22nd Mar 2007 10:04
NMBZ Holdings Ld22 March 2007 NMBZ HOLDINGS LIMITED Holding company of NMB BANK LIMITED (Registered Commercial Bank) AUDITED INFLATION ADJUSTED AND HISTORICAL COST RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 HIGHLIGHTS Inflation Adjusted 2006 2005 % Change Attributable profit (Z$ 000's) 572 225 3 044 810 -81Basic earnings per share (cents) 52 611 -91Total deposits (Z$ 000's) 48 962 455 31 915 917 +53Shareholders' funds (Z$ 000's) 13 807 388 11 287 824 +22Dividend per share (cents) 65 - +100 Historical Attributable profit (Z$ 000's) 6 989 049 325 389 +2 048Basic earnings per share (cents) 635 65 +877Total deposits (Z$ 000's) 48 962 455 2 310 882 +2 019Shareholders' funds (Z$ 000's) 8 102 119 398 749 +1 932Dividend per share (cents) 65 - +100 Dr Gibson Manyowa Mandishona, the Chairman of NMBZ Holdings, said: "The Group's capacity was enhanced by the return of confidence to the bankingsector during the period under review and buttressed by a well supported rightsissue. The vibrancy of the business model and the continuing support fromstakeholders, especially customers, should assist in confronting the businesschallenges expected in 2007". Enquiries: NMBZ HOLDINGS LIMITED Tel: +263-4-759 651/9 David T Hatendi, Chief Executive Officer [email protected] Benson Ndachena, Chief Financial Officer [email protected] Website: www.nmbz.co.zw Email: [email protected] CHAIRMAN'S STATEMENT The year under review was characterised by: • Rising inflation • Increased money supply growth • High domestic and external debt • Fluctuating and negative interest rates • Foreign currency, fuel and power shortages • Shrinking production base • Negative GDP growth • Introduction of Financial Sector Stabilisation Bonds (FSSB) and further Monetary Policy fine tunings GROUP INFLATION ADJUSTED RESULTS Introduction In accordance with International Financial Reporting Standards (IFRS's)promulgated by the International Accounting Standards Board (IASB), the Groupcontinues to prepare its results using hyperinflationary accounting withhistorical results being provided as a supplement. Unless otherwise stated,figures in this statement are inflation adjusted. Compliance with International Financial Reporting Standards The existence of hyperinflation as defined by International Accounting Standard(IAS) 29 was formally identified in Zimbabwe by the Zimbabwe AccountingPractices Board, which decided that IAS 29 would be applied for financialperiods beginning on or after 1 January 2000. Consequently, these results havebeen prepared in compliance with IAS 29, which requires the adjustment of thefinancial statements on the basis of the inflation indices over the reportingperiod, and a restatement of prior year comparative figures. Commentary on results The inflation adjusted profit before taxation reduced from Z$5 194 million toZ$1 645 million during the period under review. The Group recorded an inflationadjusted attributable profit of Z$572 million compared to Z$3 045 million forthe same period last year. A historical cost attributable profit of Z$6 989million was recorded compared to Z$325 million for 2005. Net interest incomeincreased by 129% to Z$16 763 million from Z$7 305 million. The increase wasprimarily as a result of significant positive margins during the second half.Non-interest income increased by 42% to Z$6 603 million (2005 - Z$4 657 million)and contributed 27% (2005 - 27%) of the net operating income. Operating expenses, on an inflation adjusted basis, increased by 12% to Z$9 557million from Z$8 566 million over the same period last year. The loss on net monetary position occurs as a result of the restatement ofamounts to current value. The loss of Z$12 899 million is based on theinflation index as provided by the Central Statistical Office of Zimbabwe. Theloss has been charged to income in accordance with the IAS 29 "Reporting inHyperinflationary Economies". While a conservative approach continues to be taken with respect to provisionsfor bad and doubtful debts, on an inflation adjusted basis, a decrease in theprovisions from Z$450 million in the previous year to Z$125 million wasrecorded. This is reflective of the decline in advances and other accountswhich on an inflation adjusted basis, decreased from Z$14 550 million to Z$13856 million, as well as a prudent lending policy in an uncertain environment. Dividend In light of the need to conserve cash in the business, the Board has proposed ascrip dividend alternative to the cash dividend of 65 cents per share. Thisdecision was arrived at taking into account shareholder expectations and theneed to ensure sustainable organic growth in view of the expected challengeswhich may confront the company in 2007. BALANCE SHEET The Group's total asset base, on an inflation adjusted basis, increased by 33%from Z$51 937 million at 31 December 2005 to Z$68 987 million. The increase wasmainly caused by a rise in financial assets at fair value through profit andloss (+43%), available-for-sale securities (+146%), balances with banks and cash(+11%). Financial assets at fair value through profit and loss grew mainly asa result of the increase in the Treasury Bills portfolio. Capital The banking subsidiary's capital adequacy ratio at 31 December 2006 calculatedon the historical cost basis in accordance with the guidelines of the ReserveBank of Zimbabwe (RBZ) was 30.02% (31 December 2005 - 22.52%). The minimumrequired by the RBZ is 10%. The Bank complied with the RBZ's requirement of a minimum capital base of Z$1billion after a well supported rights issue in August 2006 which raised Z$1billion net of issue expenses. The Group will continue to monitor and manageits capital base in view of market and economic developments. OUTLOOK AND STRATEGY The return of confidence to the banking sector, buttressed by a well supportedrights issue in August 2006, this has strengthened the Bank's capacity tounderwrite more business. The vibrancy of the business model and the continuingsupport from stakeholders, especially customers, should assist in confrontingthe business challenges expected in 2007. There has already been a remarkableincrease in deposits during the year and this trend is expected to continue in2007. We remain cognisant of the need for the continued enhancement of our deliverychannels and a number of prospects are currently under active consideration. DIRECTORATE It is with great sadness that the Group notes the passing away of Mr Mario dosRemedios on 10 December 2006. His wise counsel and valuable contributions toNMBZ Holdings Limited will be greatly missed. Subsequent to the financial year end, Mr Benson Ndachena was appointed the ChiefFinancial Officer of NMBZ Holdings Limited and NMB Bank Limited on 8 January2007. I would like to welcome Mr Ndachena to the Board and wish him a fruitfultenure. APPRECIATION I would like to thank our clients and the Monetary Authorities for theinvaluable support during the year under review, which was particularlychallenging in many respects. I would also like to express my appreciation tomy fellow Board members, management and staff for achieving these results undervery difficult conditions. GIBSON MANYOWA MANDISHONA CHAIRMAN 21 March 2007 NMB BANK LIMITED: CORPORATE GOVERNANCE AND RISK MANAGEMENT 1. RESPONSIBILITY These financial statements are the responsibility of the directors. Thisresponsibility includes the setting up of internal control and risk managementprocesses, which are monitored independently. 2. CORPORATE GOVERNANCE The Group adheres to principles of corporate governance derived from the King IIReport, the United Kingdom Combined Code and RBZ corporate governanceguidelines. The Group is cognisant of its duty to conduct business with duecare and in good faith in order to safeguard all stakeholders' interests. 3. BOARD OF DIRECTORS Board appointments are made to ensure a variety of skills and expertise on theBoard. Non-executive directors are of such calibre as to provide independenceto the Board. The Chairman of the Board is a non-executive director. The Boardis supported by various committees in executing its responsibilities. The Boardmeets at least quarterly to assess risk, review performance and provide guidanceto management on both operational and policy issues. 