NMBZ HOLDINGS LIMITED ANNUAL REPORT 31 DECEMBER 2020 CONTENTS Transact with ease from anywhere on your digital bank! ZIPIT, RTGS Transfers Download the NMBConnect App Dial *241# Your Digital Bank or visit https://www.nmbconnectonline.co.zw 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 Significant Accounting Policies Notes to the Financial Statements Historical Five Year Financial Summary Sustainability report Notice to Members Explanations regarding the Notice of the Annual General Meeting Shareholders’ Analysis Shareholders’ Information Secretary and Registered Office 2 Bill Payments Internal Transfers 3 4 5 - 8 9 - 14 15 - 17 18 - 22 23 - 24 25 - 26 27 - 28 29 - 30 31 - 44 45 - 105 106 - 108 109 - 121 122 - 123 124 - 125 126 - 128 129 130 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT FINANCIAL SUMMARY Inflation adjusted Historical Cost 31 December 31 December 2019 Audited Restated 2020 Audited 31 December 31 December 2019 Audited 2020 Audited ZWL ZWL ZWL ZWL Total income 2 278 895 874 3 278 415 691 2 760 886 768 464 285 244 Operating profit before impairment charge and loss on net monetary position 861 655 493 1 967 489 095 1 856 058 489 341 453 654 Total comprehensive income 1 030 289 817 1 151 854 267 2 704 776 561 473 463 396 Basic earnings per share (cents) 210.12 96.49 448.72 73.13 Total deposits 6 262 750 864 5 343 012 221 6 262 750 864 1 191 079 845 Total gross loans and advances 2 451 989 687 2 391 455 787 2 451 989 687 533 110 289 Total shareholders’ funds and shareholders’ liabilities Enquiries: NMBZ HOLDINGS LIMITED 4 194 973 015 3 211 913 897 3 388 155 345 579 169 046 Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited benefitw@nmbz.co.zw Gerald Gore, Deputy Chief Executive Officer, NMBZ Holdings Limited geraldg@nmbz.co.zw Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited bensonn@nmbz.co.zw Website: Email: Telephone: http://www.nmbz.co.zw enquiries@nmbz.co.zw +263 8688003347 3 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 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). The Bank was established in 1993 as a merchant bank incorporated under the Companies and Other Business Entities Act (Chapter 24:31) 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, Mutare, Gweru, Bindura and Chinhoyi. The Bank’s branch and agency 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 Bindura - Mwatuka Complex, Bindura Borrowdale - Shops 37 & 38, Sam Levy’s Village, Borrowdale, Harare Borrowdale Excellence Centre - NMB Head Office, 19207 Liberation Legacy Way, Borrowdale, Harare Bulawayo - NMB Centre, Corner George Silundika Street/Leopold Takawira Street, Bulawayo Chinhoyi - 469 Magamba Way, Chinhoyi Gweru - 36 Robert Mugabe Road, Gweru Head Office - NMB Head Office, 19207 Liberation Legacy Way Borrowdale, Harare Joina City - Shop 105A, First floor, Joina City Corner Jason Moyo / Innez Terrace, Harare 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, covers the following locations: • • • Avondale - Harare Borrowdale - Harare Bulawayo • Card Centre - Harare • Chinhoyi • Eastgate - Harare • Gweru • Joina City - Harare • Masvingo • Msasa - Harare • Mutare • Southerton - Harare 4 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT CHAIRMAN'S STATEMENT for year ended 31 December 2020 INTRODUCTION The 2020 operating environment was largely dogged by the devastating effects arising out of the outbreak of the COVID-19 pandemic which ravaged global economies. In response to the COVID-19 pandemic, the Government of Zimbabwe like many other Governments imposed lockdown measures of varying extents in an effort to curtail the spread of the deadly Corona virus. A number of policy pronouncements were made by the Government of Zimbabwe in response to the pandemic and these affected the operations of the Group during the period under review. Globally, the focus on COVID-19 has shifted to vaccination with notable strides having been made on that front by a number of countries. We remain hopeful that the vaccination programmes will yield the desired results which should go a long way in alleviating this global crisis. Focusing on the local economy, the first half of the year under review was characterised by hyper-inflation and incessant economic instability emanating from the deterioration of the country’s foreign exchange rate. However, the introduction of the RBZ administered Foreign Exchange Auction System on 23 June 2020 appears to have significantly contained the rapid oscillations that were characterising the country’s foreign exchange rate. Significant trades have been recorded on this platform from its inception and there has been notable stability in the foreign exchange regime ever since the auction system was introduced. This culminated in economic stability largely prevailing in the second half of the year with the annual inflation rate closing the year at 348.6% down from a peak of 837.5% recorded in July 2020. Our hopes remain pinned on the sustainability of this stability which will certainly foster economic growth into the foreseeable future. The Bank’s digital strategy was launched at the most opportune time as it has been quite instrumental in driving business within the COVID-19 induced circumstances. The Bank has recorded significant growth, expansion and improvements on its digital platforms and this has resulted in enhanced service delivery. Furthermore, in response to the prevailing hyperinflationary environment, the Group adopted a number of value preservation strategies in order to ensure that shareholders’ value is not eroded. These measures culminated in the Group’s remarkable financial performance in spite of the difficult operating environment. The key inflation adjusted financial highlights of the Group as at 31 December 2020 are depicted below: Shareholders' funds and shareholders' liabilities (ZWL$000's) 6,000,000 4,000,000 2,000,000 - 3,211,914 4,194,973 % 1 3 Total assets (ZWL$000's) 10,957,162 9,372,349 % 7 1 11,500,000 11,000,000 10,500,000 10,000,000 9,500,000 9,000,000 8,500,000 2019 2020 2019 2020 Total deposits (ZWL$000's) 6,500,000 6,000,000 6,262,751 5,500,000 5,343,012 5,000,000 4,500,000 % 7 1 Basic earnings per share (EPS) (ZWL cents) 150.00 100.00 50.00 - 210.12 96.49 % 8 1 1 2019 2020 2019 2020 SUSTAINABILITY REPORTING With the prevailing Covid-19 pandemic, we continue to build value adding relationships with our staff and all stakeholders as well as in the communities which we operate in. The Board upholds high standards of management and corporate governance, which we believe are key to delivering sustainable shareholder value and contribute to the Group’s long term success. It is our responsibility as the Board to ensure that management, not only delivers on short term objectives, but promotes the long term growth of the Group. We have fostered and are buttressing our culture of responsible business practices by paying more attention to sustainability issues. Since our inception in 1993, we have opened up opportunities for our customers, communities, and the broader society. We endeavor to build a future that prioritises resilience, social mobility and the environment as well as economic growth. We have a long standing partnership with the community and the Government in general through our involvement in a diverse range of social and economic activities that serve broad community audiences. Our aim is to continuously strengthen our performance and create our sustainability strategy anchored on financial inclusion, education, water, housing, construction, health and climate. To this end, the Group through its Banking subsidiary remains committed to financing the education sector, health, property & construction as well as supporting the SMEs, the youths, the disadvantaged, vulnerable groups in addition to supporting various environmental conservation initiatives. Through advancing affordable loans, support was extended to both educational institutions and students in pursuit of supporting the education sector. The Bank also provided support in the construction and maintenance of roads, dams and houses across the nation. Furthermore, the Bank extended funding to local authorities in a bid to ensure the provision of clean water and other critical amenities to residents. In order to assist in clearing the national housing backlog, the Bank also continued to advance mortgage facilities for residential accommodation. In addition, pursuant to its initiative to support industry and commerce, the Bank continues to advance mortgage facilities to its Corporate clients and SMEs towards the construction and acquisition of commercial properties. The Group complied with all environmental management and other related laws, regulations and best practices. Financing to both corporates and SMEs were done entirely in accordance with the Banking subsidiary’s Statement of Commitment to Responsible Financing and Exclusion List. CORPORATE SOCIAL INVESTMENTS During the period under review, the Group channelled its Corporate Social Investments towards education, environment conservation as well as the support of disadvantaged and vulnerable groups. Donations towards education were to the Ministry of Education Mashonaland West Provincial Wellness Launch and Matabeleland North Athletics team NASH/NAPH and the University of Zimbabwe COVID-19 Awareness Campaign. We sponsored the TM/PnP Charity Golf tournament where funds raised were channelled towards the Meikles Foundation, which seeks to promote sustainable development through initiatives that seek to protect wildlife and the environment as well as achieve community welfare and education. Donations were also made to KidzCan for treatment of children living with cancer, commemoration of World Hearing Day, commemoration of the World Kidney Day and to Chambuta Children’s Home. The Group, in conjunction with other banks also channelled its Corporate Social Investments towards the fight against COVID-19 under the Bankers Association of Zimbabwe. 5 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT CHAIRMAN'S STATEMENT (Cont’d) for year ended 31 December 2020 CORPORATE DEVELOPMENTS The Bank’s strategy remains firmly focused on the enhancement of its digital offerings to ensure seamless service delivery to the Bank’s existing and future clients via its exciting and refreshing digital touch points. This strategy resonates very well with the ‘new normal’, where physical interactions have to be kept at a minimum in line with the World Health Organisation (WHO) guidelines on fighting the novel COVID-19 pandemic. The Bank continues with its financial inclusion drive and has intensified the opening of a number of low cost accounts via our NMBLite product. The Bank is also quite excited by its recently launched self-account opening portal which offers an amazing and easy self on-boarding experience to the Bank’s future customers. The portal is going through further refinements which will provide even more exciting insights and convenience to the Bank’s valued customers. During the period under review, we successfully migrated our Head Office to the new home along Borrowdale road offering a refreshing environment for our staff and stakeholders. To enhance the customer experience, the Bank’s Excellence branch previously located at the Borrowdale, Sam Levy’s Village, was also moved to the new Head Office much to the delight of our valued customers. OUTLOOK AND STRATEGY The containment of the COVID-19 pandemic continues to be an imperative for a global and local economic rebound in the short to medium term. We are confident that the measures adopted by the Government of Zimbabwe and the imminent vaccination of the population with the COVID-19 vaccine, coupled with the collective efforts of all corporate and citizens will continue to minimise the spread of the virus and its total elimination in the foreseeable future. We are encouraged by the exchange rate stability which has been prevailing in the second half of the period under review and remain hopeful that the stability will continue prevailing in order to create a conducive operating environment for business and the attraction of capital which will go a long way in ensuring economic growth and stability in the foreseeable future. The Group’s banking subsidiary will continue to enhance its digital offerings to continuously improve the customer experience which will also contribute towards the Bank’s desire to broaden its market segments and grow its deposit base. In pursuit of the revised capitalisation levels announced by the Central Bank, the Group has been pursuing a number of value-preservation strategies to ensure the preservation and growth of the Bank’s regulatory capital. GROUP RESULTS Hyperinflationary reporting Following the liberalisation of the exchange rate on 22 February 2019, there has been a significant depreciation in the exchange rate of the local currency unit which in turn resulted in the economy plunging into hyper-inflation. In light of this background, the Directors assessed the impact of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies” and noted that the conditions required to apply IAS 29 had materialized in the Group’s operating environment during the previous reporting period. Furthermore, the Public Accountants and Auditors Board (PAAB) issued a pronouncement on 11 October 2019 indicating that the economy had become hyper-inflationary. The Directors have thus prepared the accompanying financial statements using the hyperinflationary accounting basis to achieve fair presentation at the reporting date of 31 December 2020. Unless indicated otherwise, the results commentary below will be primarily on the Group’s hyper-inflationary adjusted financial statements at the reporting date. Financial performance The profit before taxation was ZWL705 414 282 (2019 – ZWL691 317 803) during the period under review and this gave rise to total comprehensive income of ZWL1 030 289 817 (2019 – ZWL1 151 854 266) after total other comprehensive income of ZWL181 026 875. The Group achieved a basic earnings per share of 210.12 cents (2019 – 96.49 cents). Operating expenses amounted to ZWL1 274 247 625 and these were up 18% from a prior year amount of ZWL1 079 026 942. The increase in operating expenditure was mainly due to staff rationalisation costs and COVID-19 related expenditure to ensure the safety of the Bank’s customers and staff as well as to ensure adherence to the COVID-19 protocol set by the World Health Organisation. Impairment losses on financial assets measured at amortised cost amounted to ZWL127 974 740 for the current period from a prior year amount of ZWL49 562 276 and the increase was mainly due to the increase in the Banking subsidiary’s assets measured at amortised cost during the period under review. The bank has continued with its drive to reduce non-performing loans (NPLs) and the ratio stood at 0.44% as at 31 December 2020. This was lower than the 31 December 2019 ratio of 1.37% and below the Bank’s and regulatory target of 5% as at 31 December 2020. The decrease in the NPL ratio was largely due to aggressive collections and stricter credit underwriting standards. 6 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT CHAIRMAN'S STATEMENT (Cont’d) for year ended 31 December 2020 GROUP RESULTS (continued) Financial position The Group’s total assets increased by 17% from ZWL9 372 348 955 as at 31 December 2019 to ZWL10 957 161 610 as at 31 December 2020 mainly due to a 125% increase in investment securities, a 60% increase in investment properties and an increase of 25% in property and equipment. These increases were partly offset by a 32% decrease in intangible assets and an 11% decrease in cash and cash equivalents. Investment properties increased from ZWL1 031 154 579 as at 31 December 2019 to ZWL1 653 496 476 as at 31 December 2020 due to additions and improvements made on the Bank’s property portfolio in line with the value preservation strategies adopted by the Group to curtail the devastating effects of the prevailing hyperinflationary environment. Investment securities (Treasury Bills and Bonds) increased from ZWL480 731 899 as at 31 December 2019 to ZWL1 081 820 457 as at 31 December 2020 mainly due to the acquisition of Treasury bills and Bonds. Nevertheless, the bank has set maximum limits for investment securities in order to ensure that most of the funds are channeled towards the productive sectors of the economy. Total deposits increased by 17% from ZWL5 343 012 221 restated as at 31 December 2019 to ZWL6 262 750 864 as at 31 December 2020 as a result of the Bank’s aggressive deposit mobilization efforts in pursuit of the broadening of the Bank’s target market segments. The Bank’s liquidity ratio closed the period at 67.68% (2019 – 60.72%) and this was above the statutory requirement of a minimum of 30%. Capital The banking subsidiary’s capital adequacy ratio stood at 52.56% (Historical – 43.78%) as at 31 December 2020 (31 December 2019 – 48.46%; Historical - 39.49%). The ratio was above the statutory minimum of 12%. Our capitalisation level is adequate to cover all risks and supports the underwriting of new business. The Group’s shareholders’ funds and shareholders’ liabilities have increased by 31% from ZWL3 211 913 897 restated as at 31 December 2019 to ZWL4 194 973 015 as at 31 December 2020 largely as a result of the current year’s total comprehensive income. The Bank’s regulatory capital as at 31 December 2020 was ZWL2 186 036 634 and is above the minimum required regulatory capital of ZWL25 million. The bank remains confident that its plan to meet the revised minimum capital of the ZWL equivalent of USD30 million for a Tier 1 bank by 31 December 2021 is achievable. FUNCTIONAL CURRENCY As announced in the Group’s financial statements for the year ended 31 December 2019, we continue to closely monitor the developments in the economic and monetary landscape. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an Interbank foreign exchange market to formalize the buying and selling of foreign currency through the Banks and Bureaux de change. To operationalize this, the RBZ denominated the existing RTGS balances as RTGS dollars and initial trades between the RTGS dollar and the US$ were pegged at USD/RTGS$1:2.5. On the same date, Statutory Instrument 33 (SI 33) of 2019 was also issued and it specified that all assets and liabilities that were in USD immediately before 22 February 2019 were deemed to have been valued in RTGS$ at a rate of USD/ RTGS$1:1. On 24 June 2019, through Statutory Instrument 142 (SI 142) of 2019, the Government of Zimbabwe discontinued the multicurrency regime which had been in place since February 2009 and also introduced the Zimbabwe Dollar (ZWL), which was designated as the country’s sole legal tender to be used for all local transactions and other purposes. On 26 March 2020, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial vulnerabilities caused by the COVID-19 pandemic. One of the measures announced therein was the authorization of the use of free-funds in paying for goods and services, in terms of Statutory Instrument (SI) 85 of 2020. On 24 July 2020, the Government of Zimbabwe issued Statutory Instrument (SI) 185 of 2020, which granted permission to display, quote or offer prices for all goods and services in both Zimbabwe dollars and foreign currency at the interbank exchange rate. On 23 June 2020, the Reserve Bank of Zimbabwe introduced the Foreign Exchange Auction System, effectively abandoning the fixed foreign currency exchange rate regime which had been prevailing for the greater part of 2020. Significant trades have been recorded on the platform and significant movements in the exchange rate have been resultantly recorded. The Directors, having assessed all these developments, concluded that the Group’s functional currency remains the Zimbabwe dollar having changed from USD to RTGS dollars on 22 February 2019, which subsequently changed to Zimbabwe Dollars (ZWL) following the issuance of SI 142 of 2019 on 24 June 2019. 7 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT CHAIRMAN'S STATEMENT (Cont’d) for year ended 31 December 2020 LEGACY DEBTS The banking subsidiary owed USD13 840 412 to various lines of credit providers as at 31 December 2020. The Bank registered these foreign debts with the Reserve Bank of Zimbabwe (RBZ) as required by the regulatory directives. During the previous financial period, the Bank transferred to the RBZ the ZWL equivalent of the foreign debts at a rate of USD/ZWL1:1. The RBZ has indicated that they will be issuing a USD denominated instrument for these debts and consequently these debts and the RBZ deposits have been accounted for at the closing exchange rate of USD/ZWL 1:81.3486 at 31 December 2020. This effectively values the original credit lines at a rate of 1:1 on a netted off basis. The RBZ approved the line of credit balances amounting to USD13 840 412. DIVIDEND The Board has resolved not to declare a dividend as the Group is focusing on achieving the minimum regulatory capital requirement of the ZWL equivalent of USD30 million for a Tier 1 bank by 31 December 2021 for its banking subsidiary. DIRECTORATE Mr Givemore Taputaira was appointed to the Board of NMBZ Holdings Limited and NMB Bank Limited on 2 January 2020. The directors of both NMBZ Holdings Limited and NMB Bank Limited boards are as follows: Mr Benedict A. Chikwanha (Board Chairman), Mr Benefit P. Washaya (Chief Executive Officer), Mr Benson Ndachena (Chief Finance Officer), Mr Charles Chikaura (Independent Non-Executive Director and Deputy Chairman), Mr James de la Fargue (Non-Executive Director), Ms Jean Maguranyanga (Independent Non-Executive Director), Mr Julius Tichelaar (Non-Executive Director), Ms Sabinah Chitehwe (Independent Non-Executive Director), Ms Christine Glover (Non-Executive Director) and Mr Givemore Taputaira (Independent Non-Executive Director). APPRECIATION I wish to express my heartfelt gratitude to all our clients, shareholders, regulatory authorities and all other valued stakeholders for their continued support during these unprecedented times of the global health pandemic. To my fellow Board members, management and staff, I extend my appreciation for their hard work, diligence, commitment and focus which has underpinned the achievement of these commendable results. May I take this opportunity to encourage all our stakeholders to stay safe and continue practicing the WHO guidelines in order to minimize the spread of the deadly corona virus. MR. B. A. CHIKWANHA CHAIRMAN 10 March 2021 8 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS for year ended 31 December 2020 We have pleasure in presenting to shareholders our report and the audited financial statements of the Group for the year ended 31 December 2020 1. SHARE CAPITAL The authorised and issued share capital of the Company are as follows:- 1.1 1.2 Authorised: 600 000 000 ordinary shares of ZWL0,00028 each. Issued and fully paid: 404 171 689 ordinary shares of ZWL0,00028 each. No share options were exercised during the year. 2. GROUP ACTIVITIES AND RESULTS The Group’s total comprehensive income was ZWL1 030 289 817 for the year ended 31 December 2020 (2019 – ZWL1 151 854 266). 3. CAPITAL ADEQUACY As at 31 December 2020, the Bank's regulatory capital adequacy ratio was 52.56% (Historical – 43.78%) (2019 – 48.46%). 4. DIRECTORATE 4.1 Board of Directors During the year ended 31 December 2020, Mr G.Taputaira was appointed to the board. There were no resignations. Mr. B. A. Chikwanha Mr. B. P. Washaya Mr. B. Ndachena Mr. J. de la Fargue Ms. C. Glover Mr. J. Tichelaar Ms. J. Maguranyanga Mr. C. Chikaura Ms. S. Chitehwe Mr. G. Taputaira Independent Non-Executive Director (Chairman) Chief Executive Officer Chief Finance Officer Non-Executive Director (representing African Century) Non-Executive Director (representing Arise) Non-Executive Director (representing AfricInvest) Independent Non-Executive Director Independent Non-Executive Director (Deputy Chairman) Independent Non-Executive Director Independent Non-Executive Director In accordance with the Articles of Association, one third of the Directors will retire by rotation at the forthcoming Annual General Meeting (AGM). Those retiring Directors, being eligible, offer themselves for re-election. 4.2 Directors’ Interests As at 31 December 2020, 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:- 31 December 31 December 2020 Shares 20 800 600 10 289 - - - 2019 Shares 20 800 600 9 931 - - - Mr. B. A. Chikwanha* Ms. J. Maguranyanga Mr. B. P. Washaya** Mr. J. de la Fargue*** Ms. C. Glover**** Mr. J. Tichelaar ***** Mr. B. Ndachena****** 83 521 80 448 Mr. C. Chikaura Ms. S. Chitehwe Mr. G. Taputaira - - 4 540 - - - ---------------- ----------------- 119 750 111 779 ========== ========== * 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 Chief Executive Officer of NMBZ Holdings Limited and NMB Bank Limited 9 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS (Cont’d) for year ended 31 December 2020 4.2 Directors’ Interests (Continued) ***Mr. J. de la Fargue represents African Century Financial Investments Limited (76 426 874 shares) on the board of Directors of NMBZ Holdings Limited and NMB Bank Limited. **** Ms. C. Glover represents Arise (71 632 001 shares) on the board of Directors of NMBZ Holdings Limited and NMB Bank Limited. *****Mr J. Tichelaar represents AfricInvest (36 702 487 shares) on the board of Directors of NMBZ Holdings Limited and NMB Bank Limited. ****** Mr. B. Ndachena is the Chief Finance Officer of NMBZ Holdings Limited and NMB Bank Limited. 4.3 Directors’ attendance at meetings 4.3.1 Board of Directors Name Mr. B A Chikwanha Mr C. Chikaura Ms. J. Maguranyanga Mr.J. Tichelaar Mr J de la Fargue Ms. C. Glover Mr. G. Taputaira Ms. S. Chitehwe Mr. B.P. Washaya Mr. B. Ndachena 4.3.2 Audit Committee Name Ms. S. Chitehwe Mr. C. Chikaura Ms. J. Maguranyanga Mr. G. Taputaira 4.3.3 Risk and Compliance Management Committee Name Mr. C. Chikaura Mr. J. de la Fargue Ms. C. Glover Mr. B. A. Chikwanha* Mr. G. Taputaira Ms. J. Maguranyanga** Meetings Held Meetings Attended 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Meetings Held Meetings Attended 4 4 4 4 4 4 4 4 Meetings Held Meetings Attended 4 4 4 1 4 3 4 3 4 1 4 3 *Mr. B.A. Chikwanha resigned from the Committee on 10th March 2020. **Ms. J Maguranyanga was appointed to the Committee on 5th May 2020. 10 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS (Cont’d) for year ended 31 December 2020 4.3.4 Asset and Liability Management (ALCO) & Finance Committee Name Mr. C. Chikaura Ms. S. Chitehwe Mr. J. de la Fargue Mr. J. Tichelaar Ms. C. Glover Mr. B. P. Washaya Mr. B. Ndachena Mr. G. Gore 4.3.5 Loans Review Committee Name Ms. J. Maguranyanga Ms. C. Glover Ms. S. Chitehwe Mr. J. Tichelaar Mr G. Taputaira Meetings Held Meetings Attended 4 4 4 4 4 4 4 4 4 4 3 4 4 4 4 4 Meetings Held Meetings Attended 4 4 4 4 4 4 4 4 3 4 4.3.6 Human Resources, Remuneration and Nominations Committee Name Ms. J. Maguranyanga* Mr. B. A. Chikwanha Mr. J. Tichelaar Mr. C. Chikaura* Mr. J. de la Fargue* Meetings Held Meetings Attended 6 4 4 6 6 6 4 4 6 6 *Ms. J. Maguranyanga, Mr. C Chikaura and Mr. J. de la Fargue form the Remuneration Sub-Committee, which met twice during the year. 4.3.7 Credit Committee Name Mr. B. A. Chikwanha Mr. B. P. Washaya Mr. J. de la Fargue Mr. C. Chikaura 4.3.8 Head Office Project Sub-Committee* Name Ms. S. Chitehwe Mr. C. Chikaura Mr. J. de la Fargue Mr. B. Ndachena *The Head Office Project Sub-Committee was dissolved on 31st December 2020 Meetings Held Meetings Attended 4 4 4 4 4 4 4 4 Meetings Held Meetings Attended 9 9 9 9 9 8 9 9 11 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS (Cont’d) for year ended 31 December 2020 4.3.9 IT & Digital Banking Committee* Name Mr. G. Taputaira Mr. B. A. Chikwanha Ms. C. Glover Ms. S. Chitehwe Mr. J. Tichelaar Mr. B. P.Washaya Meetings Held Meetings Attended 3 3 3 3 3 3 3 3 3 3 3 3 *The IT & Digital Banking Committee was constituted on 29th April 2020 5. 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 IV report of South Africa, the National Code on Corporate Governance Zimbabwe and the Reserve Bank of Zimbabwe (RBZ) Corporate Governance Guideline No. 01-2004/BSD. The Board has set up the Audit Committee, Human Resources, Remuneration and Nominations Committee, ALCO & Finance Committee, Credit Committee, Loans Review Committee, IT and Digital Banking Committee and the Risk & Compliance Management Committee to assist in the discharge of its duties and responsibilities. Board and Director evaluations are carried out an annual basis, wherein the effectiveness of the Board is reviewed, including its gender and skills mix. The Board also adheres to the Bank’s Code of Ethics and Environmental and Social Risk Management Framework. 5.1 The Board of Directors The NMBZ Holdings Limited and NMB Bank Limited boards comprise of ten 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 eight non-executive Directors. Of the eight non-executive Directors, five are independent non- executive Directors. The Chairpersons of the board and all the board committees are independent non-executive Directors. Furthermore, the independence of the independent non-executive Directors is reviewed on an annual basis. The boards and the board committees meet at least four times a year. 5.2 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 also provides independent oversight of the effectiveness of the Group’s assurance functions and services, with particular focus on combined assurance arrangements. 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: Chairperson-Independent Non-Executive Director Ms. S. Chitehwe Ms. J. Maguranyanga Independent Non-Executive Director Mr. C. Chikaura Independent Non-Executive Director Independent Non-Executive Director Mr. G. Taputaira The external auditors, Chief Finance Officer and Internal Auditor are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 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. The committee is also responsible for the nomination, election and appointment of board members. Membership: Ms. J. Maguranyanga Mr. J. de la Fargue Mr. J. Tichelaar 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 The Chief Executive Officer, Deputy Chief Executive Officer and Head of Human Capital are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period 12 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS (Cont’d) for year ended 31 December 2020 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 Chairperson-Independent Non-Executive Director Ms. S. Chitehwe Mr G. Taputaira Mr. J. Tichelaar Independent Non-Executive Director Independent Non-Executive Director Non-Executive Director Non-Executive Director Ms. C. Glover The Deputy Chief Executive Officer and Chief Risk Officer are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 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 Chairperson - Independent Non-Executive Director Mr. B. P. Washaya Chief Executive Officer Non-Executive Director Mr. J. de la Fargue Independent Non-Executive Director Mr. C. Chikaura The Chief Banking Officer, Business Development Executive and Head of Credit Management are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 5.6 Asset and Liability Management & Finance Committee (ALCO & Finance Committee) The ALCO & Finance Committee is responsible for deriving the most appropriate strategy for the Group in terms of the mix of assets and liabilities given its expectations of the future and the potential consequences of interest-rate movements, liquidity constraints, foreign exchange exposure and capital adequacy. In addition, the Committee monitors the business and financial strategies of the Company and keeps track of financial performance vis a vis the budget. Membership: Mr. C. Chikaura Mr. J de la Fargue Ms. C. Glover Mr. J. Tichelaar Ms. S. Chitehwe Mr. B. P. Washaya Mr. B. Ndachena Mr. G. Gore Chairperson-Independent Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Independent Non-Executive Director Chief Executive Officer Chief Finance Officer Deputy Chief Executive Officer The Chief Risk Officer and Head of Treasury are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 5.7 Risk and Compliance Management Committee The Risk and Compliance Management Committee oversees the quality, integrity and reliability of the Group’s risk management systems and reviews all group-wide risks. Membership: Mr. C. Chikaura Chairperson-Independent Non-Executive Director Ms. C. Glover Mr. J. de la Fargue Ms. J. Maguranyanga Mr. G. Taputaira Non-Executive Director Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director The Chief Executive Officer, Deputy Chief Executive Officer, Chief Risk Officer and Head of Compliance Management are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 13 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT REPORT OF THE DIRECTORS (Cont’d) for year ended 31 December 2020 5.8 IT & Digital Banking Committee The IT & Digital Banking Committee provides governance and oversight on the technology-related investments, operations, strategies of the Bank and their alignment with the Bank’s Strategy. It also oversees the Bank’s technology risk management and security framework and its effectiveness (in conjunction with the Risk & Compliance Committee). Membership: Mr. G. Taputaira Mr. B. A. Chikwanha Ms. S. Chitehwe Ms. C. Glover Mr. J. Tichelaar Mr. B. P. Washaya Mr. G. Gore Chairperson – Independent Non-Executive Directors Independent Non-Executive Director Independent Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer Deputy Chief Executive Officer The Chief Technology Officer, Chief Risk Officer and Head Digital Banking are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period 5.9 Professional Advice The non-executive Directors have access to independent professional advice at the Group's expense. 6. AUDITORS At the forthcoming Annual General Meeting, the shareholder will be asked to authorise the Directors to approve the auditors’ remuneration for the year ended 31 December 2020 and to appoint auditors of the Group for the ensuing year. By order of the Board Miss S I Pashapa Company Secretary Harare 10 March 2021 14 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF DIRECTORS’ RESPONSIBILITY for year ended 31 December 2020 1. RESPONSIBILITY The Directors of the Group are mandated by the Companies and Other Business Entities Act (Chapter 24:31) 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 and Other Business Entities Act (Chapter 24:31) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards (IFRSs). 2. 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. 3. 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. 