NMBZ Holdings Annual Report 2016

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FY2016 Annual Report · NMBZ Holdings

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NMBZ
Holdings
Limited

Annual Report 2016

Contents

Financial Summary

Group Profile

Chairman’s Statement

Report of the Directors

Statement of Directors’ Responsibility

Report of the Independent Auditors

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

4 - 5

6 - 11

12 - 13

14 - 17

Significant Accounting Policies

Notes to the Financial Statements

Historical Five Year Financial Summary

Notice to Members

Explanations regarding the Notice
of the Annual General Meeting

Shareholders’ Analysis

Shareholders’ Information

Secretary and Registered Office

Annual General Meeting Form of Proxy

22 - 29

30 - 77

78 - 80

81 - 82

83 - 84

85 - 87

[ 1

Financial Summary

Total income (US$)
Operating profit before impairment charge (US$)
Total comprehensive income (US$)
Basic earnings per share (US cents)
Total deposits (US$)
Total gross loans and advances (US$)
Total shareholders’ funds (US$)

Enquiries:

NMBZ HOLDINGS LIMITED
Benefit Peter Washaya, Chief Executive Officer, NMBZ Holdings Limited
Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited
Website:
Email:
Telephone:

31 December
2016
51 520 403
14 268 630
5 055 196
1.32
260 550 383
205 858 392
55 600 406

31 December
2015
59 396 619
17 405 739
5 490 068
1.43
277 216 769
243 241 018
50 543 864

benefitw@nmbz.co.zw
bensonn@nmbz.co.zw
http://www.nmbz.co.zw
enquiries@nmbz.co.zw
Tel: +263-4-759 651/9

2 ] NMBZ Holdings Limited Annual Report 2016

Group Profile

The NMBZ Holdings Limited Group (the Group) comprises the company (NMBZ Holdings Limited) and the wholly owned banking subsidiary, NMB Bank
Limited (the Bank) and equities holding company, Stewart Holdings Limited.

The Bank was established in 1993 as a merchant bank incorporated under the Companies Act (Chapter 24:03) of Zimbabwe and is now registered as a
commercial bank in terms of the Banking Act (Chapter 24:20) of Zimbabwe. It operates through a branch network in Harare, Bulawayo, Masvingo, Kwekwe,
Mutare, Gweru and Chinhoyi. The Bank’s branch network is constantly growing to service customers and meet demands in suitable and convenient locations.
Set out below are the Bank’s branch locations:

Avondale - 20 King George Road, Avondale, Harare

Borrowdale - Shops 37 & 38, Sam Levy’s Village, Borrowdale, Harare

Borrowdale Excellence Centre - Block 3 Suite F, Sam Levy Village, Borrowdale, Harare

Bulawayo - NMB Centre, Corner George Silundika Street/Leopold Takawira Street, Bulawayo

Chinhoyi - 469 Magamba Way, Chinhoyi

Eastgate - Shop 24, Eastgate Mall, Corner Sam Nujoma Street/Robert Mugabe Road, Harare

Gweru - 36 Robert Mugabe Road, Gweru

Head Office - Unity Court, Corner Kwame Nkrumah Avenue/First Street, Harare

Joina City - Shop 105A, First floor, Joina City Corner Jason Moyo / Innez Terrace, Harare

Kwekwe - 57A Robert Mugabe Way, Kwekwe

Masvingo - Stand no. 377 Robert Mugabe Way, Masvingo

Msasa -77 Amby Drive, Harare

Mutare - Embassy Building, Corner Aerodrome Road/Second Street, Mutare

Southerton - 7 - 9 Plymouth Road, Harare

The Bank’s Automated Teller Machine (ATM) network, which accepts VISA cards, covers the following locations:

■ Avondale - Harare
■ Borrowdale - Harare
■ Bulawayo
■ Card Centre - Harare
■ Chinhoyi
■ Eastgate - Harare
■ Fruit & Veg - Greendale, Harare
■ Gweru
■ Joina City - Harare
■ Kwekwe
■ Masvingo
■ Msasa - Harare
■ Mutare
■ Southerton - Harare

[ 3

Chairman’s Statement (Cont’d)
for the year ended 31 December 2016

Mr James de la Fargue was appointed to both boards of NMBZ Holdings Limited and NMB Bank Limited with effect from 4 May 2016. Ms. Sabinah N Chitehwe
and Mr Benson Ndachena were appointed to the boards of NMBZ Holdings Limited and NMB Bank Limited with effect from 19 September 2016. I would like
to wish the new board members a fruitful tenure on the Board.

Subsequent to year end, Mr Benardus A M Zwinkels, who represented AfricInvest, resigned from the Board and was replaced by Mr Julius Tichelaar effective
1 January 2017. I would like to thank Mr Zwinkels for his fruitful tenure on the Board and welcome Mr Tichelaar to the Board.

OUTLOOK AND STRATEGY
The Group has continued to broaden the market catchment for the banking subsidiary by tapping into some segments of the mass market and this saw the
launch in August 2016 of the NMBLite product offering which is targeted at the low income segment. The uptake of the mass market products has been
encouraging and this has contributed to the financial inclusion agenda.

The Bank has accelerated the deployment of POS machines throughout the country and has enhanced all the e-channels for the convenience of our
transacting customers in the current environment which is characterised by cash shortages.

CORPORATE SOCIAL INVESTMENTS
We remain committed to playing an active role in the communities we serve. Our social investments during the year were channelled into the country’s
educational system, the disadvantaged, vulnerable groups, protection of the environment, wildlife conservation, the arts and various sporting disciplines.
The activities and charities supported during the year included Tinokwirira Special School, Deaf Zimbabwe Trust, Birdlife Zimbabwe, Hockey Association of
Zimbabwe, Kwekwe and Sanyati Districts Better Schools Programme initiatives and many other charity golf tournaments.

CORPORATE DEVELOPMENTS
The low cost NMBLite account, which is targeted at the low income sector, was launched in August 2016. The Bank relaunched the mobile banking platform
which now incorporates Android and Apple applications.

APPRECIATION
I would like to express my appreciation to our clients, shareholders and regulatory authorities for their continued support. I would also like to thank my fellow
Board members, management and staff for their steadfast commitment, dedication and passion which has seen the achievement of these results in the face
of an increasingly challenging operating environment.

MR. B. A. CHIKWANHA
CHAIRMAN
15 March 2017

[ 5

Report of the Directors
for the year ended 31 December 2016

SHARE CAPITAL
The authorised and issued share capital of the Company are as follows:-
1.1 Authorised: 600 000 000 ordinary shares of US$0.00028 each.
1.2 Issued and fully paid: 384 427 351 ordinary shares of US$0.00028 each.

No share options were exercised either by directors or managerial staff during the year.

GROUP ACTIVITIES AND RESULTS
The Group’s total comprehensive income was US$5 055 196 for the year ended 31 December 2016 (2015 - US$5 490 068).

CAPITAL ADEQUACY
As at 31 December 2016, the Bank’s regulatory capital adequacy ratio was 23.32% (2015 - 19.26%).

DIRECTORATE

4.1

Board of Directors
During the year ended 31 December 2016, Messrs J. Chenevix - Trench, K. Qurashi and Ms. M. R. Svova retired from the boards of NMBZ Holdings
Limited and NMB Bank Limited and Ms S. Chitehwe and Messrs B. Ndachena were appointed to the Board.

Mr. B. A. Chikwanha
Mr. B. P. Washaya
Mr. J. Chenevix-Trench*
Ms. M. R. Svova**
Mr. K. Qurashi**
Mr. B. A. M. Zwinkels
Ms. J. Maguranyanga
Mr. E. Sandersen
Mr. C.I.F Ndiaiye*****
Mr. C. Chikaura
Mr. J. de la Fargue***
Ms. S. Chitehwe****
Mr. B. Ndachena****

(Chairman and Independent Non-executive Director)
(Chief Executive Officer)
(Non-Executive Director)
(Independent Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Independent Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Independent Non-Executive Director)
(Non - Executive Director)
(Independent Non - Executive Director)
(Chief Finance Officer)

*Resigned on 21 March 2016.
**Resigned on 20 May 2016.
***Appointed on 4 May 2016.
****Appointed on 19 September 2016.
*****Resigned on 17 November 2016
In accordance with the Articles of Association, all directors will retire by rotation at the forthcoming Annual General Meeting (AGM). All retiring
directors, being eligible, offer themselves for re-election.

4.2

Directors’ Interests
As at 31 December 2016 the Directors of the Group (NMBZ Holdings Limited and the Bank) held the following direct and indirect beneficial interests
in the shares of the Company:-

Mr. B. A. Chikwanha*
Ms. J. Maguranyanga
Mr. B. P. Washaya**
Mr. J. de la Fargue***
Mr. B .A .M. Zwinkels****
Mr.E. Sandersen****
Mr. B. Ndachena
Mr. C. Chikaura
Ms. S. Chitehwe

31 Dec 2016
Shares
10 000

31 Dec 2015
Shares
10 000
600
2 070
-
-
-
77 642
-
-
90 312

600
2 070
-
-
-
77 642
-
-
90 312

*Mr. B. A. Chikwanha is the Chairman of the board of directors of NMBZ Holdings Limited and NMB Bank Limited.
**Mr. B. P. Washaya is the CEO of NMBZ Holdings Limited and NMB Bank Limited.
***Mr. J. de la Fargue represents African Century Financial Investments Limited (71 207 639 shares) on the board of directors of NMBZ Holdings
Limited and NMB Bank Limited.
****Mr.B. Zwinkels and Mr. E Sandersen represent AfricInvest (34 571 429 shares), and Norfund (34 571 429 shares) respectively on the board of
directors of NMBZ Holdings Limited and NMB Bank Limited.

6 ] NMBZ Holdings Limited Annual Report 2016

Report of the Directors (Cont’d)
for the year ended 31 December 2016

DIRECTORATE (cont’d)

4.3

Total share options granted to executive directors

Mr. B. P. Washaya
Mr. B. Ndachena

4.4

Directors’ attendance at meetings

4.4.1

Board of Directors

Name

Mr. B. P. Washaya

Mr. B. A. Chikwanha

Mr. J. Chenevix Trench*

Ms. M. R. Svova**

Mr. K. Qurashi**

Mr. B. Ndachena***

Ms. S. Chitehwe***

Mr. J. de la Fargue****

Mr. B. A. M. Zwinkels

Mr. C. I. F. Ndiaye*****

Mr. E. Sandersen

Ms. J. Maguranyanga

Mr. C. Chikaura

31 Dec 2016
Share
options
275 873
193 111
468 984

31 Dec 2015
Share
options
275 873
193 111
468 984

Meetings held

Meetings attended

*Mr. J. Chenevix Trench resigned from the NMBZ Holdings Limited and NMB Bank Limited boards with effect from 21 March 2016.
**Ms. M.R. Svova and Mr K. Qurashi resigned from the NMBZ Holdings Limited and NMB Bank Limited boards with effect from 20 May 2016.
***Mr. B. Ndachena and Ms. S. Chitehwe were appointed to the NMBZ Holdings Limited and NMB Bank Limited boards on 19 September 2016.
****Mr. J. de la Fargue was appointed to the NMBZ Holdings Limited and NMB Bank Limited boards on 4 May 2016.
*****Mr. C.I. F. Ndiaye resigned from the NMBZ Holdings Limited and NMB Bank Limited boards with effect from 17 November 2016.

4.4.2

Audit Committee

Name

Ms. M. R. Svova*

Mr. K. Qurashi*

Mr. C. Chikaura

Ms. J. Maguranyanga**

Ms. S. Chitehwe***

Meetings held

Meetings attended

*Ms. M.R. Svova and Mr. K. Qurashi resigned with effect from 20 May 2016.
**Ms. J. Maguranyanga became a member of the committee with effect from 16 August 2016.
***Ms. S. Chitehwe was appointed with effect from 19 September 2016.

[ 7

Report of the Directors (Cont’d)
for the year ended 31 December 2016

DIRECTORATE (cont’d)

4.4.3

Risk Management Committee

Name

Mr. K. Qurashi*

Mr. C. Chikaura

Mr. C. I. F. Ndiaye**

Mr. E. Sandersen

Mr. B. A. Chikwanha

Meetings held

Meetings attended

*Mr. K. Qurashi resigned with effect from 20 May 2016.
**Mr. C. I. F Ndiaye reigned with effect from 17 November 2016.

4.4.4

Asset and Liability Management (ALCO) & Finance Committee

Meetings held

Meetings attended

Meeting
attended

Name

Ms. M. R. Svova**

Mr. J. Chenevix-Trench*

Mr. B. A. M. Zwinkels

Mr. E. Sandersen

Mr. B. P. Washaya

Mr. J. de la Fargue***

Mr. C. Chikaura****

Mr. B. Ndachena*****

Ms. S. Chitehwe******

*Mr.J. Chevenix - Trench resigned with effect from 21 March 2016.
**Mr. M.R. Svova resigned with effect from 20 May 2016.
***Mr. J. de la Fargue was appointed with effect from 4 May 2016.
****Mr. C. Chikaura became a member of the committee with effect from 16 August 2016.
***** Mr. B. Ndachena was appointed with effect from 19 September 2016.
******Ms. S. Chitehwe was appointed with effect from 19 September 2016.

4.4.5

Loans Review Committee

Name

Ms. J. Maguranyanga

Mr.C. I. F. Ndiaye***

Mr. B. A. M. Zwinkels

Mr. E. Sandersen

Mr. J. Chenevix-Trench*

Ms. S. Chitehwe**

Meetings
held

*Mr. J. Chenevix - Trench resigned with effect from 21 March 2016.
**Ms. S. Chitehwe was appointed with effect from 19 September 2016.
***Mr. C. I. F. Ndiaye resigned with effect from 17 November 2016.

8 ] NMBZ Holdings Limited Annual Report 2016

Report of the Directors (Cont’d)
for the year ended 31 December 2016

DIRECTORATE (cont’d)

4.4.6

Human Resources, Remuneration and Nominations Committee

Name

Ms. J. Maguranyanga

Mr. B. A. Chikwanha

Mr. C. I. F. Ndiaye***

Mr. J. Chenevix-Trench*

Mr. B. A. M. Zwinkels

Mr. C. Chikaura

Mr. J. de la Fargue**

Meetings held

Meetings attended

*Mr. J. Chenevix - Trench resigned with effect from 21 March 2016.
**Mr. J. de la Fargue became a member of the committee with effect from 16 August 2016.
***Mr. C. I. F. Ndiaye resigned with effect from 17 November 2016.

4.4.7

Credit Committee

Name

Mr. B. A. Chikwanha

Ms. M. R. Svova*

Mr. K. Qurashi *

Mr. B. P. Washaya

Mr. J. de la Fargue**

Mr. C. Chikaura***

Meetings held

Meetings attended

*Ms. M. R. Svova and Mr. K. Qurashi resigned with effect from 20 May 2016.
**Mr. J. de la Fargue was appointed with effect from 4 May 2016.
***Mr. C. Chikaura became a member of the committee with effect from 15 August 2016.

[ 9

Report of the Directors (Cont’d)
for the year ended 31 December 2016

5.1

5.2

CORPORATE GOVERNANCE
The Group adheres to international best practice with regards to corporate governance. In particular, the Group emulates corporate governance
principles set out in the Combined Code of the United Kingdom, the King III report of South Africa, the National Code on Corporate Governance
and the Reserve Bank of Zimbabwe (RBZ) Corporate Governance Guideline No. 01-2004/BSD. The Board has set up the Audit Committee, Human
Resources and Remuneration Committee, ALCO & Finance Committee, Credit Committee, Loans Review Committee and the Risk Management
Committee to assist in the discharge of its duties and responsibilities.

The Board of Directors
The NMBZ Holdings Limited and NMB Bank Limited boards comprise of nine directors each. The boards of the holding company and the Bank
are identical. The Group obtained regulatory approval to have one board for NMBZ Holdings Limited and the banking subsidiary. The boards
comprise, of two executive and nine non-executive directors. Of the seven non-executive directors, four are independent non-executive directors.
The Chairpersons of the board and all the board committees are independent non-executive directors. The boards and the board committees meet
at least four times a year.

Audit Committee
The committee oversees the Group’s financial reporting process, monitoring the integrity and appropriateness of the Group’s financial statements;
evaluating the adequacy of the Group’s financial and operational processes, compliance, internal controls and risk management processes and the
selection, compensation, independence and performance of the Group’s external and internal auditors. The committee meets at least four times a
year. The committee meets regularly with the internal and external auditors. Both the internal and external auditors have unrestricted access to the
audit committee to ensure their independence and objectivity.

Membership:

Mr. C. Chikaura
Ms. J. Maguranyanga
Ms. S. Chitehwe

Chairperson-Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director

5.3

Human Resources, Remuneration and Nominations Committee
The committee is responsible for setting the Group’s remuneration philosophy and reviews the overall remuneration structures of the Group,
including all material remuneration proposals and packages for Executive Directors and senior personnel.

Membership:

Ms. J. Maguranyanga
Mr. J. de la Fargue
Mr. B. A. M. Zwinkels
Mr. C. Chikaura
Mr. B. A. Chikwanha

Chairperson-Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director

5.4

Loans Review Committee
The Loans Review Committee assesses compliance of the loan book with the lending policy and the Banking Regulations. The Committee conducts
loan reviews independent of any person or committee responsible for sanctioning credit.

Membership:

Ms. J. Maguranyanga
Ms. S. Chitehwe
Mr. B. A. M. Zwinkels
Mr. E. Sandersen

Chairperson-Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director

5.5

Credit Committee
The Credit Committee’s main responsibilities are to consider loan applications beyond the discretionary limits of the Management Credit Committee
and to direct the formulation of, review and monitor the credit principles and policies of the Group.

Membership:

Mr. B. A. Chikwanha
Mr. B. P. Washaya
Mr. J. de la Fargue
Mr. C. Chikaura

Chairperson - Independent Non-Executive Director
Chief Executive Officer
Non-Executive Director
Independent Non-Executive Director

10 ] NMBZ Holdings Limited Annual Report 2016

Statement of Directors’ Responsibility
for the year ended 31 December 2016

RESPONSIBILITY
The Directors of the Group are mandated by the Companies Act (Chapter 24:03) of Zimbabwe to maintain adequate accounting records and to
prepare consolidated and separate financial statements that present a true and fair view of the state of affairs of the Group and Company at the end
of each financial year. The information contained in these consolidated and separate financial statements has been prepared on a going concern
basis and is in accordance with the provisions of the Companies Act (Chapter 24:03) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe,
and International Financial Reporting Standards (IFRSs).

CORPORATE GOVERNANCE
In its operations, the Group is guided by principles of corporate governance derived from the King III Report of South Africa, the National Code on
Corporate Governance, the United Kingdom Combined Code and the Reserve Bank of Zimbabwe Corporate Governance Guideline No. 01-2004/
BSD. The directors of the Group are cognisant of their responsibility to exercise the duty of care and act in good faith in order to safeguard all
stakeholders’ interests.

BOARD OF DIRECTORS
Board appointments are made in a manner that ensures an adequate mix of skills and expertise on the board. The majority of the Group’s
non-executive directors are independent and thus provide the necessary checks and balances on the board and ensure that the interests of all
stakeholders are taken into account in the decision making process. The Chairman of the board is an independent non-executive director. The board
is assisted by various committees in executing its responsibilities. The board meets at least quarterly to assess risk, review financial performance,
and provide guidance to management on operational and policy issues.

The board conducts an annual evaluation to assess its effectiveness and develop remedial action plans to address weaknesses noted from
the evaluation. The evaluation involves an assessment of collective board performance, the chairperson’s performance and individual directors’
performance.

INTERNAL FINANCIAL CONTROLS
The board is responsible for ensuring that effective internal control systems are implemented within the Group. The Group maintains internal controls
and systems designed to provide reasonable assurance of the integrity and reliability of its records, safeguard the assets of the group and prevent
and detect fraud and errors. The Audit Committee in conjunction with the external and internal auditors of the Group reviews and assesses the
internal control systems of the Group in key risk areas.

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

INTERNAL AUDIT
The internal audit function has formally defined objectives, authority, and responsibilities enshrined in the Internal Audit Charter, which principles are
consistent with those of the Institute of Internal Auditors. The function is guided by the Internal Audit Manual and the Reserve Bank of Zimbabwe’s
Guideline on Minimum Internal Audit Standards in Banking Institutions, in conducting its activities. The internal audit function is independent of
business lines and has unrestricted access to the Audit Committee. The internal audit functions include evaluating the effectiveness of the risk
management systems, reviewing the systems of internal control including internal financial controls and the conduct of the Group’s operations.

REMUNERATION
The Human Resources, Remuneration and Nominations Committee determines the remuneration policy for the Group. The remuneration policy is
designed to reward performance and retain highly skilled individuals. Accordingly, a discretionary performance related bonus is offered in addition to
a basic salary package.

