id SekelaXabiso Southern African Music Rights: SAMRO Forensic Investi gation Report into the United Arab E Maoh a= faat tantSekelaXabiso 21 August 2018 culention: Ms Nothando Migogo, Chief Executive Officer Souther African Music Rights Organisation (SAMRO) 20 De Korte Street Braamfontein Johannesburg Decor Nothando s Investment fensic Investigation Report into the U mee ie Pleased to present our report to the Southem Afican Music Rights Organisation, Nereunder referred to as “SAMRO", forthe atorementioneg forensic investigation, For any queries and questions regarding the information contained in this report, please do not hesitate to contact Adv. Boyce Mkhize. cna Yours faithfully, aa Adv. Boyce Mkhize Head: Forensic Audit Services SekelaXabiso CA. Inc, avery Oce Park Site 14 109 Amstong enue iowa ee Bangs SNL Dain 0, Matin A Boyce ie a ond Mogg ‘Zslowa Noreen Balnge PR. Tame Fart Sempany Secretary Avr WeststateSekelaXabiso TABLE OF CONTENTS 2S PNM EoD s ABBREVIATIONS AND TERMINOLOGY. EXHIBITS ... BACKGROUND OUR UNDERSTANDING OF THE SCOPE AND DELIVERABLES, ENGAGEMENT APPROACH AND PROCEDURES PERFORMED. UMITATIONS OF THE ASSIGNMENT.. FINDINGS... CONCLUSION... RECOMMENDATION: APPRECIATION .. \w \1. ABBREVIATIONS AND TERMINOLOGY SSE ay Sennen | SAMRO- South African Music Rights Organisation [sex oe | SekeloXabiso CA Inc, att 1 hom __ | Memorandum and amie 6 Association of AEMRO | AEMRO AEMRO Intellectual Property Righis Management | [uae ae [ United Arab Emirates sa ae cisac | Contédération intemationgle | | Compositeurs ec | [IPR Management pRinolecroai Properly Righis Management LG Sa Music Rights House | Muse Rights House FUG cee 1 ‘cMO | Collective Management ‘Organisations oH ] [i Dlamini Sipho Selo Biamint Tame Chiel Executive Officer al SAMRO—| | Rerty __| Hs Wotwen Hany Tomer Chet Operon Giicerarzamess | [me Zoghby __ | Mr Gregory Zoghby. former Chief Financial Officer at SAMRO | Mt Sebsten Ts lovee Schaion, Toner Compo Secrelayy and Head 6] | Human Resource at SAMRO | | Rev Sibiya | Reverend Abe Siba, tomer Chaiman of SAMRO’ Board of | | Directors and former Acting Chief Executive Olficer Eee | Mr Khalaf Mr Mohamad Hamzeh Abdulhadi Khalaf, Managing Director af AEMRO [ Me Allabat "ar Vase achame Nob Shek Aliabal OrecTor oF Comciance | | | at AEMRO [Ms Migog0 Tvs Nomamao Migoso. Chief Execuiive Offer ai SAMRO——— | MeRibheka rr nisnanea ‘ubheke, Manager CEO's Office [Ms Moore $a joore, Company Secrelay and < | | Legal Services at SAmRO-2. EXHIBITS ear eee Board of Directors meeting held 26! June 2014 Resolution of the Board 26 June 2014 2 | Business pian proposal of the UAE Branch Operations ie Board of Directors meeling held 27" November 2014 oe [4 | | Board of Directors meeting heid 265 March 201s Board of Directors meeting held 25" June 2015 5 z Email communication with ASCAP = Email Commorication wih SACEM 3 3 Email communication with BM | Email communication with PRS zi 10 | Communicafion tom Mr Dlamini 1 ‘Mr Diamini's Power of Atiorney fe 2 i Round Robin Resolution 1" August 2013 fage | Board of recios mesing Reid 37m aw TSTS V4 | Memorandum of incorporation 2" November 2016 15 | | Annual General Meeting dated 26" November 2016 16 [emai tom Charene Giver Program “Advisor of the Westford School “of | Management Report from the Westford School of Management | ployment contracts of AEMRO- Employment contracts of caniracts of SAMRO and AEMRO Memorandum and Aricle of Asioclalion | Dubai Technology and media Free Tone Authoriy icense License from the Deparment of Economic Development [License renewal | Board of Directors of SAMRO House Holdings (Piy) Lid Resolution [ EAC Bxecuive Governance Commnoe tneeting dated 2 October DiS | CISAC Secretariat doled 07 Apr 2017 with Ihe tifle CISAC membership appiicat i \ 7 | summary of recommendations [CISA Secretarict AERO (UAE) provisional membership appicalion CISAC | 2 1 \t \ \v \Description | Secretariat analysis, based on external legal advice CISAC EGC17-06400 Letter from Mr Gaidi Oron the Director General of CISAG [Tanertom hoi torso {egal Consutan? Kanaan Advacaies 4 [Leiter fom lnkiaters Avocais/advecaten Peer apeereeoey Declaration provided by AEMRO : se Board of Directors meeting held 19" June 2017, Poe Pe 34 | ‘AEMRO Tosk team meeting took place on the 26 Jone ZO 3 Board of Directors meeting held 6 September 2017 3% | Emailregarding termination of AEMRO offices | MrKhalaf's acknowledge of receipt "| 38 Explanation of difference employment coniracis Ee a [3 4 | Mr Khalaf email to Ms Migogo | 40 ] Board Directors meeting on the 2éih Seplember OIF 7 Tar Email response from Mr Khalaf wrate to Mr Jeny Mnisl a Winding up documents reer [aac Invoice trom Yaser Consulling for consuling fees FECES cee fraseeeeece| [Tease agreement ‘ Pose Communication between Messrs Khalaf and Zoghby in [7] | Dubai Media lease agreement mr e Email communication from Mr G Le Roux3. BACKGROUND Rights’ Owners as royalties. 32 Internationally, there are similar Colective Management ‘Organizations ("CMO"), however {twas established by then SAMRO CEO that there is no equivalent entity in the United Arabs Emirates ("UAE"). SAMRO, through the former CEO, Mr Sipho Dlamini, then partnered with Torelgn nationals then based in Dubai, who stated that they would be able to assist SAMRO in establishing a CMO in the UAE as they were able to fast track Obtaining the licensing ‘ights through their networks with the Dubai Government. close down the operations in the UAE. With the Project aborting, the Board then Commissioned forensic investigation to determine, inter olla, the causes for such losses ond whether anyone could be held accountable for such losses, 34 SkX was engaged to conduct the forensic investigation in this regard and ourreport herein sels out our findings, conclusions and recommendations4, OUR UNDERSTANDING OF THE SCOPE AND DELIVERABLES 4.1 The scope of work detailed by SAMRO included the following 4-111 Investigate spending of funds in order to establish whether there are any parties who unduly benefited from the amounts expended by the organization on the UAE investment throughout the periods 2015 until present. 41.2 Review minutes of board meetings and supporting annexures in order to assess ‘ond conclude on lability of the board with regards to their fiduciary duty and whelher decisions that were taken amount fo gross negligence, reckless trading ‘and a dereliction of duties. 413 Investigate and confi whether there was a criminal /ilegal element in relation to the matter. 