4. 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. 5. STATEMENT OF COMPLIANCE The financial statements are prepared with the aim of complying fully with International Financial Reporting Standards (IFRSs) and have been prepared in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe. The Directors have been able to achieve full compliance with IFRSs in previous reporting periods up to 31 December 2017. However, the 31 December 2020 and the comparative period as well as the 31 December 2018 financial reporting period could only achieve partial compliance to the IFRS reporting framework due to developments detailed below. The IFRS Conceptual Framework states that to achieve fair presentation to the financial statements, companies should consider the underlying economic substance of the transaction over and above the legal form. International Accounting Standard (IAS 21) “The Effects of Changes in Foreign Exchange Rates” requires the Directors to determine the functional currency of the reporting entity in preparing the entity’s financial statements. In arriving at this conclusion, the entity is required to apply certain parameters which the Directors duly applied in their judgement. Furthermore, IAS 21 also requires the reporting entity to make certain judgements in determining the appropriate exchange rates to apply for certain transactions conducted in currencies other than the functional currency of the reporting entity. As explained in Note 2.4.7, “Determination of the functional currency”, it is our opinion that following the Monetary Policy pronouncements of 1 October 2018 and 20 February 2019, as well as the issuance of Exchange Control Directive RU 28 of 2019 on 22 February 2019, the country’s functional currency appeared to have changed from the United States Dollar in terms of the IAS 21 considerations. However, the Government of Zimbabwe issued Statutory Instrument (SI 33) of 2019 on 22 February 2019, which prescribes the rate of USD1:RTGS$1 in accounting for all transactions and events before the effective date of the statutory instrument. Furthermore, it is our interpretation that the SI 33 of 2019 issued in terms of the Presidential Powers Temporary Measures Act [Chapter 10:20], ranks supreme to any contrary legislation including quasi-legislations, which therefore implies that in preparing the financial statements, we sought to comply with the provisions of SI 33 of 2019 ahead of the IAS 21 requirements. 15 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF DIRECTORS’ RESPONSIBILITY (Cont’d) for year ended 31 December 2020 5. STATEMENT OF COMPLIANCE (Cont’d) This, in our opinion resulted in non-compliance with IAS 21 and that non-compliance had a significant impact on the true and fair presentation of the Group’s financial position and would therefore urge users of the financial statements to exercise due caution. The consolidated and separate financial statements were approved by the Board of Directors on 10 March 2021. The consolidated financial statements are prepared with the aim of complying fully with International Financial Reporting Standards (IFRSs) and have been prepared in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe. 5. GOING CONCERN The Directors have assessed the ability of the Group and its subsidiary to continue operating as a going concern and believe that the preparation of these financial statements on a going concern is still appropriate. 6. 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. 7. 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. 8. 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. 9. 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. In light of the priority being given to the Group’s social responsibility and sustainability issues, the Group has enhanced its disclosures to include a report on sustainability in line with best practices. 10. 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. 11. 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. 16 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF DIRECTORS’ RESPONSIBILITY (Cont’d) for year ended 31 December 2020 12. FINANCIAL STATEMENTS The Group’s Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) 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. 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 financial statements of the Group appearing on pages 23 to 105 were approved by the Board of Directors on 10 March 2021 and are signed on their behalf by: …………………………………. Mr. B. A. Chikwanha Group Chairman ……………………………… Mr. B. P. Washaya Group Chief Executive Officer Date: 10 March 2021 Date: 10 March 2021 17 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 4 750905-14 or 750979-83 Fax: +263 4 750707 or 773842 Email: admin@zw.ey.com www.ey.com Independent Auditor’s Report To the Shareholders of NMBZ Holdings Limited Report on the Audit of the consolidated and separate inflation adjusted financial statements Adverse Opinion We have audited the consolidated and separate inflation adjusted financial statements of NMBZ Holdings Limited and its subsidiaries (the Group), as set out on pages 27 to 148, which comprise the consolidated and separate inflation adjusted consolidated and separate statement of financial position as at 31 December 2020, and the related inflation adjusted consolidated statement of profit or loss and other comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation adjusted statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated financial statements, including a summary of significant accounting policies and other explanatory notes. 23 to 105 In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section of our report, the accompanying inflation adjusted financial statements do not present fairly the financial positions of the Group as at 31 December 2020, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). Basis for Adverse Opinion Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in Foreign Exchange Rates in Prior Period and Inappropriate Application of IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors Non-compliance with IAS 8 As explained in note 2.4.7 to the inflation adjusted consolidated financial statements, the Group changed its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 February 2019 in compliance with Statutory Instrument 33 of 2019. We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. Our audit report for the year ended 31 December 2019 was therefore modified as management prospectively applied the change in functional currency from USD to ZWL from 23 February 2019, which we disagreed with. The correct approach would have been a retrospective restatement as a prior period error in terms of International Financial Reporting Standards – IAS 8 – Accounting Polices, Changes in Accounting Estimates and Errors. A member firm of the Ernst & Young Global Limited 18 22 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 4 750905-14 or 750979-83 Fax: +263 4 750707 or 773842 Email: admin@zw.ey.com www.ey.com The matter continues to impact the following balances on the inflation adjusted consolidated Statement of Independent Auditor’s Report Financial Position as they still comprise of amounts from opening balances: ZWL1 768 277 432 included in Property and equipment of ZWL1 588 179 384, Intangible assets of ZWL35 509 627, Retained earnings of To the Shareholders of NMBZ Holdings Limited ZWL1 482 983 888 and Revaluation reserves of ZWL487 104 622. The impact on the inflation adjusted consolidated statements of profit or loss and other comprehensive income, changes in equity and cashflows Report on the Audit of the consolidated and separate inflation adjusted financial statements has not been discussed here due to further matters below which result in further misstatement. ZWL20 106 575 included in Fee and commission income of ZWL 1 131 552 573 Inflation adjusted consolidated Statement of Profit or Loss and Other Comprehensive Income: Adverse Opinion On date of change in functional currency, management translated elements on the financial statements using different exchange rates which resulted in a misbalance which was recorded directly in equity as a We have audited the consolidated and separate inflation adjusted financial statements of NMBZ Holdings functional currency translation reserve of ZWL 287 529 426. This is not in line with the requirements of Limited and its subsidiaries (the Group), as set out on pages 27 to 148, which comprise the consolidated IFRS. and separate inflation adjusted consolidated and separate statement of financial position as at 31 December 2020, and the related inflation adjusted consolidated statement of profit or loss and other Exchange rates used in the current year comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation adjusted statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated In the current year, the Group translated foreign denominated transactions and balances to ZWL using the financial statements, including a summary of significant accounting policies and other explanatory notes. interbank exchange rates for the period 1 January 2020 to 23 June 2020, prior to introduction of the Foreign Exchange Auction Trading System. As in the prior year, we concluded that the interbank exchange In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section rates did not meet the definition of a spot exchange rate as per IAS 21, as they were not available for of our report, the accompanying inflation adjusted financial statements do not present fairly the financial immediate delivery. Consequently, the following financial statement elements are materially misstated in positions of the Group as at 31 December 2020, and their financial performance and their cash flows for the current year in addition to those noted on matter 1 above: the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). • Basis for Adverse Opinion o Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in o Foreign Exchange Rates in Prior Period and Inappropriate Application of IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors o Non-compliance with IAS 8 The impact can however not be quantified due to the lack of records on appropriate rates and As explained in note 2.4.7 to the inflation adjusted consolidated financial statements, the Group changed impracticability given the volume of transactions. Our prior year audit report was also modified due to this its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 matter. February 2019 in compliance with Statutory Instrument 33 of 2019. Valuation of investment properties, freehold land and buildings We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. The Group’s investment properties and freehold land and buildings are carried at ZWL1,653,496,3476 1,653,496,476 (2019: ZWL1,031,154,579) and ZWL 2 218 171 535 (2019: ZWL1 768 277 432) respectively as at 31 Our audit report for the year ended 31 December 2019 was therefore modified as management December 2020 as described on Note 23 and Note 25. The implicit investment method was applied for prospectively applied the change in functional currency from USD to ZWL from 23 February 2019, which Industrial and commercial properties and key inputs into the calculations include rentals per square meter we disagreed with. The correct approach would have been a retrospective restatement as a prior period and capitalisation rates. Residential properties and vacant stands were valued in terms of the market error in terms of International Financial Reporting Standards – IAS 8 – Accounting Polices, Changes in comparable approach. In both cases, the valuation was performed based on USD denominated inputs and Accounting Estimates and Errors. converted to ZWL as the presentation currency using the closing weighted average auction rate. Management further applied a discount factor to the resultant value based on actual rental yields as described on Note 23. ZWL23 575 425 included in operating costs ZWL 1 274 247 625 Net exchange gains/losses of ZWL128 836 005 A member firm of the Ernst & Young Global Limited We have concerns over the appropriateness of using a foreign currency for the valuation and then applying a conversion rate to a USD valuation to calculate ZWL property values as this may not be an accurate reflection of the current market dynamics where there is a disparity between exchange rates. With respect to the implicit investment approach, the USD estimated rentals may not be an appropriate proxy for the ZWL amounts in which rentals are settled. 22 While historical USD amounts based on similar transactions have been used as a starting point in determining comparable values on the market comparable approach, it is noted that market participants take into account different risk factors in determining an appropriate value in ZWL terms which are not necessarily limited to the exchange rate. 19 23 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 4 750905-14 or 750979-83 Fax: +263 4 750707 or 773842 Email: admin@zw.ey.com www.ey.com Consequently, property values may be materially misstated, and we are unable to determine what Independent Auditor’s Report adjustments may be necessary to correctly account for these amounts. Our prior year audit report was also modified due to this matter. To the Shareholders of NMBZ Holdings Limited Accounting for blocked funds Report on the Audit of the consolidated and separate inflation adjusted financial statements Included in Loans, advances and other assets of ZWL3 992 648 603 (2019: ZWL 3 824 449 644) on Note Adverse Opinion 20.5 to the inflation adjusted consolidated financial statements for the year ended 31 December 2020 are local balances denominated in the Bank’s functional currency. Of this, local balances amounting to ZWL13 We have audited the consolidated and separate inflation adjusted financial statements of NMBZ Holdings 840 412 which are held with the central bank have been treated as foreign currency and translated at the Limited and its subsidiaries (the Group), as set out on pages 27 to 148, which comprise the consolidated foreign auction exchange rate of 31 December 2020 in contravention of IAS 21 which defines ‘foreign and separate inflation adjusted consolidated and separate statement of financial position as at 31 currency’ as a currency other than the functional currency of the entity resulting in an overstatement of the December 2020, and the related inflation adjusted consolidated statement of profit or loss and other balance. Our prior year audit report was also modified due to this matter. comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation adjusted statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated Our opinion on the current period’s inflation adjusted consolidated financial statements is also modified financial statements, including a summary of significant accounting policies and other explanatory notes. because of the possible effects of the above matter on the comparability of the current period’s figures and In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section the corresponding figures. of our report, the accompanying inflation adjusted financial statements do not present fairly the financial Application of IAS29 - Financial Reporting in Hyperinflationary Economies positions of the Group as at 31 December 2020, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies Furthermore, notwithstanding that IAS 29 has been applied correctly, it is noted that its application was and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). based on prior and current periods’ financial information which was not in compliance with IAS 21 / IAS 8 Basis for Adverse Opinion as described above. Had the correct base numbers and start date been used, Property and equipment stated at ZWL2 218 171 535, intangible assets (ZWL 35 509 627), Deferred tax liabilities stated at Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in ZWL291 040 065 and all reserves on the inflation adjusted consolidated Statement of Financial Position Foreign Exchange Rates in Prior Period and Inappropriate Application of IAS 8- Accounting Policies, and all amounts on the inflation adjusted consolidated statement of comprehensive income except for Changes in Accounting Estimates and Errors interest income, interest expense, impairment losses and taxation would have been materially different. Non-compliance with IAS 8 Overall Consequential Impacts As explained in note 2.4.7 to the inflation adjusted consolidated financial statements, the Group changed As no restatements have been recorded in current year per IAS8 to correct the above matters, our audit its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 report on the inflation adjusted consolidated financial statements for the year ended 31 December 2020 is February 2019 in compliance with Statutory Instrument 33 of 2019. modified for the following reasons; We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. • All corresponding numbers remain misstated on the inflation adjusted consolidated Statement of Financial Position (except for investment securities and share capital), Cash Flows Profit or Loss Our audit report for the year ended 31 December 2019 was therefore modified as management and Changes in Equity, this also impacts comparability of the current period’s figures, prospectively applied the change in functional currency from USD to ZWL from 23 February 2019, which we disagreed with. The correct approach would have been a retrospective restatement as a prior period error in terms of International Financial Reporting Standards – IAS 8 – Accounting Polices, Changes in Accounting Estimates and Errors. • As opening balances enter into the determination of cash flows and performance, our audit report is modified in respect of the impact of these matters on the inflation adjusted consolidated Statement of Cash Flows, inflation adjusted consolidated Statement of Profit or Loss and inflation adjusted consolidated Statement of Changes in Equity. The effects of the above departures from IFRS are material and pervasive to the inflation adjusted consolidated financial statements. A member firm of the Ernst & Young Global Limited We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Inflation adjusted consolidated financial statements section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Zimbabwe, and we have fulfilled our ethical responsibilities in accordance with these requirements and IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse opinion. 22 20 24 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 4 750905-14 or 750979-83 Fax: +263 4 750707 or 773842 Email: admin@zw.ey.com www.ey.com Key Audit Matters Independent Auditor’s Report Except for the matters described in the Basis for Adverse Opinion section, we have determined that there are no key audit matters to communicate in our report. To the Shareholders of NMBZ Holdings Limited Other information Report on the Audit of the consolidated and separate inflation adjusted financial statements The directors are responsible for the other information. The other information comprises the Chairman’s Adverse Opinion Statement and the Directors’ Report and the Statement of Corporate Governance and Responsibility but does not include the inflation adjusted consolidated financial statements and our auditor’s report thereon. We have audited the consolidated and separate inflation adjusted financial statements of NMBZ Holdings Our opinion on the inflation adjusted consolidated financial statements does not cover the other information Limited and its subsidiaries (the Group), as set out on pages 27 to 148, which comprise the consolidated and we do not express an audit opinion or any form of assurance conclusion thereon. and separate inflation adjusted consolidated and separate statement of financial position as at 31 In connection with our audit of the inflation adjusted consolidated financial statements, our responsibility is December 2020, and the related inflation adjusted consolidated statement of profit or loss and other to read the other information and, in doing so, consider whether the other information is materially comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation inconsistent with the inflation adjusted consolidated financial statements or our knowledge obtained in the adjusted statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we financial statements, including a summary of significant accounting policies and other explanatory notes. conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for Adverse Opinion section above, the Group did not comply with the requirements In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section of IAS 21 – Effects of Changes in Foreign Exchange Rates and IAS 8 Accounting Policies, Changes in of our report, the accompanying inflation adjusted financial statements do not present fairly the financial Accounting Estimates and Errors and we disagreed with the valuation of properties and the accounting positions of the Group as at 31 December 2020, and their financial performance and their cash flows for treatment of blocked funds as well as the application of IAS 29 - Financial Reporting in Hyperinflationary the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies Economies on incorrect base numbers. We have concluded that the other information is materially misstated and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). for the same reasons. Basis for Adverse Opinion Responsibilities of the Directors for the Inflation adjusted Consolidated Financial Statements Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in The directors are responsible for the preparation and fair presentation of the inflation adjusted consolidated Foreign Exchange Rates in Prior Period and Inappropriate Application of IAS 8- Accounting Policies, financial statements in accordance with International Financial Reporting Standards and the requirements Changes in Accounting Estimates and Errors of the Companies and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20), and for such internal control as the directors determine is necessary to enable the preparation of inflation Non-compliance with IAS 8 adjusted consolidated financial statements that are free from material misstatement, whether due to fraud or error. As explained in note 2.4.7 to the inflation adjusted consolidated financial statements, the Group changed its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 In preparing the inflation adjusted consolidated financial statements, the directors are responsible for February 2019 in compliance with Statutory Instrument 33 of 2019. assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant the Group or to cease operations, or have no realistic alternative but to do so. monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. Auditor’s Responsibilities for the Audit of the Inflation adjusted Consolidated Financial Statements Our audit report for the year ended 31 December 2019 was therefore modified as management prospectively applied the change in functional currency from USD to ZWL from 23 February 2019, which Our objectives are to obtain reasonable assurance about whether the inflation adjusted consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to we disagreed with. The correct approach would have been a retrospective restatement as a prior period issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is error in terms of International Financial Reporting Standards – IAS 8 – Accounting Polices, Changes in not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement Accounting Estimates and Errors. when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken based on these inflations adjusted consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional A member firm of the Ernst & Young Global Limited skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the inflation adjusted consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is enough and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may intentional omissions, misrepresentations, or the override of internal control. involve collusion, forgery, 22 25 21 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 4 750905-14 or 750979-83 Fax: +263 4 750707 or 773842 Email: admin@zw.ey.com www.ey.com • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Independent Auditor’s Report To the Shareholders of NMBZ Holdings Limited • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Report on the Audit of the consolidated and separate inflation adjusted financial statements Adverse Opinion • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the inflation adjusted consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We have audited the consolidated and separate inflation adjusted financial statements of NMBZ Holdings Limited and its subsidiaries (the Group), as set out on pages 27 to 148, which comprise the consolidated and separate inflation adjusted consolidated and separate statement of financial position as at 31 December 2020, and the related inflation adjusted consolidated statement of profit or loss and other comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation adjusted statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated financial statements, including a summary of significant accounting policies and other explanatory notes. • Evaluate the overall presentation, structure and content of the inflation adjusted consolidated financial statements, including the disclosures, and whether the inflation adjusted financial statements represent the underlying transactions and events in a manner that achieves fair presentation. In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section of our report, the accompanying inflation adjusted financial statements do not present fairly the financial positions of the Group as at 31 December 2020, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the inflation adjusted consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in Foreign Exchange Rates in Prior Period and Inappropriate Application of IAS 8- Accounting Policies, We communicate with the directors regarding, among other matters, the planned scope and timing of the Changes in Accounting Estimates and Errors audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Non-compliance with IAS 8 Basis for Adverse Opinion We also provide the directors with a statement that we have complied with relevant ethical requirements As explained in note 2.4.7 to the inflation adjusted consolidated financial statements, the Group changed regarding independence, and to communicate with them all relationships and other matters that may its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate February 2019 in compliance with Statutory Instrument 33 of 2019. threats or safeguards applied. We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant From the matters communicated with the directors, we determine those matters that were of most monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. significance in the audit of the inflation adjusted consolidated financial statements of the current period and Our audit report for the year ended 31 December 2019 was therefore modified as management are therefore the key audit matters. We describe these matters in our auditor’s report unless law or prospectively applied the change in functional currency from USD to ZWL from 23 February 2019, which regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we we disagreed with. The correct approach would have been a retrospective restatement as a prior period determine that a matter should not be communicated in our report because the adverse consequences of error in terms of International Financial Reporting Standards – IAS 8 – Accounting Polices, Changes in doing so would reasonably be expected to outweigh the public interest benefits of such communication. Accounting Estimates and Errors. The engagement partner on the audit resulting in this independent auditor’s report is Walter Mupanguri (PAAB Practising Certificate Number 367) A member firm of the Ernst & Young Global Limited Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Audit Auditors Harare Date: 29 March 2021 22 22 26 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENTS OF COMPREHENSIVE INCOME for year ended 31 December 2020 Inflation Adjusted GROUP COMPANY Note 4 5 6.1 6.2 7 20.3 8.1 31 Dec 2020 ZWL 760 901 869 (142 992 756) -------------------- 617 909 113 1 131 552 573 128 836 005 -------------------- 1 878 297 691 257 605 427 -------------------- 2 135 903 118 (1 274 247 625) -------------------- 31 Dec 2019 ZWL Restated 808 407 006 (231 899 654) ------------------- 576 507 352 821 825 071 1 143 047 353 ------------------- 2 541 379 776 505 136 261 ------------------- 3 046 516 037 (1 079 026 942) ------------------- 31 Dec 2020 ZWL - - ------------------- - - - ------------------- - - ------------------- - 2 672 327 ------------------- 31 Dec 2019 ZWL Restated - - ------------------ - - - ------------------ - 89 430 085 ------------------ 89 430 085 (294 545) ------------------ 861 655 493 1 967 489 095 2 672 327 89 135 540 (127 974 740) (28 266 471) -------------------- 705 414 282 143 848 660 -------------------- 849 262 942 (49 562 276) (1 226 609 016) ------------------- 691 317 803 (314 097 585) ------------------- 377 220 218 - 39 608 059 ------------------- 42 280 386 (47 064) ------------------- 42 233 322 - 304 465 013 ------------------ 393 600 553 (60 640) ------------------ 393 539 913 6.3 181 026 875 487 104 622 - - 6.3 9.3 9.3 9.3 - -------------------- 1 030 289 817 =========== 287 529 426 ------------------- 1 151 854 266 =========== - ------------------- 42 233 322 =========== - ------------------ 393 539 913 =========== 210.12 198.37 208.41 96.49 90.92 95.21 Interest income Interest expense Net interest income Fee and commission income Net foreign exchange gains Revenue Other income Operating income Operating expenditure Operating income before impairment charge and loss on net monetary position Impairment losses on financial assets measured at amortised cost (Loss)/gain on net monetary position Profit before taxation Taxation credit/(charge) Profit for the period Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of land and buildings, net of tax Items that may be reclassified to profit or loss Translation gain on change in financial currency, net of tax Total comprehensive income for the year Earnings per share (ZWL cents) - Basic - Diluted - Headline 23 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENTS OF COMPREHENSIVE INCOME (Cont’d) for year ended 31 December 2020 Historical* GROUP COMPANY 31 Dec 2020 ZWL 31 Dec 2019 ZWL 31 Dec 2020 ZWL 31 Dec 2019 ZWL 501 216 271 (90 638 279) -------------------- 410 577 992 815 541 357 217 274 144 --------------------- 1 443 393 493 1 226 846 996 --------------------- 2 670 240 489 (814 190 000) --------------------- 1 856 050 489 70 557 190 (16 894 088) ------------------- 53 663 102 87 242 303 99 863 112 -------------------- 240 768 517 206 622 639 -------------------- 447 391 156 (105 937 502) -------------------- 341 453 654 - - ------------------- - - - -------------------- - - -------------------- - 62 563 -------------------- 62 563 - - ------------------ - - - ------------------ - 3 772 370 ------------------ 3 772 370 (12 425) ------------------- 3 759 945 (127 974 740) --------------------- 1 728 075 749 85 514 320 -------------------- 1 813 590 069 (11 048 567) -------------------- 330 405 087 (44 504 548) -------------------- 285 900 539 - -------------------- 62 563 - ------------------- 62 563 - ------------------- 3 759 945 9 152 ----------------- 3 769 097 Note 4 5 6.1 6.2 7 8.1 6.3 891 186 492 175 943 209 - - 6.3 9.3 9.3 9.3 - ------------------- 2 704 776 561 =========== 11 619 648 ------------------- 473 463 396 =========== - ------------------- 62 563 - ------------------- 3 769 097 =========== =========== 448.72 423.62 443.72 73.13 67.52 72.73 Interest income Interest expense Net interest income Fee and commission income Net foreign exchange gains Revenue Other income Operating income Operating expenditure Operating income before impairment charge Impairment losses on financial assets measured at amortised cost Profit before taxation Taxation credit/(charge) Profit for the period Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of land and buildings, net of tax Items that may be reclassified to profit or loss Translation gain on change in functional currency, net of tax Total comprehensive income for the year Earnings per share (ZWL cents) - Basic - Diluted - Headlines *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 24 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENTS OF FINANCIAL POSITION as at 31 December 2020 SHAREHOLDERS’ FUNDS Share capital Capital reserves Functional currency translation reserve Revaluation reserves Retained earnings Total equity Redeemable ordinary shares Subordinated term loan Total shareholders’ funds and shareholders’ liabilities LIABILITIES Deposits and other liabilities Deferred tax liabilities Current tax liabilities Total shareholders’ funds and liabilities ASSETS Cash and cash equivalents Current tax assets Investment securities Loans, advances and other assets Trade and other investments Group companies Investment properties Intangible assets Property and equipment Deferred tax assets Total assets Note 10.2.1 11 11 12 13 14 16.1 18 8.3 19 8.3 17.1 20 21 22.1 23 24 25 18 GROUP COMPANY Inflation adjusted 31 Dec 2020 ZWL 31 Dec 2019 ZWL Restated 31 Dec 2020 ZWL 31 Dec 2019 ZWL Restated 3 574 680 3 574 680 759 195 015 756 522 688 287 529 426 287 529 426 487 104 622 668 131 497 2 332 246 830 1 482 983 888 -------------------- --------------------- 3 020 387 631 4 048 005 121 64 305 875 14 335 253 127 220 391 132 632 641 -------------------- --------------------- 3 574 680 756 522 688 - - 516 136 635 ------------------- 1 276 234 003 14 335 253 - 3 574 680 759 195 015 - - 473 903 313 ------------------- 1 236 673 008 64 305 875 - ------------------- -------------------- 4 194 973 015 -------------------- 3 211 913 897 -------------------- 1 290 569 256 1 300 978 883 -------------------- -------------------- 6 413 943 465 291 040 065 57 205 065 5 652 133 875 505 497 805 2 803 378 --------------------- --------------------- 10 957 161 610 9 372 348 955 ============ ============ 1 857 750 414 135 - - - - --------------------- --------------------- 1 290 983 391 1 302 836 633 ============ ============ 1 964 637 240 - 1 081 820 457 3 992 648 603 10 877 672 - 1 653 496 476 35 509 627 2 218 171 535 - 2 208 405 864 - 480 731 899 3 824 449 644 7 231 788 - 1 