4. RISK MANAGEMENT In the ordinary course of business the Group manages risks of all formsespecially operational, market, liquidity and credit risks. These risks areidentified and monitored through various channels and mechanisms. The riskmanagement department which reports to the Chief Executive Officer, isresponsible for the management of the overall risk profile. The Group's main objective is to contain the risks inherent within the financialservices sector and to ensure that the Group's various risk profiles areunderstood and appropriately managed to the benefit of customers, shareholdersand other stakeholders. 4.1 Operational risk This risk is inherent in all business activities and is the potential for lossarising from ineffective internal controls, poor operational procedures tosupport these controls, errors and deliberate acts of fraud. The balancing ofthe risk and the cost incurred to reduce the risk is critical. The Board has anAudit Committee whose function is to ensure that this risk is minimised. TheAudit Committee through the internal audit function assesses the adequacy of theinternal controls and makes the necessary recommendations to the Board. 4.2 Market risk This arises from adverse movements in the money market (interest rate risk),foreign exchange and equity markets in which the Group operates. The Group hasin place an Asset and Liability Management Committee (ALCO), which comprises thedepartmental heads of Risk, Treasury, Corporate and Retail Banking and Finance,in addition to executive directors. The committee monitors these risks andrecommends the appropriate levels to which the Group should be exposed at anytime. The approval of all dealing limits ultimately rests with this committee. 4.3 Liquidity risk The management of liquidity in the Group is primarily designed to ensure thatthe Group meets its obligations timeously. The Treasury Department inconsultation with ALCO formulates and applies appropriate investment methods andinstruments to ensure that this is achieved. In pursuance of the management ofthis risk, the Risk Management Department periodically reports on facilityutilisations and excesses that need management attention. 4.4 Credit risk The Board has put in place sanctioning committees which operate according to theamount requested by an applicant. The Risk Management Department reviews allapplications. This initial review allows only those applications that do notunduly expose the group to be considered by the sanctioning committees. 4.5 Legal risk Legal risk is risk from uncertainty due to legal actions or uncertainty in theapplicability or interpretation of contracts, laws or regulations. Legal riskmay entail such issues as contract formation, capacity and contract frustration. To manage this risk the Group employs a legal practitioner who is responsiblefor the drafting, monitoring and execution of all contracts. Permanentrelationships are also maintained with firms of legal practitioners and accessto legal advice is readily available to all departments. The compliancefunction is also responsible for identifying and monitoring legal risk andensuring that the Group remains in compliance with all regulatory requirements. 4.6 Reputational Risk Reputational risk is the risk of loss of business as a result of negativepublicity or negative perceptions by the market with regards to the way theGroup can conduct its business. To manage this risk, the Group strictlymonitors customer's complaints, continuously train staff at all levels, conductsmarket surveys and periodic reviews of business practices through its internalaudit department. The directors are satisfied with the risk management processes in the Group asthese have contributed to be minimisation of losses arising from risk exposures. 5. REGULATORY COMPLIANCE During the period under review the Bank was fined Z$50 000 by the RBZ for latearrival at cheque clearing on 20 December 2006. The Corrective Order issued by the RBZ in September 2004 was lifted on 20December 2006. The Group remains committed to complying with and adhering to all regulatoryrequirements. CONSOLIDATED INCOME STATEMENTS year ended 31 December 2006 INFLATION ADJUSTED HISTORICAL Note 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Interest income 4 42 959 005 18 027 789 18 338 478 688 717Interest expense 5 (26 195 982) (10 723 007) (9 829 242) (402 572)Net interest income 16 763 023 7 304 782 8 509 236 286 145Net foreign exchange gains 860 746 5 008 802 163 806 212 056Non-interest income 6 6 603 202 4 656 935 4 703 253 246 248Net operating income 24 226 971 16 970 519 13 376 295 744 449Operating expenditure 7 (9 557 307) (8 566 247) (3 631 652) (221 038)Impairment losses on loans and advances (125 391) (449 759) (125 391) (32 565)Loss on net monetary position (12 898 848) (2 760 045) - - Profit before taxation 1 645 425 5 194 468 9 619 252 490 846Taxation 8 (727 788) (1 825 990) (2 284 791) (142 022)Financial institutions levy 8 (345 412) (323 668) (345 412) (23 435) Profit for the year 572 225 3 044 810 6 989 049 325 389 Earnings/(Loss) per share (cents) - Basic 10 52 611 635 65 - Headline 10 (267) 590 316 58 - Diluted basic 10 43 237 531 25 - Diluted headline 10 (223) 229 265 22 CONSOLIDATED BALANCE SHEETS year ended 31 December 2006 INFLATION ADJUSTED HISTORICAL Note 2006 2005 2006 2005Shareholders' funds Z$ '000 Z$ '000 Z$ '000 Z$ '000 Share capital 11 4 118 209 4 117 802 392 213Capital reserves 11 14 255 380 12 212 963 896 519 86 892Revenue reserves (4 566 201) (5 042 941) 7 205 208 311 644Total shareholders' funds 13 807 388 11 287 824 8 102 119 398 749 Liabilities Deposits and other accounts 12 38 643 741 28 611 150 38 643 741 2 067 892Financial liabilities 13 12 454 310 7 473 178 12 454 310 541 098Provision for current taxation 413 003 300 710 413 003 21 773Acceptances 108 61 390 108 4 445Deferred taxation 3 668 086 4 202 309 1 131 424 108 644 68 986 636 51 936 581 60 744 705 3 142 601Assets Cash and cash equivalents 14 14 297 224 12 897 737 14 297 224 933 865Financial assets at fair value through 13profit and loss 19 966 706 13 930 022 19 966 706 1 008 608Available-for-sale securities 13 1 182 551 481 415 1 182 551 34 857Financial assets held-to-maturity 13 7 029 450 - 7 029 450 -Advances and other accounts 15 13 855 699 14 549 631 13 855 699 1 053 471Non-current assets held-for-sale 17 - 553 827 - 40 100Customers' indebtedness for acceptances 108 61 390 108 4 445Trade investment 16 6 350 28 548 6 350 2 067Quoted and other investments 52 132 31 476 52 132 2 279Investment properties 18 4 200 000 552 445 4 200 000 40 000Property and equipment 19 8 396 416 8 850 090 154 485 22 909 68 986 636 51 936 581 60 744 705 3 142 601 CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2006 Capital Reserves Revenue Reserves Capital Share Share Statutory Redemption Revaluation Accumulated Capital Premium Reserve Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2006 4 117 802 10 817 513 522 296 790 356 52 468 30 330 (5 042 941) 11 287 824 Net profit for the year - - - - - - 572 225 572 225 Shares issued rights issue 389 2 333 237 - - - - - 2 333 626 Share issue expenses - (131 411) - - - - - (131 411) Shares issued - share options 18 29 465 - - - (10 412) - 19 071 Additional impairmentlosses on loans andadvances as per RBZgrading - - - - - - (138 183) (138 183) Deferred tax onimpairment losses onloans and advances - - - - - - 42 698 42 698 Share-based payments- share options - - - - - 26 743 - 26 743 Share-based payments- share issue - - - - - 13 408 - 13 408 Fair value loss onavailable-for-sale securities - - - - - (316 373) - (316 373) Deferred tax onavailable-for-salesecurities - - - - - 97 760 - 97 760 Dividends paid - - - - - - - - ------------- -------------- -------------- ------------- ------------ ---------- --------------- -------------- Balances at 31 December 2006 4 118 209 13 048 804 522 296 790 356 52 468 (158 544) (4 566 201) 13 807 388 ======== ======== ========= ======== ======== ======= ========= ======== CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2005 Capital Reserves Revenue Reserves Capital Share Share Statutory Redemption Revaluation Accumulated Capital Premium Reserve Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances as at 1 January 2005 - as previously reported 4 116 062 9 833 691 522 296 790 356 52 468 10 800 (8 027 797) 7 297 876 Effect ofimplementation ofrevised IAS18 - - - - - - (59 954) (59 954) ------------ ------------- ------------ ------------- ------------ ----------- --------------- ------------Balances as at 1 January 2005 4 116 062 9 833 691 522 296 790 356 52 468 10 800 (8 087 751) 7 237 922 Profit for