51% 42% 0% 0% 24% 7% 17% 21% 0% 10% The Capital markets in Zambia has three licensed exchanges. The performance of the market report is however restricted to the Lusaka Securities Exchange Plc (LuSE), which is the only active regulated market. Pan African Exchange (“PANEX”) was allowed to test their operating systems. However, PANEX suspended its operations to attend to regulatory observations. The Bonds and Derivatives Exchange (BaDEX) was still non-operational during the year. The Lusaka Securities Exchange (LuSE) All Share Index (LASI) closed at 5,248.39 points on 31st December 2018, a 1 % decrease compared to the 5,311.54 points at 31st December 2017. The decrease in the LASI was mainly due to a decline in share prices notably in Lafarge (22.08%), ZANACO (13.40%), Investrust (11.11%) and Standard Chartered Bank Zambia (5.05%). We present below the salient indicators of the performance of the market during the year under review: Source: Lusaka Securities Exchange Plc *2016 GDP (CSO @ K9.92/US$) and 2017 GDP (World Bank Forecast) †Turnover to market cap ratio excludes Shoprite

16 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Market Capitalisation The market capitalization, which is the market value of securities of all listed companies was K60,493 million (K26,254 Million without Shoprite) as at 31st December 2018, down from K62,350 million (K28,111 Million without Shoprite) as at 31st December 2017, representing a 1% decrease. The market capitalization excluding Shoprite was down 7%. This decrease in the market capitalisation was mainly due to a decrease in the share prices of ZCCM-HI, Lafarge, ZANACO, Standard Chartered Bank Zambia Plc, and Investrust Bank Plc. In US$ terms, the market capitalization of the LuSE including Shoprite was US$5,058 Million at 31st December 2018, a 19% decrease from US$ 6,223 million at 31st December as at 31st December 2017. The market capitalization excluding Shoprite was US$2,196 million at 31st December 2018 compared to US$ 2,805 million as at 31st December 2017 a 22% decline. Turnover The turnover recorded during 2018 was K1,197 Million, a 1% decrease from K1,198 million in 2017. This decrease is mainly attributed to decline in some share prices. Volume of shares and number of trades The total volume of shares traded during the year increased by 51% while the number of trades increased by 42%. CEC Plc and CEC Africa Plc contributed 51% and 43% respectively towards the total volume traded. Number of Listed and Quoted Companies There was no change in the number of quoted and listed companies during the period under review. Turnover to Market Cap Ratio The turnover to market capitalisation ratio increased by 7% to 4.56 in 2018 from 4.26 % recorded in 2017. The overall market liquidity ratio was mainly driven by CEC Plc which contributed 71% of the total market turnover. Without the CEC transaction, the ratio is still below a level required to have a liquid market. Trading Turnover (Government Debt Securities) The trading turnover of government bonds decreased by 17% from K11,959 million in 2017 to K9,974 million in 2018. Corporate Bonds The private sector participation in the capital markets is mainly through issuance of bonds to raise investment funds. However, as a percentage of GDP, corporate bonds outstanding was at 0.22% or K727 million as at 31st December 2018 and 0.36% or K929 million at 31st December 2017. The 22% reduction during the year is due to some of the bonds maturing during 2018, while there was very minimal activity in new corporate bond issues.

17 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Financial Performance of the Commission Collective Investment Schemes (CISs) The number of authorized fund managers at 31st December 2018 was 11 from nine (9) in 2017. This was after two new fund managers were authorized during 2018. The value of funds under management by the authorised managers increased to K516,662,856 as at 31st December 2018, a 19.3% increase from K433,047,611 at the end of December 2017. Although there was growth in the number of fund managers, there was minimal growth attributed to the new fund managers. The recorded growth was mainly on account of increased savings by existing clients and new clients in the old Fund Managers’ Funds. In order to safe guard savings made through the capital markets, government continues to support the Commission in meeting operational costs. The Commission also continues to support government efforts by generating revenues that support budget implementation. However, as the Commission’s mandate is largely investor protection, financial performance indicators are mainly on account of the Commission needing to prudently apply the limited resources in meeting its mandated objectives. We report in other sections on some of the non-financial activities that the SEC is required to do as part of its mandate. In the period ending 31st December 2018, the Commission recorded an operating deficit of K 6,640,888 (2017 – Deficit K1,301,332) from a combined income of K 18,953,080 against total operating costs of K 25,593,968. However, the Commission met all its obligations on time by utilizing reserves. The deficit in the year is mainly attributed to the subdued market activities arising from high money market rates in 2017 through to 2018. The capital markets ability to transfer savings into productive sectors, which drives the Commission’s ability to earn fees, is affected by high money market rates as corporates are unable to raise capital from long term markets due to expensive funds. Reserves The Commission’s accumulated fund (reserves) position at 31st December 2018 stood at K 3,840,047 compared to K 10,480,935 recorded at 31st December 2017. This reduction, as explained above, was due to the Commission meeting its approved budgetary expenses by using reserves. The diagram below shows that since 2012, the Commission had been managing to contain costs and thus improve on its reserve position but due to subdued market activities from 2016, the Commission’s reserve position has been declining as depicted below:

18 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Income Earned During the year ended 31st December 2018, the Commission internally generated 46% of its income while GRZ grant support accounted for 54%. This is on the backdrop of subdued market activities as explained above. Commission Expenses The Commission being in the services sector, human capital is its main asset. Therefore, the Commission’s major expense continues to be employee costs, a significant and key component of our regulatory activities and therefore the key cost driver. On a comparative basis, for the period to 31st December 2018, the Commission’s total staff costs were 57% (2017 – 54%) of its total expenditure. Being a service-oriented organization that also champions investor awareness and investor protection, labor, awareness, and governance costs continues to be the Commission’s major cost elements. The Commission also strives to uphold good corporate governance by ensuring that the SEC had a well￾functioning Board supported by effective Board committees. In order to assist the Board, make informed licensing, authorization, and registration decisions among others, the Board, as provided for in the Securities Act, has constituted a number of committees of the Board, which have a good representation of various required professions. Capital Expenditure The Commission during the embarked on a building project on Burma Road. The building costs represents the largest capital expenditure during the period under review. The Commission’s capital expenditure was as follows: Type Computer hardware Office equipment Office furniture Motor vehicles Land and Buildings Total 2018 ZMW 216,481 54,999 88,470

1,041081 1,401,032 2017 ZMW 135,389 174,941 130,538 1,044,386 1,485,254

19 SEC ANNUAL REPORT 2018 Chief Executive’s Statement The Commission’s staff complement during the review period remained at 24 compared to an approved structure of 43 (2015 – 2018). Capacity building continued to be at the core of the Commission’s objectives. The full list of employees during the period under review is provided in Appendix I while the approved structure is highlighted below: Staff Complement

20 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Multi-national and Regional Conferences and Summits Attended by Commission Staff The Commission has a deliberate policy to ensure staff are aware of the developments in this ever-changing capital markets environment. The country and the Commission are also signatories to regional bodies such as SADC, which among other things require membership and attendance at meetings such as those of the Committee on Insurance, Securities and Non-Bank Authorities (CISNA) and the Eastern and Southern African Anti Money Laundering Group (ESAAMLG). Therefore, during the Financial Year ended 31 December 2018, Commission staff attended the following trainings, conferences, meetings and workshops. Training and Workshops Course & Location Office Assistant Course, Luanshya IOSCO AMERC, Dubai IOSCO Assessment Committee’s Capacity Building, Malaysia IOSCO TA Manual-Livingstone Leadership Program for Security Regulators-Toronto Canada Annual International Institute for Securities Market growth Dev-USA Management skills workshop -Livingstone Amended Constitution Act No.2 of 2016-Pensions, Ndola LAZ, Livingstone Investor Education/IOSCO Global investor Education, Japan ESAAMLG, Tanzania CISNA-Seychelles ZICA -Livingstone IOSCO Conference, Budapest Microsoft Exchange Server 2016 Certification, South Africa ZICA Annual Business conference -Livingstone Dates 1st to 12th January 2018 23rd to 25th January 2018 24th to 26th January 2018 26th to 28th February 2018 5th to 8th March 2018 12th to 22nd March 2018 22nd to 24th March 2018 22nd to 23rd March 2018 4th to 7th April 2018 9th to 11th April 2018 15th to 19th April 2018 18th to 20th April 2018 27th to 28th April 2018 05th to 13th May 2018 14th to 18th May 2018 14th to 18th May 2018 Attended by Office Assistant Inspector/Analysts and Investigations Officer Director Market Supervision and Development Manager Market Transaction, Finance Manager, Manager Market Supervision, Inspector/ Analyst and Investigations Officer Director Market Supervision and Development, Manager Legal Investigations Officer Secretary Administration Manager and Human Resource Officer Investigations Officer and Manager Legal Manager Financial Inclusion Director Enforcement and Legal Services Manager Market Supervision Director Enforcement & Legal Services, Manager Market Supervision, Manager Market Development and Manager Market Transactions Manager Market Supervision and Manager Market Development Chairman and Director Enforcement and Legal Services IT Officer Manager Finance, Manager Market Supervision, Manager Transactions

21 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Course & Location ICSA Certificate in Company Secretarial, London CISI-Livingstone Executive Assistants Master Class￾Livingstone Phase 1 IOSCO/PIFS-Harvard Certificate Program for regulators of Securities Markets-Spain Southern African Structured Trade￾Livingstone Legislative Drafting-Lusaka ABEAM Course, Lusaka ESAAMLG, Seychelles ESAAMLG-AML/CFT Risk based Supervision-Mauritius ZIM-Livingstone Phase 11 IOSCO/PIFS-Harvard Certificate Program for regulators of Securities Markets-Boston, Spain IOSCO-Dubai Dates 23rd to 25th May 2018 28th to 30th May 2018 25th to 29th June 2018 25th to 29th June 2018 26th to 28th June 2018 23rd July to 21st December 2018 30th to 31st August 2018 2nd to 8th September 2018 19th to 22nd November 2018 27th November to 1st December 2018 3rd to 7th December 2018 11th to 13th December 2018 Attended by Manager Legal Manager Finance, Manager Financial Inclusion and 3 Commissioners Personal Assistant to CEO Director Enforcement and Legal Services, Manager Market Supervision Inspection Analyst, Surveillance Officer Manager Legal and Legal Officer Surveillance Officer, Inspection Analyst, Manager Market Supervision and Investigations Officer Director Enforcement and Legal Services, Manager Market Supervision Manager Market Supervision Manager Financial Inclusion, Manager Development and Product Development & Market Research Officer Director Enforcement and Legal Services Manager Market Supervision Director Market Supervision and Development Strategic Plan Overview The Commission’s 2015 – 2018 strategic plan came to an end on the 31st of March 2018. The Commission engaged Management Development Division at Cabinet Office to both review the performance for the 2015- 2018 Plan as well as help the Commission come up with a new 2018 – 2021 strategic plan. The review of the old plan showed that the Commission achieved a 72% completion rate. The new Plan, developed with wide stakeholder consultations, identified Seven (7) new key objectives which include the following: Objective One: “Improve Investor Protection.” These measures are aimed at increasing financial inclusion and accessibility of capital markets products. Objective Two: “Promote diversified and customer-centric products.” These inventions are aimed at deepening and diversifying the investment options in the capital markets.

22 SEC ANNUAL REPORT 2018 Chief Executive’s Statement Third objective: “Improve Stakeholder Relationships.” We believe these interventions are aimed at increasing stakeholder support and creating a positive corporate image. Fourth objective: “Improve Sources and Management of Financial Resources.” These measures are aimed at optimizing financial resources and ensuring effective implementation of programs. Fifth objective: “Improve Operational Processes and Systems.” This Strategy is aimed at improving efficiency in service delivery. Sixth objective: “Enhance Human Capital and work culture.” These interventions are aimed at creating a positive corporate image, motivating staff and improving performance. Seventh objective: “Improve Office, Tools, Equipment and Infrastructure.” These measures are aimed at improving efficiency. The above identified objectives are expected to help the Commission achieve its goal to increase the number of investors and issuers through awareness and building market confidence. The Commission plans to see a market where there is increased liquidity achieved through having a trusted market, increased number of listed entities as well as participation on the market by an increased number of investors. Conclusion While activities on the market were subdued in 2018 compared with prior years and that the low market activities have had an impact on the Commission’s ability to mobilise resources, the Commission sees capital markets as an enabler of economic growth. Phillip K. Chitalu CHIEF EXECUTIVE OFFICER

Corporate Governance 23 SEC ANNUAL REPORT 2018 Cadbury has defined corporate governance as a system by which a firm is directed and controlled. The Commission takes corporate governance very seriously as the Commission believes that a well-managed and supervised corporate entity creates the most value for its shareholders. The Securities Act has entrenched provisions aimed at ensuring compliance, by entities regulated by the Commission, with corporate governance principles including having a say in the appointment of the Directors and senior management of securities exchanges and clearing and settlement agencies. This is meant to ensure that the office holders are not only fit and proper but also adhere to the governance principles of transparency, responsibility, accountability and fairness. Corporate governance is not only applied externally to the Commission’s regulated entities but also applies to the Commission as a statutory body. In terms of the governance structure, the Commission operates with a non-Executive Board and a Management structure whose roles are clearly distinct. The Board plays an oversight or supervisory role while Management is involved in the day-to-day administration of the Commission’s affairs. The Board’s oversight role is highlighted in Section 8 of the Securities Act, No. 41 of 2016. In addition, the Commission has a Board Charter that prescribes the conduct and operations of the Board and its Members, individually and severally. The Charter guides Members on declarations of interest, gift acceptance restrictions as well as the prohibition of trading on non￾public, price-sensitive information. The Commission also enforces a Code of Conduct to the Commission staff which prescribes the conduct and behaviour of staff on governance issues, especially regarding conflict of interest. The Code of Conduct requires staff to declare interest in matters in which staff could have personal interest. It is also a requirement that staff declare gifts received from any person or entity, whether regulated by the Commission or not as well as insider dealing restrictions. In order to ensure that the Commission is kept abreast with international corporate governance trends, the Commission requires all senior management staff to be members of the Institute of Directors of Zambia. The Commission takes corporate governance very seriously as the Commission believes that a well-managed and supervised corporate entity creates the most value for its shareholders.

24 SEC ANNUAL REPORT 2018 Corporate Governance Board Composition Section 8(2) and (3) of the Securities Act, No. 41 of 2016 specifies the composition of the Commission Board as consisting of representatives of the following organisations: a) Bank of Zambia; b) Law Association of Zambia; c) Zambia Institute of Chartered Accountants; d) Zambia Chamber of Commerce and Industry; e) Ministry responsible for finance; f) Ministry responsible for justice; g) Pensions and Insurance Authority; and h) the Commission’s Chief Executive Officer as ex-officio Member. The Minister appoints the non-executive Members of the Commission Board from a nomination made by the respective organisation. In addition, section 8(5) of the Act requires the Minister to ensure that at least fifty percent of each gender is nominated and appointed to the Commission Board, unless it is not practicable to do so. However, the Act empowers the Members to elect, from amongst their number, a Chairperson and Vice￾Chairperson of the Board. During the period under review, the Commission Board consisted of the following Members: Name of Board Member Institution Represented Position Mr. Amos Siwila Mr. George Nonde Mrs. Ireen M. Habasimbi Mrs. Natasha N. Kalimukwa Dr. Jonathan Chipili Ms. Mainza Masole Mrs. Ruth S. Mugala Phillip K. Chitalu Law Association of Zambia Zambia Chamber of Commerce and Industry Ministry responsible for finance Ministry responsible for justice Bank of Zambia Pensions and Insurance Authority Zambia Institute of Chartered Accountants SEC Chief Executive Officer Chairperson Vice-Chairperson Member ex-officio Member Front row (from Left to Right): Mrs. Natasha. N. Kalimukwa, Mr. Amos Siwila and Mrs. Ireen M. Habasimbi Back row (from Left to Right): Dr. Jonathan Chipili, Mrs. Ruth S. Mugala, Mr. George Nonde, Ms. Mainza Masole and Mr. Phillip K. Chitalu Commission Board

25 SEC ANNUAL REPORT 2018 Corporate Governance Board Meetings Committees and Committee Membership The Board held four scheduled meetings in February, May, September and December. In addition, the Board held one Special Meeting in October to deliberate on a matter that required the Board’s urgent consideration. The Board has delegated decision-making on time-sensitive matters such as those relating to licensing as well as market transactions (registration of securities for capital raising) to ensure that decisions are expeditiously made without having to wait for the quarterly scheduled meetings The following is the Board attendance at the scheduled and special meetings: Name February Scheduled Meeting September Scheduled Meeting October Special Meeting December Scheduled Meeting May Scheduled Meeting Mr. Amos Siwila Mr. George Nonde Mrs. Ireen M. Habasimbi Mrs. Natasha N. Kalimukwa * Dr. Jonathan Chipili Ms. Mainza Masole Mrs. Ruth S. Mugala** Mr. Phillip K. Chitalu 3

3 3

3 7 3

3

3 3 7 7 3 3 7 3 7 3

• Appointed in March 2018 ** Appointed in October 2018 3 Meeting attended 7 Meeting not attended

• Member not yet appointed to the Board The Commission Board has established Committees to assist the Board in performing some of the statutory functions conferred on the Board. The Commission has five standing and one ad hoc Board Committee namely – a) the Compensation Fund Committee; b) the Licensing Committee; c) the Market Transactions Committee; d) the Risk and Audit Committee; e) the Staff and Remuneration Committee; and f) the Property Acquisition and Development Committee (ad hoc). The Compensation Fund Committee is a Board Committee established pursuant to section 176 of the Securities Act. The Committee is responsible for overseeing matters relating to the Compensation Fund and reporting to the Board. In particular, the Committee shall administer the Fund and make determinations for the settlement of claims against the Fund as provided for under the Securities (Compensation Fund) Regulations.

26 SEC ANNUAL REPORT 2018 Corporate Governance The Licensing Committee is a Board Committee established pursuant to section 13 of the Securities Act and is responsible for licensing market players and overseeing and reporting on the existing and new policies as stipulated in the Act and the Rules made pursuant to the Act as well as enforcement matters. The Market Transactions Committee is a Board Committee established pursuant to section 13 of the Securities Act and is responsible for overseeing, and reporting to the Board on approval of applications for registration of securities required to be registered under Part VIII of the Act as well as the quanta and efficacy of capital formation. The Risk and Audit Committee is a Board Committee of the Board constituted under section 13 of the Securities Act. In addition, it is a statutory requirement under the Public Finance Management Act, No. 1 of 2018, for this Committee to be established. The Committee is responsible for overseeing financial management, reviewing internal controls, checks and balances and risk management. The Staff and Remuneration Committee is a Board Committee established pursuant to section 13 of the Securities Act and is responsible for overseeing, and reporting to the Board on recruitment, skills training, capacity building and retention of staff. The Property Acquisition and Development Committee has been established as an ad hoc Committee to guide Management in the Commission’s property acquisition and development process. In addition, the Commission has established a Procurement Committee, chaired by the Chief Executive Officer, in accordance with the Public Procurement Act, No. 12 of 2008. The Committees were composed of the following members: COMMITTEE MEMBERSHIP REPRESENTATION MEMBER LICENSING COMMITTEE Board Member representing MoF and Committee Chairperson Board Member representing MOJ BoZ Representative ERB Representative PIA Representative Mrs Ireen M. Habasimbi Mrs. Natasha N. Kalimukwa Mrs. Hellen L. Banda Mr. Fred Hang’andu Mrs. Namakau Mundia-Ntini MARKET TRANSACTIONS COMMITTEE Board Member representing BoZ and Committee Chairperson Board Member representing PIA Board Member representing MoF CCPC Representative PACRA Representative ZDA Representative Dr. Jonathan Chipili Ms. Mainza Masole Mrs. Ireen M. Habasimbi Mr. Chilufya P. Sampa Mr. Anthony Bwembya Mr. Perry Mapani STAFF AND REMUNERATION COMMITTEE Board Member representing ZACCI and Committee Chairperson Board Member representing BoZ MoJ Representative ZIHRM Representative Mr. George Nonde Dr. Jonathan Chipili Mr. Joe Simachela Mrs. Beatrice N. Mwila

27 SEC ANNUAL REPORT 2018 Corporate Governance COMMITTEE MEMBERSHIP REPRESENTATION MEMBER RISK AND AUDIT COMMITTEE Board Member representing ZICA and Committee Chairperson Board Member representing ZACCI ZICA Risk Expert MoF Representative LAZ Representative Mrs. Ruth S. Mugala Mr. George Nonde Mr. Kapembwa Sindano Mrs. Joyce P. Sundano Ms. Matilda C. Kaoma COMPENSATION FUND COMMITTEE Board Member representing MOJ and Committee Chairperson CMAZ Representative BAZ Representative ZACCI Representative LAZ Representative MoF Representative Mrs. Natasha N. Kalimukwa Mr. Aaron Y. Zulu Mr. Fanwell Phiri Dr. Francis M. Ndilila Ms. Abigail Chimuka Mrs. Mwila K. Zulu PROPERTY ACQUISITION AND DEVELOPMENT COMMITTEE Board Member representing PIA and Committee Chairperson Board Member representing ZICA MoJ Representative Ministry of Works and Supply Representative Show Society of Zambia Representative Ms. Mainza Masole Mrs. Ruth S. Mugala Mr. Joe Simachela Mr. Geoffrey C. Phiri Mr. Vasco Sikanyeu PROCUREMENT COMMITTEE SEC CEO and Committee Chairperson Procurement specialist Procurement specialist SEC Member SEC Member SEC Member Mr. Phillip Chitalu Mrs. Mary Banda Mr. Christopher S. Mwandu Mrs. Diana Sichone Ms. Mutumboi Mundia Mr. Mateyo Lungu Audit Function Apart from being a critical element of corporate governance, the Commission uses audit as one of the most important oversight tools. Overall, the Commission Board has an interest to ensure that it is transparent, responsible, accountable and fair in all its dealings with all types of stakeholders. The Board has delegated, to the Risk and Audit Committee its role of ensuring that the Commission has put in place sound financial management structures and processes, including financial, risk management and internal audit controls. The Commission’s external auditors are appointed by the Commission Board subject to approval by the Minister responsible for finance. The external auditors are required to perform an annual audit and present a report to the Board on the Commission’s financial statements as well as stating the level of compliance by the Commission to the law, regulations and policies. The financial statements are thereafter presented to the Minister of Finance as part of the Commission’s Annual Report. The Commission had, until 16th April, 2018, outsourced the internal audit function which was provided by MPH Chartered Accountants. However, due to the substantial increase in audit fees following the passing of the

28 SEC ANNUAL REPORT 2018 Corporate Governance Commission Secretary The Commission’s Board Secretary is appointed pursuant to Section 17 of the Securities Act and is in charge of the corporate secretarial affairs of the Commission, under the general supervision of the Chief Executive Officer. The law further allows the Secretary to perform other functions directed by the Board under the general supervision of the Chief Executive Officer. The Director – Enforcement and Legal Services is the Board-appointed Secretary to the Commission Board and performs the secretarial functions as required under the Securities Act. Board Performance Self-Evaluation In order to assess the effectiveness of the Board, its Committees, and its individual Board Members, the Commission undertakes a self-assessment on an annual basis. The self-assessment, a corporate governance tool, has been done for the last three years at Board level and for the last two years for the Board Committees. The self-assessment provides an indication of the Board’s and Committees’ performance and highlights areas of improvement. Overall Assessment of Board Performance in 2018 The Board performance self-evaluation was done for the following eight areas: Board Activity; Mission and Purpose; Governance/Partnership Alignment; Board Organisation; Administration and Staff Support; Time and Location of Meetings; Recording/Minute Taking; and Membership. The analysis of each of these areas was done and the results for each area assessed. The following Figure highlights the Board’s performance in 2018 as assessed by the Members of the Board. This assessment has revealed an overall Board’s performance rated at 84.57% with the lowest rating being the assessment of Mission and Purpose at 73.13% and the highest rating being the assessment of Board Organisation at 93.75%. Accountants (Client Fees) Regulations, Statutory Instrument No. 34 of 2018, the engagement was suspended and the Risk and Audit Committee of the Board took up the internal audit function. The internal audit function is meant to ensure that internal controls are effectively functioning in managing risk in the Commission. This is achieved by internal audit reviewing the control systems for the Commission and providing an independent assurance of risk management of the Commission to the Board.