031 154 579 52 097 749 1 768 277 432 - --------------------- --------------------- 10 957 161 610 9 372 348 955 ============ ============ 13 635 75 518 - 2 531 106 - 1 288 349 628 - - - 13 504 --------------------- 61 165 338 772 - 14 026 500 - 1 288 349 628 - - - 60 568 ------------------- 1 290 983 391 1 302 836 633 ============ =========== ---------------------------- MR. B. A. CHIKWANHA --------------------------- MR. B. P. WASHAYA 10 March 2021 Directors ------------------------ MISS. S. PASHAPA Company Secretary 10 March 2021 25 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENTS OF FINANCIAL POSITION (Cont’d) as at 31 December 2020 SHAREHOLDERS’ FUNDS Share capital Capital reserves Functional currency translation reserve Revaluation reserves Retained earnings Total equity Redeemable ordinary shares Subordinated term loan Total shareholders’ funds and shareholders’ liabilities LIABILITIES Deposits and other liabilities Deferred tax liabilities Current tax liabilities Total shareholders’ funds and liabilities ASSETS Cash and cash equivalents Current tax assets Investment securities Loans, advances and other assets Trade and other investments Group companies Investment properties Intangible assets Property and equipment Deferred tax assets Total assets Note 10.2.1 11 11 12 13 14 15 16.1 18 8.3 19 8.3 17.1 20 21 22.1 23 24 25 18 GROUP COMPANY Historical* 31 Dec 2020 ZWL 31 Dec 2019 ZWL 31 Dec 2020 ZWL 31 Dec 2019 ZWL 84 116 19 121 607 11 619 648 1 067 266 442 2 143 095 638 -------------------- 3 241 187 451 14 335 253 132 632 641 84 116 19 184 170 11 619 648 176 079 950 329 505 569 ------------------- 536 473 453 14 335 253 28 360 340 -------------------- --------------------- 84 116 19 121 607 - - 169 661 -------------------- 19 375 384 14 335 253 - 84 116 19 184 170 - - 107 098 -------------------- 19 375 384 14 335 253 - ------------------- -------------------- 3 388 155 345 -------------------- 579 169 046 -------------------- 33 710 637 33 710 637 -------------------- -------------------- 6 413 943 465 174 727 794 57 205 065 ------------------- 1 268 146 016 97 653 191 624 937 ------------------- 414 135 - - ------------------- 414 135 - - ------------------- 10 034 031 669 1 945 593 190 ============ ============ 34 124 772 34 124 772 ============ ============ 1 964 637 240 - 1 081 820 457 3 730 886 733 10 877 672 - 1 653 496 476 4 133 707 1 588 179 384 - 492 304 267 - 107 166 155 817 960 242 1 612 131 - 229 867 982 1 397 186 295 285 227 - --------------------- --------------------- 10 034 031 669 1 945 593 190 ============ ============ 13 635 75 518 - 2 531 106 - 31 491 009 - - - 13 504 --------------------- 34 124 772 13 635 75 518 - 2 531 106 - 31 491 009 - - - 13 504 ------------------- 34 124 772 ============ =========== *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. ---------------------------- MR. B. A. CHIKWANHA --------------------------- MR. B. P. WASHAYA 10 March 2021 26 Directors ------------------------ MISS. S. PASHAPA Company Secretary 10 March 2021 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF CHANGES IN EQUITY for year ended 31 December 2020 GROUP Inflation Adjusted Functional Currency Share Translation Reserve ZWL Premium ZWL Share Capital ZWL 3 486 812 - 728 690 606 - - 87 868 - - 27 832 082 - - - - - - Share Option Revaluation Reserve ZWL Reserve ZWL Retained Earnings ZWL Total ZWL 2 672 327 - - 1 133 683 620 1 868 533 365 377 220 218 - 377 220 218 - - - 487 104 622 - - - (27 919 950) 487 104 622 27 919 950 (27 919 950) - ------------- ---------------- - 287 529 426 ---------------- - --------------- - ---------------- - ----------------- 287 529 426 ----------------- 3 574 680 - 756 522 688 - 287 529 426 - 2 672 327 - 487 104 622 1 482 983 888 3 020 387 631 849 262 942 849 262 942 - - - ------------- - - ----------------- - - ---------------- - (2 672 327) ---------------- 181 026 875 - - - ----------------- ------------------ 181 026 875 (2 672 327) ------------------ 3 574 680 ======== 756 522 688 287 529 426 ========== ========== - 668 131 497 2 332 246 830 4 048 005 121 ========= ========== =========== =========== Balances at 1 January 2019 Profit for the year Revaluation of land and buildings, net of tax Share issue – scrip dividend Dividends paid Translation gain on change in functional currency, net of tax Restated balances at 1 January 2020 Profit for the year Revaluation of land and buildings, net of tax Unwinding of share option reserve Balances at 31 December 2020 GROUP Historical Cost* Functional Currency Share Translation Reserve ZWL Premium ZWL Share Capital ZWL 80 975 - 16 463 734 - - - - - - - 3 141 - ------------ 84 116 - 2 657 873 - ---------------- 19 121 607 11 619 648 - - ---------------- 11 619 648 Share Option Revaluation Reserve ZWL Reserve ZWL Retained Earnings ZWL Total ZWL 62 563 - 136 741 47 377 400 285 900 539 64 121 413 285 900 539 - 175 943 209 - 175 943 209 - - - ------------- - - (3 772 370) ----------------- 62 563 176 079 950 329 505 569 - - - ---------------- 11 619 648 2 661 014 (3 772 370) ---------------- 536 473 453 - - - - - - (62 563) - - (62 563) - - 1 813 590 069 1 813 590 069 - ------------ 84 116 ======= - ----------------- 19 121 607 ========== - ----------------- 11 619 648 ========= - -------------- 891 186 492 - ----------------- ------------------ 891 186 492 ------------------ - 1 067 266 442 2 143 095 638 3 241 187 451 ======== =========== ========== =========== Balances at 1 January 2019 Profit for the year Revaluation of land and buildings, net of tax Translation gain on change in functional currency, net of tax Share issue – scrip dividend Dividends paid Balances at 31 December 2019 Unwinding of share option reserve Profit for the year Revaluation of land and buildings, net of tax Balances at 31 December 2020 *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 27 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF CHANGES IN EQUITY for year ended 31 December 2020 COMPANY Inflation Adjusted Balances at 1 January 2019 Profit for the year Share issue – scrip dividend Dividends paid Balances at 31 December 2019 Total comprehensive income for the year Unwinding of share option reserve Balances at 31 December 2020 Share Capital ZWL Share Premium ZWL Share Option Revaluation Reserve ZWL Reserve ZWL Retained Earnings ZWL Total ZWL 3 486 812 - 87 868 - ------------- 3 574 680 728 690 606 - 27 832 082 - ---------------- 756 522 688 2 672 327 - - - ---------------- 2 672 327 - - - - ---------------- - 843 133 095 108 283 350 393 539 913 393 539 913 27 919 950 - (27 919 950) (27 919 950) ----------------- ----------------- 473 903 313 1 236 673 008 - - - - -------------- ----------------- 3 574 680 756 522 688 ======== ========== - - ---------------- - (2 672 327) ---------------- - 42 233 322 (2 672 327) ------------------ - 516 136 635 1 276 234 003 ========= ========== =========== =========== 42 233 322 - ----------------- COMPANY Historical Cost* Functional Currency Share Translation Reserve ZWL Premium ZWL Share Capital ZWL Share Option Revaluation Reserve ZWL Reserve ZWL Retained Earnings ZWL Total ZWL 80 975 - 16 463 734 - - - 62 563 - - - 110 372 3 769 097 16 717 644 3 769 097 - 3 141 - ------------ 84 116 - - ------------ 84 116 ======= - 2 657 873 - ---------------- 19 121 607 - - ----------------- 19 121 607 ========== - - - ---------------- 62 563 (62 563) - ---------------- - ========= - - - ------------- - - - ---------------- - - 2 661 014 (3 772 371) ---------------- 19 375 384 (62 563) 62 563 ---------------- 19 375 384 ======== =========== ========== =========== - - (3 772 371) ----------------- 107 098 - 62 563 ---------------- 169 661 - - - ---------------- - - - --------------- - Balances at 1 January 2019 Profit for the year Revaluation of land and buildings, net of tax Share issue – scrip dividend Dividends paid Balances at 31 December 2019 Unwinding of share option reserve Profit for the year Balances at 31 December 2020 *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 28 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF CASHFLOWS for year ended 31 December 2020 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Non-cash items: - Depreciation(excluding right of use assets) (note 7) - Depreciation –Right of use assets (note 7) - Amortisation of intangible assets (note 7) - Impairment losses on financial assets measured at amortised costs - Investment properties fair value gains (note 23) - Trade and other investments fair value gains adjustment (note 21) - Profit on disposal of property and equipment - Loss/(profit) on disposal of investment properties - Interest capitalised on subordinated loan (note 14) - Dividend received - Unrealised foreign exchange gain - Unwinding of share option reserve Inflation Adjusted GROUP COMPANY 31 Dec 2020 ZWL 31 Dec 2019 ZWL Restated 31 Dec 2020 ZWL 31 Dec 2019 ZWL 705 414 282 691 317 803 42 280 386 393 539 913 69 161 843 11 116 446 24 416 805 69 204 253 13 854 547 28 513 215 127 974 740 (228 646 579) 49 562 276 (419 983 776) - - - - - - - - - - (3 645 884) (7 881 999) 2 198 385 - - (204 729 321) - --------------------- (4 097 075) - (2 620 407) 16 955 691 - (414 431 455) - ------------------- - - - - - - (2 672 327) -------------------- - - - - (89 430 085) - - ------------------- Operating cash flows before changes in operating assets and liabilities Changes in operating assets and liabilities Increase/(decrease) in deposits and other liabilities 2 911 107 623 (Increase)/decrease in loans, advances and other assets (2 755 618 219) --------------------- 650 868 122 --------------------- Net cash generated/(used) from operations 495 378 718 28 275 072 39 608 059 304 109 828 (8 413 499 169) 4 407 969 090 ------------------- (3 977 255 007) ------------------- (51 103 453) 11 495 394 -------------------- - -------------------- (12 660 389) (354 956 149) -------------------- (63 506 711) -------------------- TAXATION Tax on dividends paid Corporate tax paid Net cash (outflow)/inflow from operations CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of intangible assets (note 24) Disposal/(Acquisition) of investment securities Proceeds on disposal of property and equipment Acquisition of property and equipment (note 25) Proceeds on disposal of investment properties Acquisition of investment properties (note 23) Dividends received Net cash generated/(used) in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of interest on subordinated term loan (note 14) Repayment of lease liabilities (note 16.4) Cash dividend paid Share issue costs – scrip dividend Net cash outflow from financing activities Net decrease in cash and cash equivalents Net foreign exchange and monetary adjustments on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year - (85 059 033) --------------------- 565 809 089 --------------------- (5 565 825) (65 138 185) --------------------- (4 047 959 017) --------------------- - - -------------------- - -------------------- (5 565 826) - -------------------- (69 072 537) -------------------- (7 828 681) (974 654 302) 10 309 948 (255 160 354) 15 381 940 (411 275 642) - --------------------- (1 623 227 091) --------------------- (2 857 048) 2 786 293 086 - (158 457 976) 26 415 943 (8 698 276) - -------------------- 2 642 695 729 -------------------- - - - - - - - -------------------- - --------------------- - - - - - - 89 430 086 -------------------- 20 357 549 -------------------- (3 602 420) - (18 782 170) (30 928 423) (19 739 519) - (618 030) - ------------------- --------------------- (42 742 139) (30 928 423) --------------------- ------------------- (1 088 346 425) (1 448 005 427) - - - - -------------------- - -------------------- - - - (19 739 518) (618 031) -------------------- (20 357 549) -------------------- - 844 577 801 2 208 405 864 --------------------- 1 964 637 240 ============ 523 370 450 3 133 040 841 ------------------- 2 208 405 864 =========== (47 530) 61 165 -------------------- 13 635 =========== 318 759 379 924 ------------------- 61 165 =========== Additional information on operational cashflows on interest Interest received Interest paid (including interest on lease liabilities) 729 123 038 (116 012 408) 757 446 936 (215 571 870) - - - - 29 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT STATEMENT OF CHANGES IN EQUITY for year ended 31 December 2020 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Non-cash items: - Depreciation (excluding right of use assets) (note 7) - Depreciation – Right of use assets (note 7) - Amortisation of intangible assets (note 7) - Impairment losses on financial assets measured at amortised costs - Investment properties fair value adjustment (note 23) - Trade and other investments fair value adjustment - Profit on disposal of property and equipment - Profit on disposal of investment properties - Interest capitalised on subordinated loan (note 14) - Impairment reversal on land and building - Unrealised foreign exchange gain - Dividends received - Unwinding of share option reserve Historical Cost* GROUP COMPANY 31 Dec 2020 ZWL 31 Dec 2019 ZWL 31 Dec 2020 ZWL 31 Dec 2019 ZWL 1 728 075 749 330 405 087 62 563 3 759 945 22 310 284 8 579 715 915 580 2 307 360 1 310 867 733 909 - - - - - - 127 974 740 (1 182 737 157) (9 265 541) (7 091 399) (10 867 431) - - (204 729 321) - - 11 048 567 (194 387 322) (1 499 630) - (584 149) 1 151 954 (40 600) (92 386 267) - - ---------------------- ---------------------- - - - - - - - - - (62 563) ---------------------- - - - - - - - - (3 772 371) - ---------------------- Operating cash flows before changes in operating assets and liabilities Changes in operating assets and liabilities Increase/(decrease) in deposits and other liabilities 2 911 107 622 (Increase)/decrease in loans, advances and other assets (1 356 425 376) --------------------- 2 027 847 465 --------------------- Net cash generated/(used) from operations 473 165 219 58 059 776 - (12 426) 552 444 546 (326 882 932) ------------------- 283 621 390 ------------------- - - -------------------- - -------------------- (118 344) (2 530 243) -------------------- (2 661 013) -------------------- TAXATION Tax on dividends paid Corporate tax paid Net cash (outflow)/inflow from operations CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of intangible assets (note 24) (Acquisition)/disposal/of investment securities Proceeds on disposal of property and equipment Acquisition of property and equipment (note 25) Proceeds on disposal of investment properties Acquisition of investment properties (note 23) Dividends received Net cash generated/(used) in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of interest on subordinated term loan Repayment of lease liabilities Cash dividend paid Share issue costs – scrip dividend Net cash outflow from financing activities Net increase in cash and cash equivalents Net foreign exchange and monetary adjustments on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year - (73 473 484) --------------------- 1 954 373 981 --------------------- (247 740) (9 079 118) --------------------- 274 294 532 --------------------- - - -------------------- - -------------------- (247 740) - -------------------- (2 908 753) -------------------- (3 652 103) (974 654 302) 7 122 008 (110 752 486) 15 381 940 (245 405 846) - --------------------- (1 311 960 789) --------------------- - (14 658 020) - - --------------------- (14 658 020) --------------------- 627 755 172 (94 320) 10 083 280 - (24 308 497) 5 888 719 (351 515) - -------------------- (8 782 333) -------------------- (180 450) (1 276 043) (832 659) (30 958) ------------------- (2 320 110) ------------------- 263 192 089 - - - - - - - -------------------- - --------------------- - - - - - - 3 772 371 -------------------- 3 772 371 -------------------- - - - - -------------------- - -------------------- - - - (832 659) (30 958) -------------------- (863 617) -------------------- - 844 577 801 492 304 267 --------------------- 1 964 637 240 ============ 116 671 266 112 440 912 ------------------- 492 304 267 =========== - 13 635 -------------------- 13 635 =========== - 13 635 ------------------- 13 635 =========== Additional information on operational cashflows on interest Interest received Interest paid (including interest on lease liabilities) 469 437 446 (63 657 930) 65 548 752 (15 089 895) - - - - *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 30 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES for year ended 31 December 2020 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 statements, investment in subsidiaries are accounted for at cost. 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. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. 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 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 Zimbabwe Dollars (ZWL), 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. 31 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 TAXATION (cont’d) 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. 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. FINANCIAL INSTRUMENTS Measurement Methods Amortised cost and effective interest rates The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired (‘POCI’) financial assets – assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows. When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss. Interest Income Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: a) b) Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset. Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision) Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset. 32 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Initial recognition and measurement At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows: a). When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. b). In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement. Financial Assets (i) Classification and subsequent measurement From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the following measurement categories: • • • Fair value through profit or loss (FVPL); Fair value through other comprehensive income (FVOCI); or Amortised cost. The classification requirements for debt and equity instruments are described below: Debt instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse. Classification and subsequent measurement of debt instruments depend on: • • the Bank’s business model for managing the asset; and the cash flow characteristics of the asset. Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories: • • • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (‘SPPI’), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method. Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument’s amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in “Net Investment Income’. Interest income from these financial assets is included in ‘Interest Income’ using the effective interest rate method. Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within ‘Net Trading Income” in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in ‘Net Investment Income’. Interest income from these financial assets is included in “Interest income” using the effective interest rate method. 33 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Debt instruments (continued) Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the ‘other’ business model and measured at FVPL. Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments’ cash flows represent solely payments of principal and interest (the “SPPI” test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period. Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Examples of equity instruments include basic ordinary shares. The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank’s management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank’s right to receive payments is established. Gains and losses on equity investments at FVPL are included in the ‘Other Income’ line in the statement of profit or loss. (ii) Impairment The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL): • • • • • • loans and advances to banks; loans and advances to customers; debt investment securities; lease receivables; loan commitments issued; and financial guarantee contracts issued. No impairment loss is recognised on equity investments. With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to: • • 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3). A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL. 34 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Expected Credit Losses ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset’s EIR. For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is drawn down; and For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party. The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset’s expected cash flows using the asset’s original EIR, regardless of whether it is measured on an individual basis or a collective basis. Credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events: significant financial difficulty of the issuer or the borrower; a). b). a breach of contract, such as a default or past due event; c). the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for that financial asset because of financial difficulties; or the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. d). e). f). It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets to become credit-impaired. Purchased or originated credit-impaired (POCI) financial assets For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition. The Bank assesses on a forward-looking basis the expected credit losses (‘ECL’) associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects: • • • An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; The time value of money; and Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. The Bank keeps track of the changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a financial instrument includes both a loan (i.e. financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected credit losses on the loan commitment is recognised together with the loss allowance for the financial asset. To the extent that the combined expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised in other liabilities. 35 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Definition of default Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk. The Bank considers the following as constituting an event of default: • • The borrower is past due more than 90 days on any material credit obligation to the Bank or; The borrower is unlikely to pay its credit obligations to the Bank in full. The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding. When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed internally or obtained from external sources. Significant increase in credit risk The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank’s accounting policy is not to use the practical expedient that financial assets with ‘low’ credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk. In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Bank’s historical experience and expert credit assessment including forward-looking information. Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased. For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank’s lenders operate, obtained from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing: • • the remaining lifetime PD at the reporting date; with the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure. The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL. The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular focus on assets that are included on the Bank’s ‘watch list’ and for the retail portfolio the Bank considers the expectation of forbearance and payment holidays, credit scores and any other changes in the borrower’s circumstances which are likely to adversely affect one’s ability to meet contractual obligations. 36 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Significant increase in credit risk (continued) Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD. The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL. (iii) Modification of loans The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the original terms. The Bank does this by considering, among others, the following factors: • If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay. • Whether any substantial new terms are introduced, such as a profit share/equity-based return that • • • substantially affects the risk profile of the loan. Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate. Change in the currency the loan is denominated in. Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan. If the terms are substantially different, the Bank derecognises the original financial asset and recognises a ‘new’ asset at fair value and recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition. If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit- impaired financial assets). (iv) Derecognition other than on a modification Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either • • the Bank transfers substantially all the risks and rewards of ownership, or the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control. The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Bank: (i) (ii) (iii) Has no obligation to make payments unless it collects equivalent amounts from the assets; Is prohibited from selling or pledging the assets; and Has an obligation to remit any cash it collects from the assets without material delay. Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Bank retains a subordinated residual interest. 37 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Financial Liabilities Classification and subsequent measurement In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for: Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss; Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability. Derecognition Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Financial guarantee contracts and loan commitments Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of: • • The amount of the loss allowance; and The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument. For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised in other liabilities. Critical accounting estimates and judgements The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Bank’s accounting policies. Note 2.4 (Use of estimates and judgements) provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements. 38 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) Measurement of the expected credit loss allowance The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: • • • • Determining criteria for significant increase in credit risk; Choosing appropriate models and assumptions for the measurement of ECL; Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and Establishing groups of similar financial assets for the purposes of measuring ECL. The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans. The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality of financial instruments and allocate commensurate loss provisions. Under the general approach, there are two measurement bases: • • 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial recognition. Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has occurred on an individual or collective basis. Probability of Default (PD) The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank’s PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used at entity level to evaluate 12 - month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12 - month PDs are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12 - month PDs, present borrower behaviour and forward looking macroeconomic factors. Exposure at Default (EAD) The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default. The Bank’s EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank’s EAD models that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding at the point of default. Loss Given Default (LGD) The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank’s LGD models were built using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12 - month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial instruments for which significant increase in credit risk has occurred. 12 - month LGDs were derived as historical loss rates while lifetime LGDs were derived using a combination of 12 - month LGDs and forward looking macroeconomic factors such as GDP and Inflation. The Bank’s ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit Loss that takes into account the time value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments. 39 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case ECL and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents a scenario of lower than market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represents scenarios of higher than market average default rates. Forward looking information In its ECL models, NMB Bank relies on a broad range of forward looking information as macroeconomic inputs, such as: Inflation Rate This is the inflation of the country of Zimbabwe. The Bank approximates the impact of inflation on the future quality of the credit portfolio by measuring the variation between the inflation rate at reporting date and the highest forecasted inflation rate for the period 2020-2023. Current inflation data is collected from the Reserve Bank of Zimbabwe (RBZ) and Zimbabwe National Statistics Agency (ZIMSTAT) websites while inflation forecast data is collected from the World Bank websites. Unemployment Rates The Bank defines this as the unemployed proportion of the country’s population. The Bank approximates the impact of unemployment on the future quality of the credit portfolio by assessing the direction of the rate. Increasing unemployment rate tends to indicate economic downsizing in the future while an improving unemployment rate ordinarily indicates economic growth. Market Non-Performing Loans Rate The Bank assesses the variance between its non-performing loans rate and the market average NPL rate as at reporting date. The variance approximates the performance of the Bank against the market with respect to the ability of the Bank to underwrite low credit loans. Producer Price Index (PPI) The Bank assesses this as the cost of production for companies. The Bank approximates the impact of PPI on the future quality of the credit portfolio by assessing the direction of the index. Increasing PPI tend to indicate economic downsizing in the future while decreasing PPI ordinarily promotes economic growth in the future. PPI data is collected from the RBZ and ZIMSTAT websites. 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. Collateral valuation The Group seeks to use collateral, where possible, to mitigate its credit risk on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other 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 39.1.4 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. 40 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 FINANCIAL INSTRUMENTS (continued) 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. 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. CASH AND CASH EQUIVALENTS Cash and cash equivalents include notes and coins on hand, unrestricted balances held with 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 derecognized. 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 plant 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. 41 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 PROPERTY AND EQUIPMENT (Continued) 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. 20% Computers 25% Motor Vehicles 20% Furniture and Equipment Buildings 2% Land and capital work-in-progress are not depreciated. 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% 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 lessor 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. As lessee In terms of IFRS 16, the Group recognises lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17, Leases. These liabilities are measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate. The Group has neither enjoyed nor extended any lease payment holidays in its capacity as either lessee or lessor respectively due to COVID-19. As such, there are no COVID-19 induced lease modifications applicable during the period under review. Measurement of right-of-use assets The associated right-of-use assets for property leases are measured on a prospective basis. The right-of-use assets are measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the consolidated statement of financial position. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight- line basis. In circumstances where the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The Group revalues its land and buildings that are presented within property and equipment and it has elected not to do so for the right-of-use buildings held by the Group. 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. 42 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 IMPAIRMENT OF NON FINANCIAL ASSETS (continued) 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. WRITE-OFFS Financial assets are written off where the recovery efforts have been pursued actively over one year without success or when it is uneconomical and inefficient to keep carrying the debt in the books as the chances of recovery become slim. Such accounts become subjects of write-backs in the event of recovery. Partial write-offs may be possible in cases where collateral security held is inadequate to expunge the debt in full. 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 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. 43 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (Cont’d) for year ended 31 December 2020 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. 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 AND SHAREHOLDERS’ LIABILITIES Shareholders’ funds and shareholders’ liabilities refers to the total investment made by the shareholders in the Group and it consists of share capital, share premium, share options reserve, functional currency translation 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. 