12 ] NMBZ Holdings Limited Annual Report 2016

Statement of Directors’ Responsibility (Cont’d)
for the year ended 31 December 2016

10.

11.

12.

EMPLOYEE PARTICIPATION AND DEVELOPMENT
The Group encourages active participation by its employees in its ownership. In line with this commitment, managerial employees have in the past
participated in the Group’s share option scheme. The Group is working on operationalising a new share option scheme for staff members approved
in the 2012 Annual General Meeting. The Group is also committed to enhancing the skills of staff and sponsors attendance of courses at reputable
local and international institutions.

SOCIAL RESPONSIBILITY
The Group recognises its responsibility in the society within which it operates. The Group’s social investments were channelled into the country’s
educational system, the disadvantaged, vulnerable groups, protection of the environment, wildlife conservation, the arts and various sporting
disciplines.

REGULATION
The banking subsidiary of the Group is subject to regulation and supervision by the Reserve Bank of Zimbabwe, which conducts the functions of the
Registrar of Banking Institutions and is also the supervisor of banking institutions. Where appropriate, the Group participates in industry-consultative
meetings and discussion groups aimed at enhancing the business environment.

ETHICS
As a Group, we aim to ensure that we adhere to the highest standards of responsible business practice. In that regard, the Group’s values include
integrity and excellence. The Group’s employees are thus expected to adhere to the highest standards of personal integrity and professional
conduct. The Group monitors its staff conduct through the code of conduct and ensures through its anti-money-laundering policies that it does not
conduct business with entities whose activities are unethical.

FINANCIAL STATEMENTS
The Group’s Directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance
with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe and the
Banking Act (Chapter 24:20) of Zimbabwe and for such internal control as the directors determine necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

The Directors have satisfied themselves that the Bank is in a sound financial position and that it has adequate resources to continue operating in the
foreseeable future. Accordingly, they are satisfied that it is appropriate to prepare the consolidated and separate financial statements of the Group
on a going concern basis.

Preparation of the Group financial statements
These Group financial statements have been prepared under the supervision of Mr Benson Ndachena, a Chartered Accountant (Zimbabwe), PAAB
registration number 00327.

Approval of the Group financial statements
The consolidated and separate financial statements of the Group appearing on pages 18 to 77 were approved by the board of directors on 15 March
2017 and are signed on their behalf by:

Mr B. A. Chikwanha
Chairman
15 March 2017

Mr B. P. Washaya
Group Chief Executive Officer
15 March 2017

[ 13

Statements of Comprehensive Income
for the year ended 31 December 2016

Interest income
Interest expense

Net interest income

Fee and commission income
Net foreign exchange gains

Revenue

Other income
Share of profit of associate

Operating income /(loss)
Operating expenditure
Impairment losses on loans and advances

Profit/(loss) before taxation
Taxation (charge)/credit

Profit/(loss) for the year

Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation, net of tax

Note

GROUP

2016
US$

2015
US$

COMPANY

2016
US$

2015
US$

4
5

33 860 139
(11 075 067)

35 761 355
(15 118 231)

22 785 072

20 643 124

6.1

15 179 149
743 255

20 984 694
1 416 445

6.2
24

7
21.3

38 707 476

43 044 263

1 737 860
-

1 234 125
-

40 445 336
(26 176 706)
(8 059 726)

44 278 388
(26 872 649)
(9 496 601)

6 208 904
(1 150 738)

7 909 138
(2 422 040)

5 058 166

5 487 098

-
-

(819)
-

(819)
-
-

(819)
41

(778)

-
-

(5 735)
-

(5 735)
-
-

(5 735)
289

(5 446)

(2 970)

2 970

Total comprehensive income/(loss) for the year

5 055 196

5 490 068

(778)

(5 446)

Earnings per share (US cents)
-Basic
-Diluted

9.3
9.3

1.32
1.23

1.43
1.33

18 ] NMBZ Holdings Limited Annual Report 2016

Statement of Changes in Equity
for the year ended 31 December 2016

GROUP

Share
Capital
US$

78 598
-
-
-

Share
Premium
US$

15 737 548
-
-
-

Balances at 1 January 2015
Profit for the year
Other comprehensive income
Transfer to regulatory reserve

Balances at 31 December 2015
Profit for the year
Other comprehensive income
Transfer from regulatory reserve

Share
Option Regulatory
Reserve
US$

Reserve
US$

62 563
-
-
-

3 293 699
-
-
453 030

3 746 729
-
-
(1 961 593)

Revaluation
Reserve
US$

Retained
Earnings
US$

Total
US$

-
-
2 970
-

2 970
-
(2 970)
-

10 131 991 29 304 399
5 487 098
5 487 098
2 970
-
-
(453 030)

15 166 059 34 794 467
5 058 166
5 058 166
(2 970)
-
-
1 961 593

Balances at 31 December 2016

78 598

15 737 548

62 563

1 785 136

22 185 818 39 849 663

COMPANY

Balances at 1 January 2015
Loss for the year

Balances at 31 December 2015
Loss for the year

Share
Capital
US$

78 598
-

Share
Premium
US$

15 737 548
-

Share
Option
Reserve
US$

62 563
-

Retained
Earnings
US$

748 260
(5 446)

742 814
(778)

Total
US$

16 626 969
(5 446)

16 621 523
(778)

Balances at 31 December 2016

78 598

15 737 548

62 563

742 036

16 620 745

20 ] NMBZ Holdings Limited Annual Report 2016

Statement of Cashflows
for the year ended 31 December 2016

CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before taxation
Non-cash items
-Impairment losses on loans and advances
-Investment properties fair value adjustment
-(Profit)/loss on disposal of property and equipment
-Profit on disposal of investment properties
-Loss on disposal of property and equipment (included in staff costs)
-Quoted and other investments fair value adjustment
-Impairment on land and buildings
-Depreciation
-Non-current assets held for sale fair value adjustment
-Interest capitalised on subordinated loan
-Amortisation of intangible asset

GROUP

2016
US$

2015
US$

6 208 904

7 909 138

8 059 726
(412 006)
(368 206)
(50 000)
-
(31 554)
51 600
1 319 396
3 000
158 599
532 768

9 496 601
(118 278)
46 924
(635 500)
68 470
62 654
44 200
1 690 902
3 000
134 676
509 687

Operating cash flows before changes in operating assets and liabilities

15 472 227

19 212 474

Changes in operating assets and liabilities
(Decrease)/increase in deposits and other liabilities
Decrease/(increase) in loans, advances and other assets
Increase Investment in debentures

(17 902 723)
27 412 159
-

42 285 825
(41 222 530)
4 614 047

Net cash generated from operations

24 981 663

24 889 816

Taxation
Corporate tax paid
Capital gains tax paid

(1 842 635)
(12 234)

(37 843)
(91 850)

Net cash from operating activities

23 126 794

24 760 123

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of property and equipment
Purchase of property and equipment
Acquisition of investment property
Acquisition of intangible asset
Increase in investment securities
Proceeds on disposal of investment properties

581 414
(1 267 404)
(5 794 464)
(490 417)
(10 196 760)
180 000

101 767
(2 271 943)
(8 230 860)
(248 339)
(10 673 466)
5 380 000

Net cash used in investing activities

(16 987 631)

(15 942 841)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment of interest on subordinated loan

Net cash used in financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

(157 253)

(128 496)

(157 253)

(128 496)

5 981 910
63 439 347

8 688 786
54 750 561

Cash and cash equivalents at the end of the year (note 20)

69 421 257

63 439 347

COMPANY

2016
US$

(819)

-
-
-
-
-
819
-
-
-
-
-

-
-
-

-
-

-
-
-
-
-
-

-
53

2015
US$

(5 735)

-
-
-
-
-
5 735
-
-
-
-
-

(4)
4
-

-
-

-
-
-
-
-
-

-
53

[ 21

Significant Accounting Policies
for the year ended 31 December 2016

BASIS OF CONSOLIDATION
The consolidated and separate financial
statements comprise of the financial statements
of the Group and company. All companies in the
Group have a December year end. Inter-group
transactions, balances, income and expenses
are eliminated on consolidation.

BUSINESS COMBINATIONS
Business combinations are accounted for using
the acquisition method as at the acquisition date
– i.e. when control is transferred to the Group.
The consideration transferred in the acquisition
is generally measured at fair value, as are the
identifiable net assets acquired.

Subsidiaries
Subsidiaries are those investees controlled by
the Group. The Group controls an investee if it is
exposed to, or has rights to variable returns from
its involvement with the investee and has the
ability to affect those returns through its power
over the subsidiary. The financial statements
of subsidiaries are included in the consolidated
financial statements, using
the acquisition
method, from the date that control effectively
commences until the date that control effectively
ceases

In the holding company’s separate financial
in subsidiaries are
statements
accounted for at cost.

investment

Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase
is recognised in profit or loss immediately.
Transaction costs are expensed as incurred,
except if they are related to the issue of debt or
equity securities.

is
Any contingent consideration payable
measured at fair value at the acquisition date.
If the contingent consideration is classified as
equity, then it is not re-measured and settlement
for within equity. Otherwise
is accounted
subsequent changes in the fair value of the
contingent consideration are recognised in profit
or loss.

Interests in equity accounted investees
Associates are those entities in which the Group
has significant influence, but not control or joint
control, over the financial and operating policies.
The Group’s investment in its associate is
accounted for using the equity method. Under the
equity method, the investment in the associate is
measured in the statement of financial position
at cost plus post acquisition changes in the
Group’s share of the profit or loss and other
comprehensive income of the associate until the
date on which significant influences ceases.

22 ] NMBZ Holdings Limited Annual Report 2016

Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related non-controlling interests (NCI) and other components of equity. Any resulting
gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at
fair value when control is lost.

Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains
arising from transactions with equity accounted investees are eliminated against the investment to the
extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.

FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated into United States Dollars (US$), which is the respective
functional currency of Group entities at the spot exchange rates at the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated
into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on
monetary items is the difference between the amortised cost in the functional currency at the beginning
of the year, adjusted for effective interest and payments during the year, and the amortised cost in the
foreign currency translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated
into the functional currency at the spot exchange rate at the date on which the fair value is determined.
Non-monetary items that are measured based on historical cost in a foreign currency are translated
using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in profit or loss.

TAXATION
Income tax
Income tax expenses comprise current, capital gains and deferred tax. Income tax is recognised in profit
or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive
income.

Current tax
Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates
enacted or substantively enacted at the reporting date in the country where the Group operates and
generates taxable income and any adjustment to tax payable in respect of previous years.
Current income tax assets and liabilities for the current period are measured at the amount expected to
be recovered from or paid to the taxation authorities.

Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax
is not recognised for:

■ temporary differences on the initial recognition of assets or liabilities in a transaction that is not a

business combination and that affects neither accounting nor taxable profit or loss;

■ temporary differences related to investments in subsidiaries to the extent that it is probable that

they will not reverse in the foreseeable future; and

■ taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which they
can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in
which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities. For this purpose, the carrying amount of investment property measured at fair value is
presumed to be recovered through sale, and the Group has not rebutted this presumption.

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realised simultaneously.
Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same
time as the liability to pay the related dividend is recognised. These amounts are generally recognised
in profit or loss because they generally relate to income arising from transactions that were originally
recognised in profit or loss.

(vi)

Due from banks and loans and
advances to customers
‘Due from banks’ and ‘Loans and
advances to customers’ include non–
derivative financial assets with fixed
or determinable payments that are not
quoted in an active market, other than:

FINANCIAL INSTRUMENTS
Financial instruments – initial recognition and subsequent measurement
(i)

Date of recognition
All financial assets and financial liabilities are initially recognised on the trade date, i.e., the
date that the Group becomes a party to the contractual provisions of the instrument. This
includes regular way trades: purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or convention in the market
place.

(ii)

(iii)

(iv)

Initial measurement of financial instruments
The classification of financial instruments at initial recognition depends on their purpose and
characteristics and management’s intention in acquiring them. All financial instruments are
measured initially at fair value plus transaction costs, except in the case of financial assets
and financial liabilities recognised at fair value through profit or loss.

Financial assets or financial liabilities held for trading
Financial assets or financial liabilities held for trading are recognised in the statement of
financial position at fair value. Changes in fair value are recognised in non-interest income.
Interest and dividend income or expense is recorded in ‘Interest income or expense’ and “Non-
interest income” respectively according to the terms of the contract, or when the right to the
payment has been established.

Included in this classification are debt securities, equities, short positions and customer loans
that have been acquired principally for the purpose of selling or repurchasing in the near term.

Financial assets and financial liabilities designated at fair value through profit or loss
Financial assets and financial liabilities classified in this category are those that have been
designated by management upon initial recognition. Management may only designate an
instrument at fair value through profit or loss upon initial recognition when the following criteria
are met, and designation is determined on an instrument-by-instrument basis:

■ The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognising gains or losses on them
on a different basis;

■ The assets and liabilities are part of a group of financial assets, financial liabilities or both,
which are managed and their performance evaluated on a fair value basis, in accordance with
a documented risk management or investment strategy; and

■ The financial instrument contains one or more embedded derivatives, which significantly

modify the cash flows that would otherwise be required by the contract.

Financial assets and financial liabilities at fair value through profit or loss are recognised in the
statement of financial position at fair value. Changes in fair value are recognised in ‘Net gain
or loss on financial assets and liabilities designated at fair value through profit or loss’.

(v)

‘Day 1’ profit or loss
When the transaction price differs from the fair value of other observable current market
transactions in the same instrument, or based on a valuation technique whose variables
include only data from observable markets, the Group immediately recognises the difference
between the transaction price and fair value (a ‘Day 1’ profit or loss) in profit or loss. In cases
where fair value is determined using data which is not observable, the difference between
the transaction price and model value is only recognised in the profit or loss when the inputs
become observable, or when the instrument is derecognised.

■ Those that the Group intends to sell
immediately or in the near term and
those
initial
recognition, designates as at fair value
through profit or loss;

the Group, upon

that

■ Those that the Group, upon initial
recognition, designates as available for
sale; and

■ Those for which the Group may not
recover substantially all of its initial
investment, other than because of
credit deterioration.

After initial measurement, amounts ‘Due from
banks’ and ‘Loans and advances to customers’
are subsequently measured at amortised cost
using the effective interest rate (EIR), less
allowance for impairment. Amortised cost is
calculated by taking into account any discount or
premium on acquisition and fees and costs that
are an integral part of the EIR.

The amortisation is included in ‘Interest income’
in the profit or loss. Impairment losses are
recognised in profit or loss under ‘Impairment
losses on loans and advances’.

into certain

lending
The Group may enter
commitments where the loan, on drawdown,
is expected to be classified as held for trading
because the intent is to sell the loans in the short
term. These commitments to lend are recorded
as derivatives and measured at fair value through
profit or loss.

Where the loan, on drawdown, is expected to be
retained by the Group, and not sold in the short
term, the commitment is recorded only when it is
an onerous contract that is likely to give rise to
a loss (for example, due to a counterparty credit
event).

[ 23

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

FINANCIAL INSTRUMENTS (cont’d)

Financial instruments - initial recognition and subsequent measurement (cont’d)

(vii)

(viii)

(ix)

Deposits and other liabilities
Deposits and other liabilities are non-trading financial liabilities payable on demand and at variable interest rates. Subsequent to initial measurement
deposits and other liabilities are measured at amortised cost applying the effective interest method.

Quoted and trade investments
Quoted investments comprise interests in equities listed on a public exchange and are accounted for at fair value. These investments are held for
trading and are measured at fair value through profit and loss.The fair value is determined using quoted market prices in active markets.

Trade investments comprise interests in unquoted equities and are accounted for at fair value. The fair value is determined using valuation
techniques or pricing models.

Reclassification of financial assets
Reclassifications are recognised at fair value at the date of reclassification, which becomes the new amortised cost. For a financial asset reclassified
out of the ‘available for sale’ category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over
the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised
over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recognised in equity is
recycled to the profit and loss.

The Group may reclassify a non–derivative trading asset out of the ‘held for trading’ category and into the ‘loans and receivables’ category if it meets
the definition of loans and receivables and the Group has the intention and ability to hold the financial asset for the foreseeable future or until maturity.
If a financial asset is reclassified, and if the Group subsequently increases its estimates of future cash receipts as a result of increased recoverability
of those cash receipts, the effect of that increase is recognised as an adjustment to the EIR from the date of the change in estimate.

Reclassification is at the election of management, and is determined on an instrument by instrument basis. The Group does not reclassify any
financial instrument into the fair value through profit or loss category after initial recognition.

Derecognition of financial assets and financial liabilities

(i)

Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

■ The rights to receive cash flows from the asset have expired;
■ The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full

without material delay to a third party under a ‘pass–through’ arrangement; and either;
- The Group has transferred substantially all the risks and rewards of the asset; or
- The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass–through arrangement, and has neither
transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the
extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and
the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.

(ii)

Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying
value of the original financial liability and the consideration paid is recognised in profit or loss.

24 ] NMBZ Holdings Limited Annual Report 2016

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

FINANCIAL INSTRUMENTS (cont’d)

Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability
reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as
active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise
the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a
transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given
or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted
price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial
instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently,
that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities
and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net
exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short
position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk
adjustment of each of the individual instruments in the portfolio.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to
be paid.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 17.

Identification and measurement of impairment
At each reporting date, the Group assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired.
A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of
the asset(s) and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.
Objective evidence that financial assets are impaired includes:
■ significant financial difficulty of the borrower or issuer;
■ default or delinquency by a borrower;
■ the restructuring of a loan or advance by the Group on terms that the Bank would not consider otherwise;
■ indications that a borrower or issuer will enter bankruptcy;
■ the disappearance of an active market for a security; or
■ observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the Group, or economic

conditions that correlate with defaults in the Group.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
However, in specific circumstances a smaller decline or a shorter period may be appropriate.

The Group considers evidence of impairment for loans and advances and held-to-maturity investment securities at both a specific asset and a collective
level. All individually significant loans and advances and held-to-maturity investment securities are assessed for specific impairment. Those found not to be
specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances and held-to-maturity
investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances and held-to-
maturity investment securities with similar risk characteristics.

In assessing collective impairment, the Group uses statistical modelling of historical trends of the probability of default, the timing of recoveries and the amount
of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than is
suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to
ensure that they remain appropriate.

Impairment losses on assets measured at amortised cost are calculated as the difference between the carrying amount and the present value of estimated
future cash flows discounted at the asset’s original effective interest rate.

[ 25

receivables,

Collateral valuation
The Group seeks to use collateral, where possible,
to mitigate its credit risks on financial assets.
The collateral comes in various forms such as
cash, securities, letters of credit/guarantees,
inventories, other
real estate,
non-financial assets and credit enhancements
such as netting agreements. The fair value of
collateral is generally assessed, at a minimum,
at inception and based on the Group’s quarterly
reporting schedule, however, some collateral, for
example, cash or securities relating to margining
requirements, is valued daily. To the extent
possible, the Group uses active market data for
valuing financial assets, held as collateral. Other
financial assets which do not have a readily
determinable market value are valued using
models. Non-financial collateral, such as real
estate, is valued based on data provided by third
parties such as mortgage brokers, housing price
indices, audited financial statements, and other
independent sources. (See note 41.1.4 for further
analysis of collateral).

Collateral repossessed
The Group’s policy is to determine whether a
repossessed asset is best used for its internal
operations or should be sold. Assets determined
to be useful for the internal operations are
transferred to their relevant asset category at the
lower of their repossessed value or the carrying
value of the original secured asset. Assets that
are determined better to be sold, are immediately
transferred to assets held for sale at their value
at the repossession date in line with the Group’s
policy.

Offsetting financial instruments
Financial assets and financial liabilities are offset
and the net amount reported in the statement of
financial position if, and only if, there is a currently
enforceable legal right to offset the recognised
amounts and there is an intention to settle on a
net basis, or to realise the asset and settle the
liability simultaneously. This is not generally the
case with master netting agreements, therefore,
the related assets and liabilities are presented
gross in the statement of financial position.

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

FINANCIAL INSTRUMENTS (cont’d)

Identification and measurement of impairment (cont’d)
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced
with a new one due to financial difficulties of the borrower, then an assessment is made of whether the
financial asset should be derecognised. If the cash flows of the renegotiated asset are substantially
different, then the contractual rights to cash flows from the original financial asset are deemed to
have expired. In this case, the original financial asset is derecognised and the new financial asset is
recognised at fair value. The impairment loss before an expected restructuring is measured as follows:
■ If the expected restructuring will not result in derecognition of the existing asset, then the
estimated cash flows arising from the modified financial asset are included in the measurement of
the existing asset based on their expected timing and amounts discounted at the original effective
interest rate of the existing financial asset.