29 SEC ANNUAL REPORT 2018 Corporate Governance Comparative Performance over a three-year period In the next Figure, a comparative analysis of the Board’s performance over the three years for which the Board Performance Self-Evaluation has been conducted is made as shown below: On average, only four out of eight areas assessed have indicated improvements while the other four areas show marginal reductions in the performance rates with the overall Board performance reducing on a comparative basis from 86.32% in 2017 to 84.57% in 2018. Board Committee Performance The Commission Board has five standing and one ad hoc Committee. The six Committees’ performance was assessed using the same methodology adopted for the Board and which was aimed at identifying strengths and weaknesses, flagging areas for improvement and planning for further action as appropriate. The self-evaluation was conducted for the following seven areas: Purpose of the Committee; Support for the Committee; Administration and Staff Support; Time and Location of Meetings; Attendance; Recording/Minute Taking; and Membership. The following table shows a summary of the overall performance of each of the Committees for the last two years:

30 SEC ANNUAL REPORT 2018 Corporate Governance The following table shows a summary of the overall performance of each of the Committees for the last two years: Diana S. Sichone (Mrs.) COMMISSION SECRETARY

Report on regulatory and operational efficiency 31 SEC ANNUAL REPORT 2018 Section 11(3) of the First Schedule to the Securities Act, No. 41 of 2016 requires the Commission to include, in its Annual Report, information relating to its regulatory and operational efficiency. The Commission is required to highlight the extent to which the Commission has fully implemented its regulatory oversight functions as provided under the Securities Act and in its rules and the effectiveness of the operation of such regulatory oversight function; the actual and projected cost savings to the Government, if any, resulting from the operations of the Commission; the actual and projected costs which the Commission and the public would have incurred if the Commission had not undertaken regulatory responsibility for certain areas under the Commission’s jurisdiction; the nature of the working relationship between the securities exchanges, clearing and settlement facilities and the Commission; an assessment of the actual and projected efficiencies the Commission has achieved or expects to be achieved as a result of the continuing regulatory activities of the Commission; and the immediate and projected capabilities of the Commission. The Commission reports on each of the six areas as follows: Extent of implementation of the Commission’s oversight function and their effectiveness Cost Savings resulting from the Commission’s Operations The Commission Board has a full complement of Members representing different institutions as required under the Securities Act. In addition, the Board has also constituted Committees to assist the Board in exercising its functions under the Act. The Board oversees the administrative affairs of the Commission by putting in place effective, efficient and transparent systems of corporate governance and generally providing strategic direction to the Commission, among other responsibilities. The Commission’s Board Charter also provides guidance to the Board Members in their conduct of Board business to ensure that there is a right balance between the oversight role of the Board and the secretarial function of the Commission. Further, the Commission applies a Code of Conduct to the Commission staff which prescribes the conduct and behaviour of the staff especially with regard to conflict of interest issues. Both the Code of Ethics and the Board Charter have enshrined provisions and procedures on the declaration of interest and declaration of gifts from any person or entity, whether regulated by the Commission or not. Further, both documents specify the procedures to be taken whenever an employee or a Board Member would like to participate in the capital markets as a player, which guard against trading on non-public, price-sensitive information. The Commission reports that during the year under review, none of the Board members and staff were sanctioned with respect to this governance structure that is in place. One of the Commission’s functions highlighted under section 8(b) of the Securities Act include the approval of the Commission’s budget estimates to ensure sound financial management structures and processes, including financial, risk management and internal audit controls. The Commission does not spend outside the approved budgeted and prudently manages its resources to achieve its strategic objectives. In this vein, the Commission does not engage in fruitless or wasteful expenditure and pays off all employee liabilities on time whenever they become due.

32 SEC ANNUAL REPORT 2018 Report on regulatory and operational efficiency Cost to the Nation for not having the Commission Actual and Projected efficiencies the Commission has achieved as a result of the continuing regulatory activities In exercising its investor protection mandate, the Commission demands the prompt and full disclosure of non-public price-sensitive information by a company’s directors to the general public on the basis of which the investor will make an informed decision. A number of institutional and retail investors have invested more than six billion United States Dollars in the Zambian capital markets. Therefore, if the Commission is not in place or does not undertake its regulatory mandate around ZMW64 billion in savings could be lost and savings mobilization could be affected as financial market confidence would be eroded. Most of the institutional investors are pension funds which invest employee contributions into several investment portfolios including the capital markets. Without regulation, the investment of the pension funds and individual members of the public would be susceptible to fraud and other criminal activities. The Commission is there to ensure that it protects the interests of investors in the capital markets and in the process ensure maintenance of financial sector confidence which is key to resource mobilisation through bond issuances and other instruments. The Commission has enhanced enforcement activities which has resulted in an increase in compliance by capital market operators which has a corresponding increase in market confidence. This has translated into increased capital mobilisation especially in Collective Investment Schemes (CISs) and Corporate Bonds. A self-assessment of the Commission’s performance during the 2015-2018 strategic planning period with technical support from the Management Development Division of Cabinet Office has revealed that the Commission had an average overall performance with a score of 72 percent. In addition, the assessment revealed that the major achievements were: Increased awareness of stakeholders about capital markets; Increased compliance to regulations in some areas; and The law now requires separation of CSDs from exchanges. The Commission Board has, for the 2019 period, approved the following Key Performance Indicators (KPIs) to enable the Commission achieve its strategic objectives in an efficient and effective manner: (a) increase of the investor base from 30,000 to 80,000; (b) issuance of the following five (05) regulations in 2019: (i) the Securities (Registration of Securities) Regulations, 2019; (ii) the Securities (Capital Market Operators) (General Licensing Procedures and Requirements) Rules and Regulations, 2019; (iii) the Securities (Collective Investment Scheme) Rules and Regulations, 2019; and (iv) the Securities (Fees and Levies) Rules, 2019; and (v) the Securities (Financial Technology) Rules, 2019. (c) enhancement of revenue mobilization by achieving revenue targets as per the 2019 approved budget by carrying out the following activities: (i) collect 90% of all invoices issued for Statutory fees as per Statutory Instrument No. 82 of 2013; (ii) carry out regular follow ups on outstanding GRZ Grants; and (iii) ensure that the Commission’s expenses are line with budget and available cash flows. The Commission believes that the implementation of these performance indicators will enhance the Commission’s regulatory efficiencies.

33 SEC ANNUAL REPORT 2018 Report on regulatory and operational efficiency Nature of the working relations with Capital Market Operators The Commission endeavours to continue building a professional working relationship with capital market operators. It is approachable and capital market operators are free to consult with and meet with the Commission at short notice on various regulatory issues. In addition, the Commission holds regular stakeholder meetings including the annual capital markets operators’ forum, the quarterly Chairman’s breakfast meeting with the market, and other regular market meetings. Further, the Chief Executive Officer also conducts media briefs on a regular basis to inform the market on the latest developments in the capital markets. To further enhance these relationships, the Commission, as required by the Securities Act, has encouraged the capital markets operators to join the Capital Markets Association (CMAZ) so that communication with the market is further enhanced. Immediate and Projected capabilities of the Commission The Commission cannot over emphasise the importance of capacity building and therefore staff training has been prioritised to ensure that the Commission is always in tune with current developments in the capital markets space. The Commission staff undergo various trainings facilitated by the Toronto Centre, the International Organisation for Securities Commissions (IOSCO), the Chartered Institute of Securities and Investments as well as by the Zambia College of Pensions and Insurance Trust, among others. The immediate capabilities include the revision to the Rules and Regulations so that the Commission has adequate tools to supervise the market. In this case, the Commission plans to issue at least five rules and regulation in 2019. With resources permitting, the Commission has also planned to move the supervisory approach to risk based supervision within the next 3 years. This will ensure that the Commission uses the limited resources to addresses risky areas of the market.

Operational Activities 34 SEC ANNUAL REPORT 2018 The Securities Act, No. 41 of 2016 is the principal Act for the regulation of the Zambian securities market. The Securities and Exchange Commission (SEC) has as a mandate to protect investors and ensure that the markets are free, fair and transparent. The Commission therefore adopts a supervision strategy for capital market players or intermediaries that ensures the protection of the investing public. The Commission has a dual mandate of investor protection and market development. Investor protection is done through various ways including the registration of securities, the licensing and authorisation of capital market operators and the supervision of capital market operators to ensure that they are in compliance with the requirements of the law. The role of market supervision and market development is performed by the Directorate of Market Supervision and Development (“DMSD”). MARKET SUPERVISION The Commission is responsible for the supervision of capital markets operators. The Commission undertakes its supervisory function through undertaking a number of activities, including licensing, inspections, monitoring and surveillance. A key objective is to ensure capital markets operators comply with the Securities Act and its subsidiary legislation, thus ensuring a secure, fair and orderly investment environment that enhances investor and public protection and promotes an orderly development of the industry. Zambia’s Capital Market Players The players that operate in Zambia’s Capital Markets industry consist of brokers/dealers, investment advisers, securities exchanges, central securities depositories, issuers, fund managers, credit rating agencies, investment banks, transfer agents among others. The full list of capital markets players and their contact details is provided in Appendices II and III. Licensing Licensing, being at the forefront, sets high regulatory standards at the very outset to fulfil the Commission’s mandate which is designed to ensure investor protection and support the operation of a free, orderly, fair, secure and properly functioning Securities Market. Licensing acts as the entry point into the Securities Market by capital markets operators. Therefore, the SEC strives to strike the right balance between its business-friendly approach and complying with international regulatory standards. In line with its endeavour to align its processes to international best practices and to embrace modern regulatory approaches, the SEC constantly ensures that these practices are embedded into its operations at the licensing stage. As a result, this provides for a more cohesive and transparent framework guiding further improvements in the Commission’s regulatory approach. The licensing procedure is clearly defined in the Securities Act and rules, regulations, directives and guidance notes issued by the SEC. At Licensing, the SEC has in place a transparent and well-established set of procedures leading to the issue of a licence or the rejection thereof.

35 SEC ANNUAL REPORT 2018 Operational Activities The regulatory power of the Commission is anchored upon four pillars as follows: a) Any person dealing or advising on securities must be licensed by the Commission; b) Any securities market must be authorized and licensed as a securities exchange by the Commission; c) All securities of a public company which are publicly traded must be registered by the Commission; and d) Collective Investment Schemes (CISs) must be authorized by the Commission. In assessing applications, the SEC is required to conduct a number of assessments - including the fit and proper test of applicants. In conducting the fit and proper test, the Commission assesses the financial soundness of the applicants, lawfulness and moral standards of the proposed activity, source of funds of the proposed activity, integrity of the shareholders, directors and key managers and any other relevant issues. For corporate applicants the Commission also analyses beneficial ownership information to ensure that only people of high integrity can operate in the Capital Markets. Where applications may cause harm to the good repute of the jurisdiction, such applications are recommended for rejection. Licences Issued for the year 2018 The Zambian Capital Markets continued to gain momentum and systemic importance in the year under review. The Commission continued with its role of ensuring that only fit and proper persons were allowed to conduct securities business and offer regulated services to the investing public. For the year ending 31st December 2018, the Commission had issued 252 licenses. A breakdown of the valid licenses (by license type) as at 31st December 2018 is provided in the table below: License type 31stDecember 2018 31st December 2017 Dealer’s License Dealer’s Representative License Investment Advisor’s License Investment Advisor’s Representative License Securities Exchange License Total 33 186 10 20 3 252 35 166 11 28 3 243 Compliance Compliance entails ensuring that persons authorized/licensed to operate in the Zambian Capital Markets, including listed and quoted businesses; collective investment schemes (CISs); exchanges; brokers; investment advisers; representatives; custodians; trustees; etc. adhere at all times to continuing obligations as set out in the Securities Act. • As part of its inspections, the Market Supervision Team reviews and assesses the licensed persons’ work procedures & their compliance to the Act, Rules and Directives. • Issuers, CISs and investment companies are also specifically monitored for purposes of compliance with continuing obligations

36 SEC ANNUAL REPORT 2018 Operational Activities • Focus is also given to compliance with the SEC’s Anti-Money Laundering & Countering the Financing of Terrorism Directives and other related laws. The SEC works closely with the Financial Intelligence Centre and the National Anti-Terrorism Centre in coordinating all Anti-Money Laundering & Anti-Terrorism related matters. Capital markets players are required to submit to the Commission monthly, quarterly and yearly returns. For example, fund managers are required to submit monthly and quarterly returns, which the SEC uses to monitor the funds’ investments and also help assess safety of the funds. The CIS industry had ten (10) fund managers who managed about 33 sub funds. A CIS that is established under trust is required to appoint a trustee whilst all other types of CISs are allowed to appoint a custodian. The prevailing scenario is that all CISs operating in Zambia have contracted custodial services thereby securing the assets of the investors at one of the two authorised custodians. In addition, the SEC collates data that is useful for assessing the growth or otherwise of the CIS market. As at 31st December 2018, the funds held under management were distributed as follows: Name of Fund Name of Fund Manager 12/31/2018 % Market Share 12/31/2017 % Market Share Mpile Unit Trust ABC Unit Trust Madison Unit Trust Kukula Fund 1 Intermarket Unit Trust Laurence Paul Unit Trust Mukuyu Growth Investment Fund Equity Capital Resources Unit Trust Altus Unit Trust Hobbiton Unit Trust Total African Life Financial Services Limited ABC Investment Services Limited Madison Assets Management Company Kukula Capital Plc African Life Financial Services Limited* LP Investment Services Limited Minet Zambia Consulting Limited Equity Capital Resources Plc Altus Capital Limited** Hobbiton Investment Management Ltd** 46.26% 25.83% 17.06% 4.66% 1.27% 1.28% 1.87% 0.96% 0.39% 0.42% 100.00% 61.04% 13.44% 13.69% 5.25% 1.47% 2.59% 1.60% 0.70% 0.00% 0.00% 100% *African Life Financial Services is interim Manager for Intermarket Unit Trust Inspections For the year 2018, the SEC carried out off-site and on-site inspections. Eight (8) of the Capital Markets players were subjected to either for-cause (targeted) or routine inspections. The Commission also sanctioned/penalised Capital Markets players found wanting in line with the Securities Act. Surveillance Market surveillance continues to be one of the key functions undertaken by the Commission. It entails monitoring trade operations by using daily analysis of market trades, writing periodic reports, investigating anomalies and other activities. It also involves analysing information gathered through complaints, social,

37 SEC ANNUAL REPORT 2018 Operational Activities electronic and print media, among others. The goal is to ensure compliance by the Capital Markets Operators to the SEC rules and regulations, in order to regulate the market and provide the necessary protection to investors. As part of surveillance, the Commission continued to attend, in an observer capacity, Annual General Meetings (AGMs) of listed and registered entities. During the year our market surveillance team attended AGMs for most of the listed companies and the following items were noted: • Attendance; Most of the AGMs held in the period underreview were well attended and compliant in terms of holding the meetings within the stipulated time. The Commission however noted a few poorly attended meetings. This is a matter of great concern to the Commission. • Investor Participation; Investors generally participated in the deliberations of the meetings and almost all of the issues raised by investors during the AGMs were well responded to by most companies. Some investors also seemed well involved in the monitoring of the performance of the companies in which they have invested. The Commission noted however that there were some instances when listed entities did not completely provide information requested for by investors, a matter the Commission followed up on. Complaints Handling The Commission continued to receive complaints from members of the public in relation to securities business. During the review period, the Commission received nineteen (19) complaints. The complaints related to various aspects of challenges faced by some investors including and claims for funds not being received after sale of shares, untraceable shares etc. Ten (10) of these complaints have been closed while the rest are still being investigated. MARKET DEVELOPMENT Familiarization Meeting with the Ministry of Finance The Securities and Exchange Commission (SEC) organized a half-day familiarization meeting for officials from the Ministry of Finance at the SEC Offices on 16th January 2018. The MoF delegation comprised a team of seven (7) officials from the Financial Sector Policies and Management Unit which is responsible for the co￾ordination and the implementation of the National Financial Inclusion Strategy (NFIS). Agenda items that were discussed during the meeting included: 3 The role of the Securities and Exchange Commission (SEC) and how the Capital Markets function fits into the financial sector and economic development agenda; 3 An update on current, on-going and up-coming developments within the capital markets sector such as laws, policies and strategies. 3 The appointment of SEC as the Secretariat for the Capital Markets Working Group under the NFIS and its role as a lead entity among other lead organizations in the implementation of activities set out in the NFIS; 3 Challenges faced by the Securities and Exchange Commission (SEC); 3 A summary review of SEC’s 2018 planned activities that are related to implementation of the NFIS Action plan; and 3 The kind of support required from the Ministry of Finance and measures to be undertaken to enhance collaboration between your institution and MoF.

38 SEC ANNUAL REPORT 2018 Operational Activities Going forward, the Securities and Exchange Commission and the Ministry of Finance agreed that it was imperative for the two Institutions to collaborate in the implementation of the National Financial Inclusion Strategy and the overall economic developmental agenda of Zambia. 2018 World Consumer Rights Day In its efforts aimed at enhancing financial consumer protection and capability, the SEC partnered with the Competition and Consumer Protection Commission (CCPC) in commemorating the World Consumer Rights Day (WCRD) under the theme ‘Promoting E-commerce without living consumers behind’. Through Hot FM’s call-in radio programme ‘Consumer Feedback’, the SEC addressed consumer rights issues related to capital markets that were raised by the general public. These mainly included issues on know your customer requirements and complaints resolution channels (among others). Launch of the 2018 Capital Markets Schools Challenge The Commission launched the 2018 Capital Markets Schools Challenge for Copperbelt Province on 23rd March 2018 at Levy Mwanawasa Stadium in Ndola. The launch was well attended, having over 350 participants, comprising mainly; teachers and pupils from the ten (10) Copperbelt Districts; financial sector representatives and stakeholders such as financial education providers; senior government officials; and media houses among others. Participants welcomed the Schools Challenge as being a useful and practical educational tool for empowering pupils as it gives them an opportunity to learn about the capital markets. The Challenge also helps the pupils to understand and appreciate the importance financial planning principles as they prepare for their future well￾being. Twenty-five (25) schools registered and took part in the competition which ran for a period of 12 weeks. The SEC plans to award deserving schools that participated in the competition. Going forward and resources permitting, the Commission seeks to continue a phased roll￾out of the Schools Challenge to other provinces. We believe this shall narrow the existing knowledge gaps among learning institutions in the Country. Participating pupil seeking clarification during the launch of the Schools Challenge in Ndola.

39 SEC ANNUAL REPORT 2018 Operational Activities 2018 Financial Literacy Week In its efforts aimed at educating children; youth and adults on key financial matters, the SEC partnered with co-sector regulators and associations in the organization and implementation of the annual Financial Literacy Week. An annual awareness and sensitization campaign aimed at providing general public with knowledge, skills and understanding on personal financial management concepts. The campaign ran under the theme ‘Save, Invest, Insure – to Live a Better Life’ from 18th to 25th March 2018. As the campaign was a build up from the previous year, theme messaging touched on the financial needs and obligations through key life events of an individual such as; education; marriage; and home construction among others. Further, the theme focused on helping people understand which products are suitable for them depending on their life stage. The SEC adopted to the Copperbelt Province where it led and coordinated activities for the 2018 FLW. The flagship event was the launch of the above-mentioned Capital Markets Schools Challenge for the Copperbelt Province. Other activities included; an official launch at Levy Mwanawasa stadium; a public exhibition at Mukuba mall; market activities at Masala market; education through print and electronic media. Toronto Centre Leadership Program for Securities Regulators The SEC partnered with the Toronto Centre of Canada and undertook a leadership training programme for Securities Regulators on international standards, regulatory surprises and crisis management Surveillance with a key focus a key focus on Surveillance. The programme took place from 5th to 8th March 2018 at Twangale Park in Chilanga. Participants included representatives from; the Bank of Zambia (BoZ); the Pensions and Insurance Authority (PIA); and the Lusaka Securities Exchange (LuSE) Plc. Group Photo taken during the Toronto Centre Leadership Programme at Twangale Park in Chilanga.