44 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS for year ended 31 December 2020 1. REPORTING ENTITY The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk. 2. ACCOUNTING CONVENTION 2.1 Basis of preparation The condensed consolidated financial statements including comparatives, have been prepared under the inflation adjusted accounting basis to account for changes in the general purchasing power of the ZWL. The restatement is based on the Consumer Price Index at the statement of financial position date. The indices are derived from the monthly inflation rates which are issued by the Zimbabwe National Statistics Agency (ZIMSTAT). The indices used are shown below. These condensed consolidated financial statements are reported in Zimbabwean dollars and rounded to the nearest dollar. Dates 31 December 2018 31 December 2019 31 December 2020 Indices 88.81 551.63 2474.52 Conversion factor 27.8639 4.4859 1.000 The indices have been applied to the historical costs of transactions and balances as follows: • • • • • • All comparative figures as of and for the periods ended 31 December 2018, 31 December 2019 and 31 December 2020 have been restated by applying the change in the index to 31 December 2020; Income statement transactions have been restated by applying the change in the index from the approximate date of the transactions to 31 December 2020; Gains and losses arising from the monetary assets or liability positions have been included in the income statement; Non-monetary assets and liabilities have been restated by applying the change in the index from the date of the transaction to 31 December 2020; Property and equipment and accumulated depreciation have been restated by applying the change in the index from the date of their purchase or re-assessment to 31 December 2020; Equity has been restated by applying the change in index from the date of issue to 31 December 2020; The net impact of applying the procedures above is shown in the statement of comprehensive income as the gain or loss on net monetary position. IAS 29 discourages the publication of historical results as a supplement to the inflation adjusted results. However, historical results have been published as additional information for the users of the Group’s financial statements. The Auditors have not expressed an opinion on the historical results. 2.2 Functional and presentation currency For the purposes of the consolidated financial statements, the results and financial position of the Group are expressed in Zimbabwe dollars which is the functional currency of the Group, and the presentation currency for the consolidated financial statements. 2.3 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. 2.4 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 2021 is included in the following notes. 45 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 2. ACCOUNTING CONVENTION (cont’d) 2.4.1 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. 2.4.2 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. The property market is currently not stable due to liquidity constraints. 2.4.3 Investment properties Investment properties were valued by an independent professional valuer. The properties market is currently not stable due to liquidity constraints. 2.4.4 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. 2.4.5 COVID-19 The Directors fully acknowledge the unprecedented challenges and uncertainties posed by the COVID-19 pandemic. In that regard, significant judgments have generally been applied in light of the likely impacts of COVID-19 on the Group’s activities. The Directors fully acknowledge the challenges and uncertainties posed by the COVID-19 pandemic. As such, significant judgements have generally been applied in light of the potential impacts of COVID-19 on the Group’s activities. 2.4.6 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. 2.4.7 Determination of the functional currency The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD), South African Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe (RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group. Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD, bond notes and RTGS/electronic transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments triggered a debate around the functional currency of Zimbabwe. It should be noted that the Group never participated in the three tier pricing and none of its products had multiple prices during the same period. 46 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 2. ACCOUNTING CONVENTION (cont’d) 2.4 Use of estimates, judgements and assumptions (cont’d) 2.4.7 Determination of the functional currency (cont’d) In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country’s functional currency. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2019 were at USD1: RTGS$2.5. On the same date, Statutory Instrument 33 of 2019 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2019 were deemed to have been valued in RTGS Dollars at a rate of 1:1 with the USD. On 24 June 2019, the Monetary Authorities announced that the multi-currency regime, which the country was operating in since February 2009 had been discontinued and the country had adopted a mono-currency regime meaning that the sole legal tender would be the Zimbabwe Dollar (ZWL). On 26 March 2020, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial vulnerabilities caused by the COVID-19 pandemic. One of the measures announced therein was the authorization of the use of free-funds in paying for goods and services, in terms of Statutory Instrument (SI) 85 of 2020. On 24 July 2020, the Government of Zimbabwe issued Statutory Instrument (SI) 185 of 2020, which granted permission to display, quote or offer prices for all goods and services in both Zimbabwe dollars and foreign currency at the interbank exchange rate. On 23 June 2020, the Reserve Bank of Zimbabwe introduced the Foreign Exchange Auction System, effectively abandoning the fixed foreign currency exchange rate regime which had been prevailing for the greater part of 2020. Significant trades have been recorded on the platform and significant movements in the exchange rate have been resultantly recorded. In light of the developments summarised above, the Directors concluded that the Group’s functional currency remains the Zimbabwe dollar (ZWL) following its change from US$ with effect from 22 February 2019. 2.4.8 Lease arrangements The Directors have exercised significant judgement on determining whether the various contractual relationships which the Group is party to, contain lease arrangements which fall into the scope of IFRS 16. Significant judgement was also exercised in determining whether the Group is reasonably certain that it will exercise extension options present in lease contracts as well. 2.5 Standards issued and effective 2.5.1 Amendments to references to the Conceptual Framework in IFRS standards These changes were applicable to annual periods beginning on or after 1 January 2020. In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ‘information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.’ The amendments did not have a significant impact on the Group’s financial statements. 47 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 2. ACCOUNTING CONVENTION (cont’d) 2.5.1 Amendments to references to the Conceptual Framework in IFRS standards (cont’d) The amendments must be applied to transactions that are either business combinations or asset acquisitions for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after 1 January 2020. Consequently, entities do not have to revisit such transactions that occurred in prior periods. Earlier application is permitted and must be disclosed. The IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a business, removed the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs and introduce an optional fair value concentration test. The Group concluded that the changes did not have a material impact on its financial statements. 2.6 Standards issued and not yet adopted 2.6.1 Amendments to IAS 37 Onerous Contract – Costs of Fulfilling a Contract The changes are effective 1 January 2022. The amendments apply a ‘directly related cost approach’. The costs relate directly to a contract to provide goods or services include both incremental costs (e.g. the costs of direct labour and materials) and an allocation of costs directly related to contract activities. The Group does not expect this to have a material impact on its operations. The changes are effective 1 January 2022. The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items and the costs of producing those items, in profit or loss. This is not expected to have a material impact on the Group. 3. SEGMENT INFORMATION For management purposes, the Group is organised into four operating segments based on products and services as follows: Retail banking Corporate banking Treasury International banking Digital Banking - - - - - Individual customers deposits and consumer loans, overdrafts, credit card facilities and funds transfer facilities. Loans and other credit facilities and deposit and current accounts for corporate and institutional customers. Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading. Handles the Group’s foreign currency denominated banking business and manages relationships with correspondent banks. Handles the Bank’s Digital Banking products including Card and POS services. 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 2020 or 2019. 48 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 3. SEGMENT INFORMATION The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units: Inflation Adjusted Retail Banking ZWL For the year ended 31 December 2020 Income Third party income Interest and similar expense 279 996 668 (10 181 079) ---------------- 269 815 589 ---------------- (51 030 789) (15 053 208) - 35 931 847 - Net operating income Other material non-cash items Impairment losses on financial assets measured at amortised cost Depreciation of property and equipment Depreciation of right of use assets Amortisation of intangible assets Segment profit/(loss) Income tax charge Revaluation of land and buildings, net of tax - ---------------- Profit/(loss) for the year 35 931 847 ========= Corporate Banking ZWL Treasury Banking ZWL International Banking ZWL Digital Banking ZWL Other ZWL Total ZWL 354 598 051 40 121 452 13 499 451 406 363 423 1 184 316 829 2 278 895 874 (54 034 392) ----------------- 300 563 659 ----------------- (78 777 285) ----------------- (38 655 833) ---------------- - ------------------ 13 499 451 ---------------- - - ---------------- ------------------ 406 363 423 1 184 316 829 ------------------ ----------------- (142 992 756) ------------------ 2 135 903 118 ------------------ (71 726 425) (5 217 526) - - - (127 974 740) (223 637) (190 094) (25 073) (6 879 288) (46 790 543) (69 161 843) - - - - - (11 116 446) (11 116 446) - 49 539 559 - - 89 459 383 - - (5 505 199) - - 59 325 022 - (24 416 805) 476 663 670 143 848 660 (24 416 805) 705 414 282 143 848 660 - ----------------- 49 539 559 - ----------------- 89 459 383 ========== ========== - ----------------- (5 505 199) ========== - ---------------- 59 325 022 ========= 181 026 875 181 026 875 ----------------- ------------------- 801 539 205 1 030 289 817 ========== =========== As at 31 December 2020 Assets and liabilities Capital expenditure (property and equipment and intangible assets) Total assets Total liabilities 7 375 151 1 745 604 620 2 787 323 898 - 139 120 2 757 964 372 1 585 971 421 1 972 993 786 1 266 708 566 22 242 537 393 534 186 581 982 1 191 180 263 283 231 254 555 538 58 344 865 4 271 882 798 10 957 161 610 548 580 362 6 762 188 594 - 49 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 3. SEGMENT INFORMATION The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units: Corporate Banking ZWL Restated Inflation Adjusted International Banking ZWL Restated Treasury Banking ZWL Restated Digital Banking ZWL Restated Other ZWL Restated Total ZWL Restated 398 189 898 158 636 488 35 817 248 378 406 384 1 945 123 199 3 278 415 691 (88 964 312) ----------------- 309 225 586 ----------------- (124 358 752) ----------------- 34 277 736 ----------------- - ------------------ 35 817 248 ---------------- - ---------------- 378 406 384 1 945 123 199 ------------------- ----------------- (231 899 654) ------------------- -------------------- 3 046 516 037 ------------------- - 36 467 556 1 854 188 - - - 49 562 276 1 506 221 463 517 258 662 30 470 889 3 162 023 69 204 252 - - - - - 13 854 548 13 854 548 - 368 734 573 - - 225 132 646 - - 247 979 418 - - (9 113 644) - - 335 647 679 - 28 513 216 (477 062 869) (314 097 585) 28 513 216 691 317 803 (314 097 585) - - - - - 487 104 622 487 104 622 Retail Banking ZWL Restated For the year ended 31 December 2019 Income Third party income Interest and similar expense 362 242 474 (18 576 590) ----------------- 343 665 884 ----------------- 11 240 532 33 342 940 Net operating income Other material non-cash items Impairment losses on financial assets measured at amortised cost Depreciation of property and equipment Depreciation of right of use assets Amortisation of intangible assets Segment profit/(loss) Income tax charge Revaluation of land and buildings, net of tax Translation gain on change in functional currency - ---------------- - ----------------- - ----------------- - ----------------- - ---------------- 287 529 426 ----------------- 287 529 426 ------------------- Total comprehensive income for the year 368 734 573 ========= 225 132 646 247 979 418 ========== ========== (9 113 644) ========== 335 647 679 ========== (16 526 406) 1 151 854 266 ========== =========== As at 31 December 2019 Assets and liabilities Capital expenditure (property and equipment and intangible assets) Total assets Total liabilities 29 571 958 1 616 070 988 2 580 488 865 4. INTEREST INCOME - 557 825 2 553 307 980 1 468 283 466 1 826 586 605 1 172 711 701 89 183 497 515 926 172 736 554 4 776 243 161 315 024 126 319 815 54 015 350 3 183 155 245 9 372 348 955 599 437 599 6 351 961 324 - Loans and advances to banks Loans and advances to customers Investment securities Loans and advances to banks Loans and advances to customers Investment securities 50 Inflation adjusted GROUP COMPANY 2020 ZWL 16 542 933 708 206 922 36 152 014 2019 ZWL Restated 19 190 164 643 787 970 145 428 872 2020 ZWL - - - 2019 ZWL Restated - - - ------------------ 760 901 869 =========== ------------------ 808 407 006 =========== ------------------ - =========== ------------------ - =========== Historical GROUP COMPANY 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 10 198 110 466 881 802 24 136 359 ------------------ 501 216 271 =========== 2 368 733 58 942 089 9 246 368 ------------------ 70 557 190 =========== - - - ------------------ - =========== - - - ------------------ - =========== NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 5. INTEREST EXPENSE Due to banks Due to customers Other borrowed funds Due to banks Due to customers Other borrowed funds Inflation adjusted GROUP COMPANY 2020 ZWL 79 510 659 54 877 880 8 604 217 ------------------ 142 992 756 =========== 2019 ZWL Restated 105 729 146 109 016 084 17 154 424 ------------------ 231 899 654 =========== 2020 ZWL - - - ------------------ - =========== 2019 ZWL Restated - - - ------------------ - =========== GROUP COMPANY Historical 2020 ZWL 56 744 354 32 844 245 1 049 680 2019 ZWL 6 159 767 8 923 660 1 810 661 2020 ZWL - - - 2019 ZWL - - - ------------------ 90 638 279 =========== ------------------ 16 894 088 =========== ------------------ - =========== ------------------ - =========== 6. 6.1 NON INTEREST INCOME AND OTHER COMPREHENSIVE INCOME Fee and commission income Retail banking customer fees Corporate banking credit relate fees Financial guarantee fees International banking commissions Digital banking fees Retail banking customer fees Corporate banking credit relate fees Financial guarantee fees International banking commissions Digital banking fees Inflation adjusted GROUP COMPANY 2020 ZWL 312 978 016 99 687 124 7 268 349 24 363 557 687 255 527 2019 ZWL Restated 254 814 639 70 979 783 2 236 976 29 356 098 464 437 575 2020 ZWL - - - - - 2019 ZWL Restated - - - - - ------------------ 1 131 552 573 =========== ------------------ 821 825 071 =========== ------------------ - =========== ------------------ - =========== GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 220 625 391 64 826 957 3 858 135 17 771 535 508 459 339 ------------------ 815 541 357 =========== 24 101 648 10 259 457 212 188 3 070 999 49 598 011 ------------------ 87 242 303 =========== - - - - - ------------------ - =========== - - - - - ------------------ - =========== 51 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 6. 6.2 NON INTEREST INCOME AND OTHER COMPREHENSIVE INCOME Other income Trade and other investments fair value gains Profit on disposal of property and equipment Fair value gains on investment properties (Loss)/profit on disposal of investment properties Rental income Recoveries Other operating income Inflation adjusted GROUP COMPANY 2020 ZWL 3 645 884 7 881 999 228 646 579 (2 198 385) 7 610 897 5 879 717 6 138 736 ------------------ 257 605 427 =========== 2019 ZWL Restated 4 097 075 - 419 983 776 2 620 407 5 745 809 66 140 660 6 548 534 ------------------ 505 136 261 =========== 2020 ZWL - - - - - - - ------------------ - =========== 2019 ZWL Restated - - - - - - 89 430 085 ------------------ 89 430 085 =========== Trade investments fair value gains Profit on disposal of property and equipment Fair value gains on investment properties Profit on disposal of investment properties Rental income Recoveries Other operating income Historical GROUP COMPANY 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 9 265 541 7 091 399 1 182 737 157 10 867 431 5 641 865 3 406 069 7 837 534 ------------------- 1 226 846 996 =========== 1 499 630 - 194 387 322 584 149 391 885 9 519 359 240 294 ------------------ 206 622 639 =========== - - - - - - - ------------------ - =========== - - - - - - 3 772 370 ------------------ 3 772 370 =========== 52 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 6. 6.3 NON INTEREST INCOME AND OTHER COMPREHENSIVE INCOME(Continued) Other Comprehensive income GROUP COMPANY Inflation adjusted Revaluations of land and buildings Tax effect (note 8) Translation gain on change in functional currency Tax effect 2020 ZWL 240 471 407 (59 444 532) ------------------ 181 026 875 =========== - - ------------------ - ------------------ 181 026 875 =========== 2019 ZWL Restated 656 029 331 (168 924 709) ------------------ 487 104 622 =========== 387 248 848 (99 719 422) ------------------ 287 529 426 ------------------ 774 634 048 =========== 2020 ZWL - - ----------------- ========== - - ----------------- - ----------------- 2019 ZWL Restated - - ------------------ ========== - - ----------------- - ----------------- ========== ========== 6.3 Other Comprehensive income GROUP COMPANY Historical Revaluations of land and buildings Tax effect (note 8) Translation gain on change in functional currency Tax effect (note 8) 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 1 183 829 028 (292 642 536) ------------------ 891 186 492 - - ------------------ ------------------ 891 186 492 =========== 236 950 551 (61 007 342) ------------------ 175 943 209 15 649 358 (4 029 710) ------------------ 11 619 648 ------------------ 187 562 857 =========== - - ------------------ - - ------------------ - - ------------------ - - ----------------- ------------------ ----------------- =========== =========== 53 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 7. OPERATING EXPENDITURE GROUP COMPANY Inflation adjusted 2020 ZWL 2019 ZWL Restated 2020 ZWL 2019 ZWL Restated 618 699 280 The net operating income is after charging the following: Administration costs** Audit fees: - Current year - Prior year Amortisation of intangible assets Depreciation (excluding right of use assets) Depreciation – right of use assets Directors’ remuneration - Fees for services as directors - Services rendered - Expenses Staff costs – salaries, allowances and related costs 13 977 416 2 814 505 24 416 805 69 161 843 11 116 446 34 698 537 13 309 810 21 151 722 237 005 499 362 793 ------------------ 1 274 247 625 =========== 521 028 863 (2 672 327) 294 545 7 088 694 1 427 391 28 513 216 69 204 252 13 854 548 27 608 198 7 110 228 19 927 596 570 374 - - - - - - - - - - - - - - - - - 410 301 780 ------------------ 1 079 026 942 =========== - ------------------ (2 672 327) =========== - ----------------- 294 545 =========== **Included in administration costs are lease finance costs amounting to ZWL16 443 895 (2019 – ZWL11 561 568) in respect of property leases which the Group uses for the purpose of carrying on its trade. 7. OPERATING EXPENDITURE GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 395 919 343 The net operating income is after charging the following: Administration costs Audit fees: 8 388 890 - Current year 1 553 413 - Prior year - Impairment reversal on land and buildings* 915 580 Amortisation of intangible assets 22 310 284 Depreciation (excluding right of use assets) 8 579 715 Depreciation – right of use assets 13 902 765 Directors’ remuneration 3 520 400 - Fees for services as directors 10 344 405 - Services rendered - Expenses 37 960 Staff costs – salaries, allowances and related costs 362 620 010 ------------------ 814 190 000 =========== 55 318 360 (62 563) 12 425 993 686 200 090 (40 600) 733 909 2 307 360 1 310 867 2 531 536 644 487 1 806 282 80 767 42 582 294 ------------------ 105 937 502 =========== - - - - - - - - - - - ------------------ (62 563) =========== - - - - - - - - - - - ----------------- 12 425 =========== *The impairment reversal on land and building arose due to fair value changes on the Group’s land and buildings measured using the revaluation model. 54 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 8. TAXATION 8.1 Income tax charge Current tax Deferred tax (note 18) Current tax Deferred tax (note 18) GROUP COMPANY Inflation adjusted 2020 ZWL 130 053 612 (273 902 272) ------------------ (143 848 660) =========== 2019 ZWL Restated 44 813 146 269 284 439 ------------------ 314 097 585 =========== 2020 ZWL - 47 064 ------------------ 47 064 =========== 2019 ZWL Restated - 60 640 ------------------ 60 640 =========== GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 130 053 612 (215 567 932) ------------------ (85 514 320) =========== 9 989 877 34 514 671 ------------------ 44 504 548 =========== - - ------------------ - =========== - (9 152) ------------------ (9 152) =========== 8.2 Reconciliation of income tax (credit)/charge GROUP COMPANY Inflation adjusted 2020 ZWL Based on results for the period at a rate of 24.72% 174 378 411 Tax effect of: - Income not subject to tax* - Non-deductible expenses** - Change in tax bases*** (53 979 127) 62 246 824 (326 494 768) ------------------ (143 848 660) =========== 2019 ZWL Restated 493 871 042 (223 083 068) 43 309 611 - ------------------ 314 097 585 =========== 2020 ZWL 10 428 443 2019 ZWL Restated 22 107 117 (10 381 379) - - ------------------ 47 064 =========== (22 046 477) - - ------------------ 60 640 =========== *Income not subject to tax includes coupon interest from Treasury Bills and income from mortgages for the Group as well as non-deductible income attributable to the unwinding of share based payments for the company. ** Non-deductible expenses include provisions, disallowable pension deductions and depreciation. ***The change in tax bases arose from the legislative pronouncement in the Finance (No.2 ) Act of 2020 which resulted in the rebasing of unredeemed foreign currency capital balances on assets ranking for capital allowances using the USD/ZWL official exchange rate prevailing on 1 January 2021. 55 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 8. TAXATION (cont’d) 8.2 Reconciliation of income tax (credit)/charge (cont’d) GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL Based on results for the period at a rate of 24.72% 444 979 506 Tax effect of: - Income not subject to tax - Non-deductible expenses** - Change in tax bases (266 245 882) 62 246 824 (326 494 768) ------------------ (85 514 320) =========== 85 079 310 16 110 968 186 (50 229 371) 9 654 609 - ------------------ 44 504 548 =========== (16 110) - - ------------------ - =========== (977 338) - - ------------------ (9 152) =========== 8.3 Current tax liabilities /(assets) GROUP COMPANY Inflation adjusted 2020 ZWL 2 803 377 9 407 109 130 053 612 (85 059 033) ------------------ 57 205 065 =========== 2019 ZWL Restated (7 964 130) 31 092 547 44 813 146 (65 138 185) ------------------ 2 803 378 =========== 2020 ZWL (338 772) 263 254 - - ------------------ (75 518) =========== 2019 ZWL Restated (2 104 266) 1 765 494 - - ------------------ (338 772) =========== GROUP COMPANY Inflation adjusted 2020 ZWL 624 937 130 053 612 (73 473 483) ------------------ 57 205 066 =========== 2019 ZWL Restated (285 822) 9 989 877 (9 079 118) ------------------ 624 937 =========== 2020 ZWL (75 518) - - ------------------ (75 518) =========== 2019 ZWL Restated (75 518) - - ------------------ (75 518) =========== At 1 January Monetary adjustment Charge for the year Payments during the year 8.3 Current tax liabilities /(assets) (cont’d) At 1 January Charge for the year Payments during the year 9. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to 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. 56 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 9.1 Earnings Inflation Adjusted Historical Cost 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL Profit for the year Headline earnings for the period 849 262 942 842 335 788 377 220 218 372 232 488 1 813 590 069 1 793 375 973 285 900 539 284 353 334 9.2 Number of shares 9.2.1 Basic earnings per share Inflation adjusted Historical Cost 31 December 2020 31 December 2019 31 December 2020 31 December 2019 Weighted average number of ordinary shares for basic and headline earnings per share 404 171 689 399 498 150 404 171 689 399 498 150 9.2.2 Diluted earnings per share Number of shares at beginning of period Effect of dilution: Share options exercised Weighted average number of shares issued – scrip dividend Share options approved but not granted 404 171 689 392 955 196 404 171 689 392 955 196 - - - - - ----------------- 404 171 689 23 942 639 ----------------- 428 114 328 ========== 6 542 954 ----------------- 399 498 150 23 942 639 ----------------- 423 440 789 ========== - ----------------- 404 171 689 23 942 639 ----------------- 428 114 328 ========== 6 542 954 ----------------- 399 498 150 23 942 639 ----------------- 423 440 789 ========== Inflation Adjusted Historical Cost 9.2.3 Headline earnings Profit for the period Add/(deduct) non-recurring items Trade investments fair value gains Profit on disposal of property and equipment Loss/(profit) on disposal of investment properties Tax thereon Headline earnings ZWL ZWL Restated ZWL ZWL 849 262 942 377 220 218 1 813 590 069 285 900 539 (3 645 884) (7 881 999) 2 198 385 2 402 344 ----------------- 842 335 788 ========== (4 097 075) - (2 620 407) 1 729 752 ----------------- 372 232 488 ========== (9 265 541) (7 091 399) (10 867 431) 7 010 275 ----------------- 1 793 375 973 ========== (1 499 630) - (584 149) 536 574 ----------------- 284 353 334 ========== This is calculated in accordance with the Statement of Investment Practice No. 1 issued by the former Institute of Investment Management and Research (now the Chartered Financial Analysts (CFA) Society of the UK). 57 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 9.3 Earnings per share (ZWL cents) Basic Diluted Headline 10. SHARE CAPITAL 10.1 Inflation Adjusted Historical Cost 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 210.12 198.37 208.41 96.49 90.92 95.21 448.72 423.62 443.72 73.13 67.52 72.73 31 December 2020 Shares million 31 December 2019 Shares million 31 December 2020 ZWL 31 December 2019 ZWL Authorised Ordinary shares of ZWL0.00028 each 600 ========== 600 ========== 168 000 ========== 168 000 ========== Inflation adjusted 31 December 2020 Shares million 31 December 2019 Shares million 31 December 2020 ZWL 31 December 2019 ZWL Restated 404 ========== 404 ========== 3 574 680 ========== 3 574 680 ========== Historical Cost 31 December 2020 Shares million 404 ========== 31 December 2019 Shares million 404 ========== 31 December 2020 ZWL 31 December 2019 ZWL 84 116 ========== 84 116 ========== Inflation Adjusted 31 December 2020 Shares million 31 December 2019 Shares million 31 December 2020 ZWL 31 December 2019 ZWL Restated 104 ========== 104 ========== 29 040 ========== 130 269 ========== 10.2 Issued and fully paid 10.2.1 Ordinary shares Ordinary shares Ordinary shares 10.2.2 Redeemable ordinary shares Redeemable ordinary shares 58 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 10.2.2 Redeemable ordinary share Historical Cost Redeemable ordinary shares 31 December 2020 Shares million 104 ========== 31 December 2019 Shares million 104 ========== 31 December 2020 ZWL 31 December 2019 ZWL 29 040 ========== 29 040 ========== Of the unissued ordinary shares of 196 million shares (2019 - 196 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639 (2019 – 23 942 639). No share options were exercised from the Scheme as at 31 December 2020. Subject to the provisions of section 214 of the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe, the unissued shares are under the control of the directors. 11. CAPITAL RESERVES GROUP COMPANY Inflation adjusted 2020 ZWL 756 522 688 - ---------------- 756 522 688 287 529 426 -------------------- 1 044 052 114 =========== 2019 ZWL Restated 756 522 688 2 672 327 ---------------- 759 195 015 287 529 426 -------------------- 1 046 724 441 =========== 2020 ZWL 756 522 688 - ---------------- 756 522 688 - ------------------- 756 522 688 =========== 2019 ZWL Restated 756 522 688 2 672 327 ---------------- 759 195 015 - ---------------- 759 195 015 ========= GROUP COMPANY Historical 2020 ZWL 19 121 607 - ---------------- 19 121 607 11 619 648 --------------- 30 741 255 ========= 2019 ZWL 19 121 607 62 563 ---------------- 19 184 170 11 619 648 --------------- 30 803 818 ========= 2020 ZWL 2019 ZWL 19 121 607 - ---------------- 19 121 607 - --------------- 19 121 607 ========= 19 121 607 62 563 ---------------- 19 184 170 - --------------- 19 184 170 ========= Share premium Share option reserve Functional currency translation reserve Total capital reserve Share premium Share option reserve Functional currency translation reserve Total capital reserve 11.1 Nature and purpose of reserves 11.1.1 Share premium 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 37.3 for further details of these plans. 11.1.3 Functional currency translation reserve The reserve arose out of translation gains on the Group’s land and buildings recorded on the change in the Group’s functional currency during the period under review. 11.1.4 Revaluation reserve The Reserve represent gains on the revaluation of land and buildings. 59 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 12. RETAINED EARNINGS Analysis of retained profit by company Inflation adjusted GROUP COMPANY 2020 ZWL 516 136 635 1 816 157 255 -------------------- 2 332 246 830 =========== - 2019 ZWL Restated 473 903 313 975 166 845 -------------------- 1 482 983 888 =========== 21.93 2020 ZWL 516 136 635 - -------------------- 516 136 635 =========== - 2019 ZWL Restated 473 903 313 - -------------------- 473 903 313 =========== 21.93 GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 169 661 2 142 925 977 ------------------- 2 143 095 638 =========== - 107 098 329 398 471 -------------------- 329 505 569 =========== 0.96 169 661 - -------------------- 169 661 =========== - 107 098 - -------------------- 107 098 =========== 0.96 NMBZ Holdings Limited NMB Bank Limited Total retained earnings Dividend per share (ZWL cents) NMBZ Holdings Limited NMB Bank Limited Total retained earnings Dividend per share (ZWL cents) 13. REDEEMABLE ORDINARY SHARES Inflation Adjusted Historical Cost Nominal value (note 10.2.2) Share premium 31 December 2020 ZWL 29 040 14 306 213 ---------------- 14 335 253 ========== 31 December 2019 ZWL Restated 130 269 64 175 606 ---------------- 64 305 875 ========== 31 December 2020 ZWL 31 December 2019 ZWL 29 040 14 306 213 ---------------- 14 335 253 ========== 29 040 14 306 213 ---------------- 14 335 253 ========== On 30 June 2013, the Group received USD14 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 USD4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements previously set by the Reserve Bank of Zimbabwe of ZWL200 million by 31 December 2020. FMO and Norfund came together with Rabobank to form ARISE which is a development finance institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa. NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors have a right at 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. 60 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 14. SUBORDINATED LOAN Inflation Adjusted Historical Cost At 1 January Monetary adjustment Exchange revaluation Interest capitalised Interest paid 31 December 2020 ZWL 127 220 391 (98 860 051) 104 272 301 - - ---------------- 132 632 641 ========== 31 December 2019 ZWL Restated 41 953 193 (44 194 322) 116 108 249 16 955 691 (3 602 420) ---------------- 127 220 391 ========== 31 December 2020 ZWL 31 December 2019 ZWL 28 360 340 1 505 647 104 272 301 - - ---------------- 132 632 641 ========== 25 883 189 1 151 954 (180 450) ---------------- 28 360 340 ========== In 2013, the Bank received a subordinated term loan amounting to USD1.4 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 defaulted on a principal repayments with respect to this subordinated loan during the year ended 31 December 2019 as a result of the prevailing nostro funding challenges affecting the economy. There was a breach on the Aggregate Unhedged Open Foreign Currency Positions Ratio covenant which stood at 19.05% (instead of a maximum 10%) between the Group and the Development Financial Institution at the reporting date of 31 December 2020. However, there were no defaults on interest payments. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation, as RTGS dollars. The RBZ pegged the initial trades at US$/RTGS$1:2.5. In order to manage the transition, the RBZ also advised on the same date that all foreign liabilities or legacy debts due to suppliers and service providers, declared dividends e.t.c would be treated separately after registering such debts with the RBZ Exchange Control Department for an orderly expunging of these debts. Consequently, the Group registered its legacy debts, which included the subordinated term loan and offshore lines of credit and transferred the ZWL equivalent of these debts at a rate of US$/ZWL1:1 to the RBZ in terms of the RBZ directive. These legacy debts and the related amounts transferred to the RBZ in terms of the RBZ directive on the legacy debts, have been translated using the interbank rate at reporting date. During the period under review, the RBZ approved the legacy debt in respect of the subordinated term loan. 15. TOTAL SHAREHOLDERS’ FUNDS AND SHAREHOLDERS’ LIABILITIES GROUP COMPANY Inflation adjusted 2020 ZWL Shareholders’ funds and shareholders liabilities 3 868 525 309 ------------------- 3 868 525 309 =========== 2019 ZWL Restated 3 211 913 897 ------------------- 3 211 913 897 ============ 2020 ZWL 2019 ZWL Restated 1 300 978 883 ------------------- 1 300 978 883 ============ ============ 1 290 569 256 ------------------- 1 290 569 256 GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL Shareholders’ funds and shareholders liabilities 3 061 660 579 ------------------- 3 061 660 579 =========== 579 169 046 ------------------- 579 169 046 =========== 33 710 637 ------------------- 33 710 637 =========== 33 710 637 ------------------- 33 710 637 =========== Shareholders’ funds and shareholders’ liabilities 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), functional currency translation reserve (refer to Note 11), retained earnings (refer to Note 12), redeemable ordinary shares (refer to Note 13) and the subordinated loan (refer to Note 14). 61 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 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* Total deposits Trade and other payables* Deposits from banks and other financial institutions** Current and deposit accounts from customers* Total deposits Trade and other payables* Inflation adjusted GROUP COMPANY 2020 ZWL 1 603 493 431 4 659 257 433 -------------------- 6 262 750 864 151 192 601 -------------------- 6 413 943 465 =========== 2019 ZWL Restated 1 386 184 358 3 956 827 863 -------------------- 5 343 012 221 309 121 654 -------------------- 5 652 133 875 =========== 2020 ZWL 2019 ZWL Restated - - -------------------- - 414 135 -------------------- 414 135 =========== - - -------------------- - 1 857 750 -------------------- 1 857 750 =========== GROUP COMPANY Historical 2020 ZWL 2019 ZWL 2020 ZWL 2019 ZWL 1 603 493 431 4 659 257 433 ------------------- 6 262 750 864 151 192 601 ------------------- 6 413 943 465 =========== 309 012 254 882 067 591 ------------------- 1 191 079 845 77 066 171 ------------------- 1 268 146 016 =========== - - ------------------- - 414 135 ------------------- 414 135 =========== - - ------------------- - 414 135 ------------------- 414 135 =========== * 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 trade and other payables are lease liabilities ranging from 1 to 5 years in respect of leased properties in which the Group is a lessee. Also included in trade and other liabilities are ECL provisions in respect of guarantees and facilities approved but not drawn down. ** Included in deposits from banks and other financial institutions are loan balances of ZWL707 186 403 (2019 – ZWL654 115 604), ZWL365 711 501 (2019 – ZWL330 653 630) and ZWL484 792 463 (2019 – ZWL90 292 554) due to Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Afreximbank. The carrying amounts of deposits from other banks and other financial institutions approximate the related fair values. All the loan balances except for Afreximbank are part of the Group’s legacy debts which were registered with the Reserve Bank of Zimbabwe (RBZ) for an orderly expunging of the debts. During the previous reporting period, the Group transferred the ZWL equivalent of the legacy debts at a rate of US$/ ZWL1:1 to the RBZ as per requirement of the Exchange Control directive RU 28 of 2019. There were no breaches to the financial covenants. However, the Group defaulted on the principal repayments repayments on the FMO and Swedfund facilities during the period under review due to the nostro-funding challenges that were prevailing in the economy and subsequent to period end, the above mentioned lines of credit balances have since been transferred to the RBZ for an orderly expunging of the debts. The Bank has been communicating with the lenders regarding these developments. The line of credit balances have been translated at 31 December 2020 at the closing rate of USD/ZWL81.7368. Consequently, the amount transferred to the RBZ for the settlement of these debts has been translated at the same closing rate as it represents the Bank’s right to the settlement of the related lines of credit. During the period under review, the RBZ approved the legacy debt in respect of the FMO and Swedfund lines of credit. 62 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 16. DEPOSITS AND OTHER LIABILITIES (Cont’d) 16.2 Maturity analysis Inflation Adjusted Historical 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 5 years Over 5 years 5 498 905 442 749 093 396 9 281 600 2 145 131 3 160 969 164 326 -------------------- 6 262 750 864 =========== The maturity analysis covers the Group’s total deposits only and does not include other trade payables. 4 686 461 205 226 671 312 151 148 281 197 063 165 80 807 732 860 526 -------------------- 5 343 012 221 =========== 5 498 905 442 749 093 396 9 281 600 2 145 131 3 160 969 164 326 -------------------- 6 262 750 864 =========== 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 Agriculture Banks and other financial institutions Distribution Individuals Manufacturing Mining companies Municipalities and parastatals Other deposits Services Transport and telecommunications Inflation adjusted GROUP 2019 ZWL Restated 113 854 228 1 386 184 358 535 137 029 462 209 895 736 800 679 90 869 882 260 152 204 519 515 687 969 121 283 269 166 976 ------------------- 5 343 012 221 =========== % 2 26 9 10 12 2 4 13 18 4 -------- 100 ===== Historical GROUP 2019 ZWL 25 380 717 309 012 254 119 294 305 103 037 176 164 249 753 20 256 979 57 993 887 115 811 950 216 039 339 60 003 485 ------------------- 1 191 079 845 =========== % 2 26 9 10 12 2 4 13 18 4 -------- 100 ===== 2020 ZWL 136 424 405 1 603 493 431 567 405 668 622 092 240 742 623 796 108 883 701 275 200 417 781 769 028 1 146 241 726 278 616 452 ------------------- 6 262 750 864 =========== 2020 ZWL 136 424 405 1 603 493 431 567 405 668 622 092 240 742 623 796 108 883 701 275 200 417 781 769 028 1 146 241 726 278 616 452 ------------------- 6 262 750 864 =========== 1 044 719 581 50 530 229 33 694 415 43 929 895 18 013 895 191 830 -------------------- 1 191 079 845 =========== % 2 26 10 9 14 2 5 10 18 4 ---------- 100 ====== % 2 26 10 9 14 2 5 10 18 4 ---------- 100 ====== 63 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 16.4 Lease Liabilites Inflation Adjusted Historical At 1 January Monetary adjustment Remeasurements Finance costs accrual Payment of lease liabilities 31 December 2020 ZWL 14 978 271 (10 277 836) 36 968 582 13 205 194 (30 928 423) -------------------- 23 945 788 =========== 31 December 2020 ZWL 31 December 2019 ZWL 3 338 967 - 29 233 252 6 031 589 (14 658 020) -------------------- 23 945 788 =========== 3 078 687 - 757 613 778 710 (1 276 043) -------------------- 3 338 967 =========== 31 December 2019 ZWL Restated 30 443 511 (3 574 861) 3 398 610 3 493 181 (18 782 170) -------------------- 14 978 271 =========== GROUP 17.1 Investment securities Inflation Adjusted Historical Amortised cost – Gross Impairment allowance – Stage 1 20.3 31 December 2020 ZWL 1 086 000 591 (4 180 134) -------------------- 1 081 820 457 =========== 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 482 537 469 (1 805 570) -------------------- 480 731 899 =========== 1 086 000 591 (4 180 134) -------------------- 1 081 820 457 =========== 107 568 657 (402 502) -------------------- 107 166 155 =========== The Group holds Treasury Bills and Government Bonds amounting to ZWL1 086 000 591 with interest rates ranging from 5% to 18%. The Treasury Bills are measured at amortised cost in line with the Bank’s business model to collect contractual cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest. Of the total Treasury Bills balance of ZWL1 081 820 457, a total of ZWL173 295 710 had been pledged as security against interbank borrowings. 17.2 Maturity analysis of investment securities – amortised cost Inflation Adjusted Historical Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 5 years Over 5 years Expected Credit loss allowance 31 December 2020 ZWL 400 000 000 450 000 000 100 360 440 124 257 920 - 11 382 231 (4 180 134) -------------------- 1 081 820 457 =========== 31 December 2019 ZWL Restated 11 214 639 28 664 954 85 231 257 245 768 444 60 599 131 51 059 044 (1 805 570) -------------------- 480 731 899 =========== 31 December 2020 ZWL 31 December 2019 ZWL 400 000 000 450 000 000 100 360 440 124 257 920 - 11 382 231 (4 180 134) -------------------- 1 081 820 457 =========== 2 500 000 6 390 075 19 000 000 54 787 417 13 508 934 11 382 231 (402 502) -------------------- 107 166 155 =========== The maturity analysis is based on the present value of future cashflows. 64 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 17.3 Fair values of financial instruments 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. 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. 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. During the reporting periods ended 31 December 2020 and 31 December 2019, 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. Financial instruments measured at fair value - fair value hierarchy Inflation Adjusted Trade investments Trade investments 31 Dec 2020 ZWL 10 877 672 ---------------- 10 877 672 ========= 31 Dec 2019 ZWL Restated 7 231 788 ---------------- 7 231 788 ========= Level 1 ZWL - ---------------- - ========= Level 2 ZWL Level 3 ZWL - ---------------- - ========= 10 877 672 --------------- 10 877 672 ========= Level 1 ZWL Level 2 ZWL Level 3 ZWL Restated - ---------------- - ========= - ---------------- - ========= 7 231 788 ---------------- 7 231 788 ========= 65 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 Financial instruments measured at fair value - fair value hierarchy Historical Cost Trade investments Trade and other investments 31 Dec 2020 ZWL 10 877 672 ---------------- 10 877 672 ========= 31 Dec 2019 ZWL 1 612 131 ---------------- 1 612 131 ========= Level 1 ZWL - ---------------- - ========= Level 1 ZWL - ---------------- - ========= Level 2 ZWL Level 3 ZWL - ---------------- - ========= 10 877 672 --------------- 10 877 672 ========= Level 2 ZWL Level 3 ZWL - ---------------- - ========= 1 612 131 ---------------- 1 612 131 ========= 17.3 Financial instruments not measured at fair value Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair value. Inflation Adjusted Historical Cash and cash equivalents Loans, advances and other accounts Investment securities Liabilities Deposits and other liabilities 31 December 2020 ZWL 1 964 637 240 3 992 648 603 1 081 820 457 -------------------- 7 039 106 300 =========== 6 413 943 465 ---------------------- 6 413 943 465 ============ 31 December 2019 ZWL Restated 2 208 405 864 3 824 449 644 480 731 899 ------------------- 6 513 587 407 =========== 31 December 2020 ZWL 31 December 2019 ZWL 1 964 634 240 3 730 886 733 1 081 820 457 ------------------- 6 777 344 430 =========== 492 304 267 817 960 242 107 166 155 -------------------- 1 417 430 664 =========== 5 652 133 875 ---------------------- 5 652 133 875 ============ 6 413 943 465 ---------------------- 6 413 943 465 ============ 1 268 146 016 ---------------------- 1 268 146 016 ============ 17.3 Financial instruments not measured at fair value Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair value. 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 he 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. 66 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 17.3 Financial instruments not measured at fair value (Continued) Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair 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. 18. DEFERRED TAX The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: GROUP COMPANY Inflation Adjusted 31 December 2020 ZWL (39 547 624) (5 919 399) 25 338 976 543 886 219 385 704 48 381 656 70 733 839 (100 892) (1 945 366) (25 081) (25 805 634) -------------------- 291 040 065 505 497 805 ------------------- 214 457 740 (273 902 272) 31 December 2019 ZWL Restated (27 423 693) (3 702 592) 4 542 712 1 446 357 62 843 787 384 003 237 115 222 237 (398 211) (2 530 902) (112 485) (28 392 642) -------------------- 505 497 805 (32 430 765) --------------------- 537 928 570 269 284 439 31 December 2020 ZWL 31 December 2019 ZWL Restated - - - - - - - - (9 152) (4 352) --------------------- (13 504) (60 568) ------------------- 47 064 47 064 - - - - - - (41 055) (19 513) ------------------ (60 568) (121 208) ------------------- 60 640 60 640 59 444 532 268 644 131 - - Allowance for impairment losses on financial assets Lease liabilities Right of use assets Quoted and other investments Investment properties Property and equipment Unrealised foreign exchange gains Suspended interest Deferred income Assessed losses Provisions Closing deferred tax liabilities/(assets) Restated opening balance at 1 January 2020 Current year charge/(credit) Relating to profit or loss (note 8.1) Relating to other comprehensive income (note 6.3) 67 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 18. DEFERRED TAX (continued) The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: GROUP COMPANY Historical 31 December 2020 ZWL (39 547 624) (5 919 399) 5 794 183 543 886 219 385 704 (48 385 822) 70 733 839 (100 892) (1 945 366) (25 081) (25 805 634) -------------------- 174 727 794 97 653 191 ------------------- 77 074 603 (215 567 933) 31 December 2019 ZWL Restated (6 113 370) (825 393) 1 012 675 322 428 14 009 320 70 569 270 25 685 677 (88 770) (564 196) (25 081) (6 329 369) -------------------- 97 653 191 (1 908 532) --------------------- 99 561 723 34 514 671 31 December 2020 ZWL 31 December 2019 ZWL Restated - - - - - - - - (9 152) (4 352) --------------------- (13 504) (13 504) ------------------- - - - - - - - - (9 152) (4 352) ------------------ (13 504) (4 352) ------------------- (9 152) (9 152) 292 642 536 65 047 052 - - Allowance for impairment losses on financial assets Lease liabilities Right of use assets Quoted and other investments Investment properties Property and equipment Unrealised foreign exchange gains Suspended interest Deferred income Assessed losses Provisions Closing deferred tax liabilities/(assets) Restated opening balance at 1 January 2020 Current year charge/(credit) Relating to profit or loss (note 8.1) Relating to other comprehensive income (note 6.3) 19. CASH AND CASH EQUIVALENTS The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: Balances with Reserve Bank of Zimbabwe Balances with the Central Bank** Current, nostro accounts* and cash Interbank placements Expected Credit loss allowance GROUP COMPANY Inflation Adjusted 31 December 2020 ZWL 416 178 289 1 394 496 343 155 000 000 (1 037 392) ------------------- 1 964 637 240 =========== 31 December 2019 ZWL Restated 1 197 870 374 718 678 470 293 823 543 (1 966 523) ------------------- 2 208 405 864 =========== 31 December 2020 ZWL - 13 635 - - ------------------- 13 635 =========== 31 December 2019 ZWL Restated - 61 165 - - ------------------- 61 165 =========== 68 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 19. CASH AND CASH EQUIVALENTS (Continued) The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: Balances with the Central Bank Current, nostro accounts* and cash Interbank placements Expected Credit loss allowance GROUP COMPANY Historical 31 December 2020 ZWL 416 178 289 1 394 496 343 155 000 000 (1 037 392) ------------------- 1 964 637 240 =========== 31 December 2019 ZWL 31 December 2020 ZWL 31 December 2019 ZWL 267 032 753 160 209 897 65 500 000 (438 383) ----------------- 492 304 267 ========== - 13 635 - - ------------ 13 635 ======= - 13 635 - - ------------- 13 635 ======= *Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients. **Balances with the Central Bank, other banks and cash are used to facilitate customer and the Bank’s transactions which include payments and cash withdrawals. 20. TOTAL LOANS, ADVANCES AND OTHER ASSETS The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: Fixed term loans – Corporate Fixed term loans – Retail Mortgages Overdrafts Other assets Fixed term loans – Corporate Fixed term loans – Retail Mortgages Overdrafts Other assets GROUP COMPANY Inflation Adjusted 31 December 2020 ZWL 1 562 652 442 281 313 339 93 469 773 361 361 619 ------------------- 2 298 797 173 1 693 851 430 ------------------- 3 992 648 603 =========== 31 December 2019 ZWL Restated 1 187 356 239 425 135 512 262 816 821 437 823 811 -------------------- 2 313 132 383 1 511 317 261 ------------------- 3 824 449 644 =========== 31 December 2020 ZWL 31 December 2019 ZWL Restated - - - - -------------- - 2 531 106 -------------- 2 531 106 ======== - - - - --------------- - 14 026 500 ---------------- 14 026 500 ========= GROUP COMPANY Historical 31 December 2020 ZWL 1 562 652 442 281 313 339 93 469 773 361 361 619 ------------------- 2 298 797 173 1 432 089 560 ------------------- 3 730 886 733 =========== 31 December 2019 ZWL Restated 264 688 911 94 772 446 58 587 891 97 600 959 ------------------- 515 650 207 302 310 035 ------------------- 817 960 242 =========== 31 December 2020 ZWL - - - - ------------------- 31 December 2019 ZWL Restated - - - - ------------------- 2 531 106 ------------------- 2 531 106 =========== 2 531 106 ------------------- 2 531 106 =========== 69 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. TOTAL LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.1 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 Total advances Allowances for impairment losses on loans and advance ECL at 1 January Monetary adjustment ECL charged through profit or loss Bad debts written off Suspended interest on credit impaired financial assets Other assets GROUP COMPANY Inflation Adjusted 31 December 2020 ZWL 1 033 855 947 289 817 298 123 458 690 285 085 872 601 281 710 118 490 170 ------------------ 2 451 989 687 (152 784 373) (76 776 964) 59 661 621 (139 000 331) 3 331 301 (408 141) ----------------- 2 298 797 173 1 693 851 430 ------------------ 3 992 648 603 =========== 31 December 2019 ZWL Restated 621 004 551 287 785 692 97 071 834 473 261 772 689 385 946 222 945 992 ------------------ 2 391 455 787 (76 776 964) (370 608 882) 310 943 909 (22 113 552) 5 001 561 (1 546 440) ----------------- 2 313 132 383 1 511 317 261 ------------------ 3 824 449 644 =========== 31 December 2020 ZWL - - - - - - ------------------ - 31 December 2019 ZWL Restated - - - - - - ------------------ - - - - - - - - - - - - ----------------- - 2 531 106 ------------------ 2 531 106 =========== - ----------------- - 14 026 500 ------------------ 14 026 500 =========== The Bank is continuing recovery efforts in respect of loans written off in the year under review amounting to ZWL3 331 301. Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 5 years Over 5 years Total advances Allowances for impairment losses on loans and advance ECL at 1 January ECL charge through profit or loss Bad debts written off Suspended interest on credit impaired financial assets Other assets GROUP COMPANY Historical 31 December 2020 ZWL 31 December 2019 ZWL 31 December 2020 ZWL 31 December 2019 ZWL 1 033 855 947 289 817 298 123 458 690 285 085 872 601 281 710 118 490 170 -------------------- 2 451 989 687 (152 784 373) (17 115 343) (139 000 331) 3 331 301 (408 141) -------------------- 2 298 797 173 1 432 089 560 -------------------- 3 730 886 733 ============ 138 436 142 64 154 025 21 639 536 105 500 893 153 679 923 49 699 770 -------------------- 533 110 289 (17 115 343) (13 300 690) (4 929 615) 1 114 962 (344 739) -------------------- 515 650 207 302 310 035 -------------------- 817 960 242 =========== - - - - - - -------------------- - - - - - - - -------------------- - - - - - - - - - - -------------------- - 2 531 106 -------------------- 2 531 106 - -------------------- - 2 531 106 -------------------- 2 531 106 =========== ============ The Bank is continuing recovery efforts in respect of loans written off in the year under review amounting to ZWL3 331 301. 70 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. TOTAL LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.2 Sectoral analysis of utilisations Inflation Adjusted GROUP 31 December 2019 ZWL Restated 434 087 244 10 754 380 393 795 281 132 143 741 566 169 298 273 362 783 5 190 674 576 952 386 ------------------- 2 391 455 787 =========== % 23 2 10 9 16 12 - 28 -------- 100 ===== % 18 1 16 6 24 11 - 24 ---------- 100 ====== 31 December 2020 ZWL 576 171 487 41 000 000 244 984 807 220 830 811 386 873 236 303 504 490 1 169 804 677 455 052 ------------------- 2 451 989 687 =========== Agriculture and horticulture Conglomerates Distribution Food & beverages Individuals Manufacturing Mining Services The material concentration of loans and advances is with services sector at 28% (2019 - 24%) and agriculture and horticulture sector at 23 % (2019 - 18%). Agriculture and horticulture Conglomerates Distribution Food & beverages Individuals Manufacturing Mining Services Historical GROUP 31 December 2020 ZWL 96 767 992 2 397 398 87 785 991 29 457 868 126 212 109 60 715 905 1 157 120 128 615 906 ------------------- 533 110 289 =========== % 23 2 10 9 16 12 - 28 -------- 100 ===== % 18 1 16 6 24 11 - 24 ---------- 100 ====== 31 December 2020 ZWL 576 171 487 41 000 000 244 984 807 220 830 811 386 873 236 303 504 490 1 169 804 677 455 052 ------------------- 2 451 989 687 =========== The material concentration of loans and advances is with services sector at 28% (2019 - 24%) and agriculture and horticulture sector at 23 % (2019 - 18%). 71 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. TOTAL LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.3 Impairment analysis of financial assets measured at amortised cost Inflation Adjusted Stage 1 Stage 2 Stage 3 ZWL ZWL ZWL Total ZWL Gross carrying amount at 1 January 2020 Monetary adjustment 3 998 366 764 (3 107 039 200) 52 618 440 (40 888 584) 32 665 167 (25 383 352) 4 083 650 371 (3 173 311 137) Transfers - to 12 months to ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired Net movement in financial assets Balance as at 31 December 2020 Loss allowance analysis At 1 January 2020 - ECL – Loans, advances & guarantees - ECL – Guarantees and facilities approved not drawn down - ECL – Investment securities - ECL – Interbank placements Monetary adjustment Transfers - to 12 month ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired (18 745 248) 15 638 978 (11 255 119) 27 935 519 (1 041 422) 13 364 320 ---------------- 40 733 154 ========= 11 520 254 (27 771 744) (2 493 758) 2 924 011 632 --------------------- 3 796 593 948 ============ 3 106 270 (265 135) (163 775) 3 535 180 328 726 ---------------- 10 716 810 ========= 89 981 483 55 237 491 3 677 029 3 677 029 17 862 444 17 862 444 30 971 903 1 805 566 1 966 523 (69 922 552) - - - (2 857 335) - - - (13 880 496) (5 544 987) 1 144 087 (6 211 014) (478 060) 4 604 170 (1 123 468) 6 247 125 (519 487) 940 818 (20 619) (36 111) 997 548 - - - - 2 937 704 678 -------------------- 3 848 043 912 =========== 111 520 956 76 776 964 30 971 903 1 805 566 1 966 523 (86 660 383) - - - - Net increase/(decrease) in ECL Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Bad debts written off Revaluation exchange on loans and advances ECL 122 188 399 122 753 705 (4 923 947) 3 777 631 599 010 - 7 146 984 3 780 921 3 780 921 - - - - - 2 005 420 5 336 721 - - - (3 331 301) - 127 974 740 131 853 347 (4 923 947) 3 777 631 599 010 (3 331 301) 7 146 984 Balance as at 31 December 2020 Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements ---------------- 143 849 327 ========= ---------------- 9 204 785 ========= ---------------- 6 928 186 ========= 136 651 402 1 980 399 4 180 134 1 037 392 ---------------- 143 849 327 ========= 9 204 785 - - - ---------------- 9 204 785 ========= 6 928 186 - - - ---------------- 6 928 186 ========= ---------------- 159 982 298 ========= 152 784 373 1 980 399 4 180 134 1 037 392 ---------------- 159 982 298 ========= 72 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.3 Impairment analysis of financial assets measured at amortised cost Gross carrying amount at 1 January 2019 Monetary adjustment Inflation Adjusted Stage 1 ZWL Restated 10 372 667 341 (8 657 895 019) Stage 2 ZWL Restated 569 220 752 (632 066 397) Stage 3 ZWL Restated 445 219 314 (455 393 530) Total ZW Restated 11 387 107 407 (9 745 354 946) Transfers - to 12 months to ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired (44 193 878) 6 023 795 (46 356 437) (3 861 236) 50 132 828 (5 524 068) 57 584 624 (1 924 728) (5 938 950) (496 728) (11 228 186) 5 785 964 - - - Net movement in financial assets 2 327 788 320 65 331 257 48 778 333 2 441 897 910 Balance as at 31 December 2019 --------------------- 3 998 366 764 ============ ------------------ 52 618 440 ========== ------------------ 32 665 167 ========== --------------------- 4 083 650 371 ============ Loss allowance analysis At 1 January 2019 - ECL – Loans, advances & guarantees - ECL – Investment securities - ECL – Interbank placements Transfers - to 12 month ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired Net increase/(decrease) in ECL Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Bad debts written off Balance as at 31 December 2019 Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Balance as at 31 December 2019 34 762 887 32 469 190 1 993 469 300 228 (3 881 638) 157 593 (3 040 060) (999 171) 59 100 228 26 649 947 30 971 885 (187 900) 1 666 296 - ---------------- 89 981 477 ========= 55 237 500 30 971 885 1 805 570 1 966 523 ---------------- 89 981 477 ========= 3 828 104 3 828 104 - - 3 930 852 (146 903) 4 593 817 (516 062) (4 081 927) (4 081 927) - - - - ---------------- 3 677 029 ========= 3 677 029 - - - ---------------- 3 677 029 ========= 23 367 674 23 367 674 - - (49 214) (10 690) (1 553 757) 1 515 233 (5 456 025) (454 464) - - - (5 001 561) ---------------- 17 862 435 ========= 17 862 435 - - - ---------------- 17 862 435 ========= 61 958 665 59 664 968 1 993 469 300 228 - - - - 49 562 276 22 113 547 30 971 885 (187 900) 1 666 296 (5 001 561) ---------------- 111 520 941 ========= 76 776 964 30 971 885 1 805 570 1 966 523 ---------------- 111 520 941 ========= 20.4 Credit-impaired financial assets Inflation Adjusted Historical Cost Total credit impaired financial assets Expected credit losses on credit impaired financial assets Retail loans insurance Suspended interest on credit-impaired financial assets Net credit impaired financial assets 31 December 2020 ZWL 10 716 808 (6 928 186) (499 057) (408 141) --------------- 2 881 424 ========= GROUP 31 December 2019 ZWL Restated 32 665 167 31 December 2020 ZWL 31 December 2019 ZWL 10 716 808 7 281 814 (17 862 444) (2 238 696) (6 928 186) (499 057) (3 981 948) (499 057) (1 546 440) ----------------- 11 017 587 ========== (408 141) --------------- 2 881 424 ========= (344 739) ------------------ 2 456 070 ========== The net credit impaired financial assets represents recoverable portions covered by realisable security, which includes guarantees, cessation of debtors, mortgages over properties, equities and promissory notes all fair valued at ZWL1 276 250 (2019 – ZWL42 146 249). 73 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.5 Other assets Services deposits* Prepayments and stocks** Other receivables GROUP COMPANY Inflation Adjusted 31 December 2020 ZWL 228 315 924 331 303 860 1 134 231 646 ------------------- 1 693 851 430 =========== 31 December 2019 ZWL Restated 160 775 435 212 400 071 1 138 141 755 ------------------- 1 511 317 261 =========== 31 December 2020 ZWL - - 2 531 105 ------------------- 2 531 105 =========== 31 December 2019 ZWL Restated - - 5 342 ------------------- 5 342 =========== *Service deposits relate to amounts pledged as collateral for VISA and the RTGS accounts. ** Prepayments and stocks are in respect of services, utilities and consumables for the Group. *** Included in other receivables is ZWL1 128 781 333 placed with the RBZ for the facilitation of legacy debts settlement in terms of regulatory directives. Services deposits* Prepayments and stocks Other receivables GROUP COMPANY Historical 31 December 2020 ZWL 228 315 924 69 494 935 1 134 278 706 ------------------- 1 432 089 565 =========== 31 December 2019 ZWL 31 December 2020 ZWL 31 December 2019 ZWL 35 840 528 12 751 635 253 717 872 ------------------- 302 310 035 =========== - - 2 531 105 ------------------- 2 531 105 =========== - - 2 531 105 ------------------- 2 531 105 =========== 20.6 Loans to officers and executive directors GROUP Inflation Adjusted Historical Included in advances and other accounts (note 20) are loans to officers:- At 1 January Monetary adjustment Net additions during the year Expected credit loss allowance on loans to officers Balance at 31 December 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 137 684 546 (153 820 186) 85 971 642 ------------------- 69 836 002 (5 067 579) --------------- 64 768 423 ========= 335 563 892 (268 460 724) 70 581 378 ------------------- 137 684 546 27 693 040 - 42 142 962 ------------------- 69 836 002 (218 685) ------------------- 137 465 861 =========== (5 067 579) ------------------- 64 768 423 =========== 11 955 832 - 15 737 208 ------------------- 27 693 040 (48 750) ------------------- 27 644 290 =========== 74 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 20. LOANS, ADVANCES AND OTHER ASSETS (cont’d) 20.7 The terms and conditions applicable to loans and advances are as follows: Product Overdraft Loan Tenure Interest rate Payable on demand Penalty interest rate of ten percent- age points above loan rate up to a maximum penalty rate of 72% per annum. Loan payable over a maximum period of 120 months (includes mortgage loans). From 35% per annum up to a max- imum of 62% 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 55% per annum. 21. TRADE AND OTHER INVESTMENTS Inflation Adjusted Historical Balance at 1 January Gain recognised in profit or loss 31 December 2020 ZWL 7 231 788 3 645 884 ---------------- 10 877 672 ========== 31 December 2019 ZWL Restated 3 134 713 4 097 075 ---------------- 7 231 788 ========== 31 December 2020 ZWL 31 December 2019 ZWL 1 612 131 9 265 541 ---------------- 10 877 672 ========== 112 501 1 499 630 ---------------- 1 612 131 ========== 22. INVESTMENTS IN GROUP COMPANIES 22.1 Subsidiaries Inflation Adjusted Historical 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 1 288 349 628 -------------------- 1 288 349 628 =========== 1 288 349 628 -------------------- 1 288 349 628 =========== 31 491 009 -------------------- 31 491 009 =========== 31 491 009 -------------------- 31 491 009 =========== Investment in subsidiaries: NMB Bank Limited 22.2 Shareholding The subsidiary is registered in Zimbabwe, and the extent of the Group's beneficial interest therein and its principal business activities are listed below:- NMB Bank Limited 2020 100% (Banking) 2019 100% (Banking) The consolidated financial statements include the financial information of the subsidiary listed above. 75 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 23. GROUP INVESTMENT PROPERTIES Inflation Adjusted Historical At 1 January Additions Disposals Fair value gains Reclassification from non-current assets held for sale Translation gains on change in functional currency At 31 December 2020 31 December 2020 ZWL 1 031 154 580 411 275 642 (17 580 325) 228 646 579 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 583 765 312 8 698 276 (23 795 535) 419 983 776 229 867 982 245 405 846 (4 514 509) 1 182 737 157 20 950 606 351 515 (5 304 570) 194 387 322 - 807 453 - 180 000 - ------------------- 1 653 496 476 =========== 41 695 297 ------------------- 1 031 154 579 =========== - ------------------- 1 653 496 476 =========== 19 303 109 ------------------- 229 867 982 =========== Investment properties comprise commercial properties and residential properties that are leased out to third parties and land held for future development. No properties were encumbered. Rental income amounting to ZWL7 610 897 (2019 – ZWL1 280 872) was received and no operating expenses were incurred on the leased investment properties in the current year due to the net leasing arrangement on the properties. The Bank has no restrictions on the realisability of its 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 Bank's investment properties as at 31 December 2020 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 3 The fair value for investment properties of ZWL1 653 496 476 (2019 – restated ZWL1 031 154 580) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below. 76 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 23. 