5. ENGAGEMENT APPROACH AND PROCEDURES PERFORMED $.1 Our approach included, but was not limited to the following procedures: 5.1.1 We obtained and perused legislation relevant to licensing righ inthe United arab Emirates ("UAE"): 5.12 We obtained and perused company policies and procedures that are relevant to SAMRO's investment of funds in the UAE: 5.1.3 We obtained and perused the board meeting minutes where the UAE investment was discussed to identity. inter alia: ©] The mandates obtained to set up the CMO in the UAE and conditions underlying the investment; ©) The liability of the Board with regards to their fiduciary duties; <1 The liability of executive management and other role-players\n Nation to the foiled UAE investment.5:1-4 Conducted a review of the relevant policies and other Gocumenm related to the Investigation in order to make appropriate recommendations in respect of the related findings 5.1.5 Performed an analysis of the transactions to identity any inegularities and misuse Of funds. This included comparing the requirements of the expenses against the supporting documents, 5.1.6 We interviewed stat and relevant parties regarding the investment in the UAE to establish the required objectives of the investment, 5.1.7. Interviewed the following key individuals: 5.17.1 S172 5173 SIA SAIS S178 S177 5178 S179 8.17.10 Ms Melissa Moore ("Ms Moore"), Company Secretary and Legal Services Head Reverend Abe Sibiya ("Rev Sibiya"), former Chaitman of SAMRO's Board of Directors Ms Bronwen Harty ("Ms Harty"), former Chief Operations Officer at SAMRO M Sipho-Setu Dlamini ("Ms Dlamini"), former Chief Executive Officer at SAMRO Mr Gregory Zoghby ("Mr Zoghby"|, former Chief Financial Officer Ms Leanne Thomas ("Ms Thomas"), Group Financial Manager at SAMRO Ms Joyce Schulten |*Ms Schulten”), former Company Secretary and Head of Human Resource at SAMRO ‘Mr Monamad Hamzeh Abudulnadi Khalaf ("Mr Khalat"). Managing Director at AEMRO. Mess Joe Niemand, Jerry Mnisi and Ms Nothando Migogo Board Members some of whom made written submissidns Ww \6. LIMITATIONS OF THE ASSIGNMENT Our investigation and findings were based primarily on consultations with SAMRO staff and 61 62 63 64 65 documentary evidence provided by SAMRO, We did not examine the authenticity of the documents provided to us and therefore did not make any finding as to the authenticity of the documents and to the extent that we may have relied on such documents as may later be established to have lacked outhenticity, we record that we relied on same without having to prove their ouihenticity. However, we were satisfied that the documents provided to us are what they purport to be and that reliance could be placed upon them We were not required to nor did we undertake an audit in terms of the Intemational Standards on Auditing. We were not required to, nor do we express any legal opinion in this document. nor should anything stoted herein be regarded as such. However, our conclusions have been tested @9inst he applicable legal principles and frameworks and found to be reasonably in ine with same. This report is intended for the addressees within SAMRO and should no! be disclosed to ony other party who is not part of the commissioning structures of SAMRO as SKX will not ‘accept any responsibilty should this report or any part thereof, be disclosed or released fo any other party without our prior written consent and/or consent of SAMRO.66° The findings contained herein ore based on the work performed to the date of this report, We have taken reasonable steps to ensure that the information obtained is authentic ond complete but we cannot guarantee the authenticity and completeness of the information as the conclusions made in this report were based on the evidence provided Tousby SAMRO. Asa consequence, we cannot conclude that our investigation autcome hos been exhaustive. However, fo the extent that our conclusions are based on the infomation provided and corroborated by interviews conducted with SAMRO Staff, we ore satisfied that the said conclusions are sound, reasonable and justifiable. 66 The investigation findings are based on facts, documentary review and other Procedures Performed to the date of this report. the investigation is not a pronouncement of guilt or lack thereof by any party but does form a basis for a consideration that could lead to whatever processes deemed necessary by SAMRO based on our conclusions and recommendations. $7. During our investigation, we were not able to obtain all relevant bank statements and supporting documents thereof for IPR (Intellectual Property Management) in order to Conduct a comprehensive review of expenses incurred and justilication thereof 68 The documents below were requested from SAMRO. however, we were not Provided with the documents as at the date of this report 68.1 The minutes of the meeting that took place on the 16% February 2017, which gave “se fo the resolution authoring SAMRO to be a shareholder by subscribing to fifty £50) shares fora total of subscription amount of United Arab Emirates Dirhams Fifty Thousand (AED 50 000) in a Music Rights ("FZ-LLC") and further nominating Messrs Siblya and Zoghby os Directors of the company, and Khalat as its legal representatives and negotiator.7. FINDINGS 7.1, Background to the UAE Concept 7-1-1 SAMRO is a membership-based Non-Profit Company ("NPC") that seeks to protect ‘he broadcasters ond performance fights for composers and authors (music creators) in terms of Section 6 of the Copyright Act 98 of 1978 both locally and intemationally. 7.1.2 The former CEO, Mr Dlamini sow an opportunity to enter the market of the United Arab Emirates stating that music concerts and festivals were taking place in Aby Dhabi end Dubai ona weekty basis and almost every hotel in the UAE had weekly Ive music and DJ programmes, often targeting tourists and the expat community The broadcast environment was very open and yet the UAE did not have a Collective Management Society to administer the use of music and collections for music tights, 718 Mt Dlamini further ingicated that an opportunity existed for SAMRO to set up a Collecting society within the UAE to exploit the gap in this market and the networks that the Consultants (Mr Hamzeh and Yaser) had established with Government 7.2 The Concept Presentation to Board 72.) We were provided with the minutes of the SAMRO Board of Ditectors where the investment project in the UAE was discussed, 722 On the 26” June 2014 at the meeting of the Boord of Directors ("the Board"), Mr Sipho Dlamini ("Mr Dlamini"}ihe previous Chief Executive Otter ("CEO") provided @ Chiat Executive Officer's report under section 5 (b) with the heading “Collective Management Organization in the UAE" (Exhibit 