40 SEC ANNUAL REPORT 2018 Operational Activities Stakeholder Engagement with the British Chamber of Commerce As an extension of the above-mentioned programme, the SEC and the Toronto Centre partnered with the British Chamber of Commerce and held a special capacity building session for Small and Medium Sized Enterprise. The theme of the session was dubbed ‘Small and Medium Enterprises (SMEs) financing through Capital Markets – A Regulators perspective’ and took place at Southern Sun Hotel on 6th March 2018. The engagement covered mainly: i) Regulatory and other challenges facing SMEs in small business capital formation; and; ii) Ways in which securities regulators can help to overcome these challenges. Through a question and answer session, expert panelists from both the Public and Private sector engaged participants in discussions on issues relating to promoting growth of SMEs as well as interventions on how to overcome existing challenges that inhibit access to long-term financing for SMEs. Factors contributing to limited access to long-term financing through capital markets by SMEs among others, included; inexistent proper Corporate Governance structures; inadequate histories of financial statements; and lack of attractive business plans were highlighted. Representatives of Small and Medium Enterprises in attendance during the Stakeholder engagement at Southern Sun Hotel in Lusaka

41 SEC ANNUAL REPORT 2018 Operational Activities Update on the implementation of the National Financial Inclusion Strategy As primary entity for the coordination and implementation of objectives related to Capital Markets in the National Financial Inclusion Strategy, the SEC has since constituted the Capital Markets Working Group composed of both public and private sector institutions. To kick-start implementation, the Commission hosted an Inception meeting on 20th February 2018 where substantive working group members where taken through key items outlined in the Strategy such as; the governance/coordination structure; terms of reference for the working group; proposed activities within the NFIS et cetera. Further, a key area that was discussed was the imminent development of a ten-year Capital Markets Master Plan. Working group members appreciated the preliminary steps that undertaken regarding the Master Plan, particularly the outcomes of the Capital Markets Indaba held in April 2017. Capital Market Operators Workshop The SEC held a two-half day workshop for Capital Market Operators on 4th to 5th April 2017. Taking an interactive approach, the following presentations formed the basis of discussions with market players: i) Findings from thematic reviews in 2017 (Anti Money Laundering/Combating Financing of Terrorism Regulations and Continuing Obligations for Issuers); ii) Progress on the development of the framework for accountants and auditors working in capital markets; iii) Market development updates; iv) Draft Statutory Instrument on Fees and Levies Rules; and v) Kay Fact Statement for Collective Investment Schemes and draft Statutory Instrument. Deliberations were successful and worth to note was a request to for the SEC to undertake more stakeholder engagements. CISNA Bi-Annual Meeting The 40th Bi-Annual CISNA Meeting was held in Seychelles from 18th to 20th April 2018. The department was represented on the Capital Markets Sub-committee and the Committee for Financial Education. Three (3) model laws were approved during plenary session. The Model laws that were approved were as follows: i) Collective Investment Schemes; ii) Central Securities Depository (CSD) and CSD participants; and iii) Pensions. The SEC presented a paper for Guidelines and Principles for Financial Education under the Committee for Financial Education. The paper was partly based on the Organisation for Economic Cooperation and Development (OECD) Guidelines and Principles. The committee deliberated on the guidelines and found them appropriate for use by members in the CISNA community. The document has been submitted to CISNA Secretariat to be presented to the Legal Committee for approval. Other deliberations included the sharing of country reports on activities undertaken and application of best practice adopted by the committee during the 39th CISNA Meeting. These were inherent in the uniform

42 SEC ANNUAL REPORT 2018 Operational Activities messaging around the themes for investor education which where suggested to ensure consumer education encourages the following: - i) Consumer rights and responsibilities; ii) Importance of using registered entities; and iii) Being a responsible borrower. As members of OECD, South Africa encouraged other countries to subscribe and become members to benefit from current and trending technologies being developed around financial education. It was announced that the 2019 OECD conference will be held in South Africa Cape Town and encouraged CISNA member countries to participate. The Capital Markets Sub-Committee discussed the following matters: i) IOSCO membership presentation: This was part of the initiative by the Committee to ensure that all CISNA members attain full IOSCO membership. The Membership currently stands at 5 full members and 4 Associate members out of 14 CISNA members. Members were also encouraged to participate more in IOSCO activities (especially the Growth and Emerging Market (GEM) and AMERC). This is the best way for members to benefit from IOSCO membership. ii) Status update from the Committee of SADC Stock Exchanges (COSSE): COSSE highlighted that they are currently working on a project to ensure that secondary trading of bonds was undertaken on Securities Exchanges in all the SADC countries. They highlighted that they would be making presentations to the Committee of Central Bank Governors. iii) Review on the status of ongoing projects: The CMS had 30 projects running. Two projects relating to model laws were completed in the 6-month period to April 2018. Of the remaining 28 projects, two were 75% complete, while a further 7 were 50% complete. The rest of the projects were below 50% completion. IFIE – IOSCO Global Investor Education Conference The SEC participated at the International Forum for Investor Education – International Organization for Securities Commissions Global Investor Education Conference under theme ‘Building Lifelong Financial Resiliency in a Changing Environment’ in Tokyo, Japan from 9th to 11th April 2018. The conference focused on improving financial resilience for individuals and the organizations that serve them by addressing emergent trends especially around the development of financial technologies such as Cryptocurrencies and Initial Coin Offerings (ICO) as well demographic challenges regarding natural disasters among others. Participation at the international forum was beneficial as it enabled information exchange through panel discussions and breakout sessions as well as access to country specific case studies and investor education material. Worth noting is the establishment of the African Chapter which was formed for the first time. However, only two countries are members of this Chapter, these being; South Africa and Kenya. Going forward, the SEC considers joining as a member of the IFIE. This will allow active participation in regular web-based discussions and access to on-going/upcoming trends in the realm of investor education.

43 SEC ANNUAL REPORT 2018 Operational Activities Copperbelt Agricultural Mining & Industrial Trade Expo For the first time, the SEC participated in the Copperbelt Agricultural Mining & Industrial Trade Expo (CAMINEX) from 5th to 7th June 2018. The theme was “Repositioning for Environmentally Sustainable Economic Growth’’. CAMINEX is an exhibition focusing on entities in the mining sector but is also open to participation by entities in other sectors such as transport, finance, agriculture and so on. Our participation allowed for us to network with other exhibitors, both local and international. Our main proposition was to raise awareness about the opportunities for raising long term capital using the various capital markets platforms and products. Our tagline was “Capital Markets: Enablers of Sustainable Economic Growth”. The show was over a three-day period and included stand tours from the President of the Republic of Zambia and senior government officials. Inspections Methodology and Supervisory Masterclass The SEC held a 3-day Executive Programme in Supervision Strategy: Inspections Methodology (Market Conduct) from the 11th to 13th June 2018. The Inspections Methodology Masterclass was a training targeted at regulatory professionals in the financial sector for staff at all levels especially in supervision and enforcement. The content of this Masterclass was designed to provide insight into a wide range of inspection types (off-site or on-site inspections; routine, risk-based, thematic, and incidental inspections; inspections). The programme was open for participation by other local and regional financial sector regulators. Locally the Bank of Zambia (BoZ) was represented whilst securities regulators from Zimbabwe, Namibia, Uganda and Angola also participated. Further, the SEC hosted a regulatory Masterclass was on 15th June 2018 in Lusaka. The aim of the class was to enable regulators and market operators to gain a deeper understanding of each other’s perspectives; the interaction between regulator and market operators; the role of trust and scepticism in this interaction; and the impact of this interaction on compliance and market development. SEC, LuSE and CMAZ Officers at the CAMINEX Based on the SEC’s articulation of the theme and the exceptional outlook of the stand, we were awarded 3rd place in the Regulatory Organization category. Out of the networking during the show, the Commission was invited to attend a workshop on Small Scale Mining working closely with the mining sector to develop financing solutions for small scale miners from 9th to 13th July 2018.

44 SEC ANNUAL REPORT 2018 Operational Activities Bond Market Development Workshop The SEC in collaboration the Bank of Zambia, ACI and Frontclear held a stakeholder’s Forum to support Zambian bond market development on 6th July 2018. The forum provided an opportunity to review the primary challenges to stable, liquid and participatory money markets and to jointly identify and commit to remedial actions. Market Operators participating in the Regulatory Relations Master Class Mr. Eric Vandjik of Front Clear making a presentation Participants comprised of representation from both the banking and capital markets sectors. The discussions were insightful and allowed for debate on some topical developmental initiatives such as the Bank of Zambia’s imminent development of an electronic trading platform for bonds. Review and update of the National Strategy on Financial Education Following the expiry of the National Strategy on Financial Education (NSFE) in 2017, the SEC alongside other stakeholders is in the process of updating the NSFE II. As such, the SEC is represented on the NSFE II drafting committee for the second Strategy. Key stakeholders include the Ministry of Finance (championing the task), the Bank of Zambia, the Pensions and Insurance Authority (PIA), the Competition and Consumer Protection Commission (CCPC), the Ministry of Education (MoE), the Ministry of Higher Education, Financial Sector Deepening Zambia (FSDZ), Rural Finance Expansion Program (RUFEP). The drafting process commenced on 24th June, 2018 and is scheduled for launch in 2019.

45 SEC ANNUAL REPORT 2018 Operational Activities 2018 Financial Literacy Awards Following the commemoration of the 2018 Financial Literacy Week, the Bank of Zambia Governor in his capacity as the Champion for financial literacy in Zambia hosted the 2018 Financial Literacy Awards. The awards are undertaken give recognition to deserving individuals and institutions that have made outstanding efforts to further financial education. Three individuals received awards in the category of individuals that have contributed towards enhancing investor education. ZAF Presentation The SEC was invited to make a presentation at the 2018 Zambia Air Force Seminar held on 25th July 2018 for officers in the Administration Department. As such, a presentation highlighting the significance of capital markets as enablers to wealth creation was made. Alongside the presentation, the SEC arranged for capital market operator’s mini exhibition showcasing various Collective Investment Schemes (CIS) products currently offered in Zambia. Staff members of ZAF had an opportunity to interact with capital market operators and SEC staff as they addressed various capital markets related questions. State Owned Entities Round Table Forum The SEC in collaboration with the Industrial Development Corporation (IDC) hosted a half-day State Owned￾Enterprise Round Table Forum at Taj Pamodzi Hotel on 31st July 2018. The Round Table was aimed at providing a deliberative platform that would encourage SOEs to participate in capital markets through listing or otherwise. Further, the forum made it possible for the SEC, capital market operators and other key stakeholders, to highlight critical information on how SOEs would be enabled to strengthen their portfolios through amenable financing mechanisms including adherence to proper corporate governance models, which are perceived to be weak by the public. Alongside presentations by the SEC and the IDC, the SEC facilitated a synopsis of success stories (as mentioned above) in capital markets made in form of presentations by representatives from Safaricom of Kenya and Zanaco Bank Plc. The dual presented their respective organisational case studies that unveiled inspirational experiences of how their Organisations have benefited from listing on the Stock Exchange. Presentations made were a pre￾cursor to an active and honest deliberation.

46 SEC ANNUAL REPORT 2018 Operational Activities CISI Marketing Event /Development of the CISI Regulatory Module The SEC in collaboration with the Chartered Institute for Securities and Investments (CISI) and the Capital Markets Association of Zambia (CMAZ) held a breakfast meeting on 16th August 2018. The objective of the event was to raise awareness about the full continuum of the CISI qualifications. In addition, the meeting sought to share the vision with respect to the proposed certification programme vis-à-vis the SEC’s agenda to facilitate capacity building programmes. Following the successful introduction of the International Introduction to Securities and Investments module, the SEC, CISI and CMAZ embarked on a plan to develop the regulatory module suited to the Zambian setting. A draft manual for the module has since been developed by a consultant contracted by the CISI. The SEC has reviewed the draft manual and submitted its preliminary comments to the CISI. Once the draft is finalized and SEC grants a no objection, the module shall be introduced in the market. It is envisaged that the local regulatory module will assist to equip practitioners with the necessary knowledge about the Zambian legal and regulatory framework in respect to the securities industry. In this regard, CMAZ and ZCPIT are spearheading this initiative in collaboration with CISI subject to SEC’s approval. DMSD Planning Meeting for 2019 The Directorate for Market Supervision and Development held a two (2) day planning meeting on 25th and 26th October 2018 at Tiffany’s Canyon in Shimabala. The purpose of the meeting was mainly to: • Review the DMSD’s performance vis-à-vis planned activities in 2018; • Review and understand the new Strategic Plan 2018 – 2021; and • Initiate planning and budgeting for 2019 activities in line with the Strategic Plan 2018 – 2021. A draft implementation plan was developed and submitted for consolidation into the overall SEC’s Strategic Planning Implementation Plan. DMSD further embarked on the development of its annual activity plan for 2019, which was finalised and approved. Ambassador Mumba Kapumpa moderating at the SOE Forum There was a general consensus among stakeholders and SOEs present expressed a genuine willingness to participate in the capital markets. As such, the SEC in collaboration with the IDC, the Lusaka Securities Exchange Plc., and Capital Market Operators indicated their commitment to support and give guidance to SOEs so as to make their participation a reality.

47 SEC ANNUAL REPORT 2018 Operational Activities Commemoration of the World Investor Week 2018 For the second time, the SEC partnered with the International Organization of Securities Commissions (IOSCO) and the local capital market community to commemorate the 2018 World Investor Week (WIW), under the theme ‘A Smart Investor through Capital Markets’. The commemoration was held from 1st – 7th October 2018. The objective of the WIW is to disseminate key messages that further enhance investor education and protection, as well as financial literacy and fostering learning opportunities for investors. A team of Capital Market Operators geared up for an awareness activity A senior citizen seeks information on Capital Markets Some activities undertaken during the WIW 2018 campaign included the following: 3 Stakeholders planning meeting: A preliminary stakeholders planning meeting was held at the SEC offices on 30th August 2018. The objective of the meeting was to inform stakeholders about the WIW 2018, discuss the concept note and to get their buy-in. 3 Pre Launch Radio Interview: The SEC featured on UNZA Radio on 26th September 2018 to explain the objectives of the WIW 2018 and planned activities to be undertaken during the awareness and sensitization campaign. 3 Public exhibition by stakeholders: The SEC facilitated a capital market operators’ public exhibition on Saturday, 6th and Sunday, 7th October 2018 at Novare Great North Road Mall. Market players took time to educate and sensitize passers-by on among other things, characteristics of being a smart investor through the capital markets, the types of products offered, and the benefits and risks associated with investing. Account opening for investment products was also made possible for potential clients that showed interest. Between 300 to 500 mall goers visited the exhibition stands over the two days. 3 Media activities: The SEC developed daily educational media messages based around the theme for dissemination on social media platforms such as Facebook, Twitter and WhatsApp. Throughout the week, capital market professionals also featured on various radio channels disseminating information about capital markets.

48 SEC ANNUAL REPORT 2018 Operational Activities World Savings Day 2018 Media Brief, University Essay Competition Awards and SEC Quarterly Media Brief The SEC held a three-fold event on 23rd October 2018 at Cresta Golf View Lusaka, namely: the World Savings Day (WSD) 2018 Media Brief; the University Essay Competition Awards Ceremony; and the SEC Quarterly Media Brief. 3 World Savings Day 2018: As part of the Organizing Committee for the World Savings Day, the SEC hosted a pre-launch media brief. The objective of the WSD 2018 was essentially to build momentum through media houses by outlining the objectives of the WSD, calendar of activities and to lobby for stakeholder support/participation. 3 University Essay Competition Awards: As a close to the University Essay Competition launched in December 2017, the SEC hosted Awards for deserving students that participated on 23rd October 2018 at Cresta Golfview. One hundred and two (102) essays were submitted by students from sixteen (16) Universities (public and private). After a rigorous adjudication process by a panel of capital market professionals, three students emerged as winners. Group Photo taken during the University Essay Competition Award giving ceremony at Cresta Golfview - Lusaka 3 SEC Quarterly Media Brief: The SEC held its quarterly Media Brief and the event gave an opportunity for SEC senior management to have an intimate discussion with media representatives, particularly about the media’s perspective of SEC and potential areas were engagement between the two parties can improve. The media houses acknowledged their low participation in capital markets related activities and acknowledged that there was need to do more, given the importance of the capital markets as an enabler for economic growth. Further, the media representatives indicated that lack of access to information

49 SEC ANNUAL REPORT 2018 Operational Activities on capital markets related activities to a great extent inhibited reporting on the capital market. A key recommendation was for the SEC to consider facilitating regular media trainings and also to make a deliberate office to constantly engage with media houses. The SEC Strategic Plan 2018 – 2021 pledges to put in place a stakeholder engagement and communication strategy. As such it is envisaged that the concerns from the journalists will be addressed going forward. 2018 World Savings Day On 31st October 2018, the SEC in collaboration with co-sector regulators namely; the Bank of Zambia (BoZ) and the Pensions and Insurance Authority (PIA) including various stakeholders, joined the rest of the World in commemorating the World Savings Day (WSD) 2018 under the theme ‘Save, Invest, Insure – What do you wish for?’ The annual awareness and sensitization campaign sought to promote a savings culture among Children, Youths and Adults. Theme messaging during the WSD 2018 placed emphasis on how an individual or organisation and the economy at large can secure their future financial well-being through adopting a savings culture. Planned activities during the WSD 2018 included some of the following: 3 Media Brief: As mentioned above, the SEC facilitated and hosted a pre-launch WSD 2018 media brief on behalf of the WSD Organizing Committee at Cresta Golfview Lusaka. The event was attended by representatives from various media houses, the Ministry of Finance (MoF), the Bankers Association of Zambia (BAZ) Secretariat, the Bank of Zambia (BoZ), and the German Savings Banks Foundation for International Cooperation (SBFIC). 3 Official Launch and Public Exhibition: Commemoration of the WSD 2018 was officially launched by the Champion for Financial Education and Governor of the Bank of Zambia at the University of Zambia on 31st October 2018. The launch was attended by senior financial sector representatives (public and private sector), government officials, university students and various stakeholders. The launch was characterized by two (2) Flagship activities which included; an inter-school debate award giving ceremony; and a WSD 2018 public exhibition by financial service providers. 3 Inter-school debate: University students were engaged to provide their perspectives on savings through an inter-school debate competition which ran from 29th – 30th October 2018 at the University of Zambia. Eight (8) leading universities were invited to discuss various issues in the context of savings in relation to Banking, Capital Markets, Pensions and Insurance. This interaction provided key stakeholders an opportunity to get a different perspective of the subject matter and to partner with youths as they are critical partners in financial sector development. Below is the list of participating Universities:

50 SEC ANNUAL REPORT 2018 Operational Activities No. 1. 2. 3. 4. No. 5. 6. 7. 8. Name of University Cavendish University Copperbelt University DMI St. Eugene Mulungushi University Name of University Rusangu University University of Lusaka University of Zambia Zambia Centre for Accountancy Studies Inter-school debate participants and senior financial sector representatives pose for a Group Photo during the WSD 2018 Launch at the University of Zambia Zambia Institute of Marketing 22nd Annual Conference The SEC participated at the 22nd Zambia Institute of Marketing (ZIM) Annual Conference held under the theme ‘Anchoring Marketing for Prosperity’ in Livingstone from 27th to 30th November 2018. The Conference was launched by the Minister for Commerce, Trade and Industry and attended by both foreign and local stakeholders who shared knowledge through presentations and master classes. The presentations and master classes served as great learning opportunities for SEC staff. Worth to note is an appreciation of data analytics and use of research as a basis

51 SEC ANNUAL REPORT 2018 Operational Activities to make informed market development decisions (among other things). For the SEC, this is a very important component to consider during in the implementation of our stakeholder engagement strategy. In practise, the use of data analytics and research enables Institutions to allocate resources towards meaningful initiatives that can translate into real value for the Commission. As an end to the programme, the SEC joined the ZIM council in a Corporate Social Responsibility event at an orphanage home, Ebenezer Children’s Trust where conference participants interacted with the children at the home and contributed gifts, both monetary and non-monetary. ENFORCEMENT AND LEGAL SERVICES The Commission through the Directorate of Enforcement and Legal Services (“DELS”) is responsible for enforcing the Securities Act (“the Act”) and the Rules made thereunder. The Directorate is responsible, inter alia, for ensuring legal and regulatory compliance by capital market operators, identifying and recommending law reform and development in the securities sector and providing corporate legal advisory and Board secretarial services. DELS also undertakes litigation, on behalf of the Commission, in all courts and administrative Tribunals. Legislative developments The World Bank through the Financial Sector support programme being offered to the Zambian Government has been providing technical assistance for the drafting of statutory instruments required to effect the Securities Act of 2016. The World Bank engaged both a local and an international consultant to draft some of the Rules and Regulations required to operationalise the Securities Act. Some of the draft Statutory Instruments include Rules and Regulations on licensing of capital market intermediaries, the registration of securities, the regulation of self-regulatory organisations and the regulation of collective investment schemes. The Commission shall, prior to the submission of the draft Rules and Regulations to the Ministry of Justice for drafting, subject the drafts to a stakeholder consultative process. In a quest to reduce the regulatory cost of doing business and encourage entities to raise as much capital as possible from the capital markets, the Commission reviewed the Securities (Licensing, Fees and Levies) Rules by introducing a minimum and maximum amount that could be charged for the registration of securities. The Commission consulted all relevant stakeholders and proposed a maximum fee of 6,666,667 fee units of K2 million as opposed to the current uncapped fee of 0.125% of the value of the securities being registered which the market felt to be too prohibitive for high value transactions. However, in practice, the Commission has been granting fee waivers pursuant to Rule 12 of the Securities (Licensing, Fees and Levies) Rules of up to 60% to applicants for registration of securities, which considerably reduces the amount of fees an applicant is expected to pay. However, the Commission believes that by placing a cap on the fees required to be paid by entities registering securities with the Commission, there will be more predictability and certainty for market operators on the expected fees for the registration process. The Commission has since submitted the draft Amendment to the Securities (Licensing, Fees and Levies) Rules and awaits its finalisation by the Ministry of Justice. The Commission Board resolved to reduce the cost of SME capital raising by granting a total waiver of the fees for the registration of securities in order to allow sufficient participation of SMEs from different sectors. The waiver was made pursuant to Rule 12 of the Securities (Licensing, Fees and Levies) Rules that allows the Commission to grant partial or full waivers to applicants. In addition, the Commission acted in accordance with the policy on waiver of fees that allows for a waiver to be granted in furtherance of a government policy, for instance, where government wants to boost the manufacturing sector by encouraging listing of manufacturing

52 SEC ANNUAL REPORT 2018 Operational Activities companies or in this case the SME sector. The Commission believes that the waiver of registration fees for Alt-M applicants is in furtherance of a government policy to encourage SMEs to access affordable capital aimed at the growth and expansion of SMEs. The benefits of listing apply both to the economy and to the SME itself. The following are some of the benefits to the economy when an SME lists: a) increase in competitiveness in Zambia as there will be a rapid increase in graduation of companies from the SME category to large local corporations (LLC) in each industry; b) increased growth of business activity leading to an increase in long-term GDP; c) guaranteed stable and rapidly increasing job creation through business expansion activities of listed SMEs; d) increased corporate governance standards as SMEs will be exposed to higher standards of business ethics and held to those standards through LuSE Rules; e) more diversified investment avenues for venture capitalists and institutional investors; f) cheaper access to capital for SMEs will apply pressure to the banking industry to lower commercial interest rates as it will decrease the corporate demand for conventional debt ultimately increasing the liquidity of the Zambian economy; and g) creation of a better structure to harmonise the stock market with the economy as there will be space that will accommodate more companies in the economy.