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 The investment method Discounted cash flows was used to value all income producing prop- erties. The direct comparison method was applied on all residential properties. • Weighted average expected market rental growth (5%); Void period (average 3 months after the end of each lease); Occupancy rate (55%); and Average market yield of 10%. • • • The estimated fair value would increase /(decrease) if: • expected market rental growth were higher/ (lower); void periods were shorter/(longer); the occupancy rates were higher /(lower); and the risk adjusted discount rates were lower/ (higher). • • • Below is an indication of the changes in fair values following change to the key unobservable limits: Changes in fair value following changes in: Expected market rental growth ZWL Occupancy rates ZWL Risk adjusted discount rates ZWL 82 674 824 49 604 894 16 534 965 - 16 534 965 - 49 604 894 - 82 674 824 177 364 674 106 418 804 35 472 935 (35 472 935) (106 418 804) (177 364 674) +5% +3% +1% -1% -3% -5% Void periods 1 month 2 months 4 months 217 959 661 130 775 796 43 591 932 (43 591 932) (130 775 796) (217 959 661) Change in fair value ZWL 444 365 259 253 650 555 (127 778 851) 77 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 24. INTANGIBLE ASSETS Inflation Adjusted Cost Balance at 1 January 2019 - Restated Acquisitions Capitalisation Balance at 31 December 2019 - Restated Acquisitions Balance at 31 December 2020 Accumulated amortisation Balance at 1 January 2019 - Restated Amortisation for the year Balance at 31 December 2019 - Restated Amortisation for the year Balance at 31 December 2020 Carrying amount At 31 December 2020 Restated at 31 December 2019 - Restated At 1 January 2019 - Restated Cost Balance at 1 January 2019 Acquisitions Capitalisation Balance at 1 January 2019 Acquisitions Balance at 31 December 2020 Accumulated amortisation Balance at 1 January 2019 Amortisation for the year Balance at 1 January 2019 Amortisation for the year Balance at 31 December 2020 Carrying amount At 31 December 2020 At 1 January 2020 At 1 January 2019 78 Computer Software ZWL 211 223 328 2 857 048 - ----------------- 214 080 376 7 828 681 ----------------- 221 909 057 ========== Total ZWL 211 223 328 2 857 048 - --------------- 214 080 376 7 828 681 ----------------- 221 909 057 ========== 133 469 410 28 513 215 ---------------- 161 982 625 133 469 410 28 513 215 -------------- 161 982 625 24 416 805 24 416 805 ----------------- 186 399 430 ========== ----------------- 186 399 430 ========== 35 509 627 ========== 52 097 749 ========== 35 509 627 ========== 52 097 749 ========== 77 753 918 ========== 77 753 918 ========== Historical Cost 5 375 405 94 320 - ----------------- 5 469 725 3 652 103 ----------------- 9 121 828 ========== 3 338 632 733 909 ----------------- 4 072 541 915 580 ----------------- 4 988 121 ========== 5 375 405 94 320 - ----------------- 5 469 725 3 652 103 ----------------- 9 121 828 ========== 3 338 632 733 909 ----------------- 4 072 541 915 580 ----------------- 4 988 121 ========= 4 133 707 4 133 707 ========== 1 397 186 ========== 2 036 773 ========== 1 397 186 ========== 2 036 773 ============= ============ NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 25. PROPERTY AND EQUIPMENT Inflation Adjusted Capital work in progress Computers Motor Vehicles Furniture & Equipment Right of Use Assets** Freehold Land & Buildings* Total Cost/Revaluation amount ZWL Restated ZWL Restated ZWL Restated ZWL Restated ZWL Restated ZWL Restated ZWL Restated At 1 January 2019 – restated 299 956 370 82 249 874 Additions (64 658 100) Capitalisations Revaluation gain - Translation gains on change in functional currency Initial recognition – Right of use assets Remeasurement – Right of use assets - - - ----------------- 284 611 050 51 491 608 5 502 543 - 51 149 660 5 205 185 1 317 424 - 181 066 977 19 511 309 4 566 022 - - - - - - - - - - - - 112 346 127 - 53 272 111 656 033 161 929 130 184 158 457 976 - 656 033 161 387 245 018 387 245 018 67 778 565 - 67 778 565 - ------------------ - ----------------- - ------------------ 3 398 610 ------------------ - ------------------- 3 398 610 --------------- At 31 December 2019 - restated Additions Remeasurement – Right of use assets Capitalisations Revaluations Disposals At 31 December 2020 Accumulated depreciation At 1 January 2019 - restated Charge for the year – Property and equipment Charge for year - Right of use Assets 317 548 144 182 930 656 341 605 201 69 629 485 57 672 269 - 205 144 308 2 600 213 71 177 175 - 1 208 896 417 2 202 043 514 255 160 354 - - (69 856 376) - - ----------------- 430 622 424 =========== - 23 034 417 - (904 038) ------------------ 433 365 065 ========= - 2 738 632 - (15 076 762) ----------------- 45 334 139 ========= - 36 227 221 - (13 731 577) ------------------ 230 240 165 ========= 36 968 582 - - - ------------------ 108 145 757 ========= 36 968 582 - - 7 856 106 240 471 407 240 471 407 (29 712 377) - ------------------- ------------------- 1 457 223 930 2 704 931 480 =========== =========== - - 148 685 254 40 815 524 150 293 775 47 588 166 7 737 014 11 168 351 - - 10 912 729 350 707 282 2 710 722 69 204 253 - ----------------- - ----------------- - ---------------- - ---------------- 13 854 547 ----------------- - ---------------- 13 854 547 --------------- At 31 December 2019 - restated Charge for the year – Property and equipment Charge for period – Right of use assets Disposals - - 196 273 420 48 552 538 161 462 126 13 854 547 13 623 451 433 766 082 48 910 965 3 900 074 14 744 475 - 1 606 329 69 161 843 - - -------------- - ======== - (904 038) ----------------- 244 280 347 ========== - (15 076 760) --------------- 37 375 852 ========= - (11 303 628) ---------------- 164 902 973 ========= 11 116 446 - ------------------ 24 970 993 ========= - - ---------------- 15 229 780 ========= 11 116 446 (27 284 426) ----------------- 486 759 945 ========== At 31 December 2020 Carrying amount At 31 December 2020 At 1 December 2019 – Restated At 1 January 2018 - Restated 430 622 424 ========== 189 084 718 ========= 7 958 287 ======== 65 337 191 ======== 83 174 764 ========= 1 441 994 151 =========== 2 218 171 535 ========== 317 548 144 ========== 145 331 782 ========= 9 119 731 ======== 43 682 182 ========= 57 322 628 ========= 1 195 272 966 =========== 1 768 277 432 ========== 299 956 370 ========== 135 925 796 ========= 10 334 136 ======== 30 773 202 ========= - ========= 101 433 398 ========== 578 422 902 ========== *Assets measured using the revaluation model ** Right-of-Use Assets recognised in respect of leased properties in which the Group is a lessee. The Right-of-Use Assets are depreciated over the shorter of the lease term including extension options where the Group is certain to exercise such and the useful life of the underlying asset. 79 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 25. PROPERTY AND EQUIPMENT (cont’d) Historical Cost Cost/Revaluation amount Capital work in progress ZWL At 1 January 2019 Additions Initial recognition - Right of use assets Capitalisations Remeasurement - Right of Use Assets Revaluation gain Translation gain on change 9 463 995 19 774 151 - (14 413 772) - - Computers ZWL 7 413 351 2 975 151 - 1 226 643 - - Motor Vehicles ZWL Furniture & Equipment ZWL Right of Use Assets** ZWL Freehold Land & Buildings* ZWL Total ZWL 1 269 770 206 348 - 293 684 - - 4 478 223 1 352 847 - 1 017 871 - - - - 3 338 967 - 757 613 - 3 852 998 - - 11 875 574 - 236 960 551 26 478 336 24 308 497 3 338 967 - 757 613 236 960 551 in functional currency - - - - - 15 653 157 15 653 157 Reclassification from Investment properties At 31 December 2019 Additions Remeasurement – Right of use assets Capitalisations Disposals Revaluation gain At 31 December 2020 Accumulated depreciation At 1 January 2019 Charge for the year – Property and equipment Charge for the year – Right of use assets At 31 December 2019 Charge for the year Charge for period – Right of Use Asset Disposals At 31 December 2020 Carrying amount At 31 December 2020 At 1 December 2019 At 1 January 2019 - ------------------ 14 824 374 52 381 396 - (58 590 341) - - ------------------ 8 615 429 ========== - - - ------------------ 11 615 145 56 223 172 - ----------------- 1 769 802 - - ------------------ 6 848 941 2 147 918 - ------------------ 4 096 580 - 40 600 ---------------- 268 382 880 - 40 600 --------------- 307 537 721 110 752 486 - 15 356 278 (46 837) - ------------------ 83 147 758 ========= - 1 994 819 (372 492) - ----------------- 3 392 129 ======== - 36 227 220 (396 841) - ------------------ 44 827 238 ======== 29 233 252 - - - ------------------ 33 329 832 ======== - 5 012 023 - 1 183 829 028 ------------------- 1 457 223 931 =========== 29 233 252 - (816 170) 1 183 829 028 ------------------ 1 630 536 318 ========== 3 607 903 1 008 262 3 262 458 1 427 692 222 449 481 383 - - 391 644 8 634 267 175 836 2 307 360 - ------------------- - - - ----------------- 5 035 595 5 048 413 - ----------------- 1 230 711 341 867 - ------------------ 4 107 841 2 257 704 1 310 867 ------------------- 1 310 867 - - - ------------------ - ========== - (40 080) ------------------ 10 043 928 ======== - (372 492) ------------------ 1 200 086 ======== - (372 989) ------------------ 5 992 556 ======== 8 615 429 ========== 14 824 373 ========== 9 463 994 ========== 73 103 831 ========= 6 579 550 ======== 3 805 448 ======== 2 192 043 ======== 539 092 ======= 261 508 ======== 38 834 681 ======== 2 741 099 ======== 851 764 ======== 8 579 715 - --------------- 9 890 582 ======== 23 439 250 ========= 2 785 713 ========= - ======== - ----------------- 567 480 14 662 300 - - ------------------ 15 229 780 ======= 1 310 867 --------------- 12 252 494 22 310 284 8 579 715 (785 561) ---------------- 42 356 932 ========= 267 815 400 1 441 994 151 1 588 179 384 =========== =========== 295 285 227 =========== =========== 17 844 069 =========== =========== 3 461 354 *Assets measured using the revaluation model ** Right-of-Use Assets recognised in respect of leased properties in which the Group is a lessee. The Right-of-Use Assets are depreciated over the shorter of the lease term including extension options where the Group is certain to exercise such and the useful life of the underlying asset. 80 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 25. PROPERTY AND EQUIPMENT (cont’d) Measurement of fair value Fair value hierarchy Immovable properties were revalued as at 31 December 2020 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 ZWL332 – ZWL574 per square metre. Level 3 The fair value of immovable properties of ZWL1 441 994 151 (2019 – ZWL1 193 666 636) 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: The following shows reconciliation between the opening and closing balances for level 3 fair values: Inflation Adjusted Historical Cost 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 1 195 272 966 112 346 127 267 815 400 3 461 354 - 7 856 106 240 471 407 - (1 606 328) ------------------- 1 441 994 151 =========== 387 245 018 53 272 111 656 033 161 - (13 623 451) ------------------- 1 195 272 966 =========== - 5 012 023 1 183 829 028 - (14 662 300) ------------------ 1 441 994 151 =========== 15 649 358 11 875 574 236 960 551 40 600 (172 037) ----------------- 267 815 400 ========== At 1 January Translation gains on change in functional currency Transfers from work in progress Revaluation gain Impairment reversal Depreciation Balance at 31 December 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 The Direct Comparison Method was applied on all residential properties • Weighted average expected market rental growth (5%); and • Average market yield of 10%. Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase /(de- crease) if: • Expected market rental growth were higher/ (lower); and • The risk adjusted discount rates were lower/ (higher). 81 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 25. PROPERTY AND EQUIPMENT (cont’d) Below is an indication of the sensitivity analysis following changes on the significant unobservable inputs:- Change in fair value Change in rate Expected market rental growth ZWL Discount rates ZWL +5% +3% +1% -1% -3% -5% 16 964 637 10 178 782 3 392 927 (3 392 927) (10 178 728) (16 964 637) 59 683 332 35 809 999 11 936 666 (11 936 666) (35 809 999) (59 683 332) 82 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26. 26.1 INTEREST RATE REPRICING AND GAP ANALYSIS Total position The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2020 Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month ZWL 1 month to 3 months ZWL 3 months to 1 year ZWL 1 year to Non-interest bearing ZWL 5 years ZWL Total ZWL 1 964 637 240 - 400 000 000 - 880 663 433 - - - - -------------------- 3 245 300 673 -------------------- - - 450 000 000 - 289 817 298 - - - - ----------------- 739 817 298 -------------------- - - 220 438 224 - 408 544 561 - - - - ----------------- 628 982 785 -------------------- - - 11 382 233 - 719 771 881 - - - - ---------------- 731 154 114 -------------------- - - - 10 877 672 693 851 430 - 35 509 627 2 218 171 535 1 653 496 476 ----------------- 1 964 637 240 - 1 081 820 457 10 877 672 3 992 648 603 - 35 509 627 2 218 171 535 1 653 496 476 ----------------- 5 611 906 740 10 957 161 610 -------------------- -------------------- 151 192 601 6 413 943 465 3 325 295 11 426 731 749 093 396 5 498 905 442 57 205 065 57 205 065 - - - - 291 040 065 291 040 065 - - - - 14 335 253 14 335 253 - - - - 4 048 005 121 4 048 005 121 - - - - - 132 632 641 - - - 132 632 641 ------------------- -------------------- ----------------- ----------------- ----------------- -------------------- 4 561 778 105 10 957 161 610 3 325 295 11 426 731 749 093 396 5 631 538 083 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 1 050 128 635 - 727 828 822 617 556 054 (9 276 098) (2 386 237 410) -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 2 386 237 410) (2 395 513 508) - - (1 777 957 453) (1 050 128 635) ============ ============ ============ ============ ============ ============ The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2019 Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL Restated Restated 3 months ZWL Restated 5 years ZWL Restated 1 month ZWL Restated Total ZWL Restated - 2 208 405 864 - - 28 664 954 11 214 639 - - 287 785 692 542 681 138 - - - - - - - - -------------------- -------------------- 316 450 646 2 762 301 641 -------------------- -------------------- - - 111 658 175 - - - 329 194 131 - 570 333 605 - - - - - 2 208 405 864 - - 480 731 899 - 7 231 788 7 231 788 912 331 939 1 511 317 270 3 824 449 644 - - - 52 097 749 - 1 768 277 432 1 768 277 432 - 1 031 154 579 1 031 154 579 -------------------- -------------------- -------------------- -------------------- 899 527 736 1 023 990 114 4 370 078 818 9 372 348 955 -------------------- -------------------- -------------------- -------------------- - 52 097 749 348 211 446 - - - - - 226 671 312 4 686 461 205 - - - - - - - - - - -------------------- -------------------- 4 686 461 205 226 671 312 -------------------- -------------------- 89 779 334 (1 924 159 564) -------------------- -------------------- (1 924 159 564) (1 834 380 232) (1 283 063 942) 309 121 657 5 652 133 875 81 668 255 505 497 805 505 497 805 - 2 803 378 2 803 378 - 64 305 875 64 305 875 - - 3 020 387 631 3 020 387 631 127 220 391 - -------------------- -------------------- -------------------- -------------------- 208 888 646 3 902 116 345 9 372 348 955 -------------------- -------------------- -------------------- -------------------- - -------------------- -------------------- -------------------- -------------------- - ============ ============ ============ ============ ============ ============ (467 962 473) 127 220 391 815 101 468 551 316 290 467 962 473 348 21 446 - 83 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26. 26.1 INTEREST RATE REPRICING AND GAP ANALYSIS Total position (Cont'd) The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2020 Assets Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL - 1 964 637 240 450 000 000 400 000 000 - - 289 817 298 880 663 428 - - - - - - - - ----------------- -------------------- 3 245 300 668 739 817 298 -------------------- -------------------- - 11 382 233 - - 220 438 224 - 408 544 561 - - - - - 1 964 637 240 - 1 081 820 457 10 877 672 10 877 672 719 771 881 1 432 089 567 3 730 886 733 - - 4 133 707 - - 1 588 179 384 1 588 179 384 - 1 653 496 476 1 653 496 476 -------------------- -------------------- -------------------- -------------------- 731 154 114 4 688 776 806 10 034 031 669 -------------------- -------------------- -------------------- -------------------- - 4 133 707 628 982 785 11 426 731 - - - - - 5 498 905 442 - - - - 132 632 641 749 093 396 - - - - - -------------------- -------------------- 5 631 538 083 749 093 396 -------------------- -------------------- (2 386 237 415) (9 276 098) -------------------- -------------------- (2 386 237 415) (2 395 513 513) (1 777 957 458) (1 050 128 635) 151 192 601 6 413 943 465 3 325 295 174 727 794 174 727 794 - 57 205 065 57 205 065 - - 14 335 253 14 335 253 - 3 241 187 451 3 241 187 451 132 632 641 - - -------------------- -------------------- -------------------- -------------------- 3 325 295 3 638 648 164 10 034 031 669 -------------------- -------------------- -------------------- -------------------- - -------------------- -------------------- -------------------- -------------------- - ============ ============ ============ ============ ============ ============ 727 828 818 1 050 128 635 617 556 054 11 426 731 - The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2019 Assets Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 84 Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL 492 304 267 2 500 000 - 120 976 061 - - - - - 6 390 075 - 64 154 025 - - - - ------------------ -------------------- 70 544 100 615 780 328 ------------------ ------------------ 50 530 229 1 044 719 581 - - - - - - - - - - -------------------- -------------------- 1 044 719 581 50 530 229 -------------------- -------------------- 20 013 870 (428 939 253) -------------------- -------------------- (428 939 253) (408 925 383) =========== =========== - 73 384 915 - 127 140 428 - - - - 492 304 267 - 107 166 155 24 891 165 1 612 131 - 817 960 242 203 379 693 - - 1 397 186 - 295 285 227 - 229 867 982 - -------------------- -------------------- -------------------- -------------------- 830 472 561 1 945 593 190 ------------------ ------------------ - - 1 612 131 302 310 035 - 1 397 186 295 285 227 229 867 982 200 525 343 ------------------ 228 270 858 ------------------ 77 624 310 - - - - - 18 205 725 - - - - 28 360 340 77 066 171 1 268 146 016 97 653 191 97 653 191 624 937 624 937 14 335 253 14 335 253 536 473 453 536 473 453 28 360 340 - -------------------- -------------------- -------------------- -------------------- 726 153 005 1 945 593 190 -------------------- -------------------- -------------------- -------------------- - -------------------- -------------------- -------------------- -------------------- (286 024 350) - =========== =========== =========== =========== (104 319 558) 181 704 792 122 901 033 104 319 558 46 566 065 77 624 310 - NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26. 26.1. INTEREST RATE REPRICING AND GAP ANALYSIS (cont’d) Zimbabwe dollars The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in Zimbabwe Dollars only. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2020 Assets Cash and cash equivalents Investment securities Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL - 1 812 557 587 450 000 000 400 000 000 257 412 315 878 064 159 - - - - - - ----------------- -------------------- 3 090 621 746 707 412 315 -------------------- -------------------- - 11 382 233 - 220 438 224 408 544 561 - - - ----------------- 628 982 785 - 1 812 557 587 - 1 081 820 457 719 771 881 1 693 851 429 3 957 644 347 - 35 509 627 35 509 627 - 2 218 171 535 2 218 171 535 - 1 653 496 476 1 653 496 476 ---------------- ----------------- ----------------- 731 154 114 5 601 029 067 10 759 200 029 -------------------- -------------------- -------------------- -------------------- 5 294 347 158 - - - - 132 632 641 -------------------- 5 426 979 799 -------------------- (2 336 358 053) -------------------- (2 336 358 053) (2 378 039 134) (1 760 483 080) (1 032 654 260) 151 192 602 6 209 385 182 3 325 295 57 205 065 - 291 040 065 - - 14 335 253 - 4 048 005 121 4 048 005 121 132 632 641 - - ------------------- ----------------- -------------------- 3 325 295 4 561 778 106 10 752 603 327 ------------------- 6 596 702 ------------------- - ============ ============ ============ ============ ============ ============ 749 093 396 - - - - - ----------------- 749 093 396 ----------------- (41 681 081) ----------------- 11 426 731 - - - - - ----------------- 11 426 731 ----------------- 617 556 054 ----------------- ----------------- -------------------- 727 828 822 1 039 250 961 ----------------- -------------------- 6 596 702 57 205 065 291 040 065 14 335 253 26.1. Zimbabwe dollars - Restated The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in Zimbabwe Dollars only. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2019 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 Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 5 years ZWL Restated - - 111 658 175 - Up to 1 month to 3 months to 1 year to Non-interest Total bearing 1 year ZWL ZWL ZWL Restated Restated Restated - 1 526 198 499 - - - - 480 731 898 - 329 194 131 - - - 912 331 939 1 511 317 270 3 667 425 604 570 333 606 - - - - - - - 52 097 749 - - 1 768 277 432 1 768 277 432 - - 1 031 154 579 1 031 154 579 - ------------------- ----------------- -------------------- ----------------- 899 527 737 1 023 990 114 4 362 847 030 8 525 885 761 ------------------- ----------------- -------------------- ----------------- 3 months ZWL Restated - - 28 664 954 - 142 421 617 - - - - - ----------------- 171 086 571 ----------------- 1 month ZWL Restated 1 526 198 499 - 11 214 639 - 531 021 170 - - - - - -------------------- 2 068 434 308 -------------------- - - 52 097 749 348 211 446 226 671 312 3 768 842 275 - - - - - - - - - - - - - - - ----------------- ----------------- -------------------- 348 211 446 226 671 312 3 768 842 275 ----------------- ----------------- -------------------- 551 316 291 (55 584 741) (1 700 407 967) -------------------- ----------------- ----------------- (1 700 407 967) (1 755 992 709) (1 204 676 418) 309 121 656 4 734 514 945 81 668 255 2 803 378 - 505 497 806 - - 64 305 875 - 3 020 387 631 3 020 387 631 127 220 392 127 220 392 - ----------------- -------------------- ------------------- 208 888 647 3 902 116 345 8 454 730 025 ------------------- ----------------- -------------------- 71 155 736 815 101 467 460 730 685 ------------------- ----------------- -------------------- - 71 155 736 ============ ============ ============ ============ ============ ============ 2 803 378 505 497 806 64 305 875 (389 574 951) 85 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26. INTEREST RATE REPRICING AND GAP ANALYSIS The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2020 Assets Cash and cash equivalents Investment securities Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL 1 812 557 587 400 000 000 878 064 159 - - - - ------------------- 3 090 621 746 ------------------- - 450 000 000 257 412 315 - - - - ----------------- 707 412 315 ----------------- - 220 438 224 408 544 561 - - - - ----------------- 628 982 785 ----------------- - 11 382 231 - 1 812 557 587 - 1 081 820 455 719 771 881 1 432 089 559 3 695 882 477 - - - 4 133 707 - 1 588 179 384 1 588 179 384 - 1 653 496 476 1 653 496 476 ----------------- ----------------- ----------------- 731 154 112 4 677 899 126 9 836 070 085 ----------------- ----------------- ----------------- - 4 133 707 5 294 347 158 - - - - 132 632 641 ------------------- 5 426 979 798 ------------------- (2 336 358 057) ------------------- 151 792 602 6 209 385 182 3 325 295 174 727 794 174 727 794 - 57 205 066 57 205 066 - - 14 335 253 14 335 253 - 3 241 187 451 3 241 187 451 132 632 641 - - ------------------- ----------------- ----------------- 3 325 295 3 638 648 164 9 829 473 385 ----------------- 6 596 702 ----------------- - ============ ============ ============ ============ ============ ============ ----------------- ----------------- 727 828 818 1 039 250 962 ----------------- ----------------- 6 596 702 (2 336 358 057) (2 378 039 138) (1 760 483 084) (1 032 654 260) 749 093 396 - - - - - ----------------- 749 093 396 ----------------- (41 681 081) ----------------- 11 426 731 - - - - - ----------------- 11 426 731 ----------------- 617 556 054 ----------------- 26.1. Zimbabwe dollars - Restated The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in Zimbabwe Dollars only. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2019 Assets Cash and cash equivalents Investment securities Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 86 Up to 1 month to 3 months to 1 year to Non-interest Total bearing 1 year ZWL ZWL ZWL 340 224 614 - - 107 166 155 73 384 915 - 782 955 988 302 310 039 127 140 428 - - - 1 397 184 1 397 184 - 295 285 227 295 285 227 - 229 867 982 229 867 982 - ------------------ ----------------- ------------------- 828 860 432 1 756 897 150 200 525 343 ------------------- ------------------ ----------------- 3 months ZWL - 6 390 075 31 749 042 - - - - ----------------- 38 139 117 ----------------- 5 years ZWL - 24 891 165 203 379 693 - - - - ----------------- 228 270 858 ----------------- 1 month ZWL 340 224 614 2 500 000 118 376 786 - - - - -------------------- 461 101 400 -------------------- 840 161 297 - - - - - -------------------- 840 161 297 -------------------- (379 059 897) -------------------- (379 059 897) 50 530 229 - - - - - ----------------- 50 530 229 ----------------- (12 391 112) ----------------- (391 451 009) ============ =========== 77 624 310 - - - - - ----------------- 77 624 310 ----------------- 122 901 033 ------------------- (268 549 976) =========== 18 205 725 - - - - 28 360 340 ----------------- 46 566 065 ----------------- 181 704 793 ----------------- (86 845 183) ========== 77 066 172 1 063 587 733 97 653 191 97 653 191 624 937 624 937 14 335 253 14 335 253 536 473 453 536 473 453 28 360 340 - ------------------ ------------------- 726 153 006 1 741 034 907 ------------------- ------------------ 15 862 243 (109 611 772) ------------------- ------------------ - 15 862 243 ========== ============ NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26.1. Zimbabwe dollars - Restated The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Other foreign currencies Inflation Adjusted 26.1. As at 31 December 2020 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 Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 1 month ZWL 152 079 653 - - - 2 599 274 - - - - - Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL - - - - - - 10 877 672 - - - - - - - - - - - - - ------------------- ------------------- 10 877 672 - ------------------- ------------------- 3 months ZWL - - - - 32 404 983 - - - - - ------------------- ------------------- 32 404 983 ------------------- ------------------- 5 years ZWL - - - - - - - - - - ------------------- - ------------------- 154 678 927 204 558 283 - - - - - - - - - - - ------------------- ------------------- - ------------------- ------------------- 32 404 983 ------------------- ------------------- (49 879 357) (17 474 374) ========== ========== (49 879 357) 204 558 283 - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) ========== - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) ========== - - - - - - ------------------- - ------------------- 10 877 672 ------------------- (6 596 701) ========== Total ZWL 152 079 653 - - 10 877 672 35 004 257 - - - - - ------------------- 197 961 582 ------------------- 204 558 283 - - - - - ------------------- 204 558 283 ------------------- (6 596 701) ------------------- - ========== The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2019 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 Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL Restated Restated - - - - - - 7 231 787 - 3 months ZWL Restated - - - - 5 years ZWL Restated - - - - 1 month ZWL Restated 682 207 365 - - - Total ZWL Restated 682 207 365 - - 7 231 787 11 659 967 - - - - 145 364 075 - - - - ------------------- ------------------- 145 364 075 157 024 042 - - - - - - - - - ------------------- ------------------- 846 463 194 - ============ ============ ============ ============ ============ ============ - - - - - ------------------- - - - - - - ------------------- 7 231787 693 867 332 917 618 930 - - - - - - - - - - - ------------------- ------------------- - ------------------- ------------------- (223 751 598) 145 364 074 ------------------- ------------------- (78 387 523) (223 751 598) 917 618 930 - - - - - ------------------- 917 618 930 ------------------- (71 155 736) ------------------- - ============ ============ ============ ============ ============ ============ - - - - - - ------------------- - ------------------- - ------------------- (78 387 523) - - - - - - ------------------- - ------------------- - ------------------- (78 387 523) - - - - - - ------------------- - ------------------- 7 231 787 ------------------- (71 155 736) 917 618 930 87 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 26. INTEREST RATE REPRICING AND GAP ANALYSIS The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Other foreign currencies Historical 26.1. As at 31 December 2020 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 Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 1 month ZWL 152 079 653 - - - 2 599 274 - - - - - Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL - - - - - - 10 877 672 - - - - - - - - - - - - - ------------------- ------------------- 10 877 672 - ------------------- ------------------- 3 months ZWL - - - - 32 404 983 - - - - - ------------------- ------------------- 32 404 983 ------------------- ------------------- 5 years ZWL - - - - - - - - - - ------------------- - ------------------- 154 678 927 Total ZWL 152 079 653 - - 10 877 672 35 004 257 - - - - - ------------------- 197 961 582 ------------------- 204 558 283 - - - - - - - - - - - ------------------- ------------------- - ------------------- ------------------- 32 404 983 ------------------- ------------------- (17 474 374) 204 558 283 - - - - - ------------------- 204 558 283 ------------------- (6 596 701) ------------------- - ============ ============ ============ ============ ============ ============ - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) - - - - - - ------------------- - ------------------- 10 877 672 ------------------- (6 596 701) - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) (49 879 357) (49 879 357) 204 558 283 The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Other foreign currencies 26.1. Historical As at 31 December 2019 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 Liabilities and equity Deposits and other liabilities Deferred tax liabilities Current tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 88 1 month ZWL 152 079 653 - - - 2 599 274 - - - - - Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL - - - - - - 1 612 131 - - - - - - - - - - - - - ------------------- ------------------- 1 612 131 - ------------------- ------------------- 3 months ZWL - - - - 32 404 982 - - - - - ------------------- ------------------- 32 404 982 ------------------- ------------------- 5 years ZWL - - - - - - - - - - ------------------- - ------------------- 154 678 927 Total ZWL 152 079 653 - - 1 612 131 35 004 256 - - - - - ------------------- 188 696 040 ------------------- 204 558 283 - - - - - - - - - - - ------------------- ------------------- - ------------------- ------------------- 32 404 982 ------------------- ------------------- (17 474 374) 204 558 283 - - - - - ------------------- 204 558 283 ------------------- (15 862 243) ------------------- - ============ ============ ============ ============ ============ ============ - - - - - - ------------------- - ------------------- 1 612 131 ------------------- (15 862 243) - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) - - - - - - ------------------- - ------------------- - ------------------- (17 474 374) (49 879 357) (49 879 357) 204 558 283 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 27. 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 Zimbabwe Dollars, the presentation currency. As at 31 December 2020 Inflation Adjusted Assets ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL 1 812 557 588 - 1 081 820 457 Cash and cash equivalents Current tax assets Investment securities Quoted and other - investments 3 957 644 347 Advances and other Intangible assets 35 509 627 Property and equipment 2 218 171 535 1 653 496 476 Investment properties - Deferred tax -------------------- 10 759 200 030 -------------------- 125 272 410 - - 24 818 968 - - 719 607 - - 754 568 - - 514 099 1 964 637 240 - - - 1 081 820 457 - 34 960 633 - - - - ----------------- 160 233 043 ----------------- - 37 259 - - - - ----------------- 24 856 227 ----------------- - - - - - - 10 877 672 3 738 - - - - ----------------- -------------------- 11 635 978 ----------------- -------------------- 719 607 - 10 877 672 2 626 3 992 642 603 - 35 509 627 - 2 218 171 535 - 1 653 496 476 - - ------------------- ------------------- 516 725 10 957 161 610 ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity Total Net foreign exchange position 6 209 385 182 57 205 065 291 040 065 132 632 641 194 895 675 - - - 8 610 494 - - - 595 759 - - - 388 664 - - - 67 691 6 413 943 465 57 205 065 291 040 065 132 632 641 - - - 14 335 253 4 048 005 121 -------------------- 10 752 603 327 -------------------- - - ----------------- 194 895 675 ----------------- - - ----------------- 8 610 494 ----------------- - - - - ----------------- -------------------- 388 664 ----------------- -------------------- 595 759 14 335 253 - - 4 048 005 121 ------------------- 67 691 10 957 161 610 ------------------- ------------------- ------------------- 6 596 702 16 245 733 ============ ============ ============ (34 662 632) 123 849 - ========== ============ ============ ============ 11 247 314 449 034 89 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 27. 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 Zimbabwe Dollars, the presentation currency. As at 31 December 2019 Inflation Adjusted Assets ZWL ZWL Restated USD ZWL Restated RAND ZWL Restated GBP ZWL Restated 3 228 054 - - EUR ZWL Restated 3 384 882 - - BWP ZWL Restated Total ZWL Restated 2 306 171 2 208 405 864 - 480 731 899 - - 561 953 947 - - 111 334 306 - - 1 526 198 499 - 480 731 899 Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and 3 667 425 594 other assets Intangible assets 52 097 749 Property and equipment 1 768 277 432 1 031 154 579 Investment properties -------------------- 8 525 885 751 -------------------- - Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity - - - 7 231 788 - 7 231 788 156 828 351 - - - ----------------- 718 782 298 ----------------- 167 138 - - - ----------------- 111 501 444 ----------------- - - - - 16 768 - - - ----------------- -------------------- 10 633 438 ----------------- -------------------- 3 228 054 11 795 3 824 449 644 - 52 097 749 - 1 768 277 432 - 1 031 134 579 ------------------- 2 317 966 9 372 348 955 ------------------- ------------------- ------------------- 4 734 514 941 2 803 378 505 497 805 127 220 391 874 273 860 - - - 38 625 433 - - - 2 672 488 - - - 1 743 492 - - - 303 663 5 652 133 875 2 803 378 505 497 805 127 220 391 - - - 64 305 875 3 020 387 631 -------------------- 8 454 730 022 -------------------- - - ----------------- 874 273 860 ----------------- - - ----------------- 38 625 433 ----------------- - - - - ----------------- -------------------- 1 743 492 ----------------- -------------------- 2 672 488 - 64 305 875 - 3 020 387 631 ------------------- 303 663 9 372 348 955 ------------------- ------------------- ------------------- 71 155 729 - ============ ============ ============ ============ ============ ============ ============ (155 491 562) 72 876 011 2 014 304 8 889 945 555 568 Total Net foreign exchange position 90 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 27. 