1). Mr Dlaminiinter alia, stated that “Music Concerts ond festivals were taking place in Abu Dhabi and Dubai on a weekly basis and almost every hotel in the UAE had weekly live music and DJ Programmes. often targeting tourists and the expat commibpity. The broadcast environment was very open ond yet the UAE did ndt have a collective management society to administer the use of music”72:3 Mr Dlamini further stated that an opportunity existed for SAMRO to set wpa collecting society in the UAE. Therefore Mr Dlamini proposed that the “Board allow management fo engage with the UAE to explore the possibilty of setting up a Collecting Society in Dubai, with the assistance of the Chairman who already had exposure in that region’ 7.2.4 The meeting resolved that “Management, with the assistance of the Chaiman Srgage with the UAE for the purpose of setting up a Collective Society in that region”. (Exhibit 2) 72.5. We further noted that during the meeting Mr Edmond expressed concem that the UAE did not have a Copyright Act and enquired whether there were any plans in ‘Not regard. Mr Dlamini advised that “they had started fo develop an IP Act. In oddition, the law was respected in the Middle East and once an Act or Law was inlace, there would be compliance". However in our meeting with Mr Mohamad Hamzeh Khalal (Mr Khalaf) he indicated that they knew from day one that there were no legal frameworks to protect copy rights and collecting management organizations. 7.3, Documents presented to Board/ Motivation Made 73.1 We noted a document styled as a business plan of the UAE Branch Operations Gdidressed to SAMRO dated 07" November 2014 (Exhibit 3), by facitators Messrs Nizom Nselr and Omar Jaber. The information below was contained in the business plan: 73.1.1 Under Strategic Alliances we noted that SAMRO was aligned with Advolaw a Dubai based legal practice and was represented by Mr Nizam Nseir and Mr Omar Jaber. 7.3.1.2 Section 2.3: under Services stated that “currently there was no collective Management organization representing the rights of composers and musicians in the UAE, meaning there was a vantfn music revenue stream being ignored" i7.3.1.3 Section 3.3 under Market Segment stated that “the current weakness wos 73.14 73.18 73.18 7317 that the legislative framework did not provide an adequate platform for Copyright administration. Their first order of business was to work with Government to create the legislative framework, The model was dependent on users becoming compliant with the legislation and obtaining a license. A further barrier was the provision of usage data by the licensees, however this can be adaressed through the implementation of music service such as Soundmouse" Under Section 3.4: Marketing, we noted a statement that “within two Years of establishing operations, SAMRO is targeting 100% of music Promoters with revenue of AED2000 000.00 or higher ticket sales and 100% of broadcasters operating in Dubai” According to Section 4.2: Risk, we noted that “the chief risk to the osed operations is the current lack of a suitable legal framework. ithout effective copyright legislation the rights will not be ent ‘nd thus no revenve will be generated”. Section 6 dealing with Capital Requirements, indicated that “external funding would not be required, as SAMRO was a fully operational business, the administration and staffing costs wil be funded from the SAMRO's reserves. I was further indicated that set-up funding of AED165 000.00 was approved by the SAMRO Board to fund the startup of ‘operations in the UAE. The document stated that the staffing requirements were to be filed by SAMRO Executives, namely M$ Dlamini Ms B Harty, $ Mhlango supported by the SAMRO Legal Manager Ms M Moore. It was further stated that ‘once the legislative — ls established and icensini a 1. UAE resident st ult ditional funding wil agian ieee een ee are fully establishes Section 7 of the proposed Financial Plan listed cost assumptions that f. would have been incurred by SAMRO for the UAE “tn yeor one and \\ amongst others, were the expenses tabled below:73.2 733 73.4 73.8 Pein Steer) [owes rental from June in year one ‘AED 250.000 Sales Stott AED 30 000 each | 2 Admin statt AEDI5 000.00 each | 1 office Manager ‘AED 50,000.00 | poe eee (eee : ~ 73.1.8 The proposal stated that with the provision of the SAMRO initial budget of AED165 000.00 to set up the operation, it was expected that the operations would self-fund in year one. Based on the interviews conducted with former CFO, COO and Company Secretary there is uncertainty as to when the said business plan document was tabled with the Board members for presentation and approval. We conducted an interview with the previous CEO of SAMRO, Mr Sipho Dlamini ‘who indicated that the above business plan was not tabled at the Board meeting ided data on but a different document was provided to the Board, which pro market research. We accessed the “market research” document referred to by ‘Mr Dlamini and found that it was a list of shops in Dubai and other facilities which could be potential targets for licensing but this in no way, constituted a market research as intimated by Mr Dlamini. We asked Mr Diaminiif the “market research" document fo which he was referring was the same document with a list of shops €nd malls in Dubai, however Mr Dlamini elected not to respond to this question despite him being furnished with the document, During our kickoff meeting with the SAMRO team we were informed that SAMRO has a Risk Committee and we asked whether the business plan of the UAE project was tabled at the Committee meeting and we were informed that there are no minutes indicating that the UAE project was discussed by the said Committee During the Board meeting held on the 27" November 2014, (Exhibit 4), Wve hoted \ thot the Chief Executive Officer’s report highlighted the following, \735.1 "SAMRO was moving forward on its proposal to create the first CMO in the UAE. in partnership with a local stakeholder. 