Final Results

NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED (Registered Commercial Bank)

FOR THE YEAR ENDED 31 DECEMBER 2011

HIGHLIGHTS

Enquiries:

NMBZ HOLDINGS LIMITED Tel: +263-4-759 651/9

James A Mushore, Group Chief Executive Officer, NMBZ Holdings Limited [email protected]

Francis Zimuto, Deputy Group Chief Executive Officer, NMBZ Holdings Limited [email protected]

Benefit P Washaya, Managing Director, NMB Bank Limited [email protected]

Benson Ndachena, Chief Financial Officer, NMBZ Holdings Limited [email protected]

Website: http://www.nmbz.co.zw

Email: [email protected]

NMBZ HOLDINGS LIMITED

CHAIRMAN'S STATEMENT

INTRODUCTION

The country continued to experience a relatively stable economic environment during the period under review. A combination of the relative political stability and continued international re-engagement resulted in considerable growth in business activity in the country. The financial sector experienced intermittent liquidity constraints in the period under review and this constrained availability of credit to industry and commerce.

GROUP RESULTS

Compliance with International Financial Reporting Standards

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared in compliance with the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20).

Commentary on operating results

The profit before taxation was US$6 193 653 during the period under review and this gave rise to an attributable profit of US$4 538 456. Net interest income was US$11 901 512 for the period. Non-interest income amounted to US$12 164 691 and this was mainly as a result of commissions and fee income (US$11 958 029).

Operating expenses amounted to US$16 979 741 and these were 11% up on prior year and were driven largely by administration and staff related expenditure.

Impairment losses on loans and advances amounted to US$2 296 111 for the current period from a prior year of US$971 803. This is commensurate with the loans and advances which amounted to US$97 138 048 at 31 December 2011 compared to US$57 913 589 as at 31 December 2010.

Dividend

In view of the need to retain cash in the business and to strengthen the statutory capital requirements for the banking subsidiary, the Board has proposed not to declare a dividend.

Statement of financial position

The Group's total assets grew by 63% from US$102 839 504 as at 31 December 2010 to US$167 287 333 as at 31 December 2011. The assets comprised mainly loans, advances and other accounts (US$99 802 065), financial assets at fair value through profit and loss (US$24 585 255), cash and short term funds (US$32 265 953), investment properties (US$2 510 000) and property and equipment (US$6 801 982). Gross loans and advances increased by 68% from US$57 913 589 as at 31 December 2010 to US$97 138 048 as at 31 December 2011. The Bank's liquidity ratio closed the period at 35.25% and this was above the statutory requirement of 25% at 31 December 2011.

Capital

The banking subsidiary's capital adequacy ratio at 31 December 2011 calculated in accordance with the guidelines of the Reserve Bank of Zimbabwe (RBZ) was 14.37% (31 December 2010 - 17.49%). The minimum required by the RBZ is 10%.

The Group's equity increased by 24% from US$18 833 125 as at 31 December 2010 to US$ 23 371 581 as at 31 December 2011 as a result of growth in retained earnings.

NMBZ HOLDINGS LIMITED 

CORPORATE SOCIAL INVESTMENTS

The Group is committed to improving the well-being of the communities where we work and live through our charitable giving. In 2011, the Group contributed towards the support of charities, community fundraisers and non-profit organizations that have a positive influence on society. During the year we supported a diverse range of causes and we dedicated a large portion of our community contributions towards areas of education, health and social services, the environment and the arts.

CORPORATE DEVELOPMENTS

In line with our strategic thrust to offer service excellence, the Bank successfully upgraded its core banking system to the latest version of T24. In addition to enhancing the efficiency of transaction processing, the new platform provides a solid base for a seamless integration to other modern service delivery channels that bring convenience to our high net worth individual and business customers. Going forward, the Bank is looking at enhancing existing electronic delivery channels through upgrades as well as acquiring new channels in an endeavour to bring more convenience to our valued clients.

A new branch was opened at the upmarket PaSangano in the Avondale (Harare) area during the last quarter of 2011. The opening of the branch is in line with the Bank's strategic intent to be present in key markets and it brings convenience to existing and potential clients in the Avondale and surrounding areas.

OUTLOOK AND STRATEGY

The Group has continued with its quest to access more lines of credit in order to underwrite more lending business for our clients. The Group has also continued to explore growth opportunities in the market.

DIRECTORATE

During the year Mr Francis Zimuto was appointed the Deputy Group Chief Executive Officer. There were no other changes to the composition of the Board.