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 Zimbabwe Dollars, the presentation currency. As at 31 December 2020 Historical Assets ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL - 3 695 882 477 1 812 557 587 1 081 820 457 Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Non-current assets held for sale - 4 133 707 Intangible assets Property and equipment 1 588 179 384 1 653 496 476 Investment properties - Deferred tax -------------------- 9 836 070 087 -------------------- 125 272 410 - 24 818 968 - 719 607 - 754 568 - 514 099 1 964 637 240 - 1 081 820 457 - - 34 960 633 37 259 - - - - - ----------------- 160 233 043 ----------------- - - - - - ----------------- 24 856 227 ----------------- - - 10 877 672 - 10 877 672 3 738 2 626 3 730 886 733 - - - - - - - - - - ----------------- -------------------- 11 635 978 ----------------- -------------------- 719 607 - - 4 133 707 - - 1 588 179 384 - 1 653 496 476 - - ------------------- ------------------- 516 725 10 034 031 669 ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity Total Net foreign exchange position 6 209 385 182 57 205 065 174 727 794 132 632 641 194 895 675 - - - 8 610 494 - - - 595 759 - - - 388 664 - - - 67 691 6 413 943 465 57 205 065 174 727 794 132 632 641 - - - 14 335 253 3 241 187 451 -------------------- 9 829 473 385 -------------------- - - ----------------- 1194 895 675 ----------------- - - ----------------- 8 610 494 ----------------- - - - - ----------------- -------------------- 388 664 ----------------- -------------------- 595 759 - 14 335 253 - 3 241 187 451 ------------------- 67 691 10 034 031 669 ------------------- ------------------- ------------------- 6 596 702 - ============ ============ ============ ============ ============ ============ ============ (34 662 632) 16 245 733 11 247 314 123 849 449 034 91 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 27. 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 Zimbabwe Dollars, the presentation currency. As at 31 December 2020 Historical Assets Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Non-current assets held for sale Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL 340 224 614 107 166 155 125 272 410 - 24 818 968 - 719 607 - 754 568 - 514 100 - 492 304 267 107 166 155 - - - 782 955 985 34 960 633 37 259 - 1 397 186 295 285 227 229 867 982 -------------------- 1 756 897 149 -------------------- - - - - ----------------- 160 233 043 ----------------- - - - - ----------------- 24 856 227 ----------------- - - 1 612 131 - 1 612 131 3 738 2 627 817 960 242 - - - - - - - - ----------------- -------------------- 2 370 437 ----------------- -------------------- 719 607 - - - - ------------------- - 1 397 186 295 285 227 229 867 982 ------------------- 516 727 1 945 593 190 ------------------- ------------------- 1 063 587 732 624 937 97 653 191 28 360 340 194 895 675 - - - 8 610 494 - - - 595 759 - - - 388 664 - - - 67 691 1 268 146 016 624 937 97 653 191 28 360 340 - - - 14 335 253 536 473 454 -------------------- 1 741 034 906 -------------------- - - ----------------- 194 895 675 ----------------- - - ----------------- 8 610 494 ----------------- - - - - ----------------- -------------------- 67 691 ----------------- -------------------- 388 664 - - ------------------- 14 335 253 536 473 453 ------------------- 303 663 1 945 593 190 ------------------- ------------------- 15 862 243 - ============ ============ ============ ============ ============ ============ ============ (34 662 632) 16 245 733 1 981 772 449 033 123 849 Net foreign exchange position 92 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 28. CONTINGENT LIABILITIES Inflation Adjusted Historical GROUP Guarantees Facilities approved but not drawn down Expected credit losses on facilities approved but not drawdown Expected credit losses on guarantees Balance at 31 December 31 December 2020 ZWL 107 418 549 47 635 086 (1 490 863) (489 529) ------------------- 153 073 243 ========== 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 569 489 191 90 021 971 107 418 549 47 635 086 126 952 189 20 067 960 (6 525 618) (24 346 282) -------------------- 628 639 262 ========== (1 490 863) (489 529) ------------------- 153 073 243 ========== (1 477 002) (5 427 344) ------------------- 140 115 803 ========== 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 specified acts. 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. 29. CAPITAL COMMITMENTS Inflation Adjusted Historical GROUP Capital expenditure contracted for Capital expenditure authorised but not yet contracted for At 31 December 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL - 26 145 307 - 5 828 388 290 414 317 ------------------- 290 414 317 ========== 527 401 476 -------------------- 553 546 783 ========== 290 414 317 ------------------- 290 414 317 ========== 117 569 873 ------------------- 123 398 261 ========== Capital commitments will be financed from the Group’s own resources. 30. ASSETS UNDER CUSTODY In 2014, the Group received Treasury Bills from the Reserve Bank of Zimbabwe amounting to ZWL343 058 on behalf of its Tobacco Retention Scheme customers. Half of the Treasury Bills matured in April 2018 and the other half matured in April 2019. 31. 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. 93 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 31.1 COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE GROUP GROUP Inflation Adjusted Historical Short term employee benefits Post employment benefits Termination benefits 31 December 2020 ZWL 27 913 083 657 437 - ------------------- 28 570 520 ========== 31 December 2019 ZWL Restated 35 326 889 1 128 024 12 829 230 -------------------- 49 284 143 ========== 31 December 2020 ZWL 31 December 2019 ZWL 22 693 564 534 501 - ------------------- 23 228 065 ========== 2 863 816 80 480 544 946 ------------------- 3 489 242 ========== 31.2 BALANCES OF LOANS TO DIRECTORS, OFFICERS AND OTHERS Loans to Directors and officers or their companies are included in advances and other accounts (note 20). Inflation Adjusted Historical GROUP Non-executive directors Executive directors Officers Directors’ companies Officers companies Expected credit loss allowance – Stage 1 31 December 2020 ZWL - 950 501 68 885 501 - - ------------------- 69 836 002 (5 067 579) ------------------- 64 768 423 ========== 31 December 2019 ZWL Restated - 3 347 229 134 337 317 - - -------------------- 137 684 546 (218 685) -------------------- 137 465 861 ========== 31 December 2020 ZWL 31 December 2019 ZWL - 950 501 68 885 501 - ------------------- 69 836 002 (5 067 579) ------------------- 64 768 423 ========== - 746 174 26 946 866 - ------------------- 27 693 040 (48 750) ------------------- 27 644 290 ========== 31.3 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 32. EMPLOYEE BENEFITS 32.1 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 71 540 shares in NMBZ Holdings Limited as at 31 December 2020. 94 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 32.2 EXPENSE RECOGNISED IN PROFIT OR LOSS Inflation Adjusted Historical GROUP Defined Contribution Plan – NSSA Defined Contribution Plan – NMB Bank Limited Pension Fund 31 December 2020 ZWL 31 December 2019 ZWL Restated 31 December 2020 ZWL 31 December 2019 ZWL 700 783 3 791 281 569 742 259 727 5 741 103 --------------- 6 441 886 ========= 9 965 400 --------------- 13 756 681 ========= 4 667 563 --------------- 5 237 305 ========= 678 733 --------------- 938 460 ========= The expense is recognised in profit or loss as part of staff costs under operating expenses (note 7). 32.3 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. Currently no share options are exercisable. 32.4 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. Inflation adjusted contributions by the employer are recognised in profit or loss account and during the period amounted to ZWL700 783 (2019 – restated ZWL3 791 281). 33. EXCHANGE RATES The following exchange rates have been used to translate the foreign currency balances to United States dollars at year end: United States Dollar British Sterling South African Rand European Euro Botswana Pula 31 December 2020 Mid - rate ZWL 81.3486 111.5978 5.919 100.3522 7.5734 USD GBP ZAR EUR BWP 31 December 2019 Mid - rate ZWL 16.7734 22.1677 0.8350 18.8164 0.6302 95 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34. RISK MANAGEMENT The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and the Board Risk and Compliance Committee, which are responsible for defining the Group’s risk universe, developing policies and monitoring implementation. The Board also has the Board Credit Committee (BCC) which is responsible for sanctioning credits and the Board Loans Review Committee (LRC), which is responsible for monitoring asset quality and adherence to the credit risk management policy. Risk management is linked logically from the level of individual transactions to the Group level. Risk management activities broadly take place simultaneously at the following different hierarchy levels: a) b) c) Strategic Level: This involves risk management functions performed by senior management and the board of directors.It includes the definition of risk, ascertaining the Group’s risk appetite, formulating strategy and policy for managing risk and establishes adequate systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated. Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are performed by middle management. Micro Level: This involves “On-the-line” risk management where risks are actually created. These are the risk management activities performed by individuals who assume risk on behalf of the organisation such as Treasury Front Office, Corporate Banking, Retail banking etc. The risk management in these areas is confined to operational procedures set by management. Risk management is premised on four (4) mutually reinforcing pillars, namely: a) b) c) d) 34.1 Credit Risk adequate board and senior management oversight; adequate strategy, policies, procedures and limits; adequate risk identification, measurement, monitoring and information systems; and comprehensive internal controls and independent reviews. 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 an 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. 96 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.1 Credit Risk (Continued) 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. 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. 34.1.2 MAXIMUM EXPOSURE TO CREDIT RISK WITHOUT TAKING ACCOUNT OF ANY COLLATERAL Loans to Directors and officers or their companies are included in advances and other accounts (note 20). Inflation Adjusted Historical GROUP Cash and Cash equivalents (excluding cash on hand) Investment securities 17 Loans and advances 20 Total Guarantees 28 Facilities approved but not drawn down 28 31 December 2020 ZWL 1 362 526 932 1 081 820 457 2 298 797 168 -------------------- 4 743 144 557 -------------------- 107 418 549 47 635 086 -------------------- 155 053 635 -------------------- 4 898 198 192 =========== 31 December 2019 ZWL Restated 1 853 566 892 480 731 899 2 282 160 476 ------------------- 4 616 459 267 ------------------- 569 489 191 90 021 971 ------------------- 659 511 162 ------------------- 5 275 970 429 =========== 31 December 2020 ZWL 31 December 2019 ZWL 1 362 526 932 1 081 820 457 2 298 797 168 ------------------- 4 743 144 557 ------------------- 107 418 549 47 635 086 ------------------- 155 053 635 ------------------- 4 898 198 192 =========== 413 202 530 107 166 155 508 745 860 ------------------- 1 029 114 545 ------------------- 126 952 189 20 067 960 ------------------- 147 020 149 ------------------- 1 176 134 694 =========== 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 in the Net Maximum Exposure column below. 97 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.1.3 RISK CONCENTRATIONS OF MAXIMUM EXPOSURE TO CREDIT RISK ON LENDING ACTIVITIES Loans to Directors and officers or their companies are included in advances and other accounts (note 20). Inflation Adjusted Historical GROUP 31 December 2020 Gross Maximum Exposure ZWL 576 171 487 41 000 000 244 984 807 220 830 811 386 873 236 303 504 490 1 169 804 677 455 052 -------------------- 2 451 989 687 (152 784 378) -------------------- 2 299 205 309 =========== 31 December 2019 Net Maximum Exposure ZWL Restated 242 540 992 41 000 000 70 610 150 125 207 365 306 788 948 61 530 737 1 169 804 230 858 398 ------------------- 1 079 706 394 31 December 2020 Gross Maximum Exposure ZWL 434 087 244 10 754 380 393 795 281 132 143 741 566 169 298 273 362 783 5 190 674 576 952 386 ------------------- 2 391 455 787 (152 784 378) ------------------- 926 922 016 ========== (76 776 964) ------------------- 2 314 678 823 =========== 31 December 2019 Net* Maximum Exposure ZWL 142 322 297 10 754 381 117 796 640 533 821 465 132 197 79 624 171 813 985 235 393 309 ------------------- 1 052 370 801 (76 776 964) ------------------- 975 593 837 =========== Agriculture and horticulture Conglomerates Distribution Food and beverages Individuals Manufacturing Mining Services Expected credit loss on loans and advances Net exposure 34.1.4 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 properties, equities, subordination of shareholder loans and promissory notes. The fair value of all collateral held by the Group at the reporting date is ZWL2 277 537 972 (2019 - ZWL168 243 694). 34.1.5 Credit quality per sector on lending activities Grade A Pass 1 month ZWL 576 171 487 41 000 000 244 350 426 220 830 811 364 456 235 281 890 627 161 425 667 584 171 3 months ZWL - - 544 995 - 13 989 645 21 613 863 - 8 679 164 ------------------- ------------------- 2 396 445 182 44 827 697 =========== ========== Grade B Special Grade C Mention Substandard 1 year ZWL - - 46 505 - 8 416 722 - 1 008 379 1 027 632 ------------------- 10 499 238 ========== Grade D Doubtful 5 years ZWL - - - - 10 635 - - 164 055 ------------------- 174 690 ========== As at 31 December 2020 Assets Agriculture and horticulture Conglomerates Distribution Food and beverages Individuals Manufacturing Mining Services Net exposure 98 Grade E Loss bearing ZWL - - 42 880 - - - - - ------------------- Total Total ZWL 576 171 487 41 000 000 244 984 807 220 830 811 386 873 236 303 504 490 1 169 804 677 455 052 ------------------- 42 880 2 451 989 687 ========== ========== NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.1.5 Credit quality per sector on lending activities As at 31 December 2019 Assets Agriculture and horticulture Conglomerates Distribution Food and beverages Individuals Manufacturing Mining Services Net exposure Grade A Pass 1 month ZWL 96 736 044 - 86 796 019 25 776 366 116 216 130 60 447 282 996 626 121 210 663 3 months ZWL - 2 397 398 510 928 3 681 501 7 214 419 268 623 160 494 3 372 882 ------------------- ------------------- 17 606 245 =========== ========== Grade B Special Grade C Mention Substandard 1 year ZWL 31 948 - 321 453 - 2 773 283 - - 1 702 978 ------------------- 4 829 662 ========== 508 179 130 Grade D Doubtful 5 years ZWL - - 100 904 - 8 276 - - 2 177 412 ------------------- 2 286 592 ========== Grade E Loss bearing ZWL - - 56 688 - - - - 151 972 ------------------- 208 660 ========== Total Total ZWL 96 767 992 2 397 398 87 785 991 29 457 868 126 212 109 60 715 905 1 157 120 128 615 906 ------------------- 533 110 289 ========== Pass: Special Mention: Substandard: Refers to loans graded 8 Doubtful: Refers to loans graded 9 Loss: Refers to loans graded 10 Refers to loans graded 1 to 3 Refers to loans graded 4 to 7 34.1.6 Rating Scale mapping to IFRS 9 Stages Below is a mapping table showing the link between IFRS stages and the Bank’s Rating scale: NMB Bank Rating Scale NMBR1 NMBR2 NMBR3 NMBR4 NMBR5 Supervisory Rating Scale 1 2 3 4 5 NMBR6 NMBR7 NMBR8 NMBR9 NMBR10 34.2 Market risk 6 7 8 9 10 IFRS 9 Stage 1 Stage 2 Stage 3 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. Management 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 2020. 99 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34. RISK MANAGEMENT (cont’d) 34.2 Market risk (cont’d) As at 31 December 2020 Sensitivity of net interest income ZWL ZWL ZWL ZWL ZWL ZWL % Changes in Interest % 5% 3% 1% -1% -3% -5% 0 to 1 month ZWL (110 186 271) (66 111 762) (22 037 254) 22 037 254 66 111 762 110 186 271 1 to 3 3 months to 1 year ZWL 30 877 803 18 526 682 6 175 561 (6 175 561) (18 526 682) (30 877 803) months ZWL (2 084 054) (1 250 432) (416 811) 416 811 1 250 432 2 084 054 1 year to 5 years ZWL 29 759 809 17 855 885 5 9951 962 (5 951 962) (17 855 885) (29 759 809) Total Total ZWL (51 632 713) (30 979 628) (10 326 543) 10 326 543 30 979 628 51 632 713 At 31 December 2019 Sensitivity of net interest income ZWL ZWL ZWL ZWL ZWL ZWL % Changes in Interest % 5% 3% 1% -1% -3% -5% 0 to 1 month ZWL 33 164 948 (19 898 969) (6 632 990) 6 632 990 19 898 969 33 164 948 1 to 3 3 months to 1 year ZWL (5 342 449) 3 205 470 1 068 490 (1 068 490) (3 205 470) (5 342 449) months ZWL (649 091) 389 455 129 818 (129 818) (389 455) (649 091) 1 year to 5 years ZWL (12 033 593) 7 220 156 2 406 719 (2 406 719) (7 220 156) (12 033 593) Total Total ZWL 15 139 815 (9 083 889) (3 027 963) 3 027 963 9 083 889 15 139 815 34.3 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. 31 December 2020 Sensitivity of net interest income USD USD USD USD USD USD % Changes in Currency Rate % 5% 3% 1% -1% -3% -5% Effect on profit before Tax ZWL 1 733 132 1 039 879 346 626 (346 626) (1 039 879) (1 733 132) 31 December 2019 Sensitivity of net interest income USD USD USD USD USD USD 100 % Changes in Currency Rate % 5% 3% 1% -1% -3% -5% Effect on profit before Tax ZWL (3 213 476) (1 928 085) (642 695) 642 695 1 928 085 3 213 476 Effect On equity ZWL 1 304 701 782 821 260 940 (260 940) (782 821) (1 304 701) Effect On equity ZWL (2 386 006) (1 431 603) (477 201) 477 201 1 431 603 2 386 006 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.4 LIQUIDITY RISK 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 reports produced by the Risk Management department. This is augmented by a monthly management ALCO and a quarterly board ALCO meetings. The contractual maturities of undiscounted cash flows of financial assets and liabilities are disclosed in note 28.1. 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. At 31 December 2020 Guarantees Commitments to lend Irrevocable letters of credit At 31 December 2019 Guarantees Commitments to lend Irrevocable letters of credit on Demand % - - - ----------------- - ========= 0 to 1 month ZWL 14 882 341 91 556 - ----------------- 14 973 897 ========= 1 to 3 3 months to 1 year ZWL 88 503 358 34 440 941 - ----------------- 122 944 299 ========= months ZWL 4 032 850 13 102 589 - ----------------- 17 135 439 ========= 1 year to 5 years ZWL - - - ----------------- - ========= Total Total ZWL 107 418 549 47 635 086 - ----------------- 155 053 635 ========= on Demand % - - - ----------------- - ========= 0 to 1 month ZWL 221 500 267 946 - ----------------- 489 446 ========= 1 to 3 3 months to 1 year ZWL 126 362 506 17 759 134 - ----------------- 144 121 640 ========= months ZWL 368 183 2 040 880 - ----------------- 2 409 063 ========= 1 year to 5 years ZWL - - - ----------------- - ========= Total Total ZWL 126 952 189 20 067 960 - ----------------- 147 020 149 ========= The Group expects that not all of the contingent liabilities or facilities approved but not drawn down will be drawn before expiry. 34.5 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 and Compliance 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. 101 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.6 Legal and compliance risk Legal risk is the 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. 34.7 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. 34.8 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. 34.9 Environmental, Social & Governance (ESG) Risk Environment, Social and Governance (ESG) or sustainability risk is the consideration of non-financial risks arising from the environment (flora and fauna) as well as societal issues. The Group is not only concerned about making profits, but is also keen on assessing the impact it has on the planet and the people it interacts with. There is a growing number of frameworks and standards aimed at addressing global concerns on sustainability. Global risk reports show that environmental and societal risks have overtaken economic and geopolitical risks in terms of both likelihood and impact. 34.9.1 Reserve Bank of Zimbabwe Ratings The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group’s banking subsidiary on 24 November 2016. Below are the final ratings from the onsite examination. 34.9.1 CAMELS* Ratings CAMELS Component Latest RBS** Ratings 24/11/2016 Previous RBS Ratings 30/06/2013 Previous RBS Ratings 31/01/2008 Capital Adequacy Asset Quality Management Earnings Liquidity Sensitivity to Market Risk Composite Rating 2 3 3 2 3 2 3 2 4 3 2 2 2 3 4 2 3 3 3 3 3 *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. 102 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.9.1.2 Summary RAS ratings RAS Component Latest RAS*** Ratings 24/11/2016 Previous RAS Ratings 30/06/2013 Overall Inherent Risk High Overall Risk Management Systems Acceptable Overall Composite Risk Moderate Direction of Overall Compos- ite Risk Stable *** RAS stands for Risk Assessment System. Moderate Acceptable Moderate Stable 34.9.1.3 Summary risk matrix – 24 November 2016 on - site examination Previous RAS Ratings 31/01/2008 Moderate Acceptable Moderate Stable Type of Risk Level of Inherent Risk Adequacy of Risk Management Systems Overall Composite Risk Direction of Overall Composite Risk Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable High High Moderate Low Moderate Moderate Moderate Moderate Moderate Stable Stable Stable Stable Stable Stable Stable Stable Stable Credit Liquidity High High Interest Rate Moderate Foreign Exchange Low Strategic Risk Moderate Operational Risk Moderate Legal & Compliance Moderate Reputation High Overall Moderate KEY High Moderate Low Level of Inherent Risk 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. 103 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34. RISK MANAGEMENT (continued) 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. 34.9.2 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 2020 - 2019 BB- The current rating which was due to expire in August 2020 was withdrawn by GCR on 23 June 2020 following the Bank’s waiver of external ratings. The Bank waived the 2020/2021 external ratings in line with a general dispensation extended by the Reserve Bank of Zimbabwe due to the COVID-19 pandemic. 34.10 Regulatory Compliance There was no regulatory breach resulting in penalties during the period under review. The Bank is committed to comply with and adhere to all regulatory requirements. 34.11 Capital management 34.11.1 Holding company The capital allocation to the subsidiary units is in accordance with the regulatory requirements of the business undertaken by the subsidiary. 104 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (Cont'd) for year ended 31 December 2020 34.11.2 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. Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets. The Bank’s regulatory capital position at 31 December was as follows: Inflation Adjusted Historical Cost 2020 ZWL 2019 ZWL Restated 2020 ZWL 2019 ZWL Less: capital allocated for market and operational risk Share capital Share premium Retained earnings Functional currency translation reserve 726 287 1 287 623 341 1 816 157 257 287 529 426 ------------------ 3 392 036 311 (192 509 961) ------------------- Tier 1 capital 3 199 526 350 Tier 2 capital (subject to limit as per Banking Regulations) 765 139 640 668 131 497 Fair valuation gains on land and buildings Subordinated debt - Stage 1 & 2 ECL provisions – (limited to 1,25% 97 008 143 of risk weighted assets) Tier 1 & 2 capital 3 964 665 990 Tier 3 capital (sum of market and operational risk capital) 192 509 961 -------------------- 4 157 175 951 =========== 7 909 196 976 Total risk weighted assets Total capital base 726 287 1 287 623 341 975 166 841 287 529 426 -------------------- 2 551 045 895 (61 484 344) ------------------- 2 489 561 551 568 942 764 487 104 622 1 355 410 80 482 732 3 058 504 315 61 484 344 -------------------- 3 119 988 659 =========== 6 438 618 594 16 506 31 474 502 2 142 925 978 11 619 648 ------------------- 2 186 036 634 (192 509 961) -------------------- 1 993 526 673 1 162 890 432 1 067 266 443 - 16 506 31 474 502 329 398 472 11 619 648 ---------------- 372 509 128 (13 706 269) ----------------- 358 802 859 194 315 734 176 079 950 294 339 17 941 445 95 623 989 553 118 593 3 156 417 105 13 706 269 192 509 961 ----------------- ------------------- 3 348 927 066 566 824 862 =========== ========== 7 649 919 150 1 435 315 609 Tier 1 ratio Tier 2 ratio Tier 3 ratio Total capital adequacy ratio RBZ minimum required 35. EVENTS AFTER REPORTING DATE 40.45% 9.67% 2.43% 52.56% 12.00% 38.67% 8.84% 0.95% 48.46% 12.00% 26.06% 15.20% 2.52% 43.78% 12.00% 25.00% 13.54% 0.95% 39.49% 12.00% Subsequent to the Group’s year end date of 31 December 2020, the Government of Zimbabwe announced more stringent COVID-19 induced lockdown measures in an attempt to contain the spread of the novel Corona virus. The Directors assessed this development and concluded that this had no impact on the Group’s operations, largely due to the fact that the nation had been operating under lockdown conditions of varying degrees for the greater part of the year and no material adverse impact was noted in terms of the Group’s operations. 105 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT HISTORICAL FIVE YEAR FINANCIAL SUMMARY (Cont'd) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Interest income Interest expense Net interest income Net foreign exchange gains Fee and commission income Revenue Other income Operating income Operating expenditure Impairment losses on financial assets measured at amortised cost Impairment losses on loans and advances Profit before taxation Taxation credit/(charge) Profit after taxation Other comprehensive income Revaluation of land and buildings, net of tax Translation gain on change in functional currency, net of tax Total comprehensive income for the year 2020 ZWL 2019 ZWL 2018 ZWL 2017 ZWL 2016 ZWL 501 216 271 (90 638 279) --------------------- 410 577 992 217 274 144 815 541 357 --------------------- 1 443 393 493 1 226 846 996 --------------------- 2 670 240 489 (814 190 000) (127 974 740) - --------------------- 1 728 075 749 85 514 320 -------------------- 1 813 590 069 70 557 190 (16 894 088) -------------------- 53 663 102 99 863 112 87 242 303 --------------------- 240 768 517 206 622 639 --------------------- 447 391 156 (105 937 502) 39 333 178 (8 865 016) ------------------- 30 468 162 1 899 670 28 539 376 -------------------- 60 907 208 4 968 447 -------------------- 65 875 655 (34 720 428) 32 061 931 (9 157 095) ------------------- 22 904 836 1 583 164 18 832 185 -------------------- 43 320 185 1 129 001 -------------------- 44 449 186 (27 578 347) 33 860 139 (11 075 067) ------------------ 22 785 072 743 255 15 179 149 ------------------ 38 707 476 1 737 860 ------------------ 40 445 336 (26 176 706) (11 048 567) - --------------------- 330 405 087 (44 504 548) -------------------- 285 900 539 (4 011 952) - -------------------- 27 143 275 (5 922 074) ------------------- 21 221 201 - (3 853 149) -------------------- 13 017 690 (3 078 864) ----------------- 9 938 826 - (8 059 726) ------------------- 6 208 904 ( 1 150 738) ----------------- 5 058 166 891 168 492 175 943 209 46 431 90 310 (2 970) - --------------------- 11 619 648 ----------------- - ------------------- - ------------------- - ------------------ 2 704 776 561 ============ 473 463 396 ========== 21 267 632 =========== 10 029 136 5 055 196 =========== =========== 106 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT HISTORICAL FIVE YEAR FINANCIAL SUMMARY (Cont'd) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION SHAREHOLDER’S FUNDS Share capital Reserves Functional currency translation reserve Revaluation reserves Retained earnings Total equity Subordinated loan Redeemable ordinary shares Total shareholders’ funds and shareholders liabilities LIABILITIES Deposits and other liabilities Deferred tax liabilities Current tax liabilities Capital employed ASSETS Cash and cash equivalent Investments securities Deferred tax assets Current tax assets Loan, advances and other assets Non-current assets held for sale Quoted and other investments Trade investments Investment properties Property and equipment Intangible assets Employment of capital 2020 ZWL 2019 ZWL 2018 ZWL 2017 ZWL 2016 ZWL 84 116 19 121 607 11 619 648 1 067 266 442 2 143 095 638 --------------------- 3 241 187 451 132 632 641 14 335 253 -------------------- 84 116 19 184 170 11 619 648 176 079 950 329 505 569 -------------------- 80 975 64 040 438 - - - ------------------- 78 751 49 821 935 - - - ------------------- 78 598 37 771 065 - - - ------------------ 536 473 453 28 360 340 14 335 253 ----------------- 64 121 143 1 505 647 14 335 253 ----------------- 49 900 686 1 415 904 14 335 253 ----------------- 39 849 663 1 415 490 14 335 253 ----------------- 3 388 155 345 -------------------- 579 169 046 ----------------- 79 962 313 ----------------- 65 651 843 ----------------- 55 600 406 ----------------- 6 413 943 465 174 727 794 57 205 065 -------------------- 10 034 031 669 ============ 1 964 637 240 1 081 820 457 - - 3 730 886 733 - - 10 877 672 1 653 496 476 1 588 179 384 4 133 707 --------------------- 10 034 031 669 ============ 1 268 146 016 97 653 191 624 937 ----------------- 1 945 593 190 447 105 283 - - ----------------- 527 067 596 ============ ============ 492 304 267 107 166 155 - - 817 960 242 - - 1 612 131 229 867 982 295 285 227 1 397 186 --------------------- 1 945 593 190 112 440 912 117 249 434 1 908 532 285 822 254 202 945 36 000 - 112 501 20 950 606 17 844 069 2 036 775 -------------------- 527 067 596 ============ ============ 356 912 509 - - ----------------- 422 564 352 ============ 89 553 202 92 245 425 1 204 449 231 007 210 483 221 36 000 88 650 102 347 18 977 000 7 335 988 2 380 180 -------------------- 422 564 352 ============ 265 384 520 - - ----------------- 320 984 926 =========== 69 421 257 24 744 752 2 264 907 368 445 199 617 095 2 261 300 68 220 88 930 14 202 270 6 280 286 1 647 034 ------------------ 320 984 926 =========== 107 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT HISTORICAL FIVE YEAR FINANCIAL SUMMARY (Cont'd) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CLOSING NUMBER OF SHARES 404 171 689 404 171 689 392 955 196 384 974 542 384 427 351 2020 ZWL 2019 ZWL 2018 ZWL 2017 ZWL 2016 ZWL Share performances Net asset value per share (ZWL cents) Basic earnings per share (ZWL cents) Dividend per share (ZWL cents) Dividend cover (times) Price/earnings ratio Closing price per share (ZWL cents) 724.70 448.72 - - 0.89 400 136.28 71.56 - - 0.57 41 19.98 16.69 5.43 0.96 5.64 4.44 24 2.58 0.15 17.2 3.49 9 14.46 1.32 - - 2.97 3.9 Market capitalisation (ZWL) 1 616 686 756 165 710 392 94 309 247 34 647 709 14 992 667 Financial performance Return on shareholders’ funds (%)¹ Return on assets (%) Total cost/net income total income (%)² Non-interest income/total income (%) Effective tax rate (%) 92.34% 26.96% 35.28% 81.85% -4.95% 81.75% 24.42% 26.15% 44.50% 18.79% 27.03 4.03 58.8 47.37 21.85 15.28 2.37 70.7 40.1 23.7 9.1 1.6 84.6 43.7 18 1. The return on shareholders’ funds is based on shareholders’ funds at the end of the year. 2. 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 ZWL0.000028 per share to 350 000 000 (350 million) shares with a nominal value of ZWL0.00028 per share. The Company also approved an increase in the authorized share capital from 350 000 000 shares with a nominal value of ZWL0.00028 per share to 600 000 000 shares with a nominal value ZWL0.00028 per share. 108 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT Sustainability Key Performance Indicators for the year ended 31 December 2020. Below is a list of the Group’s Key Performance Indicators (KPIs) based of GRI standards against the Sustainable Development Goals (SDGs). The reporting was mainly qualitative and the group is working on a framework to adopt quantitative impact analysis GRIs Disclosure SDG No. Focus Area Measure Environmental No.7 - Energy Affordable and clean energy. Reduce electricity consumption or purchase and invest in green solar energy. Organizational Achievements Generates 50kWp from solar energy. Progress subsidiary The Banking has been aggressive in implementing reduce energy measures that its operations in consumption that through various initiatives include switching off of lights when not in use and acquisition of sensor light bulbs. The Bank also successfully established its own and first solar energy power source at the newly built Headquarters (HQ) in Borrowdale, Harare. The new green energy source generates up to 50kWp (kilowatts peak). Of this, 50% of the energy is used to power the HQ‘s entire Data Centre and the remaining 50% is intended to be used to power the head office’s lighting and air conditioning systems. The Banking subsidiary is also in consultation with various partners with the aim offering green energy products. The Bank will finance the purchase and installation of solar equipment for corporate entities as well as for households. The Group has started operationalizing its carbon footprint measurement procedures. and processes Measurement of the base year’s metric tonnes of carbon dioxide equivalent (CO2e) is under way and the Group’s Greenhouse Gas (GHGs) contributions Emissions are expected to be disclosed in the next reporting period. As a result, the bank’s direct and indirect sources of emissions are recorded and monitored as per Greenhouse Gas Protocol guidelines(Scope1, Scope 2 & Scope 3). 