7352 SAMRO Duboi would recruit UAE based composers, authors and Publishers as members of the Organization, 73.5.3 That SAMRO had engaged with a consulting fim that had all the relationships that the Organization needed and would assist in partnering with the goverment and establshing local stakeholders 735.4 Orbit was the Multichoice equivalent in he UAE and that entity identified hotels that were using illegal signals 73:55 SAMRO had set up a 2 day workshop in Dubai and Mr Stephenson Mhlanga would have stop over on his way back from the CISAC meeting in Europe. The Consulting Firm would take Mr Mhlanga ‘around Dubai and inlroduce him to the broadcasters, the CIB and the Department of Economic Development, so that we could start forming the business. it 0S anticipated that a report would be available before Christmas 73.5.6 In the new year the two gentleman from Dubai would be brought to SAMRO to cay out a technical workshop ond make a presentation on {he UAE market fo the SAMRO Board at the March 2015 Boara”, 73.6 Mr Dlamini further added the timeframe below to the Board: 73.6.1 The fst step was to open a branch of SAMRO in the UAE- SAMRO Dubai 73.62 Partnering with the local entity. SAMRO would have a 49% holding in SAMRO Dubai and the local partner a 51% stake, which was a requirement in the UAE, space fora very long time and it was q way of ensuring that SAMRO wos protected" rt the Chief Executive Report presented to the Board, \73.9 We reviewed the minutes of the Board meeting dated 26h March 2015 (Exhibit 5), ond under section 3 tilled UAE Market/ Projection Assessment Report we noted thal there was a presentation made to the Boord by Mesits Jaser Aljabal and Hamzeh Khalaf. 7.10 The presentation made to the Board was a summary of the research conducted by the individuals, which included information about the GPO, intellectual property Environment, Music. Licensing Operation, Key Music usage platforms, the study ‘no! had been carried out for two months and it was stated that by the time Mr Knalof and Aljabalretumed to Dubai, it was likely that more platforms would have Been opened. However, we could not access the document used as a basis for this presentation, 73.11 The minutes stated that the CEO introduced the individual to the Board and advised that SAMRO “engaged their service to assist with the organization entry into the UAE", 73:12 The minutes highlighted the experience of Mess Khalaf and Aljabal in 1p, tracemarks and copyright forthe past 10 years. The minutes futher stated that Mr Allabol had been traveling around the world. not only involved in IPP and copyright But also in the anti-piracy activities, including the training of Custom officials on how to identify take brands. 73.13 After the presentation, the Chairman opened the Meeting for debates and Questions and the following issues were raised: 73.13.) Mrle Roux enquired whether SAMRO had knowledge of the number of South Aftican residents in Oubai and how many of them were involved in {he entertainment industry. Mr Dlamini advised that the information could Be oboined and further added that the intention was that SAMRO would Collect for all usage and not only South African music. \ {73.132 Prof Zaidel-Rudolph enquired whether Messrs Khalaf and Ajabol had the required authority, when representing and liaising with Government on behalf of a Private entity. The Board wos assured that they had the relationships with the UAE Goverment to access the top guys and decision makers and that they had taken Mr Mhianga to high level meetings during his visit, 73.133 Mrle Roux enquired how SAMRO would persuade the music users to pay for something they had not previously been paying for. Mr Khalaf advised that the music platforms in Dubai were intemational brands who had knowledge of music usage licensing in other parts of the world 73.14 We inspected the minutes and noted that no specific decision/ resolution was token with regards to the presentation made to the Boord and the subsequent decision by Mr Diamini to engage “their [UAE staft} service fo assist with the organization eniry info the UAE" 7.3.15 At the writing of this report we had not been provided with the presentation made to the Board of Directors. 3.16 We reviewed the minutes of the Board meeting held on the 25" June 2015 and Noted section 5.7 of the UAE discussion under matters arising which states that Mr Dlomini provided an update to the Board members on the following: (Exhibit 6) 7.3.16.) “Societies such as PRS, ASCAP. BMI and SACEM had asked SAMRO to represent their fights in the UAE. 73.162 SAMRO had met with the Lawyers in the UAE and had storled negotiating agreements between the participants 73.163 A budget had been drafted for the intial é weeks. Thereatter a budget would be in place for the following 6 months, which would be presented to the Board. / 7.3.16.4 If was anticipated that SAMRO would start to see revenue from the UAE within that 6 months period." \ \ YW \7.3.17 The Chairman, Mr Sibiya felt it was a great achievement and the initiative had gained traction now that some of the big players were on Board. The Chairman commended the CEO and his team on their efforts. 73.18 We inspected the minutes and noted that no resolution was reached for the update provided by Mr Dlamini. Only a round of applause was made by members of the Board, 73.19 We further reviewed email discussions between Mr Dlamini and the following repertoire societies ASCAP (The American Society of Composers, Authors and Publishers) 7.3.19.1 We noted that Mr Dlamini sent an email fo Elizabeth Matthews on the 09” November 2015, detailing the background of the AEMRO project ond stated that “they had completed the process of establishing a Collective Management Organization in the UAE". 7.3.19.2 Mr Dlamini further requested ASCAP to grant them the required rights to represent ASCAP’s works in the UAE for the period of one year, after which it can be extended after review of the progress made". 7.3.19.3 Ms Matthews responded on the 21! December 2015 apologizing for the delay and indicated that Neil and Greg, the Senior Vice President Business and Legal Affairs were considering the matter and would let Mr Dlamini know how they were intending to proceed with the proposal. 