■ If the expected restructuring will result in derecognition of the existing asset, then the expected
fair value of the new asset is treated as the final cash flow from the existing financial asset at the
time of its derecognition. This amount is discounted from the expected date of derecognition to the
reporting date using the original effective interest rate of the existing financial asset.

Impairment losses are recognised in profit or loss and reflected in an allowance account against loans
and advances or held-to-maturity investment securities. Interest on the impaired assets continues to
be recognised through the unwinding of the discount. If an event occurring after the impairment was
recognised causes the amount of impairment loss to decrease, then the decrease in impairment loss is
reversed through profit or loss.
Impairment losses on available-for-sale investment securities are recognised by reclassifying the losses
accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified
from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment
and amortisation, and the current fair value, less any impairment loss recognised previously in profit or
loss. Changes in impairment attributable to application of the effective interest method are reflected as
a component of interest income.
The Group writes off a loan or an investment debt security, either partially or in full, and any related
allowance for impairment losses, when the Bank Credit Committee and the Board of Directors
determines that there is no realistic prospect of recovery.

Regulatory guidelines and International Financial Reporting Standards Requirements in respect
of the Group’s banking activities
The Banking Regulations, Statutory Instrument, 205 of 2000 issued by the Reserve Bank of Zimbabwe
(RBZ) gives guidance on allowance for doubtful debts and stipulate certain minimum percentages to be
applied to the respective categories of the loan book.

IAS 39 Financial Instruments: Recognition and Measurement (IAS39) prescribes the allowance 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 Board has taken the view that where
the IAS 39 charge is less than the amount provided for in the Banking Regulations, the difference is
recognised directly in equity as a transfer from retained earnings to a regulatory reserve and where it is
more; the full amount will be recognised in profit or loss.

Non-performing loans
Interest on loans and advances is accrued as income until such time as reasonable doubt exists about
its recoverability, thereafter and until all or part of the loan is written off, interest continues to accrue on
customer’s accounts but is not included in income. The suspended interest is recognised as a provision
in the statement of financial position. Such suspended interest is deducted from loans and advances
in the statement of financial position. This policy meets the requirements of the Banking Regulations,
Statutory Instrument, 205 of 2000.

Renegotiated loans and advances
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This
may involve extending the payment arrangements and the agreement of new loan conditions. Once
the terms have been re-negotiated, any impairment is measured using the original effective interest
rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due.
Management continuously renews re-negotiated loans to ensure that all criteria are met and that future
payments are likely to occur. The loans continue to be subject to an individual or collective impairment
assessment, calculated using the loans original EIR.

26 ] NMBZ Holdings Limited Annual Report 2016

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

CASH AND CASH EQUIVALENTS
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with the central bank and highly liquid financial assets with original
maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group
in the management of its short term commitments.

Cash and cash equivalents are carried at amortised cost in the statement of financial position.

PROPERTY AND EQUIPMENT
Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of the equipment
when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount
of the equipment as a replacement if the recognition criteria are satisfied. The previous remaining carrying amount is derecognised. All other repair and
maintenance costs are recognised in the profit or loss as incurred.

Land and buildings are measured at revalued amount less accumulated depreciation on buildings and impairment losses recognised after the date of the
revaluation. Revaluation of property is performed at the end of each reporting period, by a registered professional valuer.

Any revaluation surplus is recognised in other comprehensive income and accumulated in the revaluation reserve included in the equity section of the
statement of financial position, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which
case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on
the same asset recognised in the asset revaluation reserve, the decrease in other comprehensive income reduces the amount accumulated in equity as the
asset revaluation reserve, the decrease in other comprehensive income reduces the amount accumulated in equity as the asset revaluation reserve. Upon
disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying
amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated
against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve
relating to the particular asset being sold is transferred to retained earnings.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in
profit or loss in the year the asset is derecognised.

Residual values and the useful life of assets are reviewed at least at each financial year end. Where the residual value of an asset increases to an amount
that is equal to or exceeds its 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.

Owned assets
The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of attributable overheads which are directly
attributable to the assets.

Depreciation
Depreciable amount is the cost of an asset or other amount substituted for cost less its residual value. Depreciation is provided to write off the depreciable
amount of property and equipment over their estimated useful lives to their estimated residual values at the following rates per annum, on a straight-line basis.

Computers
Motor Vehicles
Furniture and Equipment
Buildings
Land and capital work-in-progress are not depreciated.

20%
25%
20%
2%

INTANGIBLE ASSETS
Intangible assets are initially recognised at cost. Subsequently the assets are measured at cost less accumulated amortisation and any impairment loss.

Amortisation of intangible assets
The depreciable amount of an intangible asset with a finite useful life is allocated on a straight line basis over its useful life. The amortisation rate is as follows:

Computer software

20%

[ 27

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

LEASES
The determination of whether an arrangement is a lease, or it contains a lease is based on the substance of the arrangement and requires an assessment of
whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

As a lessee
Leases which do not transfer to the Group substantially all the risks and rewards incidental to ownership of the leased items are operating leases. Operating
lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term. Contingent rentals payable are recognised as an
expense in the period in which they are incurred.

Leases where the Group does not transfer substantially all the risks and rewards of ownership of the assets are classified as operating leases. Initial direct
costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis
as rental income.

IMPAIRMENT OF NON FINANCIAL ASSETS
The carrying amounts of the Group’s non-financial assets other than consumables are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable
amount of assets is the greater of their fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs to sell, an appropriate valuation model is used. Impairment losses of continuing operations are recognised in profit or loss in
those expense categories consistent with the functions of the impaired asset, except for property previously revalued where the revaluation was taken to other
comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. For
assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist, or may have decreased. If such an indication exists the bank estimates the assets or CGU’s recoverable amount.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount
since the last impairment loss was recognised.

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.

INVESTMENT PROPERTIES
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing
investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day to day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Rental income from
investment properties is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part
of the total rental income, over the term of the lease. Gains or losses arising from changes in the fair values of investment properties are included in profit or
loss in the year in which they arise. Revaluation is done at the end of each year by a registered independent professional valuer.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no
future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or
loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property,
the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the
Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use.

FINANCIAL GUARANTEES
In the ordinary course of business, the banking subsidiary give financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial
guarantees are initially recognised in the financial statements at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability
under each guarantee is measured at the higher of the amount initially recognised less, where appropriate, cumulative amortisation recognised in profit or loss,
and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is recognised in the profit or loss. The premium received is recognised in profit or loss on a straight
line basis over the life of the guarantee, or in full, depending on the conditions attached to the guarantee.

FEES AND COMMISSION INCOME
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement
of the EIR.

Other fees and commission – including retail banking customer fees, corporate banking and credit related fees, fees from financial guarantee contracts,
commission from international banking activities and fees from corporate finance – are recognised as the related services are performed. If a loan commitment

28 ] NMBZ Holdings Limited Annual Report 2016

Significant Accounting Policies (Cont’d)
for the year ended 31 December 2016

is not expected to be drawn down of a loan, then the related commitment fees are recognised on a straight line basis over the commitment period.

Other fees and commitment expense relate mainly transaction and service fees, which are expensed as the services are received.

INTEREST INCOME
For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is
recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected
life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

Interest income includes income arising out of the banking activities of lending and investing.

INTEREST EXPENSE
Interest expense arises from deposit taking and borrowings. The expense is recognised in profit or loss as it accrues, taking into account the effective interest
cost of the liability.

EMPLOYEE BENEFITS
Retirement benefits are provided for the Group’s employees through a defined contribution plan and the National Social Security Authority Scheme.

Defined Contribution Plan
Obligations for contribution to the defined contribution pension plan are recognised as an expense in profit or loss as they are incurred.

National Social Security Authority Scheme
The cost of retirement benefits applicable to the National Social Security Authority, which commenced operations on 1 October 1994 is determined by the
systematic recognition of legislated contributions.

Short term employee benefits/and share based payments
Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share based payments
The Group issues share options to certain employees in terms of the Employee Share Option Scheme which is an equity settled share-based payment
scheme. Share options are measured at fair value of the equity instruments at the grant date. The fair value determined at the grant date of the options
is expensed 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 is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and other behavioural considerations.

INVENTORY
Inventory is measured at the weighted average cost.

PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The
expense relating to any provision is presented in profit or loss net of any reimbursements.

SHAREHOLDERS’ FUNDS
Shareholders’ funds refers to the total investment made by the shareholders to the Group and it consists of share capital, share premium, share options
reserve, retained earnings, redeemable ordinary shares and subordinated loans. Incremental costs directly attributable to the issue of ordinary shares are
recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.

NON-CURRENT ASSETS HELD FOR SALE
Non-current assets or disposal groups are held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use.
Such assets are generally measured at the lower of the carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for
sale and subsequent gains and losses on remeasurement are recognised in profit or loss.
Once classified as held for sale, intangible assets and property and equipment are no longer amortised or depreciated.

[ 29

Notes to the Financial Statements
for the year ended 31 December 2016

2.1

2.2

2.3

2.3.1

2.3.2

2.3.3

2.3.4

REPORTING ENTITY
The holding 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 commercial and retail banking.

ACCOUNTING CONVENTION
Statement of compliance
The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs)
and have been prepared in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe and the Banking Act (Chapter 24:20) of
Zimbabwe.

The consolisated and separate financial statements were approved by the Board of Directors on 15 March 2017.

Basis of preparation
The consolidated and separate financial statements have been prepared under the historical cost convention except for quoted and other
investments, investment properties, non-current assets held for sale and financial instruments which are carried at fair value and land and buildings
which are stated at the revalued carrying amount. These consolidated financial statements are reported in United States dollars and rounded to the
nearest dollar.

Comparative financial information
The Group financial statements comprise the consolidated and separate statements of financial position, comprehensive income, changes in equity
and cash flows. The comparative information covers a period of twelve months.

Use of estimates, judgements and assumptions
In preparation of the consolidated and separate financial statements, Directors have made judgments, 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 estimates are recognised prospectively.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31
December 2017 is included in the following notes:

Deferred tax
Deferred taxation is recognised 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.

Land and buildings
The properties were valued by an independent professional valuer. The determined fair value of land and buildings is most sensitive to significant
unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not
readily available.

Investment properties
Investment properties were valued by an independent professional valuer. In addition, the properties market is currently not stable due to liquidity
constraints and hence comparable values are also not readily available.

Non-current assets held for sale
Non-current assets were valued by an independent professional valuer. All non-current assets held for sale are measured at their fair values. The
valuer applied the rental yield method to assess fair value of non-current assets held for sale. The determined fair value of non-current assets held
for sale 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.

30 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

ACCOUNTING CONVENTION (cont’d)

2.3

Use of estimates, judgements and assumptions (cont’d)

2.3.5

Impairment losses on loans and advances
The Group reviews its individually significant 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 Group 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.

2.3.6 Going concern

The Directors have assessed the ability of the Group and Company 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. 4

2.4.1

2.4.2

2.4.3

Standards issued and not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016 and earlier application is
permitted; however, the Group has not early adopted the following new or amended standards in preparing these financial statements.

Disclosure Initiative (Amendments to IAS 7)
The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities,
including both changes arising from cash flow and non-cash changes. The amendments are effective for annual periods beginning on or after 1
January 2017, with early adoption permitted.

To satisfy the new disclosure requirements, the Group will assess the potential impact on these financial statements resulting from these new
amendments and possibly present reconciliation between the opening and closing balances for liabilities with changes arising from financing
activities in the financials for the year ending 31 December 2017.

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments
are effective for annual periods beginning on or after 1 January 2017, with early adoption permitted. The Group is assessing the potential impact on
its financial statements resulting from the amendments. So far, the Group does not expect any significant impact.

IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue
recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective
for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group is still in the process of its initial assessment of
the potential impact of the adoption of IFRS 15 on its financial statements.

The Group has completed an initial assessment of the potential impact of the adoption of IFRS 15 on its financial statements. This focused on a
review of fees and commission income. The Group earns fee and commission income (other than fees included in the calculation of the effective
interest rate) on provision of the following services:

■ Retail banking;
■ Corporate banking;
■ Corporate finance;
■ International banking; and
■ Treasury services.

The initial review indicates that IFRS 15 will not have a material impact on the timing of recognition or measurement of fees and commission income.
The Group is currently performing a detailed impact assessment.

[ 31

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2. 4

Standards issued and not yet adopted (cont’d)

2.4.4

IFRS 9 Financial Instruments
In July 2014, the International Accounting Standards Board issued the final version of IFRS 9 Financial Instruments.

IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group currently plans to apply IFRS
9 initially on 1 January 2018. The actual impact of adopting IFRS 9 on the Group’s financial statements in 2018 is not known and cannot be reliably
estimated because it will be dependent on the financial instruments that the Group holds and economic conditions at that time as well as accounting
elections and judgements that it will make in the future. The new standard will require the Group to revise its accounting processes and internal
controls related to reporting financial instruments. The Group is in the process of implementing these changes.

The Group has performed a preliminary assessment of the potential impact on the following areas of adoption of IFRS 9 based on its positions at 31
December 2016:

(a) Classification – Financial assets

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are

managed and their cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at

amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The standard eliminates
the existing IAS 39 categories of held to maturity, loans and receivables and available for sale.

Based on its preliminary assessment, the Group does not believe that the new classification requirements, if applied at 31 December 2016,
would have had a material impact on its accounting for, loans and advances already measured at amortised cost, Investment securities and

trade and other investments measured at armotised cost. If these investments continue to be held for the same purpose at initial application of
IFRS 9, the Group may elect then to classify them as FVOCI or FVTPL. The Group has not yet made a decision in this regard.

(b) Impairment – Financial assets and contract assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. This will require considerable
judgement as to how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments,

and to contract assets.

Under IFRS 9, loss allowances will be measured on either of the following bases:

■ 12-month ECLs. These are ECLs that result from possible default events within the 12 months after the reporting date; and
■ Lifetime ECLs. These are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial
recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased
significantly if the asset has low credit risk at the reporting date. However, lifetime ECL measurement always applies for trade receivables and
contract assets without a significant financing component; an entity may choose to apply this policy also for trade receivables and contract
assets with a significant financing component.

The Group believes that impairment losses are likely to increase and become more volatile for assets in the scope of the IFRS 9 impairment
model. The Group has not completed its preliminary assessment that would indicate the likely movement of the impairment losses. The Group
is still to finalise the impairment methodologies that it will apply under IFRS 9. Additional information will be disclosed before the adoption of the
standard.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities.

However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognised in profit or loss, whereas under IFRS 9 these

fair value changes are generally presented as follows:
■ the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
■ the remaining amount of change in the fair value is presented in profit or loss.

The Group has not designated any financial liabilities at FVTPL and the Group has no current intention to do so. The Group’s preliminary

assessment did not indicate any material impact if IFRS 9’s requirements regarding the classification of financial liabilities were applied at 31

December 2016.

32 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2. 4

Standards issued and not yet adopted (cont’d)

(d) Disclosures

IFRS 9 will require extensive new disclosures, in particular about, credit risk and expected credit losses. The Group’s preliminary assessment
included an analysis to identify data gaps against current processes and the Group plans to implement the system and controls changes that it
believes will be necessary to capture the required data.

(e) Transition
The Group plans to take advantage of the exemption allowing it not to restate comparative information for prior periods with respect to

classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities
resulting from the adoption of IFRS 9 generally will be recognised in retained earnings at 1 January 2018.

The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application.

■ The determination of the business model within which a financial asset is held;
■ The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL; and
■ The designation of certain investments in equity instruments not held for trading as at FVOCI.

2.4.5

Clarifying share-based payment accounting (Amendments to IFRS 2)
Currently, there is ambiguity over how a company should account for certain types of share-based payment arrangements. The International
Accounting Standards Board (IASB) has responded by publishing amendments to IFRS 2 Share-based payment.

The amendments cover three accounting areas:
Measurement of cash-settled share-based payments –The new requirements do not change the cumulative amount of expense that is ultimately
recognised, because the total consideration for a cash-settled share-based payment is still equal to the cash paid on settlement.

Classification of share-based payments settled net of tax withholdings –The amendments introduce an exception stating that, for classification
purposes, a share-based payment transaction with employees is accounted for as equity-settled if certain criteria are met.

Accounting for a modification of a share-based payment from cash-settled to equity-settled –. The amendments clarify the approach that companies
are to apply.The new requirements could affect the classification and/or measurement of these arrangements and potentially the timing and amount
of expense recognised for new and outstanding awards.

The amendments are effective for annual periods commencing on or after 1 January 2018 and the Group does not expect a material impact with the
application of this standard.

2.4.6

IFRS 16 Leases
IFRS 16 was published in January 2016. It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both
parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and
related Interpretations. IFRS 16 has one model for lessees which will result in almost all leases being included on the Statement of Financial position.
No significant changes have been included for lessors.

The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted only if the entity also adopts IFRS 15.
The transitional requirements are different for lessees and lessors. The Group have begun assessing the potential impact on the financial statements
resulting from the application of IFRS 16.

2.4.7

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
The amendments require the full gain to be recognised when assets transferred between an investor and its associate or joint venture meet the
definition of a ‘business’ under IFRS 3 Business Combinations. Where the assets transferred do not meet the definition of a business, a partial gain
to the extent of unrelated investors’ interests in the associate or joint venture is recognised. The definition of a business is key to determining the
extent of the gain to be recognised.

The IASB has decided to defer the effective date for these amendments indefinitely. Adoption is still permitted.

[ 33

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2. 4

Standards issued and not yet adopted (cont’d)

2.4.8

Other new standards or amendments for 2016 and forthcoming requirements

The following new or amended standards are not expected to have a significant impact on the Group’s financial statements:
■ IFRS 14 Regulatory Deferral Accounts.
■ Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11).
■ Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38).
■ Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41).
■ Equity Method in Separate Financial Statements (Amendments to IAS 27).
■ Annual Improvements to IFRSs 2012–2014 Cycle – various standards.
■ Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28).
■ Disclosure Initiative (Amendments to IAS 1).

SEGMENT INFORMATION
For management purposes, the Group is organised into four operating segments based on products and services as follows:

Retail banking

Individual customers deposits and consumer loans, overdrafts, credit card facilities and funds transfer facilities.

Corporate banking

- Loans and other credit facilities and deposit and current accounts for corporate and institutional customers.

Treasury

- Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading.

International banking - Handles the Group’s foreign currency denominated banking business and manages relationships with correspondent

banks.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently
from operating profit or loss in the consolidated financial statements. Income taxes are managed on a Group basis and are not allocated to operating
segments.

Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and
expense.

Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenue in 2016 or 2015.