year - 3 044 810 3 044 810 Shares-issued - rights issue 1 740 983 822 - - - - - 985 562 Share-based payments - - - - - 58 007 - 58 007 Fair value loss onavailable-for- salesecurities - - - - - (55 686) - (55 686) Deferred tax onavailable-for-salesecurities - - - - - 17 209 - 17 209 Dividends paid - - - - - - - - ------------- --------------- -------------- ------------- ------------- ------------ --------------- --------------Balances at 31 December 2005 4 117 802 10 817 513 522 296 790 356 52 468 30 330 (5 042 941) 11 287 824 ======== ========= ========= ======== ======== ======== ========= ======== CONSOLIDATED HISTORICAL COST STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2006 Capital Reserves Revenue Reserves Capital Share Share Statutory Redemption Revaluation Accumulated Capital Premium Reserve Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2006 213 85 137 23 27 53 1 652 311 644 398 749 Net profit for the year - - - - - - 6 989 049 6 989 049 Shares issued -rights issue 172 1 032 383 - - - - - 1 032 555 Share issue expenses - (58 145) - - - - - (58 145) Shares issued - share options 7 16 430 - - - (2 579) - 13 858 Additional impairmentlosses on loans andadvances as per RBZ grading - - - - - - (138 183) (138 183) Deferred tax on impairmentlosses on loans andadvances - - - - - - 42 698 42 698 Share-based payments -share options - - - - - 26 743 - 26 743 Share-based payments -share issue - - - - - 13 408 - 13 408 Fair value loss onavailable-for-salesecurities - - - - - (316 373) - (316 373) Deferred tax onavailable-for-salesecurities adjustment - - - - - 97 760 - 97 760 Dividend paid - - - - - - - - ---------- -------------- ----------- ------------ ------------ ---------- ------------- ----------Balances at 31 December 2006 392 1 075 805 23 27 53 (179 389) 7 205 208 8 102 119 ======= ========= ======= ======== ======== ======== ======== ======== CONSOLIDATED HISTORICAL COST STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2005 Capital Reserves Revenue Reserves Capital Share Share Statutory Redemption Revaluation Accumulated Capital Premium Reserve Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2005 aspreviously reported 107 24 907 23 27 53 238 (13 112) 12 243 Effect ofimplementation ofrevised IAS18 - - - - - - (633) (633) -------------- ------------- ------------- ------------ ------------ ---------- -------------- ---------Balances as at 1 January 2005 107 24 907 23 27 53 238 (13 745) 11 610 Net profit for the year - - - - - - 325 389 325 389 Shares issued -rights issue 106 63 914 - - - - - 64 020 Share issue expenses (3 684) - - - - - (3 684) Share-based payments - - - - - 4 200 - 4 200 Fair value loss onavailable-for-salesecurities - - - - - (4 032) - (4 032) Deferred tax onavailable-for-salesecurities adjustments - - - - - 1 246 - 1 246 Dividends paid - - - - - - - - --------------- -------------- ------------- ------------- ------------ ---------- --------------- ----------Balances at 31 December 2005 213 85 137 23 27 53 1 652 311 644 398 749 ========= ========= ======== ========= ========= ======== ========== ========= CONSOLIDATED CASH FLOW STATEMENTS for the year ended 31 December 2006 INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005CASH FLOWS FROM OPERATING ACTIVITIES Z$ '000 Z$ '000 Z$ '000 Z$ '000 Profit before taxation and monetary position 14 544 273 7 954 513 9 619 252 490 846Non-cash items(Profit)/loss on disposal of property and equipment (5 831) 258 282 (7 915) (4 338)Depreciation 757 580 1 802 588 10 960 5 027Impairment losses on loans and advances 125 391 449 760 125 391 32 565Impairment on non-financial assets 39 267 70 823 39 267 5 128Share-based payments - share options 26 743 58 007 26 743 4 200Loss on disposal of investment property - 267 922 - 1 708Loss on net monetary position (12 898 848) (2 760 045) - - Operating cash flows before changes in operating assets and liabilities 2 588 575 8 101 850 9 813 698 535 136Changes in operating assets and liabilitiesFinancial liabilities 4 981 132 3 323 495 11 913 212 497 289Deposits and other accounts 10 032 593 (17 176 910) 36 575 851 1 584 500Advances and other accounts 390 380 16 144 445 (13 105 071) (761 625)Financial assets at fair value through profit and loss (6 036 684) (11 608 384)(18 958 098) (984 098) Financial assets held-to-maturity (7 029 450) - (7 029 450) - Available-for-sale securities (1 017 511) (537 101) (1 464 069) (38 889) Investment properties (3 093 728) 2 322 688 (4 119 900) (43 900) Trade Investments 22 198 21 559 (4 282) (1 536)Quoted and other investments (20 656) 58 007 (49 853) (1 328) 816 849 649 649 13 572 038 785 549TaxationCorporate tax paid (1 353 980) (842 229) (1 075 735) (38 462) Net cash (outflow)/inflow from operating activities (537 131) (192 580) 12 496 303 747 087 CASH FLOWS FROM INVESTING ACTIVITIESProceeds on disposal of property and equipment 18 641 250 935 7 932 6 053Purchase of property and equipment (316 717) (143 442) (142 552) (4 022)Property, plant and equipment prior year adjustment - 296 497 - 884Proceeds on disposal of quoted and other investments - 580 - 6Net cash (outflow)/inflow from investing activities (298 076) 404 570 (134 620) 2 921Net cash (outflow)/inflow before financing activities (835 207) 211 990 12 361 683 750 008 CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares - rights issue 2 202 215 985 563 974 410 60 336Proceeds from issue of shares - share options 19 071 - 13 858 -Share-based payments - share issue 13 408 - 13 408 -Dividends paid - - - - 2 234 694 985 563 1 001 676 60 336Net increase in cash and cash equivalents 1 399 487 1 197 553 13 363 359 810 344Cash and cash equivalents at beginning of year 12 897 737 11 700 184 933 865 123 521Cash and cash equivalents at the end of the year (note 14) 14 297 224 12 897 737 14 297 224 933 865 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ NOTES TO THE FINANCIAL STATEMENTS 1. REPORTING ENTITY The Company is incorporated and domiciled in Zimbabwe and is an investmentholding company and its registered office is 64 Kwame Nkrumah Avenue, Harare.Its principal operating subsidiary is engaged in banking and other companieshold property. The details of the Bank's non-operating subsidiary are shownunder note "f" to the Bank's accounts. The consolidated financial statements ofthe bank as at and for the year ended 31 December 2006 comprise the bank and itssubsidiary. 2. BASIS OF PREPARATION 2.1 Statement of compliance The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRSs), and interpretations adoptedby the International Accounting Standards Board, and the requirements of theCompanies Act (Chapter 24:03) and the Banking Act (Chapter 24:20). The financial statements were approved by the Board of Directors on 21 March2007. 2.2 Historical cost convention The financial statements are prepared under the historical cost convention andadjusted to reflect the changes in general price levels in accordance with IAS29, Financial Reporting in Hyperinflationary Economies except for quoted andother investments, investment property and financial instruments carried at fairvalue. 2.3 Functional and presentational currency These consolidated financial statements are presented in Zimbabwe dollars, whichis the Group's functional currency. Except as indicated, financial informationpresented in Zimbabwe dollars has been rounded to the nearest thousand. 2.4 Use of estimates and judgments The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actualresults may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised and in any future periods affected. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 3. ACCOUNTING POLICIES 3.1 Inflation Accounting The economy of Zimbabwe is considered to be a hyperinflationary economy. Inorder to comply with IAS 29, Financial Reporting in Hyperinflationary Economies,financial statements need to be expressed in terms of the measuring unit currentat the balance sheet date. Accordingly, the accompanying financial statements,including comparatives, have been to account for changes in the generalpurchasing power of the Zimbabwe dollar. The restatement is based on theconsumer price index at the balance sheet date. The indices and conversionfactors are derived from the inflation rates which are issued by the CentralStatistical Office of Zimbabwe. The indices and conversion factors used were asfollows: Dates Indices Conversion factors 31 December 2005 665 774.10 1.000031 December 2004 48 205.60 13.811131 December 2003 7 028.70 94.7222 3.2 Financial instruments 3.2.1 Classification Financial assets and liabilities at fair value through profit andloss include financial assets and liabilities held for trading i.e. those thatthe Group principally holds for the purpose of short-term profit taking as wellas those that were, upon initial recognition, are designated by the entity asfinancial assets or liabilities at fair value through profit and loss. There isno reclassification into or out of this category as per IAS 39. Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market other than thoseclassified as held-for-trading and the Group upon initial recognition designatesas at fair value through profit or loss and those the Group upon initialrecognition designates as available for sale. Held-to-maturity investments are non-derivative financial assets with fixed ordeterminable payments and fixed maturity that the Group has the positiveintention and ability to hold to maturity. Financial assets available-for-sale are non-derivative financial assts that aredesignated as available for sale or are not classified as loans and receivables,held-to-maturity investments or financial assets at fair value through profit orloss. 3.2.2 Recognition The Group recognises financial assets at fair value through profit and loss andavailable for sale assets on the date it commits to purchase the assets. Fromthis date any gains and losses arising from changes in fair value of the assetsare recognised in the income statement and equity respectively. Held-to-maturity investments and loans and receivables are recognised at costwhich is the fair value of the consideration given on the day that they aretransferred to the Group. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 3.2.3 Measurement Financial assets and liabilities are measured initially at fair value.Subsequent to initial recognition, financial assets and liabilities at fairvalue through profit and loss and available for sale financial assets aremeasured at fair value, except that any instrument that does not have a quotedmarket price in an active market and whose fair value cannot be reliablymeasured is stated at cost, less impairment losses. Held-to-maturity investments and loans and receivables are measured at amortisedcost less impairment losses. Amortised cost is calculated using the effectiveinterest rate method. Premiums and discounts, including initial transactioncosts, are included in the carrying amount of the related instrument andamortised based on the effective interest rate of the instrument. 3.2.4 Fair value measurement principles The fair value of financial instruments is based on their quoted market price atthe balance sheet date without any deduction for transaction costs. If a quotedmarket price is not available, the fair value of the instrument is estimatedusing pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows arebased on management's best estimates and the discount rate is a market relatedrate at the balance sheet date for an instrument with similar terms andconditions. Where pricing models are used, inputs are based on market relatedmeasures at the balance sheet date. The fair value of derivatives that are not exchange-traded is estimated at theamount that the Group would receive or pay to terminate the contract at thebalance sheet date taking into account current market conditions and the currentcredit worthiness of the counterparties. 3.3 Investment properties Investment properties are stated at fair value. Gains and losses arising from achange in fair value of investment properties are recognized in the incomestatement. 3.4 Share - based payments The Group issues share options to certain employees in terms of the EmployeeShare Option Scheme. Share options are measured at fair value at the date ofgrant. The fair value determined at the date of grant of the options isexpensed on a straight-line basis over the vesting period, based on the Group'sestimate of shares that will eventually vest. Fair value is measured using theBlack-Scholes option pricing model. The expected life used in the model hasbeen adjusted, based on management's best estimate, for the effects ofnon-transferability, exercise restrictions and other behavioural considerations. 3.5 Property and equipment International Accounting Standard 16 (IAS 16) stipulates that the residual valueand the useful life of an asset must be reviewed at least each financialyear-end. If the residual value of an asset increases by an amount equal to orgreater than the asset's carrying amount, then the depreciation of the assetceases. Depreciation will resume only when the residual value decreases to anamount below the asset's carrying amount. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 4 INTEREST INCOME INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Cash and cash equivalents 31 164 98 805 5 774 3 796Loans and advances to banks 352 487 181 961 236 342 3 510Loans and advances to customers 13 090 407 8 363 955 3 763 747 244 165Investment securities 29 482 128 9 381 231 14 331 569 437 174Other 2 819 1 837 1 046 72 42 959 005 18 027 789 18 338 478 688 717 5 INTEREST EXPENSE INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 RBZ Liquidity Support - 3 980 576 - 55 366Statutory reserves (1 667 393) 3 166 195 (120 728) 229 177Trading activities 27 863 375 3 577 236 9 949 970 118 029 26 195 982 10 723 007 9 829 242 402 572 The financial obligation with respect to interest on statutory reservesof Z$229 177 000 for 2005 and Z$421 302 000 for 2006 as reported in financialstatements for the year ended 31 December 2005 was satisfactorily resolvedduring the first half, resulting in a credit adjustment during the period underreview. INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 6. NON-INTEREST INCOME Z$ '000 Z$ '000 Z$ '000 Z$ '000 Net gains from quoted and other investments 49 852 1 146 49 852 82Net commission and fee income 2 219 414 1 158 614 443 371 49 502Fair value adjustment on investment properties 4 119 900 606 309 4 119 900 43 900Fair value adjustment on trade investments 4 282 21 214 4 282 1 536Profit/(loss) on disposal of property and equipment 5 831 (258 282) 7 915 4 338 Loss on disposal of investment property - (267 922) - (1 708)Rent received 284 207 100 1 583Other net operating income 203 639 2 995 649 77 833 147 015 6 603 202 4 656 935 4 703 253 246 248 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 7. OPERATING EXPENDITURE INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000The operating profit is after charging thefollowing:-Administration costs 3 556 374 3 033 547 1 474 674 96 186Depreciation 757 580 1 802 588 10 960 5 027Staff costs 5 243 353 3 730 112 2 146 018 119 825 9 557 307 8 566 247 3 631 652 221 038 8. TAXATION INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005Tax Charge Z$ '000 Z$ '000 Z$ '000 Z$ '000 Current taxation 1 088 895 478 763 1 088 895 34 665Aids levy 32 658 14 350 32 658 1 039Deferred tax (credit)/charge (393 765) 1 332 877 1 163 238 106 318 727 788 1 825 990 2 284 791 142 022 Financial institutions levy 345 412 323 668 345 412 23 435Total taxation 1 073 200 2 149 658 2 630 203 165 457 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 9. IMPAIRMENT LOSSES ON LOANS AND ADVANCES Impairment losses are applied to write off advances in part or in wholewhen they are considered wholly or partly irrecoverable. The aggregateimpairment losses which are made during the year are dealt with as per paragraph9.3. 9.1 Specific provisions Specific provisions are made where the repayment of identified advances is indoubt and reflect estimates of the loss. Advances are written off againstspecific provisions once the probability of recovering any significant amountsbecomes remote. 9.2 Portfolio provisions The portfolio provision relates to the inherent risk of losses which,although not separately identified, is known to be present in any loanportfolio. 9.3 Regulatory Guidelines and International Accounting Standardsrequirements The Banking Regulations 2000 gives guidance on provisioning for doubtful debtsand stipulates certain minimum percentages to be applied to the respectivecategories of the loan book. International Accounting Standard 39, Financial Instruments Recognitionand Measurement (IAS 39), prescribes the provisioning for impairment lossesbased on the actual loan losses incurred in the past applied to the sectoralanalysis of book debts and the discounting of expected cash flows on specificproblem accounts. The two prescriptions are likely to give different results. The Grouphas taken the view that where the IAS 39 charge is less than the amount providedfor in the Banking Regulations, the difference is charged against equity andwhere it is more, the full amount will be charged to the income statement. 