73.19.4 We did not find any email communication from ASCAP giving rights to SAMRO or AEMRO to represent them in the UAE, despite Mr Dlamini's assertion that ASCAP had given them the tights initially but later backtracked. (Exhibit 7) 7.19.5 We further noted that the approach to ASCAP was actually alfoxt o year later after the operations in Dubai commenced suggesting| sorte tardiness with regards to urgent attention to business, especlaty comsdering that SAMBO wos akeady incuring expenses af this stage \\SACEM 73.196 7.3.19.7 BMI 73.198 73.199 73.19.10 PRS 73.19.11 We noted that Mr Dlamini sent an email to Jean-Noel on the 210 December 2015, which requested a meeting with Mr Noel in order to Giscuss obtaining the rights from SACEM for the UAE teritory. Mr Dlamini further highlighted that “it seems things are not moving forward due to SACEM's direct licensing in the same temitory and several societies have responded saying that SACEM is not happy for their rights to be granted fo AEMRO, SAMRO’s UAE operation”, (Exhibit 8) We did not find a response from Mr Noel with regards to the above email. Again, we noted that this approach to SACEM seems to have been quite beloted considering that the operations in Dubai had long started without the critical players being approached for their rights. Mr Dlamini sent an email to Mike O'Neill on the 7% December 2015, which was in addition to the conversation they had in Paris stating that “they had completed the process of establishing a Collective ‘Management Organization in the UAE" Mr Dlamini asked Mr O'Neil to let him know if they should use his ‘Qgreement or if they should send a dratt that AEMRO had prepared for his review. (Exhibit 9) We did not find 9 response from Mr O'Neil with regards to the above email We noted an email response dated the 30” November 2015 from Karen Buse of PRS for music stating that discussions were held regarding the Middle East and AEMRO’s new venture and PRS were wiling to allow AEMRO a 12 months representation agreement of fhelhrights on trial basis. (Exhibit 10) t73.19.12 Ms Buse requested Mr Dlamini to confirm hereunder one of the 73.19.13 73.19.14 73.19.15 73.19.16 statements required as part of their due diligence: “One of the biggest challenges and the key objection we encounter 'sinrelation to Section 32 of the UAE Copyright law which requires MoE authonzation fo establish a CMO. Your email fo Robert says that your new organization hos support from the Ministry of Economy. We have been fold that thisis fundamentally required irespective of the licenses granted by the DED. Can you confirm that your local enterprise hos the necessary, official clearance from the MOE in the UAE and if so, it would be helpful to receive a copy of the authorization." ‘Mr Dlamini provided a response on the 1! December 2015 stating that “itisnot corect to say that licenses issued by DED are ineffective in the absence of MoE licenses or clearances. We engaged for several months on this issue with the authorities and after interrogating our business model, they approved our activities and instructed us to proceed.” There was no further comespondence in this regard and it seems that the matter simply ended there. Mr Diamini could not produce a record of his conversations with other Collecting Societies as claimed by him prior to November/December 2015 when the investment had already started around July 2015, In his written reply, he contradicted himself by stating that he started verbal Conversations way back prior to Nov/Dec timeline but then laterstated that: “Ireming you on top of this, that our approach in establishing the collecting society in Dubai was to keep it under wraps from other intemmational collecting societies. We were justifiably concemed about them competing with us in establishing the collecting society in Dubai ‘ond wanted to ensure that we had obtained the required licenses first". (Exhibit 11)7.4 Approval to go ahead by the Board 7.4.1 We noted a Board resolution in a document dated the 13 February 2015 stating that the Board met on the 26” June 2014, and had agreed and resolved on the following”: (Exhibit 12) 7.4.1.1 “The Company shall establish a branch in the Dubai Technology and TAVQ 74.13 7AlA 7.4. 5 Media free Zone Authority, Dubai, United Arab Emirates under the operating name SAMRO UAE or any other name approved by the authorities (“The Branch"). The Company guarantees all financial obligations incurred by the Branch, The Company appoints Mr Nizam Nseir of Lebanese nationality and holder of passport Qi GENEID os its legal representative and negotiator and is authorized to sign all documents related to the registration of the Branch including the Memorandum and Articles of Association and any amendments fo it, resolutions, applications, lease ‘ogreements and any other document and fo receive all original documents of the Branch. The Company appoints Sipho Setu Dlamini of British Nationality and the holder of passport @EEEEEEEEB os manager of the Branch and the Company's true and lawtul attomey with full powers of authority to do and undertake all acts on the Company's behalf including but not limited to the right to sell, buy, lease, mortgage. assign, rent or dispose of any real property; the right to execute, accept, undertake ond perform ail coniracts in the Company's name the right to open bank accounts in the name of the Company; the right to deposit, borrow, endorse or withdraw funds to or from any of the Company's bank accounts or safe deposit box: the right to initiate, defend commence or settle legal actions on the Company's behail; and the right fo retain any accountant, attorney or other adviser deemed necessary to protect the Company's interests relative to any foregoing unlimited power The Company confirms that the Authorized Signatory Held is empowered fo sign on behalf of and bind the Company" \7.4.2 The document was signed on the 13h February 2015, by Mr Dlamini, giving power of attomey unto himself, 7.4.3 We were provided with the copy of the round robin resolution of the Board of Directors dated 1+" August 2013, which was signed by the Chairman Mr Sibiya and members of the Board, stating the following: (Exhibit 13) 7.43.1 7.43.2 That the Chief Executive Officer of the Orgonization, be and hereby is authorized with power of substitution to sign ail documents and do all things necessary in order fo enable this Company at any time to do or give effect to anyone or more the following namely: To enter into licensing agreements for the use of the company’s repertoire; 10 institute proceedings of claim and demand by way of summons, action, petition or otherwise, against any person/s or company/companies for any cause whatsoever; to recover any debt due or owing to the Company and to enforce fulfilment of any obligations; to claim interest. altermative relief and cost; to institute any legal arbitration or other proceedings whatsoever and to defend and counterclaim in any such proceedings whatsoever and to apply for the sequestration of any person or the liquidation of any company and to apply fo place any Company tor any reason whatsoever; to agree to any setilement and compromise: to attend ony meeting of creditors or persons and vote thereat, and also to vote for and/ or agree to the ‘appointment of a Liquidator and Trustee and to arrange for the execution or cancellation or any Mortgage or Notaries Bond in favour of the Company and to sign any documents to give effect thereto; to delegate any power hereby authorized and to grant any authority or power of atftomey fo any person to act on behalf