34 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

3. SEGMENT INFORMATION (Cont’d)

The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units:
For the year ended 31 December 2016

Retail
Banking
US$

Corporate
Banking
US$

International Corporate
Finance
US$

Banking
US$

Treasury
US$

Other
US$

Total
US$

Third party income
Impairment losses on loans and advances

29 011 529
(4 527 156)

14 595 988
(3 496 994)

4 813 944
-

451 117
-

660 345
(35 576)

1 987 517
-

51 520 440
(8 059 726)

Net operating income

24 484 373

11 098 994

4 813 944

451 117

624 769

1 987 517

43 460 714

Interest income
Interest expense

15 724 296
(5 021 782)

13 336 078
(4 580 004)

4 070 689
(1 417 555)

Net interest income

10 702 514

8 756 074

2 653 134

-
-

479 424
(55 726)

249 652
-

33 860 139
(11 075 067)

423 698

249 652

22 785 072

Fee and commission income
Depreciation of property and equipment
Amortisation of intangible assets
Segment profit/(loss) before tax
Income tax expense
Other comprehensive income for the year
net of tax

13 287 237
1 002 084
-
466 829
-

1 259 874
48 765
-
1 197 279
-

-
31 329
-
3 182 690
-

451 117
26 261
-
(800 014)
-

180 921
22 665
-
174 604

-
188 292
532 768
1 987 516
- (1 150 738)

15 179 149
1 319 396
532 768
6 208 904
(1 150 738)

(2 970)

Profit/(loss) for the year

466 829

1 197 279

3 182 690

(800 014)

174 604

833 808

5 055 196

As at 31 December 2016
Assets and liabilities
Capital expenditure
Total assets
Total liabilities

997 785

36 759
84 579 341 125 687 660
61 017 973 101 048 104

-
87 613 797
97 437 938

236
10 137
-

723 041
1 757 821
240 957 22 853 035 320 984 927
7 295 995 266 800 010

[ 35

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

3. SEGMENT INFORMATION (Cont’d)

The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units:
For the year ended 31 December 2015

Retail
Banking
US$

Corporate
Banking
US$

International Corporate
Finance
US$

Banking
US$

Treasury
US$

Other
US$

Total
US$

Third party income
Impairment losses on loans and advances

30 779 845
(2 551 763)

19 942 424
(6 944 838)

5 108 349
-

1 597 671
-

992 446
-

975 884
-

59 396 619
(9 496 601)

Net operating income

28 228 082

12 997 586

5 108 349

1 597 671

992 446

975 884

49 900 018

Interest income
Interest expense

13 722 707
(5 246 473)

18 168 196
(7 523 511)

3 254 024
(2 059 002)

Net interest income

8 476 234

10 644 685

1 195 022

-
-

436 786
(289 245)

179 642
-

35 761 355
(15 118 231)

147 541

179 642

20 643 124

17 057 135
1 211 150
-
5 904 945
-

1 774 228
138 300
-
(243 837)
-

-
55 011
-
1 189 656
-

1 597 671
61 312
-
(193 878)
-

555 660
34 234
-
276 368

-
190 895
509 687
975 884
- (2 422 040)

20 984 694
1 690 902
509 687
7 909 138
(2 422 040)

2 970

Profit/(loss) for the year

5 904 945

(243 837)

1 189 656

(193 878)

276 368 (1 443 186)

5 490 068

1 219 309
2 520 282
3 183 641 17 187 304 333 831 107
6 775 798 284 701 387

As at 31 December 2015
Assets and liabilities
Capital expenditure
Total assets
Total liabilities

1 251 784

45 811
126 097 301 120 542 673
83 704 208
76 966 500

1 178
66 724 913
117 254 881

2 200
95 275
-

36 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

INTEREST INCOME

Loans and advances to banks
Loans and advances to customers
Investment securities

INTEREST EXPENSE

Due to banks
Due to customers
Other borrowed funds

NON INTEREST INCOME

6.1

Fee and commission income

Retail banking customer fees
Corporate banking credit related fees
Financial guarantee fees
International banking commissions
Corporate finance fees

6.2

Other income

Quoted and other investments fair value adjustments
Profit/(loss) on disposal of property and equipment
Fair value adjustment on investment properties
Profit on disposal on investment properties
Fair value adjustment on non-current assets held for sale
Rental income
Bad debts recovered
Other operating income

GROUP

COMPANY

2016
US$
1 245 664
29 789 449
2 825 026
33 860 139

2015
US$
2 226 621
32 271 843
1 262 891
35 761 355

2016
US$
-
-
-
-

GROUP

COMPANY

2016
US$
3 903 230
6 833 176
338 661
11 075 067

2015
US$
4 443 681
10 378 937
295 613
15 118 231

2016
US$
-
-
-
-

GROUP

COMPANY

2016
US$
13 287 237
1 029 037
230 837
451 117
180 921
15 179 149

2015
US$
17 057 135
1 567 808
206 420
1 597 671
555 660
20 984 694

2016
US$
-
-
-
-
-
-

GROUP

COMPANY

2016
US$
31 554
368 205
412 006
50 000
(3 000)
142 400
675 006
61 689
1 737 860

2015
US$
(62 654)
(46 924)
118 278
635 500
(3 000)
49 523
430 851
112 551
1 234 125

2016
US$
(819)
-
-
-
-
-
-
-
(819)

2015
US$
-
-
-
-

2015
US$
-
-
-
-
-
-

2015
US$
(5 735)
-
-
-
-
-
-
-
(5 735)

[ 37

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

OPERATING EXPENDITURE

The operating profit is after charging the following:-
Administration costs
Audit fees:
Current year
Prior year
Impairment on land and buildings
Amortisation of intangible assets
Depreciation
Directors’ remuneration

- Fees for services as directors
- Other emoluments

Staff costs -salaries, allowances and related costs

-termination benefits

8.
8.1

TAXATION
Income tax expense/(credit)

Current tax
Capital gains tax
Deferred tax (note 19)

8.2

Reconciliation of income tax charge/(credit)

Based on results for the period at a rate of 25.75%
Tax effect of:
-Income not subject to tax
-Non-deductible expenses
-Tax rate differential on capital gains
-Capital gains tax

8.3

Total taxation charge/(credit) analysed by company

Stewart Holdings (Private) Limited
NMB Bank Limited
NMBZ Holdings Limited

8.4 Current tax assets

At 1 January
Charge for the year
Payments during the year

38 ] NMBZ Holdings Limited Annual Report 2016

GROUP

2016
US$

2015
US$

COMPANY

2016
US$

2015
US$

12 098 932

12 702 704

61 468
84 892
51 600
532 768
1 319 396
620 616

311 431
309 185

85 557
109 325
44 200
509 687
1 690 902
499 024

232 705
266 319

11 407 034
-
26 176 706

10 362 780
868 470
26 872 649

-
-
-
-
-
-

-
-

-
-
-

GROUP

COMPANY

2016
US$
1 497 265
12 234
(358 761)
1 150 738

2015
US$
1 381 742
161 850
878 448
2 422 040

2016
US$
-
-
(41)
(41)

GROUP

COMPANY

2016
US$
1 598 793

(730 316)
274 266
(4 239)
12 234
1 150 738

2015
US$
2 036 603

(155 208)
392 950
(14 155)
161 850
2 422 040

2016
US$
(211)

-
211
(41)
-
(41)

GROUP

COMPANY

2016
US$
1 010
1 149 769
(41)

2015
US$
(2 720)
2 425 049
(289)

1 150 738

2 422 040

2016
US$
-
-
(41)

(41)

-
-
-
-
-
-

-
-

-
-
-

2015
US$
-
-
(289)
(289)

2015
US$
(1 477)

-
3 398
(2 210)
-
(289)

2015
US$
-
-
(289)

(289)

GROUP

COMPANY

2016
US$
(23 075)
1 509 499
(1 854 869)

2015
US$
(1 436 974)
1 543 592
(129 693)

2016
US$
(85 752)
-
-

2015
US$
(85 752)
-
-

(368 445)

(23 075)

(85 752)

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

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 dilutive potential ordinary shares; and
(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.

Profit for the year

9.2

Number of shares

Weighted average shares in issue

Diluted weighted average number of shares

Weighted average number of shares
Effect of dilution:
Share options granted but not issued
Share options approved but not granted

Diluted weighted average number of shares

9.3

Earnings per share

Basic earnings per share (US cents)
Diluted earnings per share (US cents)

2016
US$

2015
US$

5 058 166

5 487 098

2016
384 427 351

2015
384 427 351

412 498 424

384 427 351

4 128 434
23 942 639

412 498 424

1.32
1.23

1.43
1.33

[ 39

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

10.

SHARE CAPITAL

10.1

Authorised

GROUP and COMPANY

2016
Shares
million

2015
Shares
million

2016
US$

2015
US$

Ordinary shares of US$0.00028 each

600

168 000

10.2

Issued and fully paid

10.2.1 Ordinary shares

Ordinary shares

10.2.2 Redeemable ordinary shares

At 1 January

GROUP AND COMPANY

31 Dec
2015
Shares
million
281

31 Dec
2016
US$

78 598

31 Dec
2016
Shares
million
281

281

78 598

31 Dec
2015
US$

78 598

31 December
2016
Shares
million
104

31 December
2015
Shares
million
104

31 December
2016
US$

31 December
2015
US$

29 040

104

29 040

Of the unissued ordinary shares of 215 million shares (2015 - 215 million), options which may be granted in terms of the 2012 ESOS amount to 28
071 073 (2015 - 28 071 073). As at 31 December 2016; 4 128 434 share options had been allocated from the Scheme.

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.

CAPITAL RESERVES

Share premium
Share option reserve
Revaluation reserve
Regulatory

Total capital reserve

11.1

Nature and purpose of reserves

11.1.1 Share premium

GROUP

2016
US$

2015
US$

COMPANY
2016
US$

2015
US$

15 737 548
62 563
-
1 785 136

15 737 548
62 563
2 970
3 746 729

15 737 548
62 563
-
-

17 585 247

19 549 810

15 800 111

This reserve represents the excess amount paid for the shares over and above the nominal value of the shares.

11.1.2 Share option reserve

The share option reserve is used to recognise the value of equity settled share based payment transactions provided to employees, including key
management personnel, as part of their remuneration. Refer to note 39.3 for further details of these plans.

11.1.3 Regulatory reserve

This reserve represents the excess of the regulatory provision when compared to the IAS 39 impairment allowance on loan and advances.

11.1.4 Revaluation reserve

The Reserve represent gains on the revaluation of property and equipment.

40 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

12.

RETAINED EARNINGS
Analysis of retained profit by company

NMBZ Holdings Limited
NMB Bank Limited
Stewart Holdings (Private) Limited

GROUP

2016
US$

2015
US$

742 036
21 437 257
6 525

742 814
14 436 753
(13 508)

COMPANY

2016
US$

742 036
-
-

2015
US$

742 814
-
-

Total

22 185 818

15 166 059

742 036

742 814

13.

REDEEMABLE ORDINARY SHARES

Nominal value (note 10.2.2)
Share premium

GROUP

2016
US$
29 040
14 306 213

2015
US$
29 040
14 306 213

14 335 253

On 30 June 2013 the Company received US$14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V.
(FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were allocated
34 571 429 shares each (total 103 714 287) for individually investing US$4 943 715. This amount, net of share issue expenses, was used to
recapitalise the Bank in order to contribute towards the minimum capital requirements set by the Reserve Bank of Zimbabwe of US$100 million by
31 December 2020.

NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors
have a right on their own discretion at any time after the 5th anniversary (30 June 2018) but before the 9th anniversary (30 June 2022) of its first
subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms as entailed in the
share buy-back agreement. It is a condition precedent that at any point when the share buy-back is being considered, the proceeds used to finance
the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital requirements. Further, no buy-
back option can be exercised by any investor after the 9th anniversary (30 June 2022) of the effective date.

The share buy-back agreement creates a potential obligation for NMBZ Holdings Limited to purchase its own instruments. The shares issued gave
rise to a potential financial liability and are classified as redeemable ordinary shares.

14.

SUBORDINATED LOAN

Balance at 1 January
Interest capitalised
Interest paid

GROUP

2016
US$
1 414 144
158 599
(157 253)

2015
US$
1 407 964
134 676
(128 496)

1 415 490

1 414 144

In 2013, the Bank received a subordinated term loan amounting to US$1.4 million from a Development Financial Institution which attracts an interest
rate of LIBOR plus 10% and has a seven year maturity date (13 June 2020) from the first disbursement date.

The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer.

The Group has not had any defaults on the principal and interest with respect to this subordinated loan during the year ended 31 December
2016.

[ 41

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

15.

TOTAL SHAREHOLDERS’ FUNDS

GROUP

2016
US$

2015
US$

COMPANY

2016
US$

2015
US$

Shareholders’ funds

55 600 406

50 543 864

30 955 998

30 956 776

55 600 406

50 543 864

30 955 998

30 956 776

Shareholders’ funds refer to the total investments made by the shareholders into the Group and it consists of share capital (refer to Note 10), capital
and reserves (refer to Note 11), retained earnings (refer to Note12), redeemable ordinary shares (refer to Note 13) and the subordinated loan (refer
to Note 14).

16.

DEPOSITS AND OTHER LIABILITIES

16.1

Deposits and other liabilities by type

Deposits from banks and other financial institutions**
Current and deposit accounts from customers*

GROUP

COMPANY

2016
US$
50 002 468
210 547 915

2015
US$
63 192 674
214 024 095

2016
US$
-
-

2015
US$
-
-

Total deposits
Trade and other payables*

260 550 383
4 834 137

277 216 769
6 070 474

-
656 568

265 384 520

283 287 243

656 568

* The carrying amounts of current and deposit accounts and trade and other payables approximate the related fair values due to their short term nature.
**Included in deposits from banks and other financial institutions is a loan balance of US$5 263 122 due to Societe de Promotion de Participation
Pour la Cooperation Economique SA (Proparco) respectively. The Group has not had any defaults on the principal and interest with respect to these
loans during the year ended 31 December 2016. However, there were breaches to the financial covenants regarding the following ratios:
■ Non-performing loans ratio - 11% (instead of a maximum of 10%); and
■ Loans loss reserve ratio - 42% (instead of a maximum of 40%).
The Bank will apply for a waiver of the non-compliant ratios by 31 March 2017.
Refer to note 20 with respect to restrictions on cash and cash equivalents

16.2 Maturity analysis

Less than 1 month
1 to 3 months
3 to 6 months
6 months to 1 year
1 to 5 years
Over 5 years

16.3

Sectoral analysis of deposits

Agriculture
Banks and other financial institutions
Distribution
Individuals
Manufacturing
Mining companies
Municipalities and parastatals
Other deposits
Services
Transport and telecommunications companies

42 ] NMBZ Holdings Limited Annual Report 2016

GROUP

2016
US$
185 752 420
35 339 615
2 927 632
6 358 137
29 980 749
191 830
260 550 383

2015
US$
184 324 981
66 129 516
3 241 887
14 969 876
8 550 509
-
277 216 769

GROUP

2015
US$
7 959 554
63 192 674
28 153 680
30 782 718
37 633 942
6 268 507
11 833 310
34 054 452
47 908 714
9 429 218
277 216 769

%
3
19
9
8
15
2
6
14
21
3
100

%
3
23
10
11
14
2
4
12
17
4
100

2016
US$
6 274 099
50 002 468
24 098 216
21 782 045
39 033 359
5 056 123
16 027 950
36 014 266
54 712 221
7 549 636
260 550 383

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

17.

FINANCIAL INSTRUMENTS

17.1

Investment securities

Held to maturity
Loans and receivables

2016
US$
12 476 046
12 268 706
24 744 752

2015
US$
3 817 687
10 730 305
14 547 992

The Group holds Treasury Bills and Government bonds amounting to US$24 744 752 with interest rates ranging from 2% to 5%. Liquidity induced
trades have occurred in the secondary market and there is industry consensus that these trades do not represent free market activity. In light of the
absence of an observable active market for the Treasury Bills, the instruments are measured at amortised cost. Of the total Treasury Bills balance,
a total of US$22 156 958 has been pledged as security on interbank borrowings.

17.2

Maturity analysis of investment securities held to maturity

Less than 1 month
1 to 3 months
3 to 6 months
6 months to 1 year
1 year to 5 years
Over 5 years

17.3

Maturity analysis of investment securities - loans and receivables

Less than 1 month
1 to 3 months
6 months to 1 year
1 year to 5 years
Over 5 years

17.4

Fair values of financial instruments

2016
US$
-
-
-
-
2 424 461
10 051 585
12 476 046

2016
US$
-
168 563
48 341
266 785
11 785 017

2015
US$
-
1 314 802
2 502 885
-
-
-
3 817 687

2015
US$
-
-
6 329 114
3 400 415
1 000 776

12 268 706

10 730 305

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of
judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

[ 43

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

17.

FINANCIAL INSTRUMENTS (cont’d)

17.4

Fair values of financial instruments (cont’d)

Valuation models
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.
■ Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments;
■ Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived

from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted
prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all
significant inputs are directly or indirectly observable from market data; and

■ Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not

based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This
category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable
adjustments or assumptions are required to reflect differences between the instruments.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid
to transfer the liability in an orderly transaction between market participants at the measurement date.

Financial instruments measured at fair value – fair value hierarchy

Trade investments
Quoted investments

31 Dec
2016
US$

88 930
88 650

GROUP

Level 1
US$

-
88 650

177 580

88 650

31 Dec
2015
US$

77 805
68 220

Level 1
US$

-
68 220

146 025

68 220

Level 2
US$

-
-

Level 2
US$

-
-

Level 3
US$

88 930
-

88 930

Level 3
US$

77 805
-

77 805

44 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

17.

FINANCIAL INSTRUMENTS (cont’d)

17.4

Fair values of financial instruments (cont’d)
During the reporting periods ended 31 December 2015 and 31 December 2016, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurements. The trade investments were valued using the net asset value
method.

17.4.1

Financial instruments not measured at fair value
The below table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy
into which each fair value measurement is categorised:

31 December 2016

Assets

Cash and cash equivalents
Loans, advances and other assets
Investment securities

Liabilities
Deposits and other liabilities

31 December 2015

Assets

Cash and cash equivalents
Loans, advances and other assets
Investment in debentures
Investment securities

Liabilities
Deposits and other liabilities

Total carrying
amount
US$

69 431 257
199 617 095
24 744 752
293 793 104

Total carrying
amount
US$

63 439 347
235 088 981
-
14 547 992

GROUP

Level 1
US$

Level 2
US$

Level 3
US$

-
199 617 095
24 744 752
224 361 847

-
-
-
-

-
-

69 431 257
-
-
69 431 257

265 384 520
265 384 520

-
-

265 384 520
265 384 520

Level 1
US$

Level 2
US$

Level 3
US$

63 439 347
-
-
-

-
235 088 981
-
14 547 992

-
-
-
-

-
-

63 439 347

249 636 973

313 076 320

283 287 243
283 287 243

-
-

283 287 243
283 287 243

Cash and cash equivalents
Cash and cash equivalents consists of balances with the Central Bank, other banks and cash with original maturities of three months or less. These
balances are subject to insignificant risk of change in their fair value. It is the Directors’ assessment that the carrying amount of these balances
approximates their fair value at any given time.

Loans, advances and other assets
The estimated fair value of loans, advances and other assets is estimated to approximate the carrying amount due to non-availability of benchmark
interest rates to discount the expected future cash flows thereof. The Directors believe that current interest rates are market related and would
re-issue the loans at the same interest rate if needed. It is from this assessment that Directors believe that the carrying amount of these balances
reasonably approximate fair value as discounting the future cash flow using the current interest rates would not result in significant differences from
the carrying amount.

Investment securities
These financial assets consist of open market treasury bills and government bonds. There is currently no observable active market for these
instruments; or a reliable proxy to discount the expected future cash flows. Directors believe that the carrying amount approximates fair value on
these instruments. In performing this assessment, Directors have determined that interest rates are consistent with the latest transactions that the
Group entered into and the average tenor of the portfolio was short-term in nature.

Deposits and other liabilities
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The
estimated fair value of fixed interest-bearing deposits approximates the carrying amount as interest rates quoted are market related. It is the view of
Directors that the carrying amounts of these assets and liabilities reasonably approximate fair values.

[ 45

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

17.

FINANCIAL INSTRUMENTS (cont’d)

17.4.2 RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS

31 December 2016

Balance at 1 January
Net movement

Balance at 31 December

31 December 2015

Balance at 1 January
Net movement

Balance at 31 December

18.

INVESTMENT IN DEBENTURES

Debentures
Redemption of debentures

GROUP

Loans,
advances and
other assets
US$

Investment
securities
US$

Trade investments
US$

Total
US$

77 805
11 125

235 088 981
(35 471 886)

14 547 992
10 196 760

249 714 778
(25 264 001)

88 930

199 617 095

24 744 752

224 450 777

GROUP
Loans,
advances and
other assets
US$

Investment
securities
US$

Trade investments
US$

Total
US$

81 390
(3 585)

203 363 052
31 725 929

3 874 525
10 673 467

207 318 967
42 395 811

77 805

235 088 981

14 547 992

249 714 778

GROUP

2016
US$
-
-
-

2015
US$
4 787 074
(4 787 074)

The Group had convertible debentures with a carrying amount of US$4 787 074 with a maturity of 5 years from inception. The debentures were at an
interest of 10% per annum. The Group had an option to convert the debentures to equity or redeem the debentures at par on or before the maturity
date of 9 March 2018. The debentures were redeemed at par on 17 March 2015.

19.

DEFERRED TAX

GROUP

COMPANY

Allowance for impairment losses on loans and advances
Bad debts
Prepayments
Quoted and other investments
Non-current assets held for sale
Investment properties
Property and equipment
Staff loans
Unrealised foreign exchange gains
Suspended interest
Deferred income
Assessed losses
Provision for share based payments
Provision for leave pay

2016
US$
(2 138 568)
(908 972)
336 274
8 369
113 065
441 701
494 505
(98 336)
170 795
(530 711)
(66 025)
(11 743)
(4 350)
(70 911)

2015
US$
(2 210 029)
(201 922)
166 012
6 789
113 215
283 451
444 063
(75 544)
219 959
(463 111)
(106 365)
(8 150)
(4 350)
(69 134)

Closing deferred tax asset
Deferred tax asset at the beginning of the year

(2 264 907)
(1 905 116)

(1 905 116)
(2 784 594)

Current year (credit)/charge

(359 791)

879 478

Relating to profit or loss (note 8.1)
Relating to other comprehensive income

(358 761)
(1 030)

878 448
1 030

46 ] NMBZ Holdings Limited Annual Report 2016

2016
US$
-
-
-
491
-
-
-
-
-
-
-
-
-
(4 350)

(3 859)
(3 818)

(41)

(41)
-

2015
US$
-
-
-
532
-
-
-
-
-
-
-
-
-
(4 350)

(3 818)
(3 529)

(289)

(289)
-

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

20.