9.4 Non-performing loans Interest on loans and advances is accrued to income until such time asreasonable doubt exists about its collectability, thereafter and until all orpart of the loan is written off, interest continues to accrue on customers'accounts but is not included in income. Such suspended interest is deductedfrom loans and advances in the balance sheet. This policy meets therequirements of the Banking Regulations 2000 issued by the RBZ. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 10. EARNINGS PER SHARE The calculation of earnings per share is based on the following figures:- 10.1 Earnings/(losses) INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Basic 572 225 3 044 810 6 989 049 325 389Headline earnings (note 10.4) (2 933 719) 2 935 646 3 481 665 286 528 INFLATION ADJUSTED HISTORICAL10.2 Number of shares 2006 2005 2006 2005 Weighted average shares in issue 1 100 130 612 497 938 947 1 100 130 612 497 938 947Diluted number of shares 1 315 815 222 1 284 428 108 1 315 815 222 1 284 428 108 10. 3 Earnings/(loss) per share (cents) INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Basic 52 611 635 65Headline (267) 590 316 58Diluted basic 43 237 531 25Diluted headline (223) 229 265 22 10.4 Headline earnings INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Profit attributable to shareholders 572 225 3 044 810 6 989 049 325 389(Deduct)/add non-recurring items: - (Profit)/loss on disposal of property and equipment (5 831) 258 282 (7 915) (4 338) - Fair value adjustment on investment properties (4 119 900) (606 309) (4 119 900) (43 900) - Loss on disposal of investment property - 267 922 - 1 708 - Tax effect thereon 619 787 (29 059) 620 431 7 669 (2 933 719) 2 935 646 3 481 665 286 528 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 __________________________________________________________________________________________________ 11. SHARE CAPITAL HISTORICAL AND INFLATION ADJUSTED GROUP AND COMPANY 2006 2005 2006 200511.1 Authorised Shares Shares Z$ '000 Z$ '000 Million Million Ordinary shares of Z$0.25 (old currency) each 2 250 1 250 625 313 11.2 Issued and fully paid 2006 2005 2006 2005 Shares Shares Z$ '000 Z$ '000 Million Million At 1 January 854 427 213 107Shares issued - share options 27 - 7 -Shares issued during the year - rights issue 688 427 172 106 At 31 December - Historical 1 569 854 392 213Effect of IAS 29 - - 4 117 817 4 117 589At 31 December Inflation adjusted 1 569 854 4 118 209 4 117 802 Of the unissued ordinary shares of 680 660 999, options which may be granted interms of the NMBZ 2005 Employee Share Option Scheme (ESOS) amount to 85 360 962and out of these 38 414 869 had not been issued. As at 31 December 2006, 26 946769 share options out of the issued had not been exercised. Subject to the provisions of section 183 of the Companies Act (Chapter 24:03),the unissued shares are under the control of the directors. 11.3 Capital Reserves INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Statutory reserve fund 522 296 522 296 23 23Share premium 13 048 804 10 871 513 1 075 805 85 137Capital redemption reserve 790 356 790 356 27 27Revaluation reserve 52 468 52 468 53 53Other (158 544) 30 330 (179 389) 1 652 14 255 380 12 212 963 896 519 86 892 12. DEPOSITS AND OTHER ACCOUNTS 12.1 Deposits and other accounts by type INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 RBZ Productive Sector Facility 8 135 340 3 933 853 8 135 340 284 832RBZ - Statutory Reserves - 7 961 091 - 576 427Deposits from other banks 7 914 465 477 657 7 914 465 34 585Other money market deposits 12 454 419 7 628 678 12 454 419 552 357Current and deposit accounts 20 458 231 11 914 638 20 458 231 862 681Total deposits 48 962 455 31 915 917 48 962 455 2 310 882Trade and other creditors 2 135 596 4 168 431 2 135 596 298 108 51 098 051 36 084 348 51 098 051 2 608 990Less: Financial liabilities (note 13.1) (12 454 310) (7 473 178) (12 454 310) (541 098) 38 643 741 28 611 170 38 643 741 2 067 892 12.2 Maturity analysis INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Less than one month 48 693 344 31 213 864 48 693 344 2 259 7601 to 3 months 268 137 434 415 268 137 31 4543 to 6 months 939 267 610 939 19 6666 months to 1 year 35 28 35 21 to 5 years - - - -Over 5 years - - - - 48 962 455 31 915 917 48 962 455 2 310 882 12.3 Sectoral analysis of deposits INFLATION ADJUSTED 2006 2005 Z$ '000 % Z$ '000 % Banks and other financial institutions 7 914 465 16 477 657 1Reserve Bank of Zimbabwe 8 135 340 17 11 894 944 37Transport and telecommunications companies 3 112 590 6 1 901 954 6Mining companies 481 780 1 387 416 2Industrial companies 18 812 948 38 7 704 156 24Municipalities and parastatals 5 891 - 3 052 -Individuals 4 163 753 9 3 191 593 10Agriculture 3 998 213 8 1 885 054 6Other deposits 2 337 475 5 4 470 091 14 48 962 455 100 31 915 917 100 12.4 Sectoral analysis of deposits HISTORICAL 2006 2005 Z$ '000 % Z$ '000 % Banks and other financial institutions 7 914 465 16 34 585 1Reserve Bank of Zimbabwe 8 135 340 17 861 259 37Transport and telecommunications companies 3 112 590 6 137 712 6Mining companies 481 780 1 28 051 2Industrial companies 18 812 948 38 557 822 24Municipalities and parastatals 5 891 - 221 -Individuals 4 163 753 9 231 089 10Agriculture 3 998 213 8 136 488 6Other deposits 2 337 475 5 323 655 14 48 962 455 100 2 310 882 100 13. FINANCIAL INSTRUMENTS 13.1 Financial liabilities Fair Inflation Cost Value Adjusted Historical 2006 2006 2005 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Fixed term deposits 1 441 182 1 441 182 979 746 70 939Negotiable Certificates of Deposits 7 420 848 7 420 848 1 379 052 99 851Liabilities re-discounted 3 592 280 3 592 280 5 114 380 370 308Total financial liabilities 12 454 310 12 454 310 7 473 178 541 098 13.2 Financial assets at fair value through profit and loss Government and public sector securities 15 349 194 17 258 989 12 912 876 934 961Treasury bills 15 216 046 17 133 114 12 208 123 883 933Government stock 55 705 52 755 704 753 51 028Mortgage bonds 77 443 73 120 - -Bills - own acceptances 2 788 610 2 707 717 1 017 146 73 647 Total financial assets at fair value through profit and loss 18 137 804 19 966 706 13 930 022 1 008 608 INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Fair value adjustment to profit and loss 1 828 902 1 900 780 1 828 902 137 627 13.3 Available-for-sale securities INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Treasury bills (two-year bills) 606 806 481 415 606 806 34 857 Non-negotiable certificates of deposits 575 745 - 575 745 - 1 182 551 481 415 1 182 551 34 857 13.4 Financial assets held-to-maturity Financial sector stabilisation bonds 7 029 450 - 7 029 450 - ======== ======= ======== ======== 13.5 Financial liabilities INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Less than 1 month 12 185 199 6 767 132 12 185 199 489 9761 to 3 months 268 137 434 415 268 137 31 4543 to 6 months 939 271 610 939 19 6666 months to 1 year 35 21 35 21 to 5 years - - - -Over 5 years - - - - 12 454 310 7 473 178 12 454 310 541 098 13.6 Financial assets at fair value through profit and loss INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Less than 1 month 5 940 200 2 999 640 5 940 200 217 1901 to 3 months 7 330 656 873 941 7 330 656 63 2783 to 6 months 6 089 045 3 800 811 6 089 045 275 1996 months to 1 year 606 805 5 564 949 606 805 402 9321 to 5 years - 690 681 - 50 009Over 5 years - - - - 19 966 706 13 930 022 19 966 706 1 008 608 13.7 Available-for-sale securities INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Less than 1 month - - - -1 to 3 months - - - -3 to 6 months 3 588 - 3 588 -6 months to 1 year 791 194 - 791 194 -1 to 5 years 387 769 481 415 387 769 34 957Over 5 years - - - - 1 182 551 481 415 1 182 551 34 957 13.8 Financial assets held-to-maturity INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Less than 1 month - - - -1 to 3 months - - - -3 to 6 months - - - -6 months to 1 year 1 914 245 - 1 914 245 -1 to 5 years 5 115 205 - 5 115 205 -Over 5 years - - - - 7 029 450 - 7 029 450 - 14. CASH AND CASH EQUIVALENTS INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000Balances with other banks and cash Statutory reserve 10 424 301 6 151 852 10 424 301 445 427Current, nostro accounts and cash 3 872 923 6 745 885 3 872 923 488 438Total cash and cash equivalents 14 297 224 12 897 737 14 297 224 933 865 The statutory reserve balance with the Reserve Bank of Zimbabwe is non-interestbearing. The balance is determined on the basis of deposits held and is notavailable to the Bank for daily use. 15. ADVANCES AND OTHER ACCOUNTS INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 15.1.1 Advances Fixed term loans 8 411 063 6 635 809 8 411 063 480 468Local loans and overdrafts 4 373 958 4 329 763 4 373 958 313 498Other accounts 1 070 678 3 584 059 1 070 678 259 505 13 855 699 14 549 631 13 855 699 1 053 471 15.1.2 Maturity analysis Less than 1 month 4 884 024 6 908 496 4 884 024 500 2121 to 3 months 364 479 1 661 411 364 479 120 2953 to 6 months 518 071 1 987 547 518 071 143 9096 months to 1 year 5 996 247 188 563 5 996 247 13 6531 to 5 years 1 326 966 579 557 1 326 966 41 963Over 5 years - 461 872 - 33 442 Total advances 13 089 787 11 787 446 13 089 787 853 474 Provision for impairment losses on loans and advances (299 590) (648 889) (299 590) (46 983) Suspended interest (5 176) (172 985) (5 176) (12 525) 12 785 021 10 965 572 12 785 021 793 966 Other accounts 1 070 678 3 584 059 1 070 678 259 505 Total 13 855 699 14 549 631 13 855 699 1 053 471 Included in other accounts is the equivalent of an amount of US$1.8 million thatwas outstanding at 31 December 2003 and recorded as a foreign currency amountowing at the then market rate, which was the auction rate in January 2004 asreported in the financial statements at 31 December 2003. This amount wasrecovered and remitted to the RBZ in December 2004. The receipt was translatedat Z$6 200 (old currency) to the US$ as per an understanding with the RBZ at thetime the money was received. Subsequent to the remittance, the RBZ offeredsettlement at Z$824 (old currency) to the US$, being the historical rate priorto the introduction of the controlled foreign exchange auction system resultingin a loss to the Bank of $9 700 000 (revalued). The Bank was informed in early2006 that settlement was to be at a rate of Z$824 (old currency) to the US$ andthe current year results reflect this position. The Bank appealed against thisruling and discussions are being held with the Authorities. 15.2 Sectoral analysis of utilisations INFLATION ADJUSTED 2006 2005 Z$ '000 % Z$ '000 % Industrials 435 363 3 4 652 530 39Agriculture and horticulture 8 480 880 65 4 169 900 35Conglomerates 1 166 131 9 499 148 4Services 1 504 145 11 114 052 1Mining 236 920 2 172 680 1Food & Beverages 1 192 499 9 889 548 8Other 73 957 1 1 350 978 12 13 089 895 100 11 848 836 100 The above sectoral analysis comprises advances of Z$13 089 787 000 (2005 - Z$11787 446 000) and customers' indebtedness for acceptances of Z$108 000 (2005 - Z$61 390 000). 15.3 Sectoral analysis of utilisation HISTORICAL 2006 2005 Z$ '000 % Z$ '000 % Industrials 435 363 3 336 868 39Agriculture and horticulture 8 480 880 65 301 923 35Conglomerates 1 166 131 9 36 141 4Services 1 504 145 11 8 258 1Mining 236 920 2 12 503 1Food & Beverages 1 192 499 9 64 408 8Other 73 957 1 97 818 12 13 089 895 100 857 919 100 The above sectoral analysis comprises advances of Z$13 089 787 000 (2005 - Z$853474 000) and customers' indebtedness for acceptances of Z$108 000 (2005 - Z$4 445 000). The material concentration of loans and advances are in the agricultural sector65% (2005 - 35%) 15.4 Provisions for losses on loans and advances (including acceptances) INFLATION ADJUSTED -------------------- 2006 ------------ 2005 ----------- Specific Portfolio Total Specific Portfolio Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 At 1 January 598 088 52 801 64 889 3 705 058 523 719 4 228 777Charge against profits 2 621 122 770 125 391 473 321 (23 562) 449 759Charge against retained earning - 138 183 138 183 - - -Bad debts written off (10 967) - (10 967) (3 164 836) (447 356)(3 612 192)Monetary adjustment (552 928) (48 978) (601 906) (417 455) - (417 455)At 31 December 34 814 264 776 299 590 596 088 52 801 648 889 15.5 Provisions for losses on loans and advances (including acceptances) HISTORICAL -------------------- 2006 ------------------- 2005 Specific Portfolio Total Specific Portfolio Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 At 1 January 43 160 3 823 46 983 39 115 5 529 44 644Charge against profits 2 621 122 770 125 391 34 271 (1 706) 32 565Charge against retained earnings - 138 183 138 183 - - -Bad debts written off (10 967) - (10 967) (30 226) - (30 226)At 31 December 34 814 264 776 299 590 43 160 3 823 46 983 15.6 Non-performing loans and advances INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Total non performing loans and advances 39 990 745 511 39 990 33 267Provision for impairment loss on loans and advances (34 814) (572 527) (34 814) (20 742) Interest in suspense 5 176) (172 984) (5 176) (12 525) - - - - The residue on these accounts, where applicable, represents recoverable portionscovered by realisable security. 16. TRADE INVESTMENT INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Takura Ventures (Pvt) Ltd 4 069 28 548 4 069 2 067Other 2 281 - 2 281 - 6 350 28 548 6 350 2 067 17. NON-CURRENT ASSETS HELD-FOR-SALE INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 As at 1 January 553 827 - 40 100 - Transfer from investment properties - 553 827 - 40 100Transfer to investment properties (553 827) - (40 100) -At 31 December - 553 827 - 40 100 As a result of pending legal proceedings, the previous decision to dispose theremainder of Lot H of Borrowdale Estate, owned by the Bank's wholly ownedsubsidiary, Carey Farm (Private) Limited, was put in abeyance and the propertywas reclassified back to investment property. 18. INVESTMENT PROPERTY INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 At 1 January 552 445 3 618 393 40 000 38 200Reclassification from non-current assets held-for sale 553 827 - 40 100 -Disposals - (189 434) - (2 000)Fair value adjustments 4 119 900 606 309 4 119 900 43 900Transfer to non-current assets held-for-sale - (553 827) - (40 100)Monetary adjustment (1 026 172) (2 928 996) - -At 31 December 4 200 000 552 445 4 200 000 40 000 There was no rental income or operating expenses arising from investmentproperties in the current year. The investment property comprise Stand Number 19207 Harare Township of Stand19206 measuring 4.4506 hectares in extent. The property was valued for year endpurposes on 5 January 2007 by an independent and professional valuer and theopen market value was Z$1 500 million. The remainder of Lot H of Borrowdale Estate, owned by Carey Farm (Pvt) Ltd, awholly owned subsidiary of the Bank was reclassified from non-current assetsheld for sale per Note 17. The property measures 89.2623 hectares (223.16acres) in extent. The beneficial interest in Carey Farm (Private) Limited arosefrom shareholding acquired in settlement of a debt owed to the Bank amounting to$10 008 million (old currency). The acquisition is in compliance with Section34 of the Banking Act (Chapter 24.20). The land was valued by an independentand professional valuer on 11 January 2007 for year end purposes and the openmarket value was Z$2 700 million. 