of the company in any of the above matters and generally to do all other acts necessary according to law and to proceed to the final end and determination thereof. That the CEO be and hereby is authorized to delegate authority set rr above to individual in the Company.7.4.3.3 That the CEO orsuch individual be and hereby is indemnified and be kept indemnified for any liabilities arising out of any sureties he may be called upon fo give for or on behalf of the Company in the normal course of his duties, 7.4.4 We were further provided with the minutes of the Board of Directors held on the 27" June 2013 where Mr Dlamini was appointed as the Executive Director of SAMRO and Director on the boards of the SAMRO subsidiaries effective from 15 July 2013. (Exhibit 14). We noted that the contents of Exhibit 13 differ materially from the contents of Exhibit 12 in terms of the powers that Mr Dlamini assigned to himself without a Board resolution to this effect and the other Power of Attorney which seems to have been generically issued to CEOs within SAMRO. 7.45 In our meeting with the former Company Secretary Ms Joyce Schulten (Ms Schulten) she indicated that there was a standard Power of Attomey provided to each CEO but that she was not aware of a Board Resolution referred to in the said Power of Attomey which authorized Mr Diamini as set out in the document the signed under Exhibit 12. 7.4.6 We further asked Mr Diamini during our meeting held on the 9" May 2018 and he indicated that the reason the document was developed and signed by him was becouse it was part of the documents required in Dubai during the company registration process and establishment of the office there. 7.4.7 We found it quite odd that the CEO could sign a power of attomey essentially confering powers to himself and also in circumstances where there was no recorded Board resolution to this effect. AM7.8 Board Authority to Pursue the UAE investment 75.1 We reviewed the Memorandum of incorporation of SAMRO approved at the AGM on the 25" November 2016 which states the following under section 21 pertaining to reserves: (Exhibit 15) 75.1.1 The Board may se! aside out of any Net License Revenve (before making the relevant Royalty Payment) receipts that it decides to not include in the determination of the Royalty Payments in respect of o particular Royalty Payment cycle and instead transfer such receipts to a reserve for {ulure inclusion in subsequent Royalty Payments ("Royalty Reserve") 10 ater for amongst other things, the ability to reduce the impact of lean years. The Board may include the capital funds placed in the Royalty Reserve in the License Revenue ‘poo!’ for future Royalty Payments (in which case the transfer from the Reserve shall be included in the license Revenue for the relevant Royalty Payment) or decide to use such reserves for such other purposes as the Board shail in its reasonable discretion think necessary or conducive to the interests of the Company having due regard to its objects. However, until a decision is made to transfer the funds from the Royalty Reserve it shall remain par of the Royalty Reserves reserved for inclusion in future Royalty Payments, f the Board regards it reasonable fo use such Reserves for another purpose it shall forthwith transfer the relevant amounts out of the Royalty Reserve. Any income and Profits in respect of the Royalty Reserve shall not be included in future Royalty Payments but shall instead be used to fistly settle related expenses and liabilties and the balance transferred to another reserve fund for use by the Company.7.5.1.2 The Board may also set aside out of the Net License Revenue (before making the relevant Royalty Payment) receipts that the Board decides to Not include in the determination of the Royalty Payments in respect of a Particular Royalty Payment, or any other receipts from other sources, such SUMS as it thinks proper or reasonably desirable in one or more reserve funds ("Non-Royalty Reserves") for any purpose the Board in its absolute discretion thinks reasonably desirable of conducive to the interests of the ‘Company having due regard to its oblects. The Board may transfer the funds from one Non-Royalty Reserve to another. The Board may divide any Non-Royalty Reserve fund into such special funds as it thinks fit, and employ the Non-Royalty Reserve funds or any port thereof for any reasonable purpose that advances the objects of the Company. 7.5.1.3 Without limitation, the Board may in its discretion Invest the Royalty Reserve and the Non-Royalty Reserves as it may think fit, and from time 0 fime deal with or vary such investments and dispose of all or any part thereof, However, while the investment retums in respect of the Non- Royalty Reserves shall form part of such reserves and may be used accordingly, any net investment retums and gains realized on the realization of such Royalty Reserves shall not be transferred to the license Revenve ‘poo!’ but shail instead be transferred out of the Royalty Reserve ‘nd deployed in the advancement of the Company's objects. 75.14 The Company shall maintain accounting records of the Royalty Reserves ond the Non-Royalty Reserves and shall ensure that reserves as at the Harmonization Effective Date are appropriately allocated to the relevant reserve, 7.52 We reviewed the minutes of the AGM meeting dated 26" November 2016 where Reverend Sibiya informed the members that “the formation of AEMRO in Dubai wos discussed. The initial investment amounted to R16m but the marke! was expected to be worth Ribn within five years, based on thorough and extensive research of the market". There was no AGM resolution authorizing the investment although the AGM was briefed abou! the investment. In the light of the aforegoing MOI provisions, we did not find that there was a requirement for the AGM to ‘opprove the investment into the UAE. To the contrary, we established {Net it was competent for the Board to make an investment decision of this nature. Ae 16) AY NS \7.6 Employment of Staff in the UAE 7-6-1 Based on the documents provided, we noted an email dated the 10% September 2015 with the subject “Proposal on Remuneration Package" from Charlene Olivier Program Advisor of the Westford School of Management addressed to Mr Dlamini attaching the proposal and salary survey guide for the year 2015. (Exhibit 17), 762 We reviewed the report from the Westford School of Management addressed to Mr Dlamini with the title “Remuneration Guidelines in the UAE” and with subject “Proposal to Guicle Remuneration Packages to SAMRO for the New Company set up in Dubai, United Arab Emirates". The