The direct benefits of listing to an SME are the following: a) placing an objective market value on the company’s business; b) investors can exit through the market when the investment has matured; c) improvement in the debt to equity ratio; d) improvement of credit risk ratings of the company; e) performance of the company can now be gauged by the performance of the stock i.e. enhanced efficiency; and f) creates a path to listing on the main board (improvement of corporate image) since delisting will be highly unlikely due to high cost implication. The LuSE Alt-M was launched in 2015 and has to date not listed a single issuer. According to the LuSE, one of the reasons cited for the failure of a single listing includes the high costs of securities registration with the Commission. The Commission also participated in the review of the draft statutory instrument on the Capital Markets Tribunal Rules prepared by the Chief Justice. The Chief Justice submitted the Rules to the Ministry of Justice for promulgation into a statutory instrument. The Securities Act also introduced exemption powers under section 4 of the Act. The Commission may, by notice in the Gazette and a daily newspaper of general circulation in Zambia, exempt a person or any securities from the application of this Act. It must be noted that this power is exercised sparingly by the Commission and only in exceptional circumstances has the Commission exempted persons from the application of some provisions of the Act. For instance, the Commission exempted persons from the application of section 147 of the Act as there was no framework in place to guide the market players on how to comply with the said section.

53 SEC ANNUAL REPORT 2018 Operational Activities Enforcement and legal actions taken Since the enactment of the Securities Act No. 41 of 2016, the Commission has continued to enforce the provisions of the Securities Act against defaulting capital market operators. Depending on the circumstances of each case, the enforcement actions taken have ranged from private censures, fines and commencing civil suits. The Commission has continued to witness a reduction in the number of violations of the Securities laws by individuals and companies following the Commission’s initiative to take enforcement action against erring market players. It must be noted that, during the period under consideration, the Commission was defending a judicial review matter in which one of the capital market participants was challenging its regulatory decision and the matter was heard and determined by the High Court, and subsequently by the Court of Appeal after the judgment of the High Court was appealed against. In addition, the Commission also commenced a civil suit against persons who were unwilling to pay the authorisation fee as required under the Securities laws. Further, the Commission undertook a number of administrative actions against licensees and other persons in default to ensure that the provisions of the Securities Act were complied with. The Securities Act mandates the Commission co-operate with, provide assistance to, receive assistance from, and exchange information with, other regulatory bodies and law enforcement agencies. In view of this mandate, the Commission has, after investigating a number of cases, referred the cases to organisations such as the Bank of Zambia and the Drug Enforcement Commission whenever a matter was outside the Commission’s jurisdiction. The Commission has also gone a step further by assisting the organisations to which it refers matters by providing the organisations with information and conducting joint investigations. IOSCO MMOU Compliance IOSCO, which was founded in 1983, is an association of organisations that regulate the world’s securities and futures markets and is an international standard setting body for securities regulators. The MMoU, which was established in 2002 and last revised in May 2012, is a document that facilitates the sharing and exchange of information among signatories when investigating securities fraud. The MMoU was established for the following reasons: (a) Increased international activity in securities and derivatives markets and the corresponding need for mutual cooperation and consultation among IOSCO Members to ensure compliance with, and enforcement of their securities and derivatives laws and regulations; (b) the events of September 11, 2001 which underscored the importance of expanding cooperation among IOSCO Members; and (c) the desire by IOSCO Members to provide one another with the fullest mutual assistance possible to facilitate their respective regulatory functions. The MMoU has therefore provided securities regulators with the tools for combatting cross-border fraud and misconduct that can weaken global markets and undermine investor confidence. It is a benchmark for enforcement-related cooperation which will enable the Commission to obtain as well as share key investigative information with other global securities regulators.

54 SEC ANNUAL REPORT 2018 Operational Activities On 15th January 2018, the SEC Zambia attained a great milestone by becoming the 116th signatory to the International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU) and only the 6th in the 15-member SADC grouping to do so. The Commission attended the signing ceremony for the Zambia’s admission to the IOSCO MMoU as the 116th signatory in Budapest, Hungary on 9th May 2018 as part of the Presidents Committee (PC) meeting agenda in the context of the Budapest Annual Conference. The Commission was represented by the Board Chairperson, Mr. Amos Siwila and the Commission Secretary and Director – Enforcement and Legal Services, Mrs. Diana Sichone. As at the end of December, 2018 the following jurisdictions had become signatories bringing the total number of MMoU signatories to 121: the Central Bank of Armenia, the Central Bank of the Dominican Republic, the Financial Market Commission of Chile, the Securities and Exchange Organisation of the Islamic Republic of Iran and the National Bank of Kazakhstan. By the Commission becoming a signatory to the MMoU, Zambia will obtain recognition from international bodies and regulators around the world as a jurisdiction committed to improving cross-border investor protection cooperation through seamless interaction with other regulators. Through the MMoU, Zambia is reinforcing its message to the markets that regulators are co-operating and watching out for potential securities and derivatives fraud. As a result of becoming an IOSCO MMoU signatory, Zambia’s capital markets are poised to become more credible and will compete more favourably in attracting foreign investments with other countries globally. In particular, the country should see increased capital inflows which will result in a lower cost of capital. Additionally, other international organisations including the International Monetary Fund (IMF), the World Bank (WB) and the Financial Action Task Force (FATF) use a country’s MMoU signatory status when conducting country compliance assessments for international standards and best practice. Securities Industry Emerging Trends - 43rd IOSCO General Conference Apart from attending the signing ceremony, the Commission Board Chairperson and the Commission Secretary and Director – Enforcement and Legal Services also attended the IOSCO General Conference that had organized several panel discussions on topical issues including the following: Mr. Amos Siwila, the SEC Zambia Chairperson being congratulated by the IOSCO General Secretary Mr. Paul Andrews after signing the MMoU

55 SEC ANNUAL REPORT 2018 Operational Activities (a) Data privacy The Members were informed of a new EU data protection regulation will take effect on 31st May 2018 and would affect the exchange of information between EU and non-EU members or between two EU members. It was a matter of concern as it affects how Authorities exchange information under the IOSCO MMoU. However, the Members were informed that the regulation had exemption relating to public interest consideration, which could be used to share or exchange the information. (b) Initial coin offerings (ICOs) IOSCO Secretariat advised that although there may not be a regulatory framework on how to deal with ICOs in the Members’ regulatory frameworks, ICOs had border implications as the products could be marketed and sold in any jurisdiction. Other related matters were Crypto assets, crypto venues and trading which, it was noted, the public still invested in even in jurisdictions where these had been banned, and thus there was need for convergence on the matter. In addition, cybersecurity for regulators and the need to improve supervisory capacity was key in the discussions. (c) Use of leveraging by Asset managers The Members were informed that the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, had requested IOSCO as the world standard setting body for securities regulators to come up with recommendations on the use of leveraging by asset managers and this was something the IOSCO General Secretariat had started working on. (d) Financial stability This was raised especially with regard to Exchange traded funds, indexing and passive investment. The Members were advised that they needed to understand the market better as the products which were being used to index were becoming increasingly complex and the investors had largely remained financially illiterate. IOSCO Secretariat noted that although the organization had come up with regulations in 2013, there was need to focus on new developments such as passive index investing. (e) Sustainable finance The Members were informed that there was an absence of IOSCO direction on sustainable financing and improving the quality of disclosure and further that although IOSCO did not have a core mission of market development and capital formation, most members had it as their mandate. The question that was subject to discussion was whether IOSCO should now look at market development and develop standards on listing, taxonomy etc. and what role ISOCO was to play. It was reported that this matter was also being closely examined by the Growth and Emerging Markets Committee of IOSCO. The Members were also requested to analyse the benefits and opportunity presented by the Marakesh pledge which had not yet been launched. (f) Financial innovation (FinTech) The Members were informed that Financial Technology (FinTech) was all about innovation and disruption of the regular manner of doing things. Regulators worldwide needed to analyse how technology was impacting investor protection, and whether it introduced systemic risk. It was felt that there was need to look at the establishment of a Fintech Network among IOSCO members that could be used to share experiences and benefit from the efforts of others in the regulation of FinTech. It was further observed that most markets had the least legacy issues but the most opportunities and therefore FinTech could be used to support financial inclusion and growth.

56 SEC ANNUAL REPORT 2018 Operational Activities Regulatory compliance DELS ensures that as a financial services regulator, the Commission complies with legal and regulatory requirements that facilitate effectiveness in capital markets regulation. This includes compliance with international regulatory requirements and best practices of IOSCO, the Eastern and Southern African Anti￾Money Laundering Group (ESAAMLG), the Southern African Development Community (SADC) Committee on Insurance, Securities and Non-bank Administrators (CISNA), the Africa and Middle Eastern Securities Regulatory Committee of IOSCO (AMERC) and other regional and international bodies. DELS is also the contact point for liaison with foreign capital market regulators on information sharing and exchange of information. MARKET TRANSACTIONS In order to ensure there was control on the entities that obtained funds from the public, the Commission is mandated to register securities before they are offered to the public. The Commission also approves mergers or acquisitions involving entities whose securities are registered with the Commission. During the financial year ending 31st December 2018, the Commission through the Market Transactions division received and approved a number of applications from companies including those relating to the registration of securities, mergers and acquisitions. Waivers from certain Securities Act obligations as enshrined in the Act, and other miscellaneous market activities were also considered. The table below shows the companies, type and number of securities that were approved during the period under review: Date 03.05.2018 29.08.2018 29.08.2018 05.10.2018 20.11.2018 Company Izwe Loans Zambia Plc Veritas General Insurance Plc Barrick Gold Corporation Lusaka Securities Exchange Plc Longhorn Umbrella Unit Trust Barrick Gold Corporation Engineering Institution of Zambia Type and number of Securities/or Transactions Ordinary shares Ordinary shares Consideration of the application for authorization Ordinary shares Collective Investment Scheme Consideration of the application for authorization Waiver Purpose of Meeting Consideration of the application for the registration of 150,000,000 ordinary shares Consideration of the application for the registration of additional 1,000,000 ordinary shares of K5 par value Consideration of the application for authorization of restricted Share Unit Plan Consideration of the application for the registration of 10,000,000 ordinary shares of K par value Consideration of the application for authorization Consideration of the application for authorization of BSPP Consideration of the application for a waiver from continuing Obligations Date Approved/ Deferred 03.05.2018 29.08.2018 29.08.2018 05.10.2018 20.11.2018

2018 FINANCIAL STATEMENTS Financial Statements for the Year Ended 31st December 2018

58 SEC ANNUAL REPORT 2018 Financial Statements Content Page Report of the Commissioners 59 Statement of Responsibilities for the Financial Statement 67 Report of the Independent Auditors 68 Statement of Surplus or Deficit 74 Statement of Comprehensive Income 75 Statement of Changes in Funds 76 Statement of Cash Flows 77 Statement of Financial Position 78 Summary of Significant Accounting Policies 79 Notes to the Financial Statement 91-103

59 SEC ANNUAL REPORT 2018 REPORT OF THE COMMISSIONERS The Commissioners present their report, with the audited accounts for the year ended 31st December 2018.

1. Organisation The Securities and Exchange Commission (the “Commission”) is a body corporate established under the Securities Act, Cap. 354 of the Laws of Zambia (repealed) and whose existence is continued under the Securities Act, No. 41 of 2016 (the “Securities Act”). The Commission has a dual mandate of protecting investors on the Capital Markets as well as Developing the Capital Market .. This therefore entails that the Commission has a huge role of ensuring that there is a balance between investor protection and Capital Market Development. Its mission is to “safeguard interests of investors and promote the growth of Capital Markets” in order to ensure that Capital Market activities are regulated in line with the Securities Act. Its vision is to be a “dynamic regulator that promotes investors and promote market development”. The Commission has its offices on Plot No. 3827, Parliament Road, Olympia Park, Lusaka.
2. Functions In line with its primary statutory mandate, SEC undertakes the following functions and roles: (a) To take all available steps to ensure that this Act and any rules made under this Act are complied with; (b) To supervise and monitor the activities of any securities exchange and the settlement of transactions in securities,’ (c) To license and monitor the activities of securities exchanges, dealers, investment advisers and their respective representatives and of persons who, within the meaning of rules made under this Act, are non￾bank custodians or service registrars; (d) To approve the constitutions, charters, articles, bylaws, rules and regulations governing and pertaining to any securities exchange; (e) To make, issue, monitor and enforce rules for the conduct of participants in the securities industry and for the supervision and investigation of that conduct, including rules relating to Ecensing and for the revocation and suspension of hcences; (f) To promote and encourage high standards of investor protection and integrity among members of any securities exchange; (g) To support the operation of a free, orderly, fair, secure and properly informed securities market; (h) To regulate the manner and scope of securities on any securities exchange, the exchange rules, hsting requirements, margin requirements, capital adequacy requirements, disclosure and

60 SEC ANNUAL REPORT 2018 periodic reporting requirements, trade settlement and clearing requirements! (i) To take all reasonable steps to safeguard the interest of persons who invest in securities and to suppress illegal, dishonourable and improper practices in relation to dealings in securities, whether on the securities exchange or otherwise! (j) To take all reasonable steps to promote and maintain the integrity of persons licensed under Part IV and encourage the promulgation by such persons of balanced and informed advice to their clients and to the public generally! (k) To consider and suggest proposals for the reform of the law relating to the securities industry! (l) To encourage the development of securities markets in Zambia and the increased use of such markets by investors in Zambia and elsewhere! (m) To promote and develop self-regulation by securities exchange! (n) To co-operate, by the sharing of information and otherwise, with other supervisory bodies in Zambia and elsewhere! (o) To exercise and perform such other powers, authorities, duties and functions as may be conferred or imposed upon it by or under this or any other Act. 3. Commissioners (a) Composition The Commission is subject to legislative requirements regarding the composition, powers, functions, committee structure and responsibilities of the Board. The Board is accountable to Parhament through the Minister of Finance. The Securities and Exchange Commission (SEC) is governed by a Board of Commissioners appointed by the Minister responsible for Finance for a period of three (3) years. The Board consists of the following: (i) The Bank of Zambia! (ii) The Law Association of Zambia! (iii) The Zambia Institute of Chartered Accountants! (iv) The Zambia Chamber of Commerce and Industry! (v) Ministry of Finance (vi) The Pensions and Insurance Authority (vii) The Ministry of Justice .

61 SEC ANNUAL REPORT 2018 (b) Identities Mr. Amos Siwila Board Chairperson ■ Law Association of Zambia Mr. George Nonde and Industry Vice-Chairperson - Zambia Chamber of Commerce Mrs. Ireen Musonda-Habasimbi Commissioner-Ministry of Finance Dr. Jonathan Chipili Commissioner-Bank of Zambia Ms. Mainza Masole Commissioner-Pensions and Insurance Authority Mrs. Natasha N. Kalimukwa Commissioner-Ministry of Justice Mrs. Ruth S. Mugala Commissioner-Zambia Institute of Chartered Accountants Mr. Phillip K. Chitalu Ex-officio Commissioner-Securities and Exchange Commission Board members’ appointment dates, terms of office, committee membership and their biographies are available from the Commission, along with details of recent changes to Board membership. (c) Commissioners’ Interests None of the commissioners held an interest in the Commission’s capital resources during the year. (d) Commissioners’ Emoluments Commissioners’ emoluments amounted to: K1.086million (2017> K1.008million). 4. Management Management is responsible for implementation of the core functions of the Commission. The day to day operations of the Securities and Exchange Commission (SEC) are managed by the Chief Executive Officer and the Commissions Secretary who is appointed by the Board of Commissioners. Other offices include the Directorates of Market Supervision and Development, Enforcement and Legal Services, and Finance and Administration : Mr. Phillip K. Chitalu – Chief Executive Officer Mrs. Diana Sichone – Director - Enforcement & Legal Services Commission’s Secretary Ms. Mutumboi Mundia – Director - Market Supervision & Development Mr. Bruce Mulenga – Manager - Market Transactions & Investments Mr. Mateyo Lungu – Manager - Finance Mr. Saul Nyalugwe – Manager - Administration Mr. Abraham Alutuli – Manager - Market Supervision Mr. Nonde Sichilima – Manager - Market Supervision

62 SEC ANNUAL REPORT 2018 Mr. Dingase Makumba – Manager - Market Development Mr. Mubanga Kondolo – Manager - Financial Inclusion Mr. Lubunda Ngala – Manager - Law Reform and Enforcement The role of the Chief Executive is set out in the regulating Act. The Chief Executive has executive responsibility for ensuring that the Commission’s statutory objectives and functions are exercised efficiently and effectively, for leading partnership arrangements with government, for working with key stakeholders, and - as an executive member of the Board - contributing to and reviewing the strategic direction. 5. Financial Review (a) Capital The Commission has no subscription capital. Capital resources comprise accumulated funds and unamortised balances of revenue (unrestricted fund) and deferred revenue (restricted funds). (b) Operating Results The operating result for the year was a deficit of K6.801million (2017>K1.301million). (c) Income (i) . Total income amounted to K18.946million (2017: K20.299million) (ii) . Fees, levies and commissions amounted to K7.490millioii (2017: K8.000million) (iii) . Investment and sundry income amounted to K11.455million (2017: K12.298million), inclusive of grants received from Government of K10.150millioii (2017: K9.668million). (d) Expenditure Administration and operating expenditure totalled K25.747million (2017: K21.600million). The main operating costs were costs of personnel of K14.615million (2017: K11.671million) and recurrent expenditures of K9.599million (2017: K9.573million). (e) Capital Expenditure Fixed assets amounting to K1.388million. (2017: K1.485million) were acquired during the year under review. No major changes were made to the accounting policies and use of fixed assets. (f) Related Party Transactions The Commission’s related parties include board members and senior executive management. Related parties and related party transactions are discussed in Note 17 on page 42 to 43 of the financial statements.