19. PROPERTY AND EQUIPMENT INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Cost 24 259 646 24 588 034 175 435 32 957Accumulated depreciation (15 863 226) (15 737 941) (20 950) (10 048)Net book value 8 396 420 8 850 090 154 485 22 909 20. CAPITAL COMMITMENTS INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Capital expenditure authorised but not yet contracted for 3 433 139 444 828 3 433 139 32 208 21. CONTINGENT LIABILITIES INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Guarantees 788 517 1 188 293 788 517 86 039Withholding tax - 92 493 - 6 697 788 517 1 280 786 788 517 92 736 22. EXCHANGE RATES The following exchange rates have been used to translate the foreign balances toZimbabwe dollars at period end:- 31 Dec 2006 31 Dec 2005 Z$ Z$ British Sterling GBP1.00 490.45 146.16United States Dollar USD1.00 250.00 84.59 DIVIDEND ANNOUNCEMENT The Board has declared a scrip dividend alternative to the cash dividend of 65cents per share payable to members registered in the books of the company on 6April 2007. The transfer books and register of members will be closed from 7April 2007 to 13 April 2007. Dividend cheques or share certificates to residentshareholders will be mailed on or about 9 May 2007. The dividends payable tonon-resident shareholders will be paid in accordance with Exchange ControlRegulations. Resident and non-resident shareholders' tax of 15% will be deductedwhere applicable. The share price to be used for the purpose of calculating the number of sharesto be issued for the scrip dividend alternative will be the weighted averageshare price on the Zimbabwe Stock Exchange for the last 10 trading days prior tothe record date of 6 April 2007. Fractional entitlements arising from thecomputations will be paid in cash. By Order of the Board M B Narotam Company Secretary 21 March 2007 NMB BANK LIMITED CONSOLIDATED INCOME STATEMENTS for the year ended 31 December 2006 INFLATION ADJUSTED HISTORICAL Note 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Interest income 42 959 005 18 027 772 18 338 478 688 717 Interest expense (26 195 982) (10 723 007) (9 829 242) (402 572) Net interest income 16 763 023 7 304 765 8 509 236 286 145 Net foreign exchange gain 860 744 5 008 802 163 806 212 056 Non-interest income a 6 551 404 4 708 051 4 651 456 244 665 Net operating income 24 175 171 17 021 618 13 324 498 742 866 Operating expenditure b (9 427 106) (8 516 126) (3 631 140) (219 272) Impairment losses on loans and advances (125 391) (449 760) (125 391) (32 565) Loss on net monetary position (12 893 550) (2 287 732) - - Profit before taxation 1 729 124 5 768 000 9 567 967 491 029 Taxation (762 872) (2 078 617) (2 282 532) (142 763) Financial institutions levy (345 412) (323 664) (345 412) (23 435) Profit/(loss) after taxation 620 840 3 365 719 6 940 023 324 831 Earnings/(loss) per share (cents): - Basic c 38 402 21 575 429 280 2 082 - Headline c (178 460) 19 416 212 328 1 824 NMB BANK LIMITED CONSOLIDATED BALANCE SHEETS As at 31 December 2006 INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005SHAREHOLDER'S FUNDS Note Z$ '000 Z$ '000 Z$ '000 Z$ '000 Share capital 1 934 997 1 934 995 33 32Capital reserves 15 598 392 13 556 963 863 803 82 421Revenue reserves (4 108 471)(4 633 826) 7 153 602 309 064Total shareholder's funds 13 424 918 10 858 132 8 017 438 391 517 LIABILITIES Deposits and other accounts 38 674 312 28 586 899 38 674 312 2 069 844Financial liabilities 12 454 310 7 473 178 12 454 310 541 098Amount owing to holding company 40 552 40 40Provision for current taxation 412 949 299 965 412 949 21 719Acceptances 108 61 390 108 4 445Deferred taxation 3 547 674 4 046 813 1 129 569 109 048 68 514 311 51 326 929 60 688 726 3 137 711ASSETS Cash and cash e 14 297 224 12 897 737 14 297 224 933 865equivalentsFinancial assets at fairvalue through profitand loss 19 966 706 13 930 022 19 966 706 1 008 608Available-for-sale 1 182 551 481 415 1 182 551 34 857securitiesFinancial assets 7 029 450 - 7 029 450 -held-to-maturityAdvances and other 13 855 948 14 544 314 13 855 948 1 053 086accountsNon-current assets f - 553 827 - 40 100held-for-saleCustomers' indebtedness 108 61 390 108 4 445for acceptancesQuoted and other 2 422 1 174 2 422 85investmentsInvestment properties g 4 200 000 552 445 4 200 000 40 000Property and equipment h 7 979 902 8 304 605 154 317 22 665 68 514 311 51 326 929 60 688 726 3 137 711 NMB BANK LIMITED CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2006 Capital Reserves Share Share Statutory Revaluation Retained Capital Premium Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2006 1 934 995 13 032 128 522 296 41 019 (38 480) (4 633 826) 10 858 132Net profit for the period - - - - - 620 840 620 840Fair value loss onavailablefor-sale-securities - - - - (316 377) - (316 377)Deferred tax onavailable-for-sale-securities - - - - 97 760 - 97 760Additional impairmentlosses on loans andadvances as per RBZgrading - - - - - (138 183) (138 183)Deferred for tax onimpairment losses on loansand advances - - - - - 42 698 42 698Shares issued 2 2 260 046 - - - 2 260 048Dividend paid - - - - - - -Balances at 31 December2005 1 934 997 15 292 174 522 296 41 019 (257 097) (4 108 471) 13 424 918 for the year ended 31 December 2005 Capital Reserves Share Share Statutory Revaluation Retained Capital Premium Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000Balances at 1 January2005 as previouslyreported 1 934 981 12 052 078 522 296 41 019 - (7 939 591) 6 610 783Effect ofimplementation ofrevised IAS18 - - - - - (59 954) (59 954) --------------- --------------- ------------ ------------ ---------- --------------- --------------- 1 934 981 12 052 078 522 296 41 019 - (7 999 545) 6 550 829Net profit for the - - - - - 3 365 719 3 365 719periodFair value loss onavailable-for-salesecurities - - - - (55 686) - (55 686)Deferred tax onavailable- for-salesecurities - - - - 17 206 - 17 206Shares issued 14 980 050 - - - - 980 064Dividend paid - - - - - - -Balances at 31December 2005 1 934 995 13 032 128 522 296 41 019 (38 480) (4 633 826) 10 858 132 NMB BANK LIMITED CONSOLIDATED HISTORICAL STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2006 Capital Reserves Share Share Statutory Revaluation Retained Capital Premium Reserve Reserve Other Profit/ Total (loss) Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2006 32 84 946 23 238 (2 786) 309 064 391 517Net profit for the period - - - - - 6 940 023 6 940 023Fair value loss onavailable-for-salesecurities - - - (316 377) - (316 377)Deferred tax onavailable-for- salesecurities - - - - 97 760 - 97 760Additional impairmentlosses on loans andadvances as per RBZ grading - - - - - (138 183) (138 183)Deferred tax on impairmentlosses on loans andadvances - - - - - 42 698 42 698Shares issued 1 999 999 - - - - 1 000 000Dividends paid - - - - - - -Balances at 31 December 33 1 084 945 23 238 (221 403) 7 153 602 8 017 4382005 for the year ended 31 December 2005 Capital Reserves Share Share Statutory Revaluation Retained Capital Premium Reserve Reserve Other Profit/(loss) Total Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Balances at 1 January 2005 aspreviously reported 31 24 947 23 238 - (15 134) 10 105 Effect of implementation ofrevised IAS18 - - - - - (633) (633) ---------- ---------- ----------- ----------- ---------- ------------- -----------Balances as at 1 January 2005 31 24 947 23 238 - (15 767) 9 472Net profit for the period - - - - - 324 831 324 831Fair value loss onavailable-for-sale securities - - - - (4 032) - (4 032) Deferred tax onavailable-for-sale securities - - - - 1 246 - 1 246 Shares issued 1 59 999 - - - - 60 000Dividend paid - - - - - - - Balances at 31 December 2005 32 84 946 23 238 (2 786) 309 064 391 517 NMB BANK LIMITED CONSOLIDATED CASH FLOWS STATEMENTS for the year ended 31 December 2006 INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005CASH FLOWS FROM OPERATING ACTIVITIES Note Z$ '000 Z$ '000 Z$ '000 Z$ '000 Profit before taxation and monetary position 14 622 674 8 055 732 9 567 967 491 029Non-cash items(Profit)/loss on disposal of property and equipment (5 831) 258 282 (7 915) (4 338)Depreciation 628 609 1 776 416 10 883 4 950Impairment losses on loans and advances 125 391 449 760 125 391 32 565Impairment on non-financial assets 39 267 70 823 39 267 5 128Loss on net monetary position (12 893 550) (2 287 732) - -Operating cash flows before changes in operating assets and liabilities 2 516 560 8 323 281 9 735 593 529 334Changes in operating assets and liabilitiesFinancial liabilities 4 981 132 3 358 440 11 913 212 497 658Deposits and other accounts 10 087 415 (17 115 713) 36 604 468 1 587 700Financial assets at fair value through profit and loss (6 036 684) (11 608 384) (18 958 098) (984 098)Financial assets held-to-maturity (7 029 450) - (7 029 450)Available-for-sale securities (1 017 511) (537 101) (1 464 069) (38 889)Advances and other accounts 385 520 16 153 768 (13 105 705) (761 198)Investment properties (3 093 728) 2 322 688 (4 119 900) (43 900) -Quoted and other investments (1 248) (884) (2 337) (82)Amount owing to Holding Company (512) (3 246) - - 791 494 892 849 13 573 714 786 525TaxationCorporate tax paid (1 353 981) (842 231) (1 075 735) (38 472) Net cash (outflow)/inflow from operating activities (562 487) 50 618 12 497 979 748 053 CASH FLOWS FROM INVESTING ACTIVITIESProceeds on disposal of property and equipment 18 641 370 649 7 932 6 054Purchase of property and equipment (316 717) (143 442) (142 552) (4 022)Property and equipment prior year adjustment - (566) - 884Proceeds on disposal of quoted and other investments - - - 6 --------------- ------------- ------------- -------------Net