table below outines options provided for @ top monthly salary range for the post of a Managing Director in the Consulting Industry in the UAE: (Exhibit 18) Croan cry err ay Managing Director__| AED 68.000 ‘AED 75.000 _| AED 50.000 Director _| AED 68.000 AED 50.0 [Managing Partner __| AED 55 000 ‘AED 60.000__| AED 40 000 7.63 We noted however that salaries offered by Mr Dlamini and contracted with Messs Knalaf and AUabal were grossly disproportionate to the marker benchmark study undertaken by Westford School of Management and Morgan McKinley as ilustrated on the table below: ECT ner ers ea errs ery | Mohamad Khatot___| a 68 000 Yaser Shai LAllobat_— "| ag0 61 000 7-44 The Westford school repor further stated that solares vary widely depending on nationalities, qualifications. experience, employee tislory and other random factors therefore since we were not in possesion of CV ond qualification, documents of Messis Khalaf and AlJabal we compared with the 10 years | \ experience that they presented to Board on the 26h March 2015, \ yh \7.6.5 The report in conclusion provided a recommendation to Mr Dlamini stating that “a Managing Director and Managing Partner can be offered a fixed salary and Part percentage of profits (Profit sharing. A monthly salary of USD 45K seems high. USD 25K is offered for local companies in UAE and only very big Multi-National Corporations may pay up to USD 45K per month, but these are very few’" 7.6.6 On oF about the 25" October 2015 Mr Dlamini as CEO of AEMRO Intellectual Property entered into contract of employment with Messrs Khalaf and AlJabal. 7.6.7 Mr Khalaf was contracted to work in the capacity of a Managing Director and Mr Aljabal as the Director of Compliance and both employees were contracted with © gross salary of AED 128 800 or USD 35 000 per month for an unlimited contract Period which commenced on the 01: October 2015. (Exhibit 19) 7.68 Both contracts had the same benefits and conditions which stated that upon termination of an unlimited contract, employees “shall be terminated on the Provision of the Company or the employee of thirty days' notice in writing to the other 7.69 Section 10 of the contract under the restraint of trade stated that “upon the termination of this Employment, the Employee covenants and agrees with the Company that the Employee will not work for a period of one (1) year following termination of the Employment with any company that is a direct competitor of the Company in the United Arab Emirates, or solicit business from or contract business any customer of the Company’ 7.6.10We further noted additional employment contracts for Mess's Khalaf and AlJabal, which were purportedly signed on the 25" October 2015, however these contracts emerged during the closing down of the AEMRO offices and they were used as a basis to negotiote the settlement agreements. (Exhibit 20). The difference with this later set of contracts from the initial contracts was that the fist or intial contracts were of an unlimited duration with one month's notice for termination whereas the latter contracts were for a fixed 5 year term.76.11The contracts stated that the agreement was between SAMRO NPC under the egistration no. 1961/002506/08, having a registered branch in Dubai UAE named South african Music Rights Organization Limited and AEMRO Intellectual Property Rights Management the subsidiary, and Messrs Khalaf and AlJabal The term of employment indicated a period of five years commencing on the 11 October 2015. The restraint of trade indicated that “payment and terms for restraint of trade to be agreed mutually at the termination of this contract” 7.6.124s per the Recruitment and Selection process of SAMRO, section 2.4 states that" SAMRO is an equal Opportunity Employer and thus aims to eliminate all forms of untfolr discrimination in the recruitment and selection of staff and in order to facilitate this, the procedures laid out in this policy must be strictly adhered to’ 76:13 Section 6 of the Selection process states that: “preliminary screening, reference checks and confirmation of qualifications of individuals will be conducted by the Human Resources Department in respect of candidates short listed by the Manager. Once the interviews have been concluded and the prospective condidate selected, the successful candidate wil receive o written offer of employment for herfhis perusal and acceptance. The candidate will be briefed, by the Human Resources Department. on all Human Resources related policies ond procedures, probationary period, confidentiality, etc." 7.6.14 Section 7 under the Responsbilty states that “Managers are responsible to ensure thot the position is budgeted for and for establishing a business need for recruliment and for jusiving the need to fil a vacancy or the creation of new Position. Approval (which must be sought by the relevant General Manager) for Postion on a Paterson grade level C and above, from the Executive Committee is required prior to the recruitment process being started" 76.15We noted that none of the procedures set out in the Recruitment Policy were folowed in engaging these employees and neither was the HR Department Engaged during this process which Mr Dlamini single-handedly dealt with without involving anyone at SAMRO. (\7-6.16During our meeting with Mr Dlamini he indicated that the reason for drafting the wo contracts was because of the labour laws in Dubai, and he wanted to bind the two employees to a five yeor contract so that they would not resign with one month's notice and join the competition 7-6.17As per paragraph 6 of the Business Plan it was stated that: “Once the legislative ‘romework is estabished and icensing Operations begin, UAE resident staif will be recruited, additional funding wil be provided by SAMRO as the need arises unti {he operations are fuly established’. This was not adhered to by Mr Dlamini as he Prematurely committed SAMRO fo a financial obligation by appointing Mess Knalat and Ajabal before the said legislative framework and rights had been realized, 76:18 We further engaged with Mr Zoghby and Ms Schulten who indicated that during Board meetings. the employment of the AEMRO stalf were never discussed. We further reviewed the Board minutes provided to us and noted that there was no ciscussion regarding the employment contracts of Mess Khalaf and Al/abal and neither was there any Board resolution regarding the level of remuneration for these employees. It is quite opparent therefore that Mr Dlamini handled these engagements by himself and without Board sanction. 