CASH AND CASH EQUIVALENTS

Balances with Reserve Bank of Zimbabwe

GROUP

2016
US$

2015
US$

Balances with the Central Bank

36 166 732

26 238 681

Balances with other banks and cash

Current, nostro accounts and cash
Interbank placements

8 754 525
24 500 000

11 700 666
25 500 000

69 421 257

63 439 347

COMPANY

2016
US$

53
-

2015
US$

53
-

Balances with the Central Bank, other banks and cash are used to facilitate customer transactions which include payments and cash withdrawals.
During the year the Central Bank through Exchange Control Operational Guide 8 (ECOGAD8) introduced prioritisation criteria which has to be
followed when making foreign payments on behalf of customers. After prioritisation, foreign payments are then made subject to availability of bank
balances with our foreign correspondent banks, resulting in possible delay of payment of telegraphic transfers. However, no delay is expected in the
settlement of local transactions through the Real Time Gross Settlement (RTGS) system.

Of the cash and cash equivalents balance an amount of US$526 316 was pledged to Proparco as collateral for offshore lines of credit.

21.

LOANS, ADVANCES AND OTHER ASSETS

Fixed term loans
Local loans and overdrafts

Other assets

21.1.1 Maturity analysis

Less than 1 month
1 to 3 months
3 to 6 months
6 months to 1 year
1 to 5 years
Over 5 years

GROUP

2016
US$

2015
US$

16 889 687
178 602 573

25 138 443
207 408 465

195 492 260
4 124 835
199 617 095

232 546 908
2 542 073
235 088 981

COMPANY

2016
US$

-
-

-
7 385
7 385

GROUP

2016
US$

2015
US$

COMPANY

2016
US$

86 086 528
9 247 720
7 423 426
16 327 018
86 773 700
-

136 146 912
24 125 652
2 387 188
15 686 184
64 895 082
-

243 241 018
(8 582 636)
(2 111 474)

-
-
-
-
-
-

-
-
-

2015
US$

-
-

-
7 385
7 385

2015
US$

-
-
-
-
-
-

-
-
-

Total loans and advances
Allowance for impairment losses on loans and advances (note 21.3)
Provision for suspended interest

205 858 392
(8 305 117)
(2 061 015)

Other assets (note 21.5)

195 492 260
4 124 835

232 546 908
2 542 073

199 617 095

235 088 981

-
7 385

7 385

-
7 385

7 385

[ 47

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

21.

LOANS, ADVANCES AND OTHER ASSETS (cont’d)

21.2

Sectoral analysis of utilisations

Agriculture and horticulture
Conglomerates
Distribution
Food & beverages
Individuals
Manufacturing
Mining
Services

2016
US$

22 172 296
8 149 399
22 957 893
7 016 516
90 381 441
14 562 333
789 502
39 829 012

GROUP

2015
US$

13 907 259
11 348 334
37 364 138
5 692 742
101 585 312
29 774 899
1 067 328
42 501 006

11
4
11
4
44
7
-
19

6
5
16
2
42
12
-
17

205 858 392

100

243 241 018

100

The material concentration of loans and advances are with individuals 44% (2015 - 42%) and services sector at 19% (2015 - 17%).

21.3

Allowances for impairment losses on loans, advances and debentures

Specific
US$

At 1 January
Recognised in profit or loss
Bad debts written off

7 574 789
6 970 128
(8 337 245)

2016
Portfolio
US$

1 007 847
1 089 598
-

GROUP

Total
US$

Specific
US$

8 582 636
8 059 726
(8 337 245)

10 626 997
8 651 949
(11 704 157)

2015
Portfolio
US$

163 195
844 652
-

Total
US$

10 790 192
9 496 601
(11 704 157)

At 31 December

6 207 672

2 097 445

8 305 117

7 574 789

1 007 847

8 582 636

During the period under review, the Bank reviewed the basis and assumptions for recognising the portfolio impairment allowance in view of the
current macro and micro economic conditions prevailing in Zimbabwe. The review resulted in an increase in the level of the portfolio impairment
allowance recognised by the Group in proportion to its loan book size.

21.4

Non-performing loans and advances

Gross non-performing loans and advances
Allowance for impairment losses on loans and advances
Retail loans insurance
Interest in suspense

Net non-performing loans and advances

GROUP

2015
2016
US$
US$
32 092 184
22 015 828
(7 574 789)
(6 207 672)
(1 577 628)
(1 682 840)
(1 748 031) (1 798 490)

12 482 497

21 036 065

The net non-performing loans and advances represent recoverable portions covered by realisable security, which includes guarantees, cessation of
debtors, mortgages over residential properties, equities and promissory notes all fair valued at US$17 573 875 (2015 -US$22 797 088).

48 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

21.

LOANS, ADVANCES AND OTHER ASSETS (cont’d)

21.5

Other assets

Service deposits*
Prepayments and stocks
Other receivables

GROUP

2016
US$

1 725 910
1 555 840
843 085

2015
US$

1 171 927
913 532
456 614

4 124 835

2 542 073

COMPANY

2016
US$

-
-
7 385

7 385

2015
US$

-
-
7 385

7 385

*Service deposits relate to amounts pledged as collateral for VISA and the RTGS accounts.

21.6

Loans to officers

Included in advances and other accounts (note 21.1) are loans to officers:-
At 1 January
Net additions during the year

Fair value adjustment

Balance at 31 December

GROUP

2016
US$

4 893 893
2 487 222

7 381 115
(369 784)

2015
US$

3 135 666
2 043 080

5 178 746
(284 853)

7 011 331

4 893 893

Loans to officers amounting to US$3 723 737 were granted at a preferential rate of 6% per annum as part of their overall remuneration agreements,
US$2 994 905 was granted at a commercial rate of 13% per annum and the balance amounting to US$662 473 being mortgage loans which were
granted at a commercial rate of 12% per annum.

21.7

The terms and conditions applicable to loans and advances are as follows:

Product

Overdraft

Loan

Tenure

Interest rate

Payable on demand

Loan payable over a maximum period of 120
months (includes mortgage loans).

Penalty interest rate of ten percentage points
above loan rate up to a maximum penalty rate of
18% per annum.

From 8% per annum up to a maximum of 18%
per annum. Loans to employees and executive
directors are at a discounted interest rate.

Bankers Acceptances

Loan payable over a minimum period of 30 days
up to 90 days.

Average of 13% per annum.

[ 49

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

22.

NON-CURRENT ASSETS HELD FOR SALE

At 1 January 2015
Fair value adjustment

GROUP

COMPANY

2016
US$
2 264 300
(3 000)

2015
US$
2 267 300
(3 000)

2 261 300

2 264 300

2016
US$
-
-

2015
US$
-
-

The Group is in possession of land with a fair value of US$2 264 300 at year end. The Group entered into a sale agreement for a portion of the land
in 2012 (at a price of US$2 150 000), however the execution and finalisation of the sale under this contract has been pending since then. The buyer
has expressed commitment towards finalisation of the sale and the disposal process is now expected to be completed within the next twelve months.
The disposal will improve the Group’s cash flows. The fair value adjustment is included under other income (note 6.2).

Measurement of fair value

Fair value hierarchy
The fair value of non-current assets held for sale was determined by an independent professional valuer, PMA Real Estate (Private) Limited. The
valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section and was
derived with reference to market information close to the date of the valuation. Non-current assets held for sale are measured at fair value.

The values were arrived at by applying weighted average rate of US$7.50 per square metre.

Level 2
The fair value of non-current assets held for sale of U$2 261 300 (2015 – US$2 264 300) has been categorised under level 2 in the fair value
hierarchy based on the inputs used for the valuation technique highlighted above. (see note 2.3.5 use of judgement and estimates).

23.

TRADE INVESTMENTS

Unlisted

Directors’ valuation

GROUP

2016
US$

2015
US$

88 930

77 805

88 930

77 805

COMPANY

2016
US$

2015
US$

Unlisted trade investments represent an equity investment in SWIFT. The trade investments were valued using the net asset value method at 31
December 2016 (see note 17.4 on fair value measurement).

50 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

24.

INVESTMENTS IN ASSOCIATES

Investment in Altiwave Investments (Private) Limited
The Group had a 25.5 % interest in Altiwave Investments (Private) Limited which is the holding company of Lobels (Private) Limited. The investment
arose from a Scheme of Arrangement agreed to by Lobels Holdings (Private) Limited shareholders and creditors (banks, suppliers and employees).
Lobels Holdings (Private) Limited is in the bread and confectionery business. The investment was disposed off on 17 March 2015.

Altiwave Investments (Private) Limited is not listed on any public exchange. The following table illustrates the summarised unaudited financial
information of Altiwave (Private) Limited.

Summary of associate’s statement of financial position

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Share of associate’s equity (25.5%)
Associate’s revenue and profit
Revenue
Profit
Share of associate’s profit (25.5%)
Reconcilliation of carrying amount
1 January
Share of profit in associate
Allowance for impairment

GROUP

31 December
2016
US$

28 February
2015
US$

12 798 956
10 243 534
(5 212 870)
(30 857 918)
(13 028 298)
(3 322 216)

5 251 729
422 251
107 674

-
107 674
(107 674)

-
-
-
-
-
-

-
-
-

-
-
-
-

The investment in Altiwave Investments (Private) Limited had been fully impaired as the company had negative equity as at date of disposal, 17
March 2015.

25.

INVESTMENTS IN GROUP COMPANIES

25.1

Subsidiaries

Investments in subsidiaries:
-NMB Bank Limited
-Stewart Holdings Limited

COMPANY

2016
US$

2015
US$

31 491 006
14 680

31 505 686

25.2

Shareholding
The subsidiaries and associates, all of which are registered in Zimbabwe, and the extent of the Group’s beneficial interest therein and their principal
business activities are listed below:-

NMB Bank Limited
Stewart Holdings (Private) Limited

2016
100% (Banking)
100% (Equity holdings)

2015
100% (Banking)
100% (Equity Holdings)

The consolidated financial statements include the financial information of the subsidiaries and associates listed above.

26.

QUOTED AND OTHER INVESTMENTS

Quoted investments

GROUP

COMPANY

2016
US$
88 650

2015
US$
68 220

2016
US$
9 831

2015
US$
10 650

The quoted investments comprise shares stated for year-end purposes at the last trading date of 31 December 2016. As these investments are
trading on an active market they have been classified as Level 1 in the fair value hierarchy.

[ 51

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

27.

INVESTMENT PROPERTIES

At 1 January
Improvements
Fair value adjustments
Transfer from property and equipment
Disposal

At 31 December

GROUP

2016
US$

2015
US$

8 125 800
5 794 464
412 006
-
(130 000)

4 453 300
8 230 860
118 278
67 862
(4 744 500)

14 202 270

8 125 800

Investment properties comprise commercial and residential properties that are leased out to third parties and land held for future development. No
properties were encumbered.

Rental income amounting to US$142 400 (2015 - US$49 523) was received and no operating expenses were incurred on the investment properties
in the current year due to the net leasing arrangement on the properties.

Included in investment property is a property which was acquired as part of the foreclosure process with marketability restrictions measured at US$3
201 470 as at 31 December 2016. The Group has no restrictions on the realisability of all the remaining investment properties and no contractual
obligations to purchase, construct or develop the investment properties or for repairs, maintenance and enhancements

Measurement of fair value

Fair value hierarchy
The fair value of the Group’s investment properties as at 31 December 2016 has been arrived at on the basis of valuations carried out by independent
professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the
policy as set out in the accounting policies section and was derived with reference to market information close to the date of the valuation.

Level 2
The fair value for investment properties of US$7 382 270 (2015 - US$2 830 800) has been categorised under level 2 in the fair value hierarchy based
on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 2 fair values:

At 1 January
Improvements
Disposals
Fair value adjustments

Balance at 31 December

31 December
2016
US$
2 830 800
3 988 019
-
563 451

31 December
2015
US$
2 673 300
3 200 000
(3 200 000)
157 500

7 382 270

2 830 800

Level 3
The fair value for investment properties of US$6 820 000 (2015 - US$5 295 000) has been categorised under level 3 in the fair value hierarchy based
on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level fair values:

At 1 January
Improvements
Transfer from Property and Equipment
Disposals
Fair value adjustments

Balance at 31 December

31 December 31 December

2016
US$
5 295 000
1 806 445
-
(130 000)
(151 445)

2015
US$
1 780 000
5 030 860
67 862
(1 544 500)
(39 222)

6 820 000

5 295 000

The values were arrived at by applying yield rates of 10% on rental values of between US$5 - US$10 per square metre. The properties are leased
out under operating lease to various tenants.

52 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

27.

INVESTMENT PROPERTIES (cont’d)

Valuation technique and significant unobservable inputs
The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable
inputs used.

Valuation technique

Significant unobservable inputs

inter-relationship between key
unobservable inputs and fair value
measurement

investment method

The
(Discounted
cash flows) was used to value all income
producing properties.

■ Weighted average expected market rental

growth (20%);

The estimated fair value would increase /
(decrease) if:

■ Void period (average 3 months after the end

■ expected market rental growth were

of each lease);

higher/ (lower);

The direct comparison method was
applied on all residential properties

■ Occupancy rate (55%); and
■ Average market yield of 8%.

28.

INTANGIBLE ASSETS

Cost
Balance at 1 January 2015

Acquisitions

Balance at 1 January 2016
Acquisitions

Balance at 31 December 2016

Accumulated amortisation and impairment
Balance at 1 January 2015
Amortisation for the year

Balance at 1 January 2016
Amortisation for the year

Balance at 31 December 2016

Carrying amount
At 31 December 2016

At 1 January 2016

At 1 January 2015

The amortisation expense of intangible assets is included under operating expenditure (note 7).

■ void periods were shorter/(longer);
■ the occupancy rates were higher

(lower); and

■ the risk adjusted discount rates were

lower/ (higher).

Work in
Progress
US$

Computer
Software
US$

Total
US$

208 673

2 326 292

2 534 965

19 922

228 417

248 339

228 595
-

2 554 709
490 417

2 783 304
490 417

228 595

3 045 126

3 273 721

-
-

584 232
509 687

1 093 919
532 768

1 626 687

228 595

1 418 439

1 647 034

228 595

1 460 790

1 689 385

208 673

1 742 060

1 950 733

[ 53

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

29. PROPERTY AND EQUIPMENT

Cost
At 1 January 2015
Additions
Capitalisation
Revaluation loss
Disposals
Reclassification to
investment properties

Work in progress
US$

101 375
585 511
(33 513)
-
-

(67 862)

Freehold
Capital
Computers
US$

2 605 706
334 338
33 513
-
(11 220)

Motor
vehicles
US$

4 161 425
418 383
-
-
(869 083)

Furniture &
equipment
US$

3 093 648
540 202
-
-
-

Land &
buildings
US$

2 904 518
393 509
-
(40 200)
-

Total
US$

12 866 672
2 271 943
-
(40 200)
(880 303)

(67 862)

At 1 January 2016

585 511

2 962 337

3 710 725

3 633 850

3 257 827

14 150 250

Additions
Capitalisations
Revaluation loss
Disposals

188 947
(585 511)
-
-

541 737
173 827
-
-

192 113
180 000
-
(2 799 390)

215 716
64 348
-
-

128 891
167 336
(55 600)
-

1 267 404
-
(55 600)
(2 799 390)

At 31 December 2016

188 947

3 677 901

1 283 448

3 913 914

3 498 454

12 562 664

Accumulated depreciation
At 1 January 2015
Charge for the year
Disposals

At 1 January 2016
Charge for the year
Disposals

At 31 December 2016

Carrying amount
At 31 December 2016

-
-
-

1 386 055
392 601
(3 197)

1 775 459
427 666
-

2 872 564
775 381
(659 946)

2 987 999
370 383
(2 586 182)

2 121 154
464 885
-

2 586 039
458 831
-

141 632
58 035
-

199 667
62 516
-

6 521 405
1 690 902
(663 143)

7 549 164
1 319 396
(2 586 182)

2 203 125

772 200

3 044 870

262 183

6 282 378

188 947

1 474 776

511 248

869 044

3 236 271

6 280 286

At 1 January 2016

585 511

1 186 878

722 726

1 047 811

3 058 160

6 601 086

At 1 January 2015

101 375

1 219 651

1 288 861

972 494

2 762 886

6 345 267

54 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

29.

PROPERTY AND EQUIPMENT (cont’d)

Measurement of fair value

Fair value hierarchy
Immovable properties were revalued as at 31 December 2016 on the basis of valuations carried out by independent professional valuers, PMA Real
Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting
policies section. All movable assets are measured at their carrying amounts which are arrived at by the application of a depreciation charge on their
cost values over the useful lives of the assets.

The valuation of land and buildings was arrived by applying yield rates of 10% on rental levels of between US$5 - US$10 per square metre.

The carrying cost less accumulated depreciation of the land and buildings had revaluations not been performed would be US$3 887 520 as at 31
December 2016 (2015 - US$3 669 148).

Level 3
The fair value of immovable properties of US$3 236 271 (2015 - US$3 058 160) has been categorised under level 3 in the fair value hierarchy based
on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 3 fair values:

At 1 January
Additions
Transfers from work in progress
Revaluation loss
Depreciation

Balance at 31 December

31 December
2016
US$
3 058 160
128 891
167 336
(55 600)
(62 516)

31 December
2015
US$
2 762 886
393 509
-
(40 200)
(58 035)

3 236 271

3 058 160

Valuation technique and significant unobservable inputs
The following table shows the valuation technique used in measuring the fair value of freehold land and buildings, as well as the significant
unobservable inputs used.

Valuation technique

Significant unobservable inputs

inter-relationship between key
unobservable inputs and fair value
measurement

The Direct Comparison Method was
applied on all residential properties

■ Weighted average expected market rental

growth (20%);

■ Average market yield of 6%.
■ Marketability restrictions on a specific

The estimated fair value would increase /
(decrease) if:

■ expected market rental growth were

higher/ (lower); and

property with a fixed purchase consideration.

■ the risk adjusted discount rates were

lower/ (higher).

[ 55

Notes To The Financial Statements (Cont’d)
for the year ended 31 December 2016

30.

INTEREST RATE REPRICING AND GAP ANALYSIS
The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The financial assets and financial liabilities are categorised
by the earlier of contractual repricing or maturity dates.

30.1

Total position

At 31 December 2016

Up to 1
month
US$

1 month
to 3 months
US$

Assets
Cash and cash equivalents
Current tax assets
Investment securities
Quoted and other investments
Loans, advances and
other assets
Deferred tax
Non-current assets held for sale
Intangible assets
Property and equipment
Investment properties

69 421 257
-
-
-

75 720 395
-
-
-
-
-

-
-
168 563
-

9 247 720
-
-
-
-
-

GROUP

3 months
to 1 year
US$

-
-
315 126
-

23 750 444
-
-
-
-
-

1 year to
5 years
US$

Non-interest
bearing
US$

Total
US$

-
-
24 261 063
-

86 773 701
-
-
-
-
-

-
368 445
-
177 580

4 124 835
2 264 907
2 261 300
1 647 034
6 280 286
14 202 270

69 421 257
368 445
24 744 752
177 580

199 617 095
2 264 907
2 261 300
1 647 034
6 280 286
14 202 270

145 141 652

9 416 283

24 065 570

111 034 764

31 326 657

320 984 926

Liabilities and equity
Deposits and other liabilities
Redeemable ordinary shares
Equity
Subordinated loan

185 752 420
-
-
-

35 339 615
-
-
-

9 285 769
-
-
-

30 172 579
-
-
1 415 490

4 834 137
14 335 253
39 849 663
-

265 384 520
14 335 253
39 849 663
1 415 490

185 752 420

35 339 615

9 285 769

31 588 069

59 019 053

320 984 926

Interest rate repricing gap

(40 610 768)

(25 923 332) 14 779 801 79 446 695

(27 692 396)

Cumulative gap

(40 610 768)

(66 534 100)

(51 754 299)

27 692 396

56 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

30.

30.1

Total position

At 31 December 2015

Up to 1
month
US$

1 month
to 3 months
US$

3 months
to 1 year
US$

1 year to
5 years
US$

Non-interest
bearing
US$

Total
US$

GROUP

Assets
Cash and cash equivalents
Current tax assets
Investment securities
Investment in debentures
Quoted and other investments
Loans, advances and
other assets
Deferred tax
Non-current assets held for sale
Intangible assets
Property and equipment
Investment properties

Liabilities and equity
Deposits and other liabilities
Redeemable ordinary shares
Equity
Subordinated loan

63 439 347
-
-
-
-

125 452 802
-
-
-
-
-
188 892 149

184 324 981
-
-
-

-
-
1 314 802
-
-

24 125 652
-
-
-
-
-
25 440 454

66 129 516
-
-
-

-
-
8 831 999
-
-

18 073 372
-
-
-
-
-
26 905 371

18 211 763
-
-
-

-
-
4 401 191
-
-

64 895 082
-
-
-
-
-
69 296 273

-
23 075
-
-
146 025

2 542 073
1 905 116
2 264 300
1 689 385
6 601 086
8 125 800
23 296 860

63 439 347
23 075
14 547 992
-I
146 025

235 088 981
1 905 116
2 264 300
1 689 385
6 601 086
8 125 800
333 831 107

8 550 509
-
-
1 414 144

6 070 474
14 335 253
34 794 467
-

283 287 243
14 335 253
34 794 467
1 414 144

184 324 981

66 129 516

18 211 763

9 964 653

55 200 194

333 831 107

Interest rate repricing gap

4 567 168

(40 689 062) 8 693 608 59 331 620

(31 903 334)

Cumulative gap

4 567 168

(36 121 894)

(27 428 286)

31 903 334

[ 57

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

31.