cash (outflow)/inflow from investing activities (298 076) 226 641 (134 620) 2 922 --------------- ------------- ------------- -------------Net cash (outflow)/inflow before financing activities (860 563) 277 259 12 363 359 750 975 --------------- ------------- ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 2 260 050 980 066 1 000 000 60 000Dividends paid - - - - Net cash inflows from financing activities 2 260 050 980 066 1 000 000 60 000Net increase in cash and cash equivalents 1 399 487 1 257 325 13 363 359 810 975Cash and cash equivalents at beginning of the year 12 897 737 11 640 412 933 865 122 890Cash and cash equivalents at the end of the year (note e) 14 297 224 12 897 737 14 297 224 933 865 NMB BANK LIMITED NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 a. NON-INTEREST INCOME INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Net gains from quoted and other investments 2 337 1 146 2 337 83Investment property fair value adjustment 4 119 900 606 309 4 009 900 43 900Net commission and fee income 2 219 414 1 558 609 443 371 49 502Profit/(loss) on disposal of property and equipment 5 831 (258 282) 7 915 4 338 Other net operating income 203 922 2 800 269 77 933 146 842 6 551 404 4 708 051 4 651 456 244 665 b. OPERATING EXPENDITURE INFLATION ADJUSTED HISTORICAL The operating profit is after 2006 2005 2006 2005 charging the following: Z$ '000 Z$ '000 Z$ '000 Z$ '000 Administration costs 3 555 144 2 849 003 1 474 239 94 497Depreciation 628 609 1 776 416 10 883 4 950Staff costs 5 243 353 3 890 707 2 146 018 119 825 Total 9 427 106 8 516 126 3 631 140 219 272 c. EARNINGS PER SHARE The calculation of earnings per share is based on the following figures: c.1 Earnings/(losses) INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Basic 620 840 3 365 719 6 940 023 324 831Headline earnings (note c.4) (2 885 104) 3 028 824 3 432 639 284 518 c.2 Number of shares (million) Weighted average shares in issue 16.2 15.6 16.2 15.6 NMB BANK LIMITED NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2006 c.3 Earnings/(loss) per share (cents) INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Basic 38 402 21 575 429 280 2 082Headline (178 460) 19 416 212 328 1 824 c.4 Headline earnings INFLATION ADJUSTED HISTORICALThe adjustments are as follows 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Profit/(loss) attributable to shareholders 620 840 3 365 719 6 940 023 324 831Add/(deduct) non-recurring items: - Profit/(loss) on disposal of property and equipment (5 831) 258 282 (7 915) (4 338) - Fair value adjustment on investment properties (4 119 900) (606 309) (4 119 900) (43 900) - Tax effect thereon 619 787 11 132 620 431 7 925 (2 885 104) 3 028 834 3 432 639 284 518 d. SHARE CAPITAL d.1 Authorised The authorised ordinary share capital at 31 December 2006 is at the historicalcost figure of Z$50 000 (2005 - Z$50 000) comprising 25 million ordinary sharesof Z$2.00 (old currency) each. d.2 Issued fully paid The issued share capital at 31 December 2006 is at the historical cost figure ofZ$33 000 (2005 - Z$32 000) comprising 16.5 million (2005 - 16 million) ordinary shares ofZ$2.00 (old currency) each. e. CASH AND CASH EQUIVALENTS INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Statutory reserve 10 424 301 6 151 852 10 424 301 445 427Current, Nostro accounts and cash 3 872 923 6 745 885 3 872 923 488 438Total cash and cash equivalents 14 297 224 12 897 737 14 297 224 933 865 f. NON-CURRENT ASSETS HELD-FOR-SALE INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Borrowdale Estate Property - 553 827 - 40 100 The non-current asset held-for-sale is in the Bank's subsidiary, Carey Farm(Private) Limited, has been reclassified to investment property. The Bank'sbeneficial interest therein is 100%. The subsidiary's only asset is a certainpiece of land situated in the District of Harare, called The Remainder of Lot Hof Borrowdale Estate measuring 89.2623 hectares (223.16 acres) in extent. Thebeneficial interest in the subsidiary arose from shareholding acquired insettlement of a debt owed to the Bank amounting to $10 008 million (oldcurrency). This acquisition is in compliance with Section 34 of the Banking Act(Chapter 24:20). The land was valued by an independent and professional valuerfor year end purposes on 11 January 2007. The open market value of theunencumbered freehold land and buildings was Z$2 700 million. g. INVESTMENT PROPERTY INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 2Borrowdale Estate property 2 700 000 - 2 700 000 -Borrowdale Race Course Property 4 200 000 552 445 4 200 000 40 000 4 200 000 552 445 4 200 000 40 000 The investment property held by the Bank is Stand 19207 Harare Township of Stand19206 measuring 4.4506 hectares in extent and that held by the Bank's subsidiaryis the Remainder of Lot H of Borrowdale Estate, which was previously reportedunder non-current asset held for sale. The land for Stand 19207 was valued byan independent and professional valuer for year end purposes on 5 January 2007and the open market value was Z$1 500 million. h. PROPERTY AND EQUIPMENT INFLATION ADJUSTED HISTORICAL 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Cost 23 930 722 23 614 015 175 015 32 535Accumulated depreciation (15 950 820) (15 309 410) (20 698) (9 870)Net book value 7 979 902 8 304 605 154 317 22 665 i. CAPITAL ADEQUACY 2006 2005 2006 2005 Z$ '000 Z$ '000 Z$ '000 Z$ '000 Share capital 1 934 997 1 934 995 33 32Share premium 15 292 174 13 032 127 1 084 945 84 946Retained earnings (4 108 471) (4 633 826) 7 153 602 309 064Other (257 097) (38 480) (221 403) (2 786)Statutory reserve 522 296 522 296 23 23 --------------- --------------- -------------- ------------ 13 383 899 10 817 113 8 017 200 391 279Less: capital allocated for marketand operational risk (775 086) - (775 084) -Credit to insiders (111 330) (98 943) (111 330) (7 164) Tier 1 capital 12 497 483 10 718 170 7 130 784 384 115Tier 2 capital 340 649 690 460 299 868 19 089 Revaluation reserves 41 019 41 019 238 238 Subordinated debt 40 552 40 40General provisions 299 590 648 889 299 590 18 811 Total tier 1 & 2 capital 12 838 132 11 408 630 7 430 652 403 204Tier 3 capital (sum of market andoperational risk capital) 775 086 - 775 086 - Total capital base 13 613 218 11 408 630 8 205 738 403 204 Total risk weighted assets 27 331 865 24 732 876 27 331 865 1 790 797 Tier 1 ratio 45.72% 43.34% 26.09% 21. 45%Tier 2 ratio 1.25% 2.79% 1.10% 1.07%Tier 3 ratio 2.84% - 2.83% -Total capital adequacy ratio 49.81% 46.13% 30.02% 22.52% NMBZ HOLDINGS LIMITED NOTICE TO MEMBERS Notice is hereby given that the Annual General Meeting of Members of NMBZHoldings Limited will be held at the Registered Office of the Company at 4thFloor, Unity Court, Cnr 1st Street/Kwame Nkrumah Avenue, Harare on Tuesday 29May 2007 at 1430 hours for the following purposes: ORDINARY BUSINESS 1. To receive and adopt the 2006 Financial Statements together with the reports of the Directors and Auditors thereon. 2. To appoint Directors In accordance with the Articles of Association, Mr B Ndachena who was appointed subsequent to the last Annual General meeting will retire at the forthcoming Annual General Meeting and Messrs G M Mandishona and D T Hatendi retire by rotation. All the retiring directors offer themselves for re-election. 3. To appoint Auditors for the current year and to approve KPMG's remuneration for the previous year. Note: A member of the company entitled to attend and vote at this meeting isentitled to appoint a proxy to attend, speak and on a poll, vote in his stead. Aproxy need not be a member of the company. Proxy forms should be forwarded toreach the office of the transfer secretaries at least 48 hours before thecommencement of the meeting. By order of the Board Company Secretary M B Narotam 21 March 2007 Registered Offices 1st Floor NMB Centre Unity Court George Silundika Avenue/ Cnr 1st Street/Kwame Nkrumah Avenue Leopold Takawira Street Harare Bulawayo Zimbabwe Zimbabwe Telephone +263 4 759651 +263 9 70169 Facsimile +263 4 759648 +263 9 68535 Website: http://www.nmbz.co.zw Email: [email protected] Transfer Secretaries In Zimbabwe In UK First Transfer Secretaries Computershare Services PLC 4th Floor, Gold Bridge North 36 St Andrew Square Eastgate Building Edinburgh Cnr. Robert Mugabe/Second Street EH2 2YB P O Box 11 UK Harare Zimbabwe This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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