APPRECIATION

I would like to express my appreciation to our valued clients, shareholders and Regulatory Authorities for their continued support in the period under review. I would also like to thank my fellow Board members, management and staff for their continued commitment and dedication which has underpinned the achievement of these results.

T N MUNDAWARARA

CHAIRMAN

20 March 2012

NMBZ HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2011

NMBZ HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2011

NMBZ HOLDINGS LIMTED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2011

NMBZ HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December 2011

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2011

1. REPORTING ENTITY

The Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in banking and other companies hold investments.

2. ACCOUNTING CONVENTION

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board.

The financial statements have been prepared in compliance with the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20).

The financial statements were approved by the Board of Directors on 20 March 2012.

2.1 Basis of preparation

The financial statements have been prepared under the historical cost convention except for quoted and other investments, investment properties and financial instruments which are carried at fair value and land, buildings which are stated at revalued amount. These financial statements are reported in United States of America dollars and rounded to the nearest dollar.

2.2 Comparative financial information

The financial statements comprise a statement of financial position, a statement of comprehensive income, a statement of changes in equity and a statement of cash flows. The comparative statement of comprehensive income and the comparative statements of changes in equity and cash flows are for twelve months.

2.3 Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results 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 the estimate is revised and in any future periods affected.

In the process of applying the Group's accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements:

2.3.1 Deferred tax liability

Provision for deferred taxation is made using the liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences arising out of the initial recognition of assets or liabilities and temporary differences on initial recognition of business combinations that affect neither accounting nor taxable profit are not recognised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

In determining the amounts used for taxation purposes the directors referred to applicable effective exchange rates at the date of acquisition of assets or incurring of liabilities. The Zimbabwe Revenue Authority (ZIMRA), announced methods to account for the deferred tax arising on assets purchased in ZWD. These methods require the preparer to first estimate the equivalent USD value of those assets at the time of purchase. Since the measurement of transactions in Zimbabwe dollars in the prior periods is affected by several economic variables such as mode of payment and hyperinflation this is an area where the directors have had to apply their judgement and acknowledge there could be significant variations in the results achieved depending on assumptions made.

2.3.2 Land and buildings

The properties were valued by professional valuers. The valuer applied the rental yield method and comparable market evidence to assess fair value of land and buildings. The determined fair value of land and buildings is most sensitive to the estimated yield as well as the long term vacancy rate. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not stable.

2.3.3 Investment properties and property and equipment

Investment properties were valued by professional valuers.

The professional valuers considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but awaiting acceptance. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not stable.

The directors exercised their judgment in determining the residual values of the other property and equipment which have been determined as nil.

2.3.4 RBZ Bond

The RBZ Bond was valued at cost as there is currently no market information to facilitate the application of fair value principles. There is currently no active market for these bonds.

2.3.5 Impairment losses on loans and advances

The Bank reviews all loans and advances at each reporting date to assess whether an impairment loss should be recorded in profit or loss. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Bank makes judgements about the borrower's financial situation and the net realisable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilisation, loan to collateral ratios etc.), concentrations of risks and economic data.

The impairment loss on loans and advances is disclosed in more detail under note 8 below.

2.3.6 Going concern

The Directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate.

2.3.7 RBZ Statutory reserves

 The statutory reserves are stated at cost as IFRS principles of amortised cost could not be applied due to the significant uncertainty as to the expected receipt date as at 31 December 2011.

Subsequent to year end, the Reserve Bank of Zimbabwe announced that these balances would be converted to tradable interest bearing instruments (refer to note 20).

3. ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these abridged financial statements are set out in Note 2 and 3. These policies have been consistently applied unless otherwise stated.

3.1 Financial instruments

3.1.1 Classification

Financial assets and liabilities at fair value through profit and loss include financial assets and liabilities held for trading i.e. those that the Group principally holds for the purpose of short-term profit taking as well as those that were, upon initial recognition, designated by the entity as financial assets or liabilities at fair value through profit and loss. There is no reclassification into or out of this category as per IAS 39.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those classified as held-for-trading and the Group upon initial recognition designates as at fair value through profit or loss and those the Group upon initial recognition designates as available-for-sale.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.

Financial assets available-for-sale are non-derivative financial assets that are designated as available-for- sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

3.1.2 Recognition

The Group recognises financial assets at fair value through profit and loss and available for sale assets on the date it commits to purchase the assets. From this date any gains and losses arising from changes in fair value of the assets are recognised in the income statement and other comprehensive income respectively.

Held-to-maturity investments and loans and receivables are recognised at cost which is the fair value of the consideration given on the day that they are transferred to the Group.