INTEREST RATE REPRICING AND GAP ANALYSIS
The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in United States Dollars only. The financial
assets and liabilities are categorised by the earlier of contractual repricing or maturity dates.

31.1. United States dollars

At 31 December 2016

Up to 1
month
US$

1 month
to 3 months
US$

Assets
Cash and cash equivalents
Current tax assets
Investment securities
Quoted and other investments
Loans, advances and
other assets
Deferred tax
Investment properties
Intangible assets
Property and equipment
Non-current assets held for sale

60 109 588
-
-
-

75 345 696
-
-
-
-
-

-
-
168 563
-

9 247 720
-
-
-
-
-

GROUP

3 months
to 1 year
US$

-
-
315 126
-

23 750 444
-
-
-
-
-

1 year to
5 years
US$

Non-interest
bearing
US$

Total
US$

-
-
24 261 063
-

86 773 701
-
-
-
-
-

-
368 445
-
88 650

4 124 835
2 264 907
2 261 300
1 647 034
6 280 286
14 202 270

60 109 588
368 445
24 744 752
88 650

199 242 396
2 264 907
2 261 300
1 647 034
6 280 286
14 202 270

135 455 284

9 416 283

24 065 570

111 034 764

31 237 727

311 209 628

Liabilities and equity
Deposits and other liabilities
Redeemable ordinary shares
Equity
Subordinated loan

178 196 328
-
-
-

35 339 615
-
-
-

9 285 769
-
-
-

30 172 579
-
-
1 415 490

4 834 137
14 335 253
39 849 663
-

257 828 428
14 335 253
39 849 663
1 415 490

178 196 328

35 339 615

9 285 769

31 588 069

59 019 053

313 428 834

Interest rate repricing gap

(42 741 044)

(25 923 332)

14 779 801 79 446 695

(27 781 326)

(2 219 206)

Cumulative gap

(42 741 044)

(68 664 376)

(53 884 575)

25 562 120

(2 219 206)

58 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

31.

31.1. United States dollars

At 31 December 2015

GROUP

Up to 1
month
US$

1 month
to 3 months
US$

3 months
to 1 year
US$

1 year to
5 years
US$

Non-interest
bearing
US$

Total
US$

Assets
Cash and cash equivalents
Current tax assets
Investment securities
Investment in debentures investments
Quoted and other investments
Loans, advances and
other assets
Deferred tax
Non-current assets held for sale
Intangible assets
Property and equipment
Investment properties

58 375 898
-
-
-
-

124 949 290
-
-
-
-
-

-
-
1 314 802
-
-

24 125 652
-
-
-
-
-

-
-
8 831 999
-
-

18 073 372
-
-
-
-
-

-
-
4 401 191
-
-

64 895 082
-
-
-
-
-

-
23 075
-
-
68 220

2 542 073
1 905 116
2 264 300
1 689 385
6 601 086
8 125 800

58 375 898
23 075
14 547 992
-
68 220

234 585 469
1 905 116
2 264 300
1 689 385
6 601 086
8 125 800

183 325 188

25 440 454

26 905 371

69 296 273

23 219 055

328 186 341

Liabilities and equity
Deposits and other liabilities
Redeemable ordinary shares
Equity
Subordinated loan

172 295 815
-
-
-

66 129 516
-
-
-

18 211 763
-
-
-

8 550 509
-
-
1 414 144

6 070 474
14 335 253
34 794 467
-

271 258 077
14 335 253
34 794 467
1 414 144

172 295 815

66 129 516

18 211 763

9 964 653

55 200 194

321 801 941

Interest rate repricing gap

11 029 373

(40 689 062)

8 693 608 59 331 620

(31 981 139)

6 384 400

Cumulative gap

11 029 373

(29 659 689)

(20 966 081)

38 365 539

6 384 400

[ 59

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

32.

INTEREST RATE REPRICING AND GAP ANALYSIS
The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than United States
Dollars. The amounts are shown at the equivalent values in United States Dollars, the presentation currency. The financial assets and liabilities
are categorised by the earlier of contractual repricing or maturity dates.

32.1. Other foreign currencies

At 31 December 2016

GROUP

Up to 1
month
US$

1 month
to 3 months
US$

3 months
to 1 year
US$

1 year to
Non-interest
5 years bearing
US$

US$

Total
US$

Assets
Cash and cash equivalents
Quoted and other instruments
Loans, advances and other assets

Liabilities and equity
Deposits and other liabilities
Equity

9 311 669
-
374 699

9 686 368

7 556 092
-
7 556 092

Interest rate repricing gap

2 130 276

-
-
-

-
88 930
-

9 311 669
88 930
374 699

- -

88 930

9 775 298

-
-
-

7 556 092
-
7 556 092

88 930

2 219 206

Cumulative gap

2 130 276

2 219 206

60 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

32.

INTEREST RATE REPRICING AND GAP ANALYSIS
The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than United States
Dollars. The amounts are shown at the equivalent values in United States Dollars, the presentation currency. The financial assets and liabilities are
categorised by the earlier of contractual repricing or maturity dates.

32.1. Other foreign currencies

At 31 December 2015

GROUP

Up to 1
month
US$

1 month
to 3 months
US$

3 months
to 1 year
US$

1 year to
Non-interest
5 years bearing
US$

US$

Total
US$

Assets
Cash and cash equivalents
Investment securities
Quoted and other instruments
Loans, advances and other assets

Liabilities and equity

Deposits and other liabilities
Equity

5 063 449

-
503 512

5 566 961

12 029 166
-
12 029 166

Interest rate repricing gap

(6 462 205)

-
-

-
-
-

-
-

-
-
-

-
-

-
-
-

5 063 449

77 805
-

77 805
503 512

77 805

5 644 766

-
-
-

12 029 166
-
12 029 166

77 805

(6 384 400)

Cumulative gap

(6 462 205)

(6 384 400)

[ 61

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

33.

FOREIGN EXCHANGE POSITIONS
The table below indicates the currencies to which the Group had significant exposure at 31 December on all its assets and liabilities. The analysis
reflects the mismatch by currency. The amounts are shown at the equivalent values in United States Dollars, the presentation currency.

33.1

At 31 December 2016

US$
US$

60 109 588
24 744 752
88 650

199 242 396
2 261 300
6 280 286
14 202 270
2 264 907
368 445
1 647 034

RAND
US$

8 357 416
-
-

374 614
-
-
-
-
-
-

GROUP

EUR
GBP
US$ US$

103 746
-
-

234 004
-
88 930

51
-
-
-
-
-
-

6
-
-
-
-
-
-

BWP
US$

616 503
-
-

28
-
-
-
-
-
-

TOTAL

US$

69 421 257
24 744 752
177 580

199 617 095
2 261 300
6 280 286
14 202 270
2 264 907
368 445
1 647 034

311 209 628

8 732 030

103 797

322 940

616 531

320 984 926

Assets
Cash and cash equivalents
Investment securities
Quoted and other investments
Loans, advances and
other assets
Non-current assets held for sale
Property and equipment
Investment properties
Deferred tax
Current tax assets
Intangible assets

Liabilities and equity

Deposits and other liabilities
Subordinated term loan
Redeemable Ordinary shares
Equity

257 828 428
1 415 490
14 335 253
39 849 663

6 757 766
-
-
-

42 215
-
-
-

486 685
-
-
-

269 426
-
-
-

265 384 520
1 415 490
14 335 253
39 849 663

313 428 834

6 757 766

42 215

486 685

269 426

320 984 926

Net foreign exchange position

(2 219 206)

1 974 264

61 582

(163 745)

347 105

62 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

33.

33.1

At 31 December 2015

US$
US$

RAND

GBP EUR

US$

TOTAL
BWP
US$ US$

GROUP

58 375 898
14 547 992
68 220

234 585 469
2 264 300
6 601 086
8 125 800
1 905 116
23 075
1 689 385

4 383 218
-
-

501 307
-
-
-
-
-
-

55 638
-
-

1 353
-
-
-
-
-
-

363 351
-
77 805

261 242
-
-

852
-
-
-
-
-
-

-
-
-
-
-
-
-

63 439 347
14 547 992
146 025

235 088 981
2 264 300
6 601 086
8 125 800
1 905 116
23 075
1 689 385

Liabilities and equity

328 186 341

4 884 525

56 991

442 008

261 242

333 831 107

Deposits and other liabilities
Subordinated term loan
Redeemable Ordinary Shares
Equity

271 258 077
1 414 144
14 335 253
34 794 467

11 570 506
-
-
-

144 633
-
-
-

264 495
-
-
-

49 532
-
-
-

283 287 243
1 414 144
14 335 253
34 794 467

321 801 941

11 570 506

144 633

264 495

49 532

333 831 107

Net foreign exchange Position

6 384 400

(6 685 981)

(87 642)

177 513

211 710

[ 63

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

34.

CONTINGENT LIABILITIES

Guarantees
Facilities approved but not drawn down
Irrevocable Letters of Credit

GROUP

2016
US$

2015
US$

2 159 937
25 175 267
450 000

5 305 263
39 468 072
1 264 607

27 785 204

46 037 942

The Group enters into various irrevocable commitments and contingent liabilities in its normal course of business in order to meet financial needs of
customers. These obligations are not recognised on the statement of financial position, but contain credit risk and are therefore part of the overall
risk of the Group.

Guarantees commit the Group to make payments on behalf of clients in the event of a specified act. Guarantees carry the same credit risk as loans
and advances to customers.

Facilities approved but not drawn down represent contractual commitments to advance loans and revolving credits. These have fixed expiry dates
and may expire without being drawn upon, hence total contract amounts do not necessarily represent future cash requirements.

35.

CAPITAL COMMITMENTS

Capital expenditure contracted for
Capital expenditure authorised but not yet contracted for

At 31 December

Capital commitments will be financed from the Group’s own resources.

GROUP

2016
US$

2015
US$

69 315
5 379 915

807 000
3 516 220

5 449 230

4 323 220

36.

ASSETS UNDER CUSTODY
In 2014, the Group received Treasury Bills from the Reserve Bank of Zimbabwe amounting to US$2 706 327 on behalf of its Tobacco Retention
Scheme customers. A third of the Treasury Bills mature in April 2017, April 2018 and April 2019. These Treasury Bills are currently held off balance
sheet.

37.

OPERATING LEASE COMMITMENTS

Lease commitments

Up to 1 year
1 – 5 years

GROUP

2016
US$

2015
US$

4 581 665

6 346 410

916 333
3 665 332

1 280 147
5 066 263

Lease commitments relate to future rental commitments up to the expiry of the lease agreements. The amount of operating lease expenses
recognised in profit or loss is USD$1 061 072.

64 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

38.

RELATED PARTIES
As required by IAS 24 Related Party Disclosure, the Board’s view is that non-executive directors, executive directors and executive management
constitute the key management of the Group. Accordingly, key management remuneration is disclosed below.

38.1

Compensation of key management personnel of the Group

Short term employee benefits
Post employment benefits
Termination benefits

38.2 Key management interest in employee share options

At 31 December 2016, key management held options to purchase 793 125 ordinary shares of the Company.

38.3

Balances of loans to directors, officers and others
Loans to directors and officers or their companies are included in advances and other accounts (note 21.1).

Non - executive directors
Executive directors
Officers (Note 21.6)
Directors’ companies
Officers’ companies

Fair value adjustment

GROUP

2016
US$

934 396
62 150
-

2015
US$

873 038
57 406
868 470

996 546

1 798 914

GROUP

2016
US$
-
240 705
7 381 115
-
-

7 621 820
(381 887)

2015
US$
-
136 276
5 178 746
-
-

5 315 022
(293 377)

7 239 933

5 021 645

38.4 Other related party transactions

The Group outsourced services of a non-executive director in respect of consultancy services for Group employee contracts. This service was
outsourced at arms length at an amount of US$4 500.

38.5

Borrowing powers

Holding Company
In terms of the existing Articles of Association, Article 102, the directors may from time to time, at their discretion, borrow or secure the payment of
any sum or sums of money for the purposes of the Company without any limitation.

39.

EMPLOYEE BENEFITS

39.1 Pension Fund

All eligible employees of the Group contribute to the NMB Bank Pension Fund, which is a defined contribution plan.

The assets of the Pension Fund are held separately from those of the Group in funds under the control of Trustees. The pension fund assets
included 878 344 shares in NMBZ Holdings Limited as at 31 December 2016.

[ 65

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

39.

EMPLOYEE BENEFITS (cont’d)

39.2 Expense recognised in profit or loss

Defined Contribution Plan - NSSA
Defined Contribution Plan - NMB Bank Pension Fund

GROUP

2016
US$
191 221
558 670

2015
US$
182 568
659 921

749 891

842 489

The expense is recognised in profit or loss as part of staff costs under operating expenses (note 7).

39.3

Employee Share Option Scheme

In terms of the Employee Share Option Scheme, up to a maximum of 10% of the issued share capital may be granted by the Directors to senior
employees by way of options. Each set of options is exercisable at any time within a period of five years from the date the options are granted and
the issue price is based on the higher of nominal value of the shares and the middle market price derived from the Zimbabwe Stock Exchange prices
for the trading day immediately preceding the date of offer. The options vest immediately from date of issue and the fair value of the options is
estimated at the grant date using the Black – Scholes option pricing model, taking into account the terms and conditions upon which the instruments
were granted.

Movements in the year
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in share options during the year.

GROUP and COMPANY

WAEP$

2016 2015
WAEP$
No.
000’s

0.036
-
-
-

4 128 434
-
-
-

0.04
-
-
-

0.04

Outstanding as at 1 January
Lapsed
Issued
Exercised

No.
000’s

4 128 434
-
-
-

Outstanding as at 31 December

4 128 434

0.036

4 128 434

Terms of options outstanding at 31 December 2016

Expiry date

18 June 2022

GROUP and COMPANY

Exercise price
US$
0.04

2016
Shares

4 128 434
4 128 434

39.4

National Social Security Authority Scheme
All employees of the Group are members of the National Social Security Authority Scheme, a defined contribution plan to which both the employer
and the employees contribute.

Contributions by the employer are recognised in profit or loss account and during the period amounted to US$191 221 (2015 - US$182 568).

40.

EXCHANGE RATES
The following exchange rates have been used to translate the foreign currency balances to United States dollars at year end:

British Sterling
South African Rand
European Euro
Botswana Pula

66 ] NMBZ Holdings Limited Annual Report 2016

31 Dec 2016
Mid - rate
US$

31 Dec 2015
Mid - rate
US$

1.2375
13.700
1.0570
10.6838

1.4800
15.5039
1.0882
11.1111

GBP
ZAR
EUR
BWP

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.1

Credit risk
Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or
counterparties to a financial instrument fail to meet their contractual obligations. The Group’s general credit strategies centre on sound credit granting
process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery. There is a
separation between loan granting and credit monitoring to ensure independency and effective management of the loan portfolio. The Board has put
in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review of all applications
before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan amount. The Group
has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy of loan loss provisions.

The Group has automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring
and reporting module which is critical in managing credit risk. In view of the group’s move into the mass market, retail credit has become a key area
of focus. The group has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies. This includes a
rigorous scheme assessment and a dedicated pre-delinquency team and a separate recoveries team.

Credit Management
■ Responsible for evaluating & approving credit proposals from the business units.
■ Together with business units, has primary responsibility on the quality of the loan book.
■ Reviewing credit policy for approval by the Board Credit Committee.
■ Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as well as

the overall portfolio and detect unusual developments.

■ Approve initial customer internal credit grades or recommend to the Credit Committees for approval.
■ Setting the credit risk appetite parameters.
■ Ensure the Group adheres to limits, mandates and its credit policy.
■ Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts.
■ Manage trends in asset and portfolio composition, quality and growth and non-performing loans.
■ Manage concentration risk both in terms of single borrowers or group as well as sector concentrations and the review of such limits

Credit Monitoring and Financial Modelling
■ Independent credit risk management.
■ Independent on-going monitoring of individual credit and portfolios.
■ Triggers remedial actions to protect the interests of the Group, if appropriate (e.g. in relation to deteriorated credits).
■ Monitors the on-going development and enhancement of credit risk management across the Group.
■ Reviews the Internal Credit Rating System.
■ On-going championing of the Basel II methodologies across the Group.
■ Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating standards.
■ Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends identified.

Credit Administration
■ Prepares and keeps custody of all facility letters.
■ Security registration.
■ Safe custody of security documents.
■ Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking.
■ Review of credit files for documentation compliance e.g. call reports, management accounts.

Recoveries
■ The recoveries unit is responsible for all collections and ensures that the Group maximises recoveries from Non-Performing Loans (NPLs) and

loans and advances written off.

[ 67

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

The table below shows the maximum exposure to credit for the components of the statement of financial position. The maximum exposure is shown
as gross.

41.1.2 Maximum exposure to credit risk without taking account of any collateral

Cash and cash equivalents (excluding cash on hand)
Investment securities held to maturity
Investment in debentures
Loans, advances and other accounts

Total

Guarantees
Facilities approved but not drawn down
Irrevocable lines of credit

Total

Total credit risk exposure

Note

34
34
34

GROUP

2016
US$

2015
US$

62 033 603
24 744 752
-
195 492 260

53 471 405
14 547 992
-
232 546 908

282 270 615

300 566 305

2 159 937
25 175 267
450 000

5 305 263
39 468 072
1 264 607

27 785 204

46 037 942

310 055 819

346 604 247

Where financial instruments are recorded at fair value the amounts shown above represent the current risk exposure but not the maximum risk
exposure that could arise in the future as a result of changes in values. The effect of collateral and other risk mitigation techniques is shown below.

41.1.3 Risk concentrations of maximum exposure to credit risk

31 December
2016
Gross
Maximum
Exposure
US$

31 December
2016
Net
Maximum
Exposure
US$

31 December
2015
Gross
Maximum
Exposure
US$

31 December
2015
Net
Maximum
Exposure
US$

22 172 296
8 149 399
22 957 893
7 016 516
90 381 441
14 562 333
789 502
39 829 012

12 801 701
8 149 399
9 201 073
230 769
83 825 012
6 397 747
22 995
6 462 626

13 907 259

11 348 334
37 364 138
5 692 742
101 585 312
29 774 899
1 067 328
42 501 006

-
11 348 334
-
1 655 242
97 343 706
12 624 048
-
-

Agriculture and horticulture
Conglomerates
Distribution
Food and beverages
Individuals
Manufacturing
Mining
Services

Allowance for impairment losses on loans and advances

205 858 392
(8 305 117)

127 091 322
(8 305 117)

243 241 018
(8 582 636)

122 971 330
(8 582 636)

Net exposure

197 553 275

118 786 205

234 658 382

114 388 694

41.1.4 Collateral and other credit enhancements

The amount and type of collateral required depends on an assessment of credit risk of the counterparty. There are guidelines regarding the
acceptability of types of collateral. The main types of collateral obtained are guarantees, cession of debtors, mortgages over residential properties,
equities, subordination of shareholder loans and promissory notes. The fair value of all collateral held by the Group at the reporting date is US$78
767 070 (2015 - US$120 269 688).