109 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure SDG No. Focus Area Measure Environmental No.13 - Climate Action. Financing of sustainable projects. Responsible financing Organizational Achievements ESRM policy, trainings, Exclusion list, NMB Bank statement of commitment to Responsible Financing. Progress For NMB Bank, the safety of people and the environment is of paramount importance. The Group recognizes that environmental management is integral to good business prac- tice and this is outlined within the bank’s Environmental & Social Risk Management Policy (ESRM). The framework provides NMB Bank’s Statement of Commitment to Re- sponsible Financing as well as the Financing Exclusion List. The Bank only supports business projects and operations that are considered to have lesser E&S risks or implement- ed effective mitigatory measures. As a result, the Bank performs an Envi- ronmental and Social Due Diligence screening process before any finan- cial support to both Corporates and SMEs. The Group also considers suppliers who are sensitive to sus- tainability implementation of Environmental and Social Man- agement Systems as appropriate to their businesses and align them with best practice activities including the following; setting environmental and social targets, reduce impact and report progress. The Group en- courages its corporate customers to prioritize their respective employee rights, workers’ health & safety, child labor issues as well as to effectively manage their greenhouse emissions as they carry out their business op- erations. Corporate and SMEs bor- rowers with a combined exposure of ZWL7,9million or 0.33% of the total loan book had their projects rated high risk (Cat A) but with adequate and effective control measures in place. The remaining portion of the book (99.67%) was rated medium risk (Cat B) and low risk (Cat C). through 110 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure SDG No. Focus Area Measure Environmental No. 14 - Life below water Promotion of life on land and below water. Environmental management compliance as well as being among leaders in promoting initiatives that seek to protect life below water as well as flora & fauna. Organizational Achievements Complying with by-laws, national and international regulations and best standards. Progress local assessment NMB Bank respects and promotes international both and environmental management regulations and best initiatives, practices regarding the wetlands, protected areas and species. The Group ensures that environmental issues are embedded in the core business strategy and operations form part of credit as well as risk processes. Environmental risk standards are clearly referenced in our credit sanctioning policies. Our property and land valuers together with our credit processes & procedures assist in assessing the history of a piece of land and the operational implications of a site’s current or intended commercial use. Through Environmental & Social (E&S) risk due diligence and related covenants, our compelled to identify E&S risks within their operations and organizations, take measures that reduce the risks as well as disclose them to relevant stakeholders. customers are 111 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure SDG No. Focus Area Measure Environmental No.12 - Responsible Construction & Production. Sustainable projects and production. Effective waste management processes, procedures and enhancement of other carbon emission measures. Organizational Achievements Waste management policies and paperless banking model. Progress innovation and At NMB Bank, the prevention of waste takes priority over recycling or disposal. Therefore, every effort is made during the development of products to ensure that as little waste is generated as possible. Un- avoidable operational waste (mainly paper) is recorded disposed proper- ly. The Group continues to automate and replace paper with technology driven solutions. Through prod- uct technological investments, the Bank continues to embrace digitalization through automation of its operational and customer transactional process- es across the entire business. The Bank invested into various appli- cations and systems that included NMBMobile, NMBConnect for easy and mobile account opening and customer IApprove transactions, for internal applications & authority sought, SmartStream software for stationery acquisitions and account- ing, Credit Quest for loan application and assessment as well as Point of sale machines for withdrawals and deposits. Resultantly, the use of paper and ink (printers) reduced significantly during the current year. Through its influence, NMB Bank encourages its customers to uphold best waste management practices. The bank conducts relevant screen- ing for its borrowers, suppliers and partners in fulfilment of its commit- ment to sustainable financing and way of doing business. The Group also work in close cooperation with the key stakeholders such as the government’s Environmental Man- agement Agency (EMA) in managing disposables and the environment at large. 112 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Social SDG No. Focus Area Measure No. 16 - Peace, Justice and strong Institutions. Human Rights advocacy and promotion. Promote Human Rights initiatives through support and embedding in our systems and policies relevant measures. Organizational Achievements Complying with national & international Human Rights law and best standards. Staff and customers rights policies & procedures. Progress The Group operates in accordance with the Zimbabwe Human Rights Commission Act and recognizes other internationally accepted human rights standards, including the UN Guiding Principles on Business and Human Rights. We respect and promote human rights through our employment policies and practices, through our supply chain screening and engagement as well as through the responsible provisioning of our products and services. NMB Bank’s Human Resources (HR) Manual, of Conduct, Consumer Code Protection Policy, Service Standards and Prevention of Bullying & Sexual Harassment at Work Policy are all drawn and summarize our objectives and commitment to this aspect. These are reviewed at least once per year. Human rights issues are incorporated into our client and customer due diligence processes. Our Code of Conduct outlines how we expect our staff to behave and the required standards of working. The code makes specific reference to human rights and covers a number of issues relevant to client review. The bank continues to put in place controls and monitoring measures that assist in enhancing human rights management systems. 113 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Social SDG No. Focus Area Measure No.4 Quality Education. Training and Education. Create an environment and products that support education for all and staff training. Organizational Achievements NMBEdulearn, Customer and staff educational loans.(School & University fees loans). Progress As a Group, we will continue to make substantial investment in our people through training and development to enable them to execute their duties effectively and to support them to fulfil their individual ambitions. The Banking subsidiary makes use of its online NMBEdulearn platform that seeks to promote communication, training and development of all its employees across all units and levels. This ranges from induction courses for new employees, product knowledge, academic and technical skills. A number of workshops and trainings were also conducted through other online platforms and channels such as Zoom and Teams. Resultantly, each and every staff member (100%) was afforded an opportunity to go through knowledge or and skills enhancement session through trainings and workshops. In support, the Group offers a wide range of educational loan facilities to its customers and staff. The credit facilities are meant to assist primary, secondary and tertiary level students. The same facilities were also extended to educational corporate service providers, school teachers and lecturers across the country. As a result, a total of ZWL45,8million was directly advanced to the education sector as at 31 December 2020. 114 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Social SDG No. Focus Area Measure No.5 Gender Equality. Diversity and equal opportunity. Diversity and equal opportunity for employment and access to financial services by all customers. Organizational Achievements NMB Bank Staff Gender Policy, Recruitment & Selection and Promotions & Transfer Policies. Social No.5 Gender Equality. Remuneration for women and men. Equal remuneration for women and men. Performance Management Policy, Performance Based Reward & Remuneration Policy and Benefit Policies & Procedures. Social No.6 Clean water& sanitation Access to basic social amenities. Mortgage loans, funding to municipalities, road & dam construction and health. Offer products that directly and indirectly promote provisioning of clean water and sanitation, health and transport infrastructure. Progress The Group respects and promotes diversity and equal opportunities to all staff and customers regardless of gender. Employment and staff promotions are based on merit. Our staff promotions are based on performance, qualification and experience. Our Human Resources policies such as Gender Policy, Recruitment & Selection, and Promotions & Transfer Policies outline the Group’s commitment to diversity and equal opportunities for all. As at 31 December 2020, 40.74% of staff complement were women and the institution is targeting a 50% proportion as and when opportunities arise. The Banking subsidiary offers its products to both new and existing customers regardless of gender. Resultantly, a total of ZWL22,7million worth of credit facilities was granted to women only businesses. Clear and transparent remuneration policies are in place. Employee salaries are based on merit and not one’s gender. Performance Management Policy, Benefit Policies & Procedures and Performance Based Reward & Remuneration Policies are all in place in support of this noble cause. Employees who occupy same positions are equally graded and remunerated based on the Paterson Job Grading system. In specific NMB Bank has been financing various projects both in the public and private sectors in support of clean water provisioning, health, housing and transport infrastructure building. terms, these included financing of dam construction by private corporates, financing of local council operations, housing projects and borehole drilling for schools as well as donations to various communities. As a result, facilities amounting to ZWL767,8million were advanced to finance the health sector, water, ICT and roads rehabilitations and construction projects across the country. A total of ZWL91,7million worth of mortgage facilities were also granted. 115 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT Progress The Group respects and promotes employee rights and their freedom of association. In support of this, the Banking subsidiary has in place a Workers’ Committee & Works Council, Disciplinary & Grievance Procedure as well as the guidelines for managing disciplinary hearings. The bank continues to tolerate and creates an enabling environment for employee rights and freedom of association to be respected through support and establishment of internal & national workers labor structures as well as affording workers the right to be represented in all disciplinary processes and collective bargaining & labor relations. The group adheres to all government of Zimbabwe’s laws and regulations as well as by-laws in an effort to protect the environment and people. The Group works hand in hand with institutions such as the government’s Environmental Management Agency (EMA) as well as local authorities in reducing environmental, social and related risks. The Group had no record of monetary or non-monetary sanctions for non-compliance with set laws and regulations. We are committed to continue complying with all applicable local, national regulations and social on issues. Beyond compliance, the Group continues to integrate and enhance environmental and social considerations into its operations and business decisions in all units and facets of the Bank. Compliance to ESG regulations forms part of terms and conditions or covenants for our borrowers and partners. international environmental and SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Social SDG No. Focus Area Measure No.16 Peace, justice & strong institutions. Employee rights and freedom of association. Promotion of employee freedom of association and collective bargaining. Organizational Achievements Worker's Committee & Works Council, Disciplinary & Grievance Procedures. Social No.16 Peace, justice & strong institutions. Environmental, Social & Governance (ESG) laws and regulations. Compliance with internal, national and international laws, regulations and best standards Complying with E&S management regulations and best standards. (ESG Coordinator and Compliance Dept.). 116 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Social SDG No. Focus Area Measure No.3 Good Health & well- being. Occupational Health & working Conditions. Best practices regarding Staff Welfare, Heath & working Conditions. Organizational Achievements Staff Medical Aid facility, HIV policy, Employer Funeral Scheme, Pension Fund and Covid-19 response Committee. Progress The Group respects and considers the safety and welfare of its work- force. NMB Bank has in place; Staff Medical Aid facility, HIV Policy, Pen- sion Fund and Employer Funeral assisted scheme for its employees. The Group in fighting HIV at work places also supplies condoms to its staff across its branch network. It also provides dust coats, masks and fresh milk for tellers amongst other interventions aimed at promoting good health. With the outbreak of the Covid-19 pandemic, the institu- tion had to enhance its health and safety measures for both customers and employees. The Group timeous- ly updated and operationalized its Business Continuity Plan (BCP) as a way to minimize the spread and impact of the novel virus. Begin- ning April 2020, the bank initiated various Covid -19 induced health and safety measures that included awareness programs, decongestion of workplaces through telecommut- ing, Branch disinfections, social dis- tancing through reduction of physical meetings amongst staff as well as customer physical interaction. The group also invested in temperature screening thermometers, hand san- itizers, gloves, foot bath & sanitizers, sneeze guards, face masks with staff going for Covid-19 virus testing. In this regard, employees were as- sisted both financially and emotion- ally. Those that tested positive for the virus were afforded time to seek medical assistance and to recover before resuming their duties. Con- tact tracing was also conducted and all affected employees were put on isolation as per World Health Orga- nization’s guidelines. Unfortunately, one casualty or employee death due to the Covid-19 virus was recorded in January 2021. The Group contin- ues to prioritize the health and safety of its workers and customers going into 2021, especially considering the Covid-19 second wave current- ly in motion across the country. The Group will also continue to provide transport to its staff to and from work. 117 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Economic SDG No. Focus Area Measure No.16-Peace, justice & strong institutions. Whistleblowing, Bribery and Corruption free organization. Bribery and Corruption free organization. Organizational Achievements Ethics Charter, Code of Conduct, Anti-Bribery & Corruption and Tip- Offs Anonymous reporting policies. Economic No.16 Peace, justice & strong institutions. Grievances, Customer Complaints & Privacy. Minimize legal and reputational risks through reduction of customer complaints and lawsuits. Service Standards, Confidentiality& Interests Declaration, Consumer Protection policy as well as staff Code of Conduct and Ethics Charter. Economic Economic performance. No. 8 Decent work and economic growth. Financial disclosures. Profitable and growing business, which creates jobs and contributes to the economic success. 118 Progress We aspire to run our business in an open and transparent manner and therefore have a zero tolerance approach to bribery and corruption. Staff Manual, Ethics Charter, Code of Conduct, Anti-bribery & Corruption and our Tip-Offs Anonymous reporting policy summarize our commitment in conducting our activities free from any form of bribery and corruption. The Group conducts anti-bribery and corruption trainings and workshops as well as comprehensive risk assessments. This covers all units across business functional and geographical lines. The Group also uses its Audit Hotline and Tip-off Anonymous facilities in order to cab all types of malpractices by its employees and its customers. A total of nine permanent employees left the bank following disciplinary processes during the period under review. We are committed to continue offering excellent services to new and old customers. The Code of Conduct, Service Standards, Competition Act, Confidentiality and Interests Declaration, Consumer Protection Policy are all in place to give guidance to the staff on how to conduct themselves and to protect the customers. The Group provides platforms for customers to convey their grievances and complaints. These include customer Complaints & Query boxes across all our networks, Complaints registers, Online Enquiries desk and various social media platforms. Customer complaints are into our Operational Loss Tracker (OLTs) system as they are received across all units. The complaints are then quantified, analyzed, managed, resolved and reported. No penalty charge to the bank was recorded during the reporting period. logged report We the direct economic value generated and distributed in our financials including revenues, operating costs, economic value retained and dividends paid. We also publish our turnover, profits and taxes paid during the reporting period. NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Economic SDG No. Focus Area Measure Economic growth. Indirect economic impacts. No. 8 Decent work and economic growth. Organizational Achievements Non-financial disclosures and E&S product innovations. Progress to help environmental To achieve long term sustainable economic growth, a number of policy challenges must first be addressed, including; ESG disclosures, raising employment, improving access to housing and supporting families in planning for their futures. All of these goals rely on access to appropriate and responsible finance. In addition, new solutions to help tackle social and challenges also need access to appropriate financing innovate, develop, commercialize and scale deployment. NMB Bank supports SMEs and youths through offering low cost products such as NMBlite accounts and loan products. The Bank recruited a number of Agents and Brand Ambassadors to market its products that include the Tapcard, NMBConnet services as well as loans to MicroFinance institutions. With the Covid-19 pandemic adverse effects to the business operations in all sectors of the economy and the bank borrowing customers, to consider it upon took itself to repayment moratoriums loan organizations faced with cash follow challenges. Resultantly, corporates & SMEs with a combined exposure of ZWL24,7mln had their monthly repayments deferred by the bank as a way of assisting borrowers who could not shoulder the sudden impact of the pandemic. 119 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Economic SDG No. Focus Area Measure No. 11 Sustainable cites & communities. Community support Corporate Social Responsibility (CSR). Organizational Achievements Direct and indirect community support. Economic No. 12 Responsible consumption & production. Best Procurement practices. Best Procurement practices. Complying with the Zimbabwe Procurement Act. NMB Bank Procurement Committee. Progress As a Group, we play a broader role in the communities in which we live and work beyond what we deliver through our core business activities. We support communities by; Invest- ing money, time and skills in partner- ships with respected and relevant non-governmental organizations, charities and social enterprises. This enables colleagues to use their professional skills and expertise in a range of activities, including volunteering and fundraising. The Group assisted the disadvantaged and those that were affected by the Covid-19 pandemic. The support was either directly or through the industry association, Bankers Asso- ciation of Zimbabwe (BAZ). Other charitable assistance and participa- tion were those to do with Covid-19 awareness campaigns, World Can- cer, Hearing and Kidney commem- orations day. A total of ZWL621,353 was channeled towards this societal responsibility. The Group is also in the process of creating a stand-alone Covid-19 Support Fund, where all NMB Bank stakeholders will make voluntary contributions towards the containment of the disease across societies. All suppliers are treated equally and fairly in accordance with Zimbabwe Procurement Act, other relevant laws, regulations and best standards. We select suppliers based upon best value and seek ways to maximize from all segments competition of society. The Group considers environmental management, human rights, diversity and inclusion, societal responsibility and product T&Cs responsibility. applies to prospective and existing suppliers and compel them to comply with all applicable national and local laws of their specific geography. An NMB Bank Procurement committee is also in place. Supplier’s 120 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SUSTAINABILITY REPORT (Cont'd) GRIs Disclosure Economic SDG No. Focus Area Measure Organizational Achievements Progress No. 1 No poverty Job creation & Poverty eradication. Job creation & Poverty eradication. Appealing and affordable products. Through innovation initiatives, the Group offers a range of exciting and low cost products that have seen the rural, old age, women, the disadvantaged and the youth being able to have bank accounts, bank cards and employment. These (242,103 include our NMBLite customers) account, for the unbanked populace, and the Tapcard, which is mainly aimed at easing the cash challenges for the commuting public. The Group also offered credit to SMEs (ZWL275,7million) and individuals (ZWL304,6million) the country. These included both rural and urban customers. targeted facilities across Economic No. 17 Partnerships for the goals. Attainment of Sustainable Development Goals (SDGs). Support and collaborate with other stakeholders in attainment of SDGs. Partnerships with Government institutions, Local authorities, NGOs and International stakeholders. local authorities, The Group will continue working together with NGOs, Churches, corporates, the Government and other international organizations in ensuring that the Sustainable Development Goals (SDGs) are achieved. It will continue to enhance and introduce new sustainable products and programs and widen its influence in the areas of ESG issues. The Group will continue to support both financially and in kind, the attainment of SDGs by year 2030, with the main targets being Quality education, Clean water & sanitation, Good health & well- being, Zero hunger, Decent work & economic growth, Affordable & clean energy, Responsible consumption & Production, Gender equality, Climate action, Partnership for goals and Peace, Justice & Strong institutions. 121 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTICE TO MEMBERS Notice is hereby given that the 26th Annual General Meeting of Members of NMBZ Holdings Limited will be held virtually on Wednesday, 12 May 2021 at 1530 hours for the following purposes: ORDINARY BUSINESS 1. 2. 3. 4. 5. To receive and adopt the Financial Statements for the year ended 31 December 2020, together with the reports of the Directors and Auditors thereon. To re-appoint Directors. In accordance with the Articles of Association, Mr. B. Chikwanha and Ms. J. Maguranyanga retire by rotation. Being eligible, the Directors offer themselves for re-election. To approve Directors’ fees for the year ended 31 December 2020. To approve Messrs. Ernst & Young’s remuneration for the year ended 31 December 2020. To appoint Ernst & Young as the Company’s Auditors for the year ending 31 December 2021. SPECIAL BUSINESS 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. c. 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.’’ 2. To consider, and if deemed fit, to pass, with or without modification, the resolution set out below: “That the Company cancels the listing of its ordinary shares (the "Shares") on the premium segment of the Official List of the Financial Conduct Authority (London) and of trading on the Main Market of the London Stock Exchange plc (the "LSE") (the "Delisting").” 122 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT NOTICE TO MEMBERS (Cont'd) 3. To consider and if deemed fit, to pass, with or without modification, the resolution set out below: “That, subject to Special Resolution 1 and 2 being carried by the requisite majority, the Company be authorised to purchase the Company’s own ordinary shares from the LSE in the period between the date of this Notice and the date of Delisting of the Company from the LSE.” 4. To consider and if deemed fit, to pass, with or without modification, the resolution set out below: “That the Company be authorised to pay the transaction costs related to the Delisting for the six (6) shareholders who make up the LSE share register.” Notes: 1. Details of the Virtual AGM will be emailed by our transfer secretaries, First Transfer Secretaries (Pvt) Ltd through email to shareholders. Shareholders are advised to update their contact details with the transfer secretaries on the following contacts: First Transfer Secretaries (Private) Limited 1 Armagh Avenue Eastlea, Harare Telephone: +263 242 782869/7 Email: info@fts-net.com 2. Shareholders are encouraged to pre-register on the online portal that will be provided by the transfer secretaries and submit their proxy forms at least 48 hours before the meeting. In order to ensure full consultations and shareholders participation, all queries/questions must be submitted to the Company and/or transfer secretaries at least 48 hours before the meeting. All the submitted questions will be read out and answered during the meeting by the Chairman and the Directors. 3. 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 submitted at least 48 hours before the commencement of the meeting. 4. 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. 5. Please be advised that the 2020 Annual Report can be accessed on the company’s website: www.nmbz.co.zw. Electronic copies of the 2020 Annual Report (which includes the financial statements, Directors’ and Auditors’ Report) shall be emailed to those shareholders whose email addresses are on record. By Order of the Board MISS. S. I. PASHAPA COMPANY SECRETARY 10 March 2021 123 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT EXPLANATIONS REGARDING THE NOTICE OF THE ANNUAL GENERAL MEETING 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 one third of 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 and Ms. J. Maguranyanga. Both retiring Directors, being eligible, offer themselves for re- election. Each Director shall be appointed by a separate resolution. Information about these Directors is shown below: Benedict Amon Chikwanha – Independent Non-Executive Director (Chairman) Mr. 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. Ben Chikwanha has held various positions in Risk Management, Retail Banking, Human Resources, Corporate Banking and Corporate Finance. Mr. Chikwanha has held various management roles in the banking sector including being a Director Risk Management and Managing Director. 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. Resolution 3 Shareholders are requested to approve Director’s fees. The Directors’ fees for 2020 amounted to $3,520,400. Resolution 4 The Remuneration of the auditors is required to be fixed by the Company in a General meeting in terms of section 191 (6) of the Companies and Business Entities Act [Chapter 24:31]. Accordingly, Members will be requested to approve the remuneration paid to the external auditors - Messrs. Ernst & Young for the year ended 31 December 2020, which audit fee has been disclosed in the Annual Report. 124 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT EXPLANATIONS REGARDING THE NOTICE OF THE ANNUAL GENERAL MEETING (Cont'd) 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 191 (2) of the Companies and Business Entities Act [Chapter 24:31]. This resolution therefore proposes the appointment of auditors in accordance with usual practice and the Banking Act [Chapter 24:20]. Ernst & Young have served as the Company’s Auditors for four years. Being eligible for re-appointment, the directors propose their appointment as the Company’s auditors for the year ending 31 December 2021. Special Resolution 1 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. Special Resolution 2 The directors have deemed it necessary that the Company delists from the London Stock Exchange (“LSE”). This is because only a small amount of trading in the Shares is conducted on the LSE; taking into account these low trading volumes and the ongoing regulatory compliance and administrative costs the Company incurs annually as a result of its London listing, the Board determined that there is no significant benefit to the Company in maintaining the listing. The Company does not believe that the Cancellation will adversely affect its shareholders, since the Company’s common shares will continue to be listed on the Zimbabwe Stock Exchange (the “ZSE”) and will continue to be tradeable. Given that the Company has its primary listing and main trading platform on the ZSE, the continued listing on the LSE would not afford the Company a significant advantage in terms of liquidity or additional sources of funding compared to the ongoing costs of maintaining the listing. Special Resolution 3 The LSE register consists of 6 shareholders with a total holding of 198,443 shares. The purchase of those shares by the Company in line with Special Resolution 1 will not exceed the authority granted to the directors. Special Resolution 4 The LSE does not levy a charge for delisting, however there may be agency fees related to the delisting of the shares. The costs will be minimal given the small number of shares in question. 125 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SHAREHOLDERS’ ANALYSIS Size of shareholding 2020 Number of shareholders % of Holders 2020 Issued Shares % Shareholding 0 – 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 3,680 129 42 46 14 22 9 3,942 93.35 % 3.27% 1.07% 1.17% 0.36% 0.56% 0.23% 100% 2,889,490 2,992,552 3,034,802 11,358,890 9,950,114 69,426,640 304,519,201 404,171,689 0.71 % 0.74% 0.75% 2.81% 2.46% 17.18% 75.34% 100% Size of shareholding 2019 Number of shareholders % of Holders 2019 Issued Shares % Shareholding 0 – 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 3,656 127 42 45 13 25 8 3,916 93.36 % 3.24% 1.07% 1.15% 0.33% 0.64% 0.20% 100% 2,974,316 3,257,517 3,093,500 11,248,580 10,155,675 87,936,100 285,506,001 404,171,689 0.74 % 0.81% 0.77% 2.78% 2.51% 21.76 % 70.64 % 100% 126 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SHAREHOLDERS’ ANALYSIS (Cont'd) 2020 Industry Banks CO Employee Estate Late External Companies Fund Managers Insurance Companies Investment Trusts And Property Local Resident Nominees Local Non Residents Non Resident Individual Other Corporate Holdings Pension Fund Total 2019 Industry Banks CO Employee Estate Late External Companies Fund Managers Insurance Companies Investment Trusts And Property Local Resident Nominees Local Non Residents Non Resident Individual Other Corporate Holdings Pension Fund Total Shareholders % of shareholders 2 310 239 3 7 3 10 33 0.05% 7.86% 6.06% 0.08% 0.18% 0.08% 0.25% 0.84% 3,159 80.14% 53 5 39 4 75 3,942 1.34% 0.13% 0.99% 0.10% 1.90 % 100% Shareholders % of shareholders 2 313 239 3 7 4 20 34 0.05% 7.99% 6.10% 0.08% 0.18% 0.10% 0.51% 0.87% 3,129 79.90% 43 5 42 4 71 3,916 1.10% 0.13% 1.07% 0.10% 1.81% 100% Shares 19,190 61,188,517 742,143 2,229 110,029,366 2,510 42,769,956 34,127,245 14,873,679 2,901,481 112,135,058 1,624,716 5,069 23,750,530 404,171,689 Shares 19,190 50,249,241 738,310 2,229 106,866,466 18,951 64,665,221 34,393,534 9,061,883 276,689 112,097,762 1,795,226 5,069 23,981,918 404,171,689 % of Shares 0.00% 15.14% 0.18% 0.00% 27.22% 0.00% 10.58% 8.44% 3.68% 0.72% 27.74% 0.40% 0.00% 5.88% 100% % of Shares 0.00% 12.43% 0.18% 0.00% 26.44% 0.00% 16.00% 8.51% 2.24% 0.07% 27.74% 0.44% 0.00% 5.93% 100% 127 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SHAREHOLDERS’ ANALYSIS (Cont'd) Rank Shareholder 2020 Number of Shares % Shareholding 1 2 3 4 5 6 7 8 9 10 African Century Financial Investments Ltd Nnr, Arise B V Old Mutual Life Assurance Company Of Zimbabwe Limited Africinvest Financial Sector Holding, Lalibela Limited-Nnr, Alsace Trust Cornerstone Trust Omzil Stra Shareholder Trap Fund Drakmore Investments (Pri- vate) Limited Martcap Investments (Private) Limited 76,426,874 71,632,001 40,864,553 36,702,487 23,104,516 16,885,381 16,875,582 11,065,095 10,962,712 7,728,231 18.91% 17.72% 10.11% 9.08% 5.72% 4.18% 4.18% 2.74% 2.71% 1.91% TOTAL 312,247,432 77.26 % Rank Shareholder 2019 Number of Shares % Shareholding African Century Financial Investments Ltd Nnr, Arise B V Old Mutual Life Assurance Company Of Zimbabwe Limited Africinvest Financial Sector Holding, Lalibela Limited-Nnr, Alsace Trust Cornerstone Trust Omzil Stra Shareholder Trap Fund Drakmore Investments (Pri- vate) Limited Martcap Investments (Private) Limited 76,426,874 71,632,001 36,731,115 36,702,487 23,104,516 16,885,381 16,875,582 13,104,565 10,962,712 7,728,231 18.91% 17.72% 9.09% 9.08% 5.72% 4.18% 4.18% 3.24% 2.71% 1.91% TOTAL 310,153,464 76.74 % 1 2 3 4 5 6 7 8 9 10 128 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT SHAREHOLDERS’ INFORMATION MEMBERS’ DIARY Financial year end Reports:- 31 December 2020 - Announcement of annual results March 2021 - Annual financial statements posted to shareholders April 2021 - Annual General Meeting - Announcement of AGM results 12 May 2021 14 May 2021 - Delisting of NMBZ Holdings from London Stock Exchange 11 June 2021 - Announcement of the 2021 half-year results August 2021 129 tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT SECRETARY AND REGISTERED OFFICE Company Secretary S. I. PASHAPA Registered Offices NMB Head Office 19207 Liberation Legacy Way (formerly Borrowdale Road) Borrowdale Harare Zimbabwe NMB Centre Corner George Silundika Avenue/ Leopold Takawira Street Bulawayo Zimbabwe Telephone: +(263) 8688003347 Facsimile +(263) (242) 759648 Website: http://www.nmbz.co.zw Email: enquiries@nmbz.co.zw +(263) (2922) 70169 +(263) (2922) 68535 Auditors Ernst & Young Chartered Accountants (Zimbabwe) 1st floor, Angwa City Corner Angwa Street / Kwame Nkrumah Avenue 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 130 In UK Computershare Investor Services PLC The Pavilion Bridgewater Road Bristol BS599 6ZZ United Kingdom In UK Dechert LLP 160 Queen Victoria Street London EC4V 4QQ United Kingdom NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT
Continue reading text version or see original annual report in PDF format above