Investor Protection Fund in Zimbabwe: Overview and Objectives

INVESTOR PROTECTION FUND Zimbabwe Association of Pension Funds Webinar Presentation Presented by T. Shonhiwa Board Member of the Investor Protection Fund and Finance Committee Member

Contents 1. Introduction 2. Brief History of the Fund 3. Objectives of the Fund 4. Management of the Fund 5. Structure of the Fund 6. How the Fund works 7. Unclaimed Shares Portfolio 8. Claiming Process 9. Questions

1. Introduction The Investor Protection Fund (the Fund or IPF) was set up to protect the investing public in the event that a licensed entity goes out of business and is unable to return money or investment instruments it was holding on behalf of the investors. The primary stakeholders are the investing public, licensed entities, Ministry of Finance, Economic Promotion (MoFEDIP) and the Securities and Exchange Commission of Zimbabwe (SECZIM or the Commission). Development and Investment The IPF is a public entity, below are the main statutes governing its functions: i. ii. iii. iv. v. Constitution of Zimbabwe Securities and Exchange Act Public Entities Corporate Governance Act Public Procurement And Disposal Of Public Assets Act Public Finance Management Act

2. Brief History of the Fund Established in 2010 in terms of Section 4(1)(a) of the original [Chapter 24:25] read with Clause 8 of the 1st Schedule and Clause 2 of Part II of the 2nd Schedule of Statutory Instrument 100 of 2010. The Fund was under the management of a Board of Trustees. Securities Act At inception the IPF was entirely under the purview of SECZ until the 30th of August 2013 when the Securities Amendment (Number 2) of 2013 became law establishing the IPF as a separate legal entity managed by a Board of Directors. Act

3. Objective of the Fund According to the Securities Amendment Act (Number 2) of 2013 the objective of the Fund is to compensate protected investors in accordance with the Act for losses directly incurred by them as a result of malpractice on the part of a contributor or in the event of a contributor becoming insolvent. An investor will have recourse to the Fund where a SECZIM licensed entity is unable to pay its liabilities.

4. Management of the Fund The management of the Fund is vested in a Board of Directors (the Board). The Board consists of six non-executive Directors appointed by SECZIM in accordance with Amendment Act and currently the Board has representatives from the institutions listed below: 1. SECZIM 2. Zimbabwe Stock Exchange (ZSE) 3. Zimbabwe Association of Stockbrokers(ZAS) 4. Zimbabwe Association of Pension Funds (ZAPF) 5. Ministry of Finance, Economic Development and Investment Promotion 6. The Judiciary section 86C of the Securities The Fund has no fulltime secretariat, all services are outsourced.

5. Structure of the Fund Board of Directors Fund Administrator - Comarton Asset Managers IAM ABCAM OMIG Custodian Stanbic Custodial Services Investments Consultants Intellego External Auditors Rockstone Internal Auditors PKF Banker Stanbic Bank

5. Structure of the Fund The Fund does not have a secretariat and as such all services necessary for the smooth running of the Fund are outsourced. Accounting, administration and secretarial services of the Fund are provided by Comarton Consultants (Private) Limited. The investments of the Fund are under the management of three asset managers namely, ABC Asset Management, Old Mutual Investment Group and Invesci Asset Management. Intellego Investment Consultants monitor the work of the asset managers to ensure they adhere to prescribed policies. The assets of the Fund are registered in the name of the Fund and are kept at Stanbic Custodial Services. Other Fund Officers include Rockstone Chartered Accountants, external auditors are appointed by the Auditor General, and PKF Chartered Accountants who provide external and internal audit services, respectively.

6. How the Fund works A levy of 0.025% per S.I 108 of 2014 is charged on every buy or sale transaction of shares and stockbrokers remit the levies to the IPF s bank account held at Stanbic Bank every month. Comarton Consultants (Pvt) Ltd, the Fund s administrators, pays the Fund s obligations out of the received levies and any surplus is shared equally amongst the Fund s asset managers for investing.

6. How the Fund works Performance 450.00% 400.00% 350.00% 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% Q1:2021 Q2:2021 Q3:2021 Q4:2021 Q1:2022 Q2:2022 Q3:2022 Q4:2022 Q1:2023 Q2:2023 Q3:2023 Q4:2023 -50.00% IPF ZSE-ASI Inflation

6. How the Fund works Claims Claims are submitted to the Fund Administrator, which notifies the Board before the claim is handed over to SECZIM for thorough investigations. Upon completion of investigations SECZ then issues a report of its findings to the Board for further evaluation. If the Board has satisfied itself that the protected investor has lost as a result of malpractice by a contributor or a contributor has become insolvent an amount not exceeding 10% ofthe total amount of the Fund s assets, at the time payment is due, is paid to the claimant. The Board decision is final.

7. Unclaimed Shares Portfolio Prior to the directive that all shares bought by the investing public must be kept by an independent custodial service provider, some shares were registered in the name of nominees and kept by the Stock Brokers; This exposed these shares to abuse by Stock Brokers. For instance Stock Brokers could trade on these shares without the knowledge of the owners; In order to safe guard these shares, on 29 August 2012, SECZIM directed all securities dealing firms to register all securities in the name of their respective beneficial owners and subsequently deliver the securities to the owners; The SECZIM further directed that the securities that remained unclaimed were to be handed over to Custodians for safe custody pending collection by the rightful owners; Initial custodians ZB & Old Mutual Custodial then CBZ and later Chengetedzai; Comarton Consultants is involved with the Unclaimed Shares Portfolio by virtue of them administering the IPF; Comarton Consultants role in respect of the Unclaimed Shares Portfolio is mainly to: - verify claims submitted to Chengetedzai; - report the status of the portfolio at quarterly Board meetings; - Handle any queries related to the portfolio.

7. Unclaimed Shares Portfolio 1200 1,002 990 1000 Number of Collections 800 709 600 400 171 130 124 200 83 80 68 56 44 0 2012 2014 2016 2018 Period 2020 2022 2024 3,457 shares were collected since inception i.e 2013. 65 shares were collected in the current year to 31 May 2024. As at 31 December 2023 the Unclaimed Shares Portfolio had 22,592 shares (unaudited). As at 31 May 2024 the Unclaimed Shares Portfolio had a value of: - US$747,854.62 - ZiG$34,475,900.08 The IPF is trying to increase awareness of the Unclaimed Shares Portfolio through the investor education campaign in order to increase collections. The IPF pays the custodial fees for Unclaimed Shares Portfolio and does not charge any fees for its administration. Dividends from the unclaimed shares are transferred to the IPF-Unclaimed Shares Portfolio bank account and split equally amongst the IPF s asset managers and managed in a separate portfolio. Dividends are paid out when the investors collect their shares.

8. Claim process The list of unclaimed shares is available on the SECZIM website; Certificates were just under 20,000 as at 31 December 2023; Given the IPF mandate for investor protection the Board resolved to assume oversight of the Unclaimed Shares Portfolio. In order to claim his/her shares, an investor obtains and fills in a claim form which is submitted to Chengetedzai together with a copy of the National ID and proof of purchase of the shares (usually statements from stockbroker); Chengetedzai sends form to the Fund Administrator for verification and authourisation; Once authorised the claim form is sent back to Chengetedzai to hand over the shares to the beneficial owner.

8. Claiming process The shares are now in dematerialised form and as such the investor has to open a CSD account into which shares are deposited when the claim has been approved.

QUESTIONS? Thank you.