68 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.1.5 Credit quality per sector

At 31 December 2016

Agriculture and horticulture
Conglomerates
Distribution
Food and Beverage
Individuals
Manufacturing
Mining
Services

Pass
US$

7 878 415
-
3 629 042
3 267 057
75 582 031
848 365
-
8 720 002

Special
Mention
US$

12 568 962
8 149 399
16 589 450
3 560 712
8 112 552
11 086 035
41 636
23 808 906

Substandard
US$

318 870
-
272 327
-
4 318 380
607 449
7 871
1 085 105

Doubtful
US$

931 763
-
792 820
188 747
2 247 293
861 631
723 037
5 303 873

Loss
US$

474 286
-
1 674 254
-
121 185
1 158 853
16 958
911 126

Total
US$

22 172 296
8 149 399
22 957 893
7 016 516
90 381 441
14 562 333
789 502
39 829 012

Total

99 924 912

83 917 652

6 610 002

11 049 164

4 356 662

205 858 392

At 31 December 2015

Agriculture and horticulture
Conglomerates
Distribution
Food and Beverage
Individuals
Manufacturing
Mining
Services

Pass
US$

3 951 666
-
5 883 680
1 939 940
66 686 290
202 179
-
8 404 584

Special
Mention
US$

8 192 253
11 348 334
23 903 379
3 752 802
27 506 267
24 552 460
328 391
24 496 609

Substandard
US$

136 848
-
991 717
-
5 184 962
2 905 321
-
4 945 801

Doubtful
US$

1 282 053
-
3 476 085
-
1 207 793
1 662 023
738 937
4 299 028

Loss
US$

344 439
-
3 109 277
-
1 000 000
452 916
-
354 984

Total
US$

13 907 259
11 348 334
37 364 138
5 692 742
101 585 312
29 774 899
1 067 328
42 501 006

Total

87 068 339

124 080 495

14 164 649

12 665 919

5 261 616

243 241 018

Refers to loans graded 1 to 3
Pass:
Special Mention: Refers to loans graded 4 to 7
Substandard:
Doubtful:
Loss:

Refers to loans graded 8
Refers to loans graded 9
Refers to loans graded 10

[ 69

31 Dec 2016
US$

31 Dec 2015
US$

195 492 260

232 546 908

6 610 003
11 049 164
4 356 662

14 164 649
12 665 919
5 261 616

22 015 829

32 092 184

(6 207 673)
(1 748 031)

(7 574 789)
(1 798 490)

14 060 125

22 718 905

155 770 677
28 071 887

182 512 639
28 636 195

183 842 564

211 148 834

(2 097 445)
(312 984)

(1 007 847)
(312 984)

181 432 135

209 828 003

195 492 260

232 546 908

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.1.6 Credit quality analysis per grade

Loans and advances to customers

Carrying amount (note 21.1.1)

Assets at amortised cost

Individually impaired
Grade 8
Grade 9
Grade 10

Gross amount

Allowance for impairment
Impairment allowance
Suspended interest

Carrying amount

Collectively impaired
1 to 5 low to fair risk
6 to 7 watch list

Gross amount

Allowance for impairment
Impairment allowance
Suspended interest

Carrying amount

Total carrying amount at amortised cost

70 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.2

Market risk
This is the exposure of the Group’s on and off balance sheet positions to adverse movement in market prices resulting in a loss in earnings and
capital. The market prices will range from money market (interest rate risk), foreign exchange and equity markets in which the bank operates. The
Group has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and recommends the appropriate levels to
which the Group should be exposed at any time. Net Interest Margin is the primary measure of interest rate risk, supported by periodic stress tests
to assess the Group’s ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors currency mismatches and make
adjustments depending on exchange rate movement forecast. The mismatches per currency are contained within 5% of the Group’s capital position.

ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The board ALCO is
responsible for setting exposure thresholds and limits, and meets on a quarterly basis.

The following table demonstrates the sensitivity to a reasonable change in interest rates, with all other variables held constant, of the Group’s
statement of comprehensive income.

The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the profit or loss for the year,
based on the variable and fixed interest rate financial assets and liabilities held at 31 December 2016.

At 31 December 2016

Currency

USD
USD
USD
USD
USD
USD

At 31 December 2015

Currency

USD
USD
USD
USD
USD
USD

Sensitivity of net interest income

Increase in
interest
rates

0 to 1
months
US$

5%
3%
1%
-1%
-3%
-5%

(2 137 050)
(1 282 230)
(427 410)
427 410
1 282 230
2 137 050

1 to 3
months
US$

(1 296 165)
(777 699)
(259 233)
259 233
777 699
1 296 165

3months
to 1 year
US$

738 990
443 394
147 798
(147 798)
(443 394)
(738 990)

Sensitivity of net interest income

Increase in
interest
rates

5%
3%
1%
-1%
-3%
-5%

0 to 1
months
US$

551 470
330 882
110 294
(110 294)
(330 882)
(551 470)

1 to 3
months
US$

(2 034 455)
(1 220 673)
(406 891)
406 891
1 220 673
2 034 455

3months
to 1 year
US$

434 680
260 808
86 936
(86 936)
(260 808)
(434 680)

1 year to
5 years
US$

3 972 335
2 383 401
794 467
(794 467)
(2 383 401)
(3 972 335)

1 year to
5 years
US$

2 966 580
1 779 948
593 316
(593 316)
(1 779 948)
(2 966 580)

Total
US$

1 278 110
766 866
255 622
(255 622)
(766 866)
(1 278 110)

Total
US$

1 918 275
1 150 965
383 655
(383 655)
(1 150 965)
(1 918 275)

41.3

Foreign currency exchange rate risk
The table below calculates the effect of a reasonable possible movement of the significant currency rate against the United States Dollar, with all
other variables held constant. A negative amount in the table reflects a potential net reduction in the statement of comprehensive income or equity
while a positive amount reflects a net potential increase.

At 31 December 2016

Currency

ZAR
ZAR
ZAR
ZAR
ZAR
ZAR

Change in
currency
rate

Effect on profit
before tax
US$

5%
3%
1%
-1%
-3%
-5%

98 715
59 229
19 743
(19 743)
(59 229)
(98 715)

Effect on
equity
US$

73 294
43 977
14 659
(14 659)
(43 977)
(73 295)

[ 71

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.3 Foreign currency exchange rate risk (cont’d)

At 31 December 2015

Currency
ZAR
ZAR
ZAR
ZAR
ZAR
ZAR

41.4

Liquidity risk

Change in
currency
rate

Effect on profit
before tax
US$

5%
3%
1%
-1%
-3%
-5%

(334 300)
(200 580)
(66 860)
66 860
200 580
334 300

Effect on
equity
US$

(248 215)
(148 929)
(49 643)
49 643
148 929
248 215

Liquidity risk is the risk of financial loss arising from the inability of the Group to fund asset increases or meet obligations as they fall due without
incurring unacceptable costs or losses. The Group identifies this risk through maturity profiling of assets and liabilities and assessment of expected
cash flows and the availability of collateral which could be used if additional funding is required.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more
severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO.

The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Group also actively
monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The group monitors funding concentration risk by
reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and demand
deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity meeting. This is augmented by a monthly management
ALCO and a quarterly board ALCO.

The contractual maturities of undiscounted cash flows of financial assets and liabilities are disclosed in note 30.1.

The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. The Group monitors its
liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 30% of the liabilities to the public. Liquid assets consist of cash
and cash equivalents, short term bank deposits and liquid investment securities available for immediate sale.

72 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.4

Liquidity risk (cont’d)
Maturity profile for contingent liabilities
The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and facilities approved but not drawn down.

At 31 December 2016

Guarantees
Facilities approved but not
drawn down
Irrevocable letters of credit

At 31 December 2015

Guarantees
Facilities approved but not
drawn down
Irrevocable letters of credit

On
Demand
US$
-

0 to 1
months
US$
1 087 357

1 to 3
months
US$
268 580

3 months
to 1 year
US$
804 000

1 year to
to 5 years
US$
-

Total
US$
2 159 937

-
-

On
Demand
US$
-

-
-

591 116
-

3 302 870
-

17 428 238
450 000

3 853 043
-

25 175 267
450 000

1 678 473

3 571 450

18 682 238

3 853 043

27 785 204

0 to 1
months
US$
142 935

667 004
689 607

1 to 3
months
US$
850 139

3 months
to 1 year
US$
4 312 189

1 year to
to 5 years
US$
-

Total
US$
5 305 263

5 559 624
575 000

23 170 136
-

10 071 308
-

39 468 072
1 264 607

1 499 546

6 984 763

27 482 325

10 071 308

46 037 942

The Group expects that not all of the contingent liabilities or facilities approved but not drawn down will be drawn before expiry.

41.5

41.6

41.7

41.8

Operational risk
This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed internal processes, people, systems or from
external events. The Group utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Group has an elaborate
Operational Loss reporting system in which all incidents with a material impact on the well-being of the Group are reported to risk management.
The risk department conducts periodic risk assessments on all the units within the Group aimed at identifying the top risks and ways to minimise
their impact. There is a Board Risk Committee whose function is to ensure that this risk is minimised. The Risk Committee with the assistance
of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary
recommendations to the Board.

Legal and compliance risk
Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk
may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non – compliance with laws
and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice is readily
available to all departments. The Group has an independent compliance function which is responsible for identifying and monitoring all compliance
issues and ensures the Group complies with all regulatory and statutory requirements.

Reputational risk
Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the
Group conducts its business. To manage this risk, the Group strictly monitors customers’ complaints, continuously train staff at all levels, conducts
market surveys and periodic reviews of business practices through its Internal Audit department. The directors are satisfied with the risk management
processes in the Group as these have contributed to the minimisation of losses arising from risky exposures.

Strategic risk
This refers to current and prospective impact on a Group’s earnings and capital arising from adverse business decisions or implementing strategies
that are not consistent with the internal and external environment. To manage this risk, the Group always has a strategic plan that is adopted by the
Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at management level.

[ 73

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.9

Risk ratings (cont’d)

41.9.1 Reserve Bank of Zimbabwe ratings

The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group’s banking subsidiary in the last quarter of 2016. The Results of the
onsite are yet to be finalised. The last onsite before the 2016 one was conducted in 2013 and a review was done in 2014 during which the RBZ
indicated that the bank had attended to their satisfaction all matters raised in the 2013 inspection.

41.9.1.1 CAMELS* ratings

CAMELS Component

Capital Adequacy

Asset Quality

Management

Earnings

Liquidity

Sensitivity to Market Risk

Composite Rating

Latest RBS**
Ratings
30/06/2013

Previous RBS
Ratings
31/01/2008

Previous RBS
30/06/2007

*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating
system uses a rating scale of 1-5, where ‘1’ is Strong, ‘2’ is Satisfactory, ‘3’ is Fair, ‘4’ is Weak and ‘5’ is Critical.

**RBS stands for Risk-Based Supervision.

41.9.1.2 Summary RAS ratings

RAS Component

Overall Inherent Risk

Latest RAS***
Ratings
30/06/2013

Moderate

Overall Risk Management Systems

Acceptable

Overall Composite Risk

Moderate

Direction of Overall Composite Risk

Stable

** RAS stands for Risk Assessment System.

Previous RAS
Ratings
31/01/2008

Moderate

Acceptable

Moderate

Stable

Previous RAS
Ratings
30/06/2007

High

Weak

High

Increasing

74 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41.

RISK MANAGEMENT (cont’d)

41.9

Risk ratings (cont’d)

41.9.1.3 Summary risk matrix -30 June 2013 on – site examination

Type of Risk

Level of Inherent Risk

Adequacy of Risk
Management Systems

Overall Composite Risk

Direction of Overall
Composite Risk

Credit

Liquidity

Interest Rate

High

Moderate

Foreign Exchange

Low

Strategic Risk

Operational Risk

Legal & Compliance

Reputation

Overall

KEY

Moderate

Weak

Acceptable

Strong

Acceptable

High

Moderate

Low

Moderate

Increasing

Stable

Level of Inherent Risk
Low – reflects a lower than average probability of an adverse impact on a banking institution’s capital and earnings. Losses in a functional area with
low inherent risk would have little negative impact on the banking institution’s overall financial condition.

Moderate – could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.

High – reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and
harmful loss to the banking institution.

Adequacy of Risk Management Systems
Weak – risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution’s
risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control
systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies
and procedures.

Acceptable – management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk
management weaknesses, these have been recognised and are being addressed. Management information systems are generally adequate.

Strong – management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and
senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively
define the bank’s risk tolerance, responsibilities and accountabilities are effectively communicated.

Overall Composite Risk
Low – would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk
management systems are strong and effectively mitigate much of the risk.

Moderate – risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management
systems may result in a moderate composite risk assessment.

On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a
moderate negative impact on the financial condition of the organisation.

High – risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that
would have a significant impact on the bank’s overall condition.

Direction of Overall Composite Risk
Increasing – based on the current information, risk is expected to increase in the next 12 months.
Decreasing – based on current information, risk is expected to decrease in the next 12 months.
Stable – based on the current information, risk is expected to be stable in the next 12 months.

[ 75

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41. RISK MANAGEMENT (cont’d)

41.9

Risk ratings (cont’d)

441.9.2 External credit ratings

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.

Security class
Long term

2016
BB+

2015
BB+

The current rating expires in August 2017.

41.10

Regulatory compliance
There were no instances of regulatory non compliance in the period under review. The Bank remains committed to complying with and adhering to
all regulatory requirements.

41.11 Capital management

41.11.1 Holding company

The capital allocation to the subsidiary units is in accordance with the regulatory requirements of the business undertaken by the subsidiary.

41.11.2 Banking subsidiary

The primary objective of the Bank’s capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the
current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of total capital to total risk weighted assets.

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory
reserve and other equity reserves.

The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.

Tier 3 capital relates to an allocation of capital to market and operational risk.

76 ] NMBZ Holdings Limited Annual Report 2016

Notes to the Financial Statements (Cont’d)
for the year ended 31 December 2016

41.

RISK MANAGEMENT (cont’d)

41.11

Capital management (cont’d)
Various limits are applied to elements of the capital base. The core capital (Tier 1) shall compromise not less than 50% of the capital base and
portfolio provisions are limited to 1.25% of total risk weighted assets.

The Bank’s regulatory capital position at 31 December 2016 was as follows:

Share capital
Share premium
Retained earnings
Fair value gain on investment properties

Less: capital allocated for market and operational risk
Credit to insiders

Tier 1 capital
Tier 2 capital (subject to limit as per Banking Regulations)
Revaluation reserve
Subordinated debt
Regulatory reserve (limited to 1.25% of risk weighted assets)
Portfolio provisions (limited to 1.25% of risk weighted assets)

Total Tier 1 & 2 capital
Tier 3 capital (sum of market and operational risk capital)

Total capital base

Total risk weighted assets

Tier 1 ratio
Tier 2 ratio
Tier 3 ratio
Total capital adequacy ratio
RBZ minimum required

2016
US$
16 506
31 474 502
21 437 257
(1 797 022)

51 131 243
(980 355)
-

50 150 888
5 691 960
1 797 022
849 294
1 785 136
1 260 508

2015
US$
16 506
31 474 502
14 439 723
(3 112 902)

42 817 829
(722 035)
-

42 095 794
7 812 084
3 112 902
1 414 144
2 277 191
1 007 847

55 842 848
980 355

49 907 878
722 035

56 823 203

50 629 913

243 651 546

262 803 080

20.58% 16.02%
2.97%
2.34%
0.40%
0.27%
19.26%
23.32%
12.00%
12%

[ 77

Historical Five Year Financial Summary
for the year ended 31 December 2016

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Interest income
Interest expense

Net interest income
Net foreign exchange gains
Fee and commission income

Revenue
Share of profit/(loss) of associate
Other income
Profit on disposal of associate

Operating income
Operating expenditure
Impairment losses on loans
and advances

Profit /(loss) before taxation
Taxation (charge)/credit

2016
US$
33 860 139
(11 075 067)

2015
US$
35 761 355
(15 118 231)

2014
US$
31 072 461
(12 651 519)

2013
US$
33 181 704
(13 006 505)

2012
US$
27 543 784
(10 050 003)

22 785 072
743 255
15 179 149

38 707 476
-
1 737 860
-

20 643 124
1 416 445
20 984 694

43 044 263
-
1 234 125
-

18 420 942
1 822 432
15 121 536

35 364 910
-
62 025
-

20 175 199
1 502 044
14 673 834

36 351 077
217 768
777 720
580 136

17 493 781
1 902 337
13 016 115

32 412 233
434 252
2 593 515
-

40 445 336
(26 176 706)

44 278 388
(26 872 649)

35 426 935
(27 984 051)

37 926 201
(25 232 756)

35 440 000
(21 452 714)

(8 059 726)

(9 496 601)

(5 017 362)

(16 645 810)

(3 985 062)

6 208 904
(1 150 738)

7 909 138
(2 422 040)

2 425 522
(768 455)

(3 951 865)
630 042

10 002 224
(2 431 722)

Profit/(loss) after taxation
Other comprehensive income for the year, net of tax

5 058 166
(2 970)

5 487 098
2 970

1 657 067
10 180

(3 321 823)
-

7 570 502
-

Total comprehensive income/(loss) for the year

5 055 196

5 490 068

1 667 247

(3 321 823)

7 570 502

78 ] NMBZ Holdings Limited Annual Report 2016

Historical Five Year Financial Summary (Cont’d)
for the year ended 31 December 2016

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

SHAREHOLDERS’ FUNDS
Share capital
Reserves

Equity
Subordinated loan
Redeemable ordinary shares

2016
US$

2015
US$

2014
US$

2013
US$

2012
US$

78 598
39 771 065

78 598
34 715 869

78 598
29 225 801

78 598
27 541 662

78 598
30 863 485

39 849 663
1 415 490
14 335 253

34 794 467
1 414 144
14 335 253

29 304 399
1 407 964
14 335 253

27 620 260
1 485 890
14 335 253

30 942 083
-
-

Total shareholders’ funds

55 600 406

50 543 864

45 047 616

43 441 403

30 942 083

LIABILITIES
Deposits and other liabilities
Current tax liabilities

265 384 520
-

283 287 243
-

241 001 418
-

216 041 709
-

195 002 633
588 966

Capital employed

320 984 926

333 831 107

286 049 034

259 483 112

226 533 682

ASSETS
Cash and cash equivalents
Investments securities
Investments in debentures
Deferred tax assets
Current tax assets
Loans, advances and other assets
Non-current assets held for sale
Quoted and other investments
Trade investments
Investment in associate
Investment properties
Property and equipment
Intangible assets

69 421 257
24 744 752
-
2 264 907
368 445
199 617 095
2 261 300
88 650
88 930
-
14 202 270
6 280 286
1 647 034

63 439 347
14 547 992
-
1 905 116
23 075
235 088 981
2 264 300
68 220
77 805
-
8 125 800
6 601 086
1 689 385

54 750 561
3 874 525
4 614 047
2 784 594
1 436 974
203 363 052
2 267 300
127 291
81 390
-
4 453 300
6 345 267
1 950 733

48 871 983
4 685 471
3 984 723
2 823 544
1 739 210
181 316 271
2 303 300
145 850
190 148
-
4 385 300
7 372 943
1 664 369

58 171 045
5 501 963
-
1 380 596
-
146 599 994
2 225 300
130 316
195 790
1 025 919
3 115 300
8 187 459
-

Employment of capital

320 984 926 333 831 107

286 049 034

259 483 112

226 533 682

[ 79

Historical Five Year Financial Summary
for the year ended 31 December 2016

CLOSING NUMBER OF SHARES
Share performance

Net asset value per share (US cents)
Basic earnings per share (US cents)
Dividend per share (US cents)
Dividend cover (times)
Price/earnings ratio

Closing price per share (US cents)
Market capitalisation (US$)

Financial performance

2016

2015

2014

2013

2012

384 427 351

384 427 351*

14.46
1.32
-
-
2.97

12.78
1.43
-
-
2.5

3.9

14 992 667

3.5
13 454 952

11.72
0.43
-
-
10.47

4.5

17 299 224

11.30
(1.00)
-
-
(6.50)

1.12
0.29
-
-
2.24

6.50

0.65
24 987 781 18 246 197

Return on shareholders’ funds (%)¹
Return on assets (%)
Cost/net income ratio (%)²
Non-interest income/total income (%)
Effective tax rate (%)

9.1
1.6
84.6
43.7
18.59

10.9
1.7
82.1
53.8
30

3.7
0.6
92.8
35.4
31.68

(8)
(1)
110
47
(16)

26
4
70
34
23

The return on shareholders’ funds is based on shareholders’ funds at the end of the year.

Includes charge for impairment of losses on loans and advances.

* At an Extraordinary General Meeting held on 19 February 2014, the Company approved a share consolidation exercise at a ratio of 10:1 and consolidated
3 500 000 000 (3.5 billion) shares with a nominal value of US$0.000028 per share to 350 000 000 (350 million) shares with a nominal value of US$0.00028
per share. The Company also approved an increase in the authorized share capital from 350 000 000 shares with a nominal value of US$0.00028 per share
to 600 000 000 shares with a nominal value US$0.00028 per share.

80 ] NMBZ Holdings Limited Annual Report 2016

NOTICE TO MEMBERS
for the year ended 31 December 2016

Notice is hereby given that the 22nd Annual General Meeting of Members of NMBZ Holdings Limited will be held at the Registered Office of the Company at
4th Floor, Unity Court, Corner 1st Street/ Kwame Nkrumah Avenue, Harare on Wednesday, 24 May 2017 at 1000 hours for the following purposes:

ORDINARY BUSINESS

1.
2.
a.

3.
4.
5.