7.6.19 However, on or about 17 June 2017, almost two years later, one Board member, MG Le Rouxroised a query about the exorbitant solories paid to Hamza and Yaser ond provided his own benchmarking exercise which he had conducted regarding the average rate of salaries in Dubai. Nothing came of this concem 7.6.20 Khalaf and Aljabal were fist paid as Consultants the following amounts, for which there is no recorded Board Resolution: July 2015 R935 aS | August 2015 8849 054.60 | | September 2015 R919 :056.76 |. er 8876| sis | | rotor | 2.708487 | \7.621 Their solaries then started flowing in October 2015 atter their employment Contracts were signed. 7.7 Establishment of the UAE Office 77.1 We noted a Memorandum and Article of Association (M&AA) of AEMRO Intellectual Property Rights Management (civil works company) dated the 14m October 2015 by IPR Intellectual Properly Management, license number 705397 owned by Malek Sultan Sheikh Mejin Mohammed -Al Qusais, represented by Mr Yaser Mohammed Nabil Shakh Al Jabal and SAMRO (Foreign Branch} license number 92887 represented by Mr Mohamad Hamzeh Abdul Hadi Khalaf (Exhibit 21) 772 The MBAA stated that the portners agreed to form @ Civil Works Company between themselves in the United Arab Emirates in accordance with the Provisions of the Federal Law No.§ of 1985 of the Civil Transactions Law, 7.7.3 Inthe M&AAit was stated that the company was to be composed by the members listed below as the Board of Directors: Name of individual ren | Sipho Setu Diorsina Chief Executive Officer and Chaiman of i piheBood Mohamad Hamzeh AbdulHadi Managing Director and Vice Chairman Kohalot tof the Board Yaser Mohamed Nabil Shath AlJabal | Compli | Bronwen Harty Chief Operating Officer | SregowJemnzoghby _| chietfinanciototticer J 77-4 The MBAA wos signed on the 14h October 2015 by Mr Yaser Mohamed Nobil hath Ailebal on behalf of IPR Intellectual Property and Mr Mohamad Hamven AbdulHod Khalaf signed on behalf of SAMRO pursuant to power of attomey no. 2018/1/18212 signed on the 2° September2015. We were not provided wifn\s \ Copy of the said power of attomey, \ : \77.5 We noted a commercial license document from the Dubai Technology and Media Free Zone Authority. The license had the following details: (Exhibit 22) eee er 92887 | License No. E [licensee _ South African Music Rights Organisation Limited Operating Name _| South African Music Rights Organisation Limited Legal status __| Branch of « Foreign Company Business Unit | Dubai studio City | First issue Date 12 April 2015 So eee Eee eee eee Current Issues Date _| 12 April 2015, Pease Saaeaaeaa 4 Expiry date 11 Apri 2016 7 Manager Sipho-Setu Dlamini aan ___| Premises: Executive Office No. 08, fioor 08 . Aurora Address Tower- Dubai Media City Dubai, United Arab Emirates | Music and Entertainment | Seaments ~ | Music label ond Rights Management ‘Music Publishing / Copyright | Activities | ESRERenenEnESN EES 7.7.6 We noted reference to Board Resolution which allegedly stated that the ‘Company met on the 26" June 2014 and agreed and resolved on the following: 7.7.6.1 The company shall establish a branch in the Oubai Technology and ‘Media Free Zone Authority under the operating name SAMRO UAE 7.7.6.2 The Company guarantees all financial obligations incurred by the Branch 7.7.63 The company appoints Mr Nizam Nseirof Lebanese nationality and holder oF Possp0rt ED 05 i legal representative and negotiator 7.7.6.4 The company appoints Mr Sipho Setu Dlamini of British Nationality possport SERIES 0 ¥/0r0907 0! he Branch ond the Company's rug”) \ and lawful attomey with full powers of authority to do and undertake q\7.7.7 -&s per the minutes of the 26" June 2014 provided to us, the above “resolutions” were not contained or recorded in the said minutes. The only resolution recorded in the soid minutes stated that management with the assistance of the Charman, engoge with the UAE for he purpose of setting up a Collecting Society in that region. Indeed, the former Company Secretary confirmed that no such resolution 98 taken at the meeting of 26” June 2014, and that if there had been an error or Omission in the minutes, this would have been addressed at the subsequent meeting under corrections of minutes. 7.78 During our meeting with Mr Dlamini he indicated that people had occess to his clectronic signature and documents could have been back dated to meet the deadlines in Dubai 779 We further noted a professional license from the Deparment of Economic Development issued to AMRO Intellectual Property Rights Management on the 18% October 2015 with license number 744210, with expiry date of the 17 October 2016. 77.10 the license activities were listed as intellectual Property Management, Authors copyrights ond neighboring rights collective management services. The partners were listed as follows: (Exhibit 23), OTe Ne BCP T ry United Arab IPR Intellectual Property Rights Management _| Emirates 20% South “African Music Rights Organisation | Dubai Freezone fener {80% ___| Mr Dlamini a | United Kingdom _| Manager | Mr Khoiat Syria Manager Mr AlJabal Syria ae [ Manager U sseesesse : 77.1) The professional icense was renewed indicating an old issue date of the igh October 2015 with a new expiry date of the 17" October 2017. (Exhibit 24) issued on 20” June 2017, with below information: \W 72.12 We tne noted a conmercl icons om the DuboiCroave Chater Auth \ \ \oUt ea License No. 92207 a 1 lopectanore —_Inascrgussaue nue. Legal status | Free Zone Limited Liability Compan; | Business Unit | Dubsi Media City _ First Issue Date | 20 June 2017 | Current issues Date | 20 June 2017 Bee reece eet | expiry date 19 June 2018 cree | | Coneral Manager eee Inger se Hee | Premises: Executive Office No. 32, foo? 97, Aurora Tower- Dubai, United Arab | Address Emirates "| Music and Entertainment Music label and Rights Management | Music Publishing / Copyright ee ea 7.8 Establishment of Corporate Structures in the UAE 78.1 We noted a Board resolution stating that “the Board of Directors of SAMRO House Holdings Pty] Lc met on the 16% February 2017, and had agreed and resolved on the following: ( Exhibit 25) 78.1.1 The company shall become a shareholder by Subscribing to fifty (50) Shares for a total subscription amount of United Emirates Dirhams Fifty Thousand (AED 50 000) in a Free Zone Limited Ubiity Company to be Incorporated in the Dubai Creative Clusters Authority Dubai, United Arab Emirates under the name or style Music Rights House FZ LLC . The Poid up Shore copital of the FZLLC shall be United Arab Emirates Dirhams Fifty Thousand (AED 50 00). AA 712 Te Conoryquerenee fo eet o he cal continents en ae \ \ shares it owns in the FI-LLC. \ \ \ \