63 SEC ANNUAL REPORT 2018 6. Risk Factors The Commission faces a number of operational, legal and financial risks in its operations: (a) Challenges of Capital Market Regulation (i) Increasing Engagement with Investors and Other Market Participants’- To fulfil its responsibility to investors and markets, it is essential that the SEC maintain an open line of communication with investors and other market participants. In FY 2018, the SEC substantially increased its engagement with both groups. These interactions have enabled it to improve its work and better focus its resources and efforts. (ii) Engagement with Market Participants’ The local capital markets are far different today than they were a decade ago. They are increasingly global and highly data dependent. Investments are channelled through intermediaries and vehicles. The markets also are ever-changing, and the pace of that change has increased. It is essential that the SEC understand the markets of today and continually prepare for and adjust to market developments. As a result, engagement with those who participate in capital markets extensively, including public and private companies, institutional investors, broker-dealers, and auditors is essential. In FY 2018, the SEC held several public roundtables at which SEC staff engaged with market participants on some of the most salient issues affecting the markets today in an open forum. (iii) Targeting the Long-Term Interests of Investors’- Accurate, timely, clear, and actionable information is essential to a fair and well-functioning marketplace. This principle • broad access to good information as the linchpin of markets • is confirmed by decades of experience and analysis. The SEC’s mandate embodies this principle, and it has a responsibility to ensure that market participants have access to the information and advice they need to make decisions that are right for them. (iv) Empowering Investors through Information and Education’- The SEC promotes informed investment decision- making through education initiatives aimed at providing investors with a better understanding of local capital markets and the opportunities and risks associated with the array of investment choices presented to them. In FY 2018, the SEC conducted investor education and regulator events focused toward various segments of the population. (v) Aligning Professional Obligations with Investor Expectation# Broker-dealers and investment advisors both provide investment advice to retail investors but have different relationships and are subject to different regulatory regimes. However, it has long been recognised that many investors do not have a firm grasp of the important differences between broker - dealers and investment advisors - from differences in the variety of services that they offer and how investors pay for those services, to the regulatory frameworks that govern their relationship. This investor confusion could cause investor harm if investors fail to select the type of service that is appropriate for their needs, or if conflicts of interest are not adequately understood and addressed. The Commission’s work is to better align the standards of conduct and mandated disclosures or broker-dealers and investment advisors with what investors expect of these financial professionals, while preserving investor access and investor choice. In an effort to improve upon its proposals, SEC organises communications that can best bring these investors’ relationship with their investment

64 SEC ANNUAL REPORT 2018 professional inTine with their expectations. These candid, experience-based conversations are incredibly valuable and will inform its work moving forward. Staff will continue to refine these proposals in FY 2019. (vi) Protecting Investors and Improving Investment Options by Promoting Compliance: Registered entities, including broker-dealers, investment advisors, investment companies, the securities exchange, the Credit Rating Agency, and transfer agents, provide many of the services that are essential to capital markets and investors. Ensuring that these entities act in compliance with applicable laws and rules, and are appropriately focused on operational integrity and residency, is one of the SEC’s most important functions. (vii) Pursuing Enforcement Matters: The ongoing efforts made by the Enforcement to deter misconduct and punish securities law violators are critical to safeguarding investors and instilling confidence in the integrity of local capital markets. The nature and quality of the SEC’s enforcement actions during the last year speak volumes to the hard work of the women and men of the Commission. (b) Operational Risk Operational risk is the risk of losses from inadequate or failed internal processes and systems, caused by human error or external events. It has a broad scope and includes transaction authorisation and processing! completeness of income recording- payments processing and the management of information, data quality and records. The following are the main risks noted under this classification: (i) Impact of Changing Markets, Responsibilities and Developments- ’The Commission reported deficits of K6.801million, compared to K1.301million in the previous year. Changes in the securities markets and financial industry, as well as difficult fiscal realities, have entity¬wide impacts. As markets evolve, so must the SEC. These types of industry developments and financial innovation will continue to present challenges to the staff, requiring additional staff expertise, resources, and a program that is agile, responsive, and continuously improving and is well funded. (ii) Importance of Leveraging Technology and Analytics-’ As in previous years, the Commission recognizes that technology and analytics are critical to the mission of the SEC and its ability to deliver information to the public, identify risks, uncover frauds, sift through large volumes of data, inform policy making, and streamline operations. Other key information technology initiatives include improving examinations through risk assessment and surveillance tools; enhancing systems that support the enforcement program. Long-term investment and development in technology and analytical tools will be critical to the future success of the Commission’s oversight responsibilities. Particularly important since the new Act will be a continued focus on enhancing quantitative and data analytic efforts. These tools will provide staff with a greater ability to monitor for trends and emerging risks, ultimately enabling the staff to allocate SEC resources more effectively. (iii) Strengthening Cyber Security Posture: The SEC’s information systems process and store significant amounts of sensitive, non-public information, including information that is

65 SEC ANNUAL REPORT 2018 personally identifiable, commercially valuable, and market sensitive. But aside any recommendations done in prior audits, management has not worked to implement technological enhancements and additional data protection technologies. Cybersecurity is vitally important to the Commission especially given the increased use of and dependence on data and electronic communications, greater complexity of technologies present in the financial marketplace, and continually evolving threats from a variety of sources. Computer security, cybersecurity or information technology security is the protection of computer systems from the theft of or damage to their hardware, software, or electronic data, as well as from the disruption or misdirection of the services they provide. (iv) Financial Crime Risk - Financial crime risk is the risk that the Commission suffers losses as a result of internal and external fraud or intentional damage, loss or harm to people, premises or its moveable assets. The risk is directly attributable to its people risk. (v) People Risk - People risk arises from failures of the Commission to manage its key risks as an employer, including lack of appropriate people resource, failure to manage performance and reward, unauthorised or inappropriate employee activity and failure to comply with employment related requirements. (c) Legal Risk The Commission is subject to a comprehensive range of legal obligations, covered by Act No. 41 of 2016 of the Laws of Zambia. As a result, it is exposed to many forms of legal risk, which may arise in a number of ways: its business may not be conducted in accordance with requirements of the Act’, contractual obligations may either not be enforceable as intended or may be enforced against the Commission in an adverse way! the Commission may face risk where legal proceedings are brought against it, in the course of carrying out its mandate, etc. Regardless of whether such claims have merit, the outcome of legal proceedings is inherently uncertain and could result in financial loss. Defending legal proceedings can be expensive and time-consuming and there is no guarantee that all costs incurred will be recovered, even if the Commission is successful. (d) Reporting Risk (i) Financial Reporting Risk - Financial reporting risk arises from a failure or inability to comply fully with regulations or codes in relation to the preparation, presentation or disclosure of financial information. Non-compliance could lead to damage to reputation or, in extreme cases, withdrawal of external funding. (ii) Accounting Risks- The Commission’s future performance and results could be materially different from expected results depending on the outcome of certain potential risks and uncertainties, details of which are discussed above. The reported results of the Commission are also sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. Details of its critical accounting policies and key sources of accounting judgments are included on pages 21 to 32. (iii) Financial Risks - The Commission through its normal operations is exposed to a number of risks on its financial instruments, the most significant of which are credit and liquidity. Market (currency and interest) risks are generally low. The two main risks on its financial instruments

66 SEC ANNUAL REPORT 2018 are generally deemed to be within manageable limits. The Commission’s financial risk exposures are discussed in Note 15 to the financial statements. 7. Risk Management and Control As explained on Statement 6 above, the Commission through its normal operations is exposed to a number of risks, the most significant of which are liquidity risks. The Commission’s risk management objectives, policies and strategies are discussed on page 30 in Accounting Policy 6(f). Exposures are discussed on pages 38 to 42 in Note 15 to the financial statements. 8. Compliance The Commission’s management are responsible for establishing and maintaining adequate internal controls over financial reporting. Under the supervision of the Chief Executive Officer the Commission’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRSs. The Board has responsibility for monitoring compliance with the regulatory environment and the various internal control processes and procedures. 9. Subsequent Events The Commission has evaluated subsequent events to the date the financial statements were available for issuance, and has determined that there has not arisen since the end of the period any item, transaction or event of a material and unusual nature likely, in the opinion of the Board, to affect the results of those operations or the state of affairs of the Commission in the subsequent financial periods. 10. Subsequent Events EMM Corporate Partners (“EMM”) A Member of CPAAIAssociates - Europe, Middle East and Africa Region 5868 Kasiya Crescent, Kalundu Lusaka, Zambia On behalf of the board: COMMISSION SECRETARY

67 SEC ANNUAL REPORT 2018 STATEMENT OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS The following statement, which should be read in conjunction with the Auditors’ report set out on page 67, is made with a view to distinguishing for members the respective responsibilities of the Commissioners and of the auditors in relation to the financial statements for the year ending 31st December 2018. Statement of Responsibility for Financial Statements In conformity with International Financial Reporting Standards (“IFRSs”) and the requirements of Act No. 41 of 2016 of the Laws of Zambia (“the Act”), the Commissioners are required to prepare financial statements for each financial period, which give a true and fair view of the state of affairs of the Commission and of the surplus or deficit for that period. The accounts are required by law and IFRSs to present fairly the financial position of the Commission and the performance for that period. The Commissioners consider that, in preparing the accounts on pages 16 to 20, and the additional information on pages 21 to 45, the Commission has used appropriate accounting policies, supported by reasonable judgements and estimates, and that all accounting standards which they consider to be applicable have been followed. The Commissioners have responsibility for ensuring that the Commission keeps accounting records which disclose with reasonable accuracy the financial position of the Commission and which enable them to ensure that the accounts comply with the requirements of the Act. The Commissioners have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Commission and to prevent and detect fraud and other irregularities. The Board Members accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable estimates, in conformity with IFRSs. In preparing such financial statements, the Board Members are required to: select suitable accounting policies and then apply them consistently! make judgements and estimates that are reasonable and prudent! state whether the applicable accounting standards have been followed! and comply with IFRSs. In the opinion of the Board Members:

1. The statement of comprehensive income is drawn up so as to give a true and fair view of the result of the Commission for the year ended 31st December 2018!
2. Based on current records that it holds: (a) The statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Commission as at 31st December 2018 and (b) There are reasonable grounds to believe that the Commission will be able to pay its debts as and when they fall due. Accordingly, the financial statements set out on pages 74 to 78 were approved by the Board Members on and signed on its behalf by: COMMISSIONER COMMISSIONER

68 SEC ANNUAL REPORT 2018 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF COMMISSSION Opinion on Financial Statements We have audited the financial statements of the Securities and Exchange Commission (‘the Commission”), which comprise the statement of financial position as at 31st December 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the requirements of Act No. 41 of 2016 of the Laws of Zambia (“the Act”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Securities and Exchange Commission (‘the Commission”) as at 31sl December 2018, and its financial performance and their cash flows for the year then ended. The financial statements as of, and for the year ended 318t December 2017 were audited by another auditor whose report dated 8th June 2018 expressed an unqualified opinion on those financial statements. Separate Opinion in relation to IFRS as issued by the IASB The Commission has prepared financial statements in fine with IFRSs. In our opinion, the financial statements comply with International Financial Reporting Standards. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the entity within the meaning of relevant ethical requirements in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code’)an& have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. Key audit matters are selected from the matters communicated with those charged with governance but are not intended to represent all matters that were discussed with them. Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole. Our opinion is not modified with respect to any of these key matters.

69 SEC ANNUAL REPORT 2018

1. Adoption of IFRS 9 — Financial Instruments The Commission applied IFRS 9 “financial instruments” for the first time in the financial period under review. The directors are required to review the classifications of assets and align the classifications to the requirements of the reporting standards. The directors also reviewed the fair valuations and impairment models. Due to the subjective nature of judgements required in estimating the timing and valuation of impairment and in estimating the fair value of assets, this was considered a key audit matter, especially given the initial application of IFRS 9. We reviewed the classification of all financial assets to ensure compliance with IFRS 9. We reviewed the valuation and verified the calculation of the fair values. We also verified the inputs used in the valuations. In considering the reasonableness of the impairment provision, we reviewed the assumptions used in impairment calculations. We further assessed their recoverability through testing of current year and subsequent receipts. Based on the procedures we performed on this matter, we are satisfied that the impairment provision is reasonable and the financial assets were properly classified and valued.
2. Adoption of IFRS 15 -IFRS 15 Revenue from Contracts with Customers The Commission apphed IFRS 15 Revenue from Contracts with Customers for the first time in the financial period under review. The Standard, effective for annual periods beginning on or after 1 January 2018 replaces IAS 11, IAS 18 and their Interpretations. It establishes a single and comprehensive framework for revenue recognition to apply consistently across transactions, industries and capital markets, with a core principle (based on a five-step model to be apphed to all contracts with customers), enhanced disclosures, and new or improved guidance (e.g. the point at which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract, etc.).
3. Re ven ue Recognition Income from contractual arrangements should be recognised in the period in which entitlement has been earned through service delivery. Management exercise judgment in determining when income should be recognised. There is also potentially management judgement in the classification of income between restricted and unrestricted funds. We documented the income systems and carried out audit procedures to gain assurance over the operation of internal financial controls in place to prevent the loss of income and to ensure that income is recorded in the correct period. Our audit testing involving sampling income balances and the associated invoices and bills, verifying to supporting documentation to ensure income has been recognised in the correct period. We also considered whether income had been correctly classified between restricted Compensation Fund contributions and unrestricted funds for the Commission, reviewing any terms and conditions of, for example, Compensation Fund fees. Based on the procedures we performed on this matter, we are satisfied that income has been correctly recognised and reported. We found that fees on license fees are recognised on modified cash basis, which is not a recognised basis for reporting under IFRSs.
4. Valuation of Financial Instruments The Commission’s disclosures about its structured financial instruments are included in Accounting Policy 6. Because the valuation of the entity’s financial instruments is based on amortised cost, there is low significant measurement uncertainty involved in this valuation. Amortised Cost means the amount at which the financial item on and off balance are measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between

70 SEC ANNUAL REPORT 2018 that initial amount and the maturity amount. Our audit procedures included, among others, testing management’s controls related to the classification and valuation of investments and assessment of any impairment losses likely to occur. Our audit found that investments as at the prior year-end were not carried at amortised cost, using the effective interest method. Restatements were proposed as discussed in item one above. 5. Capital Work in Progress As shown in Note 7, the costs of construction of buildings is accounted for as Construction Work-in￾Progress, which is a long-term asset account in which the costs of constructing long-term assets are recorded. The account Construction Work-in-Progress will have a debit balance and will be reported on the statement of financial position as part of an entity’s Property, Plant and Equipment. The costs of a constructed asset are accumulated in the account Construction Work-in-Progress until the asset is placed into service. When the asset is completed and placed into service, the account Construction Work-in￾Progress will be credited for the accumulated costs of the asset and will be debited to the appropriate Property, Plant and Equipment account. Depreciation begins after the asset has been placed into service. We focused on this transaction because it is material to the financial statements as a whole and the fact that it is likely that when the building is complete, independent market valuations will have to be performed under the cost model. In addition, determining the assumptions that underlie the initial accounting and the useful lives associated with the constructed assets involves significant management judgment given the nature of the entity. Going Concern The financial statements of the Commission have been prepared using the going concern basis of accounting. The use of this basis of accounting is appropriate unless the Commission either intends to liquidate the entity or to cease operations or has no realistic alternative but to do so. As part of our audit of the financial statements, we have concluded that the Commission’s use of the going concern basis of accounting in the preparation of the entity’s financial statements is appropriate. The Board has not identified a material uncertainty that may cast significant doubt on the entity’s ability to continue as a going concern, and accordingly none is disclosed in the financial statements of the entity. The Commissioners have assessed, in the fight of current and anticipated economic conditions, the Commission’s ability to continue as a going concern. The Commissioners confirm they are satisfied that the Commission has adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the ‘going concern’ basis for preparing the financial statements. Our assessment considers the assumptions sound and, as such, our opinion is not qualified in this case. Emphasis of Matter We draw your attention to the fact that at the reporting date, the Commission reported a deficit of K6.801million (2017: K1.301million). As shown in Note 4 to the financial statements, a significant part of the income (K10.150million) is from government grants (2017:’K9.668miUion). Current financial performance indicates government grants will be necessary for the foreseeable future. Because the Commission is certain of the continued support from government, the financial statements have been prepared on a going concern basis, which the directors believe is appropriate.

71 SEC ANNUAL REPORT 2018 In forming our opinion, we have considered the adequacy of the disclosures made in Note 4 to the financial statements. We consider that, in view of this matter, a reduction in government support may cast doubt on the entity’s ability to sustain its operations, realise its assets and discharge its liabilities in the normal course of business. Responsibilities of Management and Those Charged with Governance for the Financial Statements The Board is responsible for the preparation and fair presentation of these financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board is responsible for overseeing the entity’s financial reporting process. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies! and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibilities for the Audit of the Financial Statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
3. Conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the entity to cease to continue as a going concern.

72 SEC ANNUAL REPORT 2018 4. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Commission. 5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the entity audit. We remain solely responsible for our audit opinion. 7. We are required to communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 8. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Qualified Report on Other Legal and Regulatory Requirements

1. Act No. 41 of 2016 of the Laws of Zambia (“the Act”), which defines the applicable reporting framework for these financial statements, require that in carrying out our audit we consider whether the Commission has kept the accounting records, other records and registers required by this Act. We confirm that in our opinion, except for the requirement to be audited by 30th June 2019, the accounting records, other records, and registers required by the Act have been kept by the Commission, so far as appears from our examination of those records.
2. Section 58(d) of the Public Finance Management Act of 2018, which supercedes all other laws, requires audit reports of government bodies and corporations to be completed by 30th April of each following year. The Commission did not comply with this requirement. Other Information The Board and the Chief Executive are responsible for the other information. The other information comprises information included in the annual report, other than the parts of the Directors Report described in this set of financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

73 SEC ANNUAL REPORT 2018 Opinion on Other Matters In our opinion:

1. The parts of the Financial Report to be audited have been properly prepared in accordance with Minister of Finance’s directions made under Act No. 41 of 2016 of the Laws of Zambia,
2. In the light of the knowledge and understanding of the Authority and its environment obtained in the course of the audit, we have not identified any material misstatements in the financial statements! and
3. The information given in the reports prepared for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we Report by Exception Other than the matters raised in the letter of recommendations, and cited in this report where necessary for the attention of those charged with governance, we have nothing to report in respect of the following matters which we report to you if, in our opinion:
4. Adequate accounting records have not been kept or adequate for our audit; or
5. The financial statements and the parts of the annual report to be audited are not in agreement with the accounting records and returns; or
6. We have not received all of the information and explanations we require for our audit; or
7. The Financial Statement does not reflect compliance with guidance. The engagement partner responsible for the audit resulting in this independent auditor’s report is:

74 SEC ANNUAL REPORT 2018 STATEMENT OF SURPLUS OR DEFICIT Amounts are Stated in Zambian Kwacha Note 2018 2017 Operating Income Fee Income 1. 3,809,528 5,146,455 Commissions and Levies 2. 3,681,314 2,853,983 Non-Operating Income Interest Income 3. 1,094,779 2,153,360 Other Income 4. 10,360,229 10,145,580 18,945,850 20,299,377 Costs Impairment of Financial Assets 5. 885,668 36,400 Depreciation 7. 646,108 318,734 Employee Costs Appendix I 14,615,593 11,671,924 Non-Operating Costs Appendix I 9,599,806 9,573,651 25,747,174 21,600,709 Deficit for the Year 6. (6,801,324) (1,301,332) Total Deficit Attributable to￾Controlling Interests (6,801,324) (1,301,332) Non-controlling Interests - - (6,801,324) (1,301,332)

75 SEC ANNUAL REPORT 2018 STATEMENT OF COMPREHENSIVE INCOME Amounts are Stated in Zambian Kwacha 2018 2017 Deficit for the Year (6,801,324) (1,301,332) Other Comprehensive Income: Items that will not be subseciuentlv reclassified to profit and loss: - - Items that mav be subseciuentlv reclassified to profit and loss-’ - -

• - Total Comprehensive Loss for Period (6,801,324) (1,301,332) Total Comprehensive Lose Attributable to: Controlling Interests (6,801,324) (1,301,332) Non’controlling Interests (6,801,324) (1,301,332)

76 SEC ANNUAL REPORT 2018 STATEMENT OF CHANGES IN FUNDS Amounts are Stated in Zambian Kwacha Accumulated Funds Balance as at 1 January 2017 11,782,267 Total Comprehensive income (1,301,332) At 31 December 2017 10,480,934 Balance as at 1 January 2018 10,480,934 Total Comprehensive income (6,801,324) At 31 December 2018 3,679,611

77 SEC ANNUAL REPORT 2018 STATEMENT OF CASH FLOWS Amounts are Stated in Zambian Kwacha Notes 2018 2017 Cash Inflow From Operating Activities Deficit for the Year (6,801,324) (1,301,332) Gain on Disposals 6,707 19,660 Depreciation 7. 646,108 318,734 Interest Received 3. (1,094,779) (196,412) Changes in Accounts Receivable 420,574 385,190 Changes in Other Receivables 1,692,544 (390,497) Increase/(Decrease) in Statutory Funds 47,421 (339,297) Increase/(Decrease) in Accruals and Provisions 797,487 (716,751) Increase in Employee Benefits and Provisions 1,787,530 211,377 Net Cash Inflow From Operating Activities (2,497,733) (2,009,327) Interest Received 1,094,779 196,412 1,094,779 196,412 Investing Activities Actual Payments to Acquire Tangible Fixed Assets 7. (1,388,202) (1,485,254) Proceeds from Disposal of Assets - Net Cash Outflow on Investing Activities (1,388,202) (1,485,254) Financing Activities Deferred Income 800,000 Net Cash Outflow on Financing 800,000 ■ Net Increase in Cash and Cash Equivalents (1,991,155) (3,298,169) Cash and Cash Equivalents at start of year 9,848,986 13,147,155 Cash and Cash Equivalents at end of year 7,857,831 9,848,986 Represented By: Cash at Bank and in Hand 10. 2,141,487 2,848,986 Short’Term Bank Deposits 10. 5,716,344 7,000,000 7,857,831 9,848,986

78 SEC ANNUAL REPORT 2018 STATEMENT OF FINANCIAL POSITION Amounts are Stated in Zambian Kwacha Notes 2018 2017 ASSETS Non-Current Assets Property, Plant and Equipment 7. 2,551,615 1,816,228 2,551,615 1,816,228 Current Assets Receivables at Amortised Cost 8. 61,324 481,898 Other Financial Assets 9. 665,499 2,358,043 Cash and Cash Equivalents 10. 7,857,831 9,848,986 Total Current Assets 8,584,654 12,688,927 Total Assets 11,136,269 14,505,155 FUNDS AND LIABILITIES Funds Accumulated Funds 3,679,611 10,480,934 Total Equity 3,679,611 10,480,934 Non-Current Liabilities Statutory Funds 11. 548,830 501,409 Deferred Income 12. 800,000 - 1,348,830 501,409 Current Liabilities Employee Benefits and Provisions 13. 4,273,614 3,476,127 Payables, Accruals and Provisions 14. 1,834,214 46,685 Total Current Liabilities 6,107,828 3,522,812 Total Equity and Liabilities 11,136,269 14,505,155 The financial statements were approved by the Board of Commissioners on and COMMISSIONER COMMISSIONER signed on its behalf by:

79 SEC ANNUAL REPORT 2018 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basis of preparation and accounting policies used in preparing the financial statements for the year ended 313t December 2018 are set out below:

1. Basis of Preparation The financial statements for the year ended 31st December 2018 are prepared on a going concern basis and in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB, except for Ecense fees which are recognised on a modified cash basis. The financial statements have also been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
2. Statement of Compliance As explained above, the financial statements have been prepared in accordance with International Financial Reporting Standards apphcable for the reporting period to 31st December 2018.
3. Adoption of New and Revised International Financial Reporting Standards (“IFRSB”) (a) .Application of new IFRS requirements (i) IFRS 9 Financial Instruments (issued in July 2014) - In the current year, the Commission has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of IFRS 9 allow an entity not to restate comparatives. However, the Commission has elected to restate comparatives in respect of the classification and measurement of financial instruments. Additionally, the Commission adopted consequential amendments to IFRS 7 Financial Instruments? Disclosures that were apphed to the disclosures for 2018 and to the comparative period:

• The Standard has replaced IAS 39 (and all the previous versions of IFRS 9) effective for annual periods beginning on or after 1 January 2018 (earlier application permitted). It contains requirements for the classification and measurement of financial assets and financial liabilities, impairment, hedge accounting, recognition and de-recognition.
• IFRS 9 requires all recognised financial assets to be subsequently measured at amortised cost or fair value (through profit or loss or through other comprehensive income), depending on their classification by reference to the business model within which they are held and their contractual cash flow characteristics.
• For financial liabilities, the most significant effect of IFRS 9 relates to cases where the fair value option is taken: the amount of change in fair value of a financial liability designated as at fair value through profit or loss that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income (rather than in profit or loss), unless this creates an accounting mismatch. The application of IFRS 9 has had no impact on the classification and measurement of the Commission’s financial liabilities.

80 SEC ANNUAL REPORT 2018

• For the impairment of financial assets, IFRS 9 introduces an “expected credit loss (ECL)” model based on the concept of providing for expected losses at inception of a contract! recognition of a credit loss should no longer wait for there to be objective evidence of impairment. The expected credit loss model requires the Commission to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
• The recognition and de-recognition provisions are carried over almost unchanged from IAS 39. The reconciliation between the ending provision for impairment in accordance with IAS 39 and the provision in accordance with IAS 37 is disclosed in their respective notes. The consequential amendments to IFRS 7 have also resulted in more extensive disclosures about the Commission’s exposure to credit risk in the financial statements
• For hedge accounting, IFRS 9 introduces a substantial overhaul allowing financial statements to better reflect how risk management activities are undertaken when hedging financial and non-financial risk exposures. The application of the IFRS 9 hedge accounting requirements has had no other impact on the results and financial position of the Commission for the current and/or prior years.
• Disclosures in relation to the initial application of IFRS 9: There were no financial assets or financial liabilities which the Commission had previously designated as at FVTPL under IAS 39 that were subject to reclassification or which the Commission has elected to reclassify upon the application of IFRS 9. There were no financial assets or financial liabilities which the Commission has elected to designate as at FVTPL at the date of initial application of IFRS 9. The application of IFRS 5 has had no impact on the cash flows of the Commission. (ii) IFRS 15 Revenue from Contracts with Customers (issued in May 2014 and amended for effective date and clarifications in September 2015 and April 2016 respectively) • The Standard, effective for annual periods beginning on or after 1 January 2018 replaces IAS 11, IAS 18 and their Interpretations. It establishes a single and comprehensive framework for revenue recognition to apply consistently across transactions, industries and capital markets, with a core principle (based on a five-step model to be applied to all contracts with customers), enhanced disclosures, and new or improved guidance (e.g. the point at which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract, etc.). The IFRS 15 revenue model has five steps: ft) Identify the contract with a customer (ii) Identify all the individual performance obligations within the contract (iii) Determine the transaction price (iv) Allocate the price to the performance obligations (v) Recognize revenue as the performance obligations are fulfilled. IFRS 15 uses the terms ‘contract asset’ and ‘contract liability’ to describe what might more commonly be known as ‘accrued revenue’ and ‘deferred revenue’, however the Standard does not prohibit an entity from using alternative descriptions in the statement of financial position. The Commission has adopted the terminology used in IFRS 15 to describe such balances. The term deferred income is used in respect of the government grant balances that are not within the scope of IFRS 15. Apart from providing more extensive disclosures for the Commission’s revenue transactions, the application of IFRS 15 has not had a significant impact on the financial position and/or financial performance of the Commission.

81 SEC ANNUAL REPORT 2018 (b) Amendments to existing Standards (i) Amendments to IAS 28 (.Annual Improvements to IFRS Standards 2014-2016 Cycle, issued in December 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2018 (earlier application permitted), clarify that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, mutual fund, unit trust or other qualifying entity , is available for each investment in an associate or joint venture on an investment￾byinvestment basis, upon initial recognition. The amendments are not expected to have an effect on the Commission’s financial statements. (ii) Amendments to IAS 40 titled Transfers of Investment Property (issued, in December 2016)

• The amendments, applicable to annual periods beginning on or after 1 January 2018 (earlier application permitted), clarify that transfers to, or from, investment property (including assets under construction and development) should be made when, and only when, there is evidence that a change in use of a property has occurred. The amendments are not expected to have a material effect on the Commission’s financial statements. (iii)Amendments to IFRS 2 titled Classification and Measurement of Share-based Payment Transactions (issued in June 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2018 (earlier application permitted), clarify the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payment (SBP) transactions, the accounting for SBP transactions with a net settlement feature for withholding tax obligations, and the effect of a modification to the terms and conditions of a SBP that changes the classification of the transaction from cash-settled to equity-settled. The amendments are not expected to have a material effect on the Commission’s financial statements. (iv)Amendments to IFRS 4 titled Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued in September 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2018, give all insurers the option to recognise in other comprehensive income, rather than in profit or loss, the volatility that could arise when IFRS 9 is applied before implementing IFRS 17 (‘the overlay approach’). Also, entities whose activities are predominantly connected with insurance are given an optional temporary exemption (until 2021) from applying IFRS 9, thus continuing to apply IAS 39 instead (‘the deferral approach’). As the Commission has not issued insurance contracts, the amendments are not expected to have an effect on its financial statements. (c) New Interpretations (i) IFRIC 22 Foreign Currency Transactions and Advance Consideration (issued in December

2016. • The Interpretation, applicable to annual periods beginning on or after 1 January 2018 (earlier application permitted), provides guidance clarifying that the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency is the one at the date of initial recognition of the non-monetary prepayment asset or deferred income liability. The Interpretation is not expected to have a material effect on the Commission’s financial statements.

82 SEC ANNUAL REPORT 2018 (d) New IFRS requirements and Interpretations in issue but not yet effective The Commission has not applied the following new or amended Standards and Interpretations that have been issued by the IASB but are not yet effective for the financial year beginning 1 January 2018. The Commissioners anticipate that the new Standards, amendments and Interpretations will be adopted in the Commission’s financial statements when they become effective. The Commission has assessed, where practicable, the potential effect of all these new requirements that will be effective in future periods. (i) . IFRS 16-Leases- IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related Interpretations when it becomes effective for accounting periods beginning on or after 1 January 2019. The date of initial application of IFRS 16 for the entity is 1 January 2018. This is because it entered into a lease in June 2018 and although it initially treated this as an operating lease in the operating results for the year, it elected to early adopt IFRS 16 (on adoption of IFRS 15, which has to be adopted on adoption of IFRS 16) and has now classified this lease using the right to use requirements of IFRS 16. Lease obligations are now reflected on its statement of financial position (ii) . IFRS 17-Insurance Contracts (iii) . Amendments to IFRS 9-Prepayment Features with Negative Compensation (iv) . Amendments to IAS 28-Long-term Interests in Associates and Joint Ventures (v) . Annual Improvements to IFRS Standards 2015—2017 Cycle-Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs (vi) . Amendments to IAS 19 Employee Benefits-Plan Amendment, Curtailment or Settlement (vii) . IFRS 10 Financial Statements and IAS 28 Amendments -Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (viii) . IFRIC 23-Uncertainty over Income Tax Treatments The commissioners do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Commission in future periods. There are no other IFRSs or IFRIC interpretations that are not yet effective and that would be expected to have a material impact on the Commission in the current or future reporting periods and on foreseeable future transactions. 4. Foreign Currencies In preparing its financial statements, the Commission’s foreign currency transactions are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss.

83 SEC ANNUAL REPORT 2018 5. Property, Plant and Equipment (a) Cost and Valuation Property, plant and equipment are stated at fair value. Land and buildings are stated in the statement of financial position at their cost or revalued amounts, if revalued, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The Commission use a depreciated historical cost basis as a proxy for fair value as non-property assets have a short useful life or are of relatively low value. Any permanent impairment in the value of property, plant and equipment on revaluation is charged to the statement of comprehensive income when it occurs. (b) Subsequent Expenditure The Commission recognises, in the carrying amount of a tangible fixed asset, the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Commission and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. (c) Depreciation Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful fives, using the straight-line method: – Motor Vehicles 25% – Office Equipment 20% – Computer Equipment 33.33% – Office Furniture Fittings 25% The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. (d) Leased Assets Leases which transfer to the Commission substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at inception of the lease. The Commission measures the cost of its lease obligation and the leased asset at the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the same period as assets that are owned.

84 SEC ANNUAL REPORT 2018 (e) Intangible Assets The costs of purchasing major software hcences are capitalised as intangible fixed assets, although ongoing software maintenance costs are written off in the period in which they are incurred. As permitted by IAS 38, intangible assets are carried at depreciated historic cost, which is a proxy for fair value as they are considered to have short useful fives or low value. (f) De-recognition An item of plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to arise from continued use of the asset. Any gain or loss arising on de¬recognition is included in the income statement in the year the item is de-recognised. (g) Impairment Under IAS 36, individual assets are reviewed for impairment to ensure their carrying amount is not greater than the recoverable amount. At each reporting date, the Commission assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Commission makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from othei￾assets or groups of assets. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. 6. Financial Instruments (a) Financial Assets and Financial Liabilities Financial assets and financial liabilities are recognised in the Commission’s statement of financial position when the Commission becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. (b) Financial Assets The Commission’s financial assets are classified into the following specified categories: ‘Available for sale’, ‘cash and equivalents’ and ‘receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

85 SEC ANNUAL REPORT 2018 (i) Classification – All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. – All recognised financial assets are measured subsequently in their entirety at either am￾ortised cost or fair value, depending on the classification of the financial assets: • Instruments that meet the following conditions are measured subsequently at am￾ortised cost: The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows! and The contrac￾tual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. • Instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI): The financial asset is held within a business model whose objective is achieved by both collecting contrac￾tual cash flows and selling the financial assets! and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. • By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). Despite the foregoing, the Commission may ir￾revocably elect to present subsequent changes in fair value of an equity invest￾ment in other comprehensive income if certain criteria are met! and the Commis￾sion may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. (ii) Cash and Cash Equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits. Bank overdrafts that are repayable on demand and form an integral part of the Commission’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. The Commission main￾tains its bank accounts with major banks in Zambia of high credit standing. (iii) Receivables Trade and other receivables are not interest-bearing and are stated at cost reduced by ap￾propriate allowances for estimated irrecoverable amounts. Receivables are recognized ini￾tially at fair value and subsequently measured at amortised cost using the effective interest method. A provision for impairment of receivables is established when there is objective evidence that the authority will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the amount between the carry￾ing amount and the present value of expected cash flows, discounted at the effective interest

86 SEC ANNUAL REPORT 2018 rate. The amount of the provision is recognised in the statement of comprehensive income. All other accounts receivable and other assets are carried at net realisable value, which approximates fair value. (iv) Impairment The Commission recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. The Commission recognises a loss allowance for expected credit losses on receivables and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Commission’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. For all other financial instruments, the Commission recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Commission measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. (v) De-recognition The Commission derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Commission neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Commission recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Commission retains substantially all the risks and rewards of ownership of a transferred financial asset, the Commission continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. In addition, on derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. (c) Financial Liabilities (i) Measurement Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

87 SEC ANNUAL REPORT 2018 Financial liabilities are classified according to the substance of the contractual arrangements entered into. Other payables and amounts due to related parties are stated at their nominal value. Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. (ii) Payables Trade and other payables are not interest-bearing and are stated at amortised cost. (iii) Provisions Provisions are recognised when the Commission has a present obligation (legal or constructive) as a result of a past event, it is probable that the Commission will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. (iv) Employee Benefits Pension Contributions: The Commission has a plan with National Pension Scheme Authority (NAPSA) where the Commission pays an amount equal to the employee’s contributions. Employees contribute 5% of their gross earnings up to a ceiling set annually. Other Employee Benefits In accordance with IAS 19 employee benefits, accruals have been made for short¬term employee benefits, such as salaries, paid absences and leave pay. Provisions for leave pay are made in respect of all staff. In addition, all employees are entitled to gratuity and a provision is made thereon. The estimated monetary liability for employees’ accrued gratuity and leave pay entitlement at the statement of financial position date is recognised as an expense accrual. (v) De-recognition The Commission derecognises financial liabilities when, and only when, the Commission’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. (d) Contingent Liabilities Contingent liabilities are initially measured at fair value. At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets

88 SEC ANNUAL REPORT 2018 and the amount initially recognised less cumulative amortisation recognised in accordance with IFRS 15Revenue from Contracts with Customers. (e) Offsetting Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (0 Financial Risk Management The Commission’s activities expose it to a variety of financial risks. The most important types of risk are currency risk, credit risk, liquidity risk, market risk and other operational risk. Policies and exposures on risks and financial instruments are discussed in Note 20 to the financial statements. (g) Fair Values of Financial Assets and Liabilities The carrying amounts of financial assets and liabilities are representative of the Commission’s position at 31st December 2018 and are in the opinion of the commissioners not significantly different from their respective fair values due to generally shorts periods to maturity dates as set out in Note 15 on page 42. 7. Grants Revenue Grants (grants with no future directly related costs) are treated as unrestricted funds; Deferred Revenue Grants (grants with specific future related costs) are treated as temporarily restricted funds and charged to revenue as the conditions attaching to them expire. 8. Taxation No allowance is made for income or deferred taxes as the Commission is exempt from taxation, except on unrelated business income. 9. Capital Management The Commission’s objective when managing capital is to safeguard the Commission’s ability to continue as a going concern so that it can continue to provide benefits to stakeholders. The Commission’s capital is supported by grants from the Government of the Republic of Zambia (GRZ) and its internally generated fees. The Commission considers its cash and cash equivalents to be the manageable capital from its financial resources. The Commission’s policy is to maintain sufficient cash balances to cover operating and administration costs over a reasonable future period. The Commission currently has no externally-imposed capital requirements except to maintain sufficient cash balances.

89 SEC ANNUAL REPORT 2018 10. Segmental Reporting Segmental reporting is applied in line with IFRS 8 to report the split between levy and fee income. Expenditure, however, is not segmented. Segmental reporting is not required for assets and liabilities as this information is not regularly reported to the chief operating decision-maker. 11. Revenue Revenue and Financing Sources Securities transaction fees Registration, merger, and other fees from registrants Compensation Fund Contributions Commission Revenue Commission Revenue Non-Commission Revenue Collection of securities transaction fees are used to supplement the SEC’s annual appropriation. There are no restrictions on collections beyond the amount needed to be billed. Certain collections of monetary sanctions are deposited into the SEC’s Compensation Fund in accordance with legislation. Statement of Comprehensive Income Statement of Comprehensive Income Reported on the Statement of Changes in Net Position Commission and non- Revenue Availability Presentation Commission Revenue Revenue is measured based on the consideration to which the Commission expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Commission recognises revenue when it transfers control of a product or service to a customer: (a) Licensing Fee Income is recognised upon issue of a licence. (b) Registration Fee Income is recognised once securities are registered. (c) Authorisation Fee Income on a takeover or merger transactions is recognised when the transaction is duly authorised. (d) The LuSE Trade Commission is credited to the statement of comprehensive income on an accrual basis. 12. Other Income and Expenditure Other income and expenditure is recognised on an accruals basis. Where income received relates to a period of time covering more than one accounting period, that part extending beyond the current accounting period is treated as deferred income. Corporate overheads are not segmented.

90 SEC ANNUAL REPORT 2018 13. Critical Judgements in Applying Accounting Policies and Key Sources of Estimation Uncertainty Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies above and/or the notes to the financial statements on Pages 33 to 45. However, the key areas are summarised below. (a) Areas of judgement that have the most significant, effect on the amounts recognised in the financial statements are: (i) Review of asset carrying values and impairment charges and reversals (ii) Estimation of asset fives (iii) Determination of fair values of non-current assets (iv) Impairment losses on receivables. (v) The Commission makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events believed to be reasonable under the circumstances. (b) Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are: (i) Review of asset carrying values and impairment charges and reversals (ii) Estimation of liabilities for post-retirement costs (iii) Contingencies 14. Comparatives Where necessary, corresponding figures have been reclassified to conform to changes in the presentation of the current period.

91 SEC ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT Amounts are Stated in Zambian Kwacha 2018 2017

1. Fee Revenue Annual Fees 1,020,000 940,000 Authorisation Fees 452,202 2,003,207 Inspection Fees 106,335 316,335 Issuers Fees 150,002 267,122 Licensing Fees 1,113,343 1,237,059 Registration Fees 896,646 85,317 Other Fees 71,000 297,414 3,809,528 5,146,455
2. Commissions and Levies Administration Fines - 223,000 Commissions on LuSE Trades 3,062,593 2,216,975 Levies on Collective Investment Schemes 618,720 414,009 3,681,314 2,853,983
3. Interest Income Interest Income-Bank Balances - 196,412 Interest Income’Investments 1,022,817 1,956,948 Interest Income-Staff Loans 71,962 - 1,094,779 2,153,360
4. Other Income Grant Income 10,150,205 9,668,005 Sundry Income 210,024 - Tax Income - 477,575 10,360,229 10,145,580
5. Impairment Lose on Financial Assets Trade Other Total Receivables Assets At 1 January 2017 88,000 88,000 Impairment Loss 36,400 36,400 Written Off (88,000) (88,000) Balance at 31 December 2017 36,400 36,400 At 1 January 2017 36,400 36,400 Changes on initial application of IFRS 9 - - Restated Balance at 1 January 2018 36,400 36,400 Impairment Loss 80,000 805,668 885,668 Written Off (36,400) - (36,400) Balance at 31 December 2018 80,000 805,668 885,668

92 SEC ANNUAL REPORT 2018 6. Taxation No provision is made for taxation as the Commission is exempt from taxation 7. Property, Plant and Equipment Motor Office & Office Computer CWIP Vehicles Equipment Furniture Equipment Total Cost At 1 January 2018 2,221,537 256,889 436,910 588,422 3,503,758 Additions 49,999 88,470 208,651 1,041,081 1,388,202 Disposals (417,543) - (49,843) - (467,386) At 31 December 2018 1,803,994 306,888 525,380 747,230 1,041,081 4,424,574 Depreciation At 1 January 2018 869,330 85,144 315,800 417,256 1,687,530 Charge for the Period 415,155 49,380 64,604 116,968 646,108 Eliminated on Disposal (410,836) - - (49,843) (460,679) Adjustments (601) (3,878) (3,479) (7,958) At 31 December 2018 873,650 133,922 376,527 480,902 1,872,959 Carrying Amounts At 31 December 2017 1,352,207 171,745 121,110 171,166 1,816,228 At 31 December 2018 930,344 172,966 148,853 266,328 1,041,081 2,551,615 Note 7 Cont’d Motor Office & Office Computer Other Vehicles Equipment Furniture Equipment Assets Total Cost At 1 January 2017 1,361,838 81,948 306,372 453,033 - 2,203,191 Additions 1,044,386 174,941 130,538 135,389 - 1,485,254 Disposals (184,687) - (184,687) At 31 December 2017 2,221,537 256,889 436,910 588,422 - 3,503,758 Denreciation At 1 January 2017 851,831 75,996 269,977 346,996 1,544,800 Charge for the Period 193,503 9,148 45,823 70,260 - 318,734 Eliminated on Disposal (176,004) - - - (176,004) At 31 December 2017 869,330 85,144 315,800 417,256 - 1,687,530 Carrying Amounts At 31 December 2016 510,007 5,952 36,395 106,037 658,391 At 31 December 2017 1,352,207 171,745 121,110 171,166 1,816,228

93 SEC ANNUAL REPORT 2018 Amounts are Stated in Zambian Kwacha 2018 2017 8. Receivables at Amortised Cost Issuer Fees 61,324 481,898 (a) Analysis of Receivables Gross Amounts Receivable 141,324 518,298 Less: Impairment Provision (80,000) (36,400) 61,324 481,898 (b) Movement in Impairment Provision 36,400 88,000 At the beginning of the Period Charge for the Period 80,000 36,400 Written off during the Period (36,400) (88,000) At the End of the Period 80,000 36,400 (c) Net Accounts Receivables are Summarised as follows: Neither past due nor impaired 61,324 82,928 Past due but not impaired 398,970 Impaired 80,000 36,400 Gross 141,324 518,298 Less: allowance for impairment (80,000) (36,400) Net 61,324 481,898 The average credit period is 60 days. No interest is charged on outstanding trade receivables. The Commission always measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. The Commission has recognised a loss allowance of 100% against all receivables over 120 days past due because historical experience has indicated that these receivables are generally not recoverable. There has been no change in the estimation techniques or significant assumptions made during the current reporting period.

94 SEC ANNUAL REPORT 2018 Amounts are Stated in Zambian Kwacha 2018 2017 The Commission writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables that have been written off is subject to enforcement activities. The following table details the risk profile of trade receivables based on the Commission’s provision matrix. As the Commission’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished between the Commission’s different customer bases. Ageing < 30 Days 31 - 60 Days 61 - 90 Days 91’120 Days 121 - 180 Days Over 180 Days Life Time ECL Ageing < 30 Days 31 - 60 Days 61’90 Days 91 - 120 Days 121 - 180 Days Over 180 Days Restatement Adjustment to ECL on Adoption of IFRS 9 Life Time E CL 2018 2017 Amount 61,324

80,000 141,324 Amount 82,928

398,970 18,200 36,400

536,498 ECL 0% 5% 10% 25% 50% 100% ECL 0% 2% 5% 10% 25% 50% 2018

80,000 80,000 2017

13,651 4,550 18,200

36,400

95 SEC ANNUAL REPORT 2018 Amounts are Stated in Zambian Kwacha 2018 2017 9. Other Financial Assets 26,211 286,245 Deposits and Prepayments GRZ Grants Receivable 805,668 805,668 Interest Receivable - 1,089,063 Staff Receivables 639,287 168,167 Sundry Debtors - 8,900 1,471,166 2,358,043 Less Impairment Provision (805,668) - 665,499 2,358,043 10. Cash and Cash Equivalents (a) Cash at Bank and in Hand Barclays Bank 2,136,847 1,709,702 Standard Chartered Bank 4,640 1,139,284 2,141,487 2,848,986 (b) Short’Term Bank Deposits Standard Chartered Bank 7,000,000 Barclays Bank I 5,500,000 Barclays Bank II 216,344 5,716,344 7,000,000 7,857,831 9,848,986 11. Statutory Funds Compensation Fund 168,148 71,489 Market Development Fund 380,681 429,920 548,830 501,409 12. Deferred Income This represents income received in the year for the following financial period. 13. Employee Benefits and Provisions Gratuity Provision 3,426,999 2,769,288 Leave Pay Provision 846,615 706,839 4,273,614 3,476,127 14. Payables, Accruals and Provisions Accruals and Provisions 122 25,554 Audit Provisions 85,960 10,568 Capital Markets Tribunal 1,059,305 NAPSA 46,165 220 PAYE 639,999 - Sundry Payables 1,663 10,342 Save as You Earn 1,000 - 1,834,214 46,685

96 SEC ANNUAL REPORT 2018 15. Financial Instruments The Commission’s activities expose it to a variety of financial risk: market risk (including currency risk, fair value positions), liquidity and credit risk: (a) Total Financial Instruments 31 December 2018 Assets as per statement of financial position Loans and Receivables-’ -Trade and Other receivables -Cash and Equivalents Total Receivables 726,823 2,141,487 2,868,310 Assets at Fair Value through P&L

Assets at Amortised Cost

5,716,344 5,716,344 Total 726,823 7,857,831 8,584,654 31 December 2017 Assets as per statement of financial position Loans and Receivables-’ -Trade and Other receivables -Cash and Equivalents Total Receivables 1,876,145 2,848,986 4,725,131 Assets at Fair Value through P&L

Assets at Amortised Cost

7,000,000 7,000,000 Total 1,876,145 9,848,986 11,725,131 Liabilities as per statement of financial position Other Financial Liabilities Trade and Other Payables Total Liabilities at Fair Value through P&L

Other Financial Liabilities at Amortised Cost 4,273,614 1,834,214 6,107,828 Total 4,273,614 1,834,214 6,107,828 Liabilities as per statement of financial position Other Financial Liabilities Trade and Other Payables (excluding non-financial liabilities) Total Liabilities at Fair Value through P&L

Other Financial Liabilities at Amortised Cost 3,476,127 46,685 3,522,812 Total 3,476,127 46,685 3,522,812

97 SEC ANNUAL REPORT 2018 (b) Market Risk (i) Currency risk The Commission takes on low exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows as the majority of its transactions and balances are in local currency. (ii) In terest Ra te Risk The Commission is exposed to interest rate risk to the extent of the balance of any loans and other borrowings taken and outstanding. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. During the period under review, the commission was not subject to any interest rate risks as it had no loans, and other borrowings outstanding. (iii) Fair Values Because of short maturity profiles, fair values of financial assets and liabilities approximate to their carrying amounts. (c) Credit Risk The Commission takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Commission by failing to pay amounts in full when due. As at 31 December 2018, the maximum exposure to credit risk, without taking into account any collateral held or other credit enhancements, which will cause a financial loss to the Commission due to failure to discharge an obligation by the counterparties arises from the carrying amount of each financial asset in the statement of financial position. In order to manage this risk, the Commission has a defined credit policy which is documented and forms the basis of all credit decisions. The Commission also makes allowance for impairment against non-performing accounts, where recovery is doubtful. The carrying amount of financial assets represents the maximum credit exposure. As shown below, exposure to credit risk is represented by cash balances and amounts due on accounts receivables: The credit risk for cash and cash equivalents and short-term deposits is considered negligible, since the counterparts are reputable banks with high quality external credit ratings. The credit risk for investments is considered to be low, since the Fund Managers are reputable entities.

98 SEC ANNUAL REPORT 2018 In respect of trade and other receivables, the Commission is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Based on historical information about default rates, management considers the credit quality of trade receivables that are not past due or impaired to be good. The Commission’s current credit risk grading framework comprises the following categories: Category Performing Doubtful In default Write-off Basis for recognising expected credit losses 12-month ECL Lifetime ECL - not impaired Lifetime ECL - credit￾impaired Amount is written off Description The counterparty has a low risk of default and does not have any past-due amounts Amount is >30 days past due or there has been a significant increase in credit risk since initial recognition Amount is >90 days past due or there is evidence indicating Lifetime ECL - credit- impaired There is evidence indicating that the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery For trade receivables, the Authority has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The Authority determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. Category Bank and Cash Balances Fixed Deposits Receivables: Amortised Cost Other Financial Assets Bank and Cash Balances Fixed Deposits Receivables: Amortised Cost Other Financial Assets Rating Performing ECL 2018 12-Month ECL 12-Month ECL Simplified Approach Not credit impaired 2017 12-Month ECL 12-Month ECL Simplified Approach Not credit impaired Gross Carrying Amount 2,141,487 5,716,344 141,324 1,471,166 7,999,155 2,848,986 7,000,000 518,298 2,358,043 10,367,284 Loss Allowance

(80,000) (805,668) (80,000)

(36,400)

(36,400) Net Carrying Amount 2,141,487 5,716,344 61,324 665,499 7,919,155 2,848,986 7,000,000 481,898 2,358,043 10,330,884

99 SEC ANNUAL REPORT 2018 The Commission’s primary credit exposure from illiquidity of cash and cash equivalents amounted to K7.857million at 31st December 2018 (2017: K9.848milhon). (d) Liquidity Risk and Interest Rate Risk Liquidity risk is the risk that the Commission will not be able to pay financial instruments liabilities as they come due. The principal external risks faced by the Commission remain unforeseen reduction of operating income. The table below summarises the Commission’s exposure to liquidity risks: Maximum exnosure to credit risk: Cash and Cash Equivalents Receivables 2018 7,857,831 726,823 8,584,654 2017 9,848,986 2,839,941 12,688,927 Weighted Average Effective Interest rate Up to 1’3 4’12 1’5 Total 1 Month Months Months Years At 31 December 2018 Non’Interest Bearing 508,986 1,526,957 4,071,885 548,830 6,656,658 At 31 December 2017 Non’Interest Bearing 1,498,440 4,495,321 11,987,522 501,409 18,482,691 (i). Liquidity Risks This is monitored on a daily basis by management and controlled as far as reasonably possible to minimise the risk of mismatches between current liabilities and current assets. (ii) In terest Ra te Risk The Commission’s interest rate risk arises from its lease obligations. The risk is deemed low. (iii) Cash Flow Risk In the opinion of the directors, the risk that future cash flows may not be sufficient to meet its working capital requirements is medium.

100 SEC ANNUAL REPORT 2018 (e) Fair Value Estimation (i) The different levels of determining fair value, by valuation method, have been defined as; Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities! Level 2’ Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly prices) or indirectly derived from prices); and Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). The fair values of the Authority’s financial assets and liabilities for both the current and comparative year do not differ materially from their carrying values: (ii) Tradeand other receivables/payables-’ For receivables/payables the carrying amount is deemed to reflect the fair value. 16. Capital Management The Commission’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns to controlling interests and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Commission monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt. The gearing ratios at 31 December 2018 and 2017 were as follows: 2018 2017 Debt - - Cash (7,857,831) (9,848,986) Net Debt (7,857,831) (9,848,986) Equity 3,679,611 10,480,934 Net debt to equity ratio ■213.55% ■93.97% 17. Related Parties (a) Control of the Commission The Commission is controlled by a Board of Commissioners. Members of the Board who held office during the year and to the date of this report are shown on Pages 2 and 3. (b) Identity of Related Parties The key executives of the Board i.e. officers other than Board members with the ability, directly or indirectly, to control or exercise significant influence over the Board in making financial and operating decisions, are fisted on Page 3.

101 SEC ANNUAL REPORT 2018 (c) Transactions and Balances with Related Parties: (1) Related Party Transactions 2018 2017 (i) Grants from Government 10,150,205 9,668,005 (ii) Key Management Compensation 3,139,632 3,713,452 (iii) Remuneration to Commissioners 1,086,949 1,008,234 (2) Related Party Balances 2018 2017 (i) Grants Payable to Government 1,059,305 - (ii) Amounts Payable to key executives 1,563,784 - 18. Capital Commitments The Commission had no capital commitments as at the year-end (2017:_ Nil). 19. Contingent Liabilities (a) From time to time, it is subject to legal challenge and judicial review of decisions made in the normal course of its business as regulator of the securities and capital markets in Zambia. Legal judgements could give rise to liabilities for legal costs but these cannot be quantified as the outcome of proceedings would be unknown and there is therefore considerable uncertainty as to the nature and extent of any subsequent liability. From time to time, it is subject to legal challenge and judicial review of decisions made in the normal course of its business as regulator of the securities and capital markets in Zambia. Legal judgements could give rise to liabilities for legal costs but these cannot be quantified as the outcome of proceedings would be unknown and there is therefore considerable uncertainty as to the nature and extent of any subsequent liability. (b) The Commission was party to two lawsuits: (i) In Bascom Enterprises Limited & 3 Others v. Bhati Airtel Zambia Holdings BV, Celtel Zambia Limited and the Securities and Exchange Commission, the Commission has been sued as third defendants for breach of statutory duty arising from the Commission sanctioning the acquisition by Bharti Airtel Zambia Holdings BV of Bascom Enterprises Limited’s shares in Celtel Zambia Limited at a nominal value of K710. The matter commenced in 2011 and has not been concluded to date. The Commission’s Legal Counsel believes it is unlikely the Commission will be found in breach of statutory duty and costs incurred to date relate to legal costs on the representation by outside Counsel.

102 SEC ANNUAL REPORT 2018 (ii) The Commission and Lusaka Securities Exchange Pic are plaintiffs in case involving amongst others, Finsbury Investments Limited, and the directors/shareholders of Finance Bank relating to authorisation fees amounting to US$184,675 believed to be due and payable to the Commission on takeover of Finance Bank Pic by Atlas Mara Limited. The matter is before the High Court and the parties have raised a preliminary issue on the jurisdiction of the Court to hear the matter. The Commission is representing itself in the matter and so far only internal costs have been incurred relating to filing of court papers. Other than the above, the Commission has not entered into any unquantifiable contingent liabilities as at the year-end by offering any guarantees, letters of comfort or indemnities to anyone. 20. Events after the Reporting Date IAS 20 requires the Commission to disclose the date on which the accounts are authorised for issue by the Board. The annual report and accounts were authorised by the Board for issue on the date of the signature of the directors and the date of the auditor’s report. The Commission has evaluated subsequent events to the date the financial statements were available for issuance, and has determined that there has not arisen since the end of the period any item, transaction or event of a material and unusual nature likely, in the opinion of the Board, to affect the results of those operations or the state of affairs of the Commission in the subsequent financial periods.

103 SEC ANNUAL REPORT 2018 APPENDIX - OPERATIONAL COSTS Amounts are stated in Zambian Kwacha 2018 2017 Employee Costs Basic Pay 9,332,185 7,426,905 Bonuses and Allowances 980,412 1,015,534 Gratuity 3,014,019 2,126,498 Leave Pay 890,743 792,559 Medical Expenses 8,822 28,703 NAPSA-Employer Contributions 263,533 200,989 Overtime 125,879 80,736 14,615,593 11,671,924 Administration Expenses Advertising & Promotions 1,915,940 2,638,213 Audit Fees 195,000 110,000 Bank Charges 67,103 55,232 Board and Committee Expenses 1,086,950 1,008,234 Consultancy 307,654 264,154 Entertainment 24,060 19,660 Electricity & Utilities 42,625 54,018 Insurance 739,491 587,156 Legal Expenses 1,993 Motor Vehicle Expenses 298,122 71,574 Office Rentals 1,310,153 1,305,192 Other Expenses 314,339 334,858 Penalties - Postage & Courier 23,132 11,622 Print & Stationery 118,059 202,683 Property Repairs & Maintenance - 205,009 Repairs & Maintenance 87,599 29,351 Security Expenses 145,146 127,543 Telephone & Internet 301,893 347,998 Workshops and Training 2,620,547 2,201,153 9,599,806 9,573,651 Total Expenses 24,215,398 21,245,575

Appendix I: The SEC Staff in 2018 104 SEC ANNUAL REPORT 2018 Name Position Date Left Mr. Phillip K. Chitalu Mrs. Diana Sichone Ms. Mutumboi Mundia Mr. Bruce Mulenga Mr. Mateyo Lungu Mr. Saul Nyalugwe Mr. Abraham Alutuli Mr. Nonde Sichilima Mrs. Dingase Makumba Mr. Lubunda Ngala Mr. Mubanga Kondolo Mrs. Sitali Mugala Ms. Racheal M. Banda Mrs. Leah Simasiku Mrs. Veronica O. Sichone Mr. Thomas Thole Ms. Gertrude Buyungwe Mr. Benson Mwileli Mr. Sydney Katumba Mrs. Theresa Chimbila Ms. Priscilla Mwale Ms. Siberia T. Siamayuwa Mr. Saviour Mooya Mr. Alexander Tondo Chief Executive Officer Commission Secretary and Director – Enforcement and Legal Services Director - Market Supervision and Development Manager - Market Transactions and Investments Manager – Finance Manager – Administration Manager – Market Supervision Manager – Market Supervision Manager – Market Development Manager – Law Reform and Enforcement Manager – Financial Inclusion Product Development and Market Research Officer Human Resource Officer Surveillance Officer Legal Officer Investigations Officer Inspector/Analyst Inspector/Analyst Information Technology Officer Accounts Assistant Personal Assistant to the CEO Pool Secretary Driver Office Assistant

SEC Management and Staff

Appendix II 105 SEC ANNUAL REPORT 2018 Item Company Name Yes No 2019 Yes No 2018 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Aflife Capital Zambia Limited Aflife Holdings Zambia Limited Aflife Private Wealth ABC Investment Services Limited ABC Zambia Limited African Life Financial Services Altus Capital Autus Securities Zambia Limited Barclays Bank Plc Black Lechwe Citibank Zambia Limited Commodity Hub Limited Equity Capital Resources Plc. Finance Securities Limited First National Bank Zambia Limited Grofin Zambia Limited Hobbiton Investments Services Limited Investrust Bank Plc Kami Solutions Limited Knutberry Trees Consultancy Limited Kukula Capital Plc Laurence Paul Investment Services Ltd Longhorn Associates Limited Madison Asset Management Company Ltd Minet Zambia Consulting Limited Pangaea Renaissance Securities Ltd Prudential Life Assurance Limited Sekela Finance Advisory Services Stanbic Bank (Z) Limited Standard Chartered Bank (Z) Limited Stockbrokers Zambia Limited Vennex Financial Services Limited Zambia National Commercial Bank Plc. List of Authorised Capital Market Players for 2018 In order to ensure that only fit and proper persons and entities are allowed to offer securities services to the investing public, the Commission approved the applications of the following entities to conduct securities business in the categories shown below: Dealer’s Licenses The following corporate entities held a Dealer’s license during the period under review:

Appendix II 106 SEC ANNUAL REPORT 2018 Item Name of Representative Dealer Yes No 2019 Yes No 2018 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Mukudzei-Ishe Zhou Fortunate Ngatsha Danny Mulenga Nicholas Kabaso Zangose Mwanza Michelle M. Musonda Clifford Muzoka Richard Ndhlovu Christopher K Mwelo Theresa Chiluba Mubanga Bwalya Geoffrey Musekiwa Vannessa K. Wright Jones Phiri Mumba Musunga Valerie M. Mwiinga Munakupya Hantuba Ken Simwaba Fumanikile Bbuku Joseph Simate Mataka Nkhoma Aaron Phiri Boston Nkuname Lesa Mulenga Hanakoma Hamubwatu Stanley Kaweme Tamele Mukelebai Wambulawae Bibi Ajusa Mildred Nana Mweemba Hambulo Chimuka Hakooma Chisoma Lombe David M Kabika Maria Shawa Mwenda Silishebo Jaqueline M. M Simaubi Jenny Kapansa Aflife Capital Aflife Holdings African Banking Corporation Investment Services Limited African Banking Corporation Investment Services Limited African Banking Corporation Investment Services Limited African Banking Corporation Investment Services Limited African Banking Corporation Investment Services Limited African Banking Corporation (Z) Limited African Banking Corporation (Z) Limited African Banking Corporation Limited African Banking Corporation Limited African Life Financial Services Limited African Life Financial Services Limited African Life Financial Services Limited African Life Financial Services Limited African Life Financial Services Limited Aflife Private Wealth Altus Capital Limited Autus Securities Zambia Limited Autus Securities Zambia Limited Autus Securities Zambia Limited Barclays Bank Zambia Barclays Bank Zambia Barclays Bank Zambia Barclays Bank Zambia Barclays Bank Zambia Barclays Bank Zambia Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Black Lechwe Advisory Limited Dealer’s Representative Licenses The following persons held a Dealer’s representative’s license during the period under review:

Appendix II 107 SEC ANNUAL REPORT 2018 Item Name of Representative Dealer Yes No 2019 Yes No 2018 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Geofrey Mchangila Ngosa Mary Kafwembe Mr. Steven Chitete Blair Siatontola Cynthia Kabondo Chipompo Mwango Mwela Daniel Nyati Gerald Chombo Jao M Duma Jona Moomba Siwabu Joshua Kupa Chimanga Phiri Maluwiza Kademaunga Collins Jason Chongo Phillip Banda Lillian Mutinta Hamangaba Mwelwa Haggai Choko Bwalya Katongo Nsangu Tembo Musaba Ian Chileshe Cornwell Fungai Musana Sabera Khan Barkat Ali Gerald Ndhlovu Kapumpe Chola Kaunda Ignatius Innocent Kashoka Naomi Hara Palale Mwangala B Mwiya Celine P. Chauwa Harry Mafuta Richard Mutukwa Alice Kasunga Chiyaba Chiwala David Watson Dominic Balengu Emmanuel Mwape Feke Daka Fumbe Kabanga Mildred Nkandu Mirriam Maulu Modester Tembo Mulotwa Munkonya Mukuka Kowa Mwansa Chibwe Namasiku Mulozi Philip Ngongo Citibank Zambia Limited Citibank Zambia Limited Citibank Zambia Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Commodity Hub Limited Equity Capital Resource Plc Equity Capital Resources Plc Finance Securities Limited First National Bank First National Bank First National Bank First National Bank Hobbiton Investment Management Services Limited Hobbiton Investment Management Services Limited Investrust Bank Plc Limited Investrust Bank Plc Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited

Appendix II 108 SEC ANNUAL REPORT 2018 Item Name of Representative Dealer Yes No 2019 Yes No 2018 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Privoster Muyooma Namakau Mufaya Patrick Mwase Joshua Mwangu John Chongo Karabassis Chanda Chipasha Mapenza Maselechi Kalenga Mibenge Jessie P. Nyirenda Sanana T. Munyinda Amos Nyirenda Dennis Sibanze Jito Kayumba Tue Andersen Aaron Yobe Zulu Chiwoni Soteli Likonge Banda Brian Chintu Blessing Chilombe Mupanga Chilungu Cecilia Kamba Siabusu Claire Machila Lungwe Siphiwe Nkunika Nkumbu P Pelekamoyo Maron Mwangala Ceaser Siwale Tidale Mwale-Chisunka Wendy Nsamwa Nglazi-Tembo Matete M. Sichizya Prabhleen Kohli Chungu Bwale Mukoma Kachinga Natasha Bwalya Esther Chipasi Beene M. Nkulukusa Moses Mwale Kambani Maseko Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Kami Solutions Limited Knutberry Trees Consultancy Limited Knutberry Trees Consultancy Limited Knutberry Trees Consultancy Limited Knutberry Trees Consultancy Limited Kukula Capital Plc Kukula Capital Plc Laurence Paul Investment Services Limited Longhorn Associates Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Madison Asset Management Company Limited Minet Consulting Limited Zambia Pangaea Securities Limited Pangaea Securities Limited Pangaea Securities Limited Prudential Life Assurance Zambia Limited Prudential Life Assurance Zambia Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited

Appendix II 109 SEC ANNUAL REPORT 2018 Item Name of Representative Dealer Yes No 2019 Yes No 2018 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. 168. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Ndembela Ndhlovu Darrel C. Silavwe Mwiza M. Namwila Alinani Simbule Chenge Besa Mwenechanya Chitemwe Ng’ambi Kapaya Dean Nathaniel Onyambu Fred Siwila Mwila Pascal Mwenya Musenge Komeki Prudence Khumbo Mhango Veronica Sinkala Victor Chileshe Benjamine N. Mulenga Chimuka Muyovwe Davy Nanduba Derek Bobo Dorothy N. K Moono Edna Towela Lungu Joseph Chibwe Ngesa Kabwe Mwaba Kayeba Mwenechanya Mubanga Yvonne Mukuka Muchindu Lombe Mulolwa Nkata Kamana Mwaka Kalengo Mfula Mwali Chisala Oluseggun M. Omoniwas Sampa David Shiyunga Ravi Kapadia Tamara M. Bbuku Wiggins Mupango Kamungoma Mate Maxime Chiluba Harlaar Chipo Chilala Hilda Chunga Hilda Nachizo Namunyola Jones Lukwesa Joseph Wonani Mafipe Chunga Mailes Tembo Mark Mondoka Megan Bloemker Michael Likando Mwami Mainga Peter Zulu Shuko Chunga Mzunze Zulu Sekela Financial Advisory Limited Sekela Financial Advisory Limited Sekela Financial Advisory Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Stanbic Bank Zambia Limited Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Standard Chartered Bank (Z) Plc Stockbrokers Zambia Limited Stockbrokers Zambia Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited

Appendix II 110 SEC ANNUAL REPORT 2018 Item Name of Representative Dealer Yes No 2019 Yes No 2018 169. 170. 171. 172. 173. 174. 175. 176. 177. 178. 179. 180. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Mwiza Mirriam Namwila Matthew Bwalya Pule Gift Naven Tembo Warren Kaunda Austin Hamukonka Chijikwa Charles Kamungu Cliff George Sakala Fredrick Mulenga Kaputo Kaluba Gloria Kaulugombe Kunda Catherine Chikumbi Virginia L. Mwalilino Lishala Clarence Situmbeko Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Vennex Financial Services Limited Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Zambia National Commercial Bank Item Company Yes No 2019 Yes No 2018 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Charles Sichangwe Entrust Financial Services Limited Riscura Limited DeVere and Partners Investment Services (Z) Limited Allied Securities and Asset Management Limited Enock Bwalya Benefit Consulting Services Limited Errol Neal Molver Simon Kalunga Vunani Asset Management Limited Investment Adviser’s License The following corporate entities held an Investment Advisors license during the period under review:

Appendix II 111 SEC ANNUAL REPORT 2018 Item Company Name Investment Advisor Yes No 2019 Yes No 2018 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13 14. 15. 16. 17. √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Joost Groenveld Chibamba Nyangu Lynda Syamunyangwa Maureen Nabulyato Elizabeth Nampasa Gift Kapande Julian Visser Lerato Siame Arthur Kalumba Dennis Nyirongo Wenu Mutiti David Brown Charity Siwale Cindy Waheeb Taudrous Collina B. Halwampa Kandiye T. Liweleya Munyumba Mutwale Allied Securities and Asset Management Limited deVere and Partners International Limited deVere and Partners International Limited deVere and Partners International (Z) Limited deVere and Partners International (Z) Limited deVere and Partners International (Z) Limited deVere and Partners International (Z) Limited deVere and Partners International Limited deVere and Partners International Limited deVere and Partners International Limited deVere and Partners International (Z) Limited Entrust Financial Services Limited Riscura Zambia Limited Riscura Zambia Limited Benefits consulting Benefits consulting Vunani Asset Management Limited Investment Adviser’s Representative License The following persons held an Investment Advisors Representatives license during the period under review: Securities Exchange Licenses The following exchanges were licensed during the period under review: Item Company Name Yes No 2019 Yes No 2018 1. 2. 3. √ √ √ √ √ √ Bond & Derivatives Exchange Zambia Plc Lusaka Securities Exchange Plc Panex Commodity Exchange (Z) Limited

Appendix III 112 SEC ANNUAL REPORT 2018 LuSE PLC BaDEx PLC PANEX PLC Chief Executive Officer: Mrs. Priscilla Sampa Address (physical): Lusaka Securities Exchange 2nd floor, Mamco House Plot 316B, Independence Avenue Address (postal): P.O. Box 34523 Lusaka Telephone: +260 (211) 228391/228537 Facsimile: +260 (211) 225969 E-mail: info@luse.co.zm Chief Executive Officer: Mr. Peter Sitamulaho Address (physical): Bonds and Derivatives Exchange Zambia Plc Plot No 7450, Katopola Road Rhodespark, Off Great East Road Address (postal): Post. Net Box 334 Private bag E10 Arcades Lusaka Telephone: +260 (211) 220537 Facsimile: +260 (211) 220574 E-mail: info@badex.co.zm Chief Executive Officer: Mr. Jacob Maaga Address (physical): Pan African Exchange Zambia Plc 17A, Paseli Road, Northmead Telephone: +260 976 507 423 E-mail: jmaaga@panexchange.com Contact Details of Capital Market Players Stock Exchange Contact Details Dealers’ Contact Details a) Members of the LuSE Autus Securities Limited The Colosseum Block A, Ground floor Bwinjimfumu Road Lusaka P. O. Box 320308 Tel: +260 (211) 220460 Fax: +260 (211) 841033 Email: joshua@autussecurities.com Equity Capital Resources 4th Floor Godfrey House Kabelenga Road Lusaka Tel: +260 955 37 84 89 Email: fungai@ecrzambia.com Website: www.ecrzambia.com Intermarket Securities limited Ground Floor, Farmers House Central park P.O. Box 35832, Cairo Road Lusaka Tel: +260 (211) 227227-8 Fax: +260 (211) 231334 Email: joseph.mazila@intermarket.co.zm Madison Asset Management Company Ltd Plot 316, Independence Avenue P.O. Box 37013 Lusaka Tel: +260 (211) 233940/16 Fax: +260 (211) 233936 Email: likonge@madisonassets.co.zm

Appendix III 113 SEC ANNUAL REPORT 2018 Pangaea Renaissance Securities Ltd Pangaea Securities Limited 2nd Floor, Pangaea Office Park Stand 2374 Great East Road Lusaka Tel: +260 (211) 220707 Fax: +260 (211) 220925 Email: wtembo@pangaea.co.zm Stockbrokers Zambia Limited 32 Lubu Road Longacres P O Box 38956, Cairo Road Lusaka Tel: +260 (211) 227303/232456 Fax: +260 (211) 224055 Email: bmwamba@sbz.com.zm Website: www.sbz.com ABC Investment Services Limited Ground Floor, Pyramid Plaza Corner Church and Nasser Roads P.O. Box 39501 Lusaka Tel: +260 (211) 257980 Fax: +260 (211) 257970-6 E-mail: abcz@africanbankingcorp.com Website: www.africanbankingcorp.com African Life Financial Services Independence Avenue Mpile Office Park Lusaka P. O. Box 51331 Tel: +260 (211) 252265/253772 Fax: +260 (211 253112 E-mail: info@aflife.co.zm Minet Zambia Consulting Limited (Formerly Aon Zambia Pension Fund Administrators Limited) Acacia Park Plot 22768 Thabo Mbeki Road, Arcades Lusaka P. O. Box 35403 Tel: +260 (211) 367288 E-mail: info@minet.co.zm Barclays Bank Zambia Plc Elunda Office Park Plot 4643 / 4644 Addis Ababa round about, Rhodes Park Lusaka Private Bag E308 Tel: + (260) (211) 366150 / 169 Fax: + (260) (211) 225553 Email: customerservice.zambia@barclays.com Website: www.home.barclays.co.zm Citibank Zambia Limited Citibank House Stand No. 4646 Addis Ababa Roundabout Lusaka P. O. Box 30037 Tel: +260 (211) 444400 Fax: +260 (211) 226064 Email: public.affairs.zambia@citi.com Website: www.citigroup.com Credit Rating Agency Suite 5, Third Floor Farmers House, Central Park Lusaka P.O. Box 320445 Telephone: +260 0977 365094 Email: info@creditratingagency.net Website: www.creditratingagency.net Focus Financial Services Limited 1st floor, Building 3 Acacia Park Thabo Mbeki Road Lusaka P. O. Box 345536 Tel: +260 (211) 291310-14 Fax: +260 (211) 291311 Website: www.focus.co.zm Grofin Zambia Limited No. 1 Chila Road Kabulonga P.O.Box 33758 Lusaka Tel: +260 211 295875/6 Fax: +260 211 295876 Email: info.zambia@grofin.com Website: www.grofin.com b) Non–Members of the LuSE

Appendix III 114 SEC ANNUAL REPORT 2018 Investrust Bank Plc Investrust House Plot 4527/8 Freedom Way Lusaka P O Box 32344 Tel: (0211) 238733-5 Email: investrust@investrustbank.co.zm Kukula Capital Plc Office 101 1st floor Foxdale Court Office Park Plot 609 Zambezi Road, Roma, Lusaka Tel: +260 211 295792 Email: info@kukulacapital.com Laurence Paul Investment Services Limited 5th Floor, Design House Dar es Salaam Place (off Cairo Road) P O Box 35008 Lusaka Tel: (0211) 220302/3 Fax: (0211) 220454 E-mail: info@laurencepaul.com Website: www.laurencepaul.com Professional Life Assurance Limited Professional Life Assurance Finsbury Park, Kabwe Round About Lusaka E-mail: ho@proflife.com.zm Website: www.proflife.co.zm Stanbic Bank Zambia Limited Stanbic House Head Office Plot 2375, Addis Ababa Drive Lusaka P. O. Box 31955 Tel: +260 (211) 370000 – 18 Fax: +260 (211 258439 Website: www.stanbicbank.co.zm Standard Chartered Bank Zambia Plc Standard Chartered House Cairo Road-South End P O Box 31934 Lusaka Tel: (0211) 229242/229260/229772 Fax: (0211) 222092/225337 E-mail: customer.first@zm.standardchartered.com Website: www.standardchartered.com/zm Zambia National Commercial Bank Plc Head Office Building Cairo Road-South End P O Box 33611 Lusaka Tel: + 260 (211) 228979/ 221355/ 221380/ 221404 Fax: + 260 (211) 223084 E-mail: customerservice@zanaco.co.zm Investment Advisors’ Contact Details Benefits Consulting Services Limited Mpile Office Park 74 Independence Avenue Lusaka P. O. Box 31986 Tel: +260 (211) 254517/252265/250190 Fax: +260 (211) 251926 E-mail: info@bencon.co.zm Website: www.bencon.co.zm Charles Sichangwe Wits Limited 4th Floor, Godfrey House, Kabelenga Road Lusaka Tel: +260 (211) 226441/5 Fax: +260 (211) 227116 Email: wits@zamnet.zm

Appendix III 115 SEC ANNUAL REPORT 2018 deVere and Partners Investment Services Zambia Limited Plot 284 Cnr Joseph Mwilwa Road and Great East Road Rhodes Park Lusaka Tel: +260 211 295999 Fax: 260 211 257114 Email: deVere@devere-group.com Website: www.devere-group.com Entrust Financial Services Limited Plot 377a/6a, Alstone Cottage Bishops Road, Kabulonga Lusaka P. O. Box 31252 Tel: +260 (211) 260260/260800 Fax: +260 (211) 266399 Email: info@holbornservices.com Website: www.holbornservices.com Imara ECR Asset Management Limited 12 Mushemi Road off Lubu Road Rhodespark Lusaka P. O. Box 37184 Tel: +260 (211) 840313 Email: info@ecrzambia.com Website: www.imara.com Profin Limited 17 Matandani Road Rhodespark Lusaka P.O.Box 31425 Tel: +260 (211) 257913 Fax: +260 (211) 254360 Email: zambia@theprofingroup.com Website: www.theprofingroup.com Riscura Zambia Limited Figtree house Plot No. 1 Warthog Road, Kabulonga Lusaka P.O.Box 320181, Lusaka Tel: +260 (211) 262 773 Fax: +260 (211) 262 773 Email: Zambia@riscura.com Website: www.risura.com Listed Companies’ Contact Details African Explosives Limited (AEL) Zambia Plc Plot 1168/M Kitwe-Mufulira Road P.O. Box 40092 Mufulira Tel: +260 (966) 990945-9 Fax: +260 (212) 412749 Website: www.ael.co.za Listed on 23rdOctober, 2006 Airtel (formerly Celtel) Zambia Plc Stand 2375 Addis Ababa drive Lusaka Tel: +260 (977) 915000 Website: www.Africa.airtel.com/zambia Listed on 11th June, 2008 Bata Shoe Company Plc Stand 6437, Mukwa Road Heavy Industrial Area Lusaka P.O. Box 30479 Tel: +260 (211) 244397/242328 Fax: +260 (211) 244254 E-mail: batashoe@zamnet.zm Website: www.bata.co.zm Listed on 31st March, 2009 British American Tobacco (BAT) Zambia Plc Plot 20992, Kafue Road Lusaka P.O. Box 30162 Tel: +260 (211)272264/272287 Fax: +260 (211) 272271 E-mail: batzam@bat.com Website: www.bat.com Listed on 15th December, 1996

Appendix III 116 SEC ANNUAL REPORT 2018 Cavmont Capital Holdings Zambia Plc Unit C, Counting House Square (behind Arcades Shopping Centre) Thabo Mbeki Road P O Box 32322 Lusaka Tel: (0211) 257772/256055/256064 Fax: (0211) 256074 E-mail: contact@cavmont.com.zm Website: www.cavmont.com.zm Listed on 13th September, 2006 Copperbelt Energy Corporation Plc 23rd Avenue, Nkana East Kitwe P.O. Box 20819 Tel: +260 (212) 244000/244281 Fax: +260 (212) 223445/244040 E-mail: info@cec.com.zm Website: www.copperbeltenergy.com Listed on 21st January, 2008 Investrust Bank Plc Investrust House Plot 4527/8 Freedom Way Lusaka P O Box 32344 Tel: (0211) 238733-5 E-mail: investrust@investrustbank.co.zm Listed on 21st June, 2007 Lafarge Cement Plc Farm No. 1880 Kafue Road Chilanga P.O. Box 30162 Tel: +260 (211) 367400/600 Fax: +260(211) 278134 E-mail: cement.enquiries@lafarge-zm.lafarge.com Website: www.lafarge.com Listed on 22nd May, 1995 Madison Financial Services Plc Plot 316 Independence Avenue P.O.Box 37013 Lusaka Tel:378700-5 Email: info@madison.co.zm Website: www.madisonshares.com Listed on 1st September 2014 Metal Fabricators of Zambia (ZAMEFA) Plc Plot 1400 Cha Road Luanshya P.O. Box 90295 Tel: +260(212) 510599 Fax: +260 (212) 229003/4 Website: www.pdic.com Listed on 9th September, 2004 National Breweries Plc Plot No. 1609/10, Sheki Sheki Road Lusaka P.O. Box 35135 Tel: +260 962 249 210 Fax: +260 (211) 246326 Website: www.ab-inbev.com Listed on 16th March, 1998 Pamodzi Hotels Plc Pamodzi Hotel Complex Plot 463, Church Road P.O. Box 35450 Lusaka Tel: +260 (211) 254455/250995 Fax: +260 (211) 254005 E–mail: pamodzi.lusaka@tajhotels.com Website: www.tajhotels.com Listed on December 21st, 2001 Prima Reinsurance Plc Plot 187C Namamboli Road Fairview Lusaka Postnet box 658 P/Bab E891 Tel: +260 (211) 221159 Email: primare@zamnet.zm Website: www.prima-re.com Listed on 21st December, 2004 Puma Energy Plc (formerly BP Zambia) Airtel House Stand No. 2375, Addis Ababa Drive Lusaka P.O. Box 31999 Tel: +260 (211) 376100 Fax: +260 (211) 376149 E–mail: zambia@pumaenergy.com Website: www.pumaenergy.com Listed on 18thJuly, 2002

Appendix III 117 SEC ANNUAL REPORT 2018 Real Estate Investments Zambia Plc (formerly Farmers House) Farmers House, Central Park Cairo Road Lusaka P.O. Box 30012 Tel: +260 (211) 227684-89 Fax: +260 (211) 222906 E-mail: robin.miller@zamsaf.co.zm Website: www.reiz.co.zm Listed on 27th September, 1997 Shoprite Holdings Plc Plot 19255 Cnr, Great East and Manchinchi Roads Manda Hill Centre Tel: +260 (211) 251155 Website: www.shopriteholdings.co.za Listed on 19th February, 2003 Standard Chartered Bank Zambia Plc Standard Chartered House Cairo Road-South End P O Box 31934 Lusaka Tel: (0211) 229242/229260/229772 Fax: (0211) 222092/225337 E-mail: customer.first@zm.standardchartered.com Website: www.standardchartered.com/zm Listed on 30th November, 1998 Zambeef Products Plc Plot 4970 Manda Road Industrial Area Lusaka P/Bag 17, Woodlands Tel: +260 (211) 369000 Fax: +260 (211) 369050 E-mail: info@zambeef.co.zm Website: www.zambeefplc.com Listed on 5th April 2005 Zambian Breweries Plc Mungwi Road, Plot 6438 Heavy Industrial Area Lusaka P.O. Box 30237 Tel: +260 (211) 246555 Fax: +260 (211) 242124 E-mail: zambrew@zambrew.com.zm Website: www.ab-inbev.com Listed on 9th June, 1997 Zambia National Commercial Bank Plc Head Office Building Cairo Road-South End P O Box 33611 Lusaka Tel: + 260 (211) 228979/ 221355/ 221380/ 221404 Fax: + 260 (211) 223084 E-mail: customerservice@zanaco.co.zm Website: www.zanaco.co.zm Listed on 27thNovember, 2008 Zambia Sugar Plc Nakambala Sugar Estate Livingstone Road P O Box 670240 Mazabuka Tel: +260 (213) 231103/231106 Fax: +260(213) 230385 E-mail: administrator@zamsugar.zm Website: www.illovosugar.co.za Listed on 28th August, 1996 ZCCM Investment Holdings Plc ZCCM-IH Office Park Stand No. 16806, Alick Nkhata Road Mass Media Complex Area Lusaka P O Box 30048 Tel: +260(211) 220654/221023 Fax: +260 (211) 220449/221057 E-mail: corporate@zccm-ih.com.zm Website: www.zccm-ih.com.zm Listed on 24th January, 1996

Appendix III 118 SEC ANNUAL REPORT 2018 Quoted Companies’ Contact Details Barclays Bank Zambia Plc Elunda Office Park Plot 4643 / 4644 Addis Ababa round about, Rhodes Park Lusaka Private Bag E308 Tel: + (260) (211) 366150 / 169 Fax: + (260) (211) 225553 Quoted on 9th March, 2005 Chambishi Metals Plc Sub–division L and M of Lot No. 10/M Kitwe–Chingola Road Chambishi P.O. Box 21151 (Kitwe) Tel: +260 (212) 744006/7 Fax: +260 (212) 744035 E-mail: info@chambishi.com.zm Quoted on 25th January, 2000 Chibuluma Mines Plc Off South Downs Airport Road Lufwanyama P.O. Box 260499 Tel: +260 (212) 749 – 333/777/110 Fax: +260 (212) 749799/749299 E-mail: bsinkala@chib.com.zm Website: www.metorexgroup.com Quoted on 22nd December, 1999 Finance Bank Zambia Plc Finance House, Cairo Road P.O.Box37102, Lusaka, Zambia Tel: +260 (211) 229733-42 Fax: +260 (211) 227544 Website: www.financebank.co.zm Quoted on 13th January 2015 Kansanshi Mining Plc Mine Site Solwezi P.O. Box 110835 Tel: +260 (212) 658000 Fax: +260 (212) 658300 E-mail: Sean.whittome@fqml.com Website: www.first-quantum.com/our-business/ operating-mines/kansanshi Quoted on 29th June, 1999 (as Cyprus Amax Kansanshi Plc) Konkola Copper Mines Plc Stand M/1408 Fern Avenue Chingola P/Bag KCM (c) 2000 Tel: +260 (211) 350604 E-mail: corporate.communications@kcm.co.zm Website: www.kcm.co.zm Mopani Copper Mines Plc Corporate Office Central Street Nkhana West Kitwe P.O. Box 22000 Tel: +260 (212) 247012/247847 Fax: +260 (212) 247445 E-mail: mopani@mopani.com.zm Website: www.mopani-copper-mines Professional Life Plc Finsbury park, Cairo road Northend Lusaka P.O. Box 31357 Tel:+260 (211) 222223/4 E-mail: ho@proflife.co.zm Website: www.picz.co.zm Quoted on 9th December 2014 Veritas General Insurance Plc Plot 6/60 Kapilingila House Kabulonga Road, Kabulonga Lusaka P. O. Box 31965, Lusaka Tel: + (260) (955) 359 873 Fax: + (260) (211)266366 Email: veritas@veritasgeneral.com Quoted on 19th February, 2015 Engineering Institute of Zambia Properties Plc CL/7 Brentwood drive Longacres Lusaka P.O. Box 51084 (Lusaka) Tel:+260 (211)255161/256205 E-mail: eiz@coppernet.zm Quoted on 9th April 2015

Appendix III 119 SEC ANNUAL REPORT 2018 Nanga Farms Plc P.O. Box 670079 Mazabuka Tel: +260 (211) 251894 & 260 (213) 235340/41 Fax: +260 (213) 235341 & 260(211) 251894 E-mail: nanga@zamnet.zm or nanga@iwayafrica.com Quoted on 20th February 2007 Professional Insurance Corporation Zambia Plc Finsbury Park, Kabwe Roundabout P.O. Box 34264 Lusaka Tel: +260 (211) 366703 E-mail: customerservice@picz.co.zm Website: www.picz.co.zm Quoted on 24th September 2014 Ikulileni Investments Plc Building 3, Acacia Park Stand 22768. Thabo Mbeki Road P.O. Box 35464 (Lusaka) Tel: +260 (211)370140-5 Fax: +260 (211) 370018-20 Website: www.stanbic.co.zm Quoted on 18th April, 2015 Details of Companies with Listed Debt Securities Bayport Financial Services - Debt securities listed on 24th April 2014 Plot 68 Independence Avenue Lusaka P.O. Box 33819 Tel: +260 (211) 257243 Fax: +260 (211) 257432 E-mail: jchola@bayportfinance.com Website: www.bayportfinance.com Focus Financial Services Limited - Debt securities listed on 24th April 2014 1st floor, Building 3 Acacia Park Thabo Mbeki Road Lusaka P. O. Box 345536 Tel: +260 (211) 291310-14 Fax: +260 (211) 291311 Website: www.focus.co.zm Investrust Bank Plc - Debt securities listed on 30th November 2009 Investrust House Plot 4527/8 Freedom Way Lusaka P O Box 32344 Tel: (0211) 238733-5 E-mail: investrust@investrustbank.co.zm Website: www.investrustbank.com Izwe Loans Zambia Limited - Debt securities listed on 15th July 2013 and 1st August 2013 Ground Floor, South Wing Lubuto House, Lubuto Road Rhodes Park P. O .Box 35087 Lusaka Tel: +260 (211) 235273 Email: info@izwezambia.com Website: www.izwezambia.com Real Estate Investments Zambia Plc - Debt securities listed on 12th November 2010 (formerly Farmers House) Farmers House, Central Park Cairo Road Lusaka P.O. Box 30012 Tel: +260 (211) 227684-89 Fax: +260 (211) 222906 E-mail: robin.miller@zamsaf.co.zm Website: www.reiz.co.zm Ulendo Road Infrastructure Road Programme (RINP) - Debt securities listed on 11th December, 2015 2nd Floor, Pangaea Office Park Stand No. 2374 Great East Road Lusaka P.O. Box 34536 (Lusaka) Tel:+260 (211)291310-14 Fax:+260 (211) 291312 Website: www.focus.co.zm

Appendix III 120 SEC ANNUAL REPORT 2018 Madison Finance Services Limited - Debt securities listed on 1st September, 2014 Madison House Plot 318, Independence Avenue Thabo Mbeki Road Lusaka P. O. Box 34366 Tel: +260 (211)252248/49 Email: customerservice@mfinance.co.zm Website: www.mfinance.co.zm Stanbic Bank Zambia Limited Plc - Debt securities listed on 31st October, 2014 Stanbic House Plot 2375, Addis Ababa House Lusaka P O Box 31955 (Lusaka) Tel: (0211) 370000 E-mail: zambiacallcentre@stanbic.com Website: www.stanbic.co.zm International Finance Corporation (IFC) - Debt securities listed on 29th September, 2013 746B Pyramid Plaza, Church Road Lusaka P. O. Box 35410 Tel: +260 (211) 373268 Fax: +260 (211)373249 Email: gchisanga@ifc.org Website: www.ifc.org

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