3.1.3 Measurement

Financial assets and liabilities are measured initially at fair value. Subsequent to initial recognition, financial assets and liabilities are measured at fair value through profit and loss and available-for-sale financial assets are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, less impairment losses.

Held-to-maturity investments and loans and receivables are measured at amortised cost less impairment losses. Amortised cost is calculated using the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument. 

3.1.4 Fair value measurement principles

The fair value of financial instruments is based on their quoted market price at the reporting date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date.

3.2 Investment properties

Investment properties are stated at fair value. Gains and losses arising from a change in fair value of investment properties are recognized in the income statement. The fair value is determined half yearly and at the end of each reporting period, by a registered profesional valuer.

3.3 Share - based payments

The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.

3.4 Property and equipment

International Accounting Standard 16 (IAS 16) stipulates that the residual value and the useful life of an asset must be reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.

4. INTEREST INCOME

5. non-interest income

6. Operating EXPENDITURE

7. taxation

8. IMPAIRMENT LOSSES ON LOANS AND ADVANCES

Impairment losses are applied to write off advances in part or in whole when they are considered partly or wholly irrecoverable. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

8.1 Specific provisions

Specific provisions are made where the repayment of identified advances is in doubt and reflect estimates of the loss. Advances are written off against specific provisions once the probability of recovering any significant amounts becomes remote.

8.2 Portfolio provisions

The portfolio provision relates to the inherent risk of losses which, although not separately identified, is known to be present in any loan portfolio.

8.3 Regulatory Guidelines and International Financial Reporting Standards Requirements

The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.

International Accounting Standard 39, Financial Instruments Recognition and Measurement (IAS 39), prescribes the provisioning for impairment losses based on the actual loan losses incurred in the past applied to the sectoral analysis of book debts and the discounting of expected cash flows on specific problem accounts.

The two prescriptions are likely to give different results. The Group has taken the view that where the IAS 39 charge is less than the amount provided for in the Banking Regulations, the difference is recognized directly in equity as a transfer from retained earnings to a regulatory reserve and where it is more, the full amount will be charged to the profit or loss.

8.4 Non-performing loans

Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts, but is not included in income. Such suspended interest is deducted from loans and advances in the statement of financial position. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ.

9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilute potential ordinary shares; (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

9.1 Earnings

9.2 Number of shares

9.3 Earnings per share (US cents)

10. SHARE CAPITAL

Of the 692 892 711 unissued ordinary shares, options which may be granted in terms of the NMBZ 2005 Employee Share Option Scheme (ESOS) amount to 85 360 962 and out of these 1 670 869 had not been issued. As at 31 December 2011, 9 072 000 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.

10.3 Own Equity Instruments

Own equity instrument amounting to 1 028 172 shares at a cost of US$8 225 which were held by the company's subsidiary, Stewart Holdings (Private) Limited, were disposed off in 2010 for a consideration of US$9 012.

11. DepositS and other accounts

\* The above are all financial liabilities at fair value through profit and loss designated as such upon initial recognition. The fair value of the above is the same as the cost. The deposits are payable on demand, have variable interest rates and varying security.

11.2 Maturity analysis

12. FINANCIAL INSTRUMENTS

All changes in the period to the fair value of the financial liabilities are attributable to changes in the related credit risk.

*All financial liabilities at fair value through profit and loss were designated as such upon initial recognition.

All changes in the period to the fair value of the financial assets are attributable to changes in related credit risk.

(1) Financial assets at fair value through profit and loss were classified as held for trading in accordance with IAS 39.

(2) Financial assets at fair value through profit and loss were designated as such upon initial recognition.

The RBZ Bond is valued at cost as there is currently no market information to facilitate application of fair value principles.

13. CASH AND CASH EQUIVALENTS

14. LOANS, ADVANCES AND OTHER ACCOUNTS

 14.1 Total loans, advances and other accounts

\* The statutory reserve balance with the Reserve Bank of Zimbabwe is non-interest bearing.

The balance was determined on the basis of deposits held and is not available to the Bank for daily use. The Reserve Bank of Zimbabwe announced on the 16th of February 2012 that the balances owed to banks would be converted to tradable interest bearing instruments (refer to Note 20).

14.2 Sectoral analysis of utilizations

The material concentration of loans and advances are in the industrial sector at 52% (2010 - 52%).

14.3 Allowance for impairment losses on loans and advances

14.4 Non-performing loans and advances

The residue on these accounts represents recoverable portions covered by realisable security.

15. PROPERTY AND EQUIPMENT