To receive and adopt the Financial Statements for the year ended 31 December 2016, together with the reports of the Directors and Auditors thereon.
To appoint/re-appoint Directors.
In accordance with the Articles of Association, Mr. B.A Chikwanha, Mr. B.P. Washaya, Ms. J. Maguranyanga, Mr. E. Sandersen and Mr C. Chikaura
retire by rotation. Being eligible, the directors offer themselves for re-election.
Mr. J. de la Fargue, Ms. S. Chitehwe and Mr. B. Ndachena were appointed as directors during the year and in accordance with the Articles of
Association retire from office. Mr. J. Tichelaar, who was appointed subsequent to year end and in accordance with the Articles of Association retires
from office. All retiring directors being eligible, they offer themselves for election.
To approve directors’ fees for the year ended 31 December 2016.
To approve Messrs KPMG’s remuneration for the year ended 31 December 2016.
To appoint new Company Auditors for the year ending 31 December 2017.

SPECIAL BUSINESS

SPECIAL RESOLUTION
1.

To consider, and if deemed fit, to pass, with or without modification, the resolution set out below:
“That the Company, being duly authorised thereto by Article 10 of its Articles of Association, may undertake general repurchases by way of open
market transactions on the Zimbabwe Stock Exchange (“ZSE”) of any of its own ordinary shares in such manner or on such terms as the directors
may from time to time determine provided that:

a.
b.

the maximum number of shares authorised to be acquired is no more than 10% of the Company’s ordinary issued share capital.
for each share, the minimum price shall not be lower than the nominal value of the Company’s shares and the maximum price that may be paid is
5% above the weighted average market price for the ordinary shares in the Company as derived from the Zimbabwe Stock Exchange (ZSE) Daily
Price Sheet for the five business days immediately preceding the date on which such ordinary shares are contracted to be purchased.

the authority in terms of this special resolution shall unless renewed prior to such time, expire on the first anniversary of this resolution or at the
conclusion of the next Annual General Meeting of the Company, whichever is later, save that the Company, may before such expiry, enter into a
contract or contracts to purchase its ordinary shares which would or might be completed wholly or partly after the expiry and may purchase its
ordinary shares in pursuance of such contract or contracts.’’
To consider, and if deemed fit, to pass, with or without modification, the resolution set out below:

That the Articles of Association of the Company be amended by the substitution of Articles 83 and 84 in their entirety by the following Articles:
“83.1 At each annual general meeting, one third of the Directors who are subject to retirement by rotation or, if their number is not three or a multiple
of three, the number nearest to but not greater than one-third, shall retire from office by rotation, but so that, if there are fewer than three Directors
who are subject to retirement by rotation, those eligible for retirement one shall retire from office.

83.2 Subject to Article 79, no Executive Director shall be subject to retirement by rotation, but shall remain a Director on such terms and for such
period as determined by the terms of their employment agreement.

84.1 Subject to the provisions of the Statutes and of these Articles, the Directors to retire by rotation shall include (so far as necessary to obtain the
number required) any Director who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other
Directors subject to retirement by rotation who have been longest in the office since their last re-election or appointment, and so that as between
persons who became or were last re-elected Directors on the same day those retire shall (unless they otherwise agree among themselves) be
determined by lot. A retiring Director shall be eligible for re-election. The Directors to retire on each occasion (both as to number and identity) shall
be determined by the composition of the board of Directors at the start of business on the date of the notice convening the annual general meeting
notwithstanding any change in the number or identity of the Directors after that time but before the close of the meeting.”

Notes:
1.

A member of the company entitled to attend and vote at this meeting is entitled to appoint a proxy to attend, speak and on a poll, vote in
his/her stead. A proxy need not be a member of the company. Proxy forms should be forwarded to the Registered Office of the company
at least 48 hours before the commencement of the meeting.
A Special Resolution is required to be passed by a majority of seventy five per cent of those present and voting (including proxy votes),
representing not less than twenty five per cent of the total number of votes in the Company.

[ 81

Explanations Regarding The Notice Of The Annual General Meeting

Resolution 1
The Directors of the Company are obliged to present their Report and Accounts to shareholders of the Company at an Annual General meeting. This is a
standard form of resolution common to all Annual General Meetings.

Resolution 2
The Company’s Articles of Association require all the Directors to stand down at each Annual General Meeting and if they are eligible, they may offer
themselves for re-election. The Directors standing down are Mr. B.A Chikwanha, Mr. B.P Washaya, Ms. J. Maguranyanga, Mr. E. Sandersen, Mr. C. Chikaura,
Mr. J. de la Fargue, Ms. S. Chitehwe, Mr. B. Ndachena and Mr. J. Tichelaar. All the retiring directors, being eligible, offer themselves for re-election. Information
about these directors is shown below:

Benedict Chikwanha – Independent Non-Executive Director (Chairman)
Benedict Chikwanha was appointed as a non-executive director of NMB Bank Limited and NMBZ Holdings Limited on 31 January 2014. Mr. Chikwanha is an
experienced banker, with over forty years working experience in the banking sector, 32 of which were spent at Barclays Zimbabwe. Benedict Chikwanha has
held various positions in Risk Management, Retail Banking, Human Resources, Corporate Banking and Corporate Finance. He has held various management
roles in the banking sector including being a Director Risk Management and Managing Director. Currently Ben Chikwanha is an Executive Director of the
Leonard Cheshire Disability Zimbabwe Trust.

Benefit P. Washaya- Chief Executive Officer
Benefit Washaya commenced his banking career with Barclays Bank in 1978 where he held general management positions including Director’s Assistant,
Risk Management and Business Centre Director. He left Barclays Bank in 1997 to join NMB Bank where he became Divisional Director, Risk Management
and was responsible for setting up the Risk Management systems in the bank. Benefit Washaya moved to Metropolitan Bank of Zimbabwe Limited in March
2004 as Chief Executive Officer. He re-joined NMB Bank as Managing Director on 7 January 2008 during a very difficult period in the history of the bank.
He successfully presided over the change-over period from the ZWD to the multi-currency regime in 2009 when most bank balance sheets started from a
near zero base. In 2010, he was part of the team that successfully raised $10 million through a rights issue which broadened the bank’s shareholder profile
and again in 2013 he was part of the team that was involved in a private placement which raised close to $15 million and brought on board three strategic
institutional investors. Benefit Washaya is a Certified Member of the Institute of Bankers of South Africa ACIB (SA) and a Chartered Secretary (ACIS). He holds
a Masters’ Degree in Business Administration, specialising in Finance, from the University of Wales.

Jean Maguranyanga - Independent Non - Executive Director
Jean Maguranyanga is a lawyer by profession with over 20 years’ experience. Jean commenced her career as a Prosecutor in the Ministry of Justice Legal
and Parliamentary affairs and moved after one year to Parliament. She worked as a Legal Advisor at the Parliament of Zimbabwe for three years after which
she left to study for her Master’s Degree in Corporate and Commercial Law. Following the completion of her Master’s degree Jean took up a lectureship post
with the University of Zimbabwe a position she held for two years. Thereafter, Jean joined the Reserve Bank of Zimbabwe where she served as Legal Counsel
and later as Division Chief Corporate Affairs / Bank Secretary for a total period of seventeen years. Currently Jean is a partner at Chinamasa Mudimu and
Maguranyanga Legal Practitioners.

Erik Sandersen - Non-Executive Director
Mr. Erik Sandersen represents Norfund on the board. Erik is a holder of an MSc in Engineering as well as a Master’s in Business Administration. Erik has
9 years’ experience in management and IT consultancy which he acquired at Anderson Consulting and Boston Consulting Group. Erik has an additional
five years’ experience in operational management. Of the five years that Erik was in operational management, two of these were served as CEO at Circle
Innovation AS and Hands ASA. From 2004 to 2014, Erik was involved in investments management, having co-founded a venture capital company called Incitia
Ventures AS. Currently Erik is an Investments Director with Norfund.

Charles Chikaura - Independent Non-Executive Director
Charles Chikaura is an independent non-executive director who was appointed to the NMBZ Holdings and NMB Bank Limited boards on 24 December 2015.
Charles holds a Bachelor of Arts Honours degree and a Masters in Business Administration degree from the University of Zimbabwe as well as an Institute of
Bankers diploma. Charles has 35 years of banking experience, of which 23 of these were with the Reserve Bank of Zimbabwe where he held several positions
including Manager Exchange Control, General Manager Operations, Senior General Manager and Deputy Governor. Charles was thereafter appointed Chief
Executive Officer of the Infrastructure Development Bank of Zimbabwe a position he held for 12 years, until August 2015 when he retired. Currently Charles
is a full time farmer and holds several directorships.

James de la Fargue - Non-Executive Director
James de la Fargue represents African Century on the Board. He is a holder of a BA Business Organisation (Herrit-Watt University), ACCA, Diplomas in
Marketing & Marketing Research and a Certificate in General Agriculture. James worked for a number of international organizations including Deloitte &
Touché Management Consultants, Unilever PLC and Chargeurs SA. He is a former president of the Zimbabwe Tobacco Association and worked at MBCA as a
senior executive in charge of Corporate Finance. James was involved in business consultancy work and management of an integrated farm in Centenary from
1998 to 2008. Since 2009, James has been with African Century Limited where he initially consulted for the group and later took up a position as Business
Development Director of African Century Financial Holdings and as Executive Chairman of Frango King.

[ 83

Explanations Regarding The Notice Of The Annual General Meeting (cont’d)

Sabinah N. Chitehwe - Independent Non-Executive Director
Sabinah Chitehwe is a qualified and experienced Chartered Accountant and a Registered Public Auditor. She holds a Bachelor of Accounting Science. She
has over ten years’ experience in senior management and advisory in finance and accounting, auditing, tax planning, strategy development & implementation
and transaction advisory. Sabinah worked for a number of international organisations including Deloitte & Touché Management Consultants. She is currently
the Chief Operating Officer of Cure Chem Overseas (Pvt) Limited, a company with global representation in India, Zambia, Tanzania, Mozambique and South
Africa.

Benson Ndachena - Finance Director
Benson Ndachena is a Chartered Accountant with over fifteen years working experience in the banking sector. Benson began his career with Deloitte & Touché
from January 1990 up until April 1998. During that time he held management positions of Audit Manager and Senior Consultant – Management Consultancy.
He left Deloitte & Touché to join OK Zimbabwe as Financial Controller and held that position until June 2001. On 1 July 2001, he joined NMB Bank as the
Head Finance & Administration and progressed within the Bank to his current position of Finance Director. Benson Ndachena holds a Bachelor of Accountancy
Degree from the University of Zimbabwe, a Master of Business Leadership Degree from the University of South Africa (UNISA) and is an associate of the
Chartered Institute of Management Accountants (ACMA).

Julius Tichelaar - Non Executive Director
Julius Tichelaar represents AfricInvest on the board. Mr. Tichelaar is currently the Senior Manager - Financial Sector of AfricInvest Capital Partners. He has
over 9 years of experience in Financial Sector Development in Africa, all of which have been spent in AfricInvest. Julius holds a Bachelor of Science and
Business Economics, Bachelor (pre-master program) of Business Administration and a Master of Finance & Investments.

Resolution 3
Shareholders are requested to approve director’s fees. The directors fees for 2016 amounted to $252 828.

Resolution 4
The Remuneration of the auditors is required to be fixed by the Company in a General meeting in terms of section 150 (6) of the Companies Act [Chapter
24:20]. Accordingly, Members will be requested to approve the remuneration paid to the external auditors of the Group, KPMG for the year ended 31 December
2016, which audit fee has been disclosed in the Annual Report.

Resolution 5
All public companies are required to appoint Auditors at each Annual General Meeting at which Financial Statements are presented, to hold office until the next
such meeting in terms of section 150 (2) of the Companies Act [ Chapter 24:03]. In addition section 41 of the Banking Act [Chapter 24:20] provides that the
term of external auditors is limited to five years within any eight year period. KPMG, as the company’s auditors, completed their five year term which ended 31
December 2016. As such a new company auditor must be appointed. This resolution therefore proposes the appointment of a new audit firm as the company’s
auditors in accordance with the Companies Act [Chapter 24:03] and the Banking Act [Chapter 24:20].

Resolution 6 - Special Resolution
This resolution seeks to empower the Company to buy back its shares. The Company is authorised in terms of Article 10 of its Articles of Association to buy
back its shares. The Zimbabwe Stock Exchange has limited such buy backs to 10% of the Company’s issued share capital. The directors are seeking authority
to allow the use of the Company’s available cash resources to purchase its own shares in the market in terms of the Companies Act and the regulations of
the ZSE. The directors will only exercise the authority if they believe that to do so would be in the best interests of shareholders generally. In exercising this
authority, the directors will duly take into account following such repurchase for the next 12 months, the ability of the Company to pay its debts in the ordinary
course of business, the maintenance of an excess of assets over liabilities, and for the Company and Group, the adequacy of ordinary capital and reserves
as well as working capital. This resolution is required to be passed by a majority of seventy five percent of those present and voting (including proxy votes)
representing not less than twenty five per cent of the total number of votes in the Company.

Resolution 7 - Special Resolution
This resolution seeks to provide for the retirement by rotation of one-third of Directors at each annual general meeting. This therefore means that the tenure of
directorship should run for at least three years before a Director is subject to retirement and eligible for re-election. Furthermore, the resolution provides that
Executive Directors’ employment contracts render them ineligible for retirement by rotation. This resolution is required to be passed by a majority of seventy
five percent of those present and voting (including proxy votes) representing not less than twenty five per cent of the total number of votes in the Company.

84 ] NMBZ Holdings Limited Annual Report 2016

Shareholders’ Analysis

Size of shareholding

0 - 5000

5,001 - 10,000

10,001 - 50,000

50,001 - 100,000

100,001 - 500,000

500,001 - 1,000,000

1,000,001 - 10,000,000

10,000,001 and above

Total

Size of shareholding

0 - 5,000

5,001 - 10,000

10,001 - 50,000

50,001 - 100,000

100,001 - 500,000

500,001 - 1,000,000

1,000,001 - 10,000,000

10,000,001 and above

Total

2016 Number of
shareholders

% of Holders

2016 Issued Shares

% Shareholding

3,533

141

91.71%

2.49%

3.66%

0.75%

0.55%

0.16%

0.39%

0.29%

3,852

100.00%

2, 119, 240

697,072

3,131,473

2,204,542

4,346,711

4,983,833

52,899,454

314,045,026

384,427,351

0.55%

0.18%

0.81%

0.57%

1.13%

1.30%

13.77%

81.69%

100.00%

2015 Number of
shareholders

% of Holders

2015 Issued Shares

% Shareholding

3,531

100

139

91.58%

2.59%

3.60%

0.70%

0.62%

0.26%

0.36%

0.29%

3,856

100.00%

2,120,835

735,115

3,120,692

2,037,869

5,023,164

7,943,954

50,040,970

313,404,752

384,427,351

0.55%

0.19%

0.81%

0.52%

1.31%

2.07%

13.02%

81.53%

100.00%

[ 85

Shareholders’ Analysis (cont’d)

2016

Industry

Bank

Local Companies

Employee

Deceased Estates

External Companies

Fund Managers

Insurance Companies

Investment Trusts And Property

Local Residents

Nominees Local

Non Residents

Non Resident Individuals

Other Corporate Holdings

Pension Fund

Total

2015

Industry

Bank

Bank And Nominees

Local Companies

Employee

Deceased Estates

External Companies

Fund Managers

Insurance Companies

Investment Trusts And Property

Local Residents

Nominees Local

Non Residents

Non Resident Individuals

Other Corporate Holdings

Pension Fund

Total

Shareholders

% of shareholders

347

242

3,090

3,852

0.05%

9.01%

6.28%

0.08%

0.16%

0.08%

0.26%

0.93%

80.21%

1.40%

0.21%

0.86%

0.08%

0.39%

100%

Holders

% of Holders

351

243

3,091

3,856

0.03%

9.10%

6.30%

0.08%

0.28%

0.08%

0.21%

0.86%

80.15%

1.22%

0.16%

0.80%

0.29%

0.41%

100%

19,190

51,607,869

817,410

2,221

99,113,967

2,510

59,656,157

49,895,835

7,850,102

434,145

108,291,249

701,716

3,369

6,031,611

384 427 351

4,290

14,900

47,620,446

820,410

2,221

104,004,827

2,510

32,135,746

49,884,095

10,185,891

424,061

106,442,385

682,622

26,615,992

5,586,955

384,427,351

% of Shares

0.00%

13.42%

0.21%

0.00%

25.78%

0.00%

15.53%

12.98%

2.04%

0.11%

28.18%

0.18%

0.00%

1.57%

100%

% of Shares

0.00%

12.39%

0.21%

0.00%

27.05%

0.00%

8.36%

12.98%

2.65%

0.11%

27.69%

0.18%

6.93%

1.45%

100%

86 ] NMBZ Holdings Limited Annual Report 2016

Shareholders’ Analysis (cont’d)

Rank

Shareholder

2016 Number of Shares

% Shareholding

African Century Financial Investments Ltd

Africinvest Financial Sector Holding

Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N V

Norwegian Investment Fund For Developing Countries (Norfund)

Old Mutual Life Assurance Company of Zimbabwe Limited

Old Mutual Zimbabwe Limited

Lalibela Limited

Alsace Trust

Cornerstone Trust

Wamambo Investments Trust

TOTAL

71,207,639

34,571,429

32,769,985

26,557,498

21,526,695

16,885,381

16,875,582

13,545,247

303,082,314

18.52%

8.99%

8.52%

6.91%

5.60%

4.39%

3.52%

78.82%

Rank

Shareholder

2015 Number of Shares

% Shareholding

African Century Financial Investments Ltd

Africinvest Financial Sector Holding

Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N V
(Fmo)

Norwegian Investment Fund For Developing Countries

Old Mutual Life Assurance Company Of Zimbabwe Limited

Old Mutual Zimbabwe Limited

Lalibela Limited

Alsace Trust

Cornerstone Trust

Wamambo Investments Trust

TOTAL

71,207,639

34,571,429

32,128,043

26,557,498

21,526,695

16,885,381

16,875,582

13,545,247

302,440,372

18.52%

8.99%

8.36%

6.91%

5.60%

4.39%

3.52%

78.66%

[ 87

Shareholders’ Information

MEMBERS’ DIARY
Financial year end

Reports:-

■ Announcement of annual results

■ Annual financial statements posted to shareholders

■ Annual General Meeting

■ Announcement of the 2017 half-year results

■ Dividend payments:

■ Interim
■ Final

31 December 2016

March 2017

April 2017

24 May 2017

August 2017

n/a
n/a

88 ] NMBZ Holdings Limited Annual Report 2016

Secretary And Registered Office

COMPANY SECRETARY S. PASHAPA
Registered Offices

4th Floor

Unity Court

Corner 1st/ Kwame Nkrumah Avenue

Harare

Zimbabwe

Telephone: +263 4 759651-9 / 759601-6

Facsimile +263 4 759648

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

Email:enquiries@nmbz.co.zw

Auditors

KPMG Charted Accountants (Zimbabwe)

Mutual Gardens

100 The Chase (West)

Emerald Hill

Harare

Zimbabwe

Transfer Secretaries

In Zimbabwe

First Transfer Secretaries

1 Armagh Avenue, Eastlea

Harare

Zimbabwe

Legal Advisors

In Zimbabwe

Gill, Godlonton & Gerrans

7th Floor, Beverley Court

100 Nelson Mandela Avenue

Harare

Zimbabwe

NMB Centre

Corner George Silundika Avenue/

Leopold Takawira Street

Bulawayo

Zimbabwe

+263 9 70169

+263 9 68535

In UK

Computershare Investor Services PLC

The Pavilion

Bridgewater Road

Bristol

BS599 6ZZ

United Kingdom

In UK

Dechert

160 Queen Victoria Street

London

EC4 V4 QQ

[ 89

Annual General Meeting Form Of Proxy

I/We, ……………………………………………………....………………..…....................................................................................……………………………...….….

of ……………………………………..………………………………………………....................................................................................……………….……………..

being a member of the above company and entitled to vote, hereby appoint

……………………………………………………………………………………………..………....................................................................................…………………

of …………………………………………….……………………………………………………...................................................................................……...…………..

or failing him ………………………………………………………………………………………….........................................................................................…………

of …………………………………………………....................................................................................…………………………………………………………………..

or failing him, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the ANNUAL GENERAL MEETING of the Company

to be held on 24 May 2017 at 10:00 hours and at any adjournment thereof.

Signed this …………..…................……………………….. day of ……………………………………………….................................................................…….2017

Signature of member ……………..................................................................................…………………………………………………………………………………

Note

(i) In terms of Section 129 of the Companies Act (Chapter 24:03) a member of the company is entitled to appoint one or more proxies to

act in the alternative to attend, vote and speak in his stead. A proxy need not be a member of the Company.

(ii) Sections 75 and 76 of the Company’s Articles of Association provide that instruments of proxy must be signed and returned to reach

the Registered Office of the Company not less than forty-eight hours before the time for holding the meeting.

90 ] NMBZ Holdings Limited Annual Report 2016