Is the ZCCM-IH register of members fit for purpose ?

- facts and consequences An open letter from shareholders of ZCCM-IH seeking to improve the corporate governance of ZCCM-Investment Holdings

To : Dr. Wala CHABALA, Chief Executive Officer Securities and Exchange Commission of Zambia 9 May 2013 Dear Sir, This letter describes how ZCCM-IH, the Investment Holding controlled by the Zambian Government with shares listed on the Lusaka, Paris Euronext and London Stock Exchanges, fails to treat shareholders equally by maintaining and using a Register of Members (shareholders) that is unfit for purpose. The register fails to identify the true owners of ZCCM-IH shares listed on the Paris Euronext Stock Exchange. As a consequence, more than 96% of the minority shareholders of the company do not receive notice of company meetings and are not entitled to vote at such meetings. In contrast, the majority shareholder (GRZ) and the remaining 4% of minority shareholders listed on the Lusaka Stock Exchange automatically receive such notices and are automatically entitled to vote. It recalls the efforts made by Euronext shareholders to persuade the company to correct its register and describes the simple procedure which would enable ZCCM-IH to resolve this problem. It also relates how officers of the company have failed to respond to requests to recognise shareholders even when presented with certified proof of shareholding. It goes on to identify some of the consequences of this failure of governance with respect to the shareholders, the officers involved as well as possible implications on the corporate business and the reputation of ZCCM-IH. In your role as the authority responsible for the fair, efficient and transparent issuance and trading of securities", the signatories of this letter formally ask you to take all necessary steps to ensure that this unacceptable situation is brought to a satisfactory conclusion in the shortest possible time. Registered and Unregistered Members The Companies Act Part III: Membership and Register, defines who are the members of a company. Section 45. (1) The members of a company with a share capital shall be the shareholders and stockholders of the company. Article 48 stipulates that a company must maintain a register of its members. Article 48. Register of members (1) A company shall maintain a register of its members and enter therein the following particulars: (a) the full name and address of each member of which it has received notice, etc. The Company Secretary of ZCCM-IH does of course maintain a Register of Members but this register is unfit for purpose since it fails to identify the true shareholders of ZCCM-IH. Indeed the Register does not mention any of the shareholders of ZCCM-IH shares listed on the Paris Euronext Stock Exchange (Euronext) where most ZCCM-IH shares are traded. Instead, all of the 10,5 million shares listed on Euronext are registered under the name of a single company, a nominee called Euroclear. As a consequence, these Euronext-listed shareholders, who represent 96% of all the minority shareholders of ZCCM-IH, are not recognised as Registered Members. 1

In contrast, shareholders who own ZCCM-IH shares listed on the Lusaka Stock Exchange automatically become Registered Members of the company entitled to vote at meetings, whereas those who own ZCCM-IH shares listed on the Paris Euronext Stock Exchange never become Registered Members. Faced with this situation, shareholders whose ZCCM-IH shares are listed on Euronext repeatedly wrote to officers of the Company as well as to the Zambian Securities and Exchange Commission (SEC). A brief chronology of events is given below. 6 February 2012 A Minority Shareholders Group informs the Executive Chairman Mr Mung'Omba that Euronext-listed shareholders are not identified in the Register of Members and asks that a solution be found to resolve this. This question had previously been raised at each AGM of the Company since 2010. 16 March 2012 ZCCM-IH sends a Circular to Shareholders with the following text The purpose of this circular to provide an equal opportunity to all minority shareholders to make a nomination of a person/institution to represent them as director on the ZCCM-IH board. The use of the term equal opportunity to all minority shareholders is important here, since, as this document will demonstrate, the opportunity to vote or nominate is not at all equal depending on whether the holder's shares are listed in the LuSE or on the Paris Euronext. 19 March 2012 The Company Secretary was informed by email that the Register of Members does not include the individual identities of Euronext shareholders and therefore prevents them from responding directly to the above nomination circular. The Company Secretary is also informed of the solution proposed by Euroclear to correct this inequality : ZCCM-IH should ask Euroclear to implement a procedure called TPI. TPI (see below), is a simple request to provide ZCCM-IH with a full and accurate list of the identities and shareholding of all the ZCCM-IH shares listed on Euronext. No reply was received. 11 April 2012 The Company Secretary was informed again the that Euronext-listed shareholders are still excluded from the Register of Members and asked how the company intends to interpret nomination forms submitted by Euronext shareholders whose names are not in the register, but whose forms are accompanied by bank certificates giving the exact details of their holding of ZCCM-IH shares. 19 April 2012 The Executive Chairman Mr Mung'Omba, the CEO Mr Muyunda are again informed of the problem and asked to ensure that Euronext-Listed shareholders be authorised to take part in the nomination process and to vote at company meetings. The Euroclear TPI procedure is once again explained. 24 April 2012 Mr Chitalu of the Zambian Securities and Exchange Commission is informed of the problem and given details of the Euroclear TPI procedure designed to ensure that all shareholders are treated equally. 2 May 2012 The Company Secretary finally replies to the email of 11 April using the following words : We will only recognise those shareholders whose names appear on the ZCCM-IH register of members. In the case of shares on Euronext, Euroclear is the registered holder per the ZCCM-IH register ad they have been contacted in this regard. In this statement Mr Chabala confirmed his clear intention to continue to use the existing register that discriminates against 96% of the minority shareholders. 2

11 May 2012 Company Secretary, the Executive Chairman, the CEO and Officials of the Securities and Exchange Commission, are contacted again with a request to recognise shareholders on the basis of signed share certificates issued by the banks in which such shares are deposited. No reply was received. 19 November 2012 More than 40 minority shareholders send emails to ZCCM-IH and the SEC complaining of the unacceptable governance and management of ZCCM-IH. They demand that the Register of Members be corrected to identify Euronext-listed shareholders. 20 November 2012 Announcement of 2012 AGM for 13 December 2012 is sent to all shareholders with the exception of those whose shares are listed on Euronext. 25 April 2013 Announcement of EGM to take place on 17 May 2013 sent to all shareholders with the exception of those whose shares are listed on Euronext. It is therefore quite clear that the Company Secretary, the CEO and the Executive Chairman as well as the SEC were fully informed for more than a year that the Register of Members was unfit for purpose since it failed to treat Euronext-listed shareholders as equal to LuSE-listed shareholders. The Company Officials failed to respond to repeated demands for Euronext-listed shareholders to be treated equally. This amounts to a serious breach of good Corporate Governance of ZCCM-IH.

The role of Euroclear in relation to ZCCM-IH shares listed on Euronext Euroclear does not own any ZCCM-IH shares and is therefore not a member of the company. Euroclear is a nominee, a financial intermediary and a depository for shares. On Euronext, ZCCM-IH shares are automatically registered with Euroclear. ZCCM-IH shareholders cannot choose to hold ZCCM-IH shares in their own names. However the true identity of the shareholders can be communicated to ZCCM-IH provided the company orders a Shareholder Identity data file (Titres au Porteur Identifi, or TPI) from Euroclear. By ordering TPI, Euroclear will provide ZCCM-IH with the details of shares listed on Euronext with the number of shares, names and co-ordinates of the shareholders at a given date. This is the equivalent of a branch register defined by Article 51 of the Companies Act. A branch register can be used to records the identities of members resident in a foreign country. The company is required to integrate this foreign share ownership as part of the register of members. Article 51. (1) Company may keep branch register. A company with share capital may, subject to its articles, keep a part of its register of members (in this Act called a "branch register"), being the part relating to members resident in a specified foreign country or countries, at a place in the foreign country, or one of the foreign countries. (2) The shares registered in a branch register shall be distinguished from the other shares of the company while they are held by members resident in a country to which the branch register applies. (3) The company shall arrange for the information as to any entry in a branch register to be transmitted to its registered records office as quickly as practicable, and shall maintain there, as part of its register of members, a duplicate of the branch register. 3

The service proposed by Euroclear (Titre Porteur Identifi ou TPI), is specifically designed to ensure that the Register of Members held in the country of the issuer (Zambia) is completed by adding to it the ownership of those shares held by members in other countries where the shares are listed. I give below an extract from the text published by Euroclear France, relating to this procedure. This information was sent to the Officers of ZCCM-IH in the documents listed above. The opening of the TPI field of application to foreign (non-French) securities under the conditions mentioned above ensures equal treatment in terms of communication between the holders (whose securities are entered in the registers of the issuer in its home country) and the holders of securities held by Euroclear France account holders.

What are the consequences of this failure to treat shareholders equally ? 1) For the shareholders concerned Article 142. (1) Entitlement to receive notice of meetings : Where a meeting of a company is to be convened, any person who is, on the day before the latest day on which notice of the meeting may be given under this Act(a) a registered member having the right to vote at a meeting of that kind; This entitlement to vote should of course apply equally to all shareholders whether in Lusaka, Paris or London. However, shareholders whose ZCCM-IH shares are listed on the Lusaka Stock Exchange automatically become Registered Members entitled receive notice and to vote at meetings, whereas those who own ZCCM-IH shares listed on the Paris Euronext Stock Exchange never become Registered Members since they are never entered into the Register and are therefore not entitled to receive notice of meetings or to vote at such meetings. ZCCM-IH even refuses to recognise official documents certifying to the ownership of ZCCM-IH shares as proof of their owners condition as shareholders of the company. This deliberate inequality of treatment of shareholders was, in all probability, a simple oversight until shareholders raised the matter with ZCCM-IH more than 2 years ago. By failing to respond to these requests in due time, the management of ZCCM-IH has allowed this issue to become a failure of corporate governance and conscious discrimination against Euronext-listed shareholders. It represents a loss to the members concerned that the courts are empowered to evaluate. Article 50. (1) If(a) a company fails to correct an error in its register of members; or (b) an error in the register causes a loss to a person; the person aggrieved or any member of the company may apply to the court for an order that the register be rectified and the person aggrieved may apply for an order that the company pay compensation for the loss. 2) For the Validity of Company meetings Article 142. (2) The proceedings of a meeting shall not be invalid by reason only of(a) the accidental omission to give notice of a meeting to a person entitled to receive notice; or (b) the non-receipt of notice of a meeting duly sent to such a person. Article 142. (2) States that a meeting cannot be declared invalid because of an accidental omission or an accident of transmission of notice of the meeting, but this is clearly not the case here. 4

For more than a year, the Company Secretary has known that the ZCCM-IH register of members was unfit for purpose. The Company has practised the systematic use of this unfit Register of Members for convening company meetings in the full knowledge of the consequences to Euronext-listed shareholders. Whereas Article 144. (2) states that : A meeting convened, held and conducted in accordance with an order under this section shall for all purposes be deemed to be a meeting of the company duly convened, held and conducted, the forthcoming EGM, if convened, could be considered, by virtue of the use of a Register of Members known to be unfit for purpose and to discriminate against 96% of the minority shareholders (excluding those held by the GRZ). The forthcoming EGM may therefore be held in breach the Companies Act. Since April 2012, validity of all company meetings may be questioned because the Officers of ZCCM-IH continue convene such meetings on the basis of a Register of Members that they know fails to provide equality of treatment to shareholders. This includes the forthcoming EGM and the AGM planned for later in the year. 3) For ZCCM-IH and its officers ZCCM-IH is not guilty of a simple oversight, accidental omission or incompetence but of repeated acts of unequal treatment of a large section of its shareholders. ZCCM-IH not only maintains a Register of Members that its officers know to be unfit for purpose, but continues to use it to convene meetings. In doing so they discriminate against the holders of 96% of the shares in circulation by failing to give Euronext-listed members the same rights as the majority shareholders or minority shareholders listed in Lusaka. The Company Secretary may be acting illegally under sections 48 and 51 of the Companies Act for continuing to use an inadequate register after having been made aware of the facts. It is clear that the individual responsibility of Mr Chabala, as Company Secretary, is engaged in this matter. By failing to take any measures whatsoever to restore the principle of the equality towards a section of the shareholders he is employed to serve, the Company Secretary is in breach of the responsibilities entrusted to him. Shareholders can no longer have confidence in his judgment. The principle that all shareholders be treated equally has not been respected. This is a failure of good corporate governance, the responsibility for which lies with the highest officers of the Company, the CEO Mr Muyunda and the Executive Chairman Mr Mung'Omba. Moreover, it is regrettable that members of the board of directors, whose primary role is to ensure good corporate governance and equality for all shareholders, have not taken up this question. We therefore ask that this letter be sent to all members of the board of directors for their consideration. As the flagship investment company of the Republic of Zambia, the governance of ZCCM-IH should be beyond reproach. Sadly this is not the case. What can be done to resolve this situation ? For more than one year the Officers of ZCCM-IH have ignored the repeated complaints of Euronextlisted shareholders concerning a Register of Members shown to be unfit for purpose. In doing so they have ignored claims that these shareholders are treated unfairly compared to other shareholders. Euroclear has made available a simple procedure called TPI to remedy any injustice that may be caused by this situation. ZCCM-IH should implement TPI without delay. Taking corrective action now and informing all shareholders concerned would be seen as a gesture of goodwill to the shareholders, a sign that ZCCM-IH intends to improve its corporate governance. It would also ensure that the AGM planned for later in the year would be carried out without being under the shadow of inequality towards a major section of the shareholders of the company. 5

Taking no action can only be a interpreted in terms of discrimination against Euronext-listed shareholders and a clear message that ZCCM-IH has no intention of improving the corporate governance of the company. The members concerned by this injustice wish to see company business conducted in good time and the Company Meetings and Reports published and validated as soon as possible. In the case of the EGM, ZCCM-IH is already in breach of the Companies Act in that the Company Accounts for 2012 are more than one year late. We do however very much appreciate the remarkable work accomplished by the CEO Mr Muyunda in reducing the backlog by publishing 5 years of financial reports in a little over two years. The shareholders therefore do not seek to delay this meeting until the Register of Members is corrected. They do however want to see urgent action on this register taken in the run up to the EGM, so that equality of treatment of all shareholders is established before the next AGM is announced. It is in the interest of all the Zambian people and the Government to ensure that Zambian companies are properly governed and managed. We therefore ask those who have any responsibility or authority to oversee this governance, use all means at their disposal to ensure that this flagship company of the Zambian Republic is governed and managed to the highest standards as soon as possible. We look forward to your reply. Yours sincerely, On behalf of the Minority Shareholders of ZCCM-IH zambia.shareholder@gmail.com This document was signed by the 40 holders of ZCCM-IH shares listed on the Paris Euronext Stock Exchange and who hold valid documents certifying to this fact. They